Gardner Leader

Playing hardball with your software

Gardner Leader Newbury Business News Legal Question Time article

PLAYING HARDBALL WITH YOUR SOFTWARE

This month, through a series of questions and answers, Chris Felton, Litigation Partner at Gardner Leader Solicitors, takes a look at the complex issue of ownership of Intellectual Property Rights.

Q. I’m a currently in the process of selling shares and negotiating an exit from a software company that I set up three years ago. My fellow director/shareholders refuse to acknowledge that I am entitled to take with me some software that I have developed. As I want to use it for my new venture – what can I do?

A. Ownership of software, coding, programming etc. is often the subject of disputes. Such assets are referred to as Intellectual Property Rights (IPR). They are often the most valuable assets in a business but as they are intangible they tend to get overlooked.

Q. So do I own the IPR in this software?

A. The starting point is that the author of the software will own the rights in it unless there is an agreement which says otherwise, or you are an employee when you write the software, in which case your employer will usually own the software. So generally, if you develop a piece of software or programming then you will own it. In order to transfer the rights in the software, you must do so in writing by an assignment.

Q. I have lots of paperwork regarding the company – what will tell me whether I still have these rights?

A. That depends. I would look at any documents you signed when you set up the company such as a Shareholders Agreement, Investment Agreement, and Articles of Association; basically anything that covers the terms of your investment. These documents will often have clauses dealing with who will own the IPR and what happens if the company is sold.

Q. What if there are no agreements or no mention of who owns the IPR?

A. Then the presumption will be that you own it and will continue to own it. There may, however, be arguments to say that there is an implied agreement that you have assigned the IPR to the company. Things to consider are:

• Had you developed the software before joining the company
  
• Were you in employment when it was developed – this may lead to a past employer having a claim over and above yourself – so you will need to check your terms of employment • Whether you were paid and the level of any development fee
  
• Whether the IPR is of major importance to the ongoing nature of the business and you were aware of this when you joined
  
• Whether there are any other matters consistent with your (or the company’s) interests – i.e. what is the company telling its customers about the software – is it consistent with ownership and have you agreed/disputed this
  
• Does your employment contract govern that anything developed or adapted whilst in the conduct of your employment belongs to the company?

Q. If it is established that I own the software am I in the clear?

A. Not necessarily; even if it is found that you own the software, there could be an express licence (or even implied) that the company has permission to use the software in its products, and this may restrict how you use the software going forward.

Also, aside from IPR issues, you should make sure you do not fall foul of any non-compete or confidential information provisions in your shareholders agreement/employment terms.

Q. And lessons to learn for the next time?

A. IPR can be a very valuable asset and defining its terms of ownership should be done just as carefully as when buying real estate. IPR that can be protected should be protected as soon as possible. When developing software it should be made very clear between the relevant parties who will own the IPR and what are its terms and restrictions of use.

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