Law and technology

More information is coming soon on New Zealand’s e-discovery solution - the electronic discovery solution developed right here in New Zealand to support the new discovery rules taking effect on 1 February 2012 (see this earlier post).

One feature is the ability to safely redact PDF documents directly in a web browser.

Redaction is increasingly important in New Zealand civil litigation, given the volume of documents and the propensity for sensitive and/or privileged information to be mixed with other discoverable information. The High Court Rules (current and new) allow redaction of certain information on the grounds of confidentiality and/or privilege. Conditions can be proposed by the disclosing party to protect confidential information – for example, the provision of certain documents (redacted or not) may be made on an “attorney’s eyes only” basis (to adopt the US parlance; in practice it often extends to experts too). Other parties can challenge the proposed restrictions, however this requires them to bring an application to do so, and in practice such issues can usually be resolved without the Court’s intervention.

The new High Court Rules will generally mean that documents must be redacted electronically, in PDF format. In practice, there are 3 key challenges to doing so:

1. Making it easy – ideally, the lawyer will be able to make their own redactions directly on each PDF while viewing it anywhere and any time, without the need to install separate standalone software and without any fuss. In particular, this avoids the  inefficient and obsolete process of printing documents, manually redacting them, and then re-scanning them.
2. Making the redactions permanent and secure – there are many real-world examples of unsafe, or non-permanent, redactions, where an apparently redacted document still allows the underlying text to be easily retrieved (read about a recent example – by a judge! – here).
3. Handling duplicates – there is no point redacting one version of a document, only to have a duplicate produced in original form.

Safe and easy PDF redaction (via the browser) is one of the features of the New Zealand developed e-discovery solution that will be announced soon. Stay tuned for more information in coming weeks.

A pre-announcement:

New High Court Rules (and District Court Rules) promoting the use of electronic discovery come into force on 1 February 2012. Key features of the “default” regime under the new rules include the following:

• Discovered documents must be exchanged electronically.
• Parties must provide a standardised list of discovered documents.
• Documents must be provided in PDF format (unless not possible for particular file types), with the document number as the filename.
• Native files must be provided if requested.
• Parties must take reasonable steps to exclude duplicates.
• Emails and attachments are to be listed separately but sequentially on the document list.

These changes reflect the ever-increasing volume of data (in particular, electronic data) in modern litigation, and the need to effectively and efficiently handle the discovery process.

A New Zealand solution

This new regime requires a new solution. Stay tuned for an announcement of a new web-based electronic discovery system developed right here in New Zealand, that supports the new rules on electronic discovery as well as providing early case assessment and detailed review capabilities. This system has been locally developed over the past several years.

Key features include:

• New Zealand designed and developed system, cognisant of the new High Court Rules on electronic discovery
• Fully managed, web-based solution – no software to install or maintain, and can be accessed on any computer, notebook, or tablet
• Handle projects ranging from a few dozen, up to hundreds of thousands of documents
• Securely access, review and upload project documents anywhere, anytime
• Track discoverability, privilege, confidentiality, and other document attributes
• View common document formats in any standard web browser without the need to install Office software
• Powerful search and analysis capabilities across the document repository
• Generate discovery lists and electronic bundles of documents (native format or converted to PDF, stamped with document numbers)
• Automated handling and de-duplication of Outlook email archives and common document types
• Single-user or collaborative multi-user options (including the ability for clients to upload their own documents)
• Fully locally supported
• Customisable by a local development team
• And much more!

Check back for more information in coming months.

(features described are subject to change before the system is publicly launched)

The Rules Committee of the High Court has released its final draft of new rules on civil discovery. This is the final stage of a long-running process to update the often troublesome rules relating to discovery, in particular electronic discovery. The latest rules are available here (pdf).

Background

For those who are lucky enough not to have been involved in civil litigation, discovery is a legal process that requires each side in the case to “discover” all relevant documents to the other side – the legal equivalent of laying your cards on the table. That doesn’t just mean documents that support your case – parties are also obliged to produce damaging documents. There are only limited grounds for refusing to disclose documents, such as legal privilege, and even then certain steps must be followed.

