A recent High Court case (Noemalife SpA v Infinitt UK Ltd) has highlighted the need to understand the "chain of title" of licensed software and the risks of relying on implied licences.
In 2003, Ferrania UK Ltd ("FUK"), which was later acquired by the defendant, Infinitt UK Ltd, contracted with an NHS Trust to provide various services, including the provision certain digital imaging software. FUK did not own the relevant software, but had an implied licence to use it from its sister company. Unfortunately that sister company went into liquidation, leading to the transfer of the copyright in the software to a new company.
The contract with the Trust (the "Trust Contract") was extended in September 2010 for six months beyond the end of the initial seven-year term (ie until 31 March 2011) and then in December 2010, the term was extended by a further 30 months.
The claimant (which had acquired copyright in the software) argued that, at the end of the initial term, the original implied licence came to an end and that (hence) a new implied licence, which required the defendant to pay a reasonable fee to use the relevant software, came into effect. The day before the proceedings commenced, the claimant also brought a claim against the defendant for infringement of copyright.
It was common ground that, under section 90(4) of the Copyright, Designs and Patents Act 1988, the acquirer of the copyright in the software was subject to the implied licence granted to FUK in 2003 (which allowed FUK to use it for the purposes of the Trust Contract). The central issue that the High Court considered was whether that implied licence continued after the initial term of the Trust Contract and, if not, whether a new implied licence was granted.
The Court decided that the original implied licence must extend to include any extension of the Trust Contract that FUK was contractually obliged to accept (under the Trust Contract). As the first extension of six months was made in accordance with the terms of the Trust Contract, which allowed the contract to be extended "in 6 month blocks for a maximum period of 36 months" and provided that neither party could unreasonably refuse a request for such an extension, the Judge found that the implied licence was extended by 6 months to 31 March 2011.
As the second extension was not one made under the "contractual machinery" (of the Trust Contract), the Court found that it was a change that FUK was entitled to refuse and that therefore the original implied licence did not automatically extend to cover it. FUK therefore required a further licence from the claimant in order to continue providing the software to the Trust after 31 March 2011. The court decided that no further licence (to FUK) to use the software after that date had been granted. By implication therefore the second extension to the licence term under the Trust Contract was not effective.
The court refused permission for the claimant's amended claim (for copyright infringement) as it was pleaded so late in the proceedings, but acknowledged the possibility of the claimant bringing a fresh claim for breach of copyright for the period from 1 April 2011 onwards in the future.
The factual background to this case is rather complex. However it illustrates both some of the challenges that may arise from relying on the existence of implied licences and, as the court left open the possibility of the claimant bringing a claim for infringement of copyright in the future, the importance of software users being cautious around who the underlying copyright owner of the relevant software is (and the basis upon which they, and any other parties that provide them with the relevant software, are entitled to use it).