In this edition
Copyright in Software: Do You Have the Rights You Think You Have?
Do you commission third parties to develop software applications? Does your agreement with the contractor adequately deal with the ownership of intellectual property in that software and your rights to use that software in the manner you require? A Federal Court decision last year provided a useful lesson as to the importance of adequately spelling out the rights of all parties when commissioning the development of software.
In Centrestage Management Pty Limited v Riedle [2008] FCA 938, the Federal Court dismissed an appeal from a decision of the Federal Magistrates Court that the respondent, Mr Riedle, was an independent contractor rather than an employee. As a result, Centrestage Management did not own copyright in the source code of the software that MrRiedle updated. Centrestage Management was also unsuccessful in arguing that it had an implied licence to access and use the source code.
Two issues central to the case were:
- 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, MrRiedle 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 MrRiedle was its employee and did not deduct PAYE, nor provide MrRiedle with sick leave, annual leave or superannuation.
MrRiedle 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, MrRiedle described himself in one of his proposal documents as “Centrestage Management Development Manager”. This did not affect the outcome as to MrRiedle’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:
- making a back-up copy;
- making interoperable products;
- error correction; and
- security testing.
These rights are only permitted to the extent reasonably necessary to obtain the information necessary to carry out the permitted action.
These rights will often be sufficient to meet the purchaser’s needs to operate and maintain the software. If the purchaser wants to use the software for more than just these purposes, it will need to either obtain an assignment of the copyright in the software from the developer or reach a written agreement with the developer granting them these rights. Without evidence that it was the actual intention of the parties, the Courts are unlikely to imply into a contract the assignment of copyright, the delivery up of the source code or the complete freedom to use, adapt, modify and commercialise.
Patents – What Do I Have And How Do I Protect It?
Benefits of patent registration
The registration of a patent for an invention can be of great benefit to the patent owner (the patentee). The patentee has the exclusive right to commercially exploit the invention that is the subject of the patent in the jurisdictions in which it is registered, for the duration of the patent. This can be very lucrative if the patent is for a valuable invention.
A patent can also be an effective store of value, enabling the owner to more effectively leverage and recoup the cost of R&D.
So what should you do to maximise your ability to both obtain a patent, and be able to successfully commercialise the invention that is the subject of the patent?
Determine whether your invention is the type that can be protected by a patent
A patent may be granted for any invention which may be a device, substance, method or process. In Australia, for a patent to be granted an invention must:
- be a manner of manufacture. You cannot patent artistic creations, theories, ideas, mathematical formulas or purely mental processes;
- be new. The invention must not have been publicly disclosed in any form, anywhere in the world as at the date the patent application is filed. This date is known as the “priority date”;
- involve an inventive step for a standard patent. The invention must not be obvious to someone with knowledge and experience in the relevant art of the invention;
- involve an innovative step for an innovation patent. There must be a difference between the invention and what is known about the relevant art and this difference must make a substantial contribution to the working of the invention;
- be useful. The invention should achieve what you say it will and achieve a useful result; and
- not have been secretly used in Australia before the date of the application. Secret use means non-public, commercial use of the invention before a patent application is filed. It is permitted, however, in certain circumstances, such as use for the purpose of reasonable experimental trial and use by a person under obligations of confidence for non-commercial reasons.
How do I get patent protection?
Patent protection is not automatic. You have to file a patent application with IP Australia (i.e. the Federal Government Patent Office) to obtain the grant of a patent. IP Australia’s examiners will assess whether your invention can be patented. Although IP Australia is not required to assess your patent application against every patentability criteria before it grants you a patent. For example, it does not investigate whether any earlier disclosure of your invention has occurred through secret use or the public use of your product in Australia. A third party may raise these issues later if they want to challenge your patent.
An Australian patent is only valid in Australia, however, and if you want patent protection overseas you will need to file a patent in that overseas country. If you intend to expand into overseas markets, you will need to consider whether to obtain patents overseas and in which countries. This should be considered at the outset, and can make a patenting program an expensive undertaking.
Where do I start?
