The commercial court has found that a software company established by former employees and contractors which directly competed with their previous employer’s product was not in breach of copyright or breach of confidence.  Due to the plaintiffs’ own expert evidence, the plaintiffs were forced to abandon an initial core claim that the defendants’ had engaged in literal copying of source code and design materials.  Mr Justice Feeney delivered judgment in favour of the defendants in Koger Inc and Koger (Dublin) Ltd v HWM Financial Solutions Ltd and Others. 

Development speed of competing software

One of the main arguments raised by the plaintiffs was that the defendants’ product was developed in a remarkably short time frame evidencing breach of copyright. The defendants asserted that their product was independently developed without improper recourse to any other products. The court commented that the defendants worked in a dynamic environment where employees had direct and meaningful contact with one another and concluded that the development speed was not implausible. 

The court found that the plaintiffs’ allegations did not allow for the knowledge and expertise of the defendants who had the training, information and knowledge to develop a competing product. The court recognised that this knowledge arose to a large extent from their work experience with the plaintiffs. The court commented that:

“persons with a high level of proficiency in a particular area exposed over a long period of time working with software will inevitably acquire a detailed knowledge of the structure and algorithms in use. That is knowledge which will be built up over a period of time and would be retained by the persons.”

Employee’s own skill and knowledge

Generally, an employer cannot insist that information forming part of the employee’s own skill and knowledge be kept confidential once the employee has left the employer. This point was acknowledged by the court as follows:

“there is clear authority for the fact that protection cannot legitimately be claimed in respect of skill, expertise, know-how and general knowledge acquired by an employee as part of his job during the course of his employment, even if it might equip him as a competitor of his employer.” 

Embryonic discussions

Although the defendants had engaged in tentative and provisional steps towards establishing the defendants’ company whilst in the plaintiffs’ employment the court was satisfied that these actions were not part of a pre-existing conspiracy, rather they were preliminary steps to put in place a contingency in the event that a future decision was taken to establish a competing company. The court found that the evolution of the defendants’ company was no more than an embryonic concept and that the preliminary steps were taken outside of the defendants’ employment. 

Breach of copyright?

The court examined the defendants’ competing product and found that it was fundamentally different in design from the plaintiffs’ product and did not constitute an adaption of the plaintiffs’ product for the purpose of the Copyright and Related Rights Act 2000 or otherwise. The similarity between the products is to be expected as they were both designed for use in the same business.  

Conclusion

As well as the interesting employment law considerations, this case is of particular interest to all of those working in the IT industry in Ireland as it contains a rare judicial analysis of the scope of copyright in software and addresses the question of when a software product is deemed to be an adaptation of an earlier work. The decision also highlights the ability of an employee to use his or her own skill and expertise even if that assists in competing with a former employer.
 
For further information please contact Leo Moore or John Magee of our Intellectual Property Department.