Do you suspect an ex-employee has copied your software?

Monday 5th June, 2023

What do you do if you find out an ex-employee has stolen the heart of your business? Software is often fundamental to companies; from time to time, a company’s ex-employees and freelancers may look to launch competing software products. Companies should take steps to prevent the value of their business being diminished by copycat products launched by somebody previously connected to the business.

If copying is suspected, the company may wish to try and bring a copyright infringement claim, but it can be especially difficult to determine whether copying has occurred where it isn’t possible to compare the source code of the two products. However, as the recent case of PQ Systems v Jeff Aughton [2023] EWHC 581 shows, the deletion of source code does not automatically render a claim for copyright infringement toothless.

Facts

This case concerned a computer software company (PQ), who specialised in software related to quality assurance manufacturing, bringing a claim against a former director (JA) for copyright infringement and breach of confidence. JA had set up a competing business using software that, PQ argued, was based on code that he had been developing whilst employed by the company.

The infringing software, it was argued, was based on a piece of software developed by JA that PQ decided not to proceed with. Subsequently, JA argued that he continued to develop the software in his spare time, at home as a hobby project. JA left his employment with PQ in 2015, but admitted to retaining a copy of PQ’s software. After leaving PQ, JA went on to set up a competing business looking to sell his software to customers. PQ became aware of JA’s software when a demo version was released in 2017.

JA argued that the software he developed was a completely new program and was written outside the course of his employment. PQ claimed JA had copied from its own program as the software had the same functionality and was also written on JA’s work computer in the course of his employment. PQ believed JA’s software was created in breach of PQ’s copyright, and in breach of the duty of confidentiality that JA was bound to as a result of his contract of employment.

JA’s contract of employment with PQ contained a common clause relating to confidential information, which prevented JA from using or disclosing any confidential information, except in certain circumstances. It was argued by PQ that JA was in breach of this clause through his retention and use of PQ’s source code.

Source Code

Generally, when infringement of copyright in software is alleged, the court will conduct a comparison of the source code of each product. However, this was not possible in the present case as JA had deleted the original source code, leaving only the object code. Source code is computer code written using language and symbols that a human can understand. Object code is computer code which a computer can understand, which is created by running source code through a “compiler”.

PQ attempted to decompile the object code into source code, however, both parties accepted that this would not produce a perfect replica of the original source code. It is similar to putting text into a computer translator and then translating it back to the original language. The specific choice of words which make up the sentences may differ. Whilst this was recognised by Justice Zacaroli, the lack of source code was not fatal to the case.

Copyright Infringement

The court drew adverse inferences and alluded that the reason the source code was deleted was to try and prevent the source codes from being compared. Indeed, JA had deleted the source code after receiving a letter before action from PQ.

One deciding factor was that the court found the type of software that JA wrote was integral to the business of PQ. Expert witnesses noted that there were similarities within the object codes that indicated common functionalities between the two software. As well as this, JA’s expert witness was discredited by Justice Zacaroli when he tried to explain away the similarities of the code.

The court found similarities in the enums of the source code. An enum is a symbolic name for a set of values that are used to create sets of constants in source code. The court was able to identify replication of enums in the decompiled object codes of the software. The ordering and number were almost precisely replicated. At some points, even spelling mistakes were replicated, such as “individuals”.

The fact that JA wrote the code at home was disregarded by the court, which found that “there was no clear delineation between personal and work matters”. It was therefore deemed to have been created in the course of JA’s employment by PQ. It will be interesting to see if such a finding becomes more common following the rise in remote working undertaken by employees in the post-covid era.

Breach of confidence

Justice Zacaroli highlighted that “the use of source code, even if only as a reminder when writing competing software, would amount to a breach of confidence”. Here, as the contract had a provision in relation to confidential information, it was clear that, if it was found that JA had retained software including the source code after his employment, he would be in breach of his confidentiality obligations.

Justice Zacaroli concluded that JA had infringed PQ’s copyright and that he breached his contractual duties of confidentiality in writing the software.

Practical take home points

This case highlights the complexity of bringing a copyright infringement claim in respect of software. Whilst the absence of comparable source code is not necessarily fatal to a claim, it would be necessary to have compelling circumstantial evidence in the absence of source code. This case was extremely fact specific and not all companies are likely to have such a favourable set of facts in relation to their potential claim.

We recommend that businesses engaged in software development should have a system in place to control and monitor development of software by individuals and to document and store source code. Having strong evidence of development and ownership will make it easier to bring a claim and should help to reduce costs. Furthermore, having detailed records will also be invaluable to a business or individual defending itself in a claim of copyright infringement brought by a third party. Businesses should check the terms of their employment contracts to check that they contain suitable provisions relating to intellectual property and confidentiality and any business that engages freelancers should ensure that it has appropriate freelancer agreements in place.

If you have any questions regarding your intellectual property rights, please get in touch with the IP team at Marriott Harrison.

Articles by Josh Little