People often labour under a mistaken view that if they pay a contractor for software to be designed and created, then they own the software. But that's not the case under Irish law. All too often, clients receive a nasty shock when they learn that the software that they commissioned and paid for is not owned by them.

Businesses often outsource the development of software to specialised companies and frequently hire individual contractors to work in their IT department to develop bespoke software. It does not make a difference that the contractor is not a company but is an individual contractor. It is also not relevant whether the software is written 'on spec', whether it is produced as the result of a commission or tender, or paid for on a time and materials basis. The principle remains the same: there must be a written assignment from the creator of the intellectual property to the customer for full ownership to pass, unless the creator is an employee. This principle is reflected in the Copyright and Related Rights Act 2000.

Failure to record the rights and obligations of a customer and contractor in writing can cause issues, not only in relation to ownership of the work created. If you do not have an agreement in writing, you may not know what you are paying a contractor for. Can the developer create a similar product for a competitor? Do you have the right to maintain or develop the product yourself if the developer's services become too expensive? Lack of clarity can give rise to problems in the future.

Albeit an English law case, the recent decision of Wrenn, Integrated Multi-Media Solutions Limited v Landamore demonstrates this lesson nicely. Although it has certain differences, English law also has within its copyright law the principle that full ownership of copyright can only be transferred by way of written assignment.

This case concerned a dispute between Stephen Landamore, a computer programmer, and Laurence Wrenn. Wrenn commissioned Landamore to create software. No express/ written agreement was made concerning the ownership of that. A dispute arose, Landamore was awarded royalties of slightly over £45,000, Wrenn was informed that he did not own the software, he had no more than an implied exclusive licence.

The cost of putting in place a written agreement from the outset easily counters the costs going to court to prove your rights. Disputes in relation to ownership of intellectual property are not only costly in terms of legal costs, but inevitably time-consuming for management. The unwanted publicity of a court case demonstrating the lack of properly documented arrangements is not a selling point for any client. Written contracts assigning software ownership can often be a very simple and short document.

So what should you do? First, review all arrangements with freelancers or contractors who produce software for you. When considering the arrangements, check that:

1. there is a written agreement
   
   
2. the software in question is fully described in the written agreement
   
   
3. the written agreement answers the questions of ownership of the intellectual property rights in the software
   
   
4. if the contractor owns the software, does the agreement set out what you will be able to do with the software? Can you maintain it? Are you entitled to the source code? Is the licence exclusive?
   
   
5. if the contractor owns the software, can it use the software elsewhere or give it to someone else?

If you find that you have commissioned software but there is no written agreement, consider if it is possible to record the arrangements between the parties retrospectively. Review your files to see if there is any evidence to support any ownership claim you may have, and consult a lawyer regarding your position. Even if it transpires that what exists is a licence agreement between you and the contractor, try to record the terms of the licence so that the restrictions and parameters of the licence are known to you as a licensee.

But remember: a customer is in the strongest bargaining position when it is a prospective customer. Endeavouring to secure valuable intellectual property rights after the award of a contract to contractor can be difficult.

For further information please contact Deirdre Kilroy.

Spring 2008.