It is relatively common for tech companies to miss out on important protections for their software inventions, with many start-ups, scale-ups and even large firms wrongly believing their software developments can’t be protected. To get some clarity on this issue we invited expert in intellectual property (IP) law, Kerry Russell, from Sheffield-based law firm Shakespeare Martineau, to explain more.
I have worked in IP for more than 10 years and, since relocating from Birmingham to South Yorkshire, I have had the privilege to pivot my role so that I now work much more closely with new business founders, particularly start-up tech companies who are building new technologies that change markets.
Typically, new tech involves some sort of software development, and what I hear from my tech entrepreneur contacts time and time again is: “IP doesn’t protect software”.
But that’s where they’re wrong. The reality is, software is protected by a whole host of IP, most of which is incredibly valuable. The confusion lies in the wording; the UK Patents Act 1977, which governs the protection of patents in the UK and protects inventions, has a lot to answer for. The Act states that protection excludes ‘software as such’, but the words ‘as such’ are incredibly important.
Is software protected by the UK Patents Act?
In a nutshell, the words ‘as such’ mean that patent rights in software are not wholly excluded. In fact, it is possible to apply for a patent protecting the ‘technical effect’ of software. This is important, as it potentially extends the scope of protection not just to the software itself (i.e. the code), but to the underlying technical output.
An experienced patent attorney will be able to advise on protecting patent rights in software. The one key thing to remember with patents is to get an application filed as soon as you can, and particularly before the invention is disclosed to the public, as the requirement that the invention is new at the time of the application is very strictly enforced.
Understanding and enforcing copyright
Even if software does not benefit from patent protection, there is another important IP right which protects original software, and that is copyright. I find it quite odd that one of the oldest IP rights, which historically has protected oil paintings and manuscripts, also protects very modern software source code, but that is the way the law works. Source code is treated as a literary work.
Copyright will also protect other components of software programmes such as the user interface and databases. However, there is an important matter to be aware of when relying on copyright protection, and that is ownership.
Copyright is an unregistered IP right, so provided a ‘work’ is original and has been recorded, then it should benefit from copyright protection automatically, without any need to register the rights (in the UK that is, it is different in some other territories).
But therein lies the problem. An enthusiastic entrepreneur will want to get their product developed and out to market sooner rather than later. This might mean that software is written before a trading company is incorporated, or may be developed by a third party. The golden rule with copyright is that the author is the first owner. The main exception to this is when an employee creates copyright in the course of their employment (e.g. when a sole director develops software for their newly incorporated company).
If a third party developer is used, then that person (as the author) will usually be the first owner of any copyright, even if they are paid by the founder for the project. I know this, because I have worked on cases where ownership of copyright in software has created a massive roadblock when it comes to raising funds, or exit, or licensing etc.
What else should tech companies be considering?
Patents and copyright are not the only rights you need to think about. Other IP protects software such as confidential information, database rights and trade marks (for the brand). It’s important to think about it all.
There is a magic way to fix this problem – and you probably know what I am going to say, me being a lawyer and all – get the right contracts in place at the start.
A software development contract will determine who between the developer and the customer owns which rights in the software (usually distinguishing library code, and background IP etc). A simple IP assignment from an individual to a newly formed company can make sure the IP is held in the entity that will either trade or look to secure investment.
I know contracts are not the most exciting thing in the world, and I know there are lots of things a busy founder will want to occupy their time with. But if you’re investing time, energy and money at the beginning, it’s worth making sure your work is properly protected, especially if it is software.
For more information, advice and guidance, you can contact Kerry directly on: Kerry.Russell@shma.co.uk. Kerry has also answered questions from our community about IP law in a recent interview on the Sheffield Digital Podcast. You can listen to that here.