Unfortunately, discovery has become often a very difficult and time-consuming (and therefore expensive) part of modern commercial litigation. The general rules of discovery were laid down in the nineteenth century, when most documents could only be produced by hand or at significant cost. It was also a lot more obvious what a “document” was back then – usually ink on paper.

In recent years there has been an explosion in the amount, and type, of documents in business. The most obvious are computer documents (Word docs, spreadsheets, etc) and email. Most significant businesses are now heavily reliant on electronic communications. Documents still include paper files, faxes, and accounts, but also include modern documents such as databases, text messages, and even tweets, and huge amounts of documents can be created during the course of an ordinary day. As a result, parties to litigation are often required to handle huge volumes of documents. In large litigations I am involved in, it is common to have tens of thousands of emails and other electronic documents in play.

Reform

The discovery reform aims to modernise the rules to improve the discovery process for the benefit of litigants, and better reflect the modern realities of business and society. I have submitted on the first draft rules, and note a few highlights and changes in the proposed final draft:

• Parties must co-operate on discovery (oh, were it always that way!) and ensure “technology is used efficiently and effectively”. (8.2)
• Parties “must take all reasonable steps to preserve [relevant documents]”, including ensuring that “documents in electronic form which are potentially discoverable [be] preserved in readily retreivable form even if they would otherwise be deleted in the ordinary course of business” (8.3). This is a significant and powerful rule that imposes an express duty to preserve electronic records (see below for more details). When a dispute arises, it may be a prudent strategy to put the other party on express notice of this duty.
• The rules introduce two types of discovery – standard and tailored (8.6). Thankfully, the proposed threshhold of 200 documents for tailored discovery (previously called non-standard discovery) has been dropped. Even small commercial litigations tend to have far more than 200 documents these days!
• Parties must undertake a “reasonable search” for electronic documents, which includes some room for negotiation over whether it is or isn’t unduly costly to do so in certain cases (8.14).
• Original native files (that are discoverable) are to be provided on request (8.27(4)). While I had proposed clearer language here, the rule is still to that effect.
• Documents are to be exchanged by way of PDF where possible (sched 9, clause 1).
• The proposed requirement of chronological ordering is not mandatory – a different order may be applied if more convenient (sched 9, clause 2).
• Exchanged documents should be DRM free (well, it’s not quite as explicit as I had proposed but it’s a start) (sched 9, clause 6.8).

Duty to preserve documents

The most notable change for non-lawyers is the duty to preserve evidence, in particular electronic records. Unlike in the US, there is no tort of “spoilation of evidence” in New Zealand. There can still be serious consequences for destroying evidence, but the threshhold is unclear and there has not generally been a positive duty to preserve documents for the purposes of potential litigation.

The proposed rule 8.3 will change that. It requires a person who knows that a document is “reasonably likely” to be relevant to a legal dispute (whether or not any dispute has arisen) to take “all reasonable steps to preserve that document”. The term “knows” here is likely to be taken as meaning “ought reasonably to know”.

In particular, the rule will require that potentially relevant electronic documents “must be preserved in readily retrievable form even if they would otherwise be deleted in the ordinary course of business”.

The most obvious type of document here is email. Many businesses let their users fully manage their own emails. If a user deletes an email from their inbox, it may be impossible to recover. This new rule will require prudent businesses to ensure there are proper processes in place for retaining important emails. Under the new Limitation Act, it may be necessary to ensure retention of some records for up to 15 years, which is the duration of the new law’s “longstop” limitation period.

The proposed rules do not set out a penalty for failing to preserve documents, but a Court may make adverse findings, or even impose more serious sanctions such as contempt of court, against a party who fails to preserve documents.

While it is far from Sarbanes-Oxley, this change is welcome and good for the interests of justice.

The rules are expected to be implemented by early 2012.

