The High Court had initially ruled that WPL had copied one of SAS’s programming manuals. However, in respect of the other allegations, the Court was of the view that there was no copyright infringement, based on previous English court cases of easyJet v Navitaire and Nova v Mazooma. However, it decided to make a reference to the European Court of Justice for a definitive ruling on the European Union’s position on the extent of copyright protection in software programming language, programming interfaces and the functionality within the software.

The European Court of Justice’s advisor has now given his opinion. Advocate General Bot has followed the High Court’s ruling. He said that the language and functionalities of a computer program were not eligible for copyright protection. They amounted to ideas without concrete expression. Functionality was the set of possibilities offered by a computer system. It is the service that the user expects from it. For example, in a program for airline tickets, this included finding the flight, checking availability, booking a seat, registering details, paying and editing. The list of possible functionalities was finite. However, the means of achieving the concrete expression of those functionalities is eligible for protection.

We will now await several months for the decision of the European Court of Justice. The Advocate General’s opinion is not binding, but is usually followed by the court.

The ruling is an important reminder that exit provisions in agreements are not something to worry about later; rather, they are just as important as those provisions of an agreement which are intended to have immediate effect. If exit provisions have not been agreed, the party receiving the services is at serious risk of being without those services for a period of time until another provider is found, with potentially catastrophic impacts on its business. Similarly, the service provider may suddenly be without a revenue stream without any form of transition period to balance the impact.

The ruling also shows the importance of not just having exit provisions within an agreement, but to make sure that those provisions set out the requirement for an exit plan which clearly defines what happens to the services on termination – in an IT contract, for example, this should include the specific hardware and software that is needed, the level of support and maintenance that will be provided, how long the transition services will be provided for and how much those transition services will cost.

Paul Gershlick, a Partner and Head of the Pharmaceutical and Life Sciences sector at Matthew Arnold & Baldwin LLP, says, “It is absolutely crucial to protect patient data. However, privacy groups again appear to be pursuing a single concern agenda – ie privacy. What about improving patient care and improving or saving lives? Instead of criticising the Government’s healthcare data strategy for being pursued too fast, people worried about privacy should instead be working with the Government to make sure the privacy safeguards are in place so that the health benefits can be achieved as soon as possible. The longer any delays take, the fewer number of people who will benefit from any reforms. When people’s lives are at stake, there should be no time to lose.”

One of CCWY’s officers had created a similar PM Absolute list with accompanying software, and received several PM Absolutes from a security operative who used FTS’s software. That officer then posted those PM Absolutes on an Internet forum for other officers to add to the list, and also used them to develop his own list and software.

FTS issued proceedings, claiming that its list was copyright protected (as it was a table or compilation that was not a database that was its own intellectual creation) and that CCWY and the officer in question had reproduced that list and infringed the copyright. FTS also claimed that the list was protected by database rights that had also been infringed and that its confidence had been breached by the publishing of the list on the Internet forum.

The High Court ruled that:

1. there was no copyright in the list under the Copyright, Designs and Patents Act 1988 as the list had been put together by trial and error and not by the type of intellectual creation of the author that was necessary to be protected by copyright. The list was not planned and had no set design, was not the author’s own intellectual creation due to the way it was arranged and selected, and had no structure that warranted copyright protection; rather, it was simply a list of data compiled over time;
2. the list was a database that FTS had made a substantial investment in obtaining and verifying that data contained in it, which did require skill and effort; it was therefore protected by database right. CCWY and the officer had extracted and reutilised a substantial part of the database, both in terms of the number of PM Absolutes and the detail contained in each, and had breached the database right; and
3. CCWY and the officer had breached FTS’s confidential information by posting the list on the website forum.

CCWY was held to be vicariously liable for the officer’s actions.

The World Wide Web Consortium (W3C) has published two draft standards to allow users to express privacy preferences in relation to cookies.  W3C released details of:

1. the “Tracking Preference Expression”, which defines mechanisms for users to express cross-site tracking preferences, and for websites to indicate whether these preferences are complied with; and
2. the “Tracking Compliance and Scope Specification”, which defines the meaning of a “Do Not Track” mechanism for notifying websites of a preference and set out best practice for website compliance.

It is hoped that the documents will culminate in the development of software that can be used and developed further by browser operators to protect users from cookies and tracking mechanisms. It is intended that the new standards will allow a user to express a preference for how their data is collected for tracking purposes and alert users as to whether a website honours their preferences or not.

