Mr Justice Zacaroli finds manufacturing software copyright infringed and confidence breached in ex-employee fight

Merpel only knows one computer language 
 - TunaOS

Back in March, Mr Justice Zacaroli handed down his decision in PQ Systems Europe v Jeff Aughton and Factroia Ltd [2023] EWHC 581 in a copyright infringement and misuse of confidential information claim (and the accompanying employment contractual issues) relating to computer software which assists in manufacturing quality assurance. When one hears the claims of copyright infringement, confidential information and employment claims one can readily assume that this is an employer/ex-employee dispute. And here, you would be correct. And with all these types of cases, there are a lot of details. The AmeriKat has given you the Reader's Digest version below, but if you want to get into the detail the judgment is agitating with facts. 

 Background  

The claimants - PQ for short - are based in the US. They develop, market and sell statistical process control (SPC) software and gauge management software. SPC is an analytical technique for improving industrial processes. PQ's principle product was called the SQCpack which incorporated a chart generating program called CHARTrunner. The defendant - Mr Aughton - had been developing software for over 50 years and was employed by PQ from 1989 as a software developer and was appointed a director in 2013. During his time, Mr Aughton began working on PQ's gauge management software, called GAGEpack and was tasked with developing a charting module for a re-write of the SQCpack and CHARTrunner software, called CHARTcore in a programming language called VB.Net. Another developer was working on an alternative version written in Windows Presentation Foundation (WPF). It was the WPF version that PQ decided to pursue. This decision was considered by Mr Aughton to be "a serious mistake" and so he requested and was granted permission to continue working on GAGEpack. He also continued on developing an SPC program in VB.NET which he shared with a fired ex-employee. This resulted in disciplinary proceedings and a demotion from managing director. He resigned in 2015. A few days after his resignation he founded Factoria.  

After his resignation, he started work on what he claimed was an entirely new SPC program for creating charts by tapping into an existing data collecting system written in VB.NET - called qSPC but renamed InSPC. It had broadly the same functionality as PQ's CHARTrunner program. A subsequent version of InSPC - InSPC+ - had broadly the same functionality as PQ's SQCpack program. These versions, known as InSPC v1, were demonstrated to a potential commercial partner in the US - CyberMetrics. Over the next three years they worked together to develop the InSPC software. The software was rewritten in C# and became InSPC v2 in 2017/2018. 

PQ became aware of InSPC v1 when it was promoted in demo form by CyberMetrics in the Summer 2017. PQ reviewed the software and noted the significant functional similarities with their own products, but also discovered references to Factoria and PQ as author. It was then, that PQ's solicitors wrote to Mr Aughton alleging breaches of confidence and infringement of copyright. CyberMetrics then removed InSPC v1 from their website. US proceedings were filed by PQ against CyberMetrics in October 2017, Mr Aughton was deposed in October 2021 and the proceedings then settled on confidential terms. The UK proceedings meanwhile were commenced in September 2019 alleging that Mr Aughton copied or otherwise made use of the PQ software ProSPC when he wrote InSPC v1 and v2 (either by use of automatic translation software, or manually, or a combination of the two). Mr Aughton denied this and said that the copyright in ProSPC belonged to him because it was written as a hobby project outside his employment and, in any event, he did not copy ProSPC by any means (automatic translation or otherwise). 

  The issues 

  (1) are the copyright and confidential information in ProSPC owned by PQ? 

  (2) was InSPC v1 copied from ProSPC, so as to infringe the copyright in ProSPC or misuse any confidential information in ProSPC? and 

  (3) was InSPC v2 copied from ProSPC, either directly or – more likely – indirectly via InSPC v1? 

Peripheral issues relating to Mr Aughton's duties under his employment contract overlapped with these three core issues.  

