Wright, Johnston & Mackenzie Solicitors

Commissioning Work? Remember your software development agreement!

The importance of a clearly drafted software development agreement has been highlighted following a recent case in the High Court in England.

The case involved the question of whether copyright over computer software had passed from the developer to the company that had commissioned works without a written agreement.

The High Court ruled that it had not.

An agreement had been reached between Infection Control Enterprises Ltd (ICEL) and Virrage Industries Limited to develop infection control software to be used in hospital systems. Prior to this agreement ICEL had commissioned a third party (LIS) to produce the software but it was never created.

The agreement between Virrage and ICEL made no reference to the ownership of the copyright.

However, the agreement between Virrage and ICEL stated that the specification should match the specification that had been agreed between ICEL and LIS unless both ICEL and Virrage Industries felt that amendments were required.

The issue then arose as to whether the copyright in the software developed had transferred from Virrage to ICEL.

Virrage argued that where a company commissions another person to create work which is the subject of copyright, the copyright remains with the creator of the work unless:

1. there is an agreement which expressly states that the copyright will transfer to the company; or

2. the circumstances of the case make it absolutely clear that copyright was meant to transfer to the company.

Virrage claimed that the current agreement between Virrage and ICEL did not constitute either of the above.

ICEL however claimed that the facts and background of the current case meant that the copyright in the software was always meant to pass to ICEL. Importantly, however, there was no express provision in the agreement between the parties which set this out.

The High Court ruled in favour of Virrage. The Court held that the facts of the case did not infer transfer of the copyright and as the agreement between the parties made no reference to the transfer of copyright, the copyright in the software remained with Virrage.

The judgment highlights the need for companies commissioning work to always have an agreement in place for copyright in the work to transfer to them. It is dangerous to rely (as ICEL did) on an expectation or “understanding” about ownership. As ICEL found to their cost, it is perfectly reasonable to pay for software to be developed for you, but end up not owning it.

If you wish any advice on software development agreements or wish a software development agreement to be drawn up to protect your business, please contact a member of the iTech team.

« Back to top

Superhero powers needed for copyright battle

Comic book giant Marvel is in the midst of a titanic battle over the rights to some of its most famous characters.

The children of the late Jack Kirby have sent Marvel 45 notices of copyright termination over comic-book characters co-created by their father. The characters include many who have featured in block-buster films in recent years including Spider-Man, X-Men, the Incredible Hulk, The Fantastic Four and the Avengers.

The Kirbys are relying on US copyright law which gives creators and co-creators 56 years to attempt to regain copyrights they previously relinquished.

If the notices prove successful, the copyright in the characters will return to the Kirbys by 2014.

However, rather than simply defend the Kirby’s action (which could prove massively expensive), Marvel has filed a counter-lawsuit in the Federal District Court in Manhattan asking for the notices to be declared invalid.

Marvel (which is now a branch of Disney) claim that the illustrations were ‘for hire’ – that Jack Kirby created them whilst he was working for Marvel. Under US law, the copyright in documents which are created ‘for hire’ remain the property of the company.

Therefore, if Marvel’s counter-claim proves to be true, the Kirby claims would be declared invalid and the copyright in the characters will remain with Marvel.

The iTech team will continue to keep you updated on the outcome of this wrangle.

« Back to top

May the force be with ……… the Court of Appeal

The UK Court of Appeal has overturned the English High Court’s enforcement of a $20 million dollar copyright infringement judgement relating to the helmets worn by the famous “Stormtrooper” soldiers in the Star Wars films.

Andrew Ainsworth was instructed in 1977 by Star Wars makers Lucasfilm to produce from his UK based offices a plastic model of a Stormtrooper soldier wearing a helmet and armour. He was given drawings and paintings of what the Storm Troopers would look like and a sample clay model helmet. The models were then used in the original Star Wars films.

In recent years, Mr Ainsworth mass produced the helmets and sold them online – making around $14,500 dollars in the USA. 

Lucasfilm (who obtained the copyright in the helmets from the original designers) sued Mr Ainsworth in the US, claiming that his production and sale of the helmets infringed their copyright. 

