COPYRIGHT AND OTHER INTELLECTUAL PROPERTY PROTECTION FOR THE INFORMATION TECHNOLOGY INDUSTRY

The protection of intellectual property arising from information technology development projects is often a difficult legal problem as the laws governing these rights were not always designed with swift technological advances in mind. The globalisation of the IT market place imposes several issues including the choice of legal jurisdiction and the increased probability of intellectual property infringement.

Copyright is often seen as a impediment to further development of a product and there are those who argue for a free market approach. On the other hand, there are developers who appreciate the financial rewards which may follow, after years of development and which are protected by laws governing copyright and other forms of intellectual property.

The main legal decision in Australia which effects the future direction of copyright laws in this country is the recent decision in the long running matter of Powerflex Services Pty Ltd v Data Access Corporation.

The Federal Court of Australia ruled in June 1997 that copyright does not subsist in an individual word within a computer program.

The background to this case involves Dr David Bennett who created a database application, PFXplus, which was highly compatible with an existing application, Dataflex. Not surprisingly, both applications were similar in functionality. PFXplus, used the some commands, file structures, function keys and macros which were used in Dataflex so users who were familiar with Dataflex would be able to easily move to using PFXplus.

Dataflex had 296 words used in its programming language and 192 of these words were used in PFXplus to perform the similar functions. However, the source code was completely in each program. The Court was asked to decide whether the commands in the Dataflex program could be given copyright protection. If the commands were held to be copyrightable, their use in other applications, without permission, would have constituted a copyright infringement.

The Court decided that copyright did not subsist in the commands. This decision brings Australian case law into line with that in other countries. For developers, the significance is that the development of products which are compatible with existing applications, or that use similar commands, will not give rise to a claim of copyright infringement.

This decision arose from an appeal of an earlier decision by the Court which found that a single word within a programming language could be a computer program and so be protected by copyright laws. It was widely considered that the outcome of this decision would be that any application, which was developed to be compatible with another, would result in a copyright infringement. This would have caused a huge problem for the concept of software interoperability. The Federal Court did not overturn the findings of the lower Court in relation to the existence of copyright in a Huffman compression table. To read the encoded data, it is necessary to have the same string of coding with which the data was originally compressed. The compression table contained in PFXplus was indistinguishable from that used by Dataflex. The Court found that the compression table fell within the definition of literary work as a table or compilation and that there had been sufficient skill, judgment and labour involved in the creation of the table for it to have copyright protection. The Court rejected claims that the table comprised a method of operation.

Having regard to the fact that there is only one method which may be used in order for the applications to have compatible data compression, the Court's decision gives the Dataflex application a monopoly over that particular method of compression. This aspect of the Court's judgment has ramifications to consider with respect to the possibilities for development of interoperable applications.

In an appeal of the decision in Sega Enterprises Ltd & Anor v Galaxy Electronics Pty Ltd & Anor, Galaxy unsuccessfully argued that the images created by the computer programs in a video game cartridge did not fall under the definition in the Copyright Act of “cinematographic film”. The court reaffirmed that video games cartridges have additional copyright protection for the actual “moving” images produced on the screen in addition to the copyright and integrated circuit layout protection already available for the programming code and screen layout. The court found that Galaxy had illegally imported into Australia, a cinematographic film of which Sega was the copyright owner. This decision means that Sega is entitled to prevent a party importing into Australia its computer game cartridges.

The calculation of damages in a copyright infringement case can be a complex matter and will depend amongst other things upon the flagrancy of the infringement and the profits made from the infringing copies. As seen in Autodesk Australia Pty Ltd and Anor v Cheung in which Cheung was found to have infringed Autodesk's copyright by supplying, without fee, unlicensed copies of Autodesk software to hardware purchasers. In was concluded that Cheung supplied the unlicensed copies whilst being fully aware of the fact that such supply constituted an infringement of copyright and that the supply would be commercially detrimental to Autodesk. Cheung's infringement was found to be flagrant and as a result additional damages were awarded to Autodesk. The fact that Cheung had given the unlicensed software to hardware purchasers as a “gift” and had made no direct profit from the software did not prevent the Court from calculating an appropriate award for damages caused by lost potential sales of software by Autodesk and the depreciation in the value of Autodesk's copyright, amongst other things. The end result was that Cheung had to pay a combined sum of $50,000 plus legal costs to the two applicants. If you are correctly accused of infringing another party's copyright, continued infringement after that time may be found by the Court as being flagrant and could result in an additional award for damages being made against you.

In the US Court of Appeal matter of Softel Inc v Dragon Medical and Scientific Communications Inc and Ors, Softel successfully appealed an earlier decision which denied copyright existed in a software program due to the fact that its component computer code elements were not copyrightable. The Court of Appeal found that together external files structures, English language commands, functional modules and a hierarchical series of menus with a touch screen may be capable of being copyright works. This is an interesting decision for software developers, which must be considered in any possible infringement claim. When developing software, it is important to distinguish between devising an alternative method to performing a certain task from “evolving” an existing method when determining your exposure to a claim for copyright infringement. It is always important to obtain professional advice if you have any doubt.

