Hidden IP: Entitlement to IP: First ownership, assignations and implied licences

Every day, businesses generate valuable intellectual property ("IP") - often without realising it. In this blog series, Andrew McDonald draws attention to some of the IP being created by businesses, which might be overlooked, undervalued, or not utilised.

In a slight twist to the format, this week, we will be looking at a common oversight in relation to ownership and licensing of IP rights – specifically copyright, first ownership, and implied licences to that IP.

Entitlement to IP - common oversights

Almost every business will need assistance in developing IP assets, for example, design of logos, photographs, software, websites, CAD drawings, and/or schematics. Where a business brings in a contractor to do any of this work, it might be assumed that by paying for the design of these items, they are also obtaining the ownership right to it. Without express wording to this effect, that is unlikely to be the case.

First ownership

All of the aforementioned designs are likely to attract some level of copyright protection. Under the Copyright, Designs and Patents Act 1988 (“CDPA”), the first owner of any copyright work is the author, in most cases, the creator of the work. Where the work is created by an employee in the normal course of their employment, the work will belong to the employer, unless they have agreed otherwise. However, that is not the default position with a contractor. So, if a contractor is brought in to create a design or even write the underlying code, then the right to that design or code is likely to vest in them, at least at first.

To take ownership of the work, it must be formally assigned to the employer/commissioner by the contractor. Under the CDPA, any assignment of copyright (or in Scotland, assignation) must be in writing. Accordingly, it is important that the initial contract makes express provision for the copyright in the end product being assigned to the commissioner. 

Implied licence

What happens where the parties have neglected to provide for any transfer of title? The commissioner/employer has clearly paid for something, and so it is unlikely that they will not be entitled to anything. Instead, they are likely to receive an implied licence to the work. The 1998 case of Robin Ray v Classic FM established that any such licence will be limited only to the extent necessary to give business efficacy to the contract. As such, that licence may fall well short of the licensee’s expectations. For example, it could preclude the right to sub-licence or transfer their right to the licence or limit the purposes for which the licensee is entitled to use the work or the duration over which it can be used.

Other types of IP

The same general position as set out above applies to both unregistered designs rights under the CDPA (see our previous blog on this subject here) and registered design rights – the creator of the design will be the first owner of the design, unless they are an employee. 

For trade marks, ownership begins at the point of registration and so there is less scope for issues of initial ownership arising from the kind of situation outlined above, unless an application has been made in bad faith. 

Likewise, with patents, the inventor or the inventor’s employer will be the first owner of the patent, and ownership begins at registration. A contractor who has made a contribution to the inventive concept of the invention may have a claim to being recognised as the inventor or co-inventor of the patent. 

Like copyright, transfer of ownership of any of the above types of IP requires a written assignment.

Conclusion

For businesses, the key takeaway is that outsourcing any element of the creation of IP may have consequences for ownership. Unless the creator is an employee acting in the course of their employment, copyright and similar rights will usually start with the individual or contractor who created the work. Without a written agreement assigning those rights, any implied licence may not be sufficient for all the uses which were intended for the work.  

Clearly, then, reaching a written agreement on the transfer of rights is crucial. Contracts with designers, developers, consultants, and other contractors should state clearly who will own the IP, when ownership transfers, or, failing that, the terms of any licence. If the design may be something that will be used for many years to come, these contracts need to be carefully filed away.

If you would like advice on ownership and licensing of IP rights, do not hesitate to get in touch with our specialists.

As part of this blog series, Andrew wrote about the importance of database IP rights and the various types of IP protection available for databases; the importance and the various benefits of registering trade marks to protect product packaging in the market; the benefits of businesses’ confidential information and know-how to qualify as a trade secret, and what information can be defined as a trade secret; and, the commercial benefits of unregistered design rights under the Copyright, Designs and Patents Act 1988 compared to other IP rights. 

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