The documents have been developed by a working group within W3C which includes representatives of Apple, Facebook, Google, IBM, Microsoft and Yahoo.

W3C is hopeful that the standards will be in operation in 2012.

The BSA recently received an anonymous tip-off that a York-based company was using unlicensed software and, after reaching an agreement with the company, handed them a £29,000 bill to cover licences and costs. The BSA has previously targeted Birmingham and now plans to audit 1,500 companies in Yorkshire. The BSA estimates that it received fines and fees of £2.2 million in the UK in 2010.

The parties have each interpreted the ruling differently. IPCom hopes to have 3G Nokia phones banned from the UK unless Nokia agrees to enter a licensing agreement and pay licensing fees relating to the patent. However, whilst the High Court did not specify which Nokia phones infringed the patent, the ruling did refer to phones using alternative software to the patent. Nokia argues that its current 3G phone offerings all use this alternative software, and that any infringement occurred only in older versions –as such, Nokia believes that no ban or injunction preventing the sale of those products in the UK can take place.

• Continued push for a single European Union patent system.
• Modernisation of the European Community Trade Mark system. This would include speeding up the registration procedure and increasing certainty over what constitutes a registrable trade mark.
• Creating a comprehensive framework for copyright in the digital single market. That would include multi-territorial collective management of copyright so that there would be online copyright licensing. There would also be a consultation on user-generated content to see if there should be more freedom for amateur producers of non-commercial film to be exempt when incorporating other copyright works. In addition, the Commission said it would propose a Directive on permitted uses of orphan works, and it actually proposed the Directive this at the same time as the strategy document.
• Replacement of the Customs Regulation to strengthen enforcement of intellectual property rights. As with the orphan works proposal, this was also introduced at the same time as the publication of the strategy.

For more on the strategy, click here: http://ec.europa.eu/commission_2010-2014/barnier/headlines/news/2011/05/20110524_en.htm.

• Creation of a Digital Copyright Exchange. This would be a centralised digital copyright works marketplace where licences to copyright content could be readily bought and sold, akin to a copyright shop. This would extend what currently happens with through music collections agencies such as PRS. The aim is to have this implemented by the end of 2012. In addition, the UK should support the European Commission’s proposals to establish a framework for cross-border licensing.
• Introduction of legislation to permit use of orphan works – copyright works where the rights owner has not been ascertained. The European Commission has also come up with similar plans recently.
• Allowing wider exceptions for lawful copying, such as to include format shifting between a laptop and mp3 player, which is still unlawful. This may also include copyright exceptions for non-commercial research, such as digital copying of medical journals for computerised analysis in research. Parody and library archiving would also be exceptions to copyright. The exceptions would be enshrined in law and non-excludable by contracting out by agreement between the parties. There is no place in the report for anything as extensive as the “fair use” exception along the lines that US law has, as that would not be compatible with European Union law.
• Increasing the Intellectual Property Office’s ability to give legally binding opinions on changes to intellectual property law in response to economic or technological changes.
• A careful look at the enforcement of intellectual property rights. The Government should look not just to enforcement but also education, growing legitimate markets and modernising copyright law. Other countries’ experiences should be considered when the Digital Economy Act starts to become operational in 2012.
• Try to remove patent thickets that stifle innovation. Thickets arise where there are overlapping patent claims by multiple applicants, resulting in delays and extra costs in innovation. This should involve cutting backlogs in patent applications. There should also be a disincentive – perhaps through cost of additional fees for patent renewals – to discourage patents that do not add much value. Computer-related patent rules also need to be clearer and stricter to avoid patents being granted for non-technical inventions or business methods.
• Investigate whether the system of protection for designs should be made clearer. The Intellectual Property Office should conduct an assessment based on evidence within the next 12 months to consider the relationship between design rights and innovation.

It now remains to be seen what the Government will do in terms of implementation of the recommendations within the report. There have been other intellectual property reviews previously – most notably the Gowers Review – which were not then followed-up significantly.

