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In an environment where organisations are looking for new income streams and looking to diversify, the development of intellectual property (IP) based products can be important. Employers also want to maintain flexibility within a workforce by the use of consultants alongside employees. But these situations can give rise to employers having to deal with difficult issues affecting the ownership of IP Products. These disputes have the potential to affect an organisation’s bottom line.
Copyright - the starting point
Section 11(2) of the Copyright Designs and Patents Act 1988 provides that work created by an employee in the course of his or her employment is presumed to be owned by the employer subject to any agreement to the contrary.
This only applies to employees - where consultants are used, the starting point is that the consultant will own any intellectual property rights in the work they create. You can require them to assign in advance the rights in any work they do but this must be in writing. Otherwise your only option is to seek an assignment of rights after the event. It can however then be difficult to negotiate after rights of potential value have been created and your organisation’s negotiating position may be weak.
Employees’ contracts
For employees it is far better to deal with intellectual property rights expressly in the employment agreement as this trumps the presumption in the Act.
Even if employment and consultancy agreements are drafted to transfer the rights needed there are still situations where an organisation can find itself at a disadvantage when developing IP based products. Workers in IT departments are often enthusiasts and write software programmes or routines in their spare time. They may seek to make use of the fruits of their hobby as part of their work.
Source material – who owns the rights?
Employers should monitor the origin of source material in order to ensure that the development process does not make use of material that is not owned by the organisation. One such example would be that a worker created a useful framework or programme at another organisation and he or she either owns IP rights in that work or the former employer does. The individual may then seek to incorporate that material in work for a subsequent organisation. It is natural to use programmes that you are familiar with and have created.
The issue for the subsequent organisation therefore is to have procedures in place to ensure that it is clear where source material comes from so that before significant time and effort is spent on a project any rights issues are identified. If the worker or another organisation has rights in a product, even if the proportion of such proprietary rights is small those rights need to be cleared. A copyright owner has no obligation to agree to any clearance and therefore organisations can face what may feel like paying a ransom payment or face re-writing the product to ensure that any suspect material is removed.
The issues arise not just in the context of software but also in relation to the creation of training materials and reports.
These considerations do need management time but also an appreciation of where these sorts of issues are likely to arise. Advice at an early stage can help prevent later problems arising particularly when projects have had significant resources invested in them.
Sean Egan is a Partner in the Charity and Social Enterprise Department Bates Wells & Braithwaite London LLP, www.bateswells.co.uk