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Cite as: [1998] EWHC Patents 340

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Flyde Microsystems Limited v. Key Radio Systems Limited [1998] EWHC Patents 340 (11th February, 1998)

CH 1994 F No 5193

 

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Before: THE HON. MR. JUSTICE LADDIE

 

B E T W E E N

 

FYLDE MICROSYSTEMS LIMITED

Plaintiff

-and -

 

KEY RADIO SYSTEMS LIMITED

Defendant

1. Mr. Iain Purvis and Mr. David Rainford instructed by Harrison, Drury & Co. for the Plaintiff

2. Mr. Guy Tritton instructed by Clifford Cowling & Co. for the Defendant

 

3. Hearing dates: 27 - 29 January, 1998

JUDGMENT

4. This is the official judgment of the court and I direct that no further note or transcript be made

DATED: 11th February 1998

5. Mr. Justice Laddie:

1. This is an action for infringement of the copyright in certain computer software. In particular this case is concerned with the alleged infringement of the copyright in software loaded into mobile and portable radios of the kind used, for example, by security guards.

2. The plaintiff, Fylde Microsystems Ltd, is engaged in the development and manufacture of telecommunications equipment and related computer software. The defendant, Key Radio Systems Limited, is a company which manufactures and imports mobile and portable radios. In the 1980's and early 1990's the plaintiff and the defendant were co-operating in the design of software to be used in a new generation of radios to be sold by the defendant. In essence the plaintiff's case is that it wrote the software, called "KEYPORT" software, which was then installed in the defendant's radios for onward sale to the defendant's customer. In this action the plaintiff asserts that the defendant has made unlicensed copies of the KEYPORT software.

3. The technical background to this dispute is as follows. When an area is to be covered by a number of mobile radios on a radio network, it is possible to allow them to intercommunicate with a base station and each other by assigning to each a distinct radio frequency. As the number of radios using the network increases so too does the number of discrete radio channels required. In the mid-1980's it was realised that more efficient use had to be made of available bandwidth. The DTI sponsored and supported a new method of reducing the number of channels. This was called the "trunked radio system". In such a system, there is a master channel to which all radios on the network have access. The radios have circuitry within them which allows them to switch from one radio frequency channel or band to another. The radios communicate with the master channel which is connected to a base station. Each mobile radio is in communication with the master channel which monitors which radios are in use and which are not. The master channel can instruct a mobile radio to switch to and use any radio channel which is free. The result is that the system is able to allocate available channels as needed to radios operating in the network. Radios which are not in use do not use any of the channels. The network is therefore able to support a greater number of radios than it has radio bands.

4. Since the radios on this type of network need to 'talk' to the master channel and obey instructions to switch from one channel to another, they must be 'intelligent'. The network will operate according to a set of rules which determine, for example, when a radio changes from one channel to another, what channel to switch to and what electronic signals are to be used to control such switching. The radios need to understand and operate in accordance with those rules.

5. Radios designed to work in this kind of environment can be thought of as being made of two parts. One is the hardware consisting of the casing containing the radio transmitter and receiver and items such as a keypad, microphone and speaker. The other is the set of instructions which tells the hardware what to do. The hardware is usually manufactured abroad. The control instructions are contained in an electronic circuit which is fitted inside the hardware. The plaintiff designs such electronic circuits. The electronic circuits which are in issue in this case are made of a printed circuit board ('PCB') which has mounted on it a number of components which are connected together in a particular electrical arrangement. One of the components is an electronic microprocessor chip called an EPROM. This is a device which can be loaded with a computer program, i.e. computer software, which controls how it and the circuit it is connected to will work. In fact an EPROM can be erased. That is to say the program or software in it can be removed and replaced by another one.

6. It is not now in dispute that the plaintiff has, and at all material times had, great expertise in designing the add-on electronic circuits for mobile radios. It designs PCBs and writes the software which is loaded onto the EPROM on each of them. Its customers include some of the largest suppliers of mobile radios to these modern radio networks. It produces the electronic brains for the bought-in hardware used by these suppliers. The plaintiff's first customer for this kind of software was a New Zealand company called Tait Mobile Radio. The software produced by the plaintiff for that company was at that time at the forefront of technology in the telecommunications industry.

