08 June 2008

Copyright and Confidence: Meridian International Services Ltd v Richardson and Others

Although there is not much law in this case, the Court of Appeal's decision in Meridian International Services Ltd v Richardson and others [2008] EWCA Civ 609 (4 June 2008) serves as an object lesson in the need for agreeing who will hold title to a computer program or other copyright work. It is a case that the sort of people who consult me should bear in mind. That is because big companies are usually much more likely to address this issue during negotiations than SME (small and medium enterprises).

In April 2006 the claimant company agreed to supply a financial forecasting system to a division of GlaxoSmithKline. That agreement contained a warranty that the claimant owned the intellectual property in the system. It outsourced the development of the software to the defendants but failed to make sure that it would acquire title to the copyrights and other IPR that might subsist in the defendants' work. Consequently, the claimant was in breach of warranty and in effect had nothing to license to GSK.

The claimant company found itself in that position because it had taken over the software development project from a company which had previously gone into liquidation. The defendant programmers had not been paid and were naturally unhappy. They met the management of the former company which had in the mean time set up the claimant. They were promised payment provided they would finish the job. The agreement was entirely oral.

The claimants sued for the assignment of the copyright and other IPR in the forecasting system on the grounds that there was an express or alternatively implied term that they should be entitled to those rights. Robert Ham QC, sitting as a deputy judge of the Chancery Division, dismissed the claim. They appealed on the ground that an implied term had to be imported into the oral agreement for the sake of business efficacy. Their case on business efficacy was that they had already agreed in principle the terms of their draft contract with GSK. That cut no ice with Mr Ham because the defendants had not been party to the negotiations and knew every little about the,.. Even if they had, there was still no basis for importing the implied term. The Chancellor together with Lord Justices Rix and Rimer could see no grounds for criticizing the deputy judge's approach and dismissed the appeal.

"So there we have it, chums", as my old games master "Buster" Reid used to say . If you want copyright in commissioned software you have to make sure that you get title in writing, especially if you keep your programmers waiting for their pay.

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