The starting point for most inventors is to determine whether the invention is in fact novel. Simply because you have not seen the product for sale does not mean that it is novel, although that can be a good indicator, especially if there is a strong need for the invention. One way of determining the novelty of the invention is to have a preliminary novelty search performed. This also helps provide a good understanding of the prior art against your invention which will be assessed if you decide to proceed with the patent process.
In some cases, inventors decide not to have a novelty search done and proceed directly to filing a patent application. This approach is commonly used where the field of the invention is evolving rapidly, or where there is potential to immediately licence or sell the invention. Unless you have good reason for not doing so, we recommend your first step is to have us perform the novelty search. This is because the patenting process gets progressively more expensive and it is better to know sooner rather than later whether your invention is likely to be patentable or not.
My invention is novel and inventive/innovative, what’s the next step?
If the novelty searches show that your invention is novel and inventive, the next step is to file a patent application. Filing a patent application secures the priority date for your invention and essentially locks in the date on which your patent will be assessed for novelty and inventive or innovative steps.
There are three types of patents you can file in Australia. These are:
- a provisional patent application;
- a standard patent application; and
- a innovation patent application.
A provisional patent application stands for 12 months, after which you have to file a standard or innovation patent. During this 12 months process, inventors typically develop and improve their inventions and the improvements are captured in the standard or innovation patent that is subsequently filed. You can, of course, file a standard or innovation patent without filing a provisional patent application, however this typically involves spending more money upfront and does not allow you the opportunity to incorporate amendments and product improvements.
A standard patent gives the longest protection over an invention because it lasts for up to 20 years (or 25 years for pharmaceuticals). An innovation patent lasts for a maximum of 8 years and is a relatively quick and inexpensive way to protect innovations that may not qualify for standard patent protection. Innovation patents are generally granted within 3 months. While this means that it is far quicker to obtain registration of an innovation patent, it should be noted that an innovation patent cannot be enforced until it has been examined.
What if I decide not to file a patent application?
Unless you patent your invention, other people may be able to use it for free. If someone finds out about the invention, they may decide to try and exploit it themselves, and either try to beat you to be first to market or, if you have already gone to market, compete with you, and take a share of the market themselves.
One alternative to filing a patent application is to keep your invention secret and rely on protection of confidential information. Practical examples of steps to maintain a trade secret include restricting access to the information, and having anyone that comes into contact with it sign a confidentiality agreement.
This has the benefit of not having to disclose your invention (a patent is a matter of public record), but can be more difficult to police and enforce than the statutory rights granted by a patent.
The question of whether to patent or to rely on confidentiality is a complex one involving assessment of a number of factors, including whether the invention is likely to be reverse-engineered, how the invention is to be exploited and the potential period of commercial exploitation.
Can I tell other people about my invention before I file a patent application?
This is now wise. You should generally not disclose or commercialise your invention before filing a patent application. If you do so, you risk losing any protection you may have been able to secure. Some disclosure is, however, inevitable for the purpose of obtaining advice and assessing the patentability of your invention. Any disclosures you do make should be under cover of an appropriately drafted confidentiality agreement, and only to those that have a need to know.
What now?
If you think you may have a patentable invention, we would recommend you seek professional advice at the earliest opportunity to maximise the chances of obtaining patent protection, and minimise the risk of doing something (or not doing something) that might jeopardise those chances.
We work with a number of patent attorneys: it is our policy to connect with the right person with the right experience and qualifications in relation to your particular technology to advise upon, and process any application.
Those that already have more sophisticated patent identification and management procedures in place should still have regard to the fundamental principles that govern patent registration.
Looking Before You Leap: The Importance of Trade Mark Searching in Branding Strategy
Seeking trade mark protection is the most important and often overlooked element of an effective branding strategy. Too often, the thought of applying for a trade mark, and checking whether or not the proposed new brand might infringe a prior-registered mark, does not appear on the radar until after significant amounts of time, effort and resources have been invested in developing a particular brand. Unfortunately, this delay in ascertaining the availability of the proposed new brand, can result in that time, effort and resources being wasted, and lead to a last minute search for an alternative brand.
Why should you do trade mark searches on your new brands?
While companies and individuals alike are quick to register a domain, company or business name, they often forget that such registrations do not themselves grant any proprietary rights to use the brand name in relation to goods and/or services.
