Can an employer be held vicariously liable for its employee’s infringement of another’s copyright?  The Singapore High Court answered affirmatively based on the facts of the case in Siemens Industry Software Inc. (formerly known as Siemens Product Lifecycle Management Software Inc) v Inzign Pte Ltd [2023] SGHC 50.

Brief Facts of the Case

Siemens Industry Software Inc. (Owner) owns the copyright to the NX Software (Software), which is comprised of various modules with differing functions.  A Software licence may cover only some modules and the price of a Software licence depends on the specific modules purchased by a user.

Inzign Pte Ltd (Employer) owns licences for three modules of the Software.  However, one of its employees (Employee) who uses the Software to carry out his duties downloaded an unpaid full version of the Software, installed it on an unused laptop (Laptop) kept by the Employee’s supervisor (Supervisor) at the Employer’s office and used it on multiple occasions.  The Employer did not purchase the Laptop, but it was used to configure a machine which the Employer purchased and was inadvertently left behind by the machine technicians.  The Supervisor kept the Laptop without informing the Employer and without securing it.  Because the Employer was not aware of the Laptop’s existence, no administrative controls were installed on it.  This enabled the Employee to download and install the unauthorised Software on the Laptop.

An employee of the Software’s distributor, which is a related entity of the Owner, discovered the unauthorised use through an automatic reporting function built into the Software and traced such use to the Employer.

The Owner filed a claim against the Employer, seeking to hold it liable for the Employee’s acts.

The Court’s Ruling

The court ruled that the Employer was not primarily liable for the Employee’s infringing acts but was vicariously liable.

Employer is Not Primarily Liable 

The court ruled that the Employer could not be held primarily liable for the Employee’s infringing acts because:

• the Employer did not authorise the infringement – on the contrary, it has an anti-software piracy policy in place which the Employee signed and it also purchased licences for certain Software modules;
• when the Employee committed the infringement, he was not acting as an agent of, or within the scope of any authority from, the Employer;
• the Employer did not have control over what the Employee did on the Laptop; and
• the Employer did not encourage or incite the Employee to commit the infringement, and did not have actual or constructive knowledge of it.

Employer is Vicariously Liable

However, the Employer was held to be vicariously liable for the Employee’s infringing acts and was ordered to pay damages to the Owner.

Under the doctrine of vicarious liability, a person (i.e., a defendant) is held secondarily liable for the wrongful acts of another, even though the defendant was not negligent.  For the doctrine of vicarious liability to apply, both conditions must be present:

• there is a special relationship between the wrongdoer and the defendant (Special Relationship Test); and
• there is a sufficient connection between the defendant and the wrongdoer on one part, and the commission of the wrongful act on the other part (Sufficient Connection Test).  In this regard, the main question to be answered is whether the defendant created or significantly increased a risk that led to the misconduct.

The court found that the Special Relationship Test was met because of the contractual relationship between the Employer and the Employee.  In addition, the court found that the Sufficient Connection Test was met because:

• the Employer’s failure to sufficiently supervise the Employee and its mismanagement of the Laptop (that is, the failure of the Supervisor to notify the Employer about the Laptop’s existence and the Employer’s failure to install administrative controls on the Laptop) created and increased the risk of an infringement being committed; and
• the Employee installed the unauthorised Software to become better at using it and improve performing his duties, which in turn benefitted the Employer. 

In reaching its decision, the court also noted that:

• the doctrine of vicarious liability in tort applies to copyright infringement, which is a statutory tort; and
• imposing vicarious liability in this case (a) will better compensate the Owner because the Employee has no financial means to do so  and (b) will courage employers to manage their employees’ conduct better, particularly when it comes to copyright infringement, which is very difficult for copyright owners to detect.

Key Takeaway

Employers should take appropriate steps to carefully manage their employees’ workplace or work-related conduct because they can be held vicariously liable for their employees’ wrongful acts, even if they did not authorise or know about those acts. Having policies in place that prohibit wrongful acts may not be sufficient to avoid liability if employers do not take sufficient steps to monitor the implementation of those policies and to put in place other measures to prevent those wrongful acts from occurring (such as putting administrative controls on company-issued electronic devices).

For More Information

OrionW regularly advises clients on intellectual property and employment matters.  For more information about Singapore’s IP and employment laws, or if you have questions about this article, please contact us at info@orionw.com.

Disclaimer: This article is for general information only and does not constitute legal advice.