White SW Computer Law Intellectual Property, Information Technology & Telecommunications Newsletter - December 1997

In Admar Computers Pty Ltd v Ezy Systems Pty Ltd & Ors the Federal Court was asked to examine evidence relating to a pseudocode analysis of software on the question of copyright infringement and breach of confidentiality in circumstances where an employee left his employer and published a similar and competing product to this former employer. Psuedocode anaysis is the examination of source code's logic flow. In this case the pseudocode analysis produced evidence that the Ezy system was based upon the Admar system. However, the Court noted that copyright is intended to grant protection to the expression of an idea, not the idea itself. Since the source code of the Admar software program had not been reproduced by Ezy, there was found to be no infringement of copyright. However, the pseudocode analysis evidence was found to be relevant in the claim for breach of confidence in that it suggested use of Admar's source code by a former employee in developing the Ezy source code. This matter is an important development in the portability of ideas by employees and contractors from one workplace to another. You should carefully examine the terms of your confidentiality agreement before re-using any ideas or materials in a new workplace.

In March 1997, in the matter of Lockheed Martin Corporation v Network Solutions Inc, NSI made an application to the Court to dismiss Lockheed's claim against it. Lockheed had claimed that NSI contributed to trade mark infringement, unfair competition and trade mark dilution by allowing parties other than Lockheed to register domain names which were identical or similar to Lockheed's registered trade mark “Skunkworks”. The Court found that NSI and the parties who had registered the domain names were all potentially liable, however, it has not yet made a decision in relation to whether or not NSI's is liable under the suit. In Australia, we have not seen the same level of litigation in relation to domain names as has occurred in the US. However, with the new levels of domain names being proposed to be released, such litigation can be expected to increase.

In November 1997, the UK decision in British Telecommunications and Ors v One in a Million and Ors followed the US decisions in finding that the registration of famous trade marks as domain names and their use would constitute a trade mark infringement even though the marks were not used by the defendant. The relevant marks were marksandspencer.com; marksandspencer.com.uk; j-sainsbury.com; sainsburys.com; ladbrokes.com; virgin.org, bt.org; and cellnet.net. The Court ordered that One in a Million be restrained from the use or sale of the domain names in question and be compelled to assign the domain names to the plaintiffs, the trade mark owners. Even though the domain names in question included a number of non-UK names (in that they did not end in the .uk suffix) the UK Court found that actions involving these names occuring in the UK fell within its jurisdiction. If you register a domain name in a foreign country, you cannot consider yourself immune from legal action within your own jurisdiction, if that domain name infringes a trade mark.

In the matter of Apscore International Pty Ltd v Grand Canyon Technologies Pty Ltd & Ors, Apscore engaged James Anthony Consulting (JAC), a UK firm to convert its CUEBIC application for use with additional operating systems. After some months, the project was discontinued by Apscore due to funding difficulties. After some negotiations, Apscore executed an assignment agreement, which was expressly subject to the laws of England and which assigned the intellectual property rights in the revised application (JBASE) to JAC. The Australian Court found that there was a claim under the Assignment agreement executed by Apscore and JAC but due to the fact that the agreement was expressly stated to be subject to English laws and amongst other things, the fact that the development of the software had occurred in the UK, Apscore and GCT were not able to seek relief from the Australian Courts. With international contracts becoming more common, it is important to consider the additional expense of conducting litigation in a foreign jurisdiction. Unless there is some benefit to be gained from submitting to a foreign jurisdiction, for example more favourable intellectual property protection, you should require that any agreement, which you sign, be expressed as being subject to Australian laws.

