His Honour Judge Cawson KC, sitting as a judge of the High Court, has declined to grant an application for summary judgment in a case concerning the ownership of IP rights relating to software integrated into point-of-sale cash registers.
The dispute arose after Clearcourse Partnership Acquireco Limited acquired the entire share capital of E-Novations (London) Limited (ENL) in September 2020. ENL provided its users with licences to use the software.
Who owns the software IP?
The application for summary judgment was brought by Palmyra Management Holdings, which had a 25% holding in ENL at the time of the sale. It sought a declaration that ENL was the legal and beneficial owner of the IP. The other parties (Mr and Mrs Jethwa and Epos Direct Europe Limited (EDE)) argued that EDE was the legal and beneficial owner.
Palmyra argued that there was one piece of software developed, and it was owned by ENL. It was clear that the software was developed for the benefit of ENL and ENL would own it. Even if the legal title might have passed to EDE, this made no difference because, as beneficial owner, ENL was entitled to call for the legal title.
However, the Jethwas and EDE argued that on its launch in 2005 ENL outsourced software development to an Indian company. It later used another company called Epos Guru, which developed new software from scratch. The IP at issue therefore belonged to Epos Guru. To the extent that ENL granted licences to use the software, it did so pursuant to an implied licence from Epos Guru. Subsequently, in June 2017, the IP was assigned to EDE.
On this basis, they said, the ownership of the IP could only be determined at trial.
Commissioning software development
The judge noted that the witness and documentary evidence indicated that (subject to any considerations of Indian law) ownership of the IP would lie with Epos Guru. He added that, when software is commissioned, the key consideration is whether there is a contract and, if so, what rights are to be implied by way of beneficial ownership or a licence.
HHJ Cawson found that the evidence indicated that real issues did arise regarding the basis on which Epos Guru was commissioned, saying:
“Even if there were a contract, and thus possible to imply a term, I consider that there is a real issue as to whether it would be appropriate to imply a licence, as the Jethwa Defendants now say was the case, or whether beneficial ownership of the software in favour of ENL is to be implied.”
He concluded that, even if Palmyra had the better case on the evidence now before the Court,
“I have a real concern that this is a case where further documentation and other relevant evidence may well come to light following disclosure, and ahead of trial, that might well support the Jethwa Defendants' position in relation to the ownership of the IP.”
Why was summary judgment refused?
The judge noted that the question for him to decide was whether there was a “real prospect” of success. Although Palmyra had mounted “a very formidable attack on the credibility and reality” of the Jethwas/EDE case, it had not shown that the case was merely fanciful. Indeed, the case was more than merely arguable and did carry some conviction.
The judge’s task in deciding on this application was made more difficult by the lack of evidence regarding the agreement and any licence, especially given that some events dated back to 2005 and took place in India. The result is that the question will now go to a full trial.
What does this mean?
The judgment is a reminder that when commissioning an IP work, such as software, there needs to be a written contract that includes a clear assignment clause. In the absence of a legal assignment, reliance on beneficial ownership is messy, factually complex and much more expensive.
It also shows the importance of documenting and recording any agreements on IP rights, including software. Not doing so risks problems arising in future, particularly if the business is sold or new investment is sought.
To find out more about the issues raised in this blog contact Rosie Burbidge, Intellectual Property Partner at Gunnercooke LLP in London - rosie.burbidge@gunnercooke.com
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