Welcome to the emw law Technology Law Update which keeps you up to date with developments in technology law that are either directly applicable to your business or may be of general interest since they affect the wider business community.

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Developed for you, owned by me!

In a perfect world the contract would make clear that although I had written the software you had paid for it and owned it. But what happens if the contract fails to cover this point? What is well known is that the creator of the software will be the first owner of the copyright in the software. It has also been established that where a contractor has been commissioned to create software for its client then there may be an implied agreement to assign the copyright or, at least, to grant a licence so that the client can use the work as intended. However, the circumstances surrounding software development will seldom allow an implied assignment so how extensive will the implied licence be?

The recent decision in Clearsprings Management Limited v BusinessLinx Limited & Others shows that the licence will be no wider than what is required to give business effect to the agreement as understood by both parties. In this case the client had an implied perpetual, irrevocable, royalty free, non-exclusive personal licence to use the system created for it by the contractor. Under the licence it may also repair, maintain and upgrade the system for its business. The licence did not extend to the right to grant sub licences. Importantly the contractor retained the right to re-use the software.

The court found that in the absence of a specific instruction to the contrary, it is expected that “a software developer will both import pre-existing code into the code he is writing for the client, as well as export it for other projects”. However, the contractor would be restricted from making use of information supplied by the client about its operating procedures, for purposes other than those of the client.

Intellectual property in China

Protecting your intellectual property rights is as important in China as it is in any other market within which you operate. The types of intellectual property recognised in China are the same as in the UK, albeit with a few quirks. For instance, unlike in the UK, copyright can be registered in China.

The following is a non-exhaustive list of key intellectual property considerations that should be taken into account if you trade in China:

• If your business name does not have a Chinese translation, find out what the locals refer to you as and then register that name as well as your English name as a trade mark. It is not uncommon for “Chinese” names to be registered by third parties.
• Any invention created by an employee belongs to the employer if made by the employee in the execution of his employment. However, this extends to any inventions made by an employee where the invention could “relate” to the employee’s duties with a previous employer. A previous employer can therefore “claw back” inventions created by a former employee during the first 12 months of his new employment, where that invention is relevant to the previous employer’s business.
• Caution should particularly be exercised when contracting with businesses based in the cities of Yongkang, Wenzhou, Shunde and Dongguan. In these cities there is a danger that the goods you are buying are counterfeit. If you have sub-contracted the manufacture to businesses based in these cities, your manufacturer could be producing counterfeit copies of your products for the black market at the same time as producing “legitimate” copies for you.
• Whilst enforcement is becoming better in China, certain courts have been warned against issuing too many intellectual property injunctions. In general, awards are low and punitive damages are never granted.
• Any court action relating to intellectual property should, where possible, be brought in one of the main commercial centres of China. It is more likely that the proceedings will be heard in front of a judge who understands intellectual property issues.
• As with any international arrangements, a good contract goes a long way in protecting against possible intellectual property problems.

Computer viruses – are you insured?

In a recent court of appeal decision it was found that an insurance policy did not exclude liability for the effects of a computer virus.

In the case, Tektrol Limited lost all copies of its source code as a result of the combined effect of the theft of 2 computers and a virus attack via an email attachment sent to the managing director of the company.

Tektrol sought to rely on its insurance policy which provided that the insurer would pay for loss resulting from the interruption of or interference to its business due to accidental loss, damage to or destruction of property. There was however an exclusion of liability for damage or consequential loss to property due to erasure, distortion or corruption of information on computer systems or other software caused deliberately by rioters, strikers, locked out workers or persons taking part in labour disturbances or civil commotion or malicious persons. The court of appeal ruled that an insurance policy should be construed most strongly against the insurer as the drafter of the policy. In the Tektrol case, the wording of the exclusion was considered in detail and the case turned on the particular wording. It was found that the words “malicious persons” added a completely new category of persons making a different kind of attack to the “rioters and strikers” who had direct access to Tektrol’s premises. A remote hacker did not single out or target any particular victim and if insurers wished to exclude all damage by a computer hacker then it should provide for this in a discrete clause.

This case does not establish any rule of general application in relation to the issue of insurance cover for such attacks as it concerned the wording of a specific insurance policy. What it does highlight is the difficulty in obtaining insurance which will cover such an event. All businesses should check their present insurance cover carefully to make sure that such issues will be covered.

.eu domain names

It is likely that the new internet registration “.eu” will become available for use before the end of 2005. The prefix “.eu” will be available for both businesses and individuals to register. When the registration period opens, applications for the prefix will be accepted on a “first come first served” basis.

A “sunrise period” is currently in force and is running in two parts. The first is applicable to registered trademark holders and public bodies. The second phase will shortly be open to holders of other prior rights. The “sunrise period” is intended to allow applicants who wish to prevent abusive registrations recording their trade marks, their company or organisation’s name or their business name using the relevant “.eu” domain.

Contact Us

For further information on the above issues or for advice in connection with any other technology law matters, please contact a member of the Technology & Commerce Team at emw law by clicking here or calling 0845 070 6000.

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Disclaimer

Whilst we endeavour to ensure that the information in the Update is accurate, complete and up-to-date, we make no warranties or representations in respect of such information as it is for general interest only and does not constitute legal or professional advice. As the application of the law can vary widely depending on the facts and circumstances of a particular matter, you should always take specific legal advice before taking or refraining from taking any action which may have legal consequences. We accept no liability for any loss suffered as a result of your use of any information provided in the Update.

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