Court orders preliminary discovery of source code 21/10/2014
ObjectiVision Pty Ltd v Visionsearch Pty Ltd  FCA 1087
On 9 October 2014, the Federal Court made an order against Visionsearch and the University of Sydney for preliminary discovery of source code. These proceedings anticipate further proceedings to be commenced by ObjectiVision for copyright infringement of its OPERA software by Visionsearch in its TERRA software.
The Federal Court noted the nature of preliminary discovery for source code is more difficult than other categories of copyright material:
“Unlike cases where copyright is said to have been infringed in more traditional categories of literary works such as a published book, song or artwork, the TERRA source code is comprised of a digital record which is commercially confidential.” 
In making the order for preliminary discovery, the Federal Court noted the difficulty for ObjectiVision to make a properly informed decision on whether to commence proceedings for copyright infringement without access to the commercially confidential TERRA source code. Without an order for preliminary discovery, ObjectiVision could not compare the similarities between its OPERA software and the potentially infringing TERRA software.
The Federal Court ordered preliminary discovery, together with orders to protect the confidentiality of the material, having regard to its commercial nature and value.
 At paragraph 92.
Cambridge, Oxford, Sage v GSU 20/10/2014
Appeals court overturns finding of fair use
Cambridge University Press, Oxford University Press, Sage Publications v Georgia State University
On 17 October 2014, the United States Court of Appeals for the Eleventh Circuit overturned a fair use decision by the District Court in favour of Georgia State University (GSU). 
Facts and Background
In 2009, Cambridge University Press, Oxford University Press and Sage Publications (the Publishers) brought an action against GSU for 74 instances of copyright infringement by its professors in making digital copies of excerpts of the Publishers’ books available via its two electronic reserves to students without payment. GSU denied all allegations of infringement, claiming the defence of fair use for the purpose of “teaching, scholarship or research and for nonprofit educational purposes”. 
The case was brought against GSU after it had changed its copyright policy in 2009. The effect of this change was to require its professors to undertake a “Fair Use Checklist” before posting unlicensed excerpts to GSU’s electronic reserves. Licensing of excerpts is ordinarily done through the relevant collecting society, the Copyright Clearance Center (CCC), which provides digital and print licences for excerpts of published works for use in educational institutions. Whereas GSU obtained licences from CCC for its paperback course packs, under the new policy, it undertook a “Fair Use Checklist” for digital course packs and did not obtain licences from CCC.
Fair use is a legislative defence to copyright infringement in the United States. It has four factors to which a court must have regard in assessing whether a use in the circumstances is fair.
The four factors are:
1) the purpose and character of the use;
2) the nature of the work;
3) the amount and substantiality of the portion taken; and
4) the effect of the use upon the potential market for the work.
The District Court’s decision
The District Court found that factors one and two strongly favoured GSU in all instances. When looking at the third factor, the District Court held a “10 per cent or one chapter” rule to the substantiality of copying, that is, if the work is not divided into chapters, 10 per cent is fair, and if the work is divided into chapters, one chapter is fair. The District Court found this favoured either GSU or the Publishers, depending on what was taken from each work. On the fourth factor, the market effect of the copying, the District Court found that GSU’s use of small excerpts did not affect “actual or potential sales of books because they do not substitute for the books”.  The District Court then looked at whether a licence for the specific excerpts was available through CCC. Where there was no licence available, it found that factor four favoured GSU.
The result of the District’s Court analysis led to a finding that:
• the Publishers had failed to make out copyright infringement in 26 instances;
• fair use in favour of GSU in 43 instances; and
• infringement in 5 instances.
The Court of Appeal’s decision
The Court of Appeal’s decision was split between a majority of Judges Tjoflat and Marcus and a minority of Judge Vinson.
The majority began its analysis by noting the ongoing tension in copyright between new technologies and the policy rationale to “promote the creation of new works for the public good by providing authors and other creators with an economic incentive to create”. The majority cautioned against expansive unpaid copying “If we allow too much unpaid copying … we risk extinguishing the economic incentive to create that copyright is intended to provide”  or in other words “killing the proverbial goose that laid the golden egg”.  The majority noted its responsibility in assessing fair use involves a consideration of whether allowing the unpaid use in a given case would be equitable and serve the objectives of copyright in light of the four factors.
The majority found that the District Court’s fair use analysis was flawed: the District Court had conducted its analysis arithmetically and mechanically – only where there was a tie of factors did the District Court undertake further analysis.
The majority then undertook its own fair use analysis:
For the first factor, the majority looked at whether GSU’s use was “transformative” and found definitively that the use was not transformative. In providing excerpts through a digital reserve, there is nothing more than a “de minimis amount of new meaning”.  The majority then considered whether the copying in light of the fair use purpose of “educational non-profit” would supersede the “non-tranformativeness” of the use. In undertaking this analysis, the majority noted the object of the inquiry is on the use, not the user. The majority found that the use fell squarely within the scope of copying that Congress had intended – non-profit educational use. As a result, the majority agreed with the District Court and found in favour of GSU under the first factor.
