Infringement of copyright in software
CANTOR FITZGERALD INTERNATIONAL V TRADITION (UK) LTD
Copyright – Infringement – Substantial part – Computer program – Unauthorised loading of entire program – Use of program for testing – Copying of certain part – Whether any part essential for performance was a substantial part – Whether such part represented a substantial part of the skill and labour of the writer – disguise of copy indicating flagrant infringement – Confidential information – Use for testing – Whether employee’s programming technique belonged to employer as trade secret after cessation of employment – Duty of disclosure to new employer of possible copying or breach of confidence – Vicarious liability of employer – Employee’s liability for indemnity.
Practice – Expert witness – Objectivity – Expert not to act as advocate or hold back relevant information.
Copyright, designs and Patents Act 1988, ss.1(1)(a), 3(1)(b), 16(3)(a), 21(3), (4), 97(2).
The plaintiffs and the first and second defendants (Tradition) in an action for infringement of copyright and breach of confidential information were interdealer bond brokers.
The third defendant (Howard) had been the plaintiffs’ managing director. After having been dismissed he sought and obtained employment with Tradition to set up a bond-broking business with himself in charge to compete with the plaintiffs. He recruited the fourth defendant (Harland) who had been working under him for the plaintiffs as a senior programming analyst and head of department, and Harland brought with him two other programmers (Guppy and Gilbert) from the plaintiffs. Other programmers (including Blakey) joined the team shortly afterwards. Within less than three months Tradition had a bond-broking system which worked and which the plaintiffs alleged must have been a copy of their system.
According to Harland, Howard had told him “Don’t forget the floppy” during discussions between them when Howard was seeking engagement with Tradition and wanted Harland (who was still with the plaintiffs) to come with him. Shortly after resigning from the plaintiffs and before joining Tradition, Harland, Guppy and Gilbert had met privately to discuss their future work, when there was a tacit understanding that they would have a copy of the plaintiffs’ system available to them. According to Harland, it was contemplated that they would copy the system that they had written for the plaintiffs, and that they would need to disguise the copying. This was supported by a memorandum found amongst Gilbert’s papers.
The plaintiffs’ code was loaded into Tradition’s computer on the third day of the programmers’ employment, probably by Guppy from a tape already in his possession (as an off-site safety measure). Certain data (the instrument and counterpart data) was missing from this tape; Harland, knowing the password, obtained it by dialling into the plaintiffs’ computer. The programmers used the plaintiffs’ system for reference while writing Tradition’s system and for testing what they had written.
Howard, Harland and the other programmers assured Tradition that there had been no copying, and infringement was denied. However, the plaintiffs found two modules (LIFE.BAS and CLOCK_ACTIVITY.BAS) in Tradition’s code which plainly were copies of modules in the plaintiffs’ code. Tradition, on learning of this, became aware that the programmers had had copies available to them of the entire source code to the plaintiffs’ system while they were writing Tradition’s system. Tradition then admitted that copying had taken place. Tradition’s solicitors interviewed the programmers to obtain admissions as to what had been copied, and the expert instructed by Tradition analysed and compared the plaintiffs’ source code as it had been just before the programmers left and the Tradition code as it was soon after it began to be used for trading purposes.
Surprisingly, only 2 per cent of Tradition’s code was admitted to have been copied from the plaintiffs’ code. In respect of most of the admitted copying, Tradition submitted that it was not a substantial part of the original and therefore did not infringe. Although an additional 1.3 per cent of tradition’s code was identified by the expert as questionable, copying of none of this was admitted. In particular, the module DLI.MAP setting out the central region of storage in Tradition’s system was not admitted to have been copied from the plaintiffs’ module REAL_IMAGE.MAP (both modules having been written by Guppy).
As well as infringement of copyright, the plaintiffs made two distinct claims for breach of confidence. The first related to a technique for effecting inter-process communication embodied in the modules BLIP.BAS and REQ.BAS. The other related to the general use of the plaintiffs’ code.
After the admission by Tradition that copying had taken place, Howard became separately represented. He received a conditional indemnity from Tradition in respect of the costs of his defence, and he sought to rely upon this. Conversely, Tradition sought an indemnity from him in respect of their costs and damages generally, on the ground that he had failed to tell them that he knew the programmers had been able to copy the plaintiffs’ system and that he expected them to do so.
Held, finding that there had been infringement of copyright and breach of confidence arising from some but not all of the acts admitted by the defendants in respect of which the plaintiffs were entitled to relief, but that there had been no copying of anything not admitted to have been copied:
- The loading of the whole of the plaintiffs’ source code into Tradition’s computer was in itself an infringement of copyright (para. 10).
