Stop funding your rivals' resources

You've paid a contractor to develop software for you, then find they're selling it to your rivals. Can you sue the pants off...

You've paid a contractor to develop software for you, then find they're selling it to your rivals. Can you sue the pants off them? That all depends, as Dai Davis explains

Dai Davis

This is the first in a two-part series of articles on the concept of copyright and who owns it. In the second article I will cover common copyright problems in the context of IT developments. This first article looks at a copyright issue familiar to many companies: you've employed a contractor to develop software and now find they're supplying the same program to your competitor. Can you stop them selling the application to others?

Copyright is the main legal right of ownership in software, so to get the answer to this you need to understand copyright law.

What is copyright?

As the name suggests, copyright gives the holder the right to prevent others copying a "work". Copyright doesn't just protect physical works such as books, articles and drawings; it protects any form of recording, such as videos, compact discs and computer programs.

Copyright exists automatically and without the need for any registration to take place. It exists as soon as a work is recorded. It lasts for the duration of the lifetime of the author, plus a further 70 years. In the context of computer programs, this is an extremely long time.

Who owns copyright in software?

The owner of the copyright is the person who creates the work. In the case of a computer program, this is the programmers. Where a program is written in the course of business by an employee, then it is the employer who owns the copyright.

However, this is only the case where there is a contract of employment between the two. Where the author is an independent consultant, then it is the independent consultant, and not the party engaging the consultant, who owns the copyright. Similarly, if a company engages a consultancy company, the consultancy company will own the copyright to any software developed during the course of their relationship.

Can you stop a contractor supplying a rival?

If a company engaging a contractor wishes to own the copyright in the software, this has to be agreed at the start of the contract - ideally, in writing. In my experience, 99% of all software copyright disputes could be avoided if this were done. Otherwise, there's nothing to prevent a contractor developing software for one company for, say, £20,000 and subsequently licensing it to the company's rivals for £5,000.

The original issue

For a work to be protected by copyright, it must be original. However, the standard of originality is low compared to the type of novelty required in, for example, a patent. In the context of copyright, originality simply means that neither the work nor a substantive part of it has been copied from another work.

So if you attend a lecture and make your own notes, those notes will be an original work even though someone sitting next to you in the lecture may have made their own notes. Each set of notes would be considered to be an original work.

How is copyright infringed?

Copyright is infringed where a copy is made of another's work or a substantial part of it. In this context, "substantiality" can be quantitative (where more than 20% of the work is copied) or qualitative (where only a small percentage of the work is a copy but the part copied is a crucial part of the work).

Where copyright is infringed in the course of business, not only is it a civil wrong for which the copyright owner can sue for damages, it is also a criminal offence.

In the context of computer programs the word "stiffing" has been coined to describe the practice of copyright holders demanding an outrageous sum of money to allow companies to use software outside the bounds of the original licence.

Dai Davis is a chartered engineer and solicitor, and a consultant at law firm Nabarro Nathanson. Email: [email protected]

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