It is advisable that a deed of assignment be executed assigning all IP rights in software to the person commissioning the work as soon as the software is developed and delivered by the vendor or developer. It is also important to ensure that the deed of assignment identifies the work assigned, specifies the rights assigned, and mentions the duration and territorial extent of the assignment.
A division bench of Delhi High Court recently deliberated on the legal consequences provided under the Copyright Act on this issue. The court’s findings are significant for everyone involved in the creation, development and outsourcing of IP work in India.
Facts of the case
Gemalto Terminals Pvt Ltd (respondent) had entered into a master agreement for development services (MSA) with Pine Labs Pvt Ltd (appellant), a software development company, under which Pine Labs was to develop a customized fleet card system for one of Gemalto’s clients, IOCL. When Gemalto was later awarded a contract for a fleet card system for HPCL, Gemalto asked Pine Labs to make the IOCL and HPCL systems interactive. Pine Labs readily agreed, but no consensus on terms could be reached.
Pine Labs later discovered that Gemalto had subcontracted QCI Technologies Pvt Ltd to create and develop software for the HPCL system. Since this system was to interact with the IOCL system, Pine Labs apprehended that the source code of the IOCL software would be handed over by Gemalto to QCI Technologies.
The prospect of distribution of the source code of the software developed by Pine Labs to the third party led Pine Labs to claim ownership of the IOCL software. The claim was based on sections 19(5) and (6) of the Copyright Act, 1957, under which the assignment of copyright in respect of the original version of the software developed for IOCL would only be for five years and only within the territorial limits of India as the agreement between the parties was silent on the time period and territorial limits of the assignment.
Pine Labs filed a suit and obtained an interim ex parte injunction, but a single judge vacated the injunction after hearing both the parties. This prompted Pine Labs’ appeal before a division bench, which upheld Pine Labs’ contention that the assignment of copyright in the software it developed for Gemalto came to an end and reverted to Pine Labs after five years.
The court observed that as Pine Labs was the creator IOCL software under section 17 of the Copyright Act, Pine Labs would be the first owner of the copyright in the work. Section 19(1) of the act stipulates that any assignment of copyright must be in writing and under section 19(2), the assignment must specify the duration and territorial extent of such assignment.
The court posed the question, “What happens if the agreement is silent on the duration and territorial extent of the assignment?”, and concluded that “as no duration or territorial extent is provided in agreement or any assignment deed, provisions of Section 19 subsections (5) & (6) of Copyright would be attracted”.
The court also found that sections 19(5) and (6) would have been triggered whether the MSA was an assignment agreement or simply an agreement to assign. Gemalto had vehemently argued that the MSA was only an agreement to assign or assignment in equity.
Refuting this, the court observed that even if it is presumed that the MSA is an agreement to assign, an assignment agreement in writing must have been subsequently executed, regarding which there is nothing on record.
The court said: “two things are possible. Either we can presume that there was no valid assignment of copyright in the software developed for IOCL Fleet Program in the favour of the respondent; or, the work order is the assignment agreement within the requirement of section 19(1). If former is the case then the respondent hardly has any chance to succeed and if later is correct then section 19(5) and (6) would automatically be attracted as the work order is silent on the time and territorial limits of assignment as we cannot beyond the work order, in the light of clause 20 of the MSA to deduce the intentions. This shakes the foundation of the respondent’s position.”
This judgment is significant for commissioning work. It clearly lays down that if the parties fail to provide for the period and territory in the document by which assignment of copyright is made, then, regardless of the intention of the parties, the period of assignment will only be five years and the territory will only be the territory of India.