Who owns the copyright when your employees create the software?
Q: If the software is created by an employee, outside of normal working hours, are they entitled to the copyright in that software?
A: This might be true in some cases but in the majority of cases, unless this has been explicitly agreed, it will belong to the employer. Even if it is created at home or outside of normal working hours, in the majority of cases, if it has been created “in the course of employment” it will belong to the employer.
Let’s explore this one in more detail, from an employer’s perspective, and look at the recent High Court decision in Penhallurick v MD5.
This case considers what “in the course of employment” really means. In this case Mr Penhallurick was paid for developing software under his contract of employment and with MD5’s knowledge. The fact that much of this work was done from home (a factor increasingly applicable during these days of COVID-19 and recovery) did not affect this fact and Judge Hacon in the Intellectual Property Enterprise Court found that as developing the software was Mr Penhallurick’s contractual role, the copyright for this software was owned by MD5.
When considering this subject in your own organisation a number of different factors need to be considered.
What was the employee employed to do? What are the terms of their employment contract? Does it expressly state that their duties include the creation of software of the relevant kind? Are the terms used to describe the type of software as wide as reasonable? Has it been updated when the employees role has changed?
If these factors are clear-cut in showing that the employee is employed to develop this software, the fact it is developed at home, or outside of office hours, or on the employee’s own computer (often arguments made towards copyright being owned by the employee) will carry little weight. This type of clear direction from the employer, evidence showing that they were employed to do this type of work and payment will mitigate any risk of the employer losing copyright to the employee. So far so good.
This can become complicated, however, when an employee has worked on an idea before being employed by a company.
In this case the copyright on work done prior to employment will be owned by the employee. Any work done after this point, however, would have copyright owned by the employer, assuming the previously listed factors are addressed. To manage a situation like this the employer should look to put in place a specific agreement, assigning legal and beneficial ownership of the copyright prior to the point of employment.
The exception to this principle is if the software is developed by someone working on a consultancy basis or as a contractor (rather than an employee).
In this situation, a contractor will normally be the first owner of the copyright. Organisations need to ensure that any contractor agreements specifically address copyright ownership or should look to put in place a specific agreement, assigning legal and beneficial ownership of the copyright prior to the point of employment.