In contrast, the registration of a trade mark for goods or services in Australia grants the owner of that mark a statutory monopoly to use the mark in relation to those goods or services. A registered trade mark grants its owner the statutory right to take infringement action against third parties who, without authorisation, use an identical or deceptively similar mark in relation to the same goods or services or goods or services “of the same description” as those covered by the registration, or in respect of services that are “closely related” to registered goods, or goods that are “closely related” to registered services.
So the new brand you have developed may infringe a prior-registered trade mark.
Comprehensive registrability and common law searches will help to determine whether an unrelated third party is using a particular trade mark in relation to the proposed goods and/or services. A search is essential in revealing potential impediments to acceptance and registration, and also in ensuring that use of the proposed new brand will not infringe a prior third party mark. Overlooking this fundamental step can lead to trade mark infringement proceedings, the common law action of “passing off” and/or claims under the Trade Practices Act for misleading and deceptive conduct, when the new brand is adopted.
The importance of conducting trade mark registrability and common law searches prior to launching a brand cannot be underestimated.
Searching can often assist in determining an appropriate filing strategy and for a comparatively small upfront expenditure.
When should you search?
Ideally, a trade mark search should be conducted immediately after “conception” of the brand and well before significant resources are invested in development. The first call after “conception” should be to a trade mark attorney to ask “Can we use this new brand in relation to these goods/services?”
What should you search for?
You should search for the goods and/or services that are intended to be sold or provided under the brand, as well as similar or related goods or services.
As a general rule of thumb, we would recommend conducting a comprehensive registrability search of the Australian Trade Marks Register as well as common law searches of the Internet, telephone books, business and company name indices and domain names prior to filing an application for trade mark protection. If you see the potential for the brand being used internationally, then the equivalent searches should also be conducted in those countries you foresee as being primary markets for the brand. We have a network of international agents who can perform similar searches in their respective countries.
Please contact our trade marks team if you would like further assistance with your branding strategies.
Remember, You Do Not Own a Domain Name
The recent experience of Domain Directors serves as a timely reminder to domain name holders that they only have a licence to use the domain name, and do not actually own the domain name.
Australian domain names (i.e. .com.au, .net.au, .org.au, etc) are administered by auDA. To obtain registration of a domain name, the applicant must meet the policy rules set down by auDA for domain name eligibility and allocation.
These policy rules make it clear that the domain name registrant acquires no proprietary rights in the domain name system. A registrant does not “own” a domain name but instead holds a licence from auDA to use a domain name for a specified period of time and under certain terms and conditions.
The standard term of the licence is two years and renewal of a domain name licence at the end of the two year period is dependent upon the registrant continuing to meet the eligibility and allocation rules.
To be eligible for the most common type of domain name, .com.au, a registrant must be, amongst other things, an Australian registered company or business, or the owner of an Australian registered trade mark. In addition, the domain name must be either an exact match, abbreviation or acronym of the registrant’s name or trade mark, or otherwise closely and substantially connected to the registrant.
auDA has the power to cancel the registration of any name that does not meet the policy rules.
Recently, Domain Directors, a supplier of internet domain names, found one of its domain names which it had been using for over eight years, was subject to auDA’s cancellation process on the basis that there was no close and substantial connection between the domain name and the registrant. Interestingly, the complaint appeared to stem from within auDA, rather than a more typical third party complaint, and this has raised issues as to the extent of auDA’s powers and its ability to make decisions regarding a potentially crucial business tool.
Domain Directors is suing auDA in the Supreme Court of Queensland in respect of this cancellation.
Domain Directors’ experience serves as a reminder to domain name “owners” that they do not “own” their domain name, but hold an exclusive licence to use it, and the domain name may be cancelled if the registrant does not continue to meet the eligibility rules for the domain name.
As domain names are a crucial asset for many businesses, we would recommend that businesses undertake an audit of their domain names and their continued eligibility to minimise the risk of their right to use the domain name being called into question.
"The material contained in this publication is no more than general comment. Readers should not act on the basis of the material without taking professional advice relating to their particular circumstances”
