Implied Licenses and Ownership of Intellectual Property Rights in the United Kingdom

Background

Mr Ray was a highly respected expert in classical music in England, reputed to have an encyclopaedic knowledge of classical music. He was engaged by Classic FM in the United Kingdom in 1991 to compile the radio station’s repertoire, compile playlists, categorising tracks for play lists, and rate their popularity under each of the categories. The contract did not deal with intellectual property rights. The consultancy agreement was originally for 11 months, however the work of Mr Ray proved beneficial for Classic FM, and his services were extended until 1997. Some 50,000 tracks were eventually categorised. The results of the work were incorporated into a database that was used to select music on a rotational basis, and prevent overplaying.

The project was success. After internal use for about 5 years, Classic FM proposed to licence the database to overseas companies. Mr Ray objected and commenced proceedings to prevent Classic FM licensing the use outside the UK without his permission, on the basis that he was the author of documents that were incorporated into the database.

The Decision of the High Court

Mr Justice Lightman in the High Court ruled that in the case of a consultancy, the author retained the copyright in the absence of an express or implied term to the contrary effect. Where services by a consultant are performed for an express purpose, a court will readily imply a term into a contract for services that a client is entitled to use it for that purpose. In this case, Classic FM always intended to utilise the Mr Ray’s work in the UK. It was not until 1996 that Classic FM intended to exploit Mr Ray’s work overseas. The court was not prepared to imply a licence into the contract that Classic FM would be entitled to exploit his work overseas. Classic FM was prevented from exploiting their database abroad without the consent of Mr Ray, which would require payment of license fees.

When implying licences in this way, a court will only go so far as is necessary in the circumstances to give effect to the intention of the parties. If a grant of a licence is required, the ambit of the licence will be the minimum required to give effect to the intention of the parties at the time of the contract. An implied term that copyright would be assigned to a client will be exceptionally rare, as most often an exclusive licence will have the same effect in law.

The judge held that the contractor retains the copyright in default of some express or implied term to the contrary effect. The contract may expressly state which party is entitled to the copyright, and the mere fact that the contractor has been commissioned - performed by a contractor - is insufficient to grant rights in the copyright to the client. In the absence of express rights, the client is left to establish an entitlement under the express or implied term of the contract.

Conclusion

The decision means that contractors retain the copyright in the absence of an implied or express term. An implied licence must be reasonable and equitable; necessary to give business efficacy to the contract, capable of clear expression and not contrary to any express term of the contract, and so obvious that it goes without saying. This means that a licence will be implied for the client to use the work for the stated purposes at the outset of the engagement. It is important to document the purposes of the engagement and the intended use for the copyright work created during the course of the engagement.