The recent case of EdSonic Pty Ltd v Cassidy (September 2010) highlights some of the complexities that can arise in deciding whether an employer owns copyright.

The applicant, EdSonic Pty Ltd, claimed copyright in certain educational materials that were created by the respondent, who worked with EdSonic in 2001-02.

The Federal Court concluded that EdSonic did not own copyright in the particular materials and, in reaching this conclusion, considered two key questions:

1) Was the respondent an employee of EdSonic; and

2) If she was an employee, did she create the works “in pursuance of the terms of her employment”?

On the first question, it was not entirely clear whether the respondent was an employee. Justice Moore noted[1] that “as is often the case” some of the evidence pointed towards her being an employee but some of it suggested otherwise.

On the second question, the Court considered the scope of the meaning of the phrase, “in pursuance of the terms of his or her employment”, per the requirements of section 35(6) of the Copyright Act 1968.

Justice Moore drew comparisons with ownership under patent law and, in particular, with the recent case of University of Western Australia v Gray[2].

“What the expression raises for consideration, in my opinion, is not the bare question of whether the author is employed under a contract of service at the time a work is made but whether the relevant work is made in furtherance of the contract of employment with the employer,” the Justice stated. “That is, did the employee make the work because the contract of employment expressly, or impliedly, required or at least authorised the work to be made? Approached in this way, it is an expression which comprehends notions similar to those addressed by the Full Court in Gray in the context of patent law.”

The Court noted that the respondent also had a separate arrangement to create materials for the Property Council of Australia. The respondent had asked EdSonic to enter into that contract on her behalf in order to avoid the administrative burdens of a direct contract (such as the need to lodge Business Activity Statements). The Court found that if any of the amounts she was paid by EdSonic could have been characterised as salary, those amounts related to her work for the Property Council. This was entirely separate to the works in question, for which she was instead paid royalties.

The Court therefore found that she was not an employee of EdSonic in relation to her making of the works.

This case demonstrates that if employers are seeking to rely on section 35(6) to claim copyright in works created by their employees, it must be clear that the relevant person is indeed an employee and that the creation of the particular works is well within the scope of the employee’s role. If not, to claim ownership, the issue should be specifically addressed through contract.

[1] EdSonic Pty Ltd v Cassidy [2010] FCA 1008 (at 4)

[2] University of Western Australia v Gray [2009] FCAFC 116; (2009) 259 ALR 224

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The September 2010 decision in Vernor v. Autodesk Inc[1] has consequences for software developers and the second-hand software market in the US. The case also reminds Australians of the importance of double-checking the fine print before reselling software or any copyright material purchased subject to a licence.

The case concerned the right of the plaintiff, Timothy Vernor, to sell second-hand copies of Autodesk Inc. software on eBay. Vernor purchased the copies from an office sale at Cardwell/Thomas & Associates (CTA), which had purchased it from Autodesk under a licence agreement.

The licence agreement stipulated that Autodesk retained title to the software copies and contained a number of restrictions on the purchaser’s subsequent use and transfer of the software. These included the licence being non-transferrable, as well as prohibitions on transferring or leasing the software without Autodesk’s written consent.

After purchasing the Autodesk software discs from CTA, Vernor offered these for sale on eBay. AutoDesk filed DMCA takedown notices with eBay, alleging that the resale of its software violated the terms of the licence under which the software was originally sold. Vernor’s sale items were then taken down by eBay but Vernor put them up again. This back-and-forth continued and eBay eventually suspended Vernon’s account. Vernor took the matter to court in 2008, to seek a declaratory judgement that his sales did not infringe copyright.

Two elements of US copyright law play a key role in the case: (i) The doctrine of first sale, which permits “owners of copies of copyrighted works to resell those copies”; and (ii) the essential step defence, in which an owner of a copy of software does not infringe copyright if a copy is made as an essential step in utilising that software on a machine. Importantly, these defences are only available when the person concerned is the owner of the copy and not a licensee.

The District Court for the Western District of Washington initially decided in Vernor’s favour (following a precedent in United States v. Wise[2]) and held that Autodesk’s transfer to CTA was one of ownership because CTA was entitled to keep a copy of the software. The court reasoned that Vernor was entitled to the protection of the first sale doctrine, as a transfer of ownership had occurred. It noted, however, that it would have come to the opposite decision if conflicting precedent[3] was applied.

