Michael Penhallurick v MD5 Limited

A signed written instrument may assign copyright without using the words copyright, grant or assign, if its objective construction shows an intention that copyright should pass. The court must construe the agreement against the objective factual matrix and exclude subjective intentions. Where ownership is disputed, it must not assume that one party owns the copyright merely because an alternative assignment issue arises. Broad wording stating that software developed by an employee and sold as a product is the employer’s sole property may assign all copyright, including residual and future copyright, where the agreement and consideration support that construction.

The appellant created software for a virtual forensic computing tool and claimed that the respondent had infringed his copyright. The respondent argued that copyright belonged to it because the software was created in the course of employment or, alternatively, had been assigned under a November 2008 agreement.

After trial, HHJ Hacon dismissed the infringement claim and the respondent’s counterclaim in [2021] EWHC 293 (IPEC). The appellant appealed on ownership and contractual interpretation. The respondent cross-appealed concerning delivery up of copies. The central issues were whether the November 2008 agreement assigned the relevant existing and future copyright and what effect should be given to its wording and factual context.

The Court of Appeal dismissed the appellant’s appeal. The respondent owned the copyright in the Works by virtue of the November 2008 agreement, so it was unnecessary to determine the challenge to the judge’s findings on first ownership.

1. Formalities and construction. Under section 90(3) of the Copyright Designs and Patents Act 1988, an assignment must be in writing and signed by or on behalf of the assignor. The instrument need not use technical words such as copyright, grant or assign if, on its true construction, it shows an intention that copyright should pass.
2. Objective interpretation. The agreement had to be construed by reference to the objective factual matrix available to both parties when it was made. Subjective intentions were irrelevant. Since the parties disputed ownership, the agreement could not be construed on the assumption that the appellant owned the core functionality.
3. Scope of the assignment. The agreement’s description of software developed by the appellant at MD5 and sold as VFC, as the respondent’s sole property, was broad enough to assign all relevant copyright. It was not limited to licensing or security features, or to work done within the scope of employment. The reference to the access code did not restrict the wider assignment. The word confirm was consistent with a confirmatory assignment.
4. Future copyright. The agreement contemplated the appellant’s continuing involvement in development. The continuing bonus supplied consideration for assignment of copyright first owned by him during that period. Section 91(1) of the Copyright Designs and Patents Act 1988 therefore operated to vest future copyright in the respondent.
5. Cross-appeal and IPEC procedure. The cross-appeal was not examined on its merits because the appellant did not object to delivery up of copies if copyright was vested in the respondent. Arnold LJ additionally observed that IPEC’s restricted procedures and short trials may be unsuitable for substantial factual disputes requiring extensive disclosure and expert evidence; transfer, an increased trial estimate or an adjournment should then be considered.

• Court of Appeal (Civil Division): The appeal from [2021] EWHC 293 (IPEC) was dismissed. The cross-appeal was disposed of without further merits investigation after the appellant accepted delivery up if the respondent owned the copyright.
• High Court, Intellectual Property Enterprise Court: HHJ Hacon dismissed the appellant’s copyright infringement claim and the respondent’s counterclaim.