Limited liability, limited rights? Lakeland Computers Plc v Steadman

A recent Court of Appeal case concerning copyright in computer programs sounds a warning note for photographers who incorporate their businesses as limited companies.

Between 1986 and 1988 Charles Steadman wrote computer software.   Like most photographers,  Steadman was a sole trader.  He was the author of the software written by him and owner of the copyright.

In 1988 Steadman and his brother set up a limited company, Lakeview Computer Services Ltd.  There was no written copyright assignment, but the software was treated as a company asset.

The company went public in 1994 as Lakeview Computers PLC, but the shareholders fell out. Steadman left, with a payment of £850,000.  Litigation followed and one of the main issues was ownership of copyright in the companies software including any software which may have been written by Steadman and licensed by the company.

Steadman argued that copyright remained with him, despite the incorporation of his business, because he was the author of the software and had never made a written assignment to Lakeview.  Lakeview’s case was that Steadman was not the author of the company’s LM software, but that on incorporation of the company and/or under the terms of the share sale agreement, copyright in all software written by Steadman now belonged to the company.

The Court of Appeal firmly rejected Steadman’s argument.  Although the Copyright, Designs and Patents Act 1988 provides that an assignment is only effective if it is in writing and signed by or on behalf of the assignor, that provision does not apply to an AGREEMENT to assign copyright.  An agreement to assign copyright will be enforced by the courts and is known as an ‘equitable assignment’.  Such an agreement need not be in writing and may be implied from conduct.  Steadman’s conduct clearly demonstrated an agreement that all software should belong to Lakeview.

There is no difference in principle between computer programmers and photographers.  If a photographer incorporates his or her business it is likely that the copyright in photographs shot post-incorporation will belong to the company.  The same may also apply to photographs shot before incorporation, depending how they are used by the company.

The photographer could end up losing all control of the photographs, if (a) the photographer leaves the company for some reason or (b) the company goes into liquidation.

When a photography business is incorporated the question of copyright ownership should therefore be dealt with by means of a carefully worded agreement.  If not, the benefits of limited liability may be outweighed by the loss of valuable intellectual property rights.

Bulletins are for general guidance only. Legal advice should be sought before taking action in relation to specific matters. Where reference is made to Court decisions facts referred to are those reported as found by the Court. Please note that past bulletins included in the Archive have not been updated by any subsequent changes in statute or case law.