Law and technology

A recent copyright case gives an interesting ruling from the Court of Appeal on the commissioning rule. The case, Oraka Technologies Limited v Geostel Vision Limited [2010] NZCA 232, involved a dispute over the ownership of industrial drawings.

In short, a customer had engaged an engineering firm to produce designs for an industrial machine. Unfortunately the terms of the engagement were unclear, and a dispute arose (some years later) between the customer and the engineering firm as to who actually owned the designs. The customer claimed that because it had commissioned those works, and provided an implied agreement to pay for them, and the designs were made pursuant to that commission, it (the customer) owned the copyright, by virtue of the commissioning rule. The engineering firm denied there had been a commissioning as defined in the Copyright Act, and that it therefore remained the owner of the designs.

The Court noted the orthodox position that:

Whether a work is “commissioned”; what the scope of that commission is; and the date on which the commission arises are all necessarily questions of fact in each case.

And it offered the following sage advice:

Patently, the better practice is to have a written agreement, and software developers and purchasers would be well advised to see that sound industry contracting procedures are put in place.

The critical issue was whether or not the customer had agreed to pay for the works – a requirement of the commissioning rule. Normally, payment (or an agreement to pay) is not in question, but was complicated in this case by the engineering firm claiming that it had provided a “free design service” in order to attract new customers. Because the designs had been provided for free, it claimed, the customer had not agreed to pay for the work and there could not have been a “commissioning” as defined in the Copyright Act.

The Court of Appeal rejected the engineering firm’s argument (which had been accepted in the High Court). It said that the engineering firm had offered “free design” on the basis that it would get to do the subsequent manufacturing work (which wasn’t free), and this was sufficient to create an intended-to-pay commissioning. The Court said it was “everyday commercial sense” that such an arrangement would be regarded as two parts of the same deal, and the customer had “agreed to pay” for the design work as part of the overall design-and-manufacture arrangement. It would be artificial to divide the “free design” and the subsequent intended manufacturing into two separate transactions. The Court therefore ruled that the copyright in the works was owned by the customer.

This is a useful case that demonstrates a pragmatic and commercially realistic substance-over-form approach to what was a murky factual situation. But, as the Court noted, these very costly disputes are easily avoidable by having a simple, appropriate agreement in place.

The New Zealand version of the Yellow Pages is facing a fight similar to the one its Australian counterpart had recently, in which an Australian court ruled that there is no copyright in a White Pages or Yellow Pages telephone directory (read my post here). Together with the IceTV case, the Australian courts appear to have decisively moved away from the “sweat of the brow” type arguments favoured in the UK and (to date) New Zealand, instead re-focussing on key principles of originality and authorship. Previous cases involving Yellow Pages and other directories have been before the New Zealand courts (for example, YPG IP Ltd v Yellowbook.com.au Pty Ltd, Auckland High Court 2007; University of Waikato v Benchmarking Services, Court of Appeal 2004), however these have not conclusively settled the question.

The New Zealand case is due to be heard in the High Court in May. The clear and forceful Australian judgments will surely be influential on the Court’s ruling (assuming the Telstra case is not overturned – it is being appealled), bearing in mind that New Zealand’s Copyright Act does have some important differences to Australia’s.

It is quite possible that by years end New Zealand will be on the road to adopting the more tightly focussed copyright law that has found favour in Australia. However, it will likley require at least one appeal to the Court of Appeal (and ideally another appeal to the Supreme Court) to set an authoritative precedent.

An Australian court appears to have completed what the IceTV case almost did nine months earlier, by ruling last week that there is no copyright in a White Pages or Yellow Pages telephone directory (Telstra Corp v Phone Directories, 10 Feb 2010, Federal Court of Australia).

If this decision is upheld (it could yet be appealed to the Australian High Court, the nation’s highest court) it means that Australia has essentially adopted the position of the United States Supreme Court in Feist Publications v. Rural Telephone Service, which involved similar facts.

While the Feist case, and now the Telstra case, concerned telephone directories, the rulings cover compilations of facts generally. The rulings are clear: compilations of facts, without any “creative spark”, are not copyrightable regardless of the effort expended. There is now considerable disparity with the UK approach, which has tended to support the “sweat of the brow” approach rejected by Australia and the US.

The New Zealand courts have yet to conclusively determine this question, but the Australian High Court decision in IceTV and now the Telstra case will be persuasive. Australia’s copyright law is similar to New Zealand’s, and there is good reason to think that New Zealand will follow Australia’s lead in this area.

The New Zealand operator of the Yellow Pages (or simply “Yellow” on this side of the Tasman) is understandably unhappy about this. Likewise, the losing party in the Telstra case said:

“We are disappointed with the result; it is not appropriate to springboard off our time, energy, thought and effort.”

