Late night coding: who owns the results?

Published on
4 min read

In a recent dispute over employees and copyright ownership – Penhallurick v MD5 Limited – ownership of copyright in software created out of hours and on a home computer was in question. Did the employee have the right to take it with him when he left or was it owned by his employer?

Copyright - a quick recap

There are several different IP rights, and copyright is one of them. Copyright protects original ‘works’ – a term covering many different kinds of creative activity. Common examples in a workplace environment are written material like articles, reports, diagrams and charts. Importantly, computer software code can also be protected by copyright. Copyright subsists automatically when an original work is created; in most countries you don’t need to register, unlike some other rights like patented inventions.

Ownership of copyright in a work is important. The initial owner of copyright is the person who can stop others from copying the work. In practice, this means owners can take action to stop other exploiting works without their permission.

UK copyright legislation states that, where an employee creates an original work in the course of their employment, their employer owns the copyright in the work. This sounds straightforward but can often lead to disputes concerning whether what an employee did was really ‘in the course of their employment’.

Penhallurick v MD5 Limited is a very recent case where this issue was examined.

What happened?

Mr Penhallurick was employed by MD5 Limited between 2006 and 2016. During that time, Mr Penhallurick wrote code for various pieces of software which were used by the police when gathering evidence. During the 10 years Mr Penhallurick was employed by MD5 he had a number of different employment contracts.

After Mr Penhallurick had resigned from his role at MD5, MD5 continued to use the software that Mr Penhallurick had written when he was an employee. However, Mr Penhallurick said that he in fact owned the copyright in the software he had written and that MD5 could not continue to use it after he had left. He sued MD5 for copyright infringement.

To succeed, Mr Penhallurick had to show that he owned copyright in the software he had written and not MD5. Mr Penhallurick argued that the legislation referred to above (which states that MD5, the employer, would own copyright in work Mr Penhallurick did in the course of his employment) did not apply because he had written the software in his own time, outside of work hours. He had also written the code on his home computer and not his work one.

MD5’s counter argument was that writing software was clearly what Mr Penhallurick was employed to do and so they owned copyright in the software under copyright legislation.

The decision

The court came down on MD5’s side. It owned copyright in the software code written by Mr Penhallurick, because Mr Penhallurick was employed to write software code. It didn’t matter that Mr Penhallurick worked in his own time and on his own equipment. He was performing a task which he was employed to do.

Three points to note

Ownership of IP rights is often extremely valuable. Remember the following:

  1. Make sure your employees’ contracts accurately describe what they are employed to do. While what the contract says isn’t the whole story, weight was given to what the contract said in this case. The various employment contracts were criticised by the judge for being unclear.
  2. With that said, remember what matters. The work that employees normally do in practice is likely to fall within ‘the course of employment’. Even employees’ work outside of their normal hours, if they are undertaking tasks which they are employed to do, probably still falls within the course of their employment. When the work was done, and the tools used, are relevant factors but are not decisive.
  3. To be even safer, include an ‘assignment’ clause in employee contracts. Provided a clause is worded correctly, this should transfer IP rights in work done by employees to the employer. (Although note that there are legislative limits on these types of clauses in relation to some IP rights.)

Discover more about our intellectual property and IP dispute resolution services, and catch up on our series of engaging Talking IP discussions.

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