My firm is currently representing a New Zealand software vendor in a litigation in the US against a large, US-based multinational vendor. Like much commercial litigation these days, this has involved processing huge amounts of data to complete the legal “discovery” process. In this case, it has involved sending gigabytes of discovery data back and forwards across the Pacific, as well as within New Zealand and other locations around the world.

Where possible, we have been using secure online services to perform these large transfers (security obviously being a key requirement). However transmitting batches of files of 6+ GB (not unusual for major litigations these days) to California has highlighted New Zealand’s lag in high speed internet connectivity. In particular, the “A” in ADSL comes to the fore, as it means upload speeds from our office are considerably slower than download speeds. Last week it took about 24 hours to transmit 4.2 GB of data to the US, a rate of 210 MB per hour, or about 48 K per second. Plus, it ate up our monthly usage cap.

For some data, it was simpler to have it FedEx’d across on DVD and portable hard-drive.

We have also experienced the sad state of affairs where it has literally been quicker and easier for our client (in Auckland) to jump in his car and hand-deliver DVDs of data to us (also in Auckland), than to transmit it via the internet. Admittedly we are talking about gigabytes worth of data, but that is not unusual these days.

So I will add international litigation to the growing list of “reasons why New Zealand businesses need high-speed, reliable, uncapped internet connectivity”.

A recent UK technology case gives a good example of “buyer beware” and “you get what you pay for” in technology procurement.

The case is London Borough of Southwark v IBM UK [2011] EWHC 599 (TCC). Computerworld has a good write-up of the facts.

In short, Southwark Council embarked on an ambitious systems integration project to build a Master Data Management (MDM) system. Such projects have been fertile ground for legal disputes. The Court noted (in typically understated fashion):

In practice, it has been found by a number of the London boroughs which have introduced or tried to introduce MDM systems that they are complex.

In March 2006, the council’s IT dept drew up a Project Brief. The next month, the council met with IBM, which proposed a solution to meet the Project Brief that would cost between £1.5 million and £2 million. However, Southwark had a budget of only £500,000. As a result, it was agreed that a more limited solution would be carried out, to meet the council’s budgetary constraints.

During 2007 the project got underway and some progress was made, but problems soon ensued (as detailed in the judgment). In October 2007, a council staffer notified the first complaint against IBM, alleging that “the MDM ’solution’ procured from IBM is not fit for purpose”.

“Fitness for purpose” is a legally loaded term. In New Zealand, it is an implied condition of sale (via the Sale of Goods Act 1908) that goods known to be bought for a particular purpose must be fit for that purpose. This applies to business and consumer goods (and “goods” includes software). There is a similar provision in the Consumer Guarantees Act 1993, though importantly, that Act applies to services as well as goods, and (in the case of consumers) cannot be contracted out of.

It is interesting to see from the judgment that after significant problems emerged, the council simply blamed IBM for delivering software that was “not fit for purpose”, apparently without looking at whether it (the council) selected the right solution for its purpose. (The fact is, it compromised on its requirements from the outset in order to meet its budget.)

I have been involved in a number of major IT implementation disputes where this has happened, with remarkable similarity. Part of it, no doubt, is corporate CYA culture, but the bigger part of it was (once you reduce it all down) the simplistic mindset that “we paid you truck loads of money, and you’re the IT experts, so if anything’s gone wrong it must be your fault”. Given what actually happened in these projects, this is quite unbelievable.

IBM reasonably responded to the council as follows:

At the time of purchase [the council] chose not to take a total solution/system option due to the cost implications and decided to contract the individual software and services items separately. In addition, [the council] chose to project manage the MDM implementation with assistance from the IBM software services team … and to date the IBM services contract has had only approximately 50% utilisation.

In Court, the judge echoed IBM’s comment above, saying:

[IBM's software] does “what it says on the box”. An analogy is the potential car purchaser who might want an off-road vehicle but, having looked at the brochure for an on-road vehicle, says to the salesman “that’s what I want” and buys that vehicle. There will be no cause of action against the garage that the car is no good off the road. The salesman will reply, with justification: “you got exactly what you asked for”. That is essentially what has happened in [the council's] case.

