Monday 3 June 2013

Cowardy custody order as copyright is ruled partnership property

Coward v Phaestos Ltd and other companies [2013] EWHC 1292 (Ch) is a Chancery Division, England and Wales, ruling of Mrs Justice Asplin on 17 May.  Asplin J is a judge who has not been hitherto associated with intellectual property law -- but that may not have been a problem since so much of this case turned on partnership law.  By a happy coincidence, each party had a line-up of five barristers.

This was a dispute as to the ownership of the intellectual property rights in hedge fund software used by a highly successful quantitative trading business, IKOS, which was carried on through the defendant companies. Coward, a mathematical and computer programmer with a doctorate in control theory engineering, was chairman and director of the third defendant, IKOS CIF, until his resignation on 11 December 2009. According to Coward, he had written a substantial part of the software used by IKOS in its business and owned the copyright in the software -- which was never the partnership property of IKOS partners, nor was it owned by IKOS CIF when he was employed by, and director of, IKOS. Said Coward, the IKOS business had an implied licence to use the software, but he terminated that licence in December 2009 and IKOS's continued use of it was a copyright infringement. No, said the defendants: the software became the partnership property of IKOS partners and all parts to it passed to IKOS UK as a result of the partnership dissolution in December 2006. Even if that were not the case they added, Coward had written the software in his capacity as an employee of IKOS UK.

In these proceedings the judge had to decide whether IKOS's continued use of the software amounted to a copyright infringement.Coward admitted that, if there was a partnership from September 1992, the software written by him during the period until December of that year was written as a partner. However, he denied that there was any agreement, express or implied, that the software he had written was to be a partnership asset.

The judge decided in favour of the defendants.

So far as copyright was concerned, this was not a difficult case. The judge first summarised that it was settled law that the issues arising in relation to copyright infringement were:
(i) what were the work or works in which the claimant claimed copyright?
(ii) was each such work 'original'?
(iii) was there any copying from that work?
(iv) had a substantial part of that work been reproduced?
Substantial part, in this context, was determined by whether the author had invested a substantial amount of skill and labour in what was copied. Copying was a question of fact. In the case of computer software, Article 1(3) of the Software Directive applied [reminder: that's the bit that says "A computer program shall be protected if it is original in the sense that it is the author's own intellectual creation. No other criteria shall be applied to determine its eligibility for protection"] and the requirements of the Copyright, Designs and Patents Act 1988 Act had to be interpreted accordingly.

Having summed up the relevant copyright provisions, the judge then focused on the decisive issue of partnership law. It was settled law, she said, that a partnership could be created entirely informally, and could be inferred from the conduct of the parties. Section 1 of the Partnership Act 1890 made it clear that such a relationship existed when two or more individuals or entities carried on business in common with a view to profit and that a partnership could be inferred from their conduct.

On the facts, concluded the judge, there was indeed a partnership between the parties between September and December 1992 and there could be no doubt but that the software written by Coward before December 1992 was written by him as a partner in the course of the September partnership. On that basis there was a necessary inference that the software was partnership property: it was the foundation of the business, without which there would have been no business at all. The facts supported the conclusion that the software had been both used and treated as partnership property: it was central to the carrying on of the business and could not be separated from it.

Since the software was partnership property, ruled the judge, all copies of the relevant material in Coward's possession, custody or control should be destroyed, with the completion of the destruction being confirmed on oath.

Cowardy Custard here

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