Protecting your most valuable assets – intellectual property

Joanna Chart | Senior | Law | +44 (0)207 1977 874 | Joanna.Chart@uk.ey.com

Intellectual property (IP) is one of a company’s most valuable assets. For technology companies, whether a start-up or a more established business, a key area of this IP is your software. It is important to understand how to protect and enforce your IP rights so that you can maximise the value of your software as you develop your business and product offering.

Copyright in software

Copyright is the primary and most important form of IP protection for software. Copyright is a legal right that protects how a copyright work can be reproduced and used. Copyright exists automatically once the work is created.

Computer programs, including software (specifically the code), are protected under copyright law as ‘literary works’, provided they are:

  1. original (meaning they have not been copied from another copyright work); and
  2. recorded in some form (this requirement is met for code which is written, it is not met if you have an idea but you have not written code to execute the idea).

If you are incorporating non-original code into your work product, you should ensure that you have the necessary licence(s) in place to avoid the risk of infringing copyright in the code you are looking to incorporate.

Generally speaking, the first owner of the copyright is the author of the work i.e. the individual who created it. However, where the work was created in the course of employment, the employer will be the first owner. You will need to be careful if you commission work; for example, if you rely on contractors or non-employees to develop any software. Even if you have paid the contractor for the software, the copyright will not be owned by your company unless it has been validly assigned.

Open Source Software (OSS)

Whilst considering IP and software, it is important to contemplate whether any OSS has been used in developing your technology. OSS is a particular type of third-party software which is made available for use by the copyright owner, usually with no charge but subject to certain conditions known as the ‘open source licence’. Particular care should be taken before utilising or incorporating OSS into your work product because the conditions of the open source licence can restrict your ability to freely commercialise your work product.

It is crucial you understand the OSS licence terms as these can vary considerably, with some imposing very restrictive conditions. In contrast to more traditional software licences, OSS licences usually offer wide rights for the licensee (the individual or entity using the OSS). However, this freedom is usually subject to the licensee not placing any restrictions on any onward distribution of the software. This could affect the commerciality of your end-product, for example by preventing you from charging a fee to users of your technology or rendering the technology you develop using the OSS subject to the same open source licensing terms.

Some practical suggestions

Do:

  • Keep a record of all software code written for your business, information on who worked on the code and what changes have been made.
  • Understand the terms of any OSS licence before you incorporate OSS into your work product.
  • Record all instances where OSS is used and incorporated into a product.
  • Put in place agreements with any contractors or non-employees to make sure IP is validly assigned.

Don’t

  • Use any third-party software or OSS without an appropriate licence.
  • Agree to licensing or other commercial terms without seeking expert advice.

By following a clear process from the outset, in respect of the creation and protection of your copyright and other IP, you will ensure you protect what is arguably one of your most important assets. Furthermore, a paper trail will ultimately help prepare start-ups for exit and increase the attractiveness of your business to a potential buyer or investor.

How we can help

Our team can work with you to create a long-term IP strategy, that will put in place processes to protect the future value of your IP. Our multi-disciplinary approach means we can also offer advice on all aspects of your IP, from strategy and licensing, to potential tax benefits such as R&D relief.

Please contact Joanna Chart or Atiq Bhagwan if you would like to discuss this topic in further detail.