Copyright is a bundle of rights which apply to literary, dramatic, musical and artistic works including the right to reproduce, publish and adapt the work. In the case of a computer program it also includes the right ‘to enter into a commercial rental arrangement in respect of the program’. Section 31 Copyright Act 1968 (Cth) (the Act).
Under the Act literary work includes a table, or compilation, expressed in words, figures or symbols and a computer program or compilation of computer programs. Section 10 the Act. As such, not only the code but also proprietary databases are protected as literary works.
Many business owners assume they will own, or fail to consider who will own, the code when they engage a software developer.
In todays connected society, with the assistance of Airtasker and other service seeking platforms, parties are increasingly entering into informal software development arrangements without adequately considering ownership.
Who owns the code?
While exceptions exist, typically the author of any literary work, including computer code, holds the copyright. The key exception that applies to most businesses relates to literary works developed by employees. If an employee under a contract of services develops the computer code the owner of any copyright subsisting in the work is the employer. This naturally turns on the definition of who is an employee.
Where a person, perhaps through their own Pty Ltd company, is engaged to develop code the copyright may remain with the software developer rather than the business which paid for the development.
Where a business pays for the software and wants to own the copyright, the code needs to be assigned to the business in writing. The Act states:
‘An assignment of copyright (whether total or partial) does not have effect unless it is in writing signed by or on behalf of the assignor.’ Section 196(3) the Act.
What about code libraries?
Often software developers have spent many years building up valuable code libraries. Businesses engaging these developers benefit from being able to make use of the libraries without having to pay the full cost of their development.
A tug of war over code libraries often ensue as the business engaging the developer believes they should obtain ownership of all the code. However, these businesses often fail to realise the true cost of these libraries. Usually a licence to the libraries and ownership of the bespoke code is sufficient for the needs of the business.
Developers must also be conscious when using their code libraries. As was the case in Redrock Holdings Pty Ltd & Hotline Communications Ltd v Hinkley  VSC 91 (4 April 2001), there are circumstances where the developers code libraries may be assigned to the business.
To add complexity, software developers will usually make use of third-party code libraries, under licence from the third party, to deliver software to their client. Consideration needs to be given to the rights available and who can be granted a licence to these libraries.
Finding the balance
Typically, the assignment of copyright, or the licencing of computer code is poorly managed without expert advice. This leaves businesses with limited rights to what at times forms either the core product or a critical element of their business.
Similarly, software developers are putting at risk years of hard work by failing to adequately protect their code libraries.
Fortunately, with a proper understanding businesses and software developers easily find a compromise which satisfies both parties needs and budgets. However, it is critical, particularly with software, that the understanding is reduced to writing in the form of a contract which not only defines the obligations but adequately assigns intellectual property rights.
Getting the right advice
Whether you are a software developer with a desire to protect your code, an established business engaging a software developer or an entrepreneur with a new tech start-up get off on the right foot with professional advice.
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