7. The defendant wanted to enter this young, but potentially substantial, market. It could obtain the hardware from abroad. It became the sole importer of one particular design and make of radio hardware. It needed the PCBs and software to make that hardware intelligent. In 1987 the plaintiff was approached by Mr. Short, the managing director of the defendant. The defendant asked the plaintiff to develop a printed circuit board for its mobile radio, the "KM225". This it did. PCBs with EPROMs loaded with the software written by the plaintiff were delivered to the defendant from the end of 1987 onwards.

8. In the late 1980's the DTI became involved in setting standards to be used by all operators of trunked radio systems. In fact Mr. Brian Seedle, a director of the plaintiff, was a member of the committee set up by the DTI to set the standard and, at some stage, became the chairman of it. The standard eventually set is extremely detailed. It sets out with great precision how a trunked radio system and the radios within it must work.

9. There were five versions of the software supplied by the plaintiff for use in the EPROMs incorporated in its PCBs for the defendant. Furthermore from the very beginning there was a continuous process of refinement and improvement. Defects, known as bugs, were discovered and fixed and, as the shape and requirements of the developing DTI standard became known, so the software was modified to make it consistent with or more compliant with that standard.

10. Initially the plaintiff supplied the defendant with PCBs carrying EPROMs already loaded with the software. However with the passage of time, a more efficient system for supplying the defendant's needs was arrived at. Eventually the plaintiff sent the PCBs it had designed to the defendant who then fitted onto them the blank EPROMs. The latter were then loaded by the defendant with the software written by the plaintiff. At first the defendant was supplied by the plaintiff with a copy of the software on disc which it could then load (or, to use the technician's jargon, 'blow') into the EPROMs. Subsequently, to speed up delivery of the software, it was supplied to the defendant by the plaintiff over telephone lines.

11. There was no contract governing the relationship between the parties. They appear to have proceeded on the basis of trust. The plaintiff also made no separate charge for the hours of work it put into writing the software. Instead it made its money from the price it charged the defendant for the PCBs which were designed to interface with and operate in accordance with the software. The plaintiff's PCBs were priced so as to give the plaintiff a significant profit and a contribution to its overheads and research and development costs. Of course, without the latter contributions, the PCBs would have been cheaper.

12. The relationship between the parties appears to have been to their mutual advantage. I understand some £3,000,000 of PCBs destined to use EPROMs loaded with KEYPORT software were sold to the defendant. However in early 1994 the plaintiff received a report from a customer that it had received some of the defendant's radios which contained PCBs which were not made by the plaintiff but which were loaded with the KEYPORT software which the plaintiff had written.

13. The plaintiff thought that the software was its property and that the defendant had no right to reproduce it, except for use on PCBs supplied by the plaintiff. If the defendant was free to reproduce the software on PCBs which it made itself or were obtained from third parties, the plaintiff would receive no payment for its software.

14. The plaintiff challenged the defendant. The defendant admitted that it had copied the software onto EPROMs and PCBs not derived from the plaintiff. The explanation given by the defendant for this action will be considered below. It said that it had only copied the software onto a very small number of EPROMs for use with PCBs not obtained from the plaintiff. The plaintiff was left carrying a significant stock of PCBs designed exclusively to fit in the defendant's hardware. The dispute between the parties was not resolved and these proceedings have been the result.

15. Subsistence of copyright in the KEYPORT software is not denied. There is no dispute that the plaintiff spent many man years on writing the software. Mr. Seedle gave evidence, which was not challenged, that the software incorporated a total of 20 man years of work, taking into account the work which had been expended by the plaintiff in writing prior software from which the software in suit was derived and which, in part, it incorporated. It is not disputed that the software was written entirely by the plaintiff or its employees. Further it is not in dispute that the defendant loaded the KEYPORT software onto a number of EPROMs not obtained from the Plaintiff which in turn were installed on PCBs not obtained from the plaintiff. It is also accepted that all of this was done without notice to or explicit permission from the plaintiff. Radios containing these PCBs and EPROMs were supplied to the defendant's customers.

