JULY - AUGUST THE COMPUTER LAW AND SECURITY REPORT

is the cheque post-dated or out-of-date? is it endorsed? has it been altered? is it mutilated? do the amounts in words and figures agree? does it bear any special crossings? has payment been countermanded by the drawer? How are all these points to be covered unless the manager or his staff have the actual paper in front of them? The way in which cheques are used has changed significantly over a number of years. The proportion of cheques issued under the cheque guarantee scheme is very high, and most are very simple payment instructions with none of the complications for the detection of which the checks outlined above were devised. In most cases, therefore, the purpose of the drawer will have been met if his account is debited and the payee's account credited, whether or not the paper itself is physically delivered to the drawee bank. The difficulty arises only in the event of a disputed payment, when the instrument will be required to establish whether or not the drawee bank had the right to debit the customer's account. In many cases, where the cheque is one that has been encashed by the customer at another branch of the same or another Bank, there is no question as to the Bank's right to debit the account, and truncation can be used with the minimum of complication. In other cases, the big question is whether the drawee Bank actually has the right to pass a debit entry in respect of a cheque (which is also a bill of exchange) without sight of the paper instrument.

The law The Bills of Exchange Act imposes on the collecting Bank a duty to present a bill for payment to the drawee Bank.

However, the Act also includes a 'waiver' clause, by which the collecting Bank can be relieved of that duty. This has been represented, mistakenly in my view, as the green light for truncation. The 'waiver' clause is there for use in the case of bills which are issued in 'sets' to enable the collecting Bank to escape inequitable liability for non-presentation where payment of a particular bill has already been effected through the presentation of another voucher of the set. It emphatically does not entitle the collecting bank to seek payment without presentment, and it does not entitle the drawee bank to pay without presentment. It has been suggested that a way round the difficulty might be for the banks to introduce a completely new vehicle for making payments, similar to a cheque, but falling outside the definitions of a cheque or bill of exchange within the Act. This might present its own problems, however, as the Act also contains a 'catch-all' clause which makes its terms applicable to any instrument the purpose of which is to effect payment. However, the banks and their customers should find encouragement in the historical development of banking law. The Bills of Exchange Act was itself the result of some 200 years' practice being codified, and banking law has continued to evolve. It seems unlikely that the same process will continue; that the law will follow practice, and that, ultimately, a procedure which works and which results in the intentions of those making payments being fulfilled will be accorded recognition. John Railton, Committee of London and Scottish Bankers.

CSA BRIEFING

COMPUTER SERVICES ASSOCIATION - LEGAL AFFAIRS GROUP The Computer Services Association is the representative body for the British computer services industry and now represents over 80% of services activity in Britain. In the eleven years since its formation, it has become an authoritative and respected voice within both industry and government circles. The main objectives of the C.S.A. are "to promote the business activities of its Members and to assist the improvement of quality of service." This is pursued through a wide range of activities including conferences, publications and debates designed to ensure that organisations which seek computing services are best served by a C.S.A. member. It is also active internationally as part of the European Computer Services Association and has been instrumental in helping the computer services industries in other countries establish similar associations. Within the C.S.A., there are a number of different groups concerned with sectors such as consultancy, training, third party maintenance and legal affairs. Each of these groups meet on a regular basis to discuss current matters of interest and concern, and to share common experience, in addition, each group has its own Code of Practice in accordance with which, members are expected to conduct themselves. These Codes of Practice, along with sets of contract guidelines, are designed to ensure that high professional standards are maintained. In this article, I shall be looking at the Legal Affairs Group, its activities and its spheres of interest.

C.C.T.A. From time to time, the Group holds discussions with members of the Central Computer and Telecommunications Agency (C.C.T.A.), the Government body whose task it is to co-ordinate the purchasing policy of the various government departments. One of the objectives of the C.CT.A. is to standardise ordering procedures. To this end, there are already in place standard contractual terms for equipment supply (CON 84) and for consultancy services (CON 107). It is intended that there is to be a review of these terms in the course of this year. The Legal Affairs Group have set up a small working party to conduct these negotiations, whose objective it is to ensure that industry's view is properly represented, particularly in areas such as ownership of intellectual property rights and liability for consequential loss.

