Court finds no copyright infringement but holds defendant breached employment and non-compete agreements.

Neutral Citation Number: [2009] IEHC 543

THE HIGH COURT

2008 6100 P

BETWEEN/

VISUSOFT LTD

PLAINTIFF

AND

ROBERT HARRIS AND ARH SOFTWARE SOLUTIONS LTD.

DEFENDANTS

JUDGMENT of Mr Justice Roderick Murphy delivered 27th day of November, 2009.

This is a dispute as to the copyright in a computer programme and software developed by the first named defendant (Mr.

Harris) prior to, during and subsequent to this 15 month employment with the plaintiff.

The two paramount elements of resolution of this dispute are the Copyright Act and the agreements entered into by Mr.

Harris, the first named defendant with the plaintiff.

There is no dispute that a computer programme is defined in s. 2 of the Copyright and Related Rights Act 2000 as a

programme which is original in that it is the authors own intellectual creation and includes any design materials used for

the preparation of the programme.

Section 32 (2) provides that the copyright in a work is infringed by a person who without the licence of the copyright

owner undertakes, or authorises another to undertake, any of the Acts restricted by copyright, that is to say to copy the

work or make it available to the public or to adapt the work as provided in subsection (1).

Subsection 3 of that section is particularly relevant. It provides that:

“References to the undertaking of an act restricted by the copyright in a work shall relate to the work as a whole or

to any substantial part of the work and to whether the part of the act is taken directly or indirectly.” (Emphasis

added.)

It is not disputed that the copyright owner is Visusoft, the plaintiff. The dispute centres around whether there has been

an unauthorised copying of a substantial part of the work which was undertaken by the first named defendant while in the

employment of the plaintiff.

The second critical element is the set of agreements made between the plaintiff and Mr. Harris on 11th and 18th May

2005 and the letter of termination of 10th March 2006.

There is a distinction between the general trade knowledge of an ex-employee and the specific knowledge in relation to

trade secrets or know-how. In Printers and Finishers Ltd. v. Holloway and Others [1964] 3 All E.R. 731, Cross J. was

prepared to grant an injunction against a former employee from using written materials of his employers. He was not

prepared to extend the jurisdiction of the courts to restrain the ex-employee from putting at the disposal of his new

employers his personal skills which necessarily incorporated his memory of particular features of the former employer’s

plant. This was followed in the judgment of O’Neill L.J. in Faccenda Chicken Ltd. v. Fowler [1987] Ch. 117 at 135/136.

This is the general principle which is, of course, subject to the property right in written work of an employer which may be

the subject of copyright.

It is clear that information, until reduced in writing or other material form cannot be susceptible of copyright protection.

To this extent there is no copyright in ideas. Once the information has been expressed as a work, elaboration of the

various elements of information may amount to a part of an original work. Copyright will subsist in its original work. (See

Rees and Chalton, Database Law, Jordans, 1998 at p. 7 and Laddie, Prescott and Victoria, The Modern Law of Copyright

and Designs, 2nd Ed., Butterworths, 1995.)

The question arises as to whether elaboration of information or ideas which is alleged have been borrowed constitutes a

substantial part of the copyright work as a whole. The approach adopted by Jacob J. in Ibcos Computers Ltd. v. Barclays

Mercantile Highland Finance Ltd. [1994] FSR 275 at 289 is as follows:

“Logically … the claim in copyright calls to be tested in the following order:

(1) What are the work or works in which the plaintiff claims copyright?

(2) Is such work original?

(3) Was there copying from the work?

(4) If there was copying, has a substantial part of that work been reproduced?

The work in which the plaintiff (Mr. Harris) claims copyright is Risc 7 which was developed by Mr. Harris for ARH Software

Ltd., the second named defendant, after Mr. Harris terminated his involvement with the plaintiff on 10th March, 2006. The

plaintiff (Visusoft) says that a copy of Datapos which was developed by Mr. Harris for Visusoft, was retained by him and

marketed as Risc 7.