16. Notwithstanding these concessions, the defendant says that it has not infringed any of the plaintiff's rights. It says that it is a joint owner of the copyright in the software because it is a work of joint authorship. Secondly it says it has an implied free licence to use the copyright as it has. Further, and for good measure, it says that if it is joint owner of the copyright and it has no licence to use it freely as it wishes then the same applies to the plaintiff who cannot use the software without the defendant's permission. It counterclaims for infringement of the copyright by the plaintiff.

17. Both parties agreed that whether or not the defendant is a joint owner of the copyright, it needs a licence to copy the software onto EPROMs. Joint ownership therefore does not provide the defendant with a defence to the plaintiff's claim. However a finding of joint ownership is a necessary ingredient in the defendant's counterclaim.

18. In November, 1996, a consent order was made for the trial of two preliminary issues as follows:

6. "(a) whether the copyright in the software is owned by the Plaintiff alone or whether it is owned by the Plaintiff and the Defendant jointly;

7. (b) whether the Defendant had an implied licence as alleged in paragraph 7 of its Defence"

  1. This is the trial of those preliminary issues.

Joint Authorship

20. The defendant pleads that the KEYPORT software was jointly developed by it and the plaintiff in such a way that the contributions of each are not distinct or capable of severance. It gives particulars of this plea in its defence as follows:

8. "In 1987, the Plaintiff sent the Defendant a module for a mobile radio system which came supplied with software. The Defendant then incorporated the module and software into its radio systems which had to be compatible with its clients' equipment e.g. Racal. Because the Plaintiff did not have full test facilities, they relied upon the Defendant to test the software. Problems were found in the software and the Plaintiff was informed of the test results and the nature of the software fault and the Plaintiff then made the relevant adjustments to the software and sent it back for re-testing. This cycle of adjustment and evaluation was repeated many times. As time went by, the Defendant learnt about the software techniques used by the Plaintiff and actually suggested what software adjustments needed to be made and the Plaintiff would then make the necessary adjustments to the software. Many times, the Defendant adjusted and modified the software itself having requested that the Plaintiff made the software adjustable.

9. After considerable development, a functional unit was reached which incorporated both the Plaintiff's and Defendant's contributions. Moreover, many customers required customisation of radios and the Defendant suggested modifications that were required to the software and the Plaintiff implemented such modification. Again, with such modifications, a period of development and evaluation would follow.

10. Later, the Defendant developed the"carrier sample technique" which provided for a different mode of operation and made the system much more effective. This development was given to the Plaintiff to incorporate accordingly into their software. Again a period of development and evaluation was carried out.

11. Eventually, a functioning module containing the jointly developed software ("the Joint Software") was obtained and which became the standard software used by the Defendants in their mobile radios."

21. As noted above, it is not disputed that all the software was written by the plaintiff. The defendant's argument is that the skill, time and effort it put into ensuring that the software performed in the way it now does makes it a joint author.

22. Section 10(1) of the Copyright Designs and Patents Act 1988 defines a work of joint authorship as "a work produced by the collaboration of two or more authors in which the contribution of each author is not distinct from that of the other author or authors". This provision does not turn someone who is not an author into an author. It is concerned to categorise works which are made from the input of two or more authors. The question to be answered in this action is whether Mr. Seedle alone was the author of the whole of KEYPORT or whether there was also another author, namely Mr. Andrew Barrett of the defendant.

23. Mr. Tritton, for the defendant, says that the correct approach is that set out in Cala Homes v. McAlpine [1995] FSR 818 at 835, a case concerning the copyright in architectural drawings:

"In my view, to have regard merely to who pushed the pen is too narrow a view of authorship. What is protected by copyright in a drawing or a literary work is more than just the skill of making marks on paper or some other medium. It is both the words or lines and the skill and effort involved in creating, selecting or gathering together the detailed concepts, data or emotions which those words or lines have fixed in some tangible form which is protected. It is wrong to think that only the person who carries out the mechanical act of fixation is an author. There may well be skill and expertise in drawing clearly and well but that does not mean that it is only that skill and expertise which is relevant. As Mr. Howe has said, where two or more people collaborate in the creation of a work and each contributes a significant part of the skill and labour protected by the copyright, then they are joint authors."