Legislation The Group is also involved in commenting upon proposed or pending legislation. Two such items are the EEC Directive on Product Liability and the Government White Paper, Intellectual Property and Innovation (Cmnd 9712). On the former of these subjects, a submission has already been sent to the D.T.I. in response to the Consultative Document dealing with implementation of the Directive. In its submission, the C.S.A. has taken the view that a computer program is essentially information, in the form of coded instructions. As it does not seem to have been the intention that the Directive should apply to provision of services, advice or information, there are reasonable grounds to expect that software wilt be

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THE COMPUTER LAW SECURITY REPORT 2 CLSR

excluded from the scope of any future legislation on this subject. The Group has also been considering the White Paper on copyright reform and shares the disappointment with it expressed in the last issue of The Report (1986/87) 1 CLSR 22. The chief concern is the provision for a levy on blank audio tapes with a playing time greater than 35 minutes. Whilst the White Paper does say that such tapes may not be used to copy computer programs, it is likely that the public perception will be, that as the levy has been paid, the right has been acquired to record anything and to infringe any copyright. It is felt that the proposed levy will serve to blur perceptions regarding copyright, something which runs counter to the efforts of organisations like the Federation Against Software Theft, which has been trying to raise public awareness about the illegality of copying. For these reasons, the C.S.A. intends to lobby heavily against this proposal.

Source code escrow For some years now the C.S.A. has offered to its members an escrow service, whereby source code for software licensed to a customer is deposited with the C.S.A., to be released in the event of the member's liquidation or otherwise ceasing business. The Escrow Agreement has recently been revised, and I shall be reviewing this and the National Computing Centre's escrow agreement in a forthcoming issue of The Report,

Seminars These matters, along with the issues of Data Protection, software exports and the maintenance~insurance debate, are just some of the topics that have appeared on the agendas of Legal Affairs Group meetings over the past twelve months. In addition, the Group occasionally sponsors seminars

covering current developments in the field of computer law. The most recent of these was held in May at the Cavendish Hotel in London. The main sessions covered: service mark registration; staff poaching and unfair competition by ex- employees; the White Paper and computer dispute litigation. As from October 1st this year, companies will be able to register and thus gain protection for marks and names used in connection with the supply of services. Up to now, this facility has only been available in connection with the sale of goods. Delegates were advised to review their existing and proposed use of service marks and to begin preparing for registration immediately. With the recent resurgence in the computer services industry of employees changing jobs frequently, questions of trade secrets and confidentiality have again come to the fore. It is not unknown for a rival employer to entice an employee for his knowledge about his ex- employer and its customer base, as much as for any inherent skills and capabilities. Whilst you cannot stop ex-employees from using any skills or experience acquired whilst in your employ, you can prevent them from disclosing your trade secrets and confidential information. This is a difficult area of the law from the point of view of enforcement, and it is far better to concentrate on good internal housekeeping and clearly written contracts of employment. Once again, these issues will be expanded upon in a future issue of The Report.

Summary At a time when the importance and the relevance of these legal issues is increasingly being recognised by the computer services industry, the Legal Affairs Group is committed both to providing a forum for discussion amongst lawyers working within the industry, and to publicising matters of interest on a wider scale. Watch this space.

David Greaves

CURRENT AWARENESS

GOVERNMENT TO IMPLEMENT PRODUCT LIABILITY DIRECTIVE

The Government has announced plans to introduce legislation to comply with the EC Directive on Products Liability adopted by the Community on 25th July 1985. Member States were given up to three years to adopt its provisions and after extensive consultation the Government has decided to act as soon as Parliamentary time permits. Two main features of the proposal are the inclusion of a "development risks defence" and the exclusion of any financial limit on a manufacturer's liability. Commenting on the announcement Michael Howard, Minister for Corporate and Consumer Affairs said "/have been persuaded by repeated and forceful representations from a large number of industrial organisations and others that the absence of a development risks defence could hold back the development and marketing of new products and new processes in certain high risk innovative sectors and that it is against the general interests, both of industry and of consumers, that such innovation should be inhibited. On financial limits, on the other hand, I have not been persuaded by arguments that we should impose a financial limit on a producer's liability in order to keep down insurance costs." Mr. Howard also announced that at least six months would

be allowed between enactment of the legislation and entry into force. The timescale would enable producers to get all their arrangements for insurance, quality control, record keeping, etc., in good order. It remains to be seen whether these proposals will have very much to do with computer software. It has always been recognised that the main objective of the Directive is to amend the law relating to industrially produced goods. It is in the field of expert systems where the law is most uncertain. Such systems are being developed to assist in a whole range of industries, services and skills. If an error in a tax planning, medical, engineering, geological or aeronautical expert system causes a false data reading who is responsible for any ensuing economic or human loss that occurs as a result.

GOVERNMENT RUNS INTO TROUBLE ON TAPE LEVY A recent survey by NOP Market Research into home audio taping has revealed weaknesses in the Government's case for imposing a ten per cent levy on blank audio tape. The levy would be paid to copyright holders and would entitle tape buyers to make recordings of broadcast or prerecorded material. Yet the survey found more than half of blank tape recording time is used to record an individual's own records

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