Does issue of new contract with restrictions on IP affect only new IP, but not old?

Steffen.Lindberg

An employee started a job on contract A. Part of the attraction of that contract (a new venture) was that it explicitly stated that no "restrictive covenants" apply. The employee, using his experience and original ideas, produced successful software and IP. The employer seeing the results decided to re-issue a new, strongly restrictive contract B, that states that everything developed or any ideas conceived belong to him.

Would a new contract B apply only to work done since its signing (not affecting previously done work)? Should the employee negotiate when presented with a new contract B and if so what particular aspects?

dundermifflin

A new contract could, if the employee agrees to the contract terms, retrospectively include any previously produced software/IP created during the previous/current contract. They would effectively be "buying out" the employee's rights.

Clearly if that software/IP has a value, then the employee should negotiate a new contract that reflects the value of it and the potential value of future software/IP.

sangie595

Steffen.Lindberg wrote: »

The employee, using his experience and original ideas, produced successful software and IP.

Presumably, the employee did this during working hours and using the employers resources? In which case, should it come to a legal dispute, I cannot see that the employee can claim intellectual ownership of something that they were paid to produce. No matter what the contract might have said. And actually, I think you will find that a restrictive covenant is not about the ownership of something produced by the employee - restrictive covenants are generally about the ability to take on second jobs or to work for competitors or in the same field after leaving employment.

Steffen.Lindberg

sangie595 wrote: »

Presumably, the employee did this during working hours and using the employers resources? In which case, should it come to a legal dispute, I cannot see that the employee can claim intellectual ownership of something that they were paid to produce. No matter what the contract might have said. And actually, I think you will find that a restrictive covenant is not about the ownership of something produced by the employee - restrictive covenants are generally about the ability to take on second jobs or to work for competitors or in the same field after leaving employment.

The issue here is "bait and switch". The employer did not have the skills, nor an idea how to produce the tools needed (or where to get them); he paid to have them produced -- he did not pay for exclusive ownership of them. It seems the employee has two options to preserve the right to use his own IP in the future: negotiate to not allow introduction of new terms in contract or leave the employer.

steampowered

What type of IP are we talking about here?

If it is software, the relevant IP is usually copyright in the underlying source code.

The Copyright, Designs and Parents Act 1988 provides that copyright in literary, dramatical, musical or artistic work belongs to the employer if it was produced by an employee in the course of his employment. If it wasn't created during the course of employment, copyright will belong to the employee. See http://www.legislation.gov.uk/ukpga/1988/48/section/11.

Crucially, if the IP does not fall within one of those categories, the copyright will belong to the employee even if the software was created during the course of his employment within working hours - UNLESS there is a specific provision in the original employment contract which says that it will belong to the employee.

However he can sign a new contract which has retrospective effect. There is no legal reason why a new contract can't apply to old IP. If the employee thinks he might own the IP in this software based on what I have described above, I would think very, very carefully before signing away valuable IP rights. Seek legal advice if the software is genuinely valuable before signing the new contract.

paddyrg

This is such a specific area that if we're talking real money, you need real advice. There are many solutions to the problem, if indeed there is a problem.

If the software is something like a line of business application (eg in the same industry as the employer) then since the employee was paid to do a job and furnished with the means, worked in a paid office on a paid PC without choosing their hours, and with the business understanding/context to do so, cutting the employer out of any exploitation will end in tears, and rightly so. If, however, it was a game like flappy bird, written at home in the evening then the employers claim is weak.

This is going to hinge on if the software has an active commercial value outside the company, I suspect. On the one hand, the company has to insure itself against any divas claiming the software can't be used once they leave the company, or that they cannot benefit from the sale of software they paid to be written. On the other side, the writer of said software probably ought to receive some consideration if the company sells it wisely through the industry. That said, do you think everyone who worked on the teams for every bit of software (operating system, database engine, web servers...) the developer used got a direct slice of sales?

The long term and sane answer is almost certainly that the writer signs the IP over to the person who paid for it, but retains a personal licence of some kind. Neither practice can take exclusive ownership of any shared libraries, or override any Apache, GPL, commercial, etc licences mandated by base platforms. The open maker commercial value of any business software written by a single developer is almost certainly significantly less than the wages it took to develop.

steampowered

If the software is something like a line of business application (eg in the same industry as the employer) then since the employee was paid to do a job and furnished with the means, worked in a paid office on a paid PC without choosing their hours, and with the business understanding/context to do so, cutting the employer out of any exploitation will end in tears, and rightly so. If, however, it was a game like flappy bird, written at home in the evening then the employers claim is weak.

Just so that you are aware, this is not an accurate description of the legal position in relation to software.

The position you describe makes perfect sense, and it also would correctly describe the legal position if we were talking about patents. But we are not talking about patents. We are talking about software: software is not usually patentable, it is protected by copyright which has different rules.

The default legal position in relation to copyright is that the employer owns the copyright if we are talking about a literary, dramatic, musical or artistic work. Otherwise, the employee owns the copyright - even if the software was completed 100% during work hours, using work resources and within the same area of business. This may feel completely unfair to employers and the employer will be upset if the employee tries to asset his legal rights, but that is what the law says - the Copyright, Design and Patents Act 1988 is very clear on this, you can read it for yourself at the link I posted.

That is why it is so crucially important for technology businesses to make sure that they have an 'assignment of copyright' clauses in their employment contracts. If they don't have this clause, the employee will usually own the IP to any software he develops.

That is why it is worth getting professional advice before signing, if this software is valuable. The employee in this case may well have complete 100% ownership of the software he developed, even if it was developed during his employment, so should make sure he knows what he is doing before signing those rights away.