24. I do not understand Mr. Purvis, for the plaintiff, to disagree with this submission. Furthermore, both parties rely on the decision of Jacob J. in Ibcos Computers v. Barclays Mercantile Highland Finance [1994] FSR 275. In particular Mr. Tritton says that the issue of infringement and authorship are interlinked. If it is an infringement to take a particular amount of the skill and labour in a copyright work, then the source of that skill and labour must be an author for copyright purposes. For this reason he drew my attention to the following passages in the Ibcos judgment:

"As 1 have said, United Kingdom, copyright cannot prevent the copying of a mere general idea but can protect the copying of a "detailed" idea. It is a question of degree where a good guide is the notion of overborrowing of the skill, labour and judgment which went into the copyright work ... in the end, the matter must be left to the value judgment of the Court. Having expressed this reservation however, 1 thoroughly agree with what Ferris J. went on to say :"Consideration is not restricted to the text of the code ..." That must be right: most literary copyright works involve both literal matter (the exact words of a novel or computer program) and a varying levels of abstraction (plot, more or less detail of the novel, general structure of a computer program).

I therefore think it right to have regard in this case not only to what Mr Turner called "literal similarities" but also to what he called "programme structure" and "design features." (p.302)

and

"... It is all a question of degree. Very often, the working out of a reasonably detailed arrangement of topics, sub topics and sub-sub topics is the key to successful work of non-fiction. I see no reason why the taking of that could not amount to an infringement. Likewise there may well be a considerable degree of skill involved in setting up the data division of the programme. In practice this is done with the operating division in mind and its construction may well involve skill, labour and, I add, judgment for it to be considered a substantial part of the programme as a whole".

25. In relation to authorship, it seems to me that two matters have to be addressed. First it is necessary to determine whether the putative author has contributed the right kind of skill and labour. If he has then it is necessary to decide whether his contribution was big enough. The latter issue in particular is a matter of fact and degree. The passages in Ibcos cited above indicate a similar approach in relation to the issue of infringement.

26. There is no doubt that there was close co-operation between Mr. Seedle and Mr. Barrett during the five or so years during which the various versions of the KEYPORT software were written and refined. As Mr. Purvis puts it, Mr. Barrett played an important role in the consultation process between the plaintiff and the defendant. He spent many hours discussing the software and what it was to do with Mr. Seedle. The plaintiff says that this was to be expected. KEYPORT was designed as specialist bespoke software to be supplied to a technically sophisticated customer. It is almost inevitable that such a customer would be intimately involved in monitoring the software as it is developed and suggesting what its functions should be. But, he says, none of this contribution was at a level recognised as giving rise to copyright protection. He argues that most of Mr. Barrett's contribution was at the level of asking Mr. Seedle to write software which could achieve functions which he or the DTI committee required.

27. Mr. Tritton submits that this analysis is unfair to the defendant. He says that the following guidelines are of assistance in helping to decide whether or not A who did not code the programme (which was coded by B) is a joint author:-

(i) Could the programme have been written without A's assistance ?

(ii) Was A's contribution the product of skill, judgment and labour?

(iii) Did A's contribution reduce the labour and skill that B had to put into coding the programme?

(iv) Did A contribute to the structure or design of the program or part of it?

(v) Was A's contribution at a high or low level of abstraction in the program?

(vi) If A was responsible for testing and evaluating the program, was A a black box tester (i.e. YES it works, NO it does not) or did A provide valuable feedback?

28. Based on this he says that Mr. Barrett' s contribution in fact was substantial and sufficient to make him an author. He placed particular emphasis on the fact that Mr. Barrett's contribution saved the plaintiff a lot of time in perfecting KEYPORT.