  The issue with the source code  

Before getting into the decision, it is worth flagging that typically questions of copying can be relatively easy to identify as you can compare source code (human readable language). However, in this case it was not possible as there was no source code available for ProSPC or InSPC v1 as Mr Aughton deleted them. Only the object code (computer readable language) was available for the two programs. Thus, PQ had to decompile the object code via commercially available de-compiling software. It was common ground that de-compiled code will look very different to the original source ode as none of the comments or extraneous language remains. It is also possible for two quite different looking pieces of source code, once compiled and then de-compiled, to look exactly the same. The position was made worse as the compiled code for InSPC v 1 was "obfuscated" and de-obfuscation does not restore names to their original values, but assigns new names. InSPC v2 had its source code in tack but was written in C#, not VB.NET, so the comparison of syntax with the decompiled version of ProSPC made it more difficult. This made PQ's case that copying occurred challenging, resting on expert comparison of decompiled code and thus was "heavily circumstantial".  

The experts adduced by the parties were not considered by the Judge to be equally convincing. The Judge found Dr Young, for PQ, to be "measured and thoughtful" and "ready to acknowledge points of weakness in his analysis". Mr Dufour, for Mr Aughton, was found by the Judge to be "unconvincing" on key points and took "an adversarial approach". Mr Aughton also provided evidence which the Judge found "unreliable". 

  The law 

A reminder for all those Kats who don't spend their days in copyright and source code, that indeed copyright can subsist in source code and object code, as well as parts of the design or structure of a computer program that are indicative of the creativity and skill of an author. If the code is dictated by technical function (i.e. where no choices are to be made by the coder as to the code), it is not protected. The functionality or ideas that lie behind the code is protected (SAS Institute Inc v World Programming Ltd [2013] EWCA Civ 1482 at §20-§37). Copying a substantial part of the computer program or making an arrangement, altered version or translation of it amounts to infringement (sections 16 and 17 and section 21(4) of the CDPA 1988, respectively). A prima facie inference of copying is raised when there is substantial similarity between the original work and the allegedly infringing work, together with proof o the possibility of access (IBCOS Computers Ltd v Barclays Finance Ltd [1994] FSR 275, p.296-297). Thus, in Cantor Fitzgerald International v Tradition (UK) Ltd [2000] RPC 95, at p.193, Mr Justice Pumfrey had before him a "certainly powerful indication" of copying whereby the arbitrary (and irrelevant) ordering of a list of variables in a piece of code was reproduced.  

As to the confidential information element, there was no dispute that the computer code in PQ's products protected confidential information. Mr Aughton's contract at the time he left defined Confidential Information as including "Company software and software development" and Clause 13.2 of that contract prevented him from at any time (during or after) using or disclosing Confidential Information (with the usual exceptions which do not apply here). The use of source code, even if only as a reminder when writing competing software, would amount to a breach of confidence (Cantor Fitzgerald at §87). Although PQ also had a claim on the equitable duty of confidence, the Judge did not consider it given the clear contractual provisions.  

The decision 

On the first issue - whether PQ owned the ProSPC copyright and confidential information - the Judge held that ProSPC was written during the course of Mr Aughton's employment such that it belonged to PQ, not to Mr Aughton. Mr Aughton had argued that he had written ProSPC from scratch as a hobby project in his spare time on his home computer without reproducing any source code from PQ.  

Copyright that is created during the course of employment is owned by the employer (section 11(2) CDPA 1988). To determine whether a work has been created during the course of employment you have to ask the following: (1) whether the work was the kind of work that the employee was engaged to do and, if it was, (2) whether the work was in fact done in the course of that employment at all (see Copinger, §5-18).  

The Judge was in no doubt on (1) - ProSPC was software that was precisely the kind which Mr Aughton was engaged to do and Mr Aughton admitted that it was his own version of PQ's CHARTrunner software but written in VB.NET (as opposed to WPF). On (2), one had to conduct a multifactorial assessment based on all the circumstances of the case which included the relevant factors set out by David Stone in MEI Fields Designs Ltd v Saffron Cards and Gifts Ltd [2018] EWHC 132  (IPEC) as follows: 

(a) the terms of the contract of employment; 

(b) where the work was created; 

(c) whether the work was created during normal office hours; 

(d) who provided the materials for the work to be created; 

(e) the level of direction provided to the author; 

(f) whether the author can refuse to create the work/s; and 

(g) whether the work is "integral" to the business. 

