The U.K. Court of Appeal has upheld a decision giving a University ownership of copyright in software programmes, even though the programmes were written by one of the sponsors of an R&D project carried out at the University. The judgement shows the importance of documenting in detail who should own the intellectual property rights created in a collaborative project.

Sheffield University’s department of clinical pharmacology had developed a modelling system for research to predict how potential new drugs would be absorbed and eliminated by the human body. The R&D project, which became the subject of the litigation, aimed to commercialise this into a more user-friendly form. Cyprotex was one of the sponsors of the programme but did not have the funds to provide sponsorship in cash. However, it did have expertise in the relevant programming skills and so it provided one of its employees to write the new software. The parties then fell out and Cyprotex sued the University, alleging that it was the owner of the copyright in the new programme.

The U.K. Technology and Construction Court reached its decision on the issue in February 2003 and held in the University’s favour. In doing so, it had to interpret the research agreement in what it admitted to be rather a "strained" way. The research agreement contained fairly usual provisions relating to who owned which intellectual property. It said that inventions made solely by employees of sponsors, relating to the research project, should belong to the relevant sponsor. IP created by members and agents of the University either alone or with any of the sponsors, was to belong to the University.

The problem for the University was that the new programme had in reality been written solely by a Cyprotex employee. On the face of it, this brought the software within the category of rights owned by Cyprotex. (Under U.K. law, copyright in works created by employees is automatically owned by their employers unless a specific deal is done to the contrary. So, had there been no agreement with the University, Cyprotex would have owned the software rights.)

The Technology and Construction Court judge looked at the surrounding relationship between Cyprotex and the University and had to interpret the contract to give effect to what he felt was a clear intention that the University should own copyright in the software. He did this by saying that sponsors would only own IP created by their employers where this "related" to the research project—whereas the new software in fact constituted the research project itself, rather than merely relating to it.

The matter then went up to the Court of Appeal, which gave its decision in April 2004. The Court also found in the University’s favour, but for a different reason, which avoided the need to put the wording of the research agreement under artificial pressure.

The Court noted that the research agreement between all of the sponsors and the University envisaged that Cyprotex would pay a cash contribution and that the University would recruit a programmer to do the work. What happened in fact was that Cyprotex made its contribution in kind via a side arrangement, through providing an employee to do the programming. The Court found that this side arrangement was the subject of an unwritten agreement which fell outside the scope of the IP provisions contained in the main research agreement. This side arrangement only involved the University and Cyprotex, not the other sponsors, and so its existence was not ruled out by the usual "entire agreement" provision in the main document. Its (unwritten) terms gave effect to the parties’ intention that the University should own the software copyright—not least so that it could then grant licences to the other sponsors to use that software for their own internal purposes and so that it could then negotiate with all of the sponsors to see who would have the right to commercialise the software going forward. As a result of this interpretation, the Cyprotex employee was treated as an "agent" of the University when he was doing the programming work. This brought his activities within the scope of the IP owned by the University.

The fact that this dispute has had to litigate up to the Court of Appeal level shows the importance of adapting research agreements when there are special arrangements—such as the provision of employees rather than cash—which take them outside the normal kind of sponsorship structure. Case reference: Cyprotex Discovery Ltd -v- The University of Sheffield, [2004] EWCA Civ 380, 1.4.2004. 

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