- An expression of thought in a human language (as, for example, an essay, a novel or a poem) differed from a program for a computer written in a programming language. There was a real risk of error in adapting principles developed in the context of literary works addressed to humans and applying them uncritically to literary works whose only purpose was to make a machine operate in a certain manner. Every part of a computer program might be essential to its performance, but it was simplistic to regard every part, however small, as a “substantial part” of the program (paras 74-75).Autodesk Inc. v Dyason  R.P.C.575 at 584-585 (High Court of Australia), criticised.
- It was the function of copyright to protect the relevant skill and labour expended by the author of the work. A copyist infringed if he appropriated a part of the work upon which a substantial part of the author’s skill and labour was expended. The maxim “what is worth copying is worth protecting” was open to the criticism that it proved too much. It was possible that entirely mechanical labour might be saved by copying something produced by entirely mechanical labour, involving no skill, when the only question was whether the entirely mechanical labour which went into the earlier work was relevant labour for the purpose of conferring originality in the copyright sense (paras 76-77).Catnic Components Ltd v Hill & Smith Ltd  183 at 223, CA (per Buckley L.J.), and Interlego AG v Tyco Industries Inc.  R.P.C. 343 at 373-374, PC, applied. Macmillan & Co v Cooper (1923) 93 L.J.P.C. 113, 40 T.L.R. 186, PC, Ladbroke (Football) Ltd v William Hill (Football) Ltd  1 W.L.R. 273,  1 All E.R. 465, HL, and Warwick Film Productions Ltd v Eisinger  1 Ch. 508,  3 All E.R. 367 (Plowman J.), referred to.
- A substantial part of the author’s skill and labour might reside in the plot of novel or play, and to take that plot without taking any part of the particular manner of its expression might be sufficient to amount to copyright infringement. The “architecture” of a computer program (which might be either the overall structure of the system at a high level of abstraction or the allocation of functions between various programs) was analogous to a plot and was capable of protection if a substantial part of the programmer’s skill, labour and judgment had gone into it (para. 77).Harman Pictures NV v. Osborne  1 W.L.R 723,  2 All E.R 324, Rees v. Melville [1911-16] MacG. Cop. Cas 168 (C A per Swinfen Eady L.J), and Ibcos Computers Ltd v. Barclays Mercantile Highland Finance Ltd  F.S.R. 265 at 304, applied.
- In this case there was no allegation of copying at such a high level of abstraction. There was nothing exceptional or unusual in the overall design of either Tradition’s system or the plaintiffs’ system, and the similarities at the “architectural” level were no more than could be accounted for by the fact that both systems had been written by the same programmers (paras 8, 78, E17).
- The complaint concerned modules which had been individually compiled and therefore linked into a small number of programs. These programs could each have been compiled from a single source file, but the source had actually been subdivided and distributed into a number of modules. The contents of each module was largely arbitrary, and on the evidence of choice of module content if not arbitrary was based on an assessment of considerations which had nothing to do with the computer program as a functional unit, but related to extraneous matters such as availability and skill of programmers, convenience of debugging and maintenance and so on. It was unlikely, although no impossible, that the skill and labour involved in making such a choice could ever amount to a substantial part of the copyright subsisting in the various modules (para 78.).
- The originality of a work (the prerequisite for the subsistence of copyright) was interrelated with the substantiality of the part of the work copied (the prerequisite for infringement). The issue was whether the code that had been copied represented a substantial part of the copyright work relied on. The criterion was whether it represented a substantial part of the skill and labour expended by the writer. The substantiality of what had been taken had to be judged against the collection of modules viewed as a whole. It was not determined by whether the system would work without the code, or by the amount of use the system made of the code. The concept of “overborrowing” was not of assistance if it merely substituted another term for the statutory concept of substantiality without providing any useful criterion (paras 73,78-79, H1).Ibcos Computers Ltd v. Barclays Mercantile Highland Finance Ltd -1994] F.S.R 275 at 289, 302 (Jacob J.), referred to.
- If copied code had been disguised to hide its origins, this would show that those responsible knew that what they were doing was wrong. If they had acted wilfully and in disregard of the plaintiff’s rights, then disguise might form the basis of a claim for additional damages under section 97(2) of the Act (para. 82).
- The admitted copying of three modules in which the plaintiffs had not shown ownership of the relevant copyright was relevant to the other issues of copying, if only to confirm a propensity to copy among the programmers (para. 11).
- The defendants were largely saved by the fact that the programmers had not used the plaintiffs’ materials to any great extent. On the evidence they had not intended to proceed by copying and the amount of code shown to have been copied was very small. They had wanted the plaintiffs’ code shown to have been copied was very small. They had wanted the plaintiffs’ code as a record of what they had done before, but they had intended to design and build a system which they had done before, but they had intended to design and build a system which was a substantial improvement on the plaintiffs’ system (paras 42,45, 50).