No defence was issued by Mr Ainsworth and the Courts in America awarded $20 million dollars in damages of which $10 million was compensatory damages.

Lucasfilm then brought a case to the High Court in England claiming that Mr Ainsworth’s manufacturing and selling of the helmets in the UK was a breach of UK copyright law. They also sought the High Court to enforce the US Courts ruling in the UK.

Whilst the High Court did enforce the US ruling in the UK, they found that the helmets were not copyright protected in the UK because they were not artistic works or sculptures. Lucasfilm therefore had no damages claim for breach of copyright in the UK.

The case was then appealed to the Court of Appeal.

The Court of Appeal agreed with the High Court that the helmets were not covered by UK copyright. Importantly, they also overturned the High Court’s enforcement of the US copyright, lifting the ban on Ainsworth’s marketing of the helmets to the US.

Over the course of the legal case Mr Ainsworth has incurred nearly £2.5million in expenses, although he is set to seek to recover many of his costs from Lucasfilm.

If you want any further information on copyright or intellectual property rights in general, please contact a member of the iTech team.

« Back to top

Jury saves 'OiNK' operator's bacon

The first person in the UK to be prosecuted for online music sharing has been acquitted of conspiracy to defraud after a high-profile trial at Teeside Crown Court.

Alan Ellis ran the online file-sharing website OiNK, which was a “torrent tracker” site – it did not actually provide files for download, but assisted its members in locating and downloading files from other sites.

Prior to its closure in 2007, OiNK had over 200,000 members who had downloaded a total of 21 million music files over a three-year period. It was reported that Ellis had earned £11,000 a month from members donating to the website.

The prosecution in the case argued that by running the OiNK website and personally profiting financially from this, Mr Ellis had assisted in the illegal downloading of music and was therefore guilty of conspiracy to defraud – in other words he was dishonestly conspiring with others to injure other people’s copyright interests.

The case drew comparisons with the recent high-profile Pirate Bay case in Sweden, in which four men were jailed and handed down a £3,000,000 fine for breaching copyright laws. Pirate Bay, like OiNK, did not hold the illegal files but assisted file sharers in locating one another.

However, unlike in the Pirate Bay case, the jury decided that Mr Ellis was not acting dishonestly and found him not guilty of conspiracy to defraud.

The decision is perhaps surprising given the recent crack down on illegal file sharing in both the UK and abroad and it remains to be seen how this will impact upon future attempts at prosecuting alleged illegal file-sharing in the UK.

Unsurprisingly, the decision has been heavily criticised by the music industry and the music industry group IFPI is now considering a civil action against Mr Ellis.

The iTech team will keep you updated with developments in this area as they occur.

« Back to top

Kodak snaps at Apple and Blackberry over alleged patent infringement

Camera maker Eastman Kodak has launched a lawsuit in the US against Apple and Research in Motion - the makers of the iPhone and Blackberry handsets - over alleged patent infringements.

Kodak claim that both the iPhone and Blackberry handsets use technology for previewing pictures that infringe its registered patents.

The software in question was developed by Kodak and allows users to preview digital colour photographs on their camera-enabled smartphones. Kodak claims that Apple and Research in Motion are using this software without a licensing agreement and have ignored several attempts to resolve the dispute out of court.

Kodak have also filed two separate lawsuits against Apple that claim infringements of patents relating to digital cameras and certain computer processes and asked the US International Trade Commission to stop the two firms from importing allegedly “infringing devices” to the US.

This is not the first time that the patent for Kodak’s picture previewing technology has been the subject of a dispute. In 2009, Kodak successfully sued both LG and Samsung for allegedly breaching the patent.

Both companies are now entering into patent cross-licensing agreements with Kodak, whereby LG and Samsung will be entitled to use the software in return for paying significant royalties to Kodak.

It is anticipated that Kodak will be seeking hundreds of millions of dollars compensation from Apple and Research in Motion for the alleged breaches and a settlement and cross-licensing agreement, similar to that with LG and Samsung, is expected.

The iTech team will keep you updated with the progress of the case.

« Back to top