This article was first published in the Bay of Plenty Business News

In pre-Covid days, if you created copyright works such as drawings or source code as part of your job, the odds are you would have done so during ‘normal office hours’ at your desk rather than at 9 o’clock at night in the comfort of your own home. It would have been straightforward to establish who was the owner of copyright (TOOC) in those drawings or source code.

In these Covid-affected times, however, many office-based employees now work flexible hours and work from home (WFH). Indeed, the 8.30am – 5pm day in the office has almost become a rarity rather than the norm. As a result, ascertaining who is the owner of copyright in drawings or source code may be a little harder to discern; or at least, the topic may be open for greater debate. The need then to be sure of who owns what in an employment context is perhaps more important now than it used to be.

The recent case of Michael Penhallurick v MD5 Ltd [2021] EWHC 293 in the Intellectual Property Enterprise Court in England, although relating to events pre-Covid, illustrates this need.

Mr Penhallurick, a former employee of MD5, claimed ownership of copyright in eight works relating to a technique he named “Virtual Forensic Computing” or “VFC”.* The eight works comprised different versions of the software code (literary works), a graphic user interface (artistic work) and a user guide (literary work).

It was established that the first two works – the earliest version of the VFC source code and the object code compiled from this code – were created in 2005 and 2006, before Mr Penhallurick was employed by MD5 in November 2006. The Court found these works were not relevant to Mr Penhallurick’s claim and consequently focussed its assessment on the remaining six works created by him after he joined MD5.

Identifying the author

The Court found Mr Penhallurick was the author of the six remaining works and therefore was the first owner of copyright in them – unless any were made in the course of his employment by MD5 pursuant to the IP clause in Mr Penhallurick’s employment agreements, in which case MD5 was the first owner. Which of these was the case turned on the meaning of “in the course of his employment”. Why? Because of the poor wording of the “Job Titles and Duties” and intellectual property clauses in Mr Penhallurick’s first employment agreement.

The Court ultimately found that all of the works had been created by Mr Penhallurick in the course of his employment with MD5. Of particular interest to this author, and relevance to this article given the current fashion for working flexible hours from home, however, is the Court’s finding in relation to the third and fourth copyright works (“VFC Version 1” and the graphical user interface (“GUI”) for VFC Version 1) created by Mr Penhallurick in 2007. In respect of these works, the Court said:

“[66] … It seems that Mr Penhallurick took on the task [of developing VFC Version 1 and GUI] with enthusiasm, to the extent that he took his work home some of the time. His staff annual appraisal of August 2007 suggests that much of the work must have been done during working hours at MD5. But whatever the exact proportion done at home, it does not displace the strong and primary indication that it was work done in 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, 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, here sometimes 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.”

Although it is not stated, I am confident the same reasoning applies to the time of day the employee chooses to do the work – that is, it doesn’t matter whether you do the work at 10am or 10pm, if the work is carried out in the course of your employment then any copyright rights in it will be owned by your employer.

What employees and employers should do

Standing back, Mr Penhallurick’s case identifies two important ‘take homes’ for both employers and employees:

• first, if an employer is going to make use of copyright works created by an employee before that person is an employee, then the employer should have the employee assign copyright in those works to the employer at the same time the employee becomes an employee. Alternatively, execute a licence agreement with the employee at the same time the employee becomes an employee to enable those works to be lawfully used by the employer;
• second, the employer should ensure employment agreements, but particularly those with employees whose job it is to create intellectual property, adequately identify an employee’s role and scope of duties so that it is clear what resulting intellectual property the employer is laying claim to by virtue of the employment agreement, irrespective of what time of day and where that intellectual property is created.

* VFC is a method of retrieving an image of the hard disk without writing on it, then booting up the image on a virtual machine so that the image can be investigated. In developing the technique, Mr Penhallurick had used a freely available product called VM Software to set up the replica of the target computer’s hardware and operating system. As computer programs generally have inbuilt safeguards to prevent them from being manipulated in this way, the method developed by Mr Penhallurick involved a password bypass feature.