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Thursday, 29 July 2010 |
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Contractor's legal guide - intellectual property
Monday, 26 May 2003
A common clause in contracts you will come across has to do with intellectual property. There are several types of intellectual property. They are copyright, trade marks, patents, circuit layouts and confidential information.
With exception of confidential information all these forms of property (or rights) come from the legislative power of Parliament in the form of various acts. Those rights are however enforced by the Courts.
We will now look at each of these rights in turn.
Copyright
Copyright arises in relation to a variety of works and non-works. Works include literary works (including computer programs), musical works, dramatic works, artistic works and compilations of works.
There are also things under the act known as non-works. These include soundtracks, cinematographic films, television and sound broadcasts and published editions of works. That is not to say that non-works are a lessor class of rights – they simply have different rights. In fact each of the works under the act have different rights so the distinction can be a bit meaningless.
The owner of the copyright in a work or non-work is granted various exclusive rights. These typically include (but do vary based on the category of work/non-work) the right to:
- Reproduce;
- Publish;
- Perform;
- Broadcast;
- Transmit;
- Adapt;
- Broadcast; and
- Communicate.
The right normally arises when the work is reduced to material form and in Australia is not a registered right.
Copyright protects expression, not ideas or information. Hence in some circumstances there is scope to create complete new works (programs) in circumstances where the new work has the same function as the old work. The concept is that expression and not function is protected.
Copyright normally last a long period of time – the life of the author plus 50 years.
Now for the important part, which gives rise to many disputes. The ownership of the copyright is normally the author unless:
- The author is an employee in which case the employer is the owner of the rights s35(6); or
- The rights are assigned in writing to another person s196(3).
Accordingly, employers are the owner of the copyright of any works produced by their employees whereas the contractor retains the intellectual property rights If that is the case, and it is, what does the principal receive if they don’t get the copyright? The principal normally receives whatever rights are set out in express or implied terms of the contract. See this article for the requirements for implied terms. This normally means that the rights are a licence to use the program for the purpose for which it was expressly supplied. This normally does not mean worldwide distribution and exploitation outside the principal company. Nor does it mean necessarily mean that the company is a position to supply the code to third party developers to do additional work.
Consideration therefore needs to be given to whether or not the source code was licensed or simply the object or executable code version. Obviously this can make a big difference to the respective negotiating positions of the parties. Warning – it is often not a good idea to upset a customer.
Based on the above issues, you can see that a good contract will:
- Clearly assign any intellectual property rights, which may be appropriate to assign; and
- Clearly licence on a suitable basis any rights, which are not assigned.
Sample clauses are as follows.
- Customer acknowledges that Supplier remains the sole owner of the intellectual property rights in the software. This ownership is absolute, worldwide and includes all intellectual property rights arising from or in relation to any future software
- If Customer has fully complied with this agreement but not before, Supplier shall grant Customer a non-exclusive and non-transferable licence to use the object code version of the software for the following purpose(s) …
- Customer shall not copy, alter, modify, reproduce, reverse assemble or reverse compile the software in whole or part or permit another to do same without Supplier's prior written consent except as authorised by this agreement.
- Supplier shall assign the intellectual property rights in the software, save for the Library Code, to Customer.
- Customer agrees that Supplier may continue to freely use concepts and ideas embodied in the software (but not the software itself), including but not limited to those that relate to program structure or technique.
- Supplier shall retain the intellectual property rights in all Library Code used by Supplier in the software.
- If Customer has fully complied with this Agreement, Supplier grants Customer the non-exclusive and non-transferable right to use and copy the object version of the Library Code as supplied to date, without fee, provided the Library Code is only used together with the software.
- Customer warrants that any materials supplied to Supplier by Customer do not infringe the intellectual property rights of any person.
To prove an infringement of copyright it needs to be established that:
- The person bringing the action is the copyright owner
- An exclusive right of the copyright owner has been breached by reproducing etc a substantial part of the work.
Confidential Information
An obligation of confidence arises in two ways:
- The first is by disclosing information in circumstances of confidence which gives rise to an obligation not to disclose or misuse that information. Disclosure or misuse of that information occurs and loss and damage is suffered.
- The second is a express contractual obligation of confidence which arises pursuant to a contract and which is breached by a contracting party.
For a negotiation point of view serious consideration needs to be given by the parties to what is really important and confidential and what can be done with that information to a make sure that the protection is adequate.
From a practical perspective, confidential documents should be marked as such and access to all confidential information should be limited only to those who need to know about it.
A record should be kept as to who has had access to and who has created confidential information.
Finally, a reminder of the parties' obligations should be given at the beginning of meetings, which will involve the disclosure of confidential information such as contract negotiations, and should be followed up with a memo or letter to each person who was present.
Common clauses protecting confidentiality include:
- Customer acknowledges the confidential nature of the Confidential Information.
- Customer hereby agrees to ensure that the Confidential Information is kept confidential.
- Customer shall not directly or indirectly divulge or communicate or otherwise disclose the Confidential Information, in whole or part to any third party and Customer shall make no use of any of the Confidential Information without the express written consent of Supplier.
- Customer shall take all necessary precautions to prevent any disclosure of Confidential Information to unauthorised third parties and shall inform Supplier of any suspected or actual disclosure of the Confidential Information.
- Customer shall not remove or cause to be removed from Supplier’s, its clients’ or its business partners’ premises any Confidential Information without prior written consent from Supplier.
Patents
Patents are intellectual property rights which:
- Protect function not expression. You will recall that copyright protects expression not function.
- Obtained by registration with IP Australia. www.ipaustralia.gov.au;
- Are expensive to obtain;
- Are owned by the parties that register the patents. The inventor will be noted on the registration (not necessarily as owner). In many cases the inventor is an employee and the employer has been assigned the rights either expressly or by virtue of the relationship of employer and employee.Note, however, that to comply with the Patents Act the assignment must be in writing.
- Are for a much more limited time frame (usually 20 years for standard patents)
To obtain a patent the following need to be proven:
- be new, which means that the invention has not been publicly disclosed in any form, anywhere in the world;
- involve an inventive step for a standard patent. This means that the invention must not be obvious to someone with knowledge and experience in the technological field of invention; or
- for an innovation patent it must involve an innovative step. This means that there must be a difference between the invention and what is currently known about that technology, and that this difference must make a substantial contribution to the working of the invention.
- be a 'manner of manufacture'. It includes any device, substance or method in process, but it excludes artistic creations, mathematical methods, plans, schemes or other purely mental processes; and
- be useful - your invention should do what you say it will do.
- It also must not be subject to secret use prior to the application for the patent.
An example of a patent is lzh compression.
A patent gives the patentee the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention.
Trade marks
A trade mark is a form of intellectual property right which
- is a sign used to distinguish goods and services provided by one party from goods and services provided by another party
- Obtained by registration with IP Australia. www.ipaustralia.gov.au;
- Are relatively inexpensive to obtain;
- Are owned by the parties that register the trademark.
- Are for a unlimited time (subject to continuing payment of registration fees).
To be registered, a trade mark must be:
- Distinctive;
- Not deceptively similar to previously registered mark; and
- Not descriptive
The trade mark owner has the exclusive right to use of the mark in relation to the goods and services with respect to which it was registered.
It may be assigned in writing and it may be licensed as may other forms of intellectual property rights.
Whilst there are other forms of intellectual property rights it is now time to return to an analysis of some contractual terms.
This information is provided courtesy of White SW Computer Law
White SW Computer Law (wcl@computerlaw.com.au)
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