Copyright ownership and software
Sprint Electric v Buyer’s Dream (High Court) [2018]
The first owner of copyright in a new computer program will, typically, be the creator irrespective of whether the creator has been paid by somebody else to develop it. The one exception to this is the relationship of employer and employee where the employer automatically owns copyright in works created by an employee in the course of employment .
Facts:
Sprint entered into an agreement in 1997 with Buyer’s Dream for the computer programming services of a Dr Potamianos. Buyer’s Dream was a service company for Dr Potamianos used to limit the taxes paid by both Dr Potamianos and Sprint. Both parties at the time and subsequently seem to have referred to Dr Potamianos as ‘joining Sprint’ in 1997 which, the court said, suggested that he had been recruited personally. In 1999 Dr Potamianos was appointed as a director of Sprint and was given the title “Research and Development Director”. For practical purposes, Dr Potamianos was Sprint’s sole programmer.
Relations between the parties broke down and Buyer’s Dream and Dr Potamianos argued that they owned the copyright in the software and that the agreement allowed only the object code (and not the source code) to be accessed and exploited by Sprint.
Decision:
The judge held that where the labels chosen by the parties (for the purpose of avoiding taxes) to describe their contractual relationship do not reflect reality, the court should consider the issue of its own motion.
The judge reviewed the terms of the contract and held that the true relationship between Sprint and Dr Potamianos was that of employer and employee. It was clear that Dr Potamianos had been obliged to perform the "technical services" described in the 1997 contract personally. Ownership of the software authored by Dr Potamianos in the period covered by the contract, both object and source code, therefore vested in the employer, Sprint, under Section 11(2) of the Copyright, Designs and Patents Act 1988.
Alternatively, the judge held that a term could be implied into the contract that Buyer’s Dream would make the source code created by Dr Potamianos available to Sprint for use in connection with its business. A contract under which Sprint commissioned and paid for the creation of software but limited its rights only to the exploitation of the object code alone lacked commercial and practical coherence. It ignored the requirement to access the source code to fix bugs or to develop the product further.
However, the judge went further. He said that if his decision based on an employer / employee relationship failed, the judge would nevertheless hold that Sprint was impliedly the owner of the copyright in the source code as this is what must have been intended. He said that the case fell firmly “within principle (7) identified in the case of Robin Ray v Classic FM namely that circumstances… exist when the necessity for an assignment of copyright [are] established”.
Points to Note:
- A minimalist approach is generally taken when considering an implied term granting rights in a commissioned copyright work - often being limited to the grant of a non-exclusive licence in favour of the commissioner. However, the judge considered that the present circumstances fell into the special category where there was a necessity for an assignment of the copyright in order to give business efficacy to the agreement.
- What the case emphasises is that the question of ownership / usage rights in relation to developed software need to be addressed expressly in any relevant commercial contract.
- This is an extreme example of a court interpreting a contract based on the conduct of the parties post contract. Strictly, such conduct should not be part of the factual matrix but in reality, the conduct of the parties does influence the courts and cannot be ignored entirely. The judge expressly acknowledged that he might be on uncertain ground when he said in the judgment “if and to the extent that it is permissible to have regard to the post-contract conduct of the parties for the purpose of determining the content of the 1997 contract”