Transferring IP rights in software

It's axiomatic that intellectual property rights are transferable.  A change of ownership of physical property can be evidenced by a change of possession; not so with intellectual property (IP). For this reason, IP transfers should always be embodied in a written instrument.  Indeed it's often is a legal requirement that IP transfers be in writing.

This short post is about the use of such instruments to transfer the IP rights in software.

Transfers of this kind may also be referred to as “assignments”.  I use the terms interchangeably in this post.

The first owner of the intellectual property rights in a computer program will usually be the individual or individuals who created the software: the developer or developers, or his or her or their employer.  Typical situations where a transfer of rights will be required include:

  • where software has been commissioned by a customer on the basis that the customer will acquire ownership;
  • where a developer is adapting or creating a module for a pre-existing software owned by the customer;
  • where a business or business unit is being acquired (i.e. a business acquisition rather than a share acquisition).

Whatever the circumstances, the first thing you need to do if you are contemplating transferring rights in software is to establish what rights subsist in the software, who owns them, and the extent to which they should be covered by the transfer.

Frequently, different people own different copyrights in a computer program.  For example, many software applications incorporate third party libraries, whether commercial or open source, and a software developer will not be in a position to transfer ownership of the copyright in those third party elements to a customer.

The water is further muddied by the fact that a number of different types of legal right may subsist in a single software program.

From a legal perspective, the key intellectual property right will usually be copyright.  Literary copyright protects software code as well as normal literary works, while artistic copyright may protect the graphical elements of a computer program (subject in each case to the usual limitations).  Legal assignments of copyright must not only be in writing, but must also be signed by or on behalf of the transferor.

Other relevant IP rights may include patents, rights in designs and database rights.  Applications for registered rights such as patents are also assignable.

In some cases confidential information may form part of a transfer.  This is not an intellectual property rights as such – it's what lawyer's call a "chose in action" – and particular care needs to be taken with this kind of right.

Once you have identified the subject matter of the rights and the rights themselves, you need to decide on what basis the transfer will be made.  Will the transferor simply transfer those rights that it actually owns?  Will the transferor transfer all rights subsisting in the identified subject matter?  Will the transferor guarantee that it actually owns all such rights?

It is possible to assign future rights, including rights in software that does not exist at the date the assignment instrument is entered into.

Most copyright assignments will include a waiver (or assertion) of moral rights, but this is often not necessary where software is concerned, because moral rights do not protect software itself.

Assignments often take the form of a deed rather than a contract.  This may be because the parties wish to avail themselves of the extended limitation periods that apply to actions based on deeds, or it may because there is no consideration for the transfer.  An alternative to a deed in the latter case is to include nominal consideration under the contract.

In the case of an assignment of registered rights (e.g. a patent), the assignment should be recorded with the relevant authorities.

Comments

Hi Alasdair, 

Thanks a lot for the useful article. Recently I was contracted to develop a technical solution to an engineering problem and implement it as software. The contract had a clause "All IP created belong to Customer", i.e. corresponds to the first situation of rights transfer:

  • where software has been commissioned by a customer on the basis that the customer will acquire ownership;

Now, since then I've substantially updated and the software implementation of it, so that it would produce different results, wrt the commissioned version, for the same input. The question is whether this new version falls under the same contract and hence also belongs to the customer?

Many thanks

Tomas 

It will depend to some extent upon the other terms of the contract whether the additional work falls under the contract.

Was the additional work performed for (and paid for by) the same customer?

Thank you very much for the swift response. No additional work was stipulated in the contract and performed, and the contracted deliverables were the program, its source code and a short doc explaining the use. No confidential info of the customer was used either. There was no verbal agreement about software updates. The contract was also of generic nature, i.e. not tailered to software IPRs.

Any ideas?

Thanks.

On the basis of the limited information above, the following points would seem to be relevant:

(a) The contract, as well as being not specific to software IP, may well be quite badly drafted, leaving lots of room for argument.

(b) One potential argument could be about whether the contract amounts to an effective legal assignment (vs equitable assignment) of the copyright in the base software.

(c) I'm still not clear as to the reason for the production of the new software, and can't really comment on whether the contract might cover the new software without a lot more information. 

(d) As the new software is built opon the base software, then it seems likely that you would need a licence / permission from the customer to exploit the new software.

(e) If the customer owns the base software, a further question arises: what rights did you have to produce the new software? Could the production of that software itself have infringed the customer's rights?

To get more specific advice you would need to have someone review the contract and discuss all the circumstances with you. I'm not taking on clients right now but if you would like a referral to another lawyer then please let me know.

Thanks Alasdair, these are good points indeed!

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