Transfer of ownership of copyright - will an implied term suffice?

The Court of Appeal, in Meridian International Services Ltd v Richardson & Ors [2008], looked at ownership of copyright in computer software. Copyright belongs to the author and can only be transferred to another with the author's consent. If there is no express term in a written contract transferring the copyright, potentially a party can argue that there is an implied term. Meridian, who commissioned the bespoke computer software, alleged that they had been granted ownership in the copyright of the financial forecasting software. Due to a lack of any express term, Meridian had to rely on an argument that there was an implied term in the contract (which was oral) with the software developers that granted it ownership of the copyright.

The facts

Meridian Associates Limited were commissioned to provide a bespoke financial forecasting software system (called Project Vista) for Consumer Healthcare UK (CHUK) a division of GlaxoSmithKline (GSK). In August 2005, Meridian Associates found themselves in serious financial difficulties. As a result the project was taken over by Meridian International Services Limited (MISL), the claimant in this case. Mr Aldersley and Mr Richardson, who worked for both Meridian Associates and MISL on this project, were becoming increasingly concerned about outstanding monies due to them. Despite assurances from MISL that all outstanding monies would be paid, money remained due to both and in December 2005 Mr Aldersley and Mr Richardson refused to continue working on the project.

At this point the project had reached an advanced stage, during which computer software called StratX was created. The source code was written by Mr Aldersley. As such, he was the legal owner of the copyright. On 9th January 2006, IP Enterprises Limited, a company set up by Mr Richardson, agreed to complete the outstanding work on the project with Mr Aldersley. Terms as to how payment was to be made were agreed. This agreement was oral. The contract for Project Vista was then executed by MISL and CHUK in April 2006.

Implying a term

MISL alleged that it was an implied term of the oral agreement reached in January that the copyright to StratX would be assigned to it by IP Enterprises and Mr Aldersley. MISL alleged the term was implied for necessity and to give business efficacy and/or it was so obvious as to go without saying. They alleged that it was well known to all involved that the project was a loss leader to MISL and no commercial benefit would be obtained by them unless it owned the copyright to sell the software package to other customers. The copyright was also required to prevent GSK using StratX outside CHUK.

If a term is to be implied it either has to be implied as a matter of necessity (to make the agreement work) or it is so obvious it goes without saying. In both instances the subjective intentions of the parties are not relevant. Subsequent events and discussions are not material. The background circumstances must be judged objectively. Terms implied "by necessity" must be of strict necessity. Only those terms strictly required will be implied and no more. If a term is to be implied because it is "so obvious" then it must be "so obvious" to, and intended by, both parties. It must be "so obvious" that if an officious bystander had asked them whether there was to be such a term both would have answered "yes, of course". On the facts of this case, the Court of Appeal agreed with the judge at first instance, rejecting the implication of such a term into the January agreement. The court could not say that the term was required "due to necessity" and they were not convinced that Mr Richardson, Mr Aldersley or IP Enterprises would have responded to the officious bystander in the manner required. Ownership of the copyright remained with the defendants.

Things to consider

The author of a software programme (or his employer) is the owner of the copyright for that design. The fact that the software was commissioned and paid for by another party does not transfer the ownership of the copyright; it remains with the author. Copyright can only be assigned if the author consents. Any such agreement should be recorded in a written contract. It is always going to be an uphill struggle to convince a court that a term should be implied transferring the copyright to a person other than the author. This is because such a term is rarely (if ever) going to be one which can be said to be of strict necessity and as both parties are required to have intended it, it is rarely going to pass the officious bystander test.