It is easy to sympathise with this view. However, the IceTV and Telstra cases are powerful restatements that, fundamentally, copyright is about originality not effort. Indeed, section 14 of the Copyright Act provides that copyright only exists in “original works”. If it’s not original (i.e. the product of independent intellectual effort), there is no copyright. In the Telstra case, the Federal Court came to this stark conclusion:

“None of the Works [i.e. the directories] were original. None of the people said to be authors of the Works exercised “independent intellectual effort” or “sufficient effort of a literary nature” in creating the Works. Further, if necessary, the creation of the Works did not involve some “creative spark” or the exercise of the requisite “skill and judgment”… For those reasons, I do not consider that copyright subsists in any of the [directories].”

In other words, the databases in question were simply collections of facts, and facts are (generally) not copyrightable.

This ruling (if upheld) opens the door in Australia for substantial third-party copying of databases for free. For content providers, the lesson is clear: copyright law can protect your originality, but not necessarily your effort.

In this week’s Computerworld, I write about copyright law and computer program backups, in light of an Australian court case Racing & Wagering Western Australia v Software AG (Australia) Pty Ltd [2008] FCA 1526.

• Article: Computerworld > Read up before you backup (3 December 2009)

A recent court case (see below) has clarified (likely for the first time) the law relating to making a backup of proprietary software. The case decided that copying software to create a cold server, and occasionally testing the cold server, did not infringe copyright. The case is Australian, though the relevant provisions of our Copyright Act are essentially the same.

Making a backup copy of software is expressly permitted under section 80 of the Copyright Act 1994. However, a backup copy can only be “used” if the original is lost or destroyed (or it can be used in lieu of the original copy). One of the issues the case clarified is that the occasional testing of a backup – which is of course sensible – does not breach that restriction.

However, if the purchaser was given an express direction that a backup cannot be made, then section 80 does not apply (i.e. a backup cannot be made). It is important to note that the direction not to make backups is only effective if given before or at the time the software was acquired. If the direction/prohibition was given in a click-through licence, but the software was “acquired” before that licence was accepted, section 80 will apply (i.e. a backup can be made). However, the licence agreement could still impose various other conditions about how the backup can be used/tested.

When the Copyright Act backup provisions were drafted, most backup scenarios would have involved physical media, not a failover system (hot/cold) backup. The court decision confirms that in the absence of any pre-purchase direction (which could be a simple notice on the package or on the website the software is downloaded from), a cold server backup can be made, and (subject to the licence terms) occasionally tested. A user could not, however, rely on section 80 to set up a hot server, as this would involve “use” of the copied software beyond the extent permitted.

It was good to see the court make a well-researched and practical judgment, following a hearing that involved a number of IT experts, including disaster recovery specialists. By the way, if this all sounds like much ado about not very much, it is worth noting the software in question was very expensive main-frame based software ($1m plus per licence) which, presumably, justified the cost of going to court. It is highly unlikely that Microsoft or Apple would have a major battle over a user making a simple backup of their software! Indeed, many software houses expressly permit it.

Read my full article here:

Computer program backups and the Copyright Act (Clendons Barristers & Solicitors)

The judgments:

Primary – Racing & Wagering Western Australia v Software AG (Australia) Pty Ltd [2008] FCA 1332
On appeal – Racing & Wagering Western Australia v Software AG (Australia) Pty Ltd [2008] FCA 1526

The proposed reformulation of s 92A of the Copyright Act, which gives the Copyright Tribunal the responsibility for deciding if users should have their internet access terminated, is a much improved proposal over the original. The key problem with the original, poorly drafted and poorly thought-out proposal was that it put the responsibility of whether or not to terminate, on the ISP. This would have been unfair to every ISP caught in the middle of a dispute between their customer and any number of third parties (who, in the case of international copyright holders, would most likely be legally represented).

The new proposal removes that responsibility from ISPs. It gives the responsibility to the Copyright Tribunal, which has (or will have) the necessary expertise and resources to deal with complaints. As a state agency, it is bound by the Bill of Rights Act 1990, which guarantees natural justice (s 27(1)). Its decisions are subject to judicial review (s 27(2)). The proposal to allow the Tribunal impose fines (quite different from “damages” that a Court could award) means that a person who is fined (even for a modest amount) could not be sued in Court for the same infringement (in addition the proposal is that the Tribunal have exclusive jurisdiction of s 92A matters) . Tribunal members are, to some extent at least, accountable to the democratically elected Government. It has statutory reporting obligations.

This not only solves the primary complaint about the original proposal, it should (subject to some changes – see below) also provide strong procedural safeguards for the web-surfing public.

So why is there still fuss about the new proposal?

A central complaint of the original proposal – the unfair burden it put on ISPs, and the real potential for “guilt by accusation” that followed – has now been resolved. The focus of critics has now shifted to the purportedly “disproportionate punishment” of terminating an internet account and the assault on “human rights” that entails.

The Creative Freedom Foundation’s position remains that termination is “disproportionate punishment“. Similarly, Keith Davidson of InternetNZ is reported as saying of the new proposal: “the termination of a household or business internet account is simply out of proportion to the alleged offence”.

How can termination be “out of proportion” to an offence that hasn’t happened yet? How can termination be “out of proportion” given the 3 stage, 3 month process, the first step of which requires notification and a right of reply and the right to mediation? How can termination be “out of proportion” when an ISP would be within its contractual rights to terminate a user’s account without notice for any number of reasons, which may or may not be less serious than copyright infringement?