The next question is whether such work is original. That is in dispute. Visusoft acknowledges and the defendants assert

that the work is based on Risc 5, an earlier version of Risc 7, which was developed by Mr. Harris from about 2001. Both

parties agree that from the beginning of 2005 Mr. Harris developed the plaintiff’s Datapos system by adapting and

developing Risc 5. What is in dispute is the incremental development during the fifteen months Mr. Harris was employed by

Visusoft. The originality in that incremental development is governed by the agreements between Mr. Harris and Visusoft.

The Court finds that there was no transfer of the intellectual property in Risc 5 to Visusoft. Accordingly, the issue is only

in relation to the fifteen month incremental development.

Visusoft asserted that Catherine McLoughlin, Paul Curran and a third programmer had worked on the development

together with Mr. Harris. It was unclear, since neither Mr. McLoughlin nor Mr. Curran gave evidence, as to what

contribution was made and when such contribution was made before the termination of Mr. Harris’s contract with Visusoft

on 10th March, 2006. Mr. Harris appeared to have worked extensively on Datapos from January 2005 to that date. The

others may indeed have worked during the latter part of that period and subsequently but this does not seem to the

Court to affect the issue of the originality of Risc 5 or of the development of Risc 7 after 10th March, 2006. What is in

issue is the originality of the incremental development of Datapos which, it is agreed, is the property of Visusoft. In that

regard the agreements are critical.

The third test propounded by Jacob J. is whether there was copying by Mr. Harris of the development of Risc 5 into

Datapos. Almost the entirety of this lengthy hearing was devoted to the technical examination and analysis of the 2007

version of Risc 7 and the 2007 version of Datapos.

Elements of Risc 5 were, understandably, found in Datapos though, as Risc 5 was not examined this was not quantified.

References to Risc 6 appear to be a reference to Datapos though, as explained by Mr. Arkins, the then managing director

of Visusoft, it was not desirable to use the name Risc given that some dispute still existed as to whether it was owned by

Mr. Harris or the company for which he worked at the time.

There was some indication by Mr. O’Duffy, an expert called by Mr. Harris, that he had found elements of Risc 7 in the

Datapos programme. There was evidence of varying degrees of copying of Datapos 2006 into Risc 7. While the

defendants’ expert Mr. Halpin, Mr. Le Breton and Mr. O’Duffy did not believe this to be substantial, they did find some

degree of copying. What was clear was that Risc 7 was not just a copy of Datapos as claimed.

In direct examination Mr. Arkins, the managing director of Visusoft, had maintained that Datapos developed by Mr. Harris

was identical to Risc 7 which was later marketed by him. In cross-examination he agreed that there were some

differences which corresponded with the evidence of each of the experts. It was a degree of difference that was critical.

Mr. Arkins evidence was that Visusoft had purchased these and existing Risc product from Mr. Harris when it was put to

him in cross-examination that software not developed by Mr. Harris with Visusoft was not the property of Visusoft. The

Court does not accept that evidence as the written agreements do not refer to any transfer of Mr. Harris’s rights in any

existing product. The Courts interpret these agreements contra proferentem and note that Mr. Harris was not legally

advised in relation thereto. This issue is of critical importance in the overall assessment of the case.

The Changes to the Software Agreement of 11th May 2005 may have presupposed a previous agreement but no evidence

was given as to the terms, date or scope of such agreement. There was no evidence of an oral agreement. It was clear

that Mr. Harris’s role as development director did not, at first, encompass the development of his (or of his previous

employers risk product) as a Visusoft product.

That agreement between the parties and the evidence and, indeed, the averment of Mr. Arkins was that all software

developed by Mr. Harris since 17th May, 2004, including the entire Datapos system, was beneficially owned by Visusoft.

This does not, accordingly, include Risc 5. There is no evidence of any agreement by Visusoft to purchase the Risc

product. Indeed the acknowledgment that the change of name was to avoid difficulties as to others having a claim seems

an admission that Visusoft did not own the rights to Risc 5. However, there was no evidence before the Court that

anyone other than Mr. Harris owned Risc 5.

