U.K. Copyright Ruling Suffers Setback

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April 30, 1999 (12:00 AM EDT)

By James Governor and Andrew Darling,

IT managers, beware. Your intellectual property could be unprotected, following a ruling last week in the High Court. Employees are now free to resign and reuse code in building software solutions for competitors.

After the judgment, lawyers are warning it is no longer sufficient to rely on standard copyright protection for bespoke software applications, and users are worried about the far-reaching implications.

The case concerned a team of computer programmers who left Cantor Fitzgerald International, one of the world's largest bond brokers, to work for Tradition, another broking company. There, they produced a dealing system that did much the same as a system they had built for Cantor Fitzgerald.

The judge ruled against Tradition, but, on important points of law, software copyright looks more vulnerable than ever. The size of the damages has yet to be ascertained, and the victory looks a little hollow.

According to a prepared statement by Robert Faulkner, Cantor's general council, his company had won damages. "However, we are concerned the heavy burden of proof imposed on the plaintiff in this case, where the defendant's employees admitted to copying software and dishonesty, sets a dangerous precedent for firms trying to protect their intellectual property against theft by departing employees," Faulkner said.

For example, the judge ruled one section of code copied was not "substantial" enough to breach copyright law. In fact, the judge ruled that the old saying, "If it's worth copying, it's worth protecting," went too far.

Another point, which concerns IT departments, is "clever programming tricks" are often not trade secrets, but are useful experiences employees can take away with them. This could affect freelance employees. Unless there is a specific provision in the contract attributing copyright to the company, then it resides with the contractor. But even if such a contract were to be signed, the ruling would open it to question, according to Simon Halberstam of legal firm Sprecher Grier Halberstam.