JANUARY - FEBRUARY THE C O M P U T E R LAW AND SECURITY REPORT

software perspective adopted by Reed J.: "Indeed the point of view that the programed chips are only attributes of a functioning part of an operating machine seems to fly in the face of common sense. The original programs registered were works at rest, as it were, not in operation. When a comparison is to be made for the purposes of establishing whether the memory chips are either reproductions or translations of the original works, it is only reasonable that they, also, should be taken in their static state .... one can under examination by an electron microscope, discover the pattern of the electric circuits and so read the code, which turns out to be an exact replica of the assembly code though in a different material form." In MacGuigan J's opinion, it was not necessary for the court to make a final decision on the exact basis upon which the ROM chips infringed "since the ROM chips are either translations or reproductions and in both cases meet the requirements of sub-section 3(1). In all other respects the reasons for the decision of the trial judge should be affirmed. I do not find it necessary to decide, any more than did the

-trial judge, regarding the Respondents' argument that the ROM chips fall within section 3(1)(d) of the Act as contrivances by means of which the works may be defivered."

The Report comments It is clear that in the unanimity of their finding that the three judges approached that conclusion in different ways. The fundamental difficulty still facing judges seems to be in deciding exactly what software is from the copyright point of view. The courts have yet to form a clear view on what exactly should be the starting point for defining copyright in software from which comparisons can be made against alleged infringing copies embodied in ROMs or other storage media. It is interesting that this decision should have been rendered at a time when Canada is currently amending its copyright law. UK law is also, of course, at such a stage. It is to be hoped that once the new laws are in place that courts will not get themselves into the kind of entanglements that one has seen demonstrated in this case.

Stephen Saxby

US CASE LAW AND LEGISLATIVE DEVELOPMENTS

HAWAIIN TELEPHONE v MICROFORM 9th Cir. CA (No 86-2181 1987) In 1978, Microform contracted to supply to Hawaiin Telephone a computerised directory assistance system. 5 months later, Hawaiin Telephone cancelled the contract on the grounds of delay in delivery and installation of the system. A lower court found against Microform and awarded damages of $782,000 to Hawaiin Telephone. Microform then asked the U.S. Court of Appeals to consider whether Hawaiin Telephone were entitled to cancel the contract. They argued that the work was a complex development and, anticipating delays, the contract had provided for penalties in the event of a delay. Moreover, the contract expressly required 30 days written notice of breach, along with the opportunity to remedy the breach. The Court decided that the inability to deliver a working system, even after the maximum penalties accrued, constituted a material breach of the contract. Turning to the 30 day notice period, the court interpreted this to mean that notice could be issued in the event of a breach, and that termination would become effective if the breach had not been

remedied within 30 days. There was no requirement for further notice at the end of the 30 days. Neither could Microform rely upon clauses excluding its liability for consequential loss. "By failing to deliver the system at all, (the limitation provisions) did not become operative and could not limit remedies to which they applied under the contract."

DATAGATE v HEWLETT PACKARD ND. CA. San Jose Div. (No. C-86-20018-RPA 1987)

Datagate, a third party maintenance organisation, allege that Hewlett Packard are violating the Sherman Act by instituting practices designed to remove competition from the market in servicing Hewleft Packard computers. The alleged practices are the refusal to provide training, documentation and hot- line support to those firms designated as 'independent service organisations.' In their defence, Hewlett Packard say that there has been no injury to competition. Datagate, on the other hand, argue that the effect of the alleged practices had been that potential competitors were prevented from entering the market. The question before the court was whether this constituted injury to competition. Cases of this type usually involve a decrease in competition, causing a reduction in the benefits available to the consumer. In this case, it is alleged that there has been an increase in the benefits to consumers, but at a slower rate than it would otherwise have been, because of the alleged practices of Hewlett Packard. However, Hewlett Packard are now arguing that Datagate may not pursue a claim on the basis that potential competitors refrained from entering the market. Datagate could not suffer any antitrust injury from the exclusion of potential competitors and therefore lacked standing to assert the claims of those whom it alleges were deterred from entering the market. If anything, Datagate would itself have benefited from this exclusion and so could not claim injury. In a similar action in Ohio, another third party maintenance organisation, My Point, are making the same allegations about Hewlett Packard practices. They also claim that Hewlett Packard's recent decision to remove the 4 hour response time from its customers on a time and materials contract, is an attempt to coerce customers into service contracts, thus restricting the market for third party maintenance organisations. S.A.P.C. v LOTUS D.Ma. (No. 87-0858-K 1987)

As reported in previous issues (see eg. 1987-88 2 CLSR 25) S.A.P.C. are claiming in a court in Boston that Lotus's best- selling 1 - 2 - 3 software package, infringes the look and feel of Visicalc. SAPC concedes that it sold the rights in Visicalc to Lotus in June 1985, but is now seeking damages for infringements prior to that sale. Lotus, in its defence, say that the claim is negated by the sale of assets in 1985. That transaction was for all SAPC's assets and intellectual property right of all manner and form, tangible and intangible, without reservation or limitation. Lotus had argued that if it was the intention to reserve the right to sue for copyright infringement, then this would have been mentioned in the agreement. SAPC contend, however, that this argument is wrong under the principles of copyright law. They argue that isit established that an agreement to assign all rights in a copyright does not automatically convey to the assignee any claims for infringement prior to the assignment. Moreover, the 1985 agreement did not grant Lotus any warranties of the type that would make the current action contrary of the intent of the parties.