It is further clear that clause 6 of that agreement of 11th May, 2005 referred to software developed since 17th May,

2004 which was to be delivered by 30th June, 2005 and in respect of which Mr. Harris would receive a shareholding in

Visusoft. This, implicitly acknowledged that the work already undertaken by Mr. Harris had been substantial.

The letter of 10th March, 2006 from Mr. Arkins to Mr. Harris purported to be in full and final settlement of all Mr. Harris’s

claim against Visusoft. This included implicitly any right he had to shares in Visusoft.

Mr. Harris’s letter of 20th March confirming that he had removed all copies of source code and components from his

computers and from any other media onto which he may have made copies was followed by a statement that:

“I no longer hold any copies of source code and components whatsoever.”

Mr. Harris confirmed that he was fully aware of his obligations and assured Visusoft that he would honour that obligation.

That should have been the end of the matter. Had Mr. Harris developed Risc 7 from the Risc product extant as of 17th

May, 2004 or later when he began full time work with Datapos and had so developed Risc 7 without reference to the

Datapos product it is unlikely that Visusoft could have succeeded in proceeding against him.

However in his own admission, Mr. Harris did retain a version of Datapos which he deleted in panic. Moreover it would

appear that his files were deleted, either by remote access or by Mr. Harris’s use of SDelete, so there is no evidence as

to whether the source code of Datapos was retained.

On the balance of probabilities and on the express evidence, including the evidence of Mr. Harris’s own experts it seems

to the Court that Mr. Harris had access to the source code of Datapos. It also seems probable that this source code had

developed, through Mr. Harris and others endeavours, beyond the source code of Risc.

It is significant that when Mr. Harris became aware that he retained a version of Datapos he did not disclose that fact to

Visusoft and was, accordingly, in breach of his obligation. The deletion by Mr. Harris occurred after litigation had

commenced.

While there may have been a possibility of hacking or remote access of his computer as proposed by Mr. McCormack who

gave evidence on Mr. Harris’ behalf, the preponderance of the evidence, which, on the balance of probabilities the Court

must accept, is that external access was unlikely. Even if this were not so, there is no evidence and only conjecture that

access was made by or on behalf of Visusoft.

The Court accepts Mr. Arkins evidence that Visusoft had no interest in removing evidence that would support Visusoft’s

case in his view.

Geoffrey Keating, managing director of Input Systems Ltd., business counting systems developer who had previously

worked with Mr. Harris, examined Risc 7 and Datapos. Mr. Harris objected to his giving evidence because of their working

together previously. Mr. Keating found three elements in Delphi language which he described as graphical user interface,

databases and source code, to be similar, and in some cases, identical. The degree of similarity he believed was 90 to

95%. If both had been developed separately there would be no such similarity.

He found that many files had the same name. Mr. Keating’s report referred in detail to barcode functionality and the

calculation of marginal price.

Mr. Keating examined the most up-to-date version of Risc 7 (including source code) and compared it with the Datapos

software. As a result of his examination he was certain that the software in Risc 7 was, in computer terms, almost

identical to the Datapos software. While there were cosmetic changes to the appearance of a screen, given the

absolutely identical lines of programming which he found in so many areas of the source code, it was a matter of certainty

that one was copied from the other. He believed that Risc 7 was not an updated version of Risc 5 with which he was

familiar. The Court, in the light of the other expert evidence cannot accept such a high degree of similarity.

Mr. Keating believed that Mr. Harris’s assertion regarding the deletion or removal of software from his computer by way of

external hacking was for a variety of technical reasons not plausible and, in some respects, technically possible. He

believed that the claim that 17 months of the work of the defendants had been erased was inconsistent with the dates of

file modification and the up-to-date version including changes made up to 27th July, 2008. The Court agrees with this

conclusion.

Mr. Colm Murphy, technical director of Espion Ltd., which dealt with information security and forensic analysis prepared a

draft report on 23rd September, 2008 and swore two affidavits in respect of his analysis.

