Replacing a service provider mid-project can cause significant disruption. It can be tempting to try to limit the disruption by simply handing over materials created by your former service provider to your new service provider. After all, you paid your former service provider, so surely there are no issues [so you think]. Unfortunately, it’s generally not that straight forward. To start with, your former service provide may, depending on the terms of any agreement, retain ownership of all copyright materials relating to the project.
The recent case of Tamawood Limited v Habitare Developments Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed)  FCAFC 65 (the Tamawood case) highlights the importance of this issue.
The Tamawood case considered a range of interesting legal issues,including:
1. Was there a licence to use plans, if so, what was the extent of the licence? In the absence of any written express licence between the parties, the Court found that an implied “bare licence” existed. This licence was limited in scope to a very narrow purpose (being use of plans to obtain planning approvals).
2. Did use beyond the bare licence amount to copyright infringement?
Yes. Since there was use beyond the bare licence, the Court held that there was (a) a causal connection between the copyright in plans from the former service provider and the new service provider and (b) the new plans developed by the new service provider substantially reproduced the essential features of the plans developed by the former service provider. This affirmed the qualitative rather than quantitative test for infringement.
3. Were the Directors of the infringer also liable? Yes. The Court held that the Directors of Habitare authorised the copyright infringement, and were consciously trying to take a short cut so that approval of plans developed by the former service provider were not revoked.
4. Was the new service provider also liable for infringement? No. The Court was satisfied that the new service provider had innocently infringed the copyright of the former service provider. This was merely a defence to avoiding payment of damages or an account of profits (being the remedies for copyright infringement), but the new service provide still had to pay their own legal costs (which could not have been insignificant noting this matter went to the Federal Court, and on appear to the Full Federal Court).
5. Was a claim under the Australian Consumer Laws also made out?
Yes. The new service provider succeeded in a claim against Habitare for misleading or deceptive conduct. This conduct was telling the new service provider that any copyright issues with the former service provider had been resolved.
6. Importance of express licence terms: This case highlights the importance of having the licensing terms associated with the use of any copyright materials in writing and with clear licence conditions. The licence terms do not need to be called a licence agreement. Rather, they can simply be contained in a standard services agreement, which contemplates who owns any IP created, what licences are granted (and the scope of the licence), and what are the consequences of termination.
At ARETE Group we have expertise and experience in drafting licence terms and conditions, together with all forms of IP protection and enforcement, including advising on copyright infringement issues.