The High Court dismissed Southwark’s claim. The framework agreement and the order had to be read together, so the reference to the Orchard software being of satisfactory quality had to be read in conjunction with the warranty in the order. The software conformed to the standard set out in the order. The judge said that satisfactory quality should be interpreted in that light rather than given the meaning under the Sale of Goods Act. It was clear from the wording in the contract that no statutory terms (including fitness for purpose or satisfactory quality) would be implied. The judge added that, in any event, the Sale of Goods Act would not apply in this case because there was no sale of any goods, as the contract made clear that there was no transfer of property in the software as the software was licensed rather than sold and on termination of the agreement all copies had to be returned or destroyed.

Atos failed to fully understand the complexity of De Beers’ requirements, resulting in significant delays to the project, but this was due, in part, to De Beers’ inability to finalise the scope of the project. There was misunderstanding on both sides and the project did not progress as well as had been hoped. As a result of the delays, De Beers decided to withhold payment of an interim invoice.

In response, Atos Origin refused to continue work on the project unless the contract was renegotiated, as it believed that the project had altered substantially in cost, specification and deadline. Atos Origin demanded that the contract be renegotiated to reflect the change in scope. Although negotiations took place, a variation to the original agreement could not be agreed and no further work took place.

Both parties claimed that the other had repudiated the agreement, breaching its terms by indicating that they no longer wished to be bound by it.

The High Court ruled that both parties had contributed to the failure of the contract. De Beers had not had a right to withhold payment of the interim invoice, but that non-payment did not amount to a repudiatory breach. However, in stopping its performance of its obligations under the contract, Atos Origin had committed a deliberate and wrongful breach of contract, which amounted to a wrongful repudiation of the agreement.

The High Court noted that Atos Origin did actually have a right under the contract to suspend work whilst waiting for De Beers’ payment, but the way in which Atos Origin communicated the threat to suspend services was an indication that Atos Origin was not willing to continue on the terms of the existing agreement, and would only proceed on their own terms.

The High Court ruled that De Beers was entitled to recover £4.4 million to cover the cost of modifying its old software system and purchasing a replacement system, less costs it would have incurred had Atos Origin not terminated the contract, totalling nearly £3 million. As such, Atos Origin was liable to pay De Beers some £1.4 million in damages, not including any claims for interest.

Simon Weinberg, a solicitor at Matthew Arnold & Baldwin LLP and assistant editor of Upload-IT, comments: “This case shows how important it is to be realistic and to have clear intentions in negotiations over an IT contract, together with commercial sensitivity in any subsequent renegotiation or variation. Suppliers must understand their customers’ requirements and ensure that they have the necessary expertise to fulfill their obligations under any agreement they enter into. At the same time, customers must limit the risk they expose themselves to, making sure that they participate in their project and that they are doing as much as possible to prevent the failure of the project.

“Here the High Court ascribed blame to both parties, and could so easily have ruled that no damages were payable. Business-critical IT contracts are essential to any business and can be expensive. It makes sense to negotiate them properly and to ensure the parties’ expectations are properly reflected in a clear written contract.”

The console-owner/hacker battle continues…

The EC’s decision shows that there were serious competition concerns in relation to the merger, in particular with regards to the potential bundling of CPUs from Intel with the security products produced by McAfee, if such bundling did not allow for interoperability of the McAfee security products with the CPUs manufactured by Intel’s competitors and vice versa.

As a result, the EC gave its conditional approval to the acquisition under the EC Merger Regulation, the conditions being that such interoperability be possible and all necessary information for interoperability be made available to Intel’s, and McAfee’s, competitors.

The ECJ has ruled that, under the European Union’s Software Directive, there is no software copyright in the graphical user interface (a ‘GUI’). Software copyright protects just the underlying code. However, it said that there could be copyright protection for the GUI under the EU’s Information Society Directive if the GUI amounted to the author’s own intellectual creation.

This case gave the expected result that there is no software copyright in GUIs. However, the fact that a GUI may be protectable by copyright gives cause for concern for anyone who wants to copy the way a user interacts with a software program on a screen. The ECJ has been asked to give another ruling on copyright protection for programming languages, interfaces and functionality in the case of SAS v World Programming in the next few months, so it will be interesting to see what the ECJ says in that case.

The Commission had called for tenders to update its machine translating systems. Unfortunately, in so doing, it was stepping all over Systran’s copyright and know-how. Although the terms of the earlier contract between the Commission and Systran had not been clear, the Commission was still infringing the intellectual property rights. The fine represented €7m for the fees which Systran would have charged the Commission for permission to use its intellectual property rights, and a further €5m for the other effects on Systran’s turnover.

