Do you own the source code to your application or website? If you do not know for sure, chances are that you do not. This video explores the legalities of source code ownership, and highlight some key aspects that you may need to consider when creating a contract with your developer.

Hi, I’m Andrew Wilcox with EverAge Consulting, and today I have Christene Hirschfeld with me. She’s with the law firm BOYNECLARKE. I asked Christene to join me today, to talk a little bit about source code ownership, and IT law is one of your specialties.

It is.

Christene has been gracious enough to join me today to talk a little bit about it, and I think that some of the things we’re going to talk about today, you’ll find quite interesting.

So, Christene, let me start off by describing a scenario for you. It was a recent discussion I had with a potential client where they had an existing application that was developed by another consulting firm, and they were kind of unhappy with the relationship. They were looking for somebody that might be able to take what currently existed and make some modifications to it. And through the process of discussions, it was discovered that they had a contract with the current firm that gave full ownership of that source code over to the other firm, so they didn’t even actually own the source code to be able to take it to somebody else and make any modifications to it.

So they were in a situation where they could continue to deal in that relationship where they were unhappy or start from scratch, and I found that bewildering that somebody could be in a situation where they would specify all of the requirements of exactly what needed to be built and pay for every hour of development time that it took to have that built, yet at the end of the day, not have ownership over the source code, and I understand that that’s not an uncommon scenario.

Unfortunately, it’s not uncommon at all, and it doesn’t apply just to source code. It applies to anything that’s subject to copyright protection.  Your potential client, I hate to say, I don’t have too, too much sympathy with people who sign contracts without reading them.  Especially businesspeople, you know, the individual off the street who signs something without reading it, that’s one situation, but if you’re in business, and you’re signing a contract, you owe it to yourself to know what it says. And if you don’t understand what it says, then you should turn to somebody, your lawyer or somebody else who understands what it is you’re getting yourself into. But if we back up from that and leave aside the issue of the contract, your client would be in exactly the same situation if there hadn’t been something in writing.

Under the Copyright Act in Canada, which is a federal statute, the provisions relating to ownership of copyright are very clearly set out. It’s normally the creator of the work who owns the copyright. So in this case, the creator of the work would own the source code. There are a few exceptions.

The first one is, if work is created by an employee in the course of his or her employment, then the employer owns the copyright. That doesn’t apply here. But the second exception is if there is a contract in writing signed by the parties that specifically assigns the copyright to the other party.  So in this situation, your client’s contract should have said, if this had been negotiated, that your client was hiring the firm to do the work and that the copyright in and to that work was being assigned to the client.

So what should your client be looking for?  If they’re entering into this type of agreement, they should be looking for something that says just that.  Who owns the copyright? Is it the creator, or is it the individual or the client?

A couple of other issues that they should be looking at as well, there’s a concept in Canada called moral — M-O-R-A-L — moral rights creature of statue, created under the Copyright Act, does not exist in the U.S., and as a result, Americans look at us very strangely when we start talking about it. It’s based on French law. The moral rights are twofold. One, it allows the creator to be identified or not as the creator of the work.

And secondly, it allows the creator of the work to protect the integrity of the work. It vests only in individuals. So if I were your employee, and you had me working on this video, and I had not waived my moral rights in it, I could, at the end of the day, say that I want to be identified as one of the creators of this work.  And I could also protect the integrity of the work, so that means, that if, for example, this is being created for educational purposes, and then suddenly you found a way of using it for something other than educational purposes, you found, if I were a pacifist, for example, and you found a way of using this for military applications.  I could object on that basis.

So, what are we looking for in contracts?  We’re looking for ownership of the copyright.  We want to make sure that whoever’s creating the copyrighted work has waived his or her moral rights. And you want to make sure the work’s original as well. You don’t want to be charged, if you’re a client, with copyright infringement.

And we run into this with websites quite often, where people will go out and hire a website developer, and even if they’re given the copyright, you want to make sure that all of the images that are used in that website are original.

Are original and they are not under copyright themselves.

Exactly. We end up with clients several times a year, coming to us and saying that they have received an invoice from a stock footage or a stock photo provider, because what’s happened is they’ve hired someone to create a website for them. The website creator has gone online and taken an image from Getty, for example, is one example. And then the website goes live; Getty goes out; they can see what’s on the Internet; they send out invoices, and under the terms of their stock photo usage, as soon as you’ve used it, you are deemed to have agreed to the terms, and the bills that come in that we see routinely are between $5,000 and $15,000.

So you mentioned moral rights, and moral rights are not in effect in the United States.


