Case No. IP-2018-000200

102.The 2016 Agreement is headed “Retention of Services & VFC Exclusivity Contract”. These were its terms: “The purpose of the agreement is to ensure that 1.The intellectual property rights of any version of VFC are not disclosed to any other party in the world. The intellectual property rights include database rights, confidential information, trade secrets, know-how, methodology, processes, trade names, trademarks and service marks. 2.VFC is supported fully by responding to support enquiries from VFC license holders (customers) and potential customers as well as MD5 employees. 3.VFC is regularly updated and developed to keep at the forefront of technology with updates to current processes and routines as well as new features and scope of use. Whilst this agreement is in place MD5 will have exclusive rights to VFC methodologies including those previously developed by Michael Penhallurick. This agreement will exist whilst MD5 pay Michael Penhallurick £5000 in advance of each month to be paid on the 1st of each month. An invoice for this amount is to be provided on the last week of each month.” 103.Mr Penhallurick characterised the 2016 Agreement as an exclusive licence granted by him to MD5 to commercialise VFC, which he said meant the compiled end-product, after he left MD5 and in return Mr Penhallurick would receive £5000 per month.104.Mr Boyd said that the 2016 Agreement was a consultancy agreement. After Mr Penhallurick had left MD5’s employment he provided consultancy services and sent invoices. 105.Leaving aside my findings above as to the ownership of the VFC software, on its face I do not read the 2016 Agreement as a licence to commercialise the VFC product. The first numbered paragraph restrains both Mr Penhallurick and MD5 from disclosing the IP rights in VFC, which obviously makes no sense. Construing it to mean a restraint on the disclosure of VFC source code would make more sense. The second and third numbered paragraphs should I think be read in association with the final paragraph. MD5 was to pay Mr Penhallurick £5000 per month for something, and the something was to assist in responding to enquiries from licence holders, to supply VFC updates and to allow MD5 the exclusive rights referred to in the penultimate paragraph. 106.It is the penultimate paragraph which implies the grant of an exclusive licence to MD5. But the licence relates to Mr Penhallurick’s methodologies, not software. In my view it was a recognition by both parties that the VFC software was based on Mr Penhallurick’s methodologies and that those had been created before his employment with MD5. In case this gave Mr Penhallurick any right which could be exercised against MD5 to restrain its marketing of VFC software, MD5 wished to ensure that there was a licence and was willing to pay for it as well as for Mr Penhallurick’s support services. Breach of the 2016 Agreement by MD5 107. Mr Penhallurick alleged that by stopping the payments to Mr Penhallurick set out in the 2016 Agreement, MD5 was in breach. This was barely pursued in argument and I think for good reason. The 2016 Agreement explicitly states that it remained in place while MD5 paid Mr Penhallurick £5000 per month. Implicitly MD5 was entitled to stop payments when it chose to and bring to the 2016 Agreement to an end. Breach of the 2016 Agreement by Mr Penhallurick 108.MD5 argued that in breach of the numbered paragraphs 2 and 3 of the 2016 Agreement Mr Penhallurick failed to respond to enquiries about VFC and failed to update and develop VFC. MD5 alleges that although Mr Penhallurick provided some updates in 2016 and 2017, nothing was done after September 2017. Mr Penhallurick was paid £20,000 between September 2017 and December 2017, a period during which, according to MD5, he did nothing. MD5 seeks damages or restitution of £20,000 for a total want of consideration between September and December 2017. 109.Mr Boyd’s evidence was that he had suspected that Mr Penhallurick was not putting time into the services MD5 needed under the 2016 Agreement. 110.In his second witness statement Mr Penhallurick said that until December 2017 he continued research into the password bypass feature of VFC; updated routines were made available to MD5 and their customer base. This did not require a new version of VFC, only that the updated password bypass be downloaded and plugged in. Mr Penhallurick added that all relevant technical support queries were responded to in a timely fashion. 111.Mr Penhallurick was not cross-examined on this evidence. I accept it and find that no sufficient ground was established for me to conclude that Mr Penhallurick was in breach.