Michael Penhallurick v MD5 Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Christopher Floyd,Lord Justice Arnold,Mrs Justice Falk |
| Judgment Date | 02 December 2021 |
| Neutral Citation | [2021] EWCA Civ 1770 |
| Docket Number | Case No: A3/2021/0936 |
| Year | 2021 |
| Court | Court of Appeal (Civil Division) |
[2021] EWCA Civ 1770
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
INTELLECTUAL PROPERTY ENTERPRISE COURT
His Honour Judge Hacon
Royal Courts of Justice,
Strand, London, WC2A 2LL
Lord Justice Arnold
Mrs Justice Falk
and
Sir Christopher Floyd
Case No: A3/2021/0936
Nicholas Caddick QC (instructed by Virtuoso Legal) for the Appellant
Michael Conway (instructed by Lupton Fawcett) for the Respondent
Hearing dates: 2–3 November 2021
Approved Judgment
The principal issue in this appeal concerns the ownership of copyright in a number of literary works consisting of computer software underlying a tool for the forensic examination of computers (“the Works”). The software in question was written by the claimant and appellant, Michael Penhallurick. The respondent, MD5 Limited, utilises at least some of the Works in software products which it markets under the name VFC. The appellant sued for infringement of copyright in the Works. The respondent contends that the copyright in the VFC software belongs to it rather than the appellant because it was all created in the course of the appellant's employment by it under a contract of service, or alternatively had been assigned to it by an agreement of November 2008 (“the November 2008 agreement”), and that the copyright can therefore be exploited without the appellant's consent.
After a two-day trial in the Intellectual Property Enterprise Court on 2–3 July 2020, HHJ Hacon decided in favour of the respondent. He therefore dismissed the appellant's claim for copyright infringement in respect of the respondent's commercial use of the Works.
The respondent also counterclaimed, asserting that the appellant had infringed the respondent's copyright in the Works by making an adaptation of the Works without the consent of the respondent, or by retaining copies of the Works. The judge also dismissed this claim.
The appellant appeals against the judge's order dismissing his claim, and the respondent appeals from the judge's order dismissing its counterclaim.
The facts
Agencies, such as the police, may wish to extract evidence from the contents of a computer's memory without thereby corrupting or altering the source files and reducing or extinguishing the value of the evidence. The appellant, a former police officer, worked on a method of retrieving an image of the hard drive of a computer without writing on it and then viewing the image on a virtual machine, allowing the contents to be investigated.
The appellant worked on this method whilst studying for an MSc degree at Cranfield University from 2002 to 2005. His master's thesis consisted of a description of his Virtual Forensic Computing (“VFC”) method. The method was manual, in the sense that it used commercially available, proprietary software. No bespoke software was written by the appellant at this stage.
The appellant asserted that in 2005 and 2006, after leaving Cranfield University and while still developing his VFC methodology, he wrote his own software which would allow a computer to perform his VFC method automatically, and that he also began work on a graphical user interface (“GUI”) and a user manual.
On 6 November 2006 the appellant commenced employment with the respondent. By early 2007 the appellant had developed software which permitted a fully automated version of VFC, including a GUI. This was referred to as “Version 1”. The appellant asserted that Version 1 incorporated software which he had written before his employment commenced, and which therefore belonged to him.
The respondent's account of these events was very different. The respondent's case was that the manual VFC method which the appellant brought to them was slow and cumbersome, and that it was Mr Geoffrey Boyd (a director of the respondent at the relevant time) and Mr John Green (then the chairman and managing director) who, at a meeting which was said to be in about January 2007, suggested to the appellant the possibility of developing software to implement the method. The respondent contended, therefore, that all such software was created following this suggestion, and all was created in the course of the appellant's employment. In consequence, all relevant copyrights belonged to the respondent.
Following the completion of Version 1, the appellant created three further versions of the VFC software. Version 2 was released in April 2008; Version 3 in May 2014; and Version 4 in August 2016. The appellant's case was that the core functionality of each of these versions was developed by him in his own time, albeit whilst employed.
