Copyright in computer code
Who owns the copyright in computer code? What are the formal requirements for the transfer of ownership at law?
With the increased ability to seek out freelance developers through platforms such as Airtasker and Upwork, more and more business founders are entering into informal software development arrangements. This newfound connectedness and access brings with it a host of advantages, however, the lack of a formal arrangement brings with it the dangers of not adequately protecting ownership of any assets produced. It is important to consider copyright in computer code.
Copyright is a bundle of rights which apply to literary, dramatic, musical and artistic pieces of work. These rights are covered by the Copyright Act 1968 (Cth) (Act) and include the right to reproduce, publish and adapt the work. Computer programs or compilations of computer programs are also protected by the Act. As such, not only code, but also proprietary databases are protected as copyright. In the case of a computer program, ownership includes the right to:
“enter into a commercial rental arrangement in respect of the program” Section 31 Copyright Act 1968 (Cth).
Who owns the copyright in computer code?
Many business owners when engaging a software developer, either assume, or fail to consider whether, they own any code developed from the engagement!
Typically, the author of any literary work (including computer code) holds the copyright in the work. This means that even when you engage and pay a software developer to develop code for your business, the developer may be considered as the owner of the copyright in the computer code.
The main exception to this is where the literary work is developed by an employee of a business. If an employee under a contract of services develops computer code, the owner of any copyright in computer code is the employer. Therefore, determining whether your developer is a contractor or employee and having in place a clear Services Agreement is important.
So, in summary, where you engage a software developer (who is not an employee) to develop your code there is a strong likelihood that initially the developer owns the copyright in the computer code.
How do you transfer the copyright in computer code?
Now that we understand that ownership of the code should not be assumed, what do you have to do to have the copyright in computer code transferred?
196(3) of the Act states:
‘An assignment of copyright (whether total or partial) does not have effect unless it is in writing signed by or on behalf of the assignor.’
What this means is that where you want to ensure that any copyright in computer code which is developed is assigned to you, you need to have your developer agree to transfer ownership in writing and then ensure they sign it.
Ideally when you engage with a developer you enter into a written agreement for their services. That may be in the form of a Services Agreement or a Software Development Agreement. Whatever form the agreement takes you will need to ensure the copyright in the code is assigned correctly. In our experience this is not something which is done particularly well. So make sure you have any agreement reviewed by a Software Development Lawyer.
If you have not entered into a formal agreement with your developer, or the intellectual property clauses are deficient, you can remedy this with an IP Assignment Deed. An IP Assignment Deed can be used to transfer the ownership of the copyright in computer code to you.
What about code libraries?
A question we normally receive is how do code libraries relate to copyright in computer code?
Often software developers have spent years building up valuable code libraries. This means that businesses which engage these developers are able to benefit from their code libraries without having to pay the full cost of their development.
When assigning the copyright in the computer code, a tug-of-war can ensue where businesses wish to obtain ownership of all the code. However, developers may have spent years building their library and do not wish to lose ownership of it. Similarly, those engaging the developers don’t want to pay for thousands of hours of development when they can leverage the past experience (make use of those libraries) to get their product delivered quickly.
What can instead be found is a middle ground where a license to use the code library can be assigned by the developer to the business, whilst ownership of the bespoke code developed is still transferred.
Another issue to be conscious of when using code libraries is the case of Redrock Holdings Pty Ltd & Hotline Communications Ltd v Hinkley  VSC 91 (4 April 2001) where it was established that a code library was owned by the business, not the developer. This case serves as a warning to developers who seek to protect and re-use their own libraries.
Further complexity is added to the copyright in computer code puzzle when you consider the use of third-party code libraries. Developers often hold licenses to third-party code libraries and consideration must be given when assigning copyright as to the rights available and whether a license or assignment of the rights in the code library can be granted. Where a developer only has a licence to use a code library (or framework) then they do not have the rights to assign the copyright in the code library.
Finding the balance
Speak to a technology lawyer who can help you find the balance.
Typically, the assignment of copyright in computer code or its licensing is poorly managed without expert advice. This can leave businesses with limited rights to what can often be their core product or a critical element of their business that they have spent significant resources in having produced. Founders who are hoping to raise capital will need to ensure they can show a chain of ownership for their intellectual property if they expect angel investors or VC’s to hand over cash.
Similarly, software developers can be putting at risk years of hard work in developing their code libraries by not having in place adequate protections.
Fortunately, with proper advice from a qualified Technology Lawyer, businesses and software developers can easily find a compromise which satisfied both needs and budgets and puts into writing clearly what each parties rights and responsibilities are.
Getting the right advice
Speak to a technology lawyer with real software development experience.
Michael Barber is a Technology Lawyer with a solid background in software development who can assist parties in negotiating and documenting software development agreements. With support of the IT Lawyers Team at IT Lawyers Brisbane Michael and his team support founders, SMEs and software developers alike.
Whether you are a software developer with a desire to protect your code, an established business engaging a software developer or an entrepreneur with a new Tech Startup make sure you get off on the right foot with professional advice.
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