The invoice is paid, the work is delivered and everyone moves on. The natural assumption is that, because the business paid for the work, it owns it.

That assumption could however be wrong…

What Does Copyright Protect?

Copyright in South Africa is regulated (largely) by the Copyright Act 98 of 1978 (“the Act”).

Copyright can subsist in a surprisingly broad range of works, including literary works, artistic works, computer programs, photographs, cinematograph films, sound recordings and musical works.

In a commercial context this may include, amongst other things, software and source code, website content, manuals, reports, presentations, drawings, plans, photographs, marketing material and other original content created for a business.

Importantly, copyright generally arises automatically. It does not depend upon registration of the copyright. Broadly speaking, once an eligible original work has been created and reduced to material form, copyright protection may arise without the owner having to make a separate application for protection.

Copyright also protects the particular expression of an idea, rather than the idea itself. Simply having a good business idea therefore does not ordinarily give someone copyright in the idea.

So Who Owns The Copyright?

The starting point under section 21 of the Act is relatively straightforward: the author of a work is generally the first owner of the copyright in that work.

There are, however, important exceptions.

Where an employee creates a work in the course and scope of his or her employment, the employer will, subject to certain exceptions and any agreement to the contrary, generally own the copyright.

The position becomes more interesting where the person creating the work is not an employee, but an independent contractor.

Consider a simple example.

ABC (Pty) Ltd appoints an independent software developer to develop a bespoke software platform for R500,000. ABC provides the specifications, funds the entire development and intends using the platform as an integral part of its business.

Unless the agreement properly deals with ownership of the intellectual property, it does not necessarily follow that ABC owns the copyright in the software simply because ABC paid the R500,000.

The developer may remain the owner of the copyright, with ABC having no more than an express or implied licence to use the software. That can become a fairly significant problem when ABC later wants to modify the software, appoint another developer, licence the technology, sell the business or attract an investor who asks a very simple due diligence question: “Who owns the IP?”

But I Commissioned And Paid For The Work?

This is where the Act contains an important, but sometimes misunderstood, exception.

Section 21 provides that the person commissioning certain specific types of works – including a photograph, portrait, gravure, cinematograph film or sound recording – and paying or agreeing to pay for them will generally own the copyright in that commissioned work.

The exception is, however, limited to the categories identified in the Act. It does not establish a general rule that whoever commissions and pays for any form of work automatically owns its copyright.

Accordingly, where an independent contractor is commissioned to create other copyright works – software being an obvious example – ownership should not simply be assumed.

Can Copyright Be Transferred?

Copyright is an asset and can be transferred or “assigned” from one person to another. There is, however, an important formality. Section 22 of the Act provides that an assignment of copyright is not effective unless it is in writing and signed by or on behalf of the person assigning the copyright. This distinction is important.

An agreement which merely states that a customer may “use” the work may amount to a licence. It does not necessarily transfer ownership. Similarly, paying an invoice which describes something as “website development”, “software development” or “design services” does not, without more, necessarily constitute an assignment of the copyright.

If ownership is commercially important, the agreement should say so expressly.

What Should Your Agreement Say?

Where a business engages an employee, consultant, developer, designer, marketing agency or other service provider to create valuable content or intellectual property, the agreement should deal expressly with the resulting IP.

Depending on the transaction, this would ordinarily include provisions dealing with:

• who owns intellectual property which existed before the engagement;
• who will own intellectual property created in performing the services;
• an express assignment of the relevant copyright and other intellectual property rights to the intended owner;
• an assignment of future copyright, where appropriate;
• an obligation on the creator to sign further documents reasonably required to give effect to the transfer;
• the treatment of third-party intellectual property incorporated into the work;
• the extent to which the creator may retain or reuse underlying tools, methodologies or pre-existing material;
• confidentiality and the protection of proprietary information; and
• the client’s rights to use, alter, develop, commercialise, licence or transfer the completed work.

The drafting naturally depends on the commercial arrangement. A software developer who has spent ten years developing its own underlying platform should not inadvertently transfer that platform to a customer simply because it performs some bespoke development work. Equally, a customer paying substantial amounts for genuinely bespoke IP should not discover several years later that it never acquired ownership of the asset it believed it had purchased.

The Takeaway

The important point is a simple one:

Paying someone to create something does not necessarily mean that you own the copyright in what they create.

The question should be addressed when the commercial agreement is concluded, rather than when the relationship has broken down or a purchaser, investor or funder starts asking questions.

A few properly drafted clauses at the outset are considerably easier – and usually considerably cheaper – than trying to establish ownership of valuable intellectual property after the event.