The Mills & Reeve team returned triumphant from the Court of Appeal recently after the Court held in favour of our client by upholding the High Court's decision in the case of (1) Laurence Wrenn (2) Integrated Multi-Media Solutions Ltd v Stephen Landamore [2007] EWHC 1833 (see IPKat's previous post on the High Court case). Rebekah Richards acted for Stephen Landamore in successfully opposing Laurence Wrenn's claim that the High Court had erred in its findings on the ownership of software written by Mr Landamore. Rebekah worked alongside the excellent Giles Fernando of 11 South Square.
I thought now would be a good time to get some inside information from Rebekah on the case. These are my questions with Rebekah's thoughts.
So remind us: what was the background?
In short, it is a software ownership dispute between our client (Mr Landamore) who is a highly skilled software engineer and Mr Wrenn who commissioned the software. The software in question enables OEM in-car audio devices to operate with other branded audio devices. Mr Wrenn is a businessman with an interest in the audio car market. In 1988, Mr Wrenn incorporated a company called In Car Developments Limited ("ICD") to market the interfaces to car manufacturers. From 2001 Mr Landamore wrote computer programs for use in different kinds of in-car audio interfaces which Mr Wrenn marketed through ICD (now insolvent). No written agreement was entered into dealing with the ownership of the software or payment of royalties. Relations between Mr Landamore and Mr Wrenn deteriorated. Mr Wrenn started to argue that he should have access to the source code. Mr Landamore claimed that there were outstanding royalties due to him from Mr Wrenn.
In April 2005, Mr Wrenn and Mr Landamore attempted to settle matters by incorporating a company known as Integrated Multi-Media Solutions Limited ("IMMS") and entering into an agreement known as the IMMS Agreement. The Agreement contained a clause relating to intellectual property in which the parties acknowledged and accepted that the rights in the software would be owned by IMMS. Mr Wrenn and Mr Landamore were joint shareholders and directors of the company. However, the IMMS Agreement was never brought into effect and IMMS remains a deadlocked company.
Eventually, in April 2006 Mr Wrenn issued High Court proceedings against Mr Landamore claiming that he owned the software and should have access to the source code of the programs. Mr Landamore counterclaimed against Mr Wrenn for unpaid royalties relating to chips which Mr Landamore had programmed with object code for Mr Wrenn.
What was the High Court's decision?
The case was heard by Robert Englehart QC (sitting as a deputy High Court Judge). The Judge held that prior to April 2005, the copyright in the software was owned by Mr Landamore subject to an exclusive royalty-bearing licence in favour of Mr Wrenn. The Judge gave effect to the IMMS Agreement in deciding that, from April 2005, the ownership to the software vested in IMMS.
As the Judge decided that the jointly owned company owned the software, he did not have to rule on the issue of whether it was owned by Mr Wrenn or Mr Landamore. However, he did go on to deal with the question of what terms the court will imply into agreements relating to the ownership of intellectual property, where there was no written agreement dealing with this issue. The Judge adopted the "minimalist approach" set out in the case of Ray v Classic FM (i.e. the court will imply the minimum term necessary to make an agreement between parties workable). In doing this, he concluded that an exclusive licence in favour of Mr Wrenn was all that would have been required to make the agreement work. It would not have been necessary to imply a term that the copyright should have been assigned to Mr Wrenn (which would give him full ownership of the software).
Turning to Mr Landamore's counterclaim for unpaid royalties, the Judge awarded him £45,324.24 plus interest. In reaching this decision, the Judge had to decide whether in making the agreement for Mr Landamore to write the software for the interfaces, Mr Wrenn was acting personally or on behalf of his insolvent company, ICD. Mr Wrenn argued that he was contracting on behalf of ICD and therefore not personally liable to pay Mr Landamore the royalties. Mr Landamore relied on various documents which suggested that Mr Wrenn viewed himself rather than ICD as the contracting party. The evidence on this issue did not paint a consistent picture as it pointed in both directions. However, on balance, the Judge concluded that the arrangement for Mr Landamore to write the software was made between them personally. Although ICD would be marketing the interfaces (and benefiting from the work), it was Mr Wrenn who had engaged Mr Landamore to do the work.
What was the basis of Mr Wrenn's appeal to the Court of Appeal?
Mr Wrenn claimed that the Judge had erred in his findings and appealed to the Court of Appeal on two grounds:
The dealings between him and Mr Landamore relating to the commissioning of the software and programming work were not personal. Instead, Mr Wrenn argued that it was his company (ICD) that had contracted with Mr Landamore and so he should not be liable to pay Mr Landamore the royalties.
The Judge's finding that Mr Wrenn was an exclusive licensee to the software should have given him an entitlement to sue personally for alleged infringements. Mr Wrenn relied on s101 of the Copyright, Designs and Patents Act 1988 ("the CDPA") which allows an exclusive licensee to take advantage of all the rights and remedies available to the copyright owner.
What did the Court of Appeal decide?
The Court of Appeal refused Mr Wrenn's appeal.
On the first ground of appeal, it had been open to the Judge in the High Court to reach the conclusion that Mr Landamore contracted with Mr Wrenn personally and Mr Wrenn was liable to pay the outstanding royalties. Although the evidence did point in both directions, it was clear that the initial contract was personal and that ICD was Mr Wrenn's vehicle.
On the second ground of appeal, it was not open to Mr Wrenn to argue that he was entitled to sue personally for alleged infringements as an exclusive licensee. This was because, as at April 2005, the copyright in the software vested in IMMS. Mr Wrenn's counsel at trial had conceded in his closing submissions that, if IMMS owns the copyright, no remedy for infringement could be claimed by Mr Wrenn. A further difficulty for Mr Wrenn was that an exclusive licensee is only entitled to sue under s101 CDPA if his licence is in writing and is signed by the copyright owner. Mr Wrenn had no written licence and an implied exclusive licence would not suffice.
Are there any lessons for software developers (or people commissioning software)?
The case highlights the problem with oral contracts and the importance of dealing expressly with IP ownership in written agreements before entering into commercial relationships. It is a lesson that people commissioning software (who have paid for this work) do not necessarily own it.
The starting point is that the first owner of the software is the author (in this case Mr Landamore) unless the author is an employee and creates the work in the course of employment. Ownership remains with the author unless it is transferred by written assignment to the commissioner. Alternatively, the commissioner could have a licence to use the software.
Where the courts are forced to intervene (as in the present case), it will generally apply the minimum term necessary to make the agreement workable (following the principle in Ray v Classic FM). Courts are very reluctant to imply full transfer of copyright to the commissioner which is often what the commissioner will be seeking.
From the software developer's point of view, an agreement clearly recording who is liable to pay royalties and the amount of royalty is clearly advisable. Otherwise, the court will have to look at the evidence of both parties (which may well be contradictory, as it was in the present case) before reaching a decision. All in all, the message is that written agreements dealing with important issues such as IP ownership helps avoid the need for time-consuming litigation to determine ownership when the relationship deteriorates.
