A company that commissions bespoke software from a developer won't necessarily own that software unless it agrees clear contractual terms. The most recent restatement of this important principle came earlier this year when the Court of Appeal dismissed a claim by Meridian International Services Limited that there was an implied term that the copyright in bespoke software should be assigned to it.
The case, known as Meridian International Services Ltd v Richardson and others, makes for interesting reading. It's a story about software developers who fall out with each other and never formally agree in writing who owns the financial forecasting software which had been developed for the Consumer Healthcare Division of GlaxoSmithKline.
Both the High Court and the Court of Appeal found that the software, known as StratX, belonged to the actual developers who wrote the code, rather than Meridian who had won the work and asked the developers to do the build StratX.
After reviewing the background which included the evidence of unreliable witnesses, the "phoenix"-like rebirth of Meridian International Services Ltd, immediately after the insolvent demise of Meridian Associates and the tangled web of the financial arrangements that existed between Meridian and the developers, the Court found that it could only imply terms into legal contracts when it was "necessary", and in this case they didn't think it was. It's a reminder that courts can only ever imply terms into agreements when they are "strictly necessary" and not just convenient.
Meridian had argued that they had to own the software not only because they wanted to be able to sell it to other customers, but also because it contained "confidential information". The Judge in the High Court, and supported by the Court of Appeal, took a very different view. Since the software was bespoke it couldn't really be resold to anyone else, unless their processes were identical to GlaxoSmithKline- which the judge commented was an "unlikely eventuality".
As to the idea there was confidential information in the software, the judge didn't actually agree, but mentioned that even if there was something confidential in there, then it could be protected as confidential information and that didn't mean the court needed to imply a term that the copyright should be assigned.
Aside from being a useful reminder that the courts are always reluctant to imply terms into agreements unless they really have to, the principles of copyright ownership are unchanged:
- The author of the work (or his or her employer) is the first owner of the copyright;
- The position is not changed simply because the work was commissioned;
- In any commercial transaction involving the development of bespoke software, there needs to be written agreement about the ownership - and assignment - of any copyright.
Post script: I have linked to the High Court judgment of Mr Robert Ham QC in the body of the post, which as I have said, provides an interesting (even dare I say it, entertaining) read.
There's less detail in the Court of Appeal's judgment which is here. Plus there's also a note of the respondents' application for security for costs which was held before the full Court of Appeal hearing. The respondents (i.e. the actual developers of the software) would have been keen to ensure that if Meridian lost on its appeal, they would be able to recover their costs. It provides information on the high costs involved in this sort of litigation, with Meridian ordered to provide security of £53,000.
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