Copyright law is the mainstay of protection for software. English courts have adopted a structured approach to deciding what parts of software is protected and the indicia which may be used to determine whether copying has taken place.
Many new software businesses are created out of the founders' prior experience after working in another company or business. When developers and programmers are employed, the source code they develop is owned by the employer, unless contractual restrictions displace this default rule. There are limited ways that an employer is able to prevent their former employees competing with them when they end their employment contract.
It is common practice for developers to copy software they have developed before moving on from project to another . The extent that former employees or partners are free to use source code owned by their former employer depends on who owns it and the basis upon which it is licensed. The question is therefore, how much one can copy code can be copied from another source such as a previous employer?
In Ibcos Computers Ltd v Barclays Mercantile Highland Finance Ltd (1994) the claimant developed and owned software that managed the financing of agricultural equipment - financial transactions could be carried out online by agricultural dealers themselves - revolutionary for the industry at that time. The case sets out the factors that a court will take into consideration when making an assessment of whether a person has copied a sufficient amount of another's skill, labour and judgement in source code to infringe the copyright of the business that developed the code in the first place.
The trial judge, Mr Justice Jacob (who went on to the Court of Appeal) set out a staged assessment process which is applied to assess whether an infringement of copyright in computer software:
The first step requires an analysis of the source code alleged to have been infringed. A business has limited claims in copyright for infringement of software that they do not own, such as open source software. The claims tend to be limited to the way the source code fits into a larger suite of suite of software (in copyright terms a ‘compilation’), and never for the particular module or segment of code.
In Ibcos, the collection of individual program files constituting the software package was protected by copyright as a compilation, due to the skill, labour and judgement invested in creating the particular source code files and the software package as a whole. In copyright law, this is a low threshold test. It is the source code in the form it is written and recorded that is protected and not the broader functionality of the code. This is a reflection of one of the fundamental principles of copyright law - copyright does not protect abstract ideas. In this case, there was identifiable source code owned by the claimant, which were created as a result of skill, labour and judgement of employed programmers. This satisfied the requirement of originality as a compilation and as a literary work for the purposes of copyright.
The Judge ruled that the particular way in which a computer program was written and appeared in individual files and the collection of files making up a software package is not a general idea which falls outside the province of copyright protection. The mere fact that the code has been set out line by line, in a detailed manner so as to solve a problem or perform a task, does not make it susceptible to attack as an idea, which is not protected by copyright.
Jacob J made some key comments in relation to the source code that was said to have been copied. He noted that computer files are time and date stamped as a matter of course during the course of development. He also noted that COBOL program files are divided have two distinct areas which are (a) the data division area and (2) the operating system division. The data division contained variable declarations, function calls and include files. The data division area may include unused variable declarations, and the operating system division contains labels for the purpose of controlling the program flow.
Software is developed over a period of time resulting in a series of development versions which, if need be, may be placed on a time line to show the incremental development of the final software product. Thus software development is broken down into smaller components, which include function calls and procedural routines that perform component tasks of the larger objective of the software. During the development process these change over time.
As a result of the integration of files that come together for software to execute, copyright exists on more than one conceptual level in the package. It subsists in the individual program files that make up a software package, as well as the entire software package. Where a computer program - whether a file or the package as a whole – has been altered sufficiently, a new copyright arises in the amended version of the software. A corollary of this principle is that constantly developed software constantly renews its copyright protection.
The Judge in the case also noted that:
Once copying has been established, the next step is to ascertain whether the amount of copying which has taken place amounts to a "substantial part" of the original source code. If that is the case, the source code has been infringed.
Whether a “substantial part” of the original source code has been copied is a qualitative test rather than a quantitative test. A subpart part will be taken when the alleged infringer has taken and incorporated the skill, labour and judgement vesting in the original work in their own (later) work. What will amount to a substantial part will vary from case to case. A court may wish to know how much time the alleged infringer saved by copying what they did.
Source code that has been translated to another language does not prevent that translation from infringing the copyright of the original source code. Indeed, specific provisions in the Copyright, Designs and Patents Act protect the original source from copying by translation in the same way as an English version of a play is infringed by a French translation of that same play.
Proprietary software is usually created by software houses in circumstance where the source code is controlled and access is limited to a limited number of programmers. Other than open source code, source code is a key asset that is likely to be protected as confidential information and frequently as a trade secret. The difference the two is relevant in post employment relationships. If it is the case that the processes and techniques employed by the software are unknown to industry at large, then a programmer is not at liberty to use that know how in subsequent employment or for their own purposes. In fact infringement proceedings are frequently run concurrently with a claim for misuse of confidential information.
Businesses that have been well advised also incorporate restrictive covenants into their contracts of employment, as well as in their contracts with consultants. These covenants are geared to grant contractual rights to prevent the employee or consultant from competing with the business for a period of time after the engagement ends. What is not well understood is that these contractual provisions are, even when professionally drafted, not easy or straightforward to enforce.
Such clauses must protect the legitimate commercial interests of the business – and go no further. To do this, precedents that may be found on the Internet are of generally little value, as they do not contemplate the particular circumstances of the business and its unique legitimate interests. A skilled commercial litigator may have little difficulty in pointing to defects in generic restrictive covenants and causing serious problems to a business seeking to rely upon them, rendering them valueless.
As a consequence of the law copyright, copying source code in its entirety without the permission of the employer will always be an infringement provided that it satisfies the requirements of originality. Copying tracts of software and using it for one’s own purposes is likely to infringe the copyright.
Copying software in a business environment is a risky business. Companies are able to address such matters in a number of ways. Firstly, applications for Pre-Action Disclosure may be brought against the alleged infringer with a view to obtain by court order a copy of the software used in the course of the new business with a view to delivering that code, with their own to an independent expert with a brief to identify instances of copying or translation of the code. Often, terms of delivery of source code may be agreed between the parties with a view to maintaining the secrecy of the source code.
Another alternative to is obtain court orders in secret, that empower the former business to enter onto the premises of the new business, the directors homes and any other relevant premises to take copies of source code and associated materials where there is a perceived risk that the potential defendant will dispose of evidence if they are given notice of legal proceedings in the usual way.
For business legal advice and more information on copyright protection and technology law disputes, contact us online or call us on 020 7353 1770.