- The module DLI.MAP setting out the central region of storage in Tradition’s system had not been copied. Guppy had decided at the outset to adopt the use of records rather than large arrays as in the plaintiffs’ REAL_IMAGE.MAP. This decision had had the effect of making it very difficult to reuse any great part of the plaintiffs’ code. No code which accessed the DLA was said to have been copied (paras 64,86, A.27-28, G.53).
- Gilbert had certainly consulted the plaintiffs’ modules BLIP–_RESOURCE.BAS and REQRES.BAS. He had not copied the code by cutting and passing but the use that he had made of it was illegitimate. By the time he had finished his investigation and debugging of Tradition’s corresponding modules he had appropriated a substantial amount of the skill and labour which had gone into the Plaintiffs’ modules. But what he had taken did not survive and at the end of the process everything had been independently derived. The appropriate relief might be a fee for the use of the code for debugging purpose (paras 86, F.22).
- From the point of view of labour saved, the admitted copying of the module LIFFE.BAS was much the most important piece of copying since Blakey thought it had saved him two month’s work. This was also the only instance of deliberate disguise. The module had been copied because the programmers were short of time, knew that the format of the LIFFE feed was about to change, and did not want to write the module twice. It was used in Tradition’s system for about six months before being replaced. On the evidence it had done little to assist the brokers, but plainly a significant amount of the original programmer’s skill and labour had been taken in they copying (paras 57,85,H.3).
- The instrument and counterparty data, which Harland had obtained dishonestly by dialling into the plaintiffs’ computer, had not been shown to be intrinsically confidential but it was a valuable compilation. It had been used for testing Tradition’s system, and although it had not formed part of Tradition’s system as used for trading purposes, the plaintiffs were entitled to relief in respect of its use for testing purposes (paras 15-16).
- The use of the plaintiffs’ source code, even as a reminder when debugging, Tradition’s modules, had been a breach of confidence (paras 86-87).
- The mechanism of inter-process communication embodied in the BLIP/REQ modules was a programming technique of general application. It had been published in the system manual, and once the concept was known the appropriate code followed. It had been developed by the programmers while employed by the plaintiffs for the purpose of their employment, and its disclosure to another during the subsistence of the employment would have been a breach of the employment contract and a breach of confidence. However, it was not a true trade secret, but the kind of useful technique which an ex-employee could not be prevented from using after the cessation of his employment in his absence of an appropriate restrictive covenant (paras 36,87, F.13).
- The first defendant was the employer of the programmers while the copying took place and was liable as their employer, but had not been sufficiently involved in a common design to be liable as joint tortfeasor. The second defendant had been funded by the first defendant but without more that was irrelevant to any question of joint torfeasance (para. 89).
- Howard was jointly liable with Harland and the other programmers for infringement and for breach of confidence. He and Harland had known that what they were proposing to do was wrong when they planned to have tapes of the plaintiffs’ system available to ensure that copying took place if needed. It was irrelevant that he had delegated the decision as to what should be copied (paras 42, 90).
- Harland had been part of the plan to have the plaintiffs’ material available for use; he had believed at the outset that it might well be necessary to copy and that any such copying should be concealed as far as possible. Moreover, he had not been on a frolic of his own when he obtained the instrument and counterpart data that had not been backed up onto the tapes (paras 42, 50, 88).
- Tradition had wasted considerable costs because Howard, Harland and the programmers did not tell the truth about having the plaintiffs’ code available. Howard had failed at all times in his undoubted duty to disclose that he knew the programmers had the wherewithal to copy the plaintiffs’ system and expected them to do so. He was obliged to indemnify Tradition against the costs and damages generally. They were not obliged to indemnity Tradition against the costs and damages generally. They were not obliged to indemnify him for the sums expended in his defence (paras 98, 99).Observed
Where the subject matter of the action lay in a highly technical area it was of particular importance that the expert witness was scrupulous in putting forward all relevant considerations which occurred to him or her as being relevant to the issued to be decided. The court had no points of reference other than those provided by the expert. It was reprehensible for the expert to hold back relevant information. The expert must not act as an advocate. If the experts for both parties lacked objectivity the court was deprived of any proper basis to arrive at a decision (para. 70).
This was an action by Cantor Fitzgerald International (an unlimited company) and Cantor Fitzgerald Securities (a firm) against Tradition (UK) Ltd, Tradition Bond Brokers Ltd, Michael Howard and Christopher Harland for infringement of copyright in certain computer programs and for breach of confidence in relation to those programs.
“Reports of Patent Cases” Issue 4 2000