Software created ‘in the course of employment’?
Penhallurick v MD5 (High Court) [2021]
Section 11(2) of the Copyright, Designs and Patents Act 1998 (CDPA) provides that, where works have been created by an employee in the course of their employment, the employer will be the first owner of any copyright in the work subject to any agreement to the contrary. Questions arose in this case regarding the impact of work having been carried out at home, out of office hours and using computers not owned by the employer.
Facts:
Mr Penhallurick developed a methodology for conducting audits of computer systems in a safe way by creating a virtual copy of the original. The methodology originated during his masters’ thesis before his employment with MD5 began. Whilst there was a dispute about whether any software embodying the methodology was created prior to his employment with MD5, it was clear that Mr Penhallurick created at least some of the software to automate the process during the period of his employment with MD5. The software had been created and developed using Mr Penhallurick’s personal computer and predominantly in his own time, but he had been employed by MD5 to develop the software, which was then subsequently sold to MD5’s customers.
The question was whether the software had been created in the course of his employment?
Mr Penhallurick had identified himself as the author of the work. Section 104 of the CDPA creates a rebuttable presumption that the person identified on copies of the work as the author will be the author of the work.
Decision:
An assessment of ‘in the course of employment’ requires what the judge described as a ‘multi-factorial assessment’. The relevant factors may include:-
(a) the terms of the contract of employment;
(b) where the work was created;
(c) whether the work was created during normal office hours;
(d) who provided the materials for the work to be created;
(e) the level of direction provided to the author;
(f) whether the author can refuse to create the work/s; and
(g) whether the work is 'integral' to the business."
The judge made clear that it is not a question of reaching a conclusion by ‘majority’, by running through the list and determining how many of the factors point in a particular direction or another. Some factors will be more compelling than others.
It was held that, despite a proportion of the work on the software having been undertaken at home, outside of working hours and on computers owned by Mr Penhallurick personally, it was nonetheless work done 'during the course of his employment'.
'The fact that an employee does work at home is relevant to the question of whether the work is of a nature to fall within the scope of the duties for which he is paid but it may or may not carry much weight. Where it is otherwise clear that the work is of such a nature [i.e. falling within the scope of duties for which he is paid], in my view the place where the employee chooses to do the work will not generally make any difference. The same applies to the ownership of the tools the employee chooses to use, in this case Mr Penhallurick’s own computer system. If it is clear that the employee is being paid to carry out a task as agreed with his employer, he may choose to use tools supplied by his employer or his own tools; either way, the task is carried out in the course of his employment.'
It was therefore held that the software was created during the course of employment and the circumstances could therefore displace the presumption in section 104 of the CDPA 1998.
Points to Note:
- It is important to clarify the position regarding any software or other intellectual property rights that an employee ‘brings to the party’. In fact MD5 sought to do that on two occasions and whilst Mr Penhallurick argued that the documents were not effective to transfer copyright, the court disagreed.
- Take care with any contract of employment and the description of the scope of the employee’s duties.
- Consider carefully the employment status of any particular individual as the rules, which entitle employers to automatically claim ownership of copyright works created by employees during the course of their employment, do not apply to independent contractors. A formal assignment of copyright ownership may be required from independent contractors. It does not necessarily follow that just because you have paid for something that you will own the resulting IP rights.