29. Before considering the facts of this case, I should say that I am not persuaded that Mr. Tritton's guidelines are sufficient. The matters he lists are all factors which may throw light on whether someone is a joint author, but they are no more than that. They do not prove authorship and, in some circumstances, they may be misleading. This may be illustrated as follows. It is common for new software to be issued to third parties for testing (so-called "beta testers"). They are asked to report back to the programmer any faults which they detect. A good beta tester may well spend hours in thinking of ways of testing the software and then carrying out those tests. He may find many bugs, some of them significant. He relieves the programmer of the task of carrying out all the tests on the software and he may save the programmer a lot of time as a consequence. In many cases beta testers can be said to be part of the team who are responsible for the finished software being as good as it is.

30. The fact that the programmer is saved time by reason of the beta tester' s efforts does not mean that the latter is an author. Although the beta tester may expend skill, time and effort on testing the software, it is not authorship skill. As Mr. Purvis put it, it can be likened to the skill of a proof-reader. In all cases it is necessary to have regard to what the time and skill was expended on. Here Mr. Purvis says that Mr. Barrett's efforts, although lengthy and valuable, did not save any of Mr. Seedle's time in respect of programming.

31. What, then, did Mr. Barrett do? As Mr. Tritton says, and Mr. Purvis agrees, it is not possible to play a video of what Mr. Barrett did over a period of 5 or so years. The evidence only enables the court to get a flavour or snap shot of what happened.

32. In support of its claim to be a joint author, the defendant relied on the fact that it had in its possession a copy of the source code of one version of KEYPORT. The significance of this is dependent upon understanding what source code is. When a programmer writes a piece of sophisticated software he is writing instructions which the computer processor will understand. The software will contain numerous routines which interact with each other. When he is writing the program he will start by writing it in a way which makes it easy to understand. To do this he will use a language, which is called a "high level" language, that is to say a language which is based on English (for an English programmer) but is very condensed. It will include within it numerous short explanations, also written in truncated English, explaining what each part of the program is supposed to be doing. This means that the author of the program or any other programmer can readily understand the logical steps by which the program is supposed to work. It facilitates the tracking down of errors and the modification or refinement of the software. This is combination of instructions and explanations in high level language is called the source code. It is highly valuable because it contains not just the program but, as explained above, an explanatory manual. The written explanations contained within the source code are neither understood by nor of relevance to the microprocessor. To enable the program to function, the source code is turned into a form which is understood by the microprocessor. The latter does not understand even simple English. It responds to a "low level" language, called machine code, which is simply a series of numbers. There are programs which will convert source code into machine code. They are called compilers. When the source code is compiled all the explanatory notes are removed.

33. The machine code for any sizeable program will be unintelligible to any normal human. Programs do exist, called de-compilers, which to a limited extent are able to turn machine code back into something like source code. But even if this is done, all the explanatory notes have been lost. Therefore a decompiled program is likely to be very difficult to understand. This again reinforces the importance of the source code to the programmer or to anyone helping the programmer to write the program.

34. In his witness statement Mr. Barrett said:

"The fact that the original source code was supplied over the years by the Plaintiff to the Defendants is indicative of the level of consultation which took place on the detailed working of the program during its development and the Plaintiff' s acknowledgement of my ability to contribute to that development in detail. ... A 51/4 inch disc containing the whole of the source code was handed to me personally by Brian Seedle during a meeting of the DTI in Waterloo Bridge House. ... At no time was there any written or verbal request to destroy or return the disc. Furthermore at no time at the initial meeting or at any time thereafter did the Plaintiff Company supply any form of Confidentiality Agreement or letter preventing the reproduction of the source code of any part of the program or indicate in any what that I or the Defendant Company could not use the various software programs as they evolved."

35. The assertion that "the original source code was supplied over the years" was accepted by Mr. Barrett as being misleading. The defendant only had in its possession one copy of one version of the complete source code, although from time to time extremely small pieces of source code were sent by Mr. Seedle to Mr. Barrett for the purpose of discussing a discrete issue. Other than in relation to this point, Mr. Barrett stuck to his story under cross examination. At the trial he produced a 51/4 inch disc which was said to contain the source code. It had a label bearing Mr. Seedle' s handwriting. For reasons which were not adequately explained to me, the defendant had refused to allow the plaintiff to see this disc or its contents before the trial.

