Copyright

Case Note: Fylde Microsystems Limited v Key Radio Systems Ltd.

John Lambert
25 July 1999
This case first appeared on the Lancaster Buildings website

This was a trial of two preliminary issues:

	whether copyright in software that had been written by the plaintiff with the defendant's co-operation belonged to the plaintiff alone or to the plaintiff and defendant jointly; and
	whether the defendant had an implied licence to do certain acts of which the plaintiff complained.

The Facts
The action arose from a joint venture between the parties. The defendant had asked the plaintiff to develop and supply printed circuit boards ("PCBs") for a sophisticated mobile radio system capable of tuning to a frequency in response to a signal from a base station known as "trunked radio". The main component of the PCBs was an EPROM chip loaded with special software. That software was written by the plaintiff, but the defendant had been in close contact with the plaintiff during its development. The plaintiff did not charge for developing the software but made a handsome return on the sale of PCBs to the defendant.   Initially it supplied PCBs fitted with the EPROM chips to the defendant, but the parties found it convenient for the defendant to install the software onto blank chips and fit those chips to the plaintiff's PCBs at its premises. Over the years the plaintiff did more than £3 million worth of business with the defendant. Things went wrong only when the defendant began to buy PCBs elsewhere to which it fitted EPROM chips loaded with the software.  

The Dispute
The defendant claimed to be entitled to do that on the grounds that it was a joint owner of the copyright subsisting in the software and that it had a free licence to make such use of the software. The plaintiff disputed that claim and contended that it was the exclusive proprietor of the copyright. The parties were unable to come to terms: the plaintiff sued the defendant, and the defendant counterclaimed against the plaintiff, for infringement of copyright.

Judgment on First Preliminary Issue
On the first issue, Laddie J observed that s.10 (1) of the Copyright Designs and Patents Act 1988 defines "a work of joint ownership" 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."      It does not turn someone who is not an author into an author but categorizes works that are made from the input of two or more authors.

In relation to authorship two matters have to be addressed:

	whether the putative author has contributed the right kind of labour;
	if he has, whether his contribution was big enough.

The approach is similar to the exercise to determine whether a defendant has infringed copyright by copying a substantial part of the copyright work. It was common ground that there had been close co-operation between the parties over 5 years and that the defendant had saved the defendant considerable time by testing the software but that was not necessarily enough. Beta testing does not make the user an author of a program and proof reading does not make the printer an author of a book. What counted was whether the defendant had contributed authorship skill. The defendant had put effort into error fixing and reporting faults and bugs. It had made a functional contribution by way of setting the specification for what the software was to do.    It suggested causes of some of the faults in the software though it did not produce solutions to them.  It had provided technical information concerning the hardware. It set parameters and timings within the software. Valuable and time consuming though such contributions must have been they did not contribute to the authoring. The defendant's claim to joint ownership on the grounds of joint authorship therefore failed and with it the counterclaim.

Judgment on Second Preliminary Issue
As to the second preliminary issue, the defendant had claimed an implied licence on the following grounds:

	it had contributed considerable effort, time and money to the development of the software which it would never have invested had it known that it would not be entitled to use the software as it did without recourse to the plaintiff;
	sales by the plaintiff of the software manifested an understanding that each party would be free to exploit the software; and
	the defendant used PCBs sourced from a third party to replace defective ones that had been supplied by the plaintiff.

Laddie J disposed of the second plea immediately on the ground that it was unsupported by the evidence. He found the first to be inconsistent with the evidence and improbable that the parties would have intended the defendant to be free to deal with the software as it wished after the plaintiff had spent 4 years on its development without payment. As for the third, there was no evidence that the plaintiff had supplied a defective PCB but if it had the defendant already had a remedy under the Sale of Goods Act 1979 without having to copy the plaintiff's software.    

Comment
Disputes of this kind occur quite frequently from collaboration on the development of new product. It is understandable that someone who has paid for or contributed to the development of the product should believe that he ought to have some interest in it. Sometimes such disputes can be resolved by the imposition of a constructive trust as in John Richardson Computers Ltd. v Flanders [1993] FSR 497. Other times an "informal partnership" comes into existence as a result of the joint venture and the copyrights become a partnership asset as in IBCOS Computers Ltd. v Barclays Mercantile Highland Finance Ltd. .[1994] FSR 275/ The only sure to  reserve the right to use the product of joint development is to negotiate a contract.

Important