The report based on forensic analysis of the alleged hacking incident and a second on the defendants’ computers for any

reference to Datapos, found a complete copy of the Datapos software programme and source code and a significant

number of other related Datapos files in a directory called “advprog”. This was found on the defendants’ main server

computer ARHServer 1. This directory had been deleted in the normal manner on or after 21st March, 2008.

There was no evidence on the hard disc that it had been subject to a hacking incident. Espion had concluded that there

was no evidence to support Mr. Harris’s claim that additional accounts had been created and deleted. The secure deletion

was most likely performed by someone in physical possession of the computer disc. The computer was running “Windows

firewall” and the most recent security batches and updates from Microsoft reducing the possibility of a hacking incident

were installed. The computer was configured to disallow remote desktop connection.

Espion examined four additional computers. Two were used by Mr. Harris for software development identified as Robdev 1

and Robdev 3. There were also two laptop computers identified as Dell 1 and IBM Thinkpad. A Datapos directory on

Robdev 1 was deleted on 19th August 2008 in a manner consistent with the SDelete tool which had been installed some

minutes earlier.

Mr. Murphy’s firm performed a source code valuation of key files of both software programmes of Datapos and Risc 7. His

evidence was that source code gives a software programme its uniqueness. He concluded that there was a large number

of similarities between the products. They shared a common directory structure. Variable and form names were similar to

the TEST.MENU and TEST.MNU files. The source code directories contained 50 out of 300 files with identical names. The

file and uFrmVIEWINVOICE.pas could not have been created without access to the Datapos version.

The source code in Risc 7 was created in such a way that it was based largely on that of Datapos and could not have

been created independently. If one were to re-write a story without reference to the published book there would be

substantial differences. The report could not give any explanation for the significant number of identical lines of source

code other than outright plagiarism.

Mr. Harris cross-examined Mr. Murphy on the extent of shared code and the reference to Datapos in Risc 7. Mr. Murphy

agreed that there was reference to Risc 6 in Datapos but no reference to Risc 7. Risc 6 was in the source code but was

not in the executable code.

When queried on the common use of naming conventions resulting in similarities Mr. Murphy said that did not explain

similar codes. Mr. Murphy agreed that many codes were generated by a computer compiler. Mr. Murphy agreed that it is

possible to hack into a computer but disagreed that that was so in this case as there was no trace of hacking.

The Court acknowledges the thoroughness of Mr. Murphy’s analysis.

Mr. O’Duffy, giving evidence on behalf of Mr. Harris, found that the shared code was 8% relative to the size of Risc 7. It

was not a copy. He believed that Mr. Colm Murphy’s analysis gave no importance or role to the code analysed while Mr.

Halpin’s analysis was more holistic. He was not an expert in the approach of Mr. Murphy. The 25 files with common

ancestry had little functionality but, while he could not say how significant it would be if they were deleted, he would be

concerned if they were absent.

The greatest degree of copying was of the Datapos version of 2006. Mr. Murphy had analysed the 2008 version which had

additional programmes which were common. The Court notes that Visusoft had access to Risc 7 in 2008 when Mr. Noel

Aherne acquired a copy from BW, a common customer of Mr. Harris and Visusoft but this does not prove that Datapos had

copied from Risc 7. However Mr. Duffy was not shown the team coherence report nor had he seen the development work

for Risc 7. Mr. Harris had no independent records of different drafts of the programme. The Court observes that this

hindered the investigation of all experts in assessing the development of Risc 5 through Risc 7.

He said that neither he nor Mr. Halpin had found it impossible for Datapos to be a copy of Risc 7. This assertion falls short

of positive evidence.

The memorandum of Mr. Harris of 24th September, 2004 was significant. It refers to Datapos having been developed over

the previous two years, that is at a time when Mr. Harris had not been working for Visusoft. Notwithstanding, Mr. Harris

referred to what he had developed as Datapos possibly because he wanted to distinguish it from work he had undertaken

for a former employer or, alternatively, because he had already begun to develop Risc 7 for Visusoft or that he had

transferred his interest in Risc 5 or Risc 7 to the plaintiff. There is no evidence of that alternative. There is no agreement

as to the transfer of either.