A US matter of A & A Records Inc and Ors v Internet Site known as Fresh Kutz and Anor saw various record companies applying for relief from the Court including an order that the Internet Service Provider which hosts the web site prevent any access to the site to prevent further copyright infringement and to prevent destruction of evidence. Fresh Kutz provided illegal copies of musical recordings at no fee and enabled visitors to the site to download and create further illegal copies. Despite the fact that the owner of the web site was unknown at the time, the Court ordered, amongst other things, that the owner of the web site or its agents from continuing to infringe the record companies' copyright, from destroying any records and computer files connected to the web site, and to block access to all infringing copies of musical recordings on the web site. Web site owners should expect that Courts around the globe will continue to order heavy penalties for activities on web sites which involve infringement of copyright. The potential orders against web site owners for the loss and damage caused by their actions should be borne in mind when adding any material to your web site which may potentially be infringing someone else's copyright.

In the May 1997 US District Court case Hyperlaw Inc v West Publishing Company, West maintained that it had copyright protection with respect to Judges' opinions from the US Supreme Court and the Circuit Courts of Appeals which it publishes in law reports. Hyperlaw produces a CD-ROM products which contain Supreme Court and Circuit Court of Appeals decisions. Hyperlaw uses West's publications to scan cases which were heard before Hyperlaw began collecting Court decisions and West claimed that this action constituted an infringement of copyright. It was found that since the authors of the opinions were Judges and the fact that Hyperlaw did not copy the headnotes or numbering system which are added by West, Hyperlaw's actions did not constitute an infringement of copyright. If you produce a product which is a collation of works authored by other parties, in the absence of an exclusive licence to use those works, you cannot prevent another party using the works in a similar collation if the authors of the works consent to such use.

Issued which should be considered in the development of legislative changes in the area of copyright protection for software include:

• Does loading of software into a computer's RAM amount to making a reproduction
• Whether decompilation should be allowed to achieve interoperability or error correction
• Parallel importation of computer programs
• Database protection
• Multimedia works
• Uniform tests for similarities between applications

It is necessary to ensure that we strike the correct balance between rewarding innovation with the grant of exclusive rights and allowing the dissemination and use of the innovation in future developments.

Trade marks are becoming more significant in the IT industry, particularly in their use on the Internet in domain names.

Recent Cases

Due to the massive proliferation of web sites, there is a great deal of competition to attract potential visitors to your site in preference to numerous other sites which may have similar information. One method used is to include “meta tags” on the pages, which constitute your site. Meta tags are a form of computer code, which is analysed by the search engines, but not visible in the normal viewing layout of a web site page. Commonly, meta tags will include subject headings which you anticipate people will use to find the information contained on your web site. An American law firm, Oppedahl & Larson, which offers information in regard to intellectual property law on its web site, issued a complaint against a number of domain name owners who used the words “Oppedahl” and “Larson” in their meta tags. Effectively the domain name owners were profiting from the reputation of Oppedahl & Larson and diverting visitors who were attempting to visit the Oppedahl & Larson site to their own sites instead. Although the Internet is often described as being a lawless jurisdiction, the laws which protect intellectual property still apply. The damages which may potentially flow from an infringement of intellectual property on the Internet may be far greater than other forms of infringement because the potential audience is so large and the speed of transmission so great. Tempting though it may be to profit from other successful web sites, care should be taken not to infringe copyright, trade marks or other intellectual property.

Australia has a form of copyright style protection for the circuit layouts. The legislation has not commonly been the subject of litigation, however it cannot be ignored. The Circuit Layouts Act 1989 can allow the parallel importation of computer programs stored on protected circuits.

The Circuit Layouts Act 1989 (Cth) provides a period of protection for ten years from when the layout was first made which prevents other parties from copying the layout; making an integrated circuit in accordance with the layout or a copy of the layout; or exploiting the layout commercially in Australia without permission from the owner of the rights in the circuit layout. In the matter of Nintendo Co Ltd v Centronics Systems Pty Ltd, which was complicated by the fact that the items containing the infringing copies of the Nintendo circuit were imported into Australia at approximately the same time that the Act commenced, the decision of the Court was appealed twice. The High Court found that the goods imported by Centronics and sold in Australia contained copies of circuit layout owned by Nintendo. Centronics were ordered to pay the costs of the original hearing and first appeal; were restrained from commercially dealing with the layout; were ordered to deliver to Nintendo the chips containing the copied layout; and to account for and pay to Nintendo all profits made from the sale of the copied layout. Although there is provision in the Act to exempt from litigation transactions involving goods which contain infringing an copy of a layout when the party dealing with these goods could not reasonably be expected to know that they contained an infringing layout, should the party involved be made aware of the existence of the infringing layout, all subsequent transactions involving the goods will be seen as infringing the layout owner's rights.

In 1997, over 200 software patents are being issued every week in the US. On these calculations, the US Patent Office will issue as many patents this year as were issued in the period of the late 1960s to early 1990s. Patent litigation is on the increase both as source of revenue and tactical manoeuvre. Major suppliers, including IBM, Microsoft, Xerox, Adobe, Autodesk, Computer Associates, Informix, Intuit, Oracle, Sequent Computers, Novell, have been parties to such litigation amongst themselves and other parties. When considering supplying unlimited intellectual property warranties it is important to either qualify the scope of the warranty and/or conduct very thorough searches of the patent offices of the states in which such indemnities are offered. The fact that you wrote the software or created other intellectual property from first principles will not prevent an injunction being granted to prevent you licensing your product as independent development is no defence to a patent infringement claim. Your responsibility for such an indemnity may be enormous. For this reason many multinational suppliers currently refuse to supply unlimited indemnities.

STEVE WHITE
WHITE SW COMPUTER LAW
NOVEMBER 1997

www.computerlaw.com.au

© White SW Computer Law 1997

This article is a guide only and should not be used as a substitute for proper legal advice, readers should make their own enquiries and seek appropriate legal advice.