Protect your firm's intellectual property

SCO's action against IBM over disputed Unix code highlights the grey area of software as intellectual property. So how do you...

SCO's action against IBM over disputed Unix code highlights the grey area of software as intellectual property. So how do you guard the rights to systems you develop? Protect your firm's intellectual property.

The multibillion-dollar lawsuit brought by SCO against IBM, and in particular the allegation that IBM violated SCO's intellectual property rights, has highlighted the need for companies to review how well their own intellectual property rights are protected.

SCO has said it will act on what it alleges are breaches of its rights, and the snowball effect is likely to be considerable, so what preventive steps should companies consider?

It is generally accepted that computer software should be protected as intellectual property. Although this is good news for software manufacturers and IT directors concerned about protecting software developed in-house, there is little or no consensus as to how much protection should be afforded or how it should be achieved.

Traditionally, computer programs have been protected as works of literary copyright. This has been, and still is, invaluable in protecting against piracy or "bit-to-bit" copying of the source code. Copyright protection under UK law arises automatically and, as such, it is important that IT directors accurately record details of software developments - who developed them, when and where - if they are to assert copyright and benefit from its protection.

What copyright cannot protect is ideas, and many who devise new programs want to protect not only their precise expression, but also something of their functionality. In many cases, the underlying ideas are effectively protected as trade secrets. However this can, arguably, stifle innovation.

Patents can protect innovative ideas and principles. They confer a 20-year monopoly in return for disclosure of the underlying concept, thereby affording more effective protection than is available through a combination of copyright and confidentiality.

Patents, which have to be published, are particularly attractive for software ideas that would be easy for competitors to copy once the software itself is in the public domain. The obligation to disclose would have little impact.

Patents and copyright will provide safeguards but of equal importance is the ability to enforce those rights and achieve as much protection as possible. It is prudent, therefore, to secure contractual protection.

Close co-operation with the human resources department is imperative to ensure that provisions in contracts of employment adequately underpin intellectual property rights.

It is vital to include specific clauses in employees' contracts of employment confirming that the employee is under a duty to disclose to the company any ideas or inventions they originate.

Similarly, you should include a provision making it clear to the employee exactly where they stand regarding materials created during the course of their employment as copyright in design works will also be important.

Typical clauses would state that any trademarks, registered designs, design rights, copyright, database and other intellectual property rights (subject to the Patent Act 1977) created during employment or the use of materials, tools or knowledge made available through their employment, will become the exclusive property of the employer.

These specific clauses may be supported by a general confidentiality clause protecting trade secrets from being divulged for the benefit of a competitor, either during the employment or after its termination.

The assertion of intellectual property rights should be clearly stated in contracts with third parties such as suppliers, contractors and sub-contractors.

The patenting of computer programs has been hotly contested in Europe, although the practice is widespread in the US. Although UK law specifically states that computer programs are not patentable, the exclusion is circumvented by claiming protection for a clear technical advancement in the program.

Of 30,000 patent applications received by the UK Patent Office each year, 15% relate to computer-implemented inventions. Now, the European Patent Office (EPO) has issued guidelines which state that software can be inventive and patentable if it displays a further technical effect.

A new draft European directive also states that computer-related programs are patentable. When a program goes further than producing normal physical interactions between the software and the hardware, it can be patented.

The new guidelines and directive, however, merely set out what was decided as long ago as 1986 under Vicom Systems' application, where a technical advance involved a substantial increase in processing speed. The ruling states, "Decisive is what technical contribution the invention makes to the known art."

The requirement for the software to produce a technical advance cannot, however, be ignored and in IBM/Document Abstracting and Retrieving (1990) the EPO rejected a patent application for a computer system which automatically abstracted and stored documents on the basis that the invention was of a purely intellectual and not a technical nature.

Examples of software patents granted by the UK Patent Office include:

  • Editing and de-bugging a computer program
  • Processing techniques to achieve increased speed of execution of software
  • Improving the efficiency and speed of execution of application programs
  • Computerised billing systems for use on, for example, a telecoms network.

The Copyright, Designs and Patents Act 1988 determines ownership of copyright and design works created by an employee. The first owner of copyright will usually be the employer if the employee created the work during the course of their employment.

The Patents Act 1977 determines ownership of patents. An invention made by an employee will belong to the employer if it was made during the course of the employee's duties and is a reasonably expected result of those duties. Ownership will also fall to the employer if the employee's duties are such that they have a special obligation to further the interests of the employer.

Where the employer is not the owner of the invention, an employee may pursue their own application for a patent and any performance of or work on the invention will not infringe any copyright or design right that the employer may have in related models or documents.

Ian Tranter and Patricia Jones are partners at law firm Hammonds

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