Copyright Developments

Y2K Disclosure
Other Government Initiatives
IT in Civil Litigation


In light of the fast pace at which new technologies and information industries are growing, 1999 saw a number of significant developments in Australian IT and e-commerce law. The most noteworthy changes occurred in relation to the protection of copyright. Other developments related to preparation for the Y2K bug and increasing recognition by the federal government of the need to foster the growth of Australia's information economy.

Other developments in the law which relate more directly to e-commerce than information technology are discussed in the E-commerce Overview.

Copyright Developments

Decompilation rights
As a result of the federal government reforms to copyright law, software developers in Australia can now decompile computer programs for certain purposes, including for the development of interoperable products, without fear of copyright infringement.

Government and industry concerns about the competitiveness of Australian software developers in the world market prompted the reforms. Although the reforms were consistent with developments in the United States and the European Union, they were subject to criticism. The Business Software Alliance and the US government suggested they were unnecessary, being little more than a reflection of existing industry practice, and they would encourage software piracy.

The new rights were introduced by the Copyright Amendment (Computer Programs) Act 1999, which amended the Copyright Act 1968. Broadly speaking, a reproduction or adaptation of a non-infringing copy of a computer program may be made by, or on behalf of, the owner or licensee, in order to:

  • find out the program's interface information where it is not readily available;

  • independently make an interoperable software or hardware product;

  • test for securityand correct a security flaw in the program or a network that includes the program; or

  • correct an error in a program, such as the year 2000 date problem, where an error-free version of the program is not reasonably available.

Other amendments allow the making of a reproduction by, or on behalf of, the owner or licensee of the original copy when:

  • it is necessary for back-up purposes;

  • it occurs incidentally in the running of a program for normal use (eg, copying into random access memory); or

  • it is used to study the ideas behind the program and the way in which it functions.

The decompilation provisions are subject to the following qualifications:

  • the amount copied must be limited to that necessary to find out the required information;

  • the information must not otherwise be readily available;

  • where copying was made for the purposes of error correction, copying is only permitted where an error-free copy was not reasonably available; and

  • the copy cannot be passed on.

The operation of the new provisions (other than reproduction for normal use) cannot be excluded or limited by agreement.

'Technology-neutral' communication right
Under further proposed federal copyright laws, the existing technology-specific broadcasting and cable-diffusion right will be replaced with, and extended by, a technology-neutral right of communication to the public, within or outside Australia.

The new communication right will subsist as an exclusive right in all protected subject matter (except for published editions), and the existing fair-dealing exceptions will be extended to cover it.

In anticipation of the reforms becoming law this year, software licensors and licensees should review existing, and future, software licences to ensure the scope of rights being granted is appropriate. This is particularly so if the software may be made available online.

The amending legislation is the Copyright (Digital Agenda) Bill 1999 (Digital Agenda Bill) which is currently before the Australian House of Representatives. It is expected to be passed this year. The reforms are intended to align Australian copyright law with new international standards in relation to copyright protection in the online environment, set by the 1996 World Intellectual Property Organization (WIPO) Copyright Treaty and WIPO Performances and Phonograms Treaty.

The proposed meaning of 'communicate' is:

"to make available online or electronically transmit (whether over a path, or a combination of paths, provided by a material substance or otherwise) a work or other subject matter."

Although this definition is intended to be very broad and to accommodate developing technologies, a drafting oversight in the Digital Agenda Bill may restrict the protection afforded, by limiting those persons who are defined as having made a communication. The Digital Agenda Bill provides that a communication (other than a broadcast) "is taken to have been made by the person responsible for determining the content of the communication".

If this provision is interpreted narrowly, it arguably excludes from direct liability for copyright infringement a person who is not responsible for determining the content of the communication, but knowingly makes available online or transmits an infringing work. Unfortunately for copyright owners, this is what is suggested to be the effect of the provision in the Explanatory Memorandum to the Digital Agenda Bill.

Other central components of the bill include the following.

First, there are two new enforcement measures to address the issue of piracy of copyright material in the digital environment. Civil and criminal sanctions will apply to (i) commercial dealings in anti-copying circumvention devices, and (ii) removal or alteration of electronic-rights management information.

Second, the liability of carriers and carriage service providers (eg, internet service providers and web hosts) is limited. Carriers and carriage service providers are generally exempt from liability for authorizing the publication of infringing material on their facilities, if they are not responsible for determining the content of the material. The legislation prescribes matters which must be taken into account when determining whether or not a person has authorized copyright infringement. They are:

  • the extent of the person's power to prevent the infringing act;

  • the nature of the relationship between that person and the person who did the infringing act; and

  • whether the person took reasonable steps to prevent the commission of the act, including compliance with relevant industry codes of practice (eg, the Australian Broadcasting Code of Conduct or the Internet Industry Association Code of Conduct).

