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

In June 1997, the Federal Court of Australia handed down a decision in the matter of Powerflex Pty Ltd v Data Access Corporation which changes the direction of copyright protection in Australia. This matter had been appealed from an earlier decision that certain words such as “save”, “display” and “find” were computer programs, and therefore copyright works, belonging to Data Access. The new decision has held that these words do not in themselves or collectively constitute computer programs. The new decision brings Australian case law more into line with recent US rulings such as Lotus Development Corporation v Borland International Inc in which the US Supreme Court refused to grant copyright protection to Lotus 1-2-3's spreadsheet command menu. It was also found that the macros contained in the Powerflex program did not infringe the copyright in the Data Access program. However, a Huffman table in the Powerflex program was found to have infringed Data Access' copyright. This case should not be construed as removing the possibility of a “look and feel” claim, however, it does make such a claim more difficult to maintain. In summary, Interoperability appears to have now been given the judicial nod in Australia. Clients who have sought legal advice with respect to copyright matters should now seek an updated opinion to ensure they take full advantage of this decision.

In the US case of Hill & Hill v Gateway 2000 Inc, the Hills ordered a computer from Gateway 2000 by telephone. The computer was delivered together with a contract of sale, which asserted that unless the computer was returned within 30 days, would govern the sale transaction and use of the computer. The Hills attempted to dismiss the ProCD Inc v Zeidenberg case on the basis that the ProCD shrinkwrap licence finding would only be relevant to software. The Court found that the Hills would have been aware that the sale was subject to various terms and had they wished to clarify these terms, they could have requested a copy prior to the sale or researched the terms from public sources rather than examining the documents upon delivery of the goods. The terms of the sale were held to be binding upon the Hills. When purchasing any goods, the terms and conditions of sale should be read as soon as possible so that you are aware of your contractual remedies against the supplier should the product be faulty or unsuitable for your intended use. In Australia a supplier cannot be forced to refund the purchase price if you have simply changed your mind about purchasing the product.

Once litigation is commenced, it is possible for the scope of the litigation to be increased as seen in Microsoft Corporation and Anor v Adelong Electronics Pty Ltd. Adelong had been caught by Microsoft conducting a sale of a PC which had been loaded with unlicensed copies of various Microsoft products. Adelong were subsequently sued for breach of the Trade Practices Act. Microsoft sought to extend the scope of the litigation to include not only the “trap purchase” but other unspecified transactions. By increasing the scope of the litigation, Microsoft would be able to examine business records relating to other PC sales to determine if other instances of supplying unlicensed software had occurred. Adelong appealed against the Court's decision to allow the scope of litigation to be increased but were unsuccessful. When conducting litigation, in some cases the parties are entitled to Discovery, the supply of a list of all relevant documents and in some cases copies of these documents. In the conduct of a commercial transaction, always bear in mind the paper trail you have created, the documents which are in your and other parties' possession and their possible effect on a dispute which may arise.

In the UK matter of Cox v Riley, Cox appealed an earlier decision that deletion of a computer program from a circuit card of a computerised saw constituted criminal damage. The earlier decision was based upon the fact that time, labour and expense would be expended in restoring the computer program to the circuit card. The appeal was dismissed with the Court rejecting the arguments that the computer program did not exist in tangible form and therefore was not property and that by erasing the computer program, the circuit card itself had not been damaged. The deletion of computer programs and records can result in an expensive process to restore and re-enter data if adequate backup procedures are not followed. The party responsible for the deletion of the records may find themselves liable for the costs involved in recovering the deleted information and possibly criminal action.

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.

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.

The dangers of using content from another party's web site without their permission is under examination in the US case of Ticketmaster Corporation v Microsoft Corporation. Microsoft linked one of its web sites ( http://seattle.sidewalk.com) to the Ticketmaster web site (http://www.ticketmaster.com). Ticketmaster claims that this linking enhanced the value of Microsoft's web site while diminishing the value of Ticket master's web site by, amongst other things: depriving Ticketmaster of advertising opportunities; publishing erroneous information; and diluting the value of Ticketmaster's relationship with MasterCard, a major advertiser. Ticketmaster is pressing claims for, amongst others, trade mark infringement and misleading and deceptive conduct. This decision will be interesting to watch. Even if your intentions are to bring more business to the linked site, you should obtain permission before establishing a link to the site to avoid possible legal ramifications.