SCL Meeting Report: Back to Basics: IP for IT Lawyers

July 5, 2013

This SCL event was hosted by Speechly Bircham and chaired by Alexander Carter-Silk, who began the seminar explaining why technology lawyers need to understand what the technology does in technology litigation and transactions. The speakers were Guy Tritton of Hogarth Chambers, who focused more specifically on patent and copyright protection in computer programs, and Jonathan Cornthwaite of Wedlake Bell, who explained the role of trade marks and database right in the field of IT as well as common IP issues that can get overlooked in certain types of IT contract.  

Alexander Carter-Silk reiterated that technology law is not as simple as it can at first appear and that it is critical for technology lawyers to know the technology they are dealing with in the first place: it is often the lowest common denominator or smallest piece in the technology that can cause the biggest problem in technology litigation and, as discussed in the questions afterwards, a business cannot necessarily say that it can assign all the IP in a piece of technology as that business may not own every element of the IP. He showed the audience an image of a printed circuit board (PCB) and asked the audience for their views as to whether this was software (as such), hardware, an interface, or incorporates an interface, or is it an invention? He also illustrated the Apple iPad and explained how much of the software involved does not actually belong to Apple. He also gave the example of text from the manuals in the SAS v WPL litigation: the text in the manuals explains what a particular mathematical function does, but to what extent is there copyright in those words, and if there is copyright, does this flow through to the code? Does code written to the requirements set out in the manuals carry copyright? Interestingly, he noted that an issue that was not explored in SAS v WPL was whether the mathematics itself can carry copyright.  

The devil is very much in the detail: when looking at code for example, lawyers should not assume that code is homogenous. When it comes to preparatory design materials associated with programs, how much detail needs to be copied for there to be copyright infringement? He particularly emphasised file formats which the High Court in SAS v WPL found not to be protectable in copyright as the format itself is an interface. Lawyers therefore need to break down the technology and consider who owns the individual components that make up the technology and which components carry the most value. In short, technology lawyers should start with the technology and not with the law.

Also, when interpreting national legislation, it is important to keep an eye on the international treaties too. A point that both Alex Carter-Silk and Guy Tritton discussed was the use of the words ‘as such’ which appear in the Software Directive and patent legislation. For example, paragraph 52(3) of the European Patent Convention provides: ‘Paragraph 2 shall exclude the patentability of the subject matter or activities referred to therein only to the extent to which a European patent application or European patent relate to such subject-matter or activities as such.’ They both noted that the words ‘as such’ have confused many lawyers but Guy Tritton explained these words essentially mean ‘per se.’

Guy Tritton focused on two main themes for protecting computer software: (i) patent protection and (ii) copyright protection. As for patent protection, he noted the dissonance between TRIPS and the European Patent Convention (a treaty to which all European states are a signatory). Article 52 of the latter excludes certain inventions from being patentable (specifically discoveries, scientific theories, mathematical methods, aesthetic creations, schemes, rules and methods for performing mental acts, playing games or doing business and programs for computers as such).

He then provided an overview of the UK case law and how various cases have grappled with the issue of the patentability of computer programs. He examined in particular the four stage test established in Aerotel v Telco and Macrossan [2007] RPC 7 (heard together; in Macrossan, the computerised process for incorporating a company was held to be a computer program as such and so unpatentable); AT & T Knowledge Ventures & Another v Comptroller-General [2009] FSR 19 (which applied the ‘technical effect’ test in Aerotel and held that a content broker hosting service was no more than a method of doing business); Halliburton Energy’s Services Inc’s Patent Application [2012] RPC129 (which held that a piece of software aimed at improving the design of roller cone drill bits had a ‘technical effect’); PKTWO Patent Application [2012] RPC 13, Really Virtual Co Ltd v Comptroller-General [2013] RPC 13, Re Shopalotto’s patent [2006] RPC 7 (where there was no technical implementation of a method for playing the lottery online and so not patentable) and Autonomy Corporation v Comptroller-General [2008] RPC 16.  The common strand in these cases is that the UK courts have applied a test of whether the invention in the program has a technical effect; if there is nothing technical about the program invented, then it is not patentable.

