The complex case of Vitof Limited v Anthony John Altoff earlier this summer highlighted how courts go about deciding copyright ownership of source code where IP rights were created by a “director” before but in anticipation of a company. In such circumstances the property will be held on trust by the director for the benefit of the company regardless of whether the agent becomes an employee of the newly formed company later. As you may know computer programs and preparatory design material are copyright protected material as literary works under the Copyright, Designs and Patents Act 1988 (CDPA) even though a “computer program” is not defined by the Act.
Infringement of copyright occurs under S17 where copying occurs without the consent of the owner. By S213 of the same copyright is owned by the first creator unless created in the course of employment in which case it will be owned by the employer or created by commission in which case it would be the person commissioning the work.
In this case two individuals discovered a gap in the market for a high-speed labelling machine in which later one later claimed he wrote the software for this alone whilst the other disputed this and claimed collaboration and hence jointly owned.
Later a dispute arose that was not resolved and this led to one party claiming the outright copyright.
Further issues arose until the matter escalated to injunctive court action and a claim for copyright infringement for use of the software in another business.
Key to this summary judgement by the court was the judge’s reliance and scrutiny of the recitals to and terms of the shareholders’ agreements to support the argument that the software development was held in trust for the embryonic company.
The use of written contracts here were key in advancing the argument for the company that the IP was held in trust for it. Here the low cost of the shareholders’ agreement in comparison with litigation costs and the potential loss of the IP showed this was an investment in the security of the company well spent. Getting an agreement drafted in writing was ideal as a mechanism for recording the parties’ intentions before the relationship broke down.