When the Court examines an alleged case of copyright infringement, it will usually be asked to determine whether the infringement was flagrant or not. In the matter of Microsoft Corporation and Anor v Atifo Pty Ltd and Ors Atifo was found to have supplied unlicensed copies of various Microsoft programs with computer hardware purchases. Atifo and its representatives did not deny claims made by Microsoft that Atifo and its representatives had openly acknowledged to customers that their activities were illegal; were found to have altered records such as copy invoices; and failed to disclose or produce documents which were relevant to the proceedings. The Court found that the copyright infringement was flagrant and awarded an extra $20,000 in damages, in addition to the $24,000 awarded in lieu of licensing fees. The awards made by the Courts for flagrant infringements are often a substantial proportion of the total damages order. It is important to bear in mind that internal documents such as e-mail or memos may provide evidence of knowledge of activities that constituted a copyright infringement. It is a disgruntled ex-employee or a dissatisfied customer that reports copyright infringement and they may have copies of documents in their possession as evidence of such copyright infringement.

In the matter of The Athlete's Foot Australia Pty Ltd (AF)v Divergent Technologies Pty Ltd (DT), AF, which was seeking damages from DT for breach of contract and for breaches of the Trade Practices Act on the basis that the hardware and software supplied to it by DT was not capable of meeting AF's requirements, proposed to obtain expert evidence in relation to a computer system. The expert witness claimed that he would require access to the source code for the software to properly analyse it and prepare his report. In order to analyse the source code, the expert witness would be required to use an access control device which AF claimed would costs over $10,000 to obtain. DT possessed the access control device required but claimed that it would be costly for it to have to provided same to AF as it was being used in the development of other large projects. Despite the fact that Judge Tamberlin acknowledged the rules in relation to evidence were not worded with today's technology in mind and did not empower him to make an appropriate order, his Honour made an order pursuant to the Court's general powers under the Federal Court Act which required that DT supply the source code and the device required to properly analyse the source code. The Court, where allowed, will be likely to make orders in relation to evidence, which assists in the production of evidence to the Court to assist it in deciding the matter.

One of the latest US decisions with respect to legal jurisdiction and the Internet, Cybersell Inc v Cybersell Inc and Ors suggests that if your Web Site acts only as a means of advertising or as a source of information, the US Courts will not be able to assert jurisdiction. If, however, you sell goods and/or services over the Internet, it is possible that a US resident or business could issue legal proceeding in the US against you or your business. To reduce the risk of such litigation, you should consider having a requirement that the potential customer submits to the laws of Australia governing the agreement before the transaction has been completed.

In the US matter of Marobie-FL Inc v National Association of Fire Equipment Distributors ("NAFED") and Anor, Marobie sued NAFED for, amongst other things, copyright infringement. NAFED's web site contained clip art which was available to download. Marobie claimed to be the copyright owner for this clip art. NAFED had obtained the clip art from an unknown source to whom blank floppy disks were provided. The floppy disks were returned with the clip art files loaded onto them. The Court found that NAFED's actions clearly constituted a copyright infringement. Marobie also sued the internet service provider that hosted NAFED's web site, but the Court found there was no liability on the part of the service provider for providing the means to copy, distribute or display the copied clip art. This decision is particularly favourable to internet service providers. Much legal discussion has occurred regarding the liability of ISPs for the actions of their customers and earlier decisions have suggested that they would be held responsible for contributing to actions such as copyright infringement by their customers.

Facts in themselves cannot be protected by copyright, however, an arrangement of facts may be deemed to be sufficiently creative and original to justify copyright protection. A new and creative collection of data will not in itself be protected by copyright. In the US case of Warren Publishing Inc v Microdos Data Corp, Microdos appealed an earlier decision which found that its software package which contained information regarding US cable system operators infringed the copyright which subsists in Warren's printed directory which contains similar information. Microdos was successful in its appeal in that it obtained a split but majority decision which found that no copyright protection should have been given to Warren's directory as it is merely a collection of information which is available to the public which is arranged in a way that is not creative or original. It is interesting to note that the dissenting Judges found that Warren's selection of data from a wider source of information was original, creative and useful and concluded by stating that the US laws provide copyright protection for compilations which should not be narrowed by the Courts without a change to the laws concerned. It would appear that if your compilation of facts requires a process of selection from a wider pool of facts, the Courts may be more likely to grant copyright protection to the compilation.

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.