Darwen-based BusinessLinx Limited wrote the software for
ClearSprings (Management) Limited. ClearSprings provides
accommodation to asylum seekers, charging its services to the Home
Office. The software helps it to report on the allocation of
housing.
The contract between the companies was hard to identify because
it was not a single, all-inclusive document. Instead, it had to be
identified by the court from evidence of negotiations, a written
estimate, meetings and emails.
In the absence of any agreement to the contrary, a contractor
generally owns the copyright in software that it writes for a
client. In most such cases, a licence to use the software can be
implied.
But ClearSprings, based in Essex, wanted more, including the
right to sub-license the software to others. It acknowledged that
BusinessLinx wrote the system and that BusinessLinx was the first
owner of copyright in the software; but it claimed that certain
rights had passed its way.
It argued that an assignment of all existing and future
copyrights in the software was an implied term in the contract.
Alternatively, it said, there was an implied term that ClearSprings
had an exclusive, perpetual, irrevocable, royalty-free licence in
the software.
It took BusinessLinx and its founder, Mark Hargreaves, to the
High Court to argue for these rights. ClearSprings' said that it
had made it clear from the start that it intended to sell the
software on to third parties, and that it had a right to do so.
BusinessLinx disagreed. It accepted that ClearSprings had a
royalty-free, perpetual and irrevocable licence to use the
software; but it said that no mention of copyright ownership or
third party sales was made during the initial negotiations or in a
letter of 21st July 2000 that, according to the court, formed the
basis of the contract between the parties.
The software firm accepted that ClearSprings had a licence to
use the software, and that BusinessLinx could not sell or licence
it as a whole to a third party because parts of it constituted
ClearSprings' procedures in electronic form based on Clearsprings'
specific input.
But BusinessLinx said that the software was just a tailored
implementation of its web-based database suite – and that an
implied assignation of ownership or an exclusive licence to
ClearSprings would restrict its entitlement to reuse important
parts of the system. The court agreed, preferring the account of Mr
Hargreaves, now the Managing Director of BusinessLinx, about what
happened at various meetings between the parties.
Deputy High Court Judge Christopher Floyd QC wrote, "it is to be
expected that a software developer will both import pre-existing
code into the code he is writing for the client, as well as export
it for other projects." He considered that no mention of copyright
was made until 24th July 2000 and negotiations over the software
continued haphazardly thereafter.
He decided that ClearSprings had a non-exclusive licence under
the copyright in the software but no right of ownership or any
right to sub-license. He reasoned that in future projects,
BusinessLinx should be free to use routines that were developed for
the software unless a particular routine would make use of
ClearSprings' own operating procedures.
An implied assignation of copyright is a very rare thing. In
January, England's Court of Appeal issued one of the few judgments
that supported such a right when upholding a decision that
copyright in Dr Martens' AirWair logo is owned by the company that
makes the famous boots and did not pass to its freelance designer.
The agreement was silent on copyright; but the High Court had
reasoned in that case that:
"…in order to give business efficacy to the
contract, it will rarely be enough to imply a term that the client
shall enjoy a mere licence to use the logo, and nothing more. In
most cases it will be obvious, it will 'go without saying,' that
the client will need further rights. He will surely need some right
to prevent others from reproducing the logo."
In the ClearSprings case, the judge made a point that highlights
the difference between these cases. He wrote:
"…in the circumstances of this case, the
only terms which are necessary to give the contract business
efficacy are, firstly, a licence for [ClearSprings] to use the
software for the purposes of their business and, secondly, a
restriction on [BusinessLinx] making use of the information about
[ClearSprings'] operating procedures for purposes other than those
of [ClearSprings.]"
He said it was not necessary to imply into the contract a term
giving ClearSprings exclusivity in relation to the copyright in the
software.
Commenting on the result, Mr Hargreaves said: “This is a classic
story of David taking on Goliath and winning. I am delighted that
the Judge has supported the line we have taken throughout this
case,” adding that his company is looking forward to developing the
"business opportunities" presented by the judgment.
John Salmon, a partner of Pinsent Masons, the law firm behind
OUT-LAW.COM, said: "The result is good news for BusinessLinx, but
the dispute serves as a reminder of the need for a clear agreement
before development begins. Court battles like this can be
avoided."
