Contractor deemed an employee of “client” and loses his right to own source code IP

An individual who provided his services though a personal service company was an employee of the “client”.  Copyright in the source code he wrote during the course of his employment therefore belonged to his employer.

Facts

In Sprint Electric Limited v Buyer’s Dream Ltd, Dr Potamianos was recruited by Sprint Electric Limited (SEL) because of his IT expertise. SEL required him to provide his services though a personal service company and Dr Potamianos set up Buyer’s Dream Limited (BDL) for this purpose. BDL entered into a contract for services with SEL for the provision of “technical services”. Dr Potamianos was SEL’s sole programmer, writing source code for various motor control algorithms. BDL retained the source code and supplied only the object code to SEL.  

Following a dispute, SEL claimed the intellectual property in, and delivery up of, the source code from Dr Potamianos and BDL.

Decision   

The High Court found in SEL’s favour. Construing the contract, it was clear that Dr Potamianos was obliged to perform the “technical services” personally.  The true relationship between SEL and Dr Potamianos was employer and employee, and accordingly the copyright in the code he wrote in the course of his employment belonged to SEL.  

Implications

This case is a useful reminder that these types of arrangements, where an individual provides their services through a personal service company or otherwise as a contractor, are vulnerable to challenge and that other important matters beyond tax and employment rights, so IP ownership arrangements in this case, can be called into question.  

Perhaps one of the key lessons from this case is to ensure that the parties consider intellectual property rights at the outset and deal with them in their contract through appropriate assignments or licences.  Otherwise, they risk finding themselves involved in costly litigation.