The appellant accepts, however, that aspects of the software (both in Version 1 and later versions) such as software related to the licensing of VFC and to security of the system, were developed by him in the course of his employment, and that the copyright in those aspects therefore vested in the respondent by operation of law. In contrast, the respondent contends that each of Version 1 and the subsequent Versions were, in their entirety, created in the course of the appellant's employment.
From March 2007 VFC software was offered by the respondent to its customers. In November 2008 the appellant and respondent entered into the November 2008 agreement under which the appellant was entitled to 7.5% of the annual sales by the respondent of its VFC software. This was later increased to 10% by an agreement entered into on 8 November 2011.
The November 2008 agreement is said by the respondent to have operated as an assignment of any relevant copyright relating to VFC which was in fact vested in the appellant. It is in the following terms:
“Michael, this letter is in confirmation of the verbal agreement we have regarding the annual payment of the 7.5% bonus of the *qualified VFC sales MD5 pay you for your continuing contribution to VFC. This payment will only be applicable while you are an employee of MD5 Ltd and you are continuing your involvement and development of VFC software or future versions.
*The bonus will be calculated from the total sales of the software less any direct VFC expenses such as dongles, postage, commissions and direct sales costs. 50% of training costs will qualify for a bonus and the balance will be added to your personal fee earnings.
I would also like to take this opportunity to confirm with you for our records, that the software developed at MD5 Ltd by yourself and sold as VFC is the sole property of MD5 Ltd, including the access code ……………….. I would also like confirmation that this code will not be modified or changed without the consent of the Managing Director.
I agree to the above statement and conditions.
Signed [by the appellant and Mr Green for the respondent]”
The appellant resigned his employment with the respondent on 26 February 2016.
The eight pleaded Works relied on were described by the judge as follows:
i) First Work: The earliest version of the VFC source code, said to have been created before November 2006;
ii) Second Work: The object code compiled from the First Work;
iii) Third Work: A fully automated version of the First Work, referred to as VFC Version 1;
iv) Fourth Work: The GUI for the Third Work;
v) Fifth Work: Version 2 of the VFC source code released on or about 4 April 2008;
vi) Sixth Work: Version 3 of the VFC source code released on or about 12 May 2014;
vii) Seventh Work: Version 4 of the VFC source code released on or about 10 August 2016;
viii) Eighth Work: The user guide for Version 2 of the VFC source code.
The judgment of HHJ Hacon
The judge had no serious criticism of any of the three principal witnesses, the appellant, Mr Green and Mr Boyd. He said that the appellant gave clear and direct answers to the questions put to him in cross-examination and made realistic concessions in the course of his honest attempt to explain matters as he saw them. Mr Green had come under some criticism for his uncertainty regarding the dates on which things had happened, and for some evidence which he had been allowed to give concerning the meaning of terms used in the November 2008 agreement. The judge rejected the suggestions that these matters undermined the reliability of his evidence. Mr Boyd was described as a very good witness who had given his evidence straightforwardly.
The judge first considered the evidence in relation to the First and Second Works. He concluded that he found the evidence of Mr Green and Mr Boyd more convincing than that of the appellant. He accepted that it was Mr Green and Mr Boyd who suggested to the appellant that software should be written to automate the VFC methodology and that the appellant had then volunteered to do it. He accepted that it was possible that the appellant had done something by way of working on VFC software before he joined the respondent, but “it did not work and was not worth showing to [the respondent]”. He went on to say that if any such software did exist it was likely that the appellant had “abandoned it and started again” while employed by the respondent. The First and Second Works, if they ever existed, were therefore not of relevance to the appellant's claim.
The judge then turned to the remaining works which were, by common accord, created whilst the appellant was in the respondent's employment. The dispute concerned whether the work done by the appellant on VFC software was within the course of that employment. The judge reached the conclusion that all the remaining works were created by the appellant in the course of his employment. An important factor was that writing VFC software was the principal task for which the appellant was being paid by the...
To continue reading
Request your trial