by Nick Gibbons*

A recent decision in the Court of Appeal in SAS Institute v World Programming Limited (“SAS”)  could be seen as yet another example of the UK courts declining to protect software manufacturers from those producing copies of their products with nearly identical functionality, simply because they are written with different software code and/or a different software language.

The European Court of Justice  previously ruled in SAS that copyright protection does not extend to software functionality, the programming language used and the format of the data files used by the program.  The Court of Appeal upheld this approach.

The decision echoes the 2004 decision of Navitaire Inc v Easyjet Airline Co and BulletProof Technologies Inc. This involved a copyright infringement claim brought by Navitaire against EasyJet and Bulletproof with regards to software used to construct an airline booking (ticket reservation) system.

In that case Navitaire was contracted to supply a ticket reservation system for Easyjet. After the system had been completed Easyjet retained BulletProof to produce its own Easyjet reservation system which was virtually identical in terms of its functionality but written in a different software code. It was held in the case that it is only the source code or object code of a program (i.e. the underlying framework) that may be protected by copyright.

Despite these decisions it seems both fair and commercially commonsensical that computer software should be protectable as intellectual property. How can software companies otherwise get a return on their investment?

Protecting your investment

There are a number of different ways in which intellectual property in software can be protected:

a.    Copyright

b.    Confidential information

c.    Patents

d.    Contracts

Copyright

The source code and object code in computer programs are protected by copyright as literary works. Source code is human readable computer instructions. Source code must be converted to object code by software called a “compiler” before the program described in the source code can be executed. Object code cannot be read by people; it is a sequence of bytes that encode specific machine instructions that will be executed by the microprocessor in the computer when it runs the program.

Although copyright in source code and object code arises automatically under UK law, in order to take advantage of copyright protection the author must prove they are the creator of the source or object code. Accordingly details of the development of the software – who developed it, when and where – must be accurately recorded if the author is to assert copyright and benefit from its protection.

The problem with copyright is that it does not protect a computer’s  functionality. It only provides protection for the source code or object code of a computer program in the same way as copyright protects the words in a book but not the ideas it is based on. Creating a computer program that produces the same computer functionality as another earlier computer program but using a different software code is not therefore a breach of copyright. For example a software house that has a novel design for a new computer-based machine or robot could not protect that idea using the copyright.

The law of confidence

The design and functionality of computer software may be protected by the law of confidence but only so long as they are secret. As soon as the design and functionality of a computer are made public they are no longer confidential and lose the protection previously afforded to them by the law of confidence.

Although the law of confidence is useful for protecting computer technology before it is released onto the open market, it should be borne in mind that confidential information that is lost or stolen before a product is ready for release onto the open market can be freely used by a third party who receives it without notice of its confidentiality. In one real life case, an employee of a very well-known smartphone manufacturer left a prototype of the latest smartphone in a bar by mistake. Within a day the new technology had been published on the internet and could be freely used by anybody.

Patents

Patents can be used to protect innovative ideas. They confer a 20-year monopoly in return for disclosure to the public of the underlying concept, thereby affording more effective protection than is available through a combination of copyright and confidentiality.

However patenting computer programs is difficult and has been hotly contested in the UK and Europe, although the practice is widespread in the US.

UK law provides that computer programs per se are not patentable. Section 1(2)(c) of the Patents Act 1977 provides that anything which consists of a program for a computer is not an invention for the purposes of the Patents Act 1977 to the extent that a patent or application for a patent relates to that thing “as such”.

However, there is a way round this exclusion.  Patents have been granted in the UK for computer programs when they create a clear technical effect and go further than producing normal physical interactions between software and hardware.

In the English High Court case, CVON Innovations Ltd’s Application (2008), the court reviewed EPO and UK case law, and in particular the judgment by the Court of Appeal in Aerotel v Telco and Macrossan’s Application  COA(2006),  and identified five guidelines which may be used to indicate that a computer program is patent-eligible.  This analysis was used again in the subsequent Court of Appeal case of Gemstar-TVGuide International Inc v Virgin Media (2011):

a.    Does the claimed technical effect have a technical effect on a process which is carried on outside the computer;

b.    Does the claimed technical effect operate at the level of the architecture of the computer; that is to say whether the effect is produced irrespective of the data being processed or the applications being run;

c.     Does the claimed technical effect result in the computer being made to operate in a new way;

d.     Is there is an increase in the speed or reliability of the computer; and

e.     Is the perceived problem overcome by the claimed invention as opposed to merely being circumvented.

There are many examples of software patents granted by the UK Patent Office including patents for:

•    Editing and de-bugging a computer program

•    Processing techniques to achieve increased speed of execution of software

•    Improving the efficiency and speed of execution of application programs

•    Computerised billing systems for use on, for example, a telecoms network.

Practical steps that you can take

In the internet age it is essential to implement and maintain effective physical, technical and administrative security within your own company. You should request contractual guarantees and internet security audit certificates from service providers, clients, customers and professional advisers with which you share information.

It is also imperative to ensure that provisions in contracts of employment adequately underpin intellectual property rights including specific clauses in employees’ contracts of employment. These should confirm that the employee is under a duty to disclose to its employer company any ideas or inventions they originate and also make it clear to the employee exactly where they stand regarding materials created during the course of their employment.  For example, by stating that any trademarks, registered designs, design rights, copyright, database and other intellectual property rights (subject to the Patent Act 1977) created during employment or the use of materials, tools or knowledge made available through their employment, will become the exclusive property of the employer.

You should seek to protect trade secrets from being divulged for the benefit of a competitor, either during the employment or after its termination pursuant to the law of confidence.

The assertion of intellectual property rights and obligations of confidentiality should also be clearly stated in contracts with third parties such as business partners, professional advisers, suppliers, contractors and sub-contractors.

Return of property clauses should be incorporated in all agreements with employees and third parties –  so that valuable information assets may be recovered or accessed from their computers.

Patents should be applied for. Although patent applications are often difficult, patents provide much better protection than the law of copyright or confidence. If there is a reasonable chance of a successful application it should therefore be made.

It should be borne in mind in a global economy that similar protections must be analysed and sought in every country in which you intend to do business. Until then, you run a serious risk of not being able to capitalise fully on your software developments.

* Nick Gibbons is a cyber and insurance specialist and a partner in the technology, media & telecommunications (TMT) team at Berrymans Lace Mawer