In my judgement, [the council] got by way of [IBM] exactly what its then team knew that they were getting and what it decided that it wanted and needed within its budgetary constraints.

As a result, the council had its case against IBM thrown out, and was ordered to pay costs to IBM. Moreover, the judge awarded indemnity (full reimbursement) costs in favour of IBM because of the council’s failure to accept a reasonable “walk away” settlement offer before the trial, in circumstances when it should have seen that its case had serious defects.

In other words, the pre-trial evidence put forward by IBM should have made the council realise that neither IBM nor its software was to blame, but that the client had itself simply chosen a cut-down solution that was “unfit” for what it later said it wanted – a situation I have witnessed on a number of occasions (and all of which we successfully settled out-of-court on favourable terms, I might add).

Copyright in compilations

Barrister Toby Futter recently wrote a handy update on originality, authorship, and copyright in compilations. He discusses the en banc Australian Federal Court appeal of last year’s Telstra ruling that there was no copyright in a White Pages or Yellow Pages telephone directory (see my post A Feisty copyright ruling on the original decision). The Court followed the Australian High Court IceTV decision and dismissed the appeal, meaning that the original finding of no copyright stands. As Toby says:

The big question in New Zealand is whether that approach will be adopted here, and, if so, in what form.

We may find out this year – as his article notes, Toby is involved in two cases currently before the High Court in which copyright in compilations is at issue.

My colleague Stuart Bradshaw also commented on the Telsra appeal here:

“‘The case is a reminder that copyright law does not protect everything you can’t put under lock and key and unless such a law comes along, and is actually enforceable, businesses will need to figure out how to add value to their directories and data-collections that cannot be duplicated.”

Aussie ISP liability

Another Federal Court decision has, in a 2-1 majority, dismissed the film industry’s appeal against last year’s ruling that Aussue ISP iiNet was liable for copyright infringment on its network. While the decision is welcome news for iiNet, which has spent over AUD$6m defending itself, the Court did rightly leave the door open for liability to exist:

It does not necessarily follow from the failure of the present proceeding that circumstances could not exist whereby iiNet might in the future be held to have authorised primary acts of infringement on the part of users of the services provided to its customers under its customer service agreements.

The case turned to a large extent on the process by which the studios notified iiNet of the alleged copyright infringment, and if further steps had been taken by the studios, iiNet may have been liable for failing to disconnect users. Also, it may not be the end of the road, with the movie studios fairly likely to appeal the decision to the High Court.

The full judgment is here.

Facebook photos fair game?

The Herald reports:

The Press Council has rejected a complaint against the Herald on Sunday by a man upset a picture off the social networking site Facebook was used in print… In its decision, the Press Council said using a photo off the website was not a breach of its rules.

While the Press Council was not making any comment about copyright, the situation does of course raise copyright issues.

It may be increasingly common for media organisations to reproduce social networking content without permission of the copyright owner. There is a copyright exception for news reporting, however this is limited to “current events”. Care must be taken when copying Facebook images (and other content) without permission. The copyright in material uploaded to Facebook remains with the owner. While users cannot expect privacy in social networking sites, using copyright material without permission is more black and white.

A potential spat over domain names and AdWord spoiling tactics was resolved before it really began last week. New firm Localist (a subsidiary of NZ Post) filed proceedings against Yellow Pages Group (YPG), after YPG registered the domain names www.localists.co.nz and www.locallists.co.nz, and registered similar Google AdWords.

Internationally, disputes over domain names and AdWords are not new (see my post, Trade marks and AdWords). Some see the ease of registering domains and search terms, and the apparent lack of a sanction, as an open invitation to do so as a spoiling tactic against a potential competitor. But firms should be in no doubt that they are on thin legal ice when they get too close to a competitor’s trade mark or otherwise act in bad faith.

