Intellectual property rights for IT consultants: what you really need to know Scott Singer Partner TMT Department Denton Wilde Sapte T: May 2007

Overview What is IPR? Different types of IPR IPR protection of software IPR protection of websites How is IPR exploited: assignments and licence. Carving up IPRs – how to split up deliverables How do I deal with IPRs in agreements? Technology design - how much would I have to change something to make it mine? If I have a good method that works for me and I have it written down how do I protect it using IPR?

What are IPRs? A set of property rights which protect creations of the mind They give the owner the exclusive right to exploit the intellectual property which is protected and to authorise others to do so a “property right”: the right to prevent others from enjoying the property the right to exploit the property

What is intellectual property? Nature of IP rights National rights Intangible assets Can be registered or unregistered Can be exploited in two different ways: Owned Licensed

What types of things are protected by IPRs in IT space? Software Data Databases Documentation Specifications User and technical manuals and documentation Know how / knowledge transfer repositories Preparatory designs The outsourcing agreement itself Domain names IP addresses? Know how Branding / Trademarks Others – deal specific

What are the common IPR? Registered IPR Patent Trade mark Registered design Domain names Unregistered IPR Copyright Database rights Unregistered design Goodwill Confidential information

Protection of software Copyright A literary, dramatic, musical or artistic work, a film or a broadcast Work must be recorded in some permanent form Automatically exists on creation – no need to register Work must be ‘original’ Protects against copying of the expression of ideas and concepts – not ideas and concepts themselves No protection against independent creation of same or similar works (provided no copying involved)

Protection of software Copyright Ownership of copyright Author of a work is the first owner of copyright Unless author is an employee acting in course of employment Duration Normally 70 years from end of year in which author dies Some exceptions: computer-generated works attract 50 years protection from end of year in which created ‘Foreign’ works Usually protected by copyright in the UK

Protection of software Copyright Object code / source code Non-literal copying an infringement? Look and feel Structure and architecture Preparatory materials

Patents General requirements for patentability: New Not disclosed before filing date Inventive step Not obvious to a skilled person in the art at the filing date Capable of industrial application Not excluded Mathematical methods, scientific theories, discoveries Methods of doing business Computer programs Protection of software

The US position Software and business process patents are patentable The UK position Computer programs not patentable “as such” but patents can be obtained where their application gives rise to an “technical effect” Macrossan's Patent Application and Aerotel v Telco (2006) CA: Properly construe the claim; Identify the actual contribution; Ask whether it falls solely within the excluded subject matter; and Check whether the actual or alleged contribution is actually technical in nature Patents for software

Software (cont.) Confidential information e.g. Source code e.g. Algorithms Database rights A look-up table within program Whole program itself Program may create a database

Protection of Software Database right Database right – a new special right. Protects collection of data in database if arranged in systematic and methodical way and accessible by electronic or other means Against extraction or re-use of all or a substantial part The person who takes the initiative in obtaining, verifying or presenting the contents of a database and assumes the risk of investing in that obtaining, verification or presentation is the maker of the database The maker of a database is automatically first owner of database right

Protection of Software Database right No registration required Database must be original (own intellectual creation) – No protection against independent creation Protection for 15 years from end of year in which completed or when made available to public New case law: William Hill vs BHB

Websites What IP rights can subsist? Copyright What type of work? Database rights Patent Trade mark Meta-tags Goodwill Registered / unregistered design Domain names

Internet domain names Quasi intellectual property right Consider defining as an intellectual property right in any event Due diligence Check ‘Who-is’ database Easy for global top level domains, such as “.com”, “.net”, “.org” May not be as easy for country code domains, depending on domain name registry Consider using searchers to search against name of owner for other domains

Internet domain names - scams Cybersquatting Typosquatting “Helpful” warning calls Phishing

Summary: What intellectual property rights are we likely to care about in a technology deal? copyright database rights patents trademarks design rights and registered designs confidential information domain names

Different ways of exploiting IPR Absolute ownership Can be in whole or in part e.g. own copyright in one territory only By its nature an “exclusive right” Can be transferred by assignment or licensed Licensed rights Can be “exclusive”, “sole” or “non-exclusive” Can be transferred by assignment or sub-licensed, but often will be restrictions in head licence prohibiting this Licences of registered rights should be recorded on register

Joint Ownership … A third way? Nightmare The “Siamese twins” scenario To licence consent of co-owner needed Litigation – need to join in co-owner Treatment of enhancements? A better way: One party owns, the other party gets a wide licence Another way: Each party owns its own IP and grants a cross licence to the other

Why is the IPR position important? It determines who owns what Important implications for future exploitation Important for control of the IP / competitors using it It will impact on who pays for what – and how much It provides a starting point to answer the question of who takes the risk for third party IPR claims

How do we deal with these in an agreement? Three key questions: Who is the initial owner of the IP? Who needs to use it and how? Who will be the ultimate owner of the IP?

How do we split these up generically? Customer IPR IPR owned and supplied by the Customer to the Supplier Bespoke IPR IPR specifically created for the Customer by the Supplier which will be owned by the Customer Supplier IPR IPR owned and supplied by the Supplier to the Customer Third Party IPR IPR owned by third parties

Software Application Operating system Proprietary core library routines Bespoke customisations The supplier’s software

Relationship with Customer’s systems core database MS desktop bespoke systems EDI systems interface Supplier’s software Customer’s systems

What are the consequences of the carve up? Assignments needed to transfer ownership (usually from supplier to customer) Licences need to use non-owned IP From customer to suppler From supplier to customer From third parties to both customer and supplier Possibility of non-compete clauses

Assignments Must be in writing and signed Should be with full title guarantee Use clear form of words – eg avoid: ‘We agree that X will own the rights …’ ‘X will be deemed to be owner …’ Cover present and future rights and Legal and beneficial rights

Software licensing General Features of a Licence exclusivity: non-exclusive exclusive sole term perpetual specific term transferability transferable non-transferable/personal sub-licences may or may not carry the right

Software licensing General Features of a Licence revocability may or may not be irrevocable territory limited territory (eg UK) worldwide royalties Licence fee/royalty payable royalty free

Software licensing Specific features of a licence: number of users user specific? number of processors number of mips machine specific? own internal business purposes only? FM/bureau services? specific location?

Software licensing Specific features of a licence: Right to suspend? Right to terminate? non payment of licence fees material breach bankruptcy change of ownership/control of business end of term at will?!

software licences check list exclusive/non-exclusive/sole any bespoke code to be owned outright? perpetual/term transferability/right to grant sub-licences revocability/termination rights scope/territory licence fees payable/royalty free purposes other issues acceptance tests source code escrow maintenance and support

Technology design - how much would I have to change something to make it mine? Depends on the IPRs in question: Copyright Whole or a substantial part Independent creation Patent A monopoly right Confidential information Potentially any disclosure – but not once information has reached public domain Database rights Extraction or re-utilisation or whole or a substantial part

If I have a good method that works for me and I have it written down how do I protect it using IPR? Confidential information Patent Copyright

Conclusion Work out what IP you are dealing with Who is the start owner and who will be the end owner What the parties will need do with it Incorporate appropriate assignments Make sure any licences are drafted widely enough to cover future requirements