Court Grants Software Copyright Temporary Restraining Order Against Former Employee

Glacern Machine Tools, LLC is suing its former employee, who was also an owner and manager of the company, for copyright infringement, conversion, and breach of fiduciary duty. Glacern alleges that defendant Eric Sun wrote and created copyrighted source code, within the scope of his employment and on a work-for-hire basis, for a first property management software program and a second, derivative work that incorporates elements of the original source code. Sun allegedly used Glacern’s equipment at the direction of Glacern to create the software programs, which are owned by Glacern under the operating agreement.

Glacern contends that Sun removed two computers from its headquarters, copied the software programs, and changed the administrative passwords. In addition, Sun allegedly contacted Glacern’s customer and demanded that monthly payments now be paid to him instead. Thus, Glacern sought a temporary restraining order from the Court preventing Sun from: “(1) destroying Plaintiff’s Software Products; (2) withholding from Plaintiff personal property which Plaintiff owns, including the Software Products; and (3) transferring “any such asset, real or intangible.” In addition, Glacer sought to compel Sun to: “(1) within five (5) days, give Plaintiff a complete list of all locations of the Software Products; and (2) allow Plaintiff unlimited remote access to an IP address, which Plaintiffs believe houses the Software Products.”

The Court noted that in order to be granted equitable relief, Plaintiff must show irreparable injury and the inadequacy of legal remedies. Also, “[t]he proper legal standard for preliminary injunctive relief requires a party to demonstrate ‘that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.'”

The Court found that Plaintiff’s first alleged harm – loss of customers and business reputation – did not constitute irreparable harm because it could be redressed through monetary relief. But the second alleged harm – possible destruction of the software – did constitute irreparable harm warranting the issuance of the TRO. The Court, however, believed that the relief sought was too broad and only restrained the defendants from deleting or destroying the software programs until a hearing on the possible issuance of a preliminary injunction on November 7, 2011.

Prudent business owners require that employees execute work-for-hire agreements assigning copyrights, as well as other intellectual property rights, created in the scope of employment to the employer despite the Copyright Act’s ownership provision. In the absence of a written agreement, in Community for Creative Non-Violence v. Reid, the Supreme Court set forth several non-exhaustive factors to determine whether a hired party is deemed an employee. If an independent contractor creates the software program without a written assignment agreement, however, the independent contractor will own the copyrights therein. So if you want to own the copyright to your website, make sure you have an agreement transferring the rights to you before you pay the web designer.

The case is Glacern Machine Tools, LLC v. Eric Suyu Sun, SACV11-1641 DOC (C.D. Cal. 2011).