In Autodesk’s successful appeal, the Court of Appeals reassessed whether CTA was an owner or licensee of the software in order to determine whether the first sale doctrine applied. The court brought together the conflicting precedents in Wise and MAI Trio and concluded that the decisions together prescribed three considerations to determine whether a software user is a licensee or an owner. According to this three-step test, the user is a licensee rather than an owner where the copyright owner:

1. Specifies that the user is granted a license;

2. Significantly restricts the user’s ability to transfer the software; and

3. Imposes notable use restrictions.

Based on these steps the court held that Autodesk’s customers were licensees rather than owners and that resale of copies infringed copyright.

This decision highlights the importance of being aware of the conditions under which you obtain software (as well as a variety of other material). It may at times seem arduous to do, but double-check those terms and conditions!

[1] Vernor v. Autodesk Inc 09-35969 (9th Cir. Sept. 10, 2010)

[2] United States v. Wise** 550 F.2d 1180 (9th Cir. 1977)]

[3] These are known as the MAI Trio cases and comprise of MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993); Triad Sys. Corp. v. Southeastern Express Co., 64 F.3d 1330 (9th Cir. 1995); Wall Data Inc. v. Los Angeles County Sheriff’s Dep’t, 447 F.3d 769 (9th Cir. 2006)“

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The Federal Court’s Justice Bennett has ruled that no copyright exists in headlines, in a defining case brought by Fairfax Media Publications against Reed International Books Australia (trading as Lexis Nexis).

Justice Bennett found that Fairfax had failed to prove that any of the ten selected Australian Financial Review headlines it submitted was a discrete work of joint authorship in which copyright could subsist.

The judgement stated at [159-162]: “As to whether Reed, in reproducing and communicating headlines of the AFR as part of [its] Abstracts, takes a substantial part of any of the contended works:

- Even if the Article/Headline Combination constitutes a copyright work, Reed does not take a substantial part of such a work.

- Reed does not take a substantial part of either the Article Compilation or the Edition Work.”

“Reed’s conduct in reproducing and communicating the AFR headlines as part of the Abstracts is a fair dealing for the purpose of reporting news, such that Reed’s conduct would not constitute an infringement of copyright by reason of s 42(1)(b) of the Act.”

To See full judgement click here

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In a much anticipated decision, Justice Jacobson in the Federal Court today handed down his judgment that the publisher and writers of Down Under will be required to pay Larrikin Music five percent of their APRA/AMCOS income earned since 2002.

Justice Jacobson found that the figures initially put forward by Larrikin were ‘excessive, overreaching and unrealistic’ (at [224]).

In determining the damages, Justice Jacobson focused on the musical significance of Kookaburra as it is used in Down Under. It was found that this contribution was relatively small, (at [137]), which led to a substantially more modest finding in damages.

See the full text of the decision at: http://www.austlii.edu.au/au/cases/cth/FCA/2010/698.html

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When the much-anticipated appeal to the Roadshow v iiNet case begins next week, two new organisations will seek permission to make their own submissions.

The Australasian Performing Right Association (APRA) and Media Entertainment and Arts Alliance (MEAA) will be allowed to seek the Court’s approval to provide separate testimony during appeal hearings for the Roadshow Films Pty Ltd & Ors v iiNet Ltd (iiNet) case. The appeal hearings begin in the Federal Court on 2nd August, 2010.

A February 2010 Federal Court decision found that iiNet was not liable for authorising copyright infringements made by its customers. The case is being watched domestically and internationally with great interest by the internet and creative industries.

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The Copyright Tribunal has released its decision to increase fees paid by the fitness industry for the use of sound recordings in exercise classes, following an application made by the Phonographic Performance Company of Australia (PPCA).

Under the new structure, the fitness industry will pay $15.00 per class or $1.00 per attendee. Previously, the rate was just 96.8 cents per class.

In its judgement the Tribunal said, “The Tribunal is aware of the fact that these amounts are considerably higher than the amounts payable under the present licence arrangements. However, this application to the Tribunal has permitted the first comprehensive examination of the use of music in fitness classes. It has revealed that recorded music is an essential accompaniment to such classes.”

It also said, “In the Tribunal’s view, the amount currently being paid does not reflect this essential nature of music in classes.”

To see PPCA’s media release, and the Tribunal decision see:

www.ppca.com.au/Fitness-Class-Tariff-Decision.html

To read Fitness Australia’s media releases go to:

www.fitness.org.au

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