  The Judge took into account two admissions made by Mr Aughton in April 2013. These related to the fired ex-employee who had sent an email to PQ attaching an executable and time-bombed version of ProSPC saying: "Attached is the product [Mr Aughton] has been writing for the last 18 months. It expires on 31/03/2013 – what is the reason I am telling you this? because he played me – but maybe you already knew he was writing it?" This prompted the internal investigation and the disciplinary hearing which resulted in Mr Aughton's demotion from managing director. The notes of the hearing were disclosed during this case and recorded two admissions - first, that the routines Mr Aughton used in ProSPC were lifted from the CHARTcore routines that he wrote for PQ and second, while he was the sole creator of ProSPC, he acknowledge that he had written it in the course of his employment and that it belonged to PQ. Mr Aughton claimed that the hearing notes were a forgery, being neither contemporaneous or accurate. However, the notes repeat what Mr Aughton had told the founder of PQ in an e-mail. In this e-mail he said that ProSPC does what CHARTrunner does, but was never intended to compete with it:  

 "When GAGEpack was rewritten for .NET I reused the old PqChartCore routines for it, enhancing them where appropriate. Further, when I started CRJA/ProSPC I just lifted them again, making the necessary changes. Essentially the bulk of CRJA/ProSPC code and all of GAGEpack's charting are those PqChartCore routines."  

Thus, the Judge held that the first admission was made out in the evidence. As to the second, the notes of the hearing records Mr Aughton saying that the code was the Company's as he wrote it while employed. Mr Aughton denied saying this, however, there were multiple references to this in the hearing notes. The Judge stated: 

"It is a theme of Mr Aughton's evidence that he feels a strong sense of ownership of the software that he wrote for PQ. He is scathing about the re-write of SQCpack undertaken in WPF by others, as compared to his own re-write of GAGEpack which he said was extremely successful. I consider that he is inherently likely to have made the point in the disciplinary hearing that the software was his own (in the sense that it was all his own creation), but that he did clarify that this meant he had written it, not that he claimed ownership of it as against PQ." 

The AmeriKat repeats what she said above - there are a lot of facts in this case and some good ones for illustrating how important recording events like these are to proofing up a claim. She encourages readers to read paragraphs 62-64 and 70-75 of the Judgment (and an interesting bit about the role of personal v work computer at paragraph 75). In the round, the Judge held that ProSPC was indeed written in the course of employment.  

On the second issue - was InSPCv1 copied from ProSPC - the Judge held that in writing InSPC v1 and seeking to make it commercially available to CyberMetrics, Mr Aughton copied and used at least a substantial part of ProSPC. In coming to the decision, the Judge relied on the expert evidence which found that:  

 "there is evidence of similarity of applications, in the capabilities and features of the programs, that the format and naming conventions of certain xml files used in ProSPC and in InSPC are highly similar, and that there are similarities in the structures of ProSPC and InSPC v1." 

In particular, the Judge relied on an example adduced by PQ's expert which has the distinct flavor as to the case that was before Mr Justice Pumfrey (noted below). This example was as follows: 

 "The list of chart types in the ProSPC ChartTypeEnum is almost precisely replicated in the InSPC v1 ChartTypeEnum, albeit the latter contains a number of additional chart types. The chart names (save in one respect) and ordering are identical. The assigned reference numbers are also (save again in one respect) identical, notwithstanding that the numbering is not consecutive (for example in each case "Histogram" is assigned the number 1 and the next listed item, "Pareto" is assigned the number 5)." 

