Michael Penhallurick v MD5 Limited; who owns the code you create from home?

Background

Michael Penhallurick was employed by MD5 to provide computer forensics services and act as an expert witness in Court. Prior to his employment with MD5, Mr Penhallurick had started to develop a methodology for a Virtual Forensic Computing (“VFC”) software that would allow users, such as police officers, to access hard drives without risking corruption or modification of the files on that computer.#

During his employment, Mr Penhallurick spoke to and discussed with MD5 the VFC software. After discussion with MD5, Mr Penhallurick started to create an automated implementation of the VFC software. MP worked on this software both at home, and at work using his own equipment. The VFC software was then sold by MD5 to various parties and Mr Penhallurick received a share of the sales.

After leaving MD5, Mr Penhallurick brought a claim against his former employers for copyright infringement and sought a declaration that he was the copyright owner of the VFC software.

Copyright Law

The default position in copyright law is that the first owner of any copyright work is the person who has created it (s11(1)) – however S11(2) of the Copyright, Designs and Patents Act 1988 states:

“Where a literary, dramatic, musical or artistic work or a film, is made by an employee in the course of his employment, his employer is the first owner of any copyright in the work subject to any agreement to the contrary.” (emphasis added)

The key question in this case was whether Mr Penhallurick had created the copyright works in the course of his employment with MD5.

The Case – Michael Penhallurick v MD5 Limited [2021] EWHC 293 (IPEC)

In looking at whether Mr Penhallurick has created the copyright works in the course of his employment, Judge Hacon referred to the case of Mei Fields Designs Ltd v Saffron Cards and Gifts Ltd [2018] EWHC 1332 (IPEC). In this case Judge David Stone had stated that ‘there is no single test to be applied’ to this question, but outlined some relevant factors that would indicate whether a work was created in the course of employment, or not.

“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.”

Judge Hacon commented that Mr Penhallurick’s case was not one in which the parties could run through the Mei Fields factors to show on the balance of the factors that Mr Penhallurick was or was not carrying out the development of the VFC Software in the course of his employment.

Instead in this case the fact that Mr Penhallurick worked on the software at home, in his spare time, and on his own computer system did not displace the “strong and primary indication that it was work done in the course of his employment”.

Judge Hacon noted that the VFC Software was the “central task” for which Mr Penhallrick was being paid. Mr Penhallurick had been given time given to work on the software at work, and there were agreements between Mr Penhallurick and MD5 that showed MD5 were exploiting the software and Mr Penhallurick was receiving a share of the profits in doing so.

Commenting generally, Judge Hacon stated “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.” And that, “the place where the employee chooses to do the work will not generally make any difference” .

Summary

This case highlights that there is no single approach to determining whether an employee has created a copyrighted work “in the course of his employment”. Instead the Court considered the factors as set out in Mei Fields, and it was shown that there are situations where this multi-factorial approach is not suitable.

Where one factor overwhelmingly shows that a copyright work was created in the course of employment, such as where there was strong evidence that creating the copyright work was the employee’s central task, then other factors, such as where the work was carried out, and whose equipment was used to carry out that work, will have less bearing on the determination of whether the work was carried out in the course of the employee’s employment.