The Court finds that Mr. Harris did retain and copy elements of the work he had done for Visusoft.

This leads to a consideration of the fifth test: that of substantiality. The question arises as to whether that work

constitutes a substantial part of Datapos as a whole.

Section 32 (3) of the Copyright and Related Rights Act 2000 referred to an act restricted by the copyright in a work as

relating to the work as a whole or to any substantial part of the work.

Substantial part is not defined by the Act and is, accordingly, a matter of fact (Ledbroke v. William Hill [1964] 1 W.L.R.

273 per Evershed L.J.) Hadson L.J. observed in that case that:

“Substantiality depends on quality not quantity as is illustrated by the case of Hawkes & Sons (London) v.

Paramount Film Services Ltd. [1934] Ch. 593.”

Substance, from the Latin substantia, to stand under would seem to refer to substratum, being, essence, material

property. A substantial part is therefore, in a strict sense, an essential part.

The Shorter English Dictionary on Historical Principle (1973 edition, reset with corrections, 1987) gives the first three

meanings as:

1. Essential nature, essence

2. Philosophically, a being that subsists by itself: a separate or distinct thing

3. That which underlies phenomena: the permanent substratum of things.

The Court has heard the evidence of the experts which range from that of Mr. Keating that Risc 7 contain 90 – 95% of

Datapos to Mr. O’Duffy’s estimate of 8%.

Mr. Murphy and Mr. Halpin coming from different approaches and making different assumptions have concluded that there

is a more significant degree of copying.

Pumfrey J. in Cantor Fitzgerald International v. Tradition (U.K.) Ltd. [2000] RPC 95 has reviewed the authorities. He held

that generally, a work is a single entity which cannot be divided into parts. It is necessary to look at the substantiality of

the skill and labour expended on that which is taken (para. 76). There is no doubt that Mr. Harris did use his skill and

labour for a period of some fifteen months in developing Datapos. There are also elements of Datapos in Risc 7 on his own

experts’ evidence. Accordingly, the skill and labour expended on that which was taken becomes the property of the

plaintiff if it is a substantial part of Risc 7.

While every part of a computer programme might be essential to its performance the Court held in Cantor Fitzgerald that

it was simplistic to regard every part, however small, as a “substantial part” of the programme (para. 74-75).

Pumfrey J. said that as far as English law was concerned the correct approach to substantiality was straightforward:

“It is the function of copyright to protect the relevant skill and labour expanded by the author on the work. I say

relevant skill and labour because (for example) a purely literary contribution is not relevant skill and labour so far as

an artistic copyright is concerned, the latter being concerned purely with visual impressions.”

I have no doubt that the plaintiff is entitled to protect the relevant skill and labour expanded by Mr. Harris on their behalf.

However while there is clear evidence of elements of Datapos in Risc 7 I am not satisfied that, given that codes can be

generated by computer, that there are common ancestry files, given in particular, the further elaboration by Mr. Harris

from March 2006 to the launch of Risc 7 in January 2007, and to the evidence of the customers of the defendants that

the elements of Datapos in Risc 7 constitute a substantial part of Risc 7 either in the dictionary meaning or in the case

law. The elaboration appears to be more a function of the commonality of Datapos and Risc 5. The substratum of Risc 7 is

more Risc than Datapos.

However this does not end the matter. Mr. Harris retained a copy of Datapos and, probably, the source code of Datapos.

In Cantor Fitzgerald the loading of the whole of the plaintiff’s source code into the defendant’s computer was in itself an

infringement of copyright (para. 10). In the present case Mr. Harris had the copy of Datapos and its source code while

working with Visusoft.

Nonetheless, Mr. Harris is clearly in breach of the agreements of 11th and 18th May, 2005 and more appositely, the

undertaking given in his letter of 10th March, 2006.

He is, accordingly, in breach of contract. The Court will hear the parties regarding the issue of damages which arise from

the breach of agreement.