The Judge held that the explanation for the coincidences in the ordering and numbering of the chart types, as between the two programs, is that the ChartTypeEnum in INSPC v1 was indeed copied from ProSPC. Although, that is not enough to prove that the whole or substantial part of ProSPC was taken when writing InSPC v 1, the Judge held this could be found in the facts and circumstances of the case. He held that: 

 "In circumstances where Mr Aughton's evidence is that he made no reference at all to ProSPC, but wrote InSPC v1 from scratch, my conclusion that he is not telling the truth in relation to this ChartTypeEnum nevertheless undermines the credibility of his denial of copying from ProSPC more generally. As Jacob J pointed out in IBCOS (above), it is often identity of trivial matter that traps a copyist. Having regard to the totality of the evidence I am satisfied that he did copy at least a substantial part of ProSPC when writing InSPC v1, for the reasons set out in the following paragraphs." 

Those reasons are set out in a lot of detail from paragraphs 93-110, which the AmeriKat again suggests readers delve into to get a flavor of the nuance and context on which these types of cases turn. The particular circumstances that rose to the top for the Judge's decisions were: the circumstances in which Mr Aughton retained ProSPC after leaving PQ; the circumstances in which he deleted it; the circumstances in which he deleted InSPC v1; and his attempts in evidence to downplay the utility of ProSPC (see [94]). The circumstances essentially were the deletion of the retention, then deletion after proceedings were brought, of the ProSPC source code. At [109] the Judge concludes: 

"In my judgment, the circumstances are such that I can and do draw the adverse inference that Mr Aughton has not retained the source code for InSPC v1 because it would have been unhelpful to him and CyberMetrics in defending PQ's actual or threatened claims. I return below to the other explanation given by Mr Aughton for deleting InSPC v1 – namely it was superseded by InSPC v2 – but for now note that in circumstances where litigation had been threatened in this jurisdiction, and was ongoing in the US, that is not a sufficient reason to mitigate the adverse inference to be drawn from his failure to retain InSPC v1." 

On the third issue - was InSPC v2 copied from ProSPC - the Judge held it was more likely than not that Mr Aughton did copy from at least a substantial part of the source code for InSPC v1 when writing InSPC v2. Accordingly, there was also a breach of Mr Aughton's contractual duties of confidence. The main touchstone for this finding was the logic that it would been odd for v2 to be written without any reference to v1 - the Judge called it an "inherent likelihood" (see [125]). The deletion of the source code also raised its head again. The Judge noted that the "evidence to defend the claims threatened in the UK and pending in the US. The fact that he did delete it does not establish copying, but it is a pointer towards it, to be assessed with the other factors I set out in this part of the judgment." Finally, he looked at the re-write in a different language. On this he held: 

 "Finally, I consider that the inference is supported by the timing of his re-write of the program in C#, which I find, for the following reasons, was after he was put on notice of PQ's claim of copying. An innocent explanation for re-writing in C# would have been that he sought to start again in a new language precisely to avoid the claims of copying which had by now been made. If that were so, however, he would have been bound to keep the source code of InSPC v1 precisely to demonstrate he had not copied from it." 

 Conclusion 

So, taken together, the Judge held that Mr Aughton infringed PQ's copyright and breached his contractual duties of confidentiality in writing both InSPC v1 and InSPC v2. As noted above, these cases are very fact and context heavy and dependent. This case illustrated the importance of keeping a record of conversations, meetings, timelines and e-mails to prove and defend claims. In the absence of directly comparable source code, the Judge had to rely on this factual record to determine whether PQ owned the copyright and confidential information in the source code and whether there was substantial taking. This case is therefore another example of the importance of record keeping and documentation of conduct and behavior. Often it is the human aspect of these cases - what people did or did not do and why - which pushes the Court to a substantive finding of infringement or breach of confidence. And, Merpel yawns awakening from her afternoon slumber, the importance of the adage "delete in haste, repent in leisure - the adverse inferences of the deletion may be way worse than the reality."