While there are potentially other legal remedies available, the starting point for most disputes involving domain names and search terms is the Fair Trading Act 1986. Among other things, this Act contains a general prohibition on business conduct that is “misleading or deceptive or is likely to mislead or deceive”, and misleading conduct in relation to trade marks. Note that there is no prohibition on “unfair conduct”. It has to be “misleading or deceptive” to a third party.

AdWords

While there has yet to be a New Zealand case on AdWords involving trade mark infringement and / or misleading & deceptive conduct, last year’s European case involving Google and Louis Vuitton did provide some guidance. There is little doubt, for example, that registering and directing a competitor’s trade mark alone to your own website would be unlawful. It gets more murky when a company simply registers an AdWord to block a competitor from registering it. That would be unlikely to amount to trade mark infringement.

Domain names

The primary remedy for .nz domain name dispute is the .nz Domain Name Commission’s Dispute Resolution Service. Unlike the Fair Trading Act, this service can provide a remedy where a competitor has acted in an “unfair” manner. Disputes unable to be solved informally are referred to experts – including former senior commercial judge Sir Ian Barker and senior IP barristers – for determination. At $1,800+gst, it’s far cheaper than the Court process, though the input of a lawyer in preparing the relevant submissions can be beneficial.

For other TLD domains, it is a matter of using the relevant dispute resolution service, or Court proceedings.

In all cases though, the Fair Trading Act (and other general laws such as passing off) still apply, meaning that Court action can be taken in appropriate circumstances. If non-domain name issues are also involved, it may be more efficient to simply include the domain name complaint in any notices sent to the other party, or Court proceedings filed, than to attempt standalone determination, although it depends on the specific circumstances (e.g. if time is of the essence).

Register!

Localist was successful in forcing Yellow Pages to back down from what clearly seemed to be pretty sneaky behaviour, even if it did take a hefty statement of claim to do so. But the lesson remains: register! A .nz domain name costs all of about $21, or less than 5 minutes of a lawyer’s billable rate. It will probably cost less to register half a dozen domain name variations than it will to get your lawyer to read & reply to your email after a situation has arisen. Firms don’t need to register every possible variation just because an unscrupulous competitor may try to ankle-tap them; there are strong remedies for misleading or deceptive conduct. But at least grab the obvious domain names and (hopefully) prevent any cybersquatting in the first place.

The Department of Internal Affairs has issued a press release:

The Department of Internal Affairs’ Anti-Spam Compliance Unit is again taking High Court action against an alleged spammer, seeking financial penalties of $200,000 against the company principal and $500,000 against his company. The Department has lodged two statements of claim in the High Court in Auckland alleging breaches under the Unsolicited Electronic Messages Act 2007 by Brendan Paul Battles and Image Marketing Group Limited.

…

The latest court application alleges that in February and March 2009 Image Marketing Group Limited and Brendan Battles sent, or caused to be sent, 44,824 SMS (Short Message Service) messages to mobile phones connected to networks in New Zealand operated by Vodafone New Zealand Limited and Telecom New Zealand Limited.

…

It is alleged that the SMS messages were unsolicited commercial electronic messages with the primary purpose of inviting the recipient to purchase over the internet a mobile phone antenna booster. In its statement of claim the Department alleges the SMS messages contravened section 9 of the Act in that they were unsolicited, section 10 as they did not include accurate sender information and section 11 as they did not contain an unsubscribe facility that could be used by the recipient at no cost.

The reference to the lack of an unsubscribe facility comes on the heels of allegations that Telecom has contravened the Act for the same reason.

The DIA is seeking the maximum penalties – $200K for an individual, and $500K for a company. Hopefully, no spammer makes amounts in excess of these penalties (surely not??) – otherwise they’d still end up in the black!

It will be interesting to see how the claim is framed against Brendan Battles personally, and his company Image Marketing Group Limited. Unless Battles was sending emails in his own right, and not via Image Marketing, issues of the “corporate veil” arise. Such issues are common in commercial litigation. For example, liability under the Fair Trading Act 1986 can attach to company officers, even though they were acting under the veil of the company (see Personal Liability of Directors under the Fair Trading Act, PDF).

