Legal Updates

Intellectual Property Law – Potential Copyright Infringement – Ownership of Copyright – Exclusive Licensee – Negation of  Personal Liability – Software Development – Joint Venture – Key Points when Invoicing a Third Party for Work Carried Out – Who is a Party to the Agreement?

The case of Wrenn and Another v Landamore [2008] involved proceedings for the infringement of copyright when developing software. The claimant in this case was a businessman who formed a company named ICD. The claimant planned to manufacture electronic interfaces that would allow audio equipment to be connected to various makes of cars. Unfortunately, the claimant lacked the necessary technical skills, and therefore needed third party help in order to design and develop those interfaces.

In February 2000, the claimant entered into a written agreement with the defendant in this case. Under the terms of that agreement the defendant was contracted to create and supply certain documentation on how the interfaces would operate, as well as develop the necessary software. Upon completion of the work, the defendant was asked by the claimant to issue the invoices to ICD.

It was agreed that the defendant would be paid an hourly rate for the programming work and would be paid royalties for the interfaces where his software had been used. Then, in 2004, the claimant sent to the defendant draft heads of agreement establishing a joint venture company between them.

As a result of the draft heads of agreement, a company, IMMS, was incorporated, and the parties entered into a written agreement (“the IMMS Agreement”). According to clause 2.1 of the IMMS Agreement, the parties accepted that the rights contained in the software were owned by IMMS. Furthermore, clause 2 stated that each director of IMMS owned 50% of the shares in the company.

A dispute arose between the parties concerning the copyright in the software.

The claimant in this case commenced proceedings on the grounds that the agreement under which the defendant was to write software was an agreement between the defendant and ICD, and that therefore ICD was the owner of the software. He also stated that he had no personal liability for any payment of any money to the defendant. In addition, he argued that since ICD was not a party to the IMMS agreement ICD's property had not been transferred to IMMS.

As a result, the defendant elected to counterclaim for payment of accrued royalties due on the use of the software. He submitted that he had been engaged by the claimant personally and that although he had invoiced ICD for the work, he had only done so at the request of the claimant. He argued that this meant that the claimant was liable to him for money due for the work carried out under contract.

When the issue came to trial, the defendant conceded that if IMMS owned the copyright in the software then no remedy for infringement of the copyright could be claimed by him.

The judge found that whilst the claimant was an exclusive licensee, the arrangement had been for the defendant to write the software. He held that that arrangement had been executed as between the parties personally. Furthermore, he held that neither had given any thought to the fact that the claimant would not be taking personal responsibility, and that the request by the claimant for the defendant’s invoices to be sent to ICD was not sufficient to establish that ICD was solely liable to the defendant.

As a result, the judge dismissed the claimant's claim and gave judgment in favour of the defendant's counterclaim in the sum of £45,324.24.

The claimant subsequently appealed against the decision.

The claimant argued that the judge had been incorrect in finding that he had contracted personally with the defendant. Since the judge had been of the opinion that he was an exclusive licensee, he should have been granted damages for infringement due to the fact that he had standing to sue the defendant.

The appeal was dismissed.

It was held that even where an individual acts as an agent, personal liability on his behalf is not discounted. This meant that a person should be deemed liable for engagements unless he could show that he had expressly or impliedly negated his personal liability.

The claimant had impliedly negated his liability by asking the defendant to send his invoices to ICD. However, the obvious explanation for ICD not being made a party to the IMMS agreement was that it was not considered necessary due to the fact that all the intellectual property rights in the software was understood to be at the disposal of one or other of the parties.

This meant that the court was of the opinion that on the evidence as a whole, it had been allowable for the judge to reach the conclusion that the claimant was personally liable on the contract. Furthermore, it was held that the initial contract had been made between the parties on in their personal capacities.

This meant that the request for the defendant to send the invoices to ICD was not sufficient to establish that ICD had sole liability over the defendant. In addition, it was held that the concession that the claimant had made at trial had been right, which meant that it was not open to him to receive damages for infringement.

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© RT COOPERS, 2008. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.

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