The jury’s verdict can be found at http://www.cand.uscourts.gov/CAND/Judges.nsf/b75c9d2875ba29bf88256d480060b70f/e2d2869a39a60704882577e50002cd0a/$FILE/oracle-v-sapag.pdf.

Another aspect of the Commission’s review involves looking at standardising the availability of online content across the European Union. The Commission is concerned that the EU market is fragmented, expensive, difficult and primitive, meaning that everyone suffers – from rights holders through to consumers. There is a particularly concern that users can buy music from any physical shop, but are restricted from purchasing music online from different jurisdictions. Removing the barriers would allow more trade and more user choice, the Commission says.

The High Court ruled that S had been in breach of contract and KDP had been right to terminate. The Court of Appeal has now upheld that decision. The agreement had required a full and accurate report every six months, including details of who the end users were, the contracts with them, the pricing and costs deductions. Those reports had not been provided. KDP had acted properly in provide notice of the breach, the required cure and the intention to terminate if not properly cured. KDP then properly terminated when there had not been an adequate correction after that first letter.

Mark Weston, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘This case shows the importance of getting the process right when a party is aggrieved about the other party’s failure to perform its obligations under the contract. Too often, businesses either terminate too early without proper warning, or don’t terminate when they should, or don’t set up their exercise of their right to terminate properly. If they get that process wrong, they could face a claim for their own breach of contract. That’s what S sought to argue here. However, because KDP had involved its lawyer at the earliest stage and followed their advice, it got the result it wanted.’

The need for software escrow agreements has increased dramatically with the economic downturn, with many software suppliers experiencing financial difficulties and failing to fulfill their support obligations and having increased risk of going out of business. The lack of a software escrow agreement in such a situation could leave the software licensee in serious difficulty if they want to keep using their business-critical software.

The Tribunal accepted that there would likely to be a prejudice to the DWP’s commercial interests. However, it did not accept that it would actually prejudice. There was no evidence to show that it was more probable than not that there would be prejudice – this was mere speculation. The Tribunal did agree to keep one bit secret, though – Atos’s financial model should have special protection as a trade secret. The Tribunal said that for trade secrets, there was a stronger public interest in keeping it secret because of the investment involved, and competitors would get an unfair advantage. However, for liability caps, benchmarking and the rest of the contract, the public interest favoured an order for disclosure so that the public could know the service levels, performance measures, costs and risks.

Playables claimed that it did not know that the devices would be used for an unlawful purpose, as it could be used for legitimate home-made games. However, the High Court rejected that argument. Two provisions of the Copyright Designs and Patents Act 1988 (as amended) were broken. One involved strict liability, meaning that knowledge was not needed – just the fact that the device circumvented the security measures; the mere fact that the device could be used for a lawful purpose was not a defence. Another section of the Act – this time involving knowledge – was also broken because Playables had reason to believe that the device would be used to make infringing copies of the games. The use of R4 cards (which the device contained) was very well known to be used for video game piracy. Given 165,000 devices had been seized and the relatively minor proportion of the market represented by lawful use, it was not credible to argue that Playables did not know the devices would be used for infringing copies. Accordingly, Playables had no realistic prospect of success and Nintendo’s summary judgment application was granted.

The action comes following the European Commission’s other high-profile competition law battles with major IT and Internet players such as Microsoft, Google, Intel and DRAM chip suppliers.

The High Court ruled that WPL had copied one of SAS’s programming manuals. However, in respect of the other allegations, the Court was of the view that there was no copyright infringement, based on previous English court cases of easyJet v Navitaire and Nova v Mazooma. However, it decided to make a reference to the European Court of Justice for a definitive ruling on the European Union’s position on the extent of copyright protection in software programming language, programming interfaces and the functionality within the software.

Mark Weston, a Partner at Matthew Arnold & Baldwin, comments: ‘There have now been three big cases on the extent to which the functionality within software can be copied if the underlying source code has not been copied. In order to enable players within the software industry to properly compete with each other, it is to be hoped that the European Court of Justice will confirm the English courts’ understanding of the law in this area. A definitive ruling on these issues will take several months. Until then, the current position set out in the English cases remains good law, although there will now follow a period of uncertainty as to what may happen next.’

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.’