With regard to the second factor, the majority found that the District Court erred in holding the second factor favoured GSU in every instance. However, the majority placed limited weight on this finding, “the second fair use factor is of relatively little importance in this case”, because the works in question are neither fictional nor unpublished.
In evaluating the third factor, the majority found that the District Court’s arbitrary “10 per cent or one chapter” rule was improper and the District Court had abrogated its duty to analyse the third factor on a case-by-case basis. This analysis includes assessing the quality of what was copied, whether the copying was excessive in light of its educational purpose and whether the use involved market substitution.
In examining the fourth factor, the majority emphasised that GSU’s copying involved a great threat of market substitution and this factor “looms large in the overall fair use analysis”.  While the majority noted the Publishers did not lead any evidence of lost sales, the Publishers did lead evidence of a licencing framework for these uses through CCC. The majority approved of the District Court’s analysis, which essentially found fair use where there was no licence on offer through CCC. The District Court had asked the Publishers to provide evidence of digital licences for the 74 works. As such, fair use was found for the 17 works that were not licenced. However, the majority found that the District Court had not given the fourth factor additional weight in its overall fair use calculus.
According to the majority, the District Court indulged arguments that “royalties are not an important incentive for academic writers” and that the incentive to publish academic writing is “primarily to enhance their professional reputation and contribute to academic knowledge”.  The majority took issue with the emphasis the District Court had placed on these arguments.
In a separate judgment, Judge Vinson concluded both the District Court’s methodology and analysis were flawed. Judge Vinson stressed that a fair use analysis is on the use, not the user and found comprehensively that “what GSU is doing is not fair use” – substituting licenced paperback course packs with unlicensed digital course packs.  Judge Vinson specifically rejected the majority’s analysis under the first factor in favour of fair use because the copying was done for educational purposes at a non-profit university.
The matter has been remitted to the District Court.
Interestingly, the Eleventh Circuit Court of Appeal biased its fair use analysis on equitable principles and the text of the fair use provision in the United States Copyright Act. The Court of Appeal did not stray far from this analytical framework and did not emphasise “transformative use” as the primary consideration and treated all four factors holistically. In this regard, this puts the Eleventh Circuit at odds with more expansive fair use circuits such as the Ninth and the Second Circuits where transformative use holds greater sway – see our reports on the Hathitrust decision  and the Google Books Project .
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Copyright in Software Updates 08/10/2014
JR Consulting & Drafting & Anor v Cummings & Ors  NSWSC 1252
A recent case in the New South Wales Supreme Court examined originality and subsistence of copyright in software updates. It also highlights the importance of putting in place proper licensing arrangements.
This case emerges out of an informal licensing arrangement over a software package developed for use in the design and manufacture of cold form metal light gauge wall frames, trusses, flooring and roofing and used in the construction of buildings. It features a series of corporate entities on both sides, but the main protagonists were a plaintiff businessman who sought to sell the software to his clients and a defendant software programmer.
The main questions the court was asked to consider were regarding the construction of agreements entered into by the parties in 2002 and 2004. Much of the decision was taken up with assessing the evidence. This was not easy as critical events took place over a decade ago and much of the business between the parties was run informally and in some cases, without legal representation.
With regard to the 2002 agreement, the plaintiff argued that that agreement (which was entered into by the software programmer without legal advice) was an assignment of copyright in the software, while the programmer argued it was either a limited, non-exclusive licence to use the software or a limited retail distribution licence. This shows how far apart the parties began in their pleadings.
Subsistence of copyright in software updates
The main copyright matters emerged in the cross-claim, where the programmer argued that the businessman had infringed copyright in the software and updates by using the software outside the terms of the 2002 and 2004 agreements. Software is protected by copyright as a literary work; for copyright to subsist in works, Part III of the Copyright Act 1968 requires them to be ‘original’.
An interesting issue was whether copyright subsisted in the updates made by the programmer. Following Interlego AG v Croner Trading Pty Ltd , the court assessed whether each a new version of the software, which was made up of previous versions with additional material, would be a new work. The Court also noted the requirements set out by the High Court in IceTV v Nine Network Australia  that for each updated to be considered a new work, the programmer would need to have had expended some independent intellectual effort.
The Court heard that the programmer did substantial work on the updates, working approximately 40 hours a week writing code for between 2002 and 2011 and releasing more than 500 versions. The Court concluded that the evidence led did not allow it to determine whether any or all of the updates were ‘original’ although it suggested that many updates are likely to have that character given the time and work that went into their development. As such, the Court could not declare that every release and update was protected by copyright individually. However, the Court did find that the substantial time and effort spent by the programmer over time is sufficient to establish that three identified versions of the software are protected by copyright.
The Court found the updates made to the software following the sale of the programmer’s company in 2011 were not protected because the purchasing company did not identify the relevant authors of the new releases. The court followed Fairfax v Reed  where that court considered that the presumption of anonymous authorship in section 129 of the Copyright Act is not available where a party seeking to rely on the presumption knows the authors but choses not to identify them.
