Court of Appeal Judgment in SAS v WPL

November 21, 2013

In SAS Institute Inc v World Programming Ltd [2013] EWCA Civ 1482, the Court of Appeal had to give judgment on the extent to which the developer of a computer program may lawfully replicate the functions of an existing computer program; and the materials that he may lawfully use for that purpose.

In the High Court, SAS alleged that in creating its World Programming System, WPL had:

·        used the SAS Manuals as a technical specification for WPS and copied a substantial part of those manuals in its system, thereby infringing copyright in the SAS Manuals (the ‘Manual to Program Claim’);

·        indirectly infringed copyright in the SAS Components in creating its system (the ‘Program to Program Claim’);

·        infringed the copyright in the SAS Manuals by reproducing a substantial part of them (the ‘Manual to Manual Claim’); and

·        repeatedly used the SAS Learning Edition outside the scope of the applicable, thereby infringing the SAS copyright and acting in breach of contract (the ‘Learning Edition Claim’).

The proceedings followed a torturous course that required a reference to the ECJ, but in his third judgment (after a valiant attempt to fathom the meaning of the answers of the ECJ), Arnold J dismissed the SAS claims, except insofar as he found limited breaches of copyright in relation to the Manual to Manual Claim. He gave permission to appeal on the Learning Edition Claim, and the Court of Appeal gave permission to appeal on the Manual to Program Claim, and the remainder of the Manual to Manual Claim. There was no appeal against the dismissal of the Program to Program Claim as, following the ECJ judgment, it was common ground that neither the SAS Language nor the functionality of the SAS System is protected by copyright under the Software Directive.

In a detailed judgment, Lewison LJ initially focused on the creation of the WPL program by reference to the SAS manuals. In essence it was alleged that WPL in writing its system in Java (and subsequently in C++) had copied the expression of the intellectual creation of the author of the SAS Manuals. Lewison LJ observes that ‘this argument seems at first sight to be counter-intuitive, because the SAS Manuals themselves do not contain any programming language’. After considering various cases and the ECJ responses to the questions referred to it in this dispute, Lewison LJ states that, while Arnold J may have been partially misled in his reading of the ECJ judgment (‘the judge does not seem to have appreciated that the judgment of the CJEU had, to some extent, changed the question‘), he nevertheless reached the right conclusion. Lewison LJ agreed ‘with the Advocate-General’s pithy conclusion that “The WPL System does not reproduce the description [in the SAS Manuals] of those statistical operations but simply executes them.”‘

Lewison LJ did highlight one important point, distinguishing his view from that of Arnold J. Where it was suggested by Arnold J that the SAS System was not the intellectual creation of its authors because it had grown by accretion without an overall design, Lewison LJ felt that that was not a reason to deny it protection.

Subject to a procedural point (which received no welcome from Lewison LJ), the appeal in relation to the Manual to Manual Claim, or what remained of it on appeal, was said to stand or fall with the Manual to Program Claim. So that element of the appeal also failed.

Readers may find all the comments on WPL’s alleged breach of the SAS Learning Edition licence of considerable interest (from [91]) but, in dealing with the SAS complaint that WPL had exceeded the contemplated use of the Learning Edition, Lewison LJ may surprise some with these observations which may be of relevance in any number of software licensing contexts:

  1. In my judgment the only real indication that the licence is granted to a single human being is the rubric right at the beginning of the licence: viz “By clicking on the ‘Yes’ button, the individual licensing the Software (‘Customer’) agrees to these terms”. It seems to me to be obvious that only a human being can click on the “Yes” button. But that, as it seems to me, is not in itself a strong pointer. The word “individual” can be read as meaning “a single person”, which would include a legal person such as a company. In addition a human who clicks on the “Yes” button may do so as agent for the person (in this case a company) who bought the program and is, in the ordinary sense of the word, a customer. There are other indications elsewhere in the licence that point to the conclusion that the Customer may be a company. First, in both clause 1.3 and clause 4 “Customer” is referred to as “it”, which does not suggest a human being. Second, the prohibition on concurrent usage would be unnecessary if the licence only extended to the single human being who had clicked on the “Yes” button. Third, it is difficult to envisage how a single human being would use the Learning Edition on more than one workstation at a time. Fourth, the licence, and in particular clause 1.1, is drafted on the basis that the person who pays for the program is the “Customer”. Where, as in this case, it is a company that pays the purchase price, the assumption must be that the company is the Customer. Fifth, the fact that the chosen defined term is “Customer” is itself an indication that the licensee is the same person as the person who bought the product: Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 [2009] 1 AC 1101 at [17]; Cattles plc v Welcome Financial Services Ltd [2010] EWCA Civ 599 [2010] 2 BCLC 712 at [35]. Sixth, SAS positively avers that the licence agreement subsists between it and WPL. It is difficult to see how there could be a licence agreement with a contracting party under which the contracting party acquired no licence.
  1. I do not consider that the background material detracts from these points. The judge referred to the fact that the packaging calls the Learning Edition a “personal learning” version. But that is consistent with the view that the person in question is a company. The packaging also says that “students” and “business professionals” will learn from the edition. But clearly the actual operation of the program will be carried out by a human being whoever the “Customer” is; so that, too, carries the argument no further. What is of equal, if not more, significance is that SAS Institute describes the SAS System as “the world’s leading business intelligence and analytical software”. Since it promotes the software as business software it is natural to suppose that businesses want to learn how to use it; although obviously corporate businesses will do so through the agency of human beings.
  1. Finally, one cannot forget that the licence agreement is offered on a take-it-or-leave-it basis. The purchaser has only two choices: click on the “Yes” button or click on the “No” button. There is no room for negotiation. If there were any doubt about the meaning of the licence at this stage, in my judgment the application of the contra proferentem principle would tip the balance in WPL’s favour. In my judgment the judge was wrong to rule out the principle at an early stage in his analysis. Accordingly, in disagreement with the judge, I would hold that WPL had the right to use the Learning Edition. Once one arrives at that position, there is no restriction on the number of employees whom WPL may authorise to observe, study and test the program, provided that they do so one at a time and at a single workstation at a time. It follows, therefore that WPL were not in breach of the licence by authorising multiple employees to use the program for the purposes of observation, testing and study. Thus I reach the same conclusion as the judge, but for a different reason.  

Finally, it is worth noting that Lewison LJ was not greatly impressed by the contribution of the ECJ to the resolution of this dispute, saying (at [5]):

Unfortunately the parties could not agree what the CJEU had actually decided. The language in which the court expressed its judgment was, at times, disappointingly compressed, if not obscure. Moreover, although the judge had referred specific and detailed questions to the CJEU, the CJEU refrained from answering them, but instead answered its own paraphrase. This led to a disagreement about whether the court had actually given answers to all the questions posed. It would, perhaps, be more helpful if in response to a national court asking for help the CJEU, in the performance of its duty of sincere co-operation, answered the questions it was asked unless there are cogent reasons not to.