Articles

Murky waters of software ownership

Business Law & Tax Review September 2006
By Angie Whitehouse

A recent decision by the Supreme Court of Appeal has left the software industry in SA in disarray.

The Copyright Act 1978, as amended, has kept pace with technology by dealing specifically with the issue of ownership of computer programs. A computer program is defined as “a set of instructions fixed or stored in any manner and which, when used … in a computer, directs its operation to bring about a result”.

Software, then, is a clear example of a computer program.
The act provides that ownership of copyright in a program vests in its “author” — the person who exercised control over the making of the program. But “control” is not defined and is open to interpretation.

Copyright is infringed where a person (not being the owner of the copyright and not authorised by the owner) does or causes any person to do any act which the owner has the exclusive right to do or authorise.

Brothers-in-law Anton Haupt and Christopher Brewer were employed by Brewers Marketing Intelligence (BMI). While in BMI’s employ, Haupt commissioned Coetzee, an independent contractor, to write a piece of software for the company which would allow for the meaningful presentation of the results of a six-monthly research survey produced for the South African Advertising Research Foundation.

On July 31 1998, the two parted ways, with the software at a stage where it was producing results (sometimes correct, sometimes incorrect). Hence, in terms of the act, it was already a “computer program”.

Coetzee continued to develop the software for Haupt exclusively and it was eventually taken to market by him. Coetzee later allowed BMI to use the software (and provided the company with parts of its source code) to develop a similar piece of software. Haupt wished to interdict BMI, Brewer and Coetzee from infringing his copyright.

The trial court held that in-depth technical knowledge is not a requirement for exercising “control” (and being held to be the “author” of a computer program). The person who provides the specifications or requirements for the software and oversees its development is in “control”. It was held that BMI was the “author” of the software — Haupt (and Coetzee for that matter) had no rights that were being infringed.

The trial court failed to distinguish between the original software (as at July 31 1998) and the enhanced software (post-July 1998).

On appeal, the court held that Haupt had acquired certain intellectual property rights in the software after July 31 1998. After his split from BMI, Haupt instructed Coetzee as to the end result to be achieved with the software. He was in a position of authority over Coetzee and “controlled” the writing of the enhanced software. But, by developing the software, Haupt had infringed BMI’s copyright in the original software. However, he acquired copyright in these (albeit illegal) developments.

The appeal court held that BMI copied a substantial portion of the enhanced software when it developed its similar piece of software. Haupt succeeded with his appeal.
Whatever one’s view of the court’s interpretation of “control”, one cannot deny that the decision has resulted in once-clear waters turning decidedly murky.

Before the Haupt decision, South African law was in line with international law. The worldwide position (and the position according to various treaties and conventions to which SA is a signatory) is that the owner of a computer program is the person who creates it — in other words, the software developer.

Now, due to the case law precedent set by the Haupt decision, the person who commissions the creation or development of the software and exercises authority over the software developer’s actions will own the intellectual property rights to the software.

Under the act, works created by employees are owned by their employers. It must be remembered, however, that as Coetzee was an independent contractor — surely he would be justified in feeling aggrieved at the appeal court’s failure to consider his position?

Now more than ever, it is vital for all parties interested in creating, developing, using or dealing in software to discuss the issue of ownership of copyright and to agree on their respective rights up front.