Infringement of the updates
The programmer argued that the businessman and his companies had exercised his rights of reproduction and communication to the public without a licence and therefore they infringed copyright. The programmer also argued that the businessman and his various companies had authorised the infringements between them.
The cross defendants argued they were licenced, and consequently there was no infringement or authorisation liability. However, the Court found no such licence and found the software had been infringed. The Court considered authorisation liability and found there was authorisation by one of the businessman’s companies, but not the other. The Court then considered whether a director might be liable for a company’s breach of copyright, finding that the businessman himself had authorised the infringements.
Having found copyright in the software had been infringed, the court suggested an order for additional damages ought to be made. However, as the parties agreed that the court would only assess liability, the quantum of damages will be assess at a subsequent hearing.
This case demonstrates the importance for parties who enter into business relationships (even if they are informal) putting in place agreements which accurately reflect their intentions.
The full case is available here:
 Interlego AG v Croner Trading Pty Limited (1992) 39 FCR 348
 IceTV v Nine Network Australia  HCA 14
Copyright infringement in photograph: Federal Court refuses summary judgment application in case where identity of subject of photograph in dispute 08/10/2014
Francis v Allen & Unwin  FCA 1027
The Federal Court of Australia recently considered what is required for a successful application for summary judgment in the context of a copyright and moral rights infringement claim.
The case concerned a photograph which was published by Allen & Unwin in a book about the ‘Milperra massacre’ – an infamous shoot out between two rival motorcycle gangs in 1984 in South West Sydney. The photograph was of a young woman and was published with a caption indicating that its subject was Leanne Walters, a 15-year-old who was killed in the shoot out. The applicant, Janette Francis, brought proceedings claiming that the publication of the photograph infringed her copyright and moral rights. The applicant’s case was that she and not Walters was the subject of the photograph, that she had taken the photograph herself in a photo booth when she was 27 and that the photograph had been used without her permission and without attribution to her.
The respondents brought an application for summary judgment or alternatively, an order striking out the substance of the applicant’s statement of claim. They contended that the proceeding had no reasonable prospect of success because the applicant’s allegation that the photograph depicted her and not Walters was fanciful, implausible, improbable and contrary to all available evidence, as well as frivolous and vexatious. They contended there was no real question of fact as to the identity of the woman in the photograph.
The Court rejected these contentions. In doing so, it considered its power to give summary judgment for one party against another where it is satisfied that the other party has no reasonable prospects of success. The Court emphasised that the power was draconian and should not be exercised lightly. It cited Spencer v Commonwealth of Australia  in which French CJ and Gummow J noted that where there are factual issues capable of being disputed and in dispute, the Court should not give summary judgment to the respondent merely because the Court has formed the view that the applicant is unlikely to succeed on the factual issues.
The Court held that this was such a case - there was a factual issue capable of being disputed and in dispute. The respondents’ application was insufficient to establish the onus of proof for summary dismissal as it was supported merely by hearsay and innuendo. For example, the respondents did not provide sworn evidence from the victim’s father as to his belief that the photograph depicted his daughter. Rather, they relied on evidence from the solicitor for the respondents about what the victim’s father had told him, together with evidence going to the applicant’s credibility. Moreover, the respondents provided no evidence as to the critical issue of who took the photograph or the circumstances in which it was taken.
In contrast, the applicant provided evidence asserting the photograph was a self portrait and the circumstances in which it was taken. Her evidence was supported by a written statement from a former husband which was capable of corroborating her assertions. While the Court acknowledged that the applicant’s case may be an ‘overreaction’ to the publication, ‘irrational in some respects’ and appear to ‘lack credibility’, on the whole of the evidence it was not persuaded that the case should not proceed to trial. It noted that questions of credibility (which, it said, formed the ‘subtext’ of the respondents’ case) were inherently unfit for summary resolution.
The case provides a cautionary reminder that an assertion that there is no real question of fact to be decided will be examined critically by the courts. Courts will be unwilling to give summary judgment in the absence of probative evidence in support of such an assertion.
 (2010) 241 CLR 118
The decision is available here:
Competition Policy Review: Draft Report Released 22/09/2014
The Competition Policy Review Panel has today released its Draft Report.
The Draft Report looks at a wide range of issues in relation to competition regulation in Australia, including intellectual property.
It recommends abolition of the exemption for licences of intellectual property in s 51(3) of the Competition and Consumer Act.
It also recommends abolition of the remaining restrictions on parallel importation.
The Draft Report recommends an overarching review of intellectual property be undertaken by an independent body, such as the Productivity Commission.
It says: “The review should focus on competition policy issues in intellectual property arising from new developments in technology and markets.
The review should also assess the principles and processes followed by the Australian Government when establishing negotiating mandates to incorporate intellectual property provisions in international trade agreements.“
The Draft Report also recommends that trade negotiations should be informed by an independent and transparent analysis of the costs and benefits to Australia of any proposed IP provisions.
Submissions in response to the Draft Report are due by 17 November.
The Draft Report is available here
The Australian Copyright Council’s submission in response to the Issues Paper is available here