## Facts

- A corporation was formed to develop and market a computer system for medical offices; its core product was proprietary software.
- One co-founder served as president and principal programmer and wrote the software that formed the company’s central asset.
- Another co-founder provided financing and business management and later served as president; his spouse contributed medical-office domain knowledge.
- The co-founders executed employment agreements requiring them to devote full time and best efforts to the company; the board later permitted limited outside, non-conflicting programming work.
- The software was presented to investors as the company’s primary asset, and the company intended to obtain copyright protection in its own name.
- The company experienced capitalization and product issues; the programmer increasingly focused on outside ventures and reduced involvement with the software while remaining on payroll.
- After the company filed a Chapter 11 petition, a dispute arose whether the software was owned by the programmer (with the company holding only a license) or by the company.
- In consolidated adversary proceedings, the debtor sought a declaration that the software was estate property, and the programmer sued the manager for breach of fiduciary duty, corporate waste, and alter-ego liability.

## Issues

1. Whether the software was property of the bankruptcy estate under 11 U.S.C. § 541, turning on whether it was owned by the debtor as a copyright “work made for hire.”
2. Whether the manager breached fiduciary duties, committed corporate waste, or so dominated the corporation that alter-ego liability should be imposed.

## Decision

- The court determined the software was property of the bankruptcy estate under § 541.
- Applying copyright work-made-for-hire rules, the court found the software was created by the programmer as an employee/officer within the scope of his duties, and no written agreement rebutted employer ownership.
- The court rejected the programmer’s claim that after-hours or offsite work established personal ownership or reduced the work’s connection to employment.
- The court dismissed all claims against the manager for breach of fiduciary duty, corporate waste, and alter ego for lack of sufficient proof and found the challenged conduct protected by the business judgment rule.

## Legal Principles

- Under 11 U.S.C. § 541, a bankruptcy estate includes all legal and equitable interests of the debtor at filing, including intangible intellectual property.
- Ownership of alleged estate property is determined by applicable non-bankruptcy law; for software, federal copyright law governs ownership.
- Software created by an employee within the scope of employment is presumptively a “work made for hire” owned by the employer absent a written agreement allocating ownership differently.
- Work performed after hours or offsite does not, by itself, remove the work from the scope of employment when it is tied to the employer’s business purpose and created under an employment relationship.
- Directors and officers are generally protected by the business judgment rule for good-faith, informed decisions made in the corporation’s interests; claims for fiduciary breach, waste, and alter ego require concrete supporting evidence.

## Conclusion

The court held the debtor owned the software as a work made for hire, making it property of the bankruptcy estate, and dismissed the programmer’s fiduciary-duty, waste, and alter-ego claims against the company’s manager for insufficient proof under corporate law standards.


Simplified Info. Sys., Inc. v. Cannon (In re Simplified Info. Sys., Inc.), 89 B.R. 538 (Bankr. W.D. Pa. 1988)