Employers can be held vicariously liable for employee’s acts of copyright infringement

In Siemens Industry Software Inc. v Inzign Pte Ltd [2023] SGHC 50, the General Division of the High Court found the Defendant-employer vicariously liable for acts of copyright infringement committed by its employee. This was despite the fact that the employer did not know that the infringing acts had occurred, and did not authorise the infringing acts.

Introduction

The Plaintiff is the owner of the copyright subsisting in its NX Software (the “Software”), which enables the creation, development and use of a computerised model of a product without any physical testing. The Defendant was a licensee of certain modules of the Software, which it used for its business.

In 2020, an employee of the Defendant downloaded and installed an unauthorised version of the Software on an unused laptop found at his workplace. He used the unauthorised Software at least on 15 different occasions to practice using the Software.

This infringing use was detected and traced back to the Defendant, who identified the employee as the user of the unauthorised version of the Software. The Defendant subsequently uninstalled the unauthorised Software.

The Plaintiff commenced proceedings against the Defendant, alleging that the Defendant should be found primarily and vicariously liable for the acts of copyright infringement committed by its employee.

Summary of decision

The High Court held that the Defendant was not primarily liable for the acts of copyright infringement committed by its employee. In particular, the Defendant did not instruct or allow its employees to download unauthorised software, had no knowledge that the infringing acts had occurred, and had limited control over the employee’s use of the laptop for the infringing acts.

On the issue of vicarious liability, the High Court noted that there was a dearth of local case law on whether the doctrine of vicarious liability in tort applies to copyright infringement cases. After reviewing the position in the UK and Australia, and noting the absence of express restrictions in the Copyright Act, the High Court held that the doctrine of vicarious liability may be extended to copyright infringement.

The High Court was satisfied that, after applying the relevant legal test, vicarious liability should be imposed on the Defendant.

Firstly, the Defendant had failed to take reasonable steps to prevent the infringing acts, and had actually created and enhanced the risk of the infringing acts being committed. In particular, the Defendant’s lax supervision of the employee afforded him the opportunity to commit the infringing acts. Further, the relevant laptop was left physically unsecured and the usual administrative controls, which could have prevented the download of the unauthorised Software, were not installed on the laptop.

Secondly, the infringing acts were committed by the employee in the context of his employment for the Defendant’s benefit. Even though the employee’s infringing acts fell outside his authorised job scope, the evidence showed that the employee’s intention for installing the unauthorised Software was ultimately to improve his performance at work, which would translate into an increase in productivity for the Defendant.

Thirdly, the High Court also considered that the imposition of vicarious liability on the Defendant was in line with the relevant policy considerations. The Defendant was best placed and most able (relative to the employee) to provide effective compensation to the victim. Further, employers should be incentivised to take further steps to reduce the incidence of copyright infringement by their employees.

Lastly, in dismissing the Defendant’s arguments that the Plaintiff had failed to take reasonable measures to prevent copyright infringement, the High Court noted that:

1. the Plaintiff was free to pursue (or not pursue) every instance of copyright infringement as it deemed fit, given that the law enables rather than mandates the enforcement of intellectual property rights; and
2. it would be overly onerous to impose a duty on copyright owners to take active measures in protecting their copyright, as it would (a) prejudice copyright owners with less financial resources and (b) unduly complicate decision-making regarding the measures needed to monitor and/or prevent copyright infringement.

Looking ahead

For employers, this decision makes clear that vicarious liability cannot be avoided simply by reliance on what their employees are authorised to do under company policies or employment contracts. Active steps should also be taken to minimize or prevent opportunities for employees to commit copyright infringement. These include:

• Effectively installing technological controls which prevent the installation of unauthorised software;
• Physically securing unused company equipment and having greater control over the use of external devices in the workplace; and
• Properly supervising and actively educating employees on the existence and importance of anti-software piracy policies.

Further, for the purposes of ascertaining vicarious liability, the Court will also pay close attention to the extent to which the infringing acts may have furthered the employer’s business interests. As such, it will be important to conduct proper investigations and ascertain the purpose of the infringing acts should these acts be found to have taken place.

Lastly, the decision is a welcome one for copyright owners who face difficulties in enforcing their copyright, especially in the online sphere. In particular, copyright owners are now insulated from objections regarding the existence of infringing copies of their works online, and from having to justify how they protect their copyright and who they enforce it against. The decision emphasises that the burden for preventing copyright infringement ultimately rests on employers, and not on copyright owners.

This article is produced by our Singapore office, Bird & Bird ATMD LLP. It does not constitute as legal advice and is intended to provide general information only. Information in this article is accurate as of 30 August 2023.