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THE C O M P U T E R LAW AND SECURITY REPORT 5 CLSR

PLAINS COTTON v GOODPASTURE US.Sup.Ct. (No 86-1868-1987) The Supreme Court has denied a petition for writ of certiorari brought by Plains, which sought a review of the Court of Appeals opinion (see 1987-88 1 CLSR 34) that the organisation and structure of its Telcot Software was not protected by Federal Copyright Law. The Court of Appeals had found that the similarities in the software of each party were dictated by the externalities of the market, and therefore refused to follow the reasoning of the appeal court in Whelan v Jaslow. The arguments about look and feel cases continues, and it now seems that only a decision of the Supreme Court will settle this contentious issue.

ANALYSTS INTERNATIONAL R.RR ND IL Eastern Div. No 85-C-8637)

Analysts International claimed to be owed $330,000 for some software which it had developed specifically for R.P.P.R.P.P., on the other hand, claimed that the software had never functioned properly and argued that Analysts Int. were in breach of the implied terms of merchantability and fitness for purpose. The plaintiff then argued that the agreement with R.RP. was for the provision of services, and not for goods, and was therefore outside the scope of the Uniform Commercial Code, Article 2 of which implies terms of merchantability and fitness for purpose into contracts for the sale of goods. The Court decided that although the software was not an 'off the shelf' package, and that services had been provided in the course of the development, the end result was the production of a computer program and this constituted goods.

NB In the UK, such contracts would probably fall under the provisions of the Supply of Goods and Services Act 1982, and the usual implied terms would apply.

ADDITIONAL TECHNICAL SUPPORT v V.G. SYSTEMS D.MA. (No 87-1746-Y)

A.T.S. are claiming in a Boston Court that VG intentionally

misrepresented the present and future capabilities of its CAD/CAM hardware, and in particular its ability to conform with the changing operating system software used within the CAD/CAM industry. ATS had entered into a 4 year lease agreement for V.G.'s hardware, but stopped using it after only a year, claiming that it was obsolete as it was no longer compatible with IBM's VM operating system. VG is denying the claims of misrepresentation. It says that the equipment is not obsolete, it performs as represented, despite the fact that it may be less effective than newer models. The case illustrates how quickly equipment is overtaken by new technological advances, and also shows the need for some measure of flexibility in long term lease and rental agreements.

LEGISLATION

The Report has, in previous issues, reported cases which illustrate the apparent injustice of U.S. bankruptcy laws on agreements concerning intellectual property (see 1987-88 2 CLSR 26). A Bill has now been introduced in the Senate which aims to secure the rights of licensors and licencees in the event of a bankruptcy. The Bill, at present entitled the Intellectual Property Protection Act 1987,, S1626 provides that if a licensor declares bankruptcy, the trustee may not interfere with the licencee's rights; a) to deal with the intellectual property as provided for in the agreement

b) to gain access to any information or property (e.g. source code) which the agreement provided for in such circumstances

In the event that a licensee declares bankruptcy, then notwithstanding rejection of the agreement as executory by the trustee, the licensor would be entitled to request the return of all materials which embody any protected information.

David Greaves, Editorial Panelist

The Report acknowledges the assistance of the US publication, The Computer Industry Litigation Reporter in tracing these case reports

CURRENT AWARENESS

IN B R I E F

Data Protection Act - Subject Access a Reality As most readers will know, on November 11, 1987 the Data Protection Act 1984 came fully into force with individuals having the right from that date to be given a copy of any computerised information held about them. The Data Protection Registrar, Eric Howe, has suggested that the following check list might help in implementing arrangements for this new right under the Act:

• Do all staff who may receive requests or enquiries know where to channel them?

• What information will be needed* (a) to identify an applicant? (b) to locate any information about them held on computer?

• How will any multiple register entries be explained? • Will a standard subject access form be designed and sent

to applicants? • Will a fee be charged, in some or all circumstances? (eg.

will employees be charged the same as customers?) The maximum fee has been set at £10.

• Is a mechanism in place for searching the appropriate files and feeding the output back to the person dealing with the request?

• Will any of the information produced need to be "made intelligible" and if so how and by whom?

• Is any of the data exempt from subject access and does it contain references to third party individuals whose identity you want to protect? If so, who will edit the information and by what rules?

• Will your procedures allow you to respond within 40 days of receiving all the information you need?

As Eric Howe remarked: " I f you can answer all of the above questions satisfactorily then fine: if not, or you are not registered but should be, then a subject access request could find you out at any time!"

Data Protection - New Regulations To coincide with the coming into force of the subject access rights the Home Secretary has brought in four new regulations under the provisions of the 1984 Act. They are as follows:

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