It is advisable that a deed of assignment is executed assigning all IP rights to the person commissioning the work as soon as the actual work is done and delivered by the vendor. It is also important to ensure that the deed of assignment, as executed on completion and delivery of work, identifies the work assigned, specifies the rights assigned, and mentions the duration and territorial extent of such assignment. The instant case [Pine Labs Pvt. Ltd. vs. Gemalto Terminals India Pvt. Ltd. & Ors. FAO (OS) 635 & 636 of 2009; Delhi High Court] is upon the legal consequences provided under the Copyright Act on this issue, significant for all those who are involved in the creation, development and outsourcing of IP works in India.
Section 19 of the Copyright Act, 1957 stipulates the mode of assignment of copyright. The assignment is to identify such work and also specify the rights assigned and the "duration and territorial extent of such assignment". What happens if the agreement is silent on the duration and territorial extent of the assignment?
Gemalto Terminals Pvt. Ltd (respondent) had sought services of Pine Labs Pvt. Ltd (appellant), a software development company, to develop a customised fleet card system for one of its client, IOCL and therefore entered into a "Master Agreement for Development Services" (MSA). This was in the year 2004. Later Gemalto when awarded the contract for HPCL Fleet Card Programme wanted Pine Labs to customize and interact the existing IOCL system, to which Pine Labs readily agreed but no consensus could be reached between them. Thereafter Pine Labs discovered that Gemalto had sub-contracted the contract to QCI Technologies Pvt. Ltd to create and develop software for the HPCL card programme. Since this program system was to be interacting with the existing IOCL system, Pine Labs apprehended that the source code of the IOCL programme would be handed over by the Gemalto to QCI Technologies. The prospect of distribution of the source code of the software developed by Pine Labs to the third party caused it to claim ownership of the software developed by IOCL. The genesis of this claim was founded upon the reason that due to operation of section 19 subsections (5) and (6) of the Copyright Act, 1957 the assignment of copyright in respect of the Original Version 1.03 of the software developed for IOCL was only for 5 years and that too within the territorial limits of India as the terms regarding time period and territorial limits of the assignment was nowhere provided in the agreement entered into between the parties.
Pine Labs filed a suit and obtained an ad-interim ex-parte injunction, however subsequently after hearing both the parties, the learned single judge vacated the aforesaid injunction. This prompted Pine Labs to prefer an appeal before a division bench against the order passed by the learned single judge. The division bench upheld Pine Labs' contention that the assignment of copyright in software developed by it for Gemalto came to an end after 5 years and thereafter, the copyright reverted to Pine Labs.
The bench observed that:
Since IOCL Fleet Program is developed by Pine Labs, which is the creator of the said Programme as per Section 17 of the Copyright Act, Pine Labs would be the first owner of the copyright in this work. Section 18 of the Act, however, permits the copyright owner to assign the copyright either wholly or partially and either generally or subject to limitation and either for the whole term of the copyright or any part thereof. Section 19 of the Act stipulates the mode of assignment. Sub Section (1) thereof provides that in no uncertain term that assignment has to be in writing signed by the assignor or by his authorized agent. As per sub section (2) of Section 19 of the Act, the assignment of the copyright, any such work is to identify such work and also specify the rights assigned and the "duration and territorial extent of such assignment". Thus by agreement the assignment can be for a limited duration and limited territory. What happens if the agreement is silent on the duration and territorial extent of the assignment?
The Bench relied upon section 19(5) and 19(6) of the Copyright Act and after analyzing the documents in question came to the conclusion that:
The Bench also concluded that provisions contained in sections 19(5) and 19(6) of the Copyright Act would inevitably be triggered whether MSA is an Assignment Agreement or simply an Agreement to Assign. Gemalto had vehemently contented that as MSA was only an 'Agreement to Assign' or assignment in equity, therefore in such cases there existed only an equitable assignment involving the agreement to assign future work generally flowing from contractual relations where work is commissioned.
Refuting this, the bench observed that even if it is presumed that MSA is an Agreement to Assign, then there must have been a subsequent execution of the Assignment Agreement in writing, regarding which there is nothing on record. Further dwelling on the reasoning, the bench said –
This judgment is of significant importance in commissioning works. It clearly lays down that if the parties fail to provide for the period in the document by which assignment of copyright is made, then regardless of intention of the parties, the period of assignment would only be 5 years and the territory would only be the territory of India.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.