36. Mr. Seedle's version of events was quite different. He said that one copy of the source code was sent to the defendant by mistake over a telephone linkage. Mr. Seedle said that as soon as he realised the mistake, he asked Mr. Barrett to destroy the code and Mr. Barrett agreed. He says that he would never have contemplated sending out a complete source code. It was the lifeblood of the company. He denied ever handing over a copy of the source code on disc to Mr. Barrett whether at the DTI or otherwise. According to him, Mr. Barrett must have loaded the software onto a disc which the defendant already had and which had originally contained machine code. Hence the existence of Mr. Seedle's handwriting on the label.

37. There is no middle ground between these two versions of events. Each witness put forward his evidence forcefully. Neither admitted to any difficulty in recalling the events clearly. Each said that the other's version of events was untrue. There are, it appears to me, a number of peculiarities about the defendant's version of events. It is said that Mr. Seedle was not asked for the source code, he simply volunteered it at the DTI meeting. It is not said that he explained why he was giving it to the defendant. It is not referred to in any subsequent correspondence although small pieces of source code continued to be sent to the defendant. No explanation was given for the fact that the source code for only one version of KEYPORT was handed over. The co-operation between Mr. Seedle and Mr. Barrett was extensive over a period of about 5 years. If, as the defendant asserts, the plaintiff was willing to let the defendant have its source code to facilitate discussion of the details of the program, why didnít the plaintiff supply and why didnít the defendant ask for the source code for each version of KEYPORT rather than engaging in the practice of supplying only a few lines of code on an as-required basis? Mr. Barrett said during examination in chief that Mr. Seedle could not have transferred the source code over the telephone lines as claimed because at that time the speed of telephone transmission and reception of data was so slow that it would have taken 24 hours. Mr. Barrett said that it would have been readily apparent that a file which was much too long was being sent and the transmission would have been terminated by the plaintiff. However under cross examination he withdrew his evidence that transmission would have taken 24 hours and accepted that, at worst, it would have taken about 25 minutes.

38. On this issue I have come to the conclusion that Mr. Seedle is telling the truth. I accept his evidence that the source code was something which his company would always keep confidential. In my assessment, Mr. Seedle would not have simply handed over the source code to the defendant particularly when he had not been asked to do so. I do not believe he would have handed over the source code without telling the recipient why he was doing so. It follows that this episode throws no light on the level of Mr. Barrett's involvement in the creation of the KEYPORT software.

39. Nevertheless, there is no doubt that the contribution which Mr. Barrett made was extensive and technically sophisticated. I think Mr. Purvis is right to categorise Mr. Barrett's work as falling under five heads. First he put effort into error fixing and reporting faults and bugs. Secondly he made a functional contribution by way of setting the specification for what the software was to do. Even Mr. Barrett's design of the carrier sample technique, a technique which enables the radio to detect that it is nearing the outer receiving limit of a transmitter's signal, was in substance only specifying what the software was to do, not how it did it. Thirdly he made a contribution by suggesting what was causing some of the faults, but he did not produce the software solution to them. Fourthly, he provided technical information concerning the characteristics of the hardware into which the software fitted and with which it had to co-operate. This enabled Mr. Seedle to write the I/O (in-out) software which allowed the software to talk to the hardware and vice versa. Fifthly he set parameters and timings within the software. That is to say that where the software was written in a way in which parameters and timings could be chosen by the user, he made the choice.

40. Mr. Tritton says that there was a division of labour and duties between Mr. Seedle and Mr. Barrett. He says that the former was experienced in programming while the latter was experienced in the design and operation of radios. However the fact that each had learned enough about the other's field of expertise to allow them to interchange ideas did not turn Mr. Barrett into an author of the software written by Mr. Seedle. This division of labour is consistent with Mr. Seedle being entirely responsible for the skill and labour involved as author of the KEYPORT software. Although all of Mr. Barrett's contributions took a lot of time and were very valuable they did not amount to contributions to the authoring of KEYPORT.

  1. It follows that the assertion of joint authorship fails. With it falls the counterclaim.

Implied Licence

42. The licences which the defendant says should be implied are expressed as follows in the defence:

"Furthermore or alternatively, if the Defendant needed by operation of law permission from the Plaintiff to carry out any of the acts set out in Paragraph 5 of the Statement of Claim (which is denied), the Defendant had an implied licence to do the said acts.
PARTICULARS
(a) The joint development of [KEYPORT] software involved considerable effort, time and money on behalf of the Defendant. By way of example, in the years 1987 to 1992, Andrew Barrett, an employee of the Defendant spent approximately 50% of his time developing the [software] in co-operation with the Plaintiff. For reasons of commercial efficacy, the Defendant would not have committed itself without having the ability itself to exploit the [software] without recourse to the Plaintiff.
(b) The Plaintiff has sold to third parties the [software] (which includes the Defendantís said "carrier sample technique") to third parties without seeking the permission of the Defendant and/or the payment of royalties to the Defendant. Such is evidence of the partiesí mutual intention throughout the period of development that each party would be free to independently exploit jointly developed software.
(c) Where radios were supplied by the Defendant which incorporated the Plaintiffís PCB and the [software] were not of merchantable quality because the Plaintiffís PCB was not of merchantable quality, in particular because it produced too much electronic "noise", the Defendant was required by reason of commercial efficacy to replace the PCBs in its radios with PCBs which did work (whether its own or the Plaintiffsí). In any event, the Defendant did replace radios supplied to some customers (in particular those customers referred to in the Statement of Claim) which contained defective PCBs of the Plaintiff with its own PCBs (in both cases containing the KEYPORT software) for which the Defendant bore the entire cost of replacing the PCBs."

43. Particular (b) in this plea can be disposed of immediately. It is not a particular of an implied term at all. It appears to be an allegation that there was a consensus between the parties and some sort of collateral contract. This was a plea which was not supported by any of the evidence. On the contrary, the defendant accepted throughout that there was no contractual relationship between the parties. Furthermore the plea fails because there is no doubt that the plaintiff never intended to allow the defendant to exploit the software, whatever its own rights might have been. Further, it did not sell KEYPORT to third parties. It is true that after it had learned of the defendantís use of KEYPORT without its permission, it put out an advertisement offering PCBs containing KEYPORT for sale. Mr. Seedle' s evidence, which was not really challenged, was that this was done in a fit of pique because the defendantís actions left the plaintiff with a large stock of unsaleable PCBs. Mr. Seedle said that there was no one other than the defendant to whom the PCBs could be sold and that he knew that. The advertisement was no more than a futile gesture of anger.

44. Particular (a) asserts that there was an implied licence arising by reason of commercial efficacy. Mr. Tritton expands this as follows. He says that in collaborative ventures where neither party pays the other for the other's work and each contributes substantially itself in terms of time, money and effort to the protected work it is reasonable and necessary to infer that each party will be free to exploit the work in whatever manner it deems fit. No reasonable business person would agree to commit its company's resources to a joint project which results in a protected work if it was always dependent on the whim of the other party or parties as to whether or not it could exploit the work. If such was the case, all collaborative ventures which produce protected works would be seriously jeopardised. Accordingly, in a collaborative venture such as occurred in this case, in the absence of express agreement, there is invariably an implied licence that both sides are free to exploit the work themselves.

45. The only part of this submission with which the plaintiff agrees is that a term can only be implied in cases of necessity. It goes further and says that a term can only be implied into a contract and here there was none.

46. In my view this plea fails. If the defendant is right, it would mean that after the plaintiff had spent 4 years developing KEYPORT without payment, the defendant would be able to go off and exploit it without recompense. Since it was at all times apparent that the only customer for the software was the defendant, this means that the plaintiff would lose the only avenue through which it could be reimbursed for its efforts. As Mr. Short, the defendantís managing director put it:

"The PCBs and the software were always designed to fit in Key radios so initially Fylde would no have had any other persons to sell the PCB with the software in them."

47. Save for the use of the word "initially" this statement is accurate and was always appreciated by the parties. Mr. Short also agreed under cross examination that the defendant was paying the plaintiff every time it bought a PCB and that that was the only way the plaintiff was being remunerated.

48. Mr. Trittonís suggestion that this makes his client dependent on the whim of the plaintiff is not a reflection of the commercial reality. Since the defendant was the only company in the United Kingdom with access to the hardware into which the PCBs could fit, the plaintiff had no commercial option but to supply them to the defendant. This is reflected in what actually happened. The plaintiff always met the defendantís procurement requirements. In fact, when the defendant changed over to a new source of software and PCBs (the development of which had been kept secret from the plaintiff) the result was to leave the plaintiff carrying a large stock of bespoke PCBs for which there were no customers. The risks were mainly carried by the plaintiff.

49. The imposition of a term such as that suggested by the defendant is not necessary. It is not reasonable either. I do not accept that either the plaintiff or the defendant would have thought otherwise. Indeed, the reaction of the defendant to the plaintiffís complaint is illuminating. It is contained in a letter dated 29 April 1994 from Mr. Barrett to Mr. Seedle. In it Mr. Barrett tried to explain that the defendant only used the copyright software because it was not in a position to supply alternative software which it was having written by another company. Apparently a prototype of the replacement software had been shown to some customers but the defendant was not yet in a position to sell radios containing this. He said that the defendant therefore decided "perhaps unadvisedly" to produce a short run of PCBs with KEYPORT software. He said that this was a "drop in the ocean" and he ended as follows:

" I re-state, for the record, that any customer whose system requires Fylde software (BA etc.) in portables will only have Fylde software fitted in X112 supplied by Fylde. As we have always done, that is why we continue to buy quantities of boards, albeit much fewer than in the heyday"

50. If the implied licence claimed by the defendant was both reasonable and necessary, it would have been apparent to the defendant at the time of writing this letter. The letter would have been in very different terms. In particular, it would not have been defensive and apologetic. In my view Mr. Purvis was right to suggest that a term like that proposed by the defendant would have represented a commercial disaster for the plaintiff.

51. This defence fails

52. The alternative implied term put forward is to the effect that the defendant had a licence to replace PCBs supplied by the plaintiff which were not of merchantable quality. For this purpose the defendant was entitled to copy the KEYPORT software. Once again the defendant advances the argument that such a term is both necessary and reasonable.

53. As Mr. Purvis points out, if the plaintiff supplied goods which are not of merchantable quality, the defendant would have a cause of action in breach of contract. Since that is so, the defendant must show that a licence to copy the software is implied notwithstanding the existence of that cause of action. It is to be noted that the defendant is not claiming that all PCBs supplied by the plaintiff are not of merchantable quality. It would have been difficult to do so in view of the very large sales which had been achieved. The licence extends only to replacing defective PCBs with new ones.

54. The defendant has failed to make out the existence of any such term. If the plaintiff supplied a small number of defective PCBs it could, no doubt, be required to replace them or pay damages. There is no necessity to give to the defendant a licence to reproduce the KEYPORT software in PCBs not obtained from the plaintiff. Furthermore, even if a licence of such limited scope could be implied, there is no material to support the defendantís assertion that it has any relevance to this case. In particular the defendant has failed to prove that any of the non-Fylde PCBs containing KEYPORT were produced for the purpose of replacing defective Fylde PCBs. There is no evidence that any customer returned a defective radio and that its PCB was replaced. There is no evidence from any such customer and no documents have been produced by the defendant which show that any such replacement took place. Once again the only document which seems to throw light on this issue is the letter of April 1994 from Mr. Barrett referred to above. That states that the reason for making the non-Fylde PCBs and loading them with copies of KEYPORT was to satisfy the demands of customers who had been shown the prototype of the new PCB and its software. The letter does not assert that KEYPORT was copied onto non-Fylde PCBs because of a merchantability problem. As Mr. Purvis pointed out, the first time the defendant mentioned a merchantability problem was in its witness statements and proposed re-amended Defence and Counterclaim which were sent to the plaintiff a few days before the commencement of the trial and some three years after this action was commenced.

55. This defence fails also.

56. It follows that the plaintiff has proved sole ownership of the copyright in the KEYPORT software and its infringement by the defendantís acts of unlicensed reproduction.

___________________________________________________________________________

1 Witness statement paragraph 12.

 

 

 

 

 


© 1998 Crown Copyright


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