Copyright Infringement

October 31, 2017 / Spring Report 2017

The imitation game: the perils of copying a developer’s code

How much pre-existing source code can a software or firmware developer use before their new work is deemed to infringe copyright? A recent decision by the Federal Court tackles this very question.

Introduction

Using pre-existing code that performs similar or identical functions can be a big time saver for developers and an even bigger cost saver for their employers.

However, as outlined by the Federal Court in IPC Global Pty Ltd v Pavetest Pty Ltd (No 3) [2017] FCA 82, even copying a small amount of code without authority from the owner can lead to significant financial and legal consequences.

Background

IPC Global Pty Ltd (“IPC Global”) develops equipment for testing materials such as asphalt and other construction supplies. The equipment includes custom programming to enable the user to test the materials and view the results.

In 2012, two high ranking employees of IPC Global resigned and established a rival company, Pavetest Pty Ltd (“Pavetest”). Pavetest immediately began producing a range of testing equipment which directly competed with IPC Global.

One of the resigning employees had been involved in the creation of the testing software at IPC Global, and was still in possession of a copy of the software at the time of their resignation.

The employee provided a copy of the software to a programmer engaged by Pavetest. The employee claimed this was to provide the programmer with some background in relation to the application of the software in order to develop a different and better system for Pavetest.

When creating the new Pavetest software, the programmer referred to IPC Global’s software in writing a first version of Pavetest’s software.

It was found that the Pavetest software contained some identical and some similar lines of code to IPC Global’s software.

Claim against Pavetest

IPC Global brought an action against Pavetest, alleging that:

1. Pavetest had infringed IPC Global’s copyright in the source code of the software;
2. The two employees had authorised the infringement;
3. Both employees had breached duties of confidence towards IPC Global; and
4. The two employees had breached contractual duties of good faith and fidelity owed to IPC Global.

In order to be successful in their claim for infringement of copyright, IPC Global had to establish that Pavetest had reproduced a ‘substantial part’ of the copyright work (i.e. the IPC Global software source code) in the Pavetest software source code.

Pavetest argued that the software copied was “common code”, and supporting infrastructure for the software as opposed to forming a key part of the functionality and operation of the software.

It was also established on evidence that only approximately 800 lines of Pavetest’s source code were identical to the IPC Global source code, which contained approximately 250,000 lines of code in total.

Findings

The Federal Court found that:

• Pavetest infringed IPC Global’s copyright in the software by the act of the former employee copying the software and providing it to the programmer.
• The former employees were liable as they authorised this infringement by Pavetest.

• Pavetest infringed IPC Global’s copyright in the software by reproducing a ‘substantial part’ of IPC Global’s software as, although the amount of source code copied was relatively quite small, the parts of the software that were copied constituted a functionally significant part of the software as they related to the interface or communication between the software and firmware.

• The two employees breached duties of confidence towards IPC Global relating to the software. The software was found to be confidential, and the employees misused the information by disclosing it to the programmer.

Orders

The Federal Court ordered that:

• Pavetest be permanently restrained from offering to sell the versions of the infringing software;
• the employees be permanently restrained from offering to sell the infringing software;
• Pavetest destroy the copies of the infringing software;
• an inquiry be held to quantify the damages (including any additional damages) or, at IPC Global’s election, to take an account of profits; and
• Pavetest and the individuals pay IPC Global’s costs of and incidental to the proceeding.

Takeaways

This case emphasises the care that must be taken by firmware and software developers to ensure that they do not rely too much on existing code when developing their own programs unless they have obtained all the relevant licences.

Even copying only a small proportion of an existing code can have significant consequences if that source code constitutes a functionally significant part of the software.

The findings in this case can be relevant for copying of other forms of copyright works. It is often an issue as to whether a “substantial part” of a work has been copied in cases relating to many artistic works (such as building plans), literary works or musical works (see for example the well-known case of Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Ltd [2010] FCA 29 where Australian band Men at Work were found to have copied the riff from popular children’s song “Kookaburra sits in the Old Gum Tree” and reproduced it in their famous song “Down Under”).

The lesson to be learnt is that it is not merely the amount of a part of a work that is copied, but the importance of the part to the work as a whole that may make it “substantial”. It is quality, not quantity, that counts.

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This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this report, or what it means for you, your business or your clients' businesses, please feel free to contact us.