The claimant company designed, developed and sold motor controllers. Programming services for the motor controllers were provided by the first defendant, who, for tax avoidance reasons, was engaged through his service company. The claimant brought copyright proceedings in relation to source code and associated documents relating to the software it used in its motor controllers against the first defendant and his service company. The first defendant counterclaimed for, inter alia, the copyright in the same source code and documentation. It was common ground that, in accordance with section 11(2) of the Copyright, Designs and Patents Act 1988, if the defendant was employed by the claimant, code written during the course of that employment belonged to the claimant. None of the parties called into question the labels they had applied to their relationship pursuant to which the claimant obtained the defendant’s services through his service company.
On the claim—
Held, claim allowed. Where the court had concerns that the labels that the parties had chosen to apply to their relationship were untrue or inaccurate, and had been applied as a device to avoid the payment of taxes that were properly due, the court could and should consider the issue of its own motion. There was a clear public interest in everyone paying whatever taxes are properly due from them, and not escaping the payment of due taxes by devices including false descriptions of their contractual relationships. If the court reached the conclusion that the label that was applied to any particular contract in the circumstances of the present case was designed to deceive the revenue then the court should declare the true legal position between the parties notwithstanding that none of the parties had argued that the contract did not correctly describe the true relationship between them. The true relationship between the parties under their first contract was that of employer and employee and accordingly, the claimant was the owner of the copyright in the documents and the source code which were authored under that first contract (paras 141, 142, 186, 189).
Michael Hicks (instructed by Moore Blatch llp) for the claimant company.
Rebecca Page (instructed by Moore Blatch llp) for the company’s majority shareholder.
Anthony Pavlovich and Jaani Riordan (instructed by Blake Morgan llp) for the defendants.