UK: Got What You Paid For? Why Express Terms Transferring Copyright In Software Are Crucial

The High Court's decision in Infection Control Enterprises Ltd (ICEL) v Virrage Industries Ltd (Virrage) [2009] EWHC 2602 confirms that where work is commissioned and the contract does not contain terms detailing how and when copyright in the commissioned work passes to the commissioning party, the courts will not imply an assignment of copyright where only a non-exclusive licence is necessary.

• The UK Intellectual Property Awareness Survey 2006 (revised in 2007) published by the Intellectual Property Office indicated that approximately 30% of firms incorrectly believe that copyright in a commissioned work automatically vests in the commissioning firm.  A further 40% are unsure in whom the copyright vested.
• Where work is commissioned and paid for, copyright in the commissioned work is owned by the author of the work.
• Section 91(1) of the Copyright Designs and Patents Act 1988 provides that future copyright (i.e. works that are not yet in existence) can be assigned.  The assignment must be in writing and signed by the assignor (s.90(3)).
• In the absence of an express assignment, the courts will only imply terms necessary for the use of copyright by the commissioning party (established by Lightman J in Robin Ray v Classic FM [1998] FSR 622). This may result in the commissioning party receiving no rights at all or, at best, a limited non-exclusive licence to use the copyright in the work, rather than a full assignment of the copyright.
• Even if the courts grant a full assignment of copyright, the process of obtaining the assignment is lengthy, expensive, uncertain and can be easily avoided with appropriate drafting of the contract at the outset. 

The High Court heard that ICEL contracted with Link Information Systems Limited (LIS) to provide a software computer system intended to collate data relevant to the identification and eradication of hospital bred diseases like MRSA and C. difficile. The agreement between ICEL and LIS stated:

LIS failed to deliver the system and ICEL contracted with Virrage on the same terms, save for the payment terms, which were amended but did not specify an assignment of the copyright. 

ICEL argued that it was self-evident that the parties had intended for copyright to pass to ICEL on delivery in order for ICEL to be able to sell the system to third parties. HHJ Chambers QC dismissed this argument, stating that this approach would deprive Virrage of the protection it had as an "unpaid author of the software" (unpaid in this instance being because Virrage had not received the full sum of £95,000). The Judge stated that he saw "nothing that necessitates the surrender by Virrage of a valuable right until compelled to do so by certain terms of that [i.e. the payment] provision". Accordingly, the Judge refused to imply any transfer of copyright in the system.

This case serves as a timely reminder of the vital importance of including clearly drafted assignments of intellectual property rights into any contract for commissioned works.  Especially important are assignments of future copyright, so that the ICEL v Virrage issues can be avoided altogether.  It also creates certainty as to what rights the commissioning party had, rather than leaving it to the courts to decide on the scope of any license, absent assignment.

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