Third, a temporary reproduction of a work made in the course of the technical process of making a communication is deemed not be an infringement.

Finally, the meanings of 'computer program' and 'reproduction' in respect of a computer program are clarified.

Moral rights
The federal government introduced a Moral Rights Bill into Parliament in December 1999. The bill is expected to be passed early this year. This means that software licensees acquiring a licence of software, and software houses acquiring assignments of copyright from their developers, should ensure that the relevant licence or assignment agreement contains express consent from the author to allow dealing with the subject matter. Where the licence or assignment is being acquired from someone other than the author, then a warranty from the licensor or assignor that the author has given written consent should be sought.

The bill provides for three new moral rights for individual authors, including:

  • the right of attribution of authorship (ie, the right to be identified as the author of the work);

  • the right not to have authorship of a work falsely attributed (ie, the right to take action against false attribution); and

  • the right of integrity of authorship (ie, the right of an author to object to derogatory treatment of his or her work that prejudicially affects his or her honour or reputation).

The rights apply to literary works (computer programs are a literary work), dramatic, musical and artistic works, and films.

Generally, the right of integrity will last until the death of the author, while the other moral rights will continue until copyright ceases to subsist. The right of integrity will only subsist in works made after commencement of the legislation. The right of attribution, and the right not to have authorship falsely attributed, subsist in relation to all works (except cinematograph films) made before commencement of the legislation and to all works (including cinematograph films) after that date. However, the legislation will only apply to infringements of those rights committed on or after commencement of the legislation.

There are exceptions to the rights of integrity and attribution. The onus is on the defendant to show that it was reasonable not to identify the author, or reasonable to subject the work to derogatory treatment. There are certain prescribed matters that a court must take into account when considering the reasonableness of a defendant's actions.

Unlike moral rights legislation in the United States, the proposed Australian moral rights regime adopts a consent approach to moral rights. Whereas a waiver provision requires the author to give up his or her moral rights forever, under the Australian regime, an author may give written consent to the doing of something that would otherwise infringe his or her moral rights. Nevertheless, he or she will always 'own' those moral rights.

The principal requirement in respect of consent is that it must be in writing. In addition, the consent may be:

  • specific or comprehensive. It is not necessary to specify the actions or omissions to a work that are consented to under a comprehensive consent;

  • related to works that are in existence, in progress or yet to be commenced; or

  • related to past acts or omissions that would otherwise constitute an infringement of the author's moral rights.

Computer commands
The High Court of Australia decision last year in Data Access Corporation v Powerflex Services Pty Ltd is a success for supporters of open systems and consumers. The decision assists the use of industry standard terms and expressions by software vendors to develop compatible products.

However, the decision is a blow to the software industry in that it confirms that the scope of copyright protection is limited to the literal expression of the language in which the computer program is written, not the function it performs. Consequently, Australia is likely to see a trend by the software industry to patent protection of its creative endeavour.

On appeal from the Full Federal Court, the High Court unanimously confirmed that individual words (in this specific case, computer commands and macros) were not computer programs and, therefore, were not entitled to protection under copyright law.

Data Access owned the copyright in an application development system, known as Dataflex. The product became well-known and achieved a significant market share. By reverse-engineering the Dataflex system and studying how it operated, Powerflex Services developed an application development system (PFXplus) compatible with the Dataflex system. It was undisputed that the Dataflex source code was different from the PFXplus source code, and there was not necessarily any similarity between the object codes of the two systems.

Of the 254 words comprising the Dataflex language , the PFXplus language used 192 in a way that caused the computer to perform the same function as those words perform in the Dataflex language. Of the 166 words in issue at trial, three were 'macros' and the remainder were described as 'reserved words'. Many of the reserved words were ordinary English words, or a combination thereof, and some were common to all computer programs (eg, 'save' and 'pagebreak').

Dataflex claimed that Powerflex infringed its copyright in each of the Reserved Words as a 'computer progamme', within the meaning of that phrase under the Copyright Act 1968. The High Court concluded that none of the Reserved Words satisfied the definition of 'computer program' for two reasons.

First, each Reserved Word was not "an expression…of a set of instructions", it was a single word only.

Second, none of the Reserved Words "intend to cause a device having digital information processing capabilities to perform a particular function". A 'computer program' intends to express, directly or indirectly, an algorithmic or logical relationship between the function to be performed, and the physical capabilities of the device that has digital information processing capabilities.

In the words of the Full Federal Court, the Reserved Words merely acted as a 'trigger' to the underlying set of instructions. However, the High Court acknowledged that their finding on this point did not mean that the expression of the Reserved Words in source code and object code was not a computer program.

Dataflex also contended that the collocation of Reserved Words formed a substantial part of the Dataflex system, thereby infringing Dataflex's copyright, but the High Court rejected the contention. In doing so, it had to consider the test to determine whether something is a substantial reproduction of a computer program. The court rejected the interpretation it adopted previously (by majority) in Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300.

It is well-established that in determining substantiality, the inquiry is a qualitative, rather than a quantitative, one (ie, considering the importance that the specific portion bears to the whole work). But, in making this inquiry, the essential or material features of a computer program should not be considered in relation to the functioning of the computer program (ie, the test in Autodesk). Rather, the essential or material features should be ascertained by considering the originality with which the specific portion expressed the algorithmic or logical relationship between the function to be performed, and the physical capabilities of the device having digital information processing capabilities. In the case of the Reserved Words, even when considered as a collocation, the High Court did not consider them to have sufficient originality as data to constitute a substantial part of the Dataflex system.

Government inquiry into enforcement
In March 1999, the attorney-general asked the House of Representatives Standing Committee on Legal and Constitutional Affairs to inquire into, and report on, issues relevant to the effective enforcement of copyright in Australia. The committee has received all submissions, and is due to report later this year.

The inquiry aims to (i) examine the extent of copyright piracy in Australia, an area of particular concern for many industries (including the film, music and software industries), and (ii) review the mechanisms available and used by government and copyright owners to combat copyright piracy (eg, border interception). This will be the first time since the enactment of the Copyright Act 1968 that a specific review of the enforcement of copyright in Australia has been undertaken.

The Business Software Association of Australia (BSAA), representing leading software manufacturers, estimated in its submission to the inquiry that software piracy is costing local businesses A$286 million per year in lost revenues. It also suggests that reducing Australia's software piracy rate of 33% to the US rate of 27%, would generate an additional A$1.2 billion in sales. The BSAA has called on the federal government to:

  • substantially increase the level of criminal enforcement for software copying and introduce harsher penalties for software theft;

  • introduce statutory damages in civil actions for infringement, the minimum award being set at the retail value of the software infringed; and

  • introduce simpler procedures for proving copyright ownership.

Y2K Disclosure

On February 26 1999, the Year 2000 Information Disclosure Act 1999 became law. The aim of the act was to encourage the voluntary disclosure and exchange of information about Year 2000 computer problems and remediation. Broadly speaking, the act affords makers of Year 2000 disclosure statements limited protection from civil litigation. The act will only protect statements made after February 26 1999 and before July 1 2001.

Importantly, the act does not apply to systems failures or business interruptions caused by the Year 2000 date change. A business that fails to fulfil its obligations because of Year 2000 problems may not be assisted by the act in any way.

The act protects Year 2000 disclosure statements that satisfy a number of formal requirements relating to the substance and form of the statements. For example, the statement must identify that it is a Year 2000 disclosure statement for the purposes of the act.

Due to constitutional limitations on the legislative power of the Commonwealth, the act will not necessarily protect all Australians and Australian businesses. Nevertheless, there is an extensive range of situations in which Year 2000 disclosure statements will fall within the scope of the act. The most important point is that the act will protect disclosures made by almost all companies. To alleviate the constitutional limitations met by the act, several states, such as New South Wales, Queensland and Victoria enacted acts in substantially the same form, which extended the protection of the act to entities other than companies.

There are some important exceptions to the protection afforded by the act. For example, protection is not afforded to false or misleading statements, nor statements made in the course of contract negotiations.

Other Government Initiatives

On November 29 1999 the minister for communications, information technology and the arts launched the federal government's A$78 million Building Information Technology Strengths (BITS) Programme.

The BITS programme will fund the establishment of at least one 'information industries' incubator in each mainland Australian state and territory, with the aim of providing new and growing technology firms with:

  • management, financial and technical advice and support;

  • assistance towards the costs of start-up firms; and

  • concept development funding for multimedia and other product and service projects.

To receive a grant under the BITS programme a project will need to have some private investor capital contributed to its growth and development.

IT in Civil Litigation

On a procedural note, in March 1999 the Chief Justice of the Supreme Court of New South Wales issued guidelines for the more efficient use of technology in civil litigation. Parties to civil litigation are now encouraged to:

  • use databases to create lists of discoverable documents;

  • give discovery by exchanging databases created in accordance with an agreed protocol;

  • exchange electronic versions of court documents (eg, pleadings and statements); and

  • arrange for the inspection of discovered material, while other material may be inspected by way of images if appropriate.

The guidelines touch on a range of issues, including images, viruses, verification, agreed software formats and a list of fields for litigation databases as well as explanations for each.

For further information please contact Katherine Sainty or Franki Ganter at Allen Allen & Hemsley by telephone (+61 2 9230 4000) or by fax (+61 2 9230 5333) or by e-mail ([email protected] or [email protected]).

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