Staff use of personal devices can complicate recovery of IP in insolvency situations, says expert

Insolvency law specialist Nick Pike of Pinsent Masons, the law firm behind Out-Law.com, said that in most situations business-related IP stored on electronic devices used by staff for work purposes will belong to the company. He said it is common for administrators to look to "secure and preserve" that IP when they are appointed following an insolvency event.

However, Pike said that the recovery of IP by administrators has become more challenging as a result of the rise of mobile working and the fact many companies now allow staff to use their own personal laptops and smartphones for work purposes.

"IP and other commercially sensitive information are important assets for businesses," Pike said. "Administrators often have to secure and preserve that information when they are appointed when a business experiences an insolvency event."

"When a business goes bust and stops operating, one of the things administrators will do is try to recover all the electronic equipment that belongs to the business so as to secure the electronic information held on those devices. However, the 'bring your own device' trend means that some staff may use their own personal devices for work purposes. Recovering important data and IP from those devices can be more complicated, since administrators will not generally be entitled to physical recovery of those devices themselves," he said.

"Employment contracts will often specify that any IP created by employees is owned by the employer. However, sometimes things are not as clear cut as that. If there are no terms in the employment contract an argument may arise as to whether IP in fact belongs to the individual employee, including senior managers," Pike said.

"In exceptional cases it might be necessary for administrators to obtain court orders to require the destruction or deletion of business data from employees' personal devices," Pike said.

Pike was commenting after the Financial Times reported that administrators had written to staff at Powa Technologies instructing them not to pass on IP to former management of the company. Powa Technologies went into administration in February.

According to the Financial Times' report, the administrators now running Powa Technologies had said in their letter to staff that some employees may have been asked to share "computer code from staff laptops" with "members of the Powa Group’s previous management”.

Pike said: "Generally, employees who leave a business when it enters administration, including former senior managers of the company, will have no entitlement to access or use the IP of that business."

Intellectual property law expert Louise Fullwood of Pinsent Masons said that employees that share commercially sensitive data or IP with former colleagues without the consent of administrators are likely to find themselves in breach of the terms of their employment contracts. Former employees that use business IP passed on to them could face legal claims of IP infringement, she said.

"It used to be the case that businesses would only need to worry about preventing people from physically entering premises and accessing important data and IP in paper form," Fullwood said. "The latest technology, however, makes it easier than ever to access business assets remotely. Organisations should consider using software that controls and tracks when important data and documents are accessed on their corporate servers to make it easier to recover IP."