Making sure your intellectual property is really yours
Any business owner lucky enough to receive an attractive offer for their business will be familiar with the dreaded Due Diligence Questionnaire – 20, 30 or even 40 pages of questions about every aspect of their business. Details of everything from key customer accounts down to the person who services the fire extinguishers.
The questionnaire will inevitably contain a section on intellectual property and one of the first questions is often a request for confirmation that the business owns all intellectual property rights (IPR) used by it.
It’s at this point that the seller’s solicitor often has to explain that, contrary to what the seller thought, his business doesn’t actually own the IPR he thought it did.
One of the most common examples of this is promotional brochures or websites. “But I paid good money for that website” the seller protests. “How can it not be mine?”
Copyright is owned by the creator
Unfortunately, any copyright is always owned by the person that created the relevant materials unless they assign the copyright to someone else in writing, irrespective of who paid for the work. The most significant exception to this is where an employee creates something in the course of their employment, in which case the copyright is owned by the employer. So if the employees have put together the entire website, then there is nothing to worry about.
However, if an external photographer took the photographs for the website, then he will own the copyright in them (even if the photographs are just of employees or of the business premises). If the website company designed the layout then the website company will own any copyright in it. If a marketing company put together the words on the website, then the marketing company will own the copyright in those.
Of course, this needn’t be fatal. Provided they have been paid, many businesses will be happy to assign the copyright or write a letter confirming that the ownership has passed. But no seller wants to be dealing with issues of IPR ownership at the same time as selling his business. And of course, some businesses may demand extra payment to assign the copyright.
Audit your IPR regularly
It’s a good idea for all businesses to take stock of their IPR from time to time – look at all your websites, logos, brochures, business cards etc and make a note of who produced them.
It’s possible that external authors/photographers/designers may have already assigned IPR to your business in their standard terms (e.g. if they state that you own any copyright once you’ve paid for their work). But this is rare.
Where you don’t own the copyright, you should consider asking the contractors to assign it to you. A formal Deed of Assignment is the most robust way of doing this, but if this is likely to intimidate your suppliers (as can be the case with freelancers or smaller businesses) then a carefully-crafted letter confirming that ownership has passed may be a more realistic alternative.
Ensure you own copyright from the start
The simplest way to avoid these issues is to be up front with your suppliers before engaging them to do work for you. Unless there is good reason, they shouldn’t object to you owning IPR in the materials they produce for you – insist that the contract states that your business will own the IPR. If there isn’t a formal contract, ask them to sign a letter stating that the IPR will be assigned in return for payment of their bill.
The position with 3D objects
In general, 3D objects don’t benefit from copyright protection but they may benefit from design rights. These may protect everything from the design of agricultural tools to the shape of a hot water bottle.
At the moment, design rights are owned by the person that commissions the work, so your business will own any design rights it has commissioned from third party designers.
However, the Government is proposing to reverse this position to be the same as copyright, so that the designer will own design rights unless assigned to the commissioner.
Businesses should therefore get into the habit of taking the same precautions with design rights as they do with copyright and ensure that all IPR is assigned in writing.
Matt Worsnop is an Associate Solicitor at BHW Solicitors in Leicester and regularly writes on Intellectual Property issues. Matt can be contacted on 0116 281 6235 or by email at matt@bhwsolicitors.com.