The basic position under English law is that Intellectual Property (“IP”) is owned by the party that creates it, and that if an individual creates IP in the course of their employment it will be owned by their employer.
When it comes to Software Developers creating IP for customers (i.e. they enter into a contract with a customer to do so) there are some important caveats to include in the contract between parties, where IP cannot, or from a commercial perspective, should not, be assigned to the customer. These are as follows:
The IP in the end product
The parties should specify whether the IP in the end product is to be owned by the customer or whether in fact it should simply be licensed to the customer (and if so on what terms). This is a key commercial consideration (most customers will expect to own the IP given that they have paid for its creation and development).
Third party IP
The Software Developer would not be able to assign the IP in any third party software which it may be including as part of the end product. Such third party software should therefore be carved out of the IP which is being assigned to the customer. Instead it is likely that either the Software Developer or the customer will pay a licence fee to use the third party software albeit this will be dependent upon the contractual terms between the Software Developer and the third party.
Background IP
The Software Developer will need to retain its rights to any “Background IP”, this being the IP which the Software Developer owns before any contract is entered into or that it utilises outside of any contract and which it might wish to use again on other projects for other customers. Instead the Software Developer should provide the customer with a licence to use the Background IP which has been included in the end product. The terms of that licence should ideally be restricted so that no competitor is able to access the Background IP, it should be used for specific purposes, not disassembled and varied in any way etc., and potentially also limited in time to a set period.
Generic know-how
The Software Developer should ideally retain the rights to use any generic know-how which is gained through its work for the customer, which will enable the Software Developer to learn from what worked/didn’t work and implement appropriate changes in future projects.
The risk of the Software Developer assigning all IP rights to the end product, is that it may lose the ability to carry out work in the future which is substantially similar to that of a past project due to the possibility of infringing the assigned IP. Furthermore, where the Software Developer does not have the ability to assign Third Party IP, there could be potential for future claims for breach of IP rights.
If you have any questions about the protection of your IP rights and what can be assigned please do get in touch with us.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
