“Hold it right there!!” – When Employees try to run off with your Intellectual Property

12 December 2014

In the recent Federal Court decision of Leica Geosystems Pty Ltd v Koudastaal (No 3) [2014] FCA 1129, the Court has found that an employee who, over the course of several hours, deliberately copied approximately 190,000 files from his employer’s computer to an external hard drive and took them with him following his resignation, had infringed his employer’s copyright and breached his employment contract.

Mr Koudstaal was employed by Leica Geosystems Pty Ltd (“Leica”) as a software engineer from 10 May 2010 to 3 November 2011.  During the final week of his employment with Leica, he worked particularly hard to develop programs for Leica’s system, including writing source code for the systems.  These codes made up the 60 gigabytes of data which he then transferred and accessed via his own personal laptop computer.

In his defence, the employee said that he deeply regretted his actions.  His reasons for taking the source code included that it was a “trophy” for the hard work he had done and that “at the time, I (he) felt a deep sense of ownership of that code” and felt “some pride in it”.  Whilst the employee admitted that he had lied to Leica by falsely declaring that he did not have any of Leica’s property in his possession when he left, he maintained that none of the material had been passed onto others (including his subsequent employer, which was in direct competition with Leica) and that nobody besides Leica had profited from it.

His Honour Justice Collier was satisfied that Leica had substantiated its claim against the employee in respect of the infringement of copyright.  His Honour found that the material the employee had copied was subject to copyright law and that Leica were the rightful owners of that copyright.  Further, that the employee had, by taking the material, reproduced the material without the licence, consent or authority of Leica and that the “sheer volume and complexity” of the material meant that it was not taken by the employee as merely part of his general knowledge.

Whilst His Honour accepted, to a degree, that the employee took the material as a “trophy” and to protect himself in the event that his work was ever questioned, he said that the employee was fully aware that the source codes were “at the core of the applicant’s (Leica’s) business” and that they would be useful to him in his subsequent employment.  It was held that the employee had not only breached his obligations under copyright law, but that he had also breached his employment contract, which expressly required the return of all company property upon termination of the contract.  As a consequence, the employee was ordered to pay $50,000.00 in damages pursuant to section 115(4) of the Copyright Act 1968 (Cth), as well as Leica’s legal costs.

Lessons 

For Employers:  This case highlights the need for employers to expressly pre-warn employees of the potential consequences of taking copies of, or removing employer property, upon leaving the workplace.  It is important to have clauses in any employment contract that place obligations on employees to return any property belonging to the employer, and to seek that employees return that material before they leave.  It is also important to include clauses dealing with intellectual property rights and the obligations of employees in relation those rights.

For Employees: Employees need to be aware that even in situations where they contribute significantly to the value of the employer’s property, this does not entitle them to that property, or to a copy or share of that property.  The intellectual property rights remain with the employer and any misuse of the property can lead to significant damages being awarded against them.