The High Court said that the warranty did not apply because no operating documents had been provided by the time of the contract. There was therefore a disconnect between what Red Sky provided in its contracts and its actual processes. Instead of the contractual warranty, implied warranties applied based on the Sale of Goods Act and Supply of Goods and Services Act (notwithstanding that the contract terms had purported to exclude those terms) as no other reasonable warranty applied. The software was not of satisfactory quality or fit for its purpose. In addition, the exclusions and proposed cap on liability did not apply because, in deciding upon reasonableness, the judge took account of the fact that the parties were not of equal bargaining power, the standard terms had sought to exclude the statutory implied terms without providing reasonable replacements, and Kingsway did not know of the existence of the exclusions and limitations on liability. The judge sided with the customer to a large part based on its inability to satisfy itself with the system unless there were clear demonstrations or operating documents.

The High Court sided with BMS.  Of most interest, it ruled that ‘perpetual’ had different shades of meaning. On the one hand, it could mean ‘incapable of being brought to an end’, while alternatively it could mean ‘of indefinite duration, but subject to any contractual provisions governing termination.’ In this case, the latter applied. There was no incompatibility between the variation and the ability to continue to link the two agreements, especially since termination was an important right. There were also good reasons to retain the right to terminate the licence agreement, because the agreement contained potential onerous obligations. The original agreement had been extended rather than replaced. If the parties had not wanted the link to apply, they would have chosen express words to remove it.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.Upload-IT.com, comments: ‘This ruling only applies to Microsoft’s supply of products to the US market. Patents are by their nature territorial. The claim relates to infringement of i4i’s patent rights in the US. Different jurisdictions take different approaches to accepting and enforcing patents. The US takes a far more pro-patent line for patenting technical innovations or business methods than in Europe. Whenever any European-based business is considering going to the US market in the future, it is always worth considering the potential patent position there at the outset before launching anywhere else. Otherwise, once the thing is in the public domain, patent protection may no longer be available for the US market. In addition, care needs to be taken to ensure you are not infringing someone else’s patent when you launch there or you could be hit with a multi-million dollar legal action.’

“Last year, I predicted that IT projects would take a battering unless they could be financially justified by reducing costs that pay for those projects.  With continued belt-tightening, I expect that to continue in 2010, with many non-essential IT projects being deferred. 

I also predict that with organisations having fewer staff and each with more on their plates, there will be more incidents of software licences not being kept up-to-date.  As pressure mounts on software licensors to hit their revenue targets, bodies like the BSA will have rich pickings and there could be some high-profile revelations of copyright infringement.

On data protection, I expect the next hot topic involving breaches of the seventh principle of the Data Protection Act to revolve around loss or misuse of data caused by dishonest staff.  With between one and two in every three British staff (depending on which research you believe) apparently willing to lie on their CVs and so many data breaches caused by acts of individual staff, how long before the next wave of press interest into data loss surrounds theft of databases containing sensitive data by staff who should never have got through basic background checks when applying for their jobs?”

I welcome anyone’s thoughts on these or their other predictions.

The High Court sided with Virrage, which was represented by Matthew Arnold & Baldwin LLP in the case. The court dismissed ICEL’s arguments that in the absence of any express statements about copyright ownership, the background of the case would mean that ICEL was the intended owner. ICEL had argued that the intention of the parties was obvious so that no mention needed to be made about copyright being transferred. The judge said that any inferred right had to be the minimum required in the circumstances. Therefore, if a mere licence will suffice, there is no need to infer an assignment.

Paul Gershlick, editor of www.Upload-IT.com and a Principal at Matthew Arnold & Baldwin LLP, comments: ‘Although the case does not make new law, it is a useful reminder of existing law. Many people think that they own the software that they have commissioned just because they paid for it. However, the software developer owns the software unless something clearly and expressly is agreed in the contract. It is therefore important to address the issue in the contract.’