-
whether the developer (Mr Riedle) was an independent contractor rather than an employee of the commissioning party (Centrestage Management); and
-
whether Centrestage Management not only had a licence to use the software developed by Mr Riedle, but also the right to access and use the source code.
Employee or independent contractor?
Under the Copyright Act 1968 (the Act) a computer program falls within the category of a literary work. Under the Act, it is generally the case that the author (i.e. the developer) of a literary work (i.e. a computer program) owns any copyright that subsists in such work. An exception to this rule is where the literary work is made by the author pursuant to the terms of their employment. In these circumstances, the employer owns any copyright subsisting in such work.
The relationship between the person creating the work and the person commissioning the work can, therefore, be critical in determining the ownership of copyright. Each scenario is determined on a case by case basis and can involve consideration of a number of relevant factors including, but not limited to, the degree of control which the commissioning party can exercise over the person engaged to perform the work, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays and the deduction of income tax.
In the case at hand, Mr Riedle was a sole operator, had his own ABN, used his own motor vehicle and secretarial facilities without expenses or allowances from Centrestage Management, was at liberty to take other work and worked at home without supervision.
Centrestage Management did not advise the Tax Office that Mr Riedle was its employee and did not deduct PAYE, nor provide Mr Riedle with sick leave, annual leave or superannuation.
Mr Riedle was judged to be an independent contractor and, as a result, the owner of the copyright in the computer program.
The Court highlighted that parties cannot alter their true relationship by the use of labels. In this case, Mr Riedle described himself in one of his proposal documents as “Centrestage Management Development Manager”. This did not affect the outcome as to Mr Riedle’s position. He may have been part of the Centrestage Management team, but this did not necessarily make him an employee.
Extent of implied licence
It was not a matter of debate as to whether the purchaser of software had an implied licence to use that software. Indeed, it is essential for business efficacy for a bona fide purchaser to be able to use that which they have purchased. What was in question in this case was the extent of Centrestage Management’s licence to use the software.
Centrestage Management argued that for business efficacy, this licence should be replaced by a right to ownership of the copyright, as well as the delivery up of the source code.
The Court did not deem this necessary for business efficacy. Centrestage Management had paid for the software and was entitled to use the software. In addition, Part III Division 4A of the Act permitted Centrestage Management to do a number of things with the computer program that would, but for Part III Division 4A, amount to copyright infringement, including the reproduction or adaptation of the computer program to make interoperable products, to correct errors, or for security testing.
The Court deemed it enough for Centrestage Management to have the right to use the software and, where necessary, perform the acts permitted by Part III Division 4A. Centrestage Management was permitted to gain access to the source code for these purposes.
If Mr Riedle was required to deliver up the source code, it would have enabled the software to be modified or adapted for future uses, without recourse to the developer. Such an implied term would have gone further than that necessary to give business efficacy to the contract between the parties.
Lessons to be learned
It is important to make the ownership of intellectual property rights clear in any contract where one party develops or creates software (or other works in which intellectual property rights may subsist) at the instruction of, and/or for use by, another. The contract should explicitly deal with the ownership of any intellectual property rights that may be created under that contract. It is an all too common surprise for a commissioning party to find that, despite paying for the creation or design of software, they do not own all the rights in that software. A clear definition of intellectual property ownership may also avoid the need to determine the employee/independent contractor question.
In addition, if the commissioning party is not taking ownership of all the intellectual property rights in the software, the agreement between the parties should spell out clearly the licence rights of the commissioning party. This reduces the scope for argument.
Purchasers of software should note their rights to reproduce and adapt the software in accordance with Part III Division 4A of the Act. Even if a purchaser does not own the copyright in the software, it may reproduce and adapt that software for the purposes of:
