High Court hearing
Back to the High Court
The long-awaited decision of the European Court of Justice (ECJ) in SAS Institute Inc v World Programming Ltd(1) is to be welcomed as bringing certainty to the IT industry that functionality in a computer program is not protected by copyright. Although this will almost certainly put suppliers of certain established software programs at a disadvantage, it should encourage third-party innovation and customers should ultimately benefit from competition between suppliers. The decision also seems to remove a potential liability risk for insurers in the technology industry.
SAS Institute Inc was the developer and owner of a longstanding set of integrated programs used for analysis and processing, particularly statistical analysis. The main element of the SAS system was Base SAS, which allowed users to write and run their own programs so that they could use the SAS system with their own data inputs.
The user programs needed to be written in SAS's proprietary computer language in order to function. This meant that SAS customers had no alternative but to license the SAS system in order to run their existing SAS language application programs or create new programs. Customers that wanted to switch to another supplier's software had to rewrite their existing applications in another computer language.
World Programming Ltd (WPL), a competitor of SAS, developed a rival system which recreated, as closely as possible, the functionality of the SAS system. The same inputs into the SAS system and the WPL system would result in the same outputs. This enabled users of the SAS system to run their own application programs on the WPL system with little or no change in functionality. As a result, users were free to discontinue their licences for the SAS system without the onerous task of rewriting their programs in non-SAS computer language.
SAS brought a claim against WPL, alleging copyright infringement of both the functionality of its system and its user manuals.
The case was heard at first instance in the High Court by Justice Arnold. WPL admitted that the response of the WPL system was - and was intended to be - identical to the response of the SAS system. The parties also agreed that WPL had not had access to SAS's source code when developing its system; nor had it copied the text or the structural design of SAS's source code.
The judge recognised that previous decisions(2) had held that copyright in the source code of a computer program is not infringed if a developer studies how the system works and reproduces the functionality of the original program, provided that the source code or object code is not copied. The judge also recognised that the previous case law suggested that there is no copyright in the functionality of a program or in the programming language or data file formats used in the program.
SAS separately argued that WPL was in breach of the licence agreement which it had taken out to use the learning edition of the SAS system, as it had used this edition for purposes outside the scope of the licence. SAS also contended that WPL had infringed the copyright in its user manuals, both in designing the software and in creating its own user manuals.
The judge decided one aspect definitively, holding that there had been literal copying of the user manuals by WPL in the preparation of its own user manuals.
On the other issues, the judge provisionally followed Navitaire and Nova and found that WPL had not infringed the IP rights in SAS's software applications when it emulated the functionality of the SAS system in creating the WPL system. However, he considered that certain issues of EU law were not acte clair (ie, reasonably obvious, so that referral would be superfluous). As a result, he stayed the case and in July 2010 referred a number of questions to the ECJ.
The ECJ's judgment was handed down on May 2 2012. The decision mainly followed the recommendations of the attorney general that were made in November 2011.
The ECJ found that:
- the functionality of a computer program, which includes the programming language and the format of data files, constitutes the overarching ideas behind a program, rather than a form of expression of the program, and thus is not protected by copyright;
- a person who uses a computer program in accordance with a licence is entitled, without the authorisation of the copyright owner, to observe, study or test the program functions to determine the program's underlying ideas and principles; and
- computer manuals (or parts of them) are protected by copyright to the extent that they are, in themselves, an expression of the intellectual creation of the author. In this case, although keywords, syntax and commands were insufficient on their own to be protected by copyright, their choice, sequence and combination may amount to an intellectual creation and be protected as a literary work. It was for the English court to decide whether a substantial part of those elements had been reproduced and copyright thereby infringed.
Now that the ECJ decision has been received, the case will revert to the English courts. The first instance judge must apply the ECJ's answers to the particular facts.
The ECJ decision is broadly consistent with current English law, following the decisions in Navitaire and Nova, in which it was held that general ideas are not protected by copyright, whereas the expression of these ideas is protected. It is also consistent with previous case law that recreating the functionality of a computer program does not in itself infringe copyright. It is therefore unlikely that the judge will depart substantially from his original views.
It remains to be decided whether any elements of the SAS manuals copied by WPL merit copyright protection, and if so, whether WPL copied a substantial part of those elements in its development of the WPL system. Although this may not be regarded as the central part of the dispute, SAS will still want to preserve protection for at least some aspects of its SAS system.
For the industry as a whole, and for the sector's insurers, this is likely to be seen as a healthy result, preventing rights being claimed over functionalities. Those seeking to develop and protect proprietary systems will need to look to other barriers to entry, both commercial and legal. Literal copying of object or source code (other than within the narrow exceptions) remains an infringement, and manuals and related materials may be protected by copyright. Brands, additional developments and 'value added' services may help to encourage or maintain customer loyalty. However, suppliers of software programs will be unable to assert copyright over the outcomes of a program – which, many would say, is the right result.
For further information on this topic please contact David Cran or Louise Williams at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected] or [email protected]).
(1)  EWHC 1829 (Ch) (July 23 2010).
(2) Navitaire v easyJet  EWHC 1725 (Ch) and Nova Productions Ltd v Mazooma Games Ltd  EWCA Civ 219.