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Copyright subsists in original artistic works, giving the author or creator the exclusive right to reproduce or republish the work. A copyright owner also has the right to grant licences to others to use their work. In many situations, the existence of copyright is straightforward, ownership clearly identifiable and any licences may be well-documented. Unfortunately, this is not always the case, particularly in the case of copyright in software.

Last month, the Full Federal Court handed down a decision in JR Consulting & Drafting Pty Limited v Cummings, which was on appeal from a Supreme Court decision in 2014. The case dealt with a broken down business relationship between a software developer and its client retailer/distributor. The retailer engaged the developer’s services from 2002, and the developer continued to work on updating and maintaining the software until 2011.

Both the Supreme Court and the Full Federal Court considered two questions:

  1. Whether there is copyright subsisting in the software updates that the developer worked on; and
  2. Whether the developer had licensed the copyright to the retailer under their arrangement, allowing the retailer to reproduce and communicate the copyright material to the public.

The Situation

JR Consulting & Drafting (JRCD) engaged Cummings under an informal arrangement to conduct several software updates to a software package and used as a tool to assist in building construction. The nine-year relationship eventually broke down, and plaintiff company JRCD continued to sell the software to its clients.

The contractual relationship between the parties was not evident from the agreements, leaving it up to the court to decide where copyright subsisted and whether infringement had occurred.

Copyright in Software Updates

Over the years, Cummings had performed numerous updates to the software and produced over 500 versions. Cummings spent about 40 hours a week writing the code from 2002 to 2011. In the Supreme Court, the originality of the updates was considered to determine whether copyright would subsist in the software updates. Based on the evidence was led, the Court stated that many of the updates were likely to have the characteristic of “originality” in light of the time and work Cummings put into them. However, the Court did not declare whether each update had copyright attached to them. The Court was, however, able to identify three versions of the software that were protected by copyright.

The Full Federal Court in considering the authorship of software updates expanded upon this decision. It looked to principles of copyright law as well as the decision of IceTV Pty Ltd v Nine Network Australia Pty Ltd in before finally concluding that copyright in fact protected each update and version of the software.

This is the first time the Full Federal Court has set out its approach concerning authorship and originality in software updates since 2009. Parties entering into software development engagement relationships need to be aware of this approach to make sure that contracts adequately deal with copyright ownership in relation to software updates, not just the initial development.

Infringement and Authorisation Liability

The second issue the Court considered related to JRCD selling the various software version to its clients. Given that copyright did subsist in the software updates, JRCD would need permission (a licence) from Cummings to sell the software to its clients. Cummings asserted that he had not given permission, and JRCD had therefore infringed his copyright, whereas JRCD claimed that there was a licence.

The Court agreed with Cummings that there was no licence, particularly in light of the relationship breakdown. Therefore, the copyright had been infringed. As director of JRCD and the individual authorising the sales, Pacione was found to be liable for the company breaching the copyright.

Key Takeaways

Copyright was then found to subsist in the software updates and was found to be infringed by unauthorised reproduction and sales. Damages will be assessed at the next hearing.

As a software developer, the presumption is that you will own the copyright subsisting in software programmes that you develop unless otherwise specified under an agreement. Any agreement between yourself and your client needs to assign clearly any intellectual property created as part of the engagement. If you are retaining ownership of the copyright, you need to review the terms of the licence (if any) to ensure they offer you maximum protection.

If you are engaging a software developer for your business, make sure that the Development Agreement gives you the rights that you need to be able to conduct your business. If you are reselling the software or licensing the software to others, the Agreement needs to outline your right to do so. Questions? Get in touch.

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