Law and technology

Not a never ending licence

A UK court has ruled, and a customer found out the hard way, that what was described as a “perpetual” software licence was not a “never ending” licence. In BMS Computer Solutions v AB Agri Ltd (UK High Court, 10 March 2010) the customer was granted a “UK-wide perpetual licence” for a program. However, the contract granting the licence also required the customer to keep buying support from the developer:

In the event that the software technical support agreement is terminated for any reason whatsoever this agreement shall terminate.

The customer wanted to terminate the support agreement, but keep using the software. Terminating the support agreement would terminate the contract which had granted the licence. It is quite common for specific terms of a contract (including software licences) to survive termination (assuming that is what the parties intended). The question in this case was whether the grant of the “UK-wide perpetual licence” intended to create a never-ending licence that would survive termination of the main contract. The judge said:

The word “perpetual” can carry different shades of meaning. It can, for example, mean “never ending” (in the sense of incapable of being brought to an end) or it can mean “operating without limit of time”.

The judge found that in this instance, the “perpetual licence” meant a licence “operating without limit of time”, i.e. it continued until either party terminated it for some valid reason (such as ending the support agreement).

The ruling does not mean that every “perpetual licence” is perpetual until terminated. A contract (such as a licence) is always interpreted according to its terms and intentions of the parties. In some cases, “perpetual” will clearly mean “never ending” (in which case it may be a good idea to record it as “perpetual, irrevocable licence”). In this case, the “perpetuality” was trumped by the tied support requirement, and could not have been intended as never-ending – either a case of poor drafting by the customer, or good (or fortuitous) drafting by the developer.

Smoking gun emails

The major court battle over copyright infringement between YouTube and Viacom currently underway in the US has turned up some pretty damaging internal emails between the founders. E.g. this from YouTube co-founder Steve Chen to Jawed Karim:

“jawed, please stop putting stolen videos on the site. We’re going to have a tough time defending the fact that we’re not liable for the copyrighted material on the site because we didn’t put it up when one of the co-founders is blatantly stealing content from other sites and trying to get everyone to see it.”

While the founders probably aren’t too concerned (having long since cashed out), the evidence may yet cause YouTube’s owner Google a headache. Another reminder not to put damaging comments in writing – in litigation, almost everything is potentially discoverable.

More audio/visual technology in NZ courts

“A bill that will allow greater use of audio visual links in courtrooms passed its first reading in Parliament yesterday.” more…

Nestlé trade marks Kit Kat shape

Nestlé has won an appeal allowing it to trade mark (in Australia) the shape of a Kit Kat bar (or as the application prosaicly calls it, “Chocolate confectionary being chocolate-coated confectionary blocks or bars and chocolate-coated wafer biscuits”). Trade marking shapes is permitted in New Zealand and other countries (for example Toblerone chocolate in some countries). In fact, many “non-lexical” things can be trade marked, including (in New Zealand) colours, smells, sounds, and tastes.

Strangely, chocolate has long been a major battle-ground for trade mark disputes. In New Zealand, Cadbury lost a 2008 Court of Appeal battle to trade mark the word “purple” (though not the colour, which it already trade marks). Last month in Australia, Guylian lost a Federal Court battle to trade mark its seahorse shaped chocolates, which the court found “not sufficiently inherently distinctive”.  In contrast, two years ago a Japanese court allowed Guylian the same trade mark in Japan, finding that the shape was sufficiently distinctive.

I’m sure the story about the unfortunate “fudge this” comment accidentally left in a set of company accounts is familiar to many lawyers, especially those involved in litigation (or M&A, when rounds of revised documents are flying through the small hours).

This latest example is embarrasing but really not too bad. The real mistake was using the word “fudge”. Anyone who has helped put together (or dissect) accounts and other reporting data knows that occasionally something does need to be a “best estimate” (a more advisable term).

In litigation a lawyer’s job often involves poring over documents, looking for mistakes, inconsistencies, and things that are generally helpful to your client’s case. Much money and sweat is expended on discovery and hoping to find the elusive smoking gun. It does happen, but in my experience unless it’s an outright admission of guilt/breach/bad faith/etc (or something similar), it’s usually not as damaging as it might at first seem.

It’s more productive to focus on the links between documents and “data mine” what you already have (or can get easily). Many lawyers on the other side of major disputes I’ve been involved in have done a terrible job (apparently, based on the results) of data mining their material.

But in terms of what’s in the documents themselves, far better (or worse) than a simple comment, can be tracked changes left in a document. These are great because they record the exact changes made to specific words, the user who made the change and the time. I recently had a situation where this was especially useful in proving certain negotiations between a first and second draft of a contract. There are stories of clients (and lawyers) being caught out by some unmerged tracked changes, or Word’s less-understood “versioning” feature.

The upcoming changes to the District Court Rules make the old discovery process obsolete. It is no longer necessary for the parties to disclose all relevant, non-privileged material. But thanks to email, litigants tend to have far more of the “other side’s” documents than ever before. And thanks to electronic documents, tracked changes and the like, there is more data in the documents than ever before. It will be interesting to see how the new DC discovery process goes, and whether it results in litigants focussing more on data mining what they have, in preference to wrangling over what they don’t.