But the same copyright laws are effective between Canada and United States. Or are there any differences there?

There are some differences. There are differences, for example, in the term of copyright protection.  In Canada, it’s the life of the author plus 50 years, and in the U.S., it’s life of the author plus 75 years.  That was a result of the Sonny Bono legislation. It was the year that Sonny Bono died, and they brought it in, because the Micky Mouse copyright was about to expire.  So big business, presumably had some influence on the government, and they extended it.

There are also some other issues. The major one that comes up in my line of work is how long the copyright is in effect. So if we’re looking at using something that is or maybe in what they call public domain, in other words, copyright has expired, that’s usually the reason, you have to look at when the work was created, and what the copyright legislation said at that time.  The fact that it says 75 years after the death of the author right now does not necessarily mean that that’s what it was at the time that the work was created.

Let’s talk a little bit about the idea of creation, the one who’s actually creating the application, because I think, depending on how you take that context, you know, perhaps somebody might try an angle, a defensible angle. So, let’s say that I have a desire to have an application built, and I design it; I create all of the graphical treatments for it. I create all the screenshots. I know exactly how it’s going to behave, and I specify that very clearly, and then I have a developer simply implement that. Would there be an argument to say that I’m really the creator, because it was my imagination that came up with what the end product is, as opposed to just the source code?

You can have a layering of rights in copyright.  So, what we would say is that you created the image, for example, but yet, when the developer actually implemented this, there’d be another layer of rights.

A good example would be cover of Time magazine. So we’ve got nice picture on the cover of Time magazine. You’ve got several levels of ownership there. You’ve got the layout; you’ve got the photo. So the photographer may be an independent contractor who provided the photo. And then you’ve got the layout, and you’ve got the look and feel of the Time magazine cover itself.

So in that circumstance, if the owner was actively involved in the specification of what the application can do, then they could take the entire idea and have somebody re-code to that specification, but they can’t simply reuse the source code?


Right, I see. OK.

Because the creator, the person who implemented this, would own the copyright in the source code itself.  They didn’t have the concept behind it, but they owned that.

OK, so, this is pretty enlightening. I’d imagine there are a lot of people who aren’t aware of this. So what types of things should they look to have embedded into their contracts that will prevent them — so, specifying the copyright was one of those.


Waiving of the moral rights?


I missed something; didn’t I?

You also want to make sure that the work is original, so that you’re not going to get, you as the client, are not going to get a bill from a third party, or worse still, a letter saying that you’re infringing the copyright.

And another thing that I would want, if I were a consumer, is, depending on the situation, a provision saying that the work won’t be used for anybody else.  In certain circumstances, I, as a consumer, may not care whether I own the copyright, but I want to make sure that my competitor doesn’t end up with something that functions the same way.  And that would be especially true in your example where the client comes in and says, this is what it’s going to look like; this is what it’s going to do.  You don’t want your competitor getting that advantage. So it’s not truly a non-disclosure or non-competition provision, but it’s something along those lines.

Now, last item on, sort of, the development of source code. A lot of source code these days is based on design patterns. So, is there any argument to be said that if a developer relies heavily on design patterns, that it’s not truly their creation?

You can always try arguing that. I don’t think you’re going to be successful.  I think that ultimately, the definition of copyright and the definition of work under the Copyright Act, it’s so broad that you’re probably going to be able to get some protection, because there is a degree of originality there.  It would have to be almost an out-and-out copying in order to allow you to get through with that argument.

I see. So, if they did indeed take code from some other location, perhaps an open source project, and represent that open source project as their work, then they would not have copyright?

Correct. And you’ve raised an interesting point that I didn’t mention, that if you’re dealing with software, it’s something that you’ll want to build into your contract in many circumstances, a provision that what’s been providing is not not open source, because there are provisions in the open source contracts with respect to commercialization and with respect to the sharing of any improvements.  So if I am the consumer, or the company that’s hiring the developer, and I end up being delivered something that’s open source, I’ll be deemed to have a contract that provides that I have to share any improvements on that with the rest of the open source world.  And that’s not what I want necessarily.

Well, it certainly is an enlightening topic, and I’m sure that you know, many people, like myself who are not aware of the real implications, because I think there’s a tendency to believe that if you specify something and you pay for it, you have an inherent ownership, and that is absolutely not the case.

So, I appreciate you taking the time today to walk us through that. If anybody has any questions, would they be free to contact you through BOYNECLARKE?

Of course.

Thank you very much for your time.

It’s a pleasure.