“But it was not me!” is a refrain familiar to many of us involved in intellectual property defence work when companies are hit with infringement lawsuits due to the actions of their employees.

However, companies can be held vicariously liable if their employees commit an act of infringement. This was recently confirmed in no uncertain terms by the Court of Appeal in Siemens Industry Software Inc v KB Engineering Coatings Sdn Bhd.

In this case, Siemens Industry Software Inc (“Siemens”) had, on 14 December 2020, sent a demand to KB Engineering Coatings Sdn Bhd (“KB Engineering”) for the infringement of its copyright in a computer program known as NX12 and its licence file (“software”). Following an internal investigation by KB Engineering, it was discovered that one of its employees had downloaded and used the software. The employee claimed that this was for personal reasons, namely, to improve his skills.

Siemens subsequently applied for summary judgment against KB Engineering for copyright infringement, but the application was dismissed primarily on the basis of lack of locus standi. The High Court judge concluded – based on his own online research – that a different entity should have brought the action.

The Court of Appeal, however, found that the High Court judge had erred. It held that the High Court judge should have accepted the evidence adduced by Siemens, which included an affidavit and an extract from the Register of Copyright of Malaysia showing Siemens as the copyright owner. In other words, the judge should have been guided by the evidence put forward by the parties, as facts must be proven by admissible evidence. Siemens had produced prima facie proof of copyright ownership in the software, which KB Engineering failed to rebut.

More importantly, the Court of Appeal emphasised that liability for copyright infringement is strict in nature. It is immaterial whether KB Engineering had any knowledge of, or intention to permit, the download and use of the software. A finding of infringement turns solely on the act of unauthorised reproduction.

In other words, innocence is not a defence to copyright infringement. Both the evidence adduced and KB Engineering’s own admission show that its employee had downloaded the software onto KB Engineering’s computer. There was also no evidence to prove that the employee had, in fact, used the software solely for personal reasons. Instead, the employee had used the software in the course of his employment. Hence, KB Engineering was vicariously liable, regardless of whether it was aware of its employee’s infringing acts.

This decision makes it clear that employers cannot avoid liability by distancing themselves from their employees’ infringing conduct. If infringement were to occur within the context of employment, companies face direct risk of liability – even if an employee were to claim that his act of infringement was motivated by personal reasons.

Companies should therefore ensure that robust internal controls, compliance policies, and regular software audits are in place to safeguard against liability and reduce the exposure risk in the event of infringement by staff.

Further, rights owners should note that affidavits and extracts from the Register of Copyright (pursuant to the lodgement of a voluntary notification of copyright) can serve as powerful enforcement tools. They provide strong evidentiary support not only for the subsistence but also for the ownership of copyright in a work. It is therefore advisable for voluntary copyright notifications to be lodged even though this is not mandatory for the purpose of obtaining copyright protection.