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

Does your software development agreement define in adequate detail the dates for delivery and at what development stage the product is to be delivered?

Unless there is a clear written agreement, the customer and developer can have different interpretations of delivery dates and the development timetable. Does your agreement draw attention to the fact that it cannot be warranted that the software is “bug free”. Some customers with little exposure to software development can expect to receive a perfect product on the delivery date. In a UK case, Virgin Interactive Entertainment (Europe) Ltd v Bluewall Ltd & Ors, Virgin agreed to a variation of the delivery date, but there was no written agreement prepared which outlined what was to be delivered and when under the revised agreement. Bluewall was developing two computer games which they were unable to deliver on the delivery date. They claimed that Virgin had agreed that the revised delivery dates were flexible and that the product was to be delivered at an Alpha version stage. Both these points were refuted by Virgin. The Court found in favour of the customer. One wonders if the developer had a limitation of liability clause in the contact in order to limit the damages payable in such a dispute.

Warranties and Limitation of Liability

It is human nature to agree to just about anything if you are desperate to win that new contract you have worked so hard to get. You may have complete confidence in your abilities as a method of self insurance but what about those unforeseen problems that your testing procedures did not find or those issues which you simply did not consider. There has been a lot of discussion about the “year 2000 bug” but have you checked your contractual documentation to see whether you would be liable to fix such a fault. Does your software maintenance agreement exclude that problem from what will be normally included in the maintenance fee. As a customer dealing with a software developer, have you considered the liability of the developer for loss and damage caused by faults in the software. Is your developer insured? If the developer is not required to have insurance, you may experience difficulty enforcing an award for damages. Damages can arise from unusual events such as the failure of the Art Centre's prop control system which released a 800 kg backdrop being used for the opera Aida at the wrong time - how much is an Opera Singer worth?, or the breach of the Scotland Yard telephone system which allowed $1.29 million worth of international calls to be made by hackers, or the $48.06 million accounting error allegedly made by software used by Franklins Supermarkets Chain following an upgrade of its computer system. The contract may be important, but could you afford the consequences if the development goes wrong?

Contract negotiations in Cyberspace

We are all familiar with concepts of receiving a written contract and signing it as a method of acceptance, or ordering a product by telephone and paying for it by quoting your credit card number but an increasing number of contracts are involving electronic data interchange in the negotiation and/or acceptance stages. When there is little or no person to person contact, it is easy for misunderstandings to arise as to what is being offered by a contract. The speed at which documents can be altered and delivered by way of electronic negotiations can result in the contract being rushed to completion. Consider also where the contract is deemed to have been made and what laws will be governing the parties. It is important to treat contractual negotiations with care, regardless of the mode of delivery of documentation, as once a contract is accepted, it may be difficult to escape your obligations.

If you are importing goods into Australia, you should take undertake an investigation to determine whether the items being imported would have infringed an Australian copyright, had they been manufactured in Australia by the importer. In Polygram Records v Raben Footware, the Federal Court found that the directors of a company importing CD recordings of musical performances knew from previous experience that copyright exists in a sound recording. Despite the fact that they imported the CDs from a well known company and that it was claimed that Raben were unaware that this company did not hold a licence to distribute the sound recordings in Australia, it was found that Raben had flagrantly infringed Polygram's copyright. Conversion damages of $5 per CD, $15,000 additional damages and costs were awarded against Raben. Do you have a company policy to guard against authorising imports which infringe copyright in Australia?

Do you use music in developing multimedia products or advertising?

If you record an adaptation of an existing work, you may be subject to, amongst other things, s55(2) of the copyright act which states that the adaptation must not debase the original work. The Court has taken a fairly liberal interpretation of what would be considered as a work which debases another. In Schott Musik International GMBH & Co & Ors v Colossal Records of Australia Pty Ltd & Ors it was claimed the a “techno” dance adaptation debased the original classical music piece ( “Carmina Burana” ) it was based upon. In his comments, the judge stated that the Courts had to be cautious in judging artistic merit, taste, appreciation and value and so needed to adopt a broad approach in analysing whether an adaptation debased the original work and found that work did not debase the original. When adapting music you should always be careful of a copyright infringement.

Does your computer program produce forms similar to those produced by a similar program?

In Andrew Cash and Co Investments v John Porter & Ors a computer program had been developed to produce the forms required by a pawn broker and to maintain the required records electronically by Andrew Cash & Co's principal, Mr Doyle, a pawn broker. Porter, also a pawn broker, approached Doyle to make preliminary inquiries about the computer program. Having been given a demonstration and an example of the pledge ticket produced, Doyle approached a computer programmer with the view to writing a new program which would produce a similar ticket. Andrew Cash & Co claims that Porter infringed its copyright in the ticket. The question of whether or not there has been a copyright infringement is yet to be decided, however, the Court has ordered that in the interim that Porter be restrained from using his version of the tickets and from authorising the printing of copies of the ticket.

In making this decision, the Court acknowledged that Porter would be inconvenienced. What would you do if your business was “put on hold” until such a time that any such litigation was finalised?

Do you do business on the internet? Beware of foreign laws!

Georgia Tech Lorraine which is the European platform of the American Georgia Institution of Technology is being sued by the French-Defence Association because its home page is only presented in English. A 1994 law requires that public communications such as advertising and restaurant menus must be in French and if they are also translated, it must be into more than one language. It is also required that goods and services be offered in French in addition to any other language used.

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