The “human rights” line of argument also misses the point. Internet access through a particular ISP is not a human right. Every ISP in New Zealand provides their service subject to terms and conditions, including prohibiting copyright infringement. If you breach those terms and conditions (or your ISP believes you have), they may terminate your account. ISPs can impose whatever (lawful) terms and conditions they like. Most ISPs even reserve the right to change those terms and conditions at any time without your knowledge.

The revised proposal does not stop a terminated user from immediately signing up with another ISP. In fact it does not even stop a terminated user from opening a new account with the same ISP. It does not ban a person from the internet. The human rights argument falls flat.

Don’t get me wrong – there is a global war being fought by the major IP rights holders over the future of intellectual property and human rights are certainly one of the many factors at stake. The issue of software patents in this country (which should be banned) is one small battlefront in that war.

The difficulty, as I see it, is that some critics of s 92A (and critics of copyright/IP in general) only see the issue in terms of the big, wealthy, multinational companies suing mothers of young children for millions of dollars for sharing US$24 worth of music. Through my work as a lawyer, I have recently witnessed a situation where a semi-retired New Zealand man had spent many years painstakingly creating certain written works. For the past couple of years he had managed to make a reasonable amount of money selling these works to hobbyists in his particular field – not enough to live on, but enough to pay for his hobby and help him in his pending retirement. All that changed when one particular individual – lets call him Mr X – publicly (and illegally) republished all of those works online for free. Mr X admitted doing so, but refused to take the works down, claiming that in his view authors didn’t deserve copyright in these sorts of works, and they should be freely shared with everyone. Obviously, this was devastating to the New Zealand man. While in this particular situation Mr X’s website was hosted overseas, a s 92A-style notice-and-takedown procedure would have provided a reasonably efficient first-step remedy against this blatant theft and destruction of one man’s years of hard work and creative effort by someone ideologically opposed to the idea of copyright.

There is no doubt that heavy-handed, excessive enforcement has backfired and been a PR disaster for major rights holders. It is precisely that “overkill” that the ISP account termination approach seeks to alleviate, and that the revised s 92A proposal provides a reasonable balance against. Whether this is the “thin end of the wedge” remains to be seen – no doubt for some it is the first step in a larger strategy – but misrepresenting the current situation as a human rights issue is (at best) jumping at shadows.

The new proposal is obviously not yet complete. Whether or not the final proposal does turn out to be “fair, efficient and workable” as Policy Proposal Document promises remains to be seen. Some specific areas that need to be addressed are:

1. Protection against the making of frivolous, vexatious or bad-faith (e.g. abuse of process) complaints (this sort of protection is a good way of dealing with the false complaint issue).
2. Onus and standards of proof (the Policy Proposal Document talks about the balance of probability – which is usual for civil actions – but more detail on the types of permissible evidence will be important).
3. Clarification over who a “subscriber” is in a shared-access environment.
4. Requiring the Tribunal to take into account the rights of other users of the particular internet account in question.
5. Clarification over the status of non-ISP organisations caught by the Copyright Act’s very wide definition of “ISP” under the new proposal.
6. Clarification of jurisdiction (territorial limits, maximum fines, matters that may be taken into account, etc).

In a case that will possibly influence New Zealand law, the High Court of Australia (their highest court) last week handed down a major decision that makes it harder for companies to claim copyright over compilations and databases such as television schedule listings.

After a hearing involving no less than six QC’s (or Senior Counsels as they are now known in New Zealand and most Australian states), the High Court unanimously ruled in IceTV Pty Limited v Nine Network Australia Pty Limited that IceTV, which provides electronic programme guides, did not infringe the Nine Network’s copyright by partially reproducing its television schedule listings.

Continue reading ‘Aussie copyright decision increases scope for fair (dinkum) dealing’ »

The World Digital Library has recently been launched. This is a UN-sponsored initiative to digitise historically significant books (mainly) as well as photographs and other content, and put them online for free public access. The library currently has 1200 exhibits, some dating back over 2000 years, and is expected to grow significantly as museums, galleries, universities and other institutions add content.

This raises a question: who owns the copyright in these historical works? Before you think “who cares – the authors have been dead for centuries”, think again. Continue reading ‘Copyright in historical works in the digital age’ »

If you operate a website, ISP or other online service in New Zealand, a recent law change provides you with a limited, but useful, protection against some types of copyright liability.

The new section 92B (no, not 92A) of the Copyright Act 1994 came into force last year. While the attention was on its “guilt by accusation” neighbour, section 92B has quietly provided all website operators, ISPs, and businesses who have a LAN with what is known in the US as a “safe harbour” provision.

Continue reading ‘A safe harbour from copyright infringement liability’ »

So much attention has been on the infamous (now indefinitely suspended) section 92A of the Copyright Act 1994, that another quirk introduced by the same batch of amendments has largely gone unnoticed.

Continue reading ‘Welcome to my ISP’ »