Who's IP is it anyway...?
In our recent In House Lawyers’ Forum, we discussed the presumption that the originator of material will own any intellectual property rights that arise. However, in the recent case of Coward v Phaestos Ltd and others (the IKOS dispute) the court found that the intellectual property rights in software were in fact owned by an implied partnership, and not by its original creator.
In 1991, Coward and his then wife Ambrosiadou, co-founded a hedge fund business; Ambrosiadou establishing the regulatory requirements, with Coward writing the software on which the business was founded. When they subsequently entered into a formal partnership deed, there was no mention of ownership of the software. Over time, the original software was developed and added to by Coward as a partner under the partnership deed, and subsequently by employees of IKOS. In 2009, when the marriage broke down, Coward claimed ownership of the software, and tried to terminate IKOS’s rights to use it.
However, the court found that the software was so fundamental to the original partnership, they had to conclude that the software was a partnership asset. They cited a number of reasons:
- Coward and Ambrosiadou had jointly taken steps to establish a business and in doing so, created an implied partnership; therefore, when writing the software, Coward was in fact a partner under this implied partnership;
- after a formal partnership deed was then signed, Coward’s continued development of the software was undertaken as a partner in the business, and therefore any rights in material created at that time were owned by the partnership (and not Coward in his personal capacity);
- further development of inextricably inter-related software code by employees of IKOS were inconsistent with Coward’s claims of ownership in his personal capacity.
Cowards’s implied right to download and use the software ended when he resigned as a director of IKOS. When Coward downloaded a copy of the software from IKOS and began to use it in his new business he was, in fact, breaching the confidentiality and copyright of IKOS in the software.
The case highlights the risks that organisations run by failing to clearly establish ownership of both original and subsequent developments of intellectual property rights. Whilst there is a presumption that rights will be owned by their creator, authorship is not a guarantee of ownership.
The danger of relying on implied rights is that the terms of those arrangements are unclear and uncertain. This can affect the value of the business when looking for sale or investment, and can risk costly infringement cases. Whilst on this occasion, IKOS were able to defend their position in court, for many businesses the cost and management impact of a court case means that a compromise solution is often sought.
The good news is that it is not too late, and retrospective arrangements can be put in place to clarify the position before relationships breakdown making a compromise unobtainable.
For advice on clarifying the ownership of your material, or arrangements to transfer or licence intellectual property please contact Elisabeth Bell.