Sanity prevails in software IP case

A recent NZ Court of Appeal decision has calmed fears in the software industry that pre-existing code could be claimed by those commissioning software.

Under New Zealand copyright law, a person that commissions and agrees to pay for the development of software is the person that owns that software, unless the parties have agreed otherwise.

As a result, Perry Group Limited (Perry) was successful in its High Court claim that it owned software that it had contracted Pacific Software Technology Limited (Pacific) to develop for it.

The contract was an oral one and did not alter the general rule that the party that commissions the software development gets to own the software.

The High Court judgment was read by some as conferring ownership rights on Perry - and not only for the code that Pacific developed during the commission, but also for several of Pacific's pre-existing "library codes" that had been used during the software development process.

This conclusion caused considerable concern in the software industry, but a recent Court of Appeal decision has gone some considerable way towards allaying those concerns.

In its ruling, the Court of Appeal agreed with the High Court that Perry had commissioned and had agreed to pay for the construction of database software that met Perry's requirements.

The Court of Appeal therefore concluded that Perry took sole copyright in the source code of the software that had been developed for Perry by Pacific during the commission.

However, the Court of Appeal chose to interpret the High Court judgment in a way that did not result in Pacific's ownership in pre-existing "library code" being removed by Perry's claim to the software.

The Court found that Perry (and anyone to whom it chose to assign the software) had a non-revocable licence to use that that part of the software package comprising pre-existing "library code" as part of that package.

The Court of Appeal's judgment is viewed by many as a sensible commercial result. However, in the absence of a written agreement there could still be arguments over when any code later alleged to have been pre-existing, was in fact written, and whether it was created ahead of the time at which the software had been actually commissioned.

It should also be noted that the judgment was restricted to ownership of the copyright of the source code. The Court of Appeal decided that claims to ownership of copyright in the object code were outside the ambit of the appeal.

Stephen Revill, Consultant, Bell Gully