In a recent case of Exegesis v Medimanage, the Bombay High Court considered the question of copyright over commissioned works in the context of software. The Plaintiff had developed a customised software for use in the insurance broking business of the Defendant, at the Defendant’s behest. The Plaintiff claimed that it owns the copyright in this software as the author of the same. Moreover, the Plaintiff contended that the Defendant is only entitled to the software which was developed for it and not the source code underlying this software. Additionally, the Plaintiff contended that the Defendant, using the pretext of load testing, obtained the source code of the software and is now attempting to disclose and share in them. This, the Plaintiff submitted, is a breach of confidentiality. Therefore, the Plaintiff prayed for an interlocutory injunction citing copyright infringement and breach of confidence.
The Defendant on the other hand, contended that the customised software had been developed in the course of the Plaintiff’s employment under a contract of service and therefore, it is the first owner of the copyright under S. 17(c), Copyright Act. In any event, the defendant contended that there was a contract between the parties that the Defendant would be the owner of the copyright in the impugned software. Additionally, the Defendant submitted that no case had been made out for breach of confidentiality by the Plaintiff.
The Court noted that the issue of whether the software was developed in the course of employment is a complex issue involving various factual parameters, including the control test, organisation test and the many other factors laid out in Zee Entertainment Enterprises v. Gajendra Singh. This issue, the Court noted was best determined at trial. For the purposes of the interlocutory application, the Court approached the fact situtation from the perspective of an “agreement to the contrary” (which was raised by the Defendant in their second submission). Section 17(c), Copyright Act states that when a work is created in the course of employment, then the employer shall be the first owner of the copyright in the absence of an agreement to the contrary. The condition of an “agreement to the contrary” is present in other clauses of Section 17 as well. Therefore, it is observed that “an agreement to the contrary” is a factor that can tilt the balance in the question of ownership of copyright under Section 17.
On a detailed factual analysis of the relationship between the parties, the Court noted that “there was an overwhelming prima facie case of an agreement between the parties that the Defendant shall be the first owner of the copyright in the work, namely the impugned software.” The Court analysed the email correspondence between the parties, the draft agreeement agreed to by them as well as a MoU signed by them to come to this conclusion. Under the draft agreement, the Defendant had asserted ownership of copyright in the software and had gone to the extent to state that such ownership would be construed as part of the original understanding between the parties. This had not been contested by the Plaintiff contemporaneously. Moreover, the MoU signed by both parties had clauses that acknowledged the ownership of copyright by the Defendant. Examples of such clauses from the MoU are: “(5) Medimanage will hold the complete ownership of the software & Exegesis will own the rights for background technologies used for development of this software.
(7) In case, due to any dispute or otherwise, Exegesis wishes to not work with Medimanage for development of software, they could terminate this contract with 3 months notice without assigning any reason. However, they should handover the original software source code to Medimanage & cooperate with them for smooth transition of change of vendor without any undue service disruption, which may cause inconvenience to Medimanage customers & partners. In such circumstances, this MOU would be null & void and both parties will be absolved of conditions stated within this MOU.”
Therefore, the Court held that there was a prima facie case in favour of the Defendant and consequently, injunction could not be granted on the basis of copyright infringement. It is interesting to note that the Patents Act does not have any express stipulations like the Copyright Act with respect to inventions created in the course of employment. Prof. Shamnad’s post on the same is available here.
With respect to the claim of breach of confidentiality. the Court held that the Plaintiff had failed to even properly identify the allegedly confidential material or to establish its confidentiality. There is also no case that the Defendant had used or threatened to use the alleged material unauthorizedly. Therefore, the Court ruled that the Plaintiff failed on this count as well.
The Plaintiff also put forward a claim the the Defendant might obtain the source code or other background information througha process of reverse engineering or otherwise. The Court noted that the Plaintiff’s claim at this stage was highly speculative. Moreover, even if the Defendant was able to obtain the source code or other information by independently working on the software, the same cannot be prevented using the weapon of copyright infringement as it is not a copying of the first work.
Therefore, the Bombay High Court ruled in favour of the Defendant and denied the Plaintiff the interlocutory injunction.