Computer software is now a significant part of how we live, communicate and do business.
Most businesses use a variety of software products. In turn, software development and licensing is now a highly lucrative operation.
Whether you are a customer or developer of software (or both), it is vital that you understand the legal basis upon which software can be owned.
Failure to do so can lead to complex and expensive legal disputes.
Under the Copyright Act 1968 (Cth) (the Act), the owner of copyright in a “work” has the exclusive right to (among others):
The definition under the Act of “work” includes a “literary work”.
A “literary work” includes a “computer program”, being a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.
This definition has been the subject of much judicial comment, however, the general position is that protection attaches to the written source code.
The source code provides the “set of statements or instructions” that cause a computer “to bring about a certain result”.
Copyright only protects expression in a material form. It is not enough to merely devise a new concept for a software product. Copyright will only apply if that concept is realised by developing the source code.
As a general rule, the “author” of a computer program will own the copyright.
The author is the person who caused the computer program to be expressed in a written form.
Usually, this will be the developer tasked with creating the source code comprising the computer program.
However, copyright is personal property, and can be assigned to another person.
If the developer has created the source code in the scope of his/her employment, then the copyright will usually vest in their employer.
However, if an independent contractor has been engaged to develop a computer program, the independent contractor will own the copyright, unless agreed otherwise in writing. This commonly leads to disputes, as the principal may not realise it does not own the copyright until it is too late.
When instructing an employee to develop all, or part, of a computer program, you should confirm that the task falls within the scope of that person’s employment. You should also keep a written record of the instruction, in case you are ever required in the future to prove ownership of the copyright.
When engaging an independent contractor to develop software, the written contract should state that the copyright will vest in the principal. This should be accompanied by warranties and indemnities from the developer, to make sure you are protected in circumstances where the computer program infringes on a third parties’ intellectual property.
Further, if you are providing another entity with access to your computer program, you must be clear on the terms upon which you do so. If the customer is merely licensed to use the computer program, then the written agreement must reflect this. Otherwise, there may be circumstances where the customer claims that it has obtained an interest in the computer program, which is likely to lead to a messy dispute.
It is also important to protect the source code comprising your computer programs. Often, parties to a licence agreement will enter into an escrow agreement, where a third party holds a copy of the source code – which will only be disclosed to the customer if certain (pre-agreed) conditions are met.
Copyright in computer programs can be difficult to navigate. If you require advice on this issue, please do not hesitate to contact Iain Freeman or Andrew Sutton.
