Intellectual Property & Bespoke Software

Intellectual Property & Software

This blog looks at Intellectual Property (IP) within software and its surrounding material. The discussion regarding software protection is vast and has been raging on for years, furthermore, the discussion of how to monetise this protection is not a simple one. In short if all the issues were to be looked at and explained in one blog, it would be a tome and so here we will introduce some of the concepts and issues only.

The problem with Intellectual Property and Software Protection

It is an issue that has been at the core of software production since its inception, how to protect what you or your Company has produced? What protection is available? What is to be achieved by protecting your software or even, should you even protect it?

All software production starts with an idea related to an effect to be achieved, whether it is to improve the integrity, efficiency or reliability of a process, to entertain or inform (such as with games and television), or to solve an issue between technologies. It is at this point when a design of a software solution begins and the creative process is undertaken.

Though it would be factually incorrect to say that IP is a modern concept, having a history reaching back as far as the infamous “Statute of Anne (Copyright Act 1710)”, It is correct to say that the management and exploitation of IP within commercial enterprise is a relatively modern idea. Indeed, as a concept it continues to inform an ever growing area of the legal system and commercial strategy. Though the most well known of IP discussions are dominated by Copyright cases (generally), the Patent and Trademark areas of law have grown significantly over the past 50 years and it is nestled between the protection afforded by Patents and those arising from Copyright that software sits.

Clearly it would be understood that the history of protecting software doesn’t stretch back much beyond the 1980s, but as software has seen its impact move from giant server-rooms and the single machines, to the palm of everyone’s hand, the growth in innovation and expression has been significant and therefore the need to protect IP has been increasingly presented.

Taking the broadest look at the forms of protection available for IP, they generally fall into the divisions of registered and unregistered rights with registered rights being those that must be claimed and assessed to be valid and unregistered rights arising from the creation of the works. Registered rights tend to be made up of Patents, Trademarks and Registered Design Rights, whereas unregistered rights subsist in Copyright.

Protection generally

Due to the nature of registered rights, it is often the case that they are simpler to enforce. This is because the concept being protected is clear, having been through a checking procedure before the right is allowed. With unregistered rights the question to whether an infringement of rights has taken place may need to be argued and the consequential expense can be high. Unfortunately it is within Copyright works where the most literal and common protection is realised for software as Copyright works are broken down (generally) into Literary, Dramatic, Musical and Artistic works, as well as Database Designs. All of which may form part of software.

Though it is important to recognise that the rights to unregistered works arise by the nature of their creation, registration may still be possible and may support future operations such as sale, assignment or litigation.    

Software and Protection

As previously stated, the protection for software falls within the bounds of both patents and copyright (though primarily copyright), though due to how the legal protection for IP was formed, the rights do not overlap.

A patent protects a realised idea, though the idea must me novel, inventive and have an industrial application to be considered able to be patented. Specifically excluded from the ability to obtain a patent, alongside mathematical methods and methods of doing business are computer programs, “as such”. Generally, this means that the written computer program cannot be protected by patent and is split out, however a patent is still potentially available where an idea is, realised using software.

The idea of excluding a computer program “as such” from patent protection is to prevent layers of protection over a single article and in this case the written code that forms the computer program is protected under Copyright law (see Copyright Designs and Patents Act 1988), specifically literary works, though will also cover the artistic works in the User Interface (UI), the Databases used (if any) and the supporting documentation. In this regard the Copyright arises as soon as the tests for Copyright in the UK are met, in that the article created is original (not copied) and the author has used some judgement or skill to create the article. Once the criteria is met, the right in the works is present and belongs to the author (unless assigned to another party such as through employment), this right protects the “whole or substantial part of the work” being copied (ignoring the legal exclusionary conditions e.g. experimentation, critic etc.), and absent the permission of the rights owner. The idea of infringement is extended to a person, whom, without the consent of the rights owner, imports or sells a copy of the protected article (where s/he knows or has reason to believe it is an infringing copy).

We are therefore presented with two ways to protect the works generated in software, we look for novel and inventive achievements that have a technical effect and we identify what literary or artistic works are present.

The Copyright born in the works from construction of the software design, the written code that forms the classes, the database arrangement (if one is used) and the images that make up the UI or the guides that explain how the software works, are but a few examples.

Commercialisation and points of Conflict  

The commercialisation of IP can be difficult and should always be considered carefully as it may not actually be where the value of the IP lies. It may be that the sale of the IP would cut your business off from future revenue streams, it may be a short term monetary gain that would cause your business additional effort in the future (for example through rework)? When the issues are considered, if there is still a desire to monetise IP, it can be done through the act of Licensing or by Sale.

Licensing generally falls into a contracted license, which will allow a party or parties to utilise the IP in question for an agreed period in either a sole, exclusive or non-exclusive capacity. Sole, as the name suggests, means that the person licensing the IP may be the only person to exploit the IP covered by the license, excluding the actual owner of the IP from any act that would be considered infringing (see CDPA 1988 S.60) from the date agreed in the license. An exclusive license allows the owner of the IP and the party named in the license the use of the IP covered in the license and, as the name suggests,  a non-exclusive license allows the IP to be used by a particular party but additional licenses may be issued to further parties. The sale of IP transfers the ownership and rights to the purchasing party, preventing the use of that IP without the new party’s permission.

The idea of sale and licensing is significant in software as, although licensing is fairly common in software the sale of IP in software refers to the materials that created the software, not simply the software itself.

This raises an important question of ownership in regards to software that is part of commissioned works. Surely if you produce software on behalf of a person or company, isn’t it theirs? Well, absent any declaration of the assignment of IP rights from the outset of working together, the answer is yes and no, it depends how you consider software.

In a field such as automotive production, if a consumer requested the construction of a bespoke car, they would naturally expect the car to be produced as they described and for them to drive off in their brand new car, but what about the Company who built the car? Can they build more of them to sell? Does the person who commissioned the car build get to take all the components of the design with their car? Does the fact that the person paid for a car to be produced, mean that they own the Intellectual Property behind the car? Well no is the short answer (absent assignment). The person in this case owns what was to be produced, they own the car.

The example above is somewhat of an oversimplification and gets more complex when discussing issues surrounding the assumption of or implied ownership. What thought was given to “what happens after” before the work of design and construction had taken place? Did the charge for the work seem fair for a one-off design or did the car manufacturer clearly price intending to acquire future revenue from the works? This of course does not impact the default legal position, but may inform an argument.

In software this is the same, the product is the software, but the source code and design materials are your factories, moulds, presses or robotic arms (to extend the analogy to breaking point). So, by not giving the IP away as part of a sale, significant portions can be reused later by helping to speeding up the instantiation of future functionality (building software repositories), the resale of the software or the provision of licenses.

Unlike the field of manufacture, the IP that arises in software can cause points of conflict as assumptions are often made absent the clear understanding of software boundaries. Therefore, it is the responsibility of all parties to understand their position from an IP perspective, make it clear to all parties, protect it and understand the consequential commercial impact, before entering into an engagement of works, especially where that engagement is lengthy.