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IP ownership - Consultants or employees in disguise?

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Many consultants and contractors are aware that, usually, when they create a piece of work for a customer, the intellectual property (IP) in the work belongs to them, not their customer (unless agreed otherwise).

The IP ownership may be assigned to the customer as part of the contract between the parties but, as the case of Sprint Electric Ltd -v- Buyer’s Dream Ltd [2018] shows, if an assignment is not explicitly stated, the IP ownership may be disputed.

In this case, Buyer’s Dream Ltd was engaged to create software for Sprint Electric Ltd and the parties entered into three written agreements setting out the terms of the engagement. Once the software was completed, Sprint Electric Ltd found they no longer had access to the source code and could therefore not modify the program or fix any bugs they found.

When Sprint Electric Ltd tried to claim IP ownership of the source code, Buyer’s Dream Ltd (by way of its owner, Dr Potamianos) denied the claim and stated that the IP in the software resided in Buyer’s Dream Ltd. Buyer’s Dream Ltd argued that there was no express assignment of the IP ownership in the agreements between the parties and that, because they had been hired as a consultant rather than an employee, the IP belonged to them.

The Court agreed with Buyer’s Dream Ltd that there were no assignments of IP rights in the agreements. However, when the court examined the manner in which Dr Potamianos carried out the work for Spring Electric Ltd, the Court’s view was that (despite the description of the parties’ relationship in the agreements) the legal relationship between the two was actually, in the circumstances, that of an employer and employee, rather than a customer and consultant. For this reason, the Court found that the IP in the software belonged to Spring Electric Ltd.

The Court went on to state that if Buyer’s Dream Ltd had not been an employee, the agreements did not assign to Sprint Electric Ltd any rights of ownership over the IP in the software.

The Sprint Electric case shows just how important it is for businesses to carefully consider the capacity in which third parties may be working for them. If there is any chance that someone would not be deemed an employee, and the instructing business wishes to own the IP rights in whatever works they have commissioned, the business should ensure that any agreement entered into expressly states the transfer to them of the relevant rights from the individual. Further, if that individual is employed by a company, an assignment from that company is necessary to assign the IP rights.

Similarly, if you are a consultant and want to retain ownership of the IP in your works, it will always be prudent to reflect on how you carry out your work for third parties and to consult with a solicitor to ensure that any agreement does not assign your IP rights.

If you have any queries regarding IP ownership or protecting IP rights in works you have commissioned or created, or any questions about IP rights generally, please take a look at the Intellectual Property Team page for more details or to directly contact the team.

Alternatively, please contact David Spence or Sue Streatfield to discuss anything that appears in this blog.

Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.