Clearsprings Management v Business Link - Software copyright licences

On 14 July the court gave its decision in Clearsprings Management v Business Link. Clearsprings had commissioned Business Link to develop software for a web-based database. Business Link used generic code, which it had created for a previous internal project, to commence development of the Clearsprings software.

The contract did not contain an express term dealing with ownership of the copyright in the software. In particular, it did not contain an assignment of the legal ownership of the copyright to Clearsprings. As such, in the absence of express written agreement to the contrary, legal ownership of the copyright went to the contractor, Business Link.

Clearsprings brought an action against Business Link claiming that despite a lack of express terms in the contract, there was an implied term that all copyright in the commissioned software would be assigned to them, or alternatively that they should be granted an exclusive licence to repair, maintain and upgrade the software and sub-licence it to third parties on the grounds that:

• the software constituted Clearsprings’ specific procedures in electronic form;
• Business Link had worked closely with Clearsprings’ employees to jointly develop a work based on substantial amounts of information supplied by Clearsprings;
• the contract price was consistent with such implied terms; and
• the implied terms would have a limited impact on Business Link.

The Judge held that in the circumstances it was not necessary to imply a term into the contract giving Clearsprings an assignment or an exclusive licence. Instead, the only implied term necessary to give the contract business efficacy was a non-exclusive, perpetual, irrevocable, royalty-free licence for Clearsprings to use the software for the purposes of its business under which it was entitled to repair, upgrade and maintain the software in accordance with the needs of its business but not to sub-licence. The Judge commented that Business Link would in any event be restricted from making use of the information about Clearsprings’ operating procedures by the law of confidence.

This case shows the problems that may be incurred if it is not clearly established who owns the copyright in software developed for a client by a contractor. As a copyright work, software causes particular problems because, in developing a system for a client, a developer will often reuse existing work. For this reason, it is unusual for software developers to hand over complete ownership of the copyright to the commissioning party.

The case highlights the difference between how the courts will deal with software as a copyright work as against other copyright works. It demonstrates that the courts will take into account established trade practices and specific types of work in order to consider the implied terms required to give an agreement business efficacy.

This article first appeared in our Technology Annual Review, March 2006. To view this publication, please click here to open in a new window.