Who owns copyright works that an employee creates at home?
One of the highlights of the pandemic has been the opportunity to catch up on a lifetime's worth of TV. Fortunately, there are some truly great TV shows including the comedy Silicon Valley. It is not for nothing that this great TV show has been described as a documentary! It confronts many of the business issues that face the tech industry in the US and beyond. One of my favourite episodes is a mini courtroom drama (a binding arbitration, if we're going to be precise). The episode looks at the complex question: who owns a copyright work if it is created by an employee in their spare time but directly relates to the business of their employer? I won't spoil the episode but the short answer is that it's complicated.
A judgment by HHJ Hacon in the IPEC (Penhallurick v MD5 Ltd  EWHC 293 (IPEC) on 15 February 2021) delves into this complex question and reminds us of the risks of asserting copyright when ownership of the relevant works is disputed.
The claimant, Mr Penhallurick, sued his former employer, a digital forensics company called
MD5, for infringing copyright in eight works relating to a technique called Virtual Forensic
Computing (VFC). Unfortunately for Mr Penhallurick, the claim backfired.
The judge found that:
the first two works (the earliest version of the source code and the object code compiled from it) were of no relevance to the claim, if indeed they ever existed.
The remaining six works were all created by Mr Penhallurick “in the course of his employment” by MD5.
Copyright in five of these works belonged to MD5 because they “were created by Mr Penhallurick with the knowledge and encouragement of MD5 and all were directed to making and improving the VFC software product sold by MD5. Mr Penhallurick was paid by MD5 to carry out that work.”
The final work, a user guide, was created to promote MD5’s business, and the judge found this also fell “squarely within the duties for which Mr Penhallurick was employed” and therefore MD5 was the first owner of the copyright.
The situation got even worse for Mr Penhallurick... The judge further found that even if MD5 was not entitled to ownership of the copyrights as the employer, then it was assigned those rights by a November 2008 agreement between the parties.
This does not mean that every work created by someone who is an employee necessarily belongs to their employer. HHJ Hacon noted that deciding whether works are made “in the course of employment” requires a multi-factorial assessment. In this case, the evidence presented, including agreements between the parties with clauses regarding IP rights, clearly favoured the employer, even in circumstances where the employee was carrying out work at home in his own time.