However, the EPO in cases such as T 931/95 Pension Benefit Systems, T 250/03 Hitachi and T 641/00 Microsoft/Data Transfer has adopted the ‘any hardware’ approach (which asks whether the claim involves the use of or relates to a piece of physical hardware, however mundane – if yes, Article 52(2) does not apply), and Guy explained how the EPO deals with the issue of ‘technical effect’ at the inventive step stage, asking broadly (i) what was the problem in the prior art, (ii) what was the solution provided by the ‘invention’ and (iii) was that solution a technical or non-technical solution? In short, it can be difficult to apply the law, particularly when you have to decide if a program has a technical effect: if there is a technical side to a program then a client should try to seek patent protection.

As for copyright in computer programs, Guy explained how programs are protected as literary works, including the preparatory design materials (which are the specifications, flowcharts, layouts for menus, screen displays etc which go into the making of the program). He also explained the restricted acts in the Software Directive and exceptions (for example Article 5(3), which was explored in the SAS v WPL litigation and the question of whether it is possible to investigate another program to find out its principles in order to create your own commercially competitive program), as well as decompilations (to obtain the information necessary to achieve the interoperability of an independently created program). In terms of case law, he particularly focused on Navitaire v Easyjet [2004] EWHC 1725 (Ch) and SAS v WPL (up to the most recent judgment of the High Court in January 2013, [2013] EWHC 69 (Ch)) explaining how copyright protection will not extend to the functionality of a computer program (which falls on the wrong side of the ideas v expression dichotomy). Guy also explained how in SAS v WPL the claimants on return to the High Court from the CJEU tried to plead copyright in the SAS programming language but Arnold J held that the programming language was not protectable in copyright and, in any case, it was too late for SAS to amend their pleadings.

Jonathan Cornthwaite provided a helpful revision of why trade marks are such powerful rights and why IT lawyers should have a working knowledge of them. He explained how registered trade marks provide their owners with a true monopoly, how the scope of this monopoly can be very extensive (depending on the scope of goods and services in the trade mark registration), how they can co-exist with other monopolies, how they are potentially immortal (so long as they are renewed, are used and do not become generic), how CTMs can acquire steady growth as the EU expands, how they are diverse and also relatively cheap for any business to register. There is also the default mechanism of the common-law action for passing off for unregistered trade marks (though admittedly such actions can be difficult). In terms of case law, he focused on the Google Ad Words cases, in particular Google France (C-236/08) and Interflora v M&S [2013] EWCA Ch 1291 (in the former, the CJEU held that Google, the operator, would not be liable for trade mark infringement, whereas in the latter, Arnold J held that an advertiser can be liable for trade mark infringement in certain circumstances).

He then provided an overview of the sui generis database right, which is often overlooked by businesses. He explained what the database right is and how it is important to establish that the owner of the right has made a substantial investment in obtaining, verifying or presenting the contents of the database (though this does not mean that the owner has created the data itself) and he explained the recent database right cases Executive Grapevine v Wall [2012] EWHC 4152 (Ch) and Football Dataco v Sportradar & Stan James [2013] EWCA Civ 27 in which the Court of Appeal held that there was database right in Football Dataco’s ‘Football Live’ database which was infringed by the Stan James’ web site and Sportradar’s online ‘Live Scores’ service. The Court of Appeal also held that a web site operator can be a joint tortfeasor with an infringing end-user.

The third and final section of Jonathan Corthwaite’s talk examined the minefield of IP issues inherent in typical IT transactions, and he illustrated these through three types of IT contract. Firstly, when purchasing databases, it is important for the lawyers to seek due diligence evidence that the database constitutes the author’s own intellectual creation, whether the maker is based in an EEA state and seek evidence that a substantial investment has been made in obtaining, verifying or presenting the data (or no database right will subsist). Secondly, with respect to the assignment of rights in software, the lawyers should ensure that the assignment sweeps up all the IPRs concerned (not just copyright and database right but also patents, confidential information, trade marks, designs), and must bear in mind that moral rights cannot be assigned, as well as seek evidence as to whether the vendor commissioned any third party to create any part of the software (if so, the third party may own the IP). Thirdly, when commissioning the design of a web site, lawyers should seek broad warranties and an outright assignment (written and signed) of the IPR in the design and underlying software. If there is push-back on the assignment, then a fall-back option is to seek an exclusive irrevocable royalty-free licence, supported by escrow arrangements.  

James Smith is a solicitor in the IPTD Group at Speechly Bircham LLP.