Understanding the legal framework that underpins the exploitation of such information is critical to ensuring that the relationship between contractor and client is appropriately documented.
In this article, solicitor (and former freelance consultant) Neil Forrest sets out the basic rules that apply to the creation of intellectual property ("IP") and the options for the parties in managing the exploitation of any IP created during the relationship.
Copyright as an IP right seeks to protect the form of the expression of ideas - not ideas as such. Copyright law is intended to provide a right to owners of copyright to prevent others from copying their work.
Copyright protection in the United Kingdom is set out in the Copyright Designs and Patents Act 1988 (CDPA). The CDPA protects copyright works from the point of creation such as original literary, dramatic, musical or artistic works, sound recordings, films, broadcasts and typographical arrangements of published editions of copyright works. Contractors during periods of consultancy mainly create literary and artistic works.
A "literary work" would include a table or compilation, a computer program, preparatory design material for a computer program and a database. Literary works also comprise of employee handbooks, contracts for services, reports, website content and marketing materials.
"Artistic" works would include graphic design materials, architects and engineering drawings (including software architecture drawings) and other diagrams such as flow diagrams and graphics.
The duration of copyright in literary and artistic works is generally 70 years from the calendar year in which the author dies. The copyright in computer generated works (including computer programs) expires at the end of 50 years from the end of the calendar year in which the work was made.
To use software as an example: Just because software is no longer being sold or supported does not mean that it may be treated as freeware or open source. The duration of copyright in software means the majority of software systems in use within organisations are likely to be protected by copyright, including old legacy software systems such as mainframes.
Who owns the copyright?
Under the CDPA the general rule is the author (creator of the work) is the first owner of copyright. However, where a work is made by an employee in the course of their employment, the employer will be the first owner of copyright in the work, subject to any agreement to the contrary.
A contractor working for a client under a contract for services, as author of the copyright work, is likely to be the first owner of copyright.
Where a work is jointly authored, for example a software program, the general rule is that the joint authors will be the first owners of copyright. The exception to this rule is where joint authors are employees in which the employer will be the first owner of copyright in the work.
The owner of the copyright has the exclusive right to copy the work, rent or lend the work and to make adaptations of the original work.
The rights conferred on a copyright owner also serve to prohibit a person who is not an owner of the copyright work from performing any of the restricted acts. A person who performs a restricted act on a copyright work without the consent of the copyright owner will infringe copyright.
A copyright owner who has had their copyright work infringed may take action in the courts to seek damages, injunctions to prevent use of the copyright works, orders for delivery up of the infringing copyright works and orders for seizure of the infringing material.
Patent protection in the United Kingdom, is subject to the Patents Act 1977. Patents as an IP right seek to protect ideas that are new, involve an inventive step, are capable of industrial application and are not specifically excluded from protection as a patent.
The specific exclusions from patent protection are largely guided by public policy and these include: computer programs, scientific theories and mathematical methods and rules for doing business. However, patents have been granted for ideas such as encryption algorithms.
A patent confers a monopoly right which permits the proprietor to stop third parties from using the invention. A person who undertakes an infringing act such as manufacture of goods without the consent of the patent owner will infringe the patent.
Patents last for 20 years from their filing date, subject to payment of renewal fees and the patent not being invalidated.
A patent owner who has had their patent infringed may take action in the courts to seek damages, injunctions to prevent further infringement, orders for delivery up of the infringing goods and orders for seizure of the infringing material.
Making a patent application
Patent protection does not arise automatically. An application has to be filed and then the application has to be granted before the patent applies.
However, a patentable idea disclosed to a third party prior to filing the application for the patent would no longer be patentable if the inventor discloses the idea without a confidentiality agreement.
Any person, including a contractor, either alone or jointly with another, may make an application for a patent in the United Kingdom, or a European patent or international patent applications.
Primarily, the right to be granted a patent belongs to the inventor. However, inventions created by employees in the United Kingdom are generally taken to belong to the employer, but only if made:
- in the course of normal duties of the employee;
- in the course of duties specifically assigned to the employee; or
- made in the course of the duties of the employee which duties were such to give rise to a special obligation to further the interests of the employer's undertaking.
The general rule of thumb for a contractor is that if he or she is the actual divisor of an invention it will be he or she who has the right to be granted the patent.
Software patentability - brief outline
In the United Kingdom the general rule is that if patent claims relate to a computer program as such (i.e. the computer software itself) they are excluded from patentability.
However, it is well established that the application of a computer program may well be patentable if it possesses technical character. This is a difficult test to establish but the United Kingdom and European Patent Offices now tend to follow the rules set out in a case1 heard by the Court of Appeal to determine the patentability of computer-implemented inventions. The test for patentability of computer-implemented inventions has been recently reinforced in the UK in a further case heard by the Court of Appeal2. In essence, two main approaches have been identified by the Court of Appeal:
- The "technical effect" approach: this involves asking whether the invention as defined in the claim made a technical contribution to the known art - if it did not then the invention was not patentable;
- The "any-hardware" approach: this involves asking whether the claim involved the use of or was to a piece of physical hardware, however mundane (whether a computer or a pencil and paper) - if yes, the invention was patentable.
1Aerotel Ltd v Telco Holdings Ltd and others and In re Macrossan's Application  EWCA Civ 1371
2Symbian Ltd v Comptroller of General Patents  EWCA Civ 1066
A common clause to be found in a consultancy agreement will be an assignment of all of the IP rights (including inventions, patents and copyright) created by the contractor during the term of the agreement to the client.
The effect of an assignment is to transfer ownership of the IP rights created during the period of consultancy to the client in return for the payments made to the contractor during the period of engagement.
However, a contractor should be acutely aware of any IP already owned and their use of that IP during a period of consultancy. A direct assignment clause may have the effect of transferring the IP to the client. A freelance contractor’s 'stock in trade' may as a result become owned by the client.
It is important for a contractor to ensure that any IP already owned is adequately defined in the consultancy agreement and appropriately licensed (for the appropriate fee) to the client for use during and after the consultancy ends.
The creation, ownership and protection of IP rights is of paramount importance to both consultant and client. It is vital to understand what IP is likely to be created, how to protect it and deal with the appropriate allocation of ownership and exploitation of rights.
A failure to file a patent may result in significant loss of potential revenue streams to the client and subsequently loss of a contract for the contractor. If you believe that an idea may be patentable it is essential that the appropriate options are considered before disclosing the idea.
The law surrounding copyright and patents is complex and it makes sense to take specialist advice before signing a contract for services.
Neil Forrest (a former freelance consultant) is a solicitor at Shakespeare Putsman LLP.