However, the anti-spam act contains a specific section covering “third party breaches” (accessory liability), and also includes sufficiently expansive language, to cast the net wide enough to enable personal liability to attach to company officers and employees.

The Oracle v Google lawsuit in the US, which was shaping up to be yet another patent slugfest (albeit an important one), has taken an interesting turn with Oracle adding important detail to its copyright infringement claims. Oracle’s amended statement of claim now alleges the following (full document here):

Android includes infringing class libraries and documentation. Approximately one third of Android’s Application Programmer Interface (API) packages are derivative of Oracle America’s 19 copyrighted Java API packages and corresponding documents.

The infringed elements of Oracle America’s copyrighted work include Java method and class names, definitions, organization, and parameters; the structure, organization and content of Java class libraries; and the content and organization of Java’s documentation.

Examples of this copying are illustrated in Exhibit I to this complaint. In at least several instances, Android computer program code also was directly copied from copyrighted Oracle America code. For example, as may be readily seen in Exhibit J, the source code in Android’s “PolicyNodeImpl.java” class is nearly identical to “PolicyNodeImpl.java” in Oracle America’s Java, not just in name, but in the source code on a line-for-line basis.

Copyright claims are quite a different beast from patent infringement claims. Generally, copyright infringement requires there is (a) a copyright work; and (b) unauthorised copying of a substantial part of that work. While Oracle is alleging outright copying of code, it is the recent addition of more novel categories of “works” highlighted above that sparks interest.

The first question that arises is, does copyright subsist in “works” such as:

• Method and class names
• Parameters of methods
• The “structure, organisation and content” of class libraries
• The “content and organisation” of documentation.

These are quite different concepts from software code itself. Code is recognised as literary work for the purpose of copyright, and is protected as such. But what about related aspects and “concepts” such as the method names?

Copyright attaches to certain “original works” involving some independent intellectual effort. Clearly this will apply to the code comprising most human-authored non-trivial methods. The method could possibly be copyright as an individual work, or (more likely) as a part of a larger work (like a chapter in a novel). The name of the method may be included as part of the copyright work; to borrow the novel analogy again, in the same way as a chapter heading would probably be included as part of the novel’s copyright, albeit a very minor part.

An important distinction with a novel’s chapter headings, however, is that most method names are purely functional. In fact, good software design dictates that methods follow a logical and obvious naming convention. “Creativity” should be kept to a minimum (for the sanity of future developers!) For that reason, an individual method name is unlikely to attract copyright protection on its own, and would only constitute a very “thin” part of the overall work. Another developer, seeing the method name alone and copying it, would probably not have infringed copyright because the method name was not a substantial part of the copyright work.

The Oracle claims are not about copying just one or two method names, but rather about copying all (or most) of the Java methods, classes and parameters in order to replicate the Java API. If one method name is not copyrightable, what about all method names in an API? Compilations of works (or parts of works) are certainly copyrightable, but again there needs to be a minimum level of intellectual effort. And beside method names, does an entire API – consisting of method names, class names, return types, parameter names and types, access levels, namespaces and so on – have copyright protection?

How the US court answers this question could have important implications for developers.

My latest Computerworld article is now available online:

• Getting to yes, but at what cost? Computerworld 15 June 2010

In New Zealand, several laws are relevant to allegations of deceit or misrepresentation in trade, the most significant of which is the Fair Trading Act 1986. The key part of this Act states that “no person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.” The Act cannot be excluded by contract, and applies to virtually all local commercial dealing.

…

BSkyB v EDS provides a useful example, applicable in New Zealand, of a vendor impliedly misrepresenting that there was a proper foundation for making a statement in a pre-contractual situation. The message is that such conduct (making a representation without foundation) may not simply be “negligent” or an oversight, but may be found to be deceitful.

Since publication, it has been announced that HP (which bought EDS) will pay a total settlement of £318 million (~NZ$680 million), and will not appeal the High Court judgment.

An amusing aspect of the trial involving a barrister’s dog is mentioned here.

The judgment itself is here.