October 2005
Clearsprings or Muddywaters
Yet another company has ended up in the High Court arguing about terms of a deal when this could so easily have been avoided by putting the agreement in writing in the first place.
Clearsprings Management Limited that provides accommodation and related services to asylum seekers commissioned a software designer, Businesslinx, to develop a web based database system to cater the need to report on the allocation of housing. The computer system took over four years to develop and costs over £1 million.
The parties had no written agreement and problems arose when Clearsprings wanted to sub-license the system to third parties. Businesslinx argued that third party sales by Clearsprings had never been discussed and denied that it had assigned any rights in the system to Clearsprings or that Clearsprings had an exclusive licence allowing such further sales. Businesslinx claimed that it had developed the system based on its existing software.
In the absence of an agreement to the contrary the software developer owns copyright in software that it creates. In most such cases, a licence to use the software will be implied for the benefit of the commissioner. This was the position taken by Businesslinx and upheld by the Court. The Court stated that in the absence of an agreement to the contrary Businesslinx remained as the owner of the system. Clearsprings was allowed to use the system but had no right to sell it to third parties.
The Court's decision was based on business efficacy. The court was prepared to imply terms into the agreement but only so far as was necessary to make the agreement commercially viable. Any other terms should have been agreed expressly - and preferably put in writing.
Briffa Comment:
This case illustrates the need to ensure that when commissioning a third party to create works, an agreement is put in place which provides, clearly and unambiguously, for the rights which the commissioning party requires.