Case Review: Exegesis Infotech vs. Medimanage
Case title-Exegesis Infotech (India) Pvt. Ltd. & Anr v. Medimanage Insurance Broking Pvt. Ltd.
Citation- Notice of Motion No. 1290 of 2014 in Suit No.784 of 2014,Order Pronounced on 15th July, 2015
The Plaintiff in this case, Exegesis, had been commissioned by the Defendant, Medimanage, to develop a customized software, for the purpose of their insurance broking business. It was Exegesis’s claim that it had complete authorship over the software code of the aforementioned software, which Medimange had also obtained on the pretext of testing. Medimanage was now trying to use and deal in such source code without the express permission from Exegesis. They also feared that Medimanage may use reverse engineering to obtain the source code of proprietary software which was a part of the concerned software. Medimanage on the other hand claimed that the software was made under the course of the employment of Exegesis and being the employer in this case, the former the rightful first owner. Exegesis had therefore approached the court seeking an interlocutory injunction against Medimanage for copyright infringement as well as breach of confidentiality.
Should the Defendant be held responsible for copyright infringement and breach of confidentiality?
No, the Defendant should not be held liable for copyright infringement and breach of confidentiality.
Rule of law
Section 17(c), Copyright Act, 1957
Analysis of the Court
The Court first took note of the many tests, such as the control test and the organization test, that have been formulated by the Courts to conclude whether a ‘contract of service’ exists between the author and the employer (Zee Entertainment Enterprises Ltd Vs Gajendra Singh). The control test is where the purported employer not only has control over the actions of the author but also controls the manner in which the author executes those activities. The organization test takes into account the fact whether the author was a part of the organization when the copyrighted work was made and other related factors like the appointing authority, the paymaster, who has the power to dismiss, nature of the job, nature of establishment, the right to reject etc. However, stating the complex nature of the issue, the Court in the present case refrained from going into it in great detail and deemed it fit to be dealt with at trial.
The Court then went on to discuss the Section 17(c) of the Copyright Act, 1957, which states that if any work is made in the course of the author’s employment under a contract of service or apprenticeship, the employer shall, in the absence of any agreement to the contrary, be the first owner of the copyright therein. Therefore the decisive factor in this case is an “agreement to the contrary”, which decides who shall have the copyright in the work. This means that where there is an implied or express agreement to the contrary, the author of the work will have the copyright. But in case of the absence of such an agreement the employer will be the rightful first owner.
The Court then analysed the email correspondence between the parties, the draft agreement and the MoU to determine the ownership of the software. The Court stated that, even though the draft agreement was not eventually executed it showed the Medimangae had asserted its copyright in the impugned software. The Court then went into the clauses of the MoU which clearly stated that Medimanage would hold complete ownership of the software and Exegesis will own the rights to the background technologies used for further development. Also in the event of termination of contract by Exegesis , the original software was to be handed over to Medimanage. The Court concluded that it was clear that Medimanage had complete ownership of the software, which would also include all the other intellectual property in it.
Next, the Court delved into Exegesis’s breach of confidentiality claim, which was that Medimanage had obtained the source code of certain parts of the impugned software and was attempting to disclose this confidential information by sharing or dealing in the software code without permission. The Court looked into the email correspondence between Exegesis and Medimanage and concluded that the evidence furnished by the former not only failed to identify the confidential information in question, but also failed to prove any wrongdoing on the part of Medimanage with respect to breach of confidentiality. The Court added that there should be three essential elements in the claim for protection of confidence. Firstly, it should be demonstrated that the information itself is of a confidential nature. Secondly, the circumstances under which the information is disclosed to the other party should cast an obligation of confidence on it. Lastly, there should be evidence showing the unauthorised use of such information without the Plaintiff’s permission (Beyond Dreams Entertainment Pvt. Ltd. Vs Zee Entertainment Principles Ltd).
The Court finally went into Exegesis’s last claim that the Defendant may use reverse engineering and procure the source code to the background software used in the impugned software. The Court found the suggestion highly speculative and dismissed it.
On the basis of the foregoing the Court ruled in the favour of the Defendant and dismissed the Plaintiff’s application for interlocutory injunction.