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Businesses and software designers wrangle over who owns copyright

09 September 2008, Skills Portal

There is an important tale with many lessons in how Microsoft got its big break.

In 1980 IBM entered the personal computer world but needed an operating system.

It approached Gary Kendall of Data Research (of course, you’ve never heard of them) but they turned IBM down.

IBM approached Microsoft and the rest is history – we all know who and what Microsoft and Bill Gates are.

The second and most important part of this fable is how Microsoft began earning its billions – the royalties earned on each copy of MS-DOS sold propelled the company into the big league. Today Microsoft employs 91 000 people has assets of US$73bn, profits of $18bn and annual sales of $60bn.

“Copyright and the importance of royalties is too little known or understood by big business and often the originators of original works themselves, writers, artists and software developers,” Liza van Wyk, CEO of management training organisation AstroTech says.

AstroTech’s course IT Contracts and SLA’s has proven consistently popular and is regularly updated to keep track of rapid changes in this dynamic field

Course presenter and well-known Johannesburg IT lawyer, Warren Weertman, who has also helped draft legislation, says, “On the SLA side the biggest challenge is always defining measurables, who will deliver, what, when and how and how you measure that. It will always turn on what you are trying to measure; sometimes it can be hours worked. A support agreement may stipulate eight hours support, but if something needs to be rewritten in a programme then what is a reasonable amount of time to get a component developed?”

Can deadlines be placed on creativity? Journalists work to deadlines but that is formulaic writing, no one considered giving Michelangelo a deadline to complete the Sistine chapel.

Weertman says there are considerable difficulties from business in understanding creativity, rewarding it appropriately and honouring and understanding copyright.

“Often IT managers get frustrated because management don’t understand the full implications of what they are asking for in development. Or they may ask something that exceeds the IT budget and not understand why more is necessary.”

Weertman says that similarly with IT contracts “people aren’t really sure about what the law says or how to apply it. If I have someone developing software I may think that because I’ve paid for it and given the ideas that were translated into software that it is mine but in terms of copyright it doesn’t work that way.”

A Supreme Court of Appeals decision in such a case, Haupt vs Softcopy saw the parties spend hundreds of thousands of rand to pursue conflict over infringement.

Haupt won – but the important consideration is whether you have that sort of money to debate around?

If you don’t Weertman suggests you use an IT lawyer to draft an agreement so that there can be no doubt as to precisely who owns copyright and whether or not any party is entitled to royalties and if so, how that agreement should be structured.

As any writer will tell you the money is not to be made in being commissioned to write a book, it’s in the royalties following sales.

Weertman advises in IT Contracts and SLA’s, “If you are going to get someone to develop software on your behalf make sure you have a copyright assignment clause in the contract to take ownership of copyright. If the developer won’t agree to that then look at a license agreement.

“If you have software developed the first prize is to get ownership, but in terms of the Copyright Act that has to be in writing. If you look at things such as a website or software you need to consider - who will support it if something goes wrong?

Will there be some sort of maintenance and support?

If a developer doesn’t sign software to you then the source code needs to be with a third party.

You don’t want to be in position where if a developer disappears you are unable to do maintenance.

“Issues around intellectual property are huge. If I get a design house to design a logo, then I need to trademark that logo, if it isn’t assigned to you then it is owned by the design house.” Weertman says that, “especially when it comes to IT, the IP is a critical component.

“An idea is always difficult to protect and copyright protects material embodiments around that. If you have an idea then look at a non-disclosure agreement if you share it with others. If it is something that has never been done before it could be patentable. But remember: because you pay for it (writing, software development, and a design) it is not necessarily something you own.”

The problem in understanding this, Weertman avers is that “people apply the same principles for non-creative purchases: buying a desk, buying a car, but you cannot apply that logic to the creative sphere. “

The International Journal of Electronic Commerce supported this in an article that said “Assessing the value of information technology security investments by firms is a challenging task because of difficulties in the measurement of tangible and intangible benefits. (If you look at) the information transfer effect of security breaches … the results of our study show that the announcement of Internet security breach is negatively associated with the market value of the announcing firm. Compromised firms, on average, lose approximately 2.1 % of their market values within two days surrounding the events. This translates into $ 1.65 billion average loss in market capitalization per incident… Each security developer, on average, gains 1.36 % or $ 1.06 billion per security firm over a two-day period.”