Friday, 29 August 2014
1. The owner licenses the IP to either all members of the Named Group or to Corporate Group—In principle, this arrangement should not pose a problem, since the law contemplates that an IP licence may be either exclusive or non-exclusive. On its face, the licence described here would appear to fall comfortably under the rubric of a “non-exclusive” licence. There are, however, a number of possible pitfalls here.
The agreement can explicitly recite that the licence is “exclusive” (this Kat not discuss here the situation where the licence recites that it is “exclusive” except for the following named entities, and leaves this possibility for perhaps another time). True, one is not bound by the contractual characterization of the licence as “exclusive” or “non-exclusive” and the actual provisions of the licence will prevail. But what happens where the parties draft the licence in terms of an exclusive licence, whereby the only material aspect of the licence that supports the conclusion that it is non-exclusive is the existence of multiple licensees by virtue of their inclusion within either the Named Group or the Corporate Group? If ever put to legal challenge, will the court simply impose the relevant provisions appropriate for a non-exclusive licence, which would effectively require the court to rewrite a portion of the licence as agreed-upon? Or would a court find that the licence provisions are invalid, because they have failed their essential purpose, or have run afoul of a similar contract doctrine?
2. The owner assigns the IP to either all members of the Named Group or Corporate Group—This type of provision may pose an even more fundamental problem because transfer (and receipt) of ownership of the IP right is involved. Let’s first take the situation where the grant provision simply provides that the assignor assigns its IP rights to all members of the Named Group or Corporate Group, without further stating the proportional interest granted to each entity. Depending upon the laws of the relevant national jurisdiction, there may be a presumption that the proportional interest received by each assignee is equal. The national jurisdiction may also provide either explicitly or by case law the terms and conditions for the exploitation of the IP right (as well as an accounting to the other assignees for profits obtained) by each of the assignees. Here too the open-ended nature of the entities included within the Corporate Group may pose a difficulty of identification. Also, where the law does not provide an easy way to determine the proportional interest or the right of exploitation for each assignee, uncertainty will prevail and may well require the various assignees to enter into a further agreement to resolve the situation. And did we mention the tax consequences?
Perhaps of more interest is a further clause in the assignment agreement that provides all members of the Named Group or Corporate Group, as assignees, undertake to subsequently designate a single entity from among the relevant group that will be the ultimate owner of the IP rights. A number of possibilities arise. If the assignees do not thereafter designate the ultimate owner of the IP rights, does that invalidate the entire assignment arrangement or does such failure to designate simply mean that each of the assignees as members of the Named Group or Corporate Group becomes the owner of a proportional interest of the IP right? In any event, which part (ies) has a right to seek termination of the assignment for failure to comply fully with its terms, or to the otherwise challenge the assignment?
In a variation, consider that the assignment agreement itself provides the identity of the ultimate owner of the IP rights, while still preserving the initial assignment grant to each of the members of the Named Group or Corporate Group? In such a situation, at least two possible alternatives (there well could be more) suggest themselves to explain the outcome of such a provision: (i) a two-stage assignment arrangement has been created, whereby at the first stage each of the assignees takes ownership, subject to the considerations discussed in the previous paragraph, followed by the later assignment to a single entity; or (ii) the first stage creates a situation where the assignor remains the constructive owner of the IP rights, wherein the members of the Named Group and Corporate Group hold merely a legal right in the IP rights; it is only after the second stage is consummated that beneficial and legal rights are joined in the hands of a single ultimate owner.
For Kat readers who have braved this post until the end, the discussion has been intended to emphasize one overarching point. Absent extremely unusual circumstances, it is advisable to avoid the kind of grants of IP right discussed above, lest uncertainty cloud the outcome of the disposition for all concerned.
"Hello Kitty: not a cat?" is the striking but -- to this Kat quite unsurprising -- title of an article by Hannah Marsh, published in The Telegraph earlier this week. in relevant part, the article reads (with spellings corrected):
"... D]id you know that Hello Kitty is not a cat, but a young British girl with a twin sister and an entire backstory? Christine R Yano, an anthropologist from the University of Hawaii and visiting professor at Harvard, has spent years studying the phenomenon that is Hello Kitty and her lasting appeal. Speaking to the LA Times, she explains some of the lesser-known facts about the cutesy character.Rupert Bear. This nominal ursine (right), despite his ears and facial features, is not a bear at all but a boy (also apparently British) with the face of a bear [a cursory surf of the internet has not yet revealed any source to support this contention but, like Hello Kitty, Rupert behaves in human fashion]. This Kat is fairly certain that there may be others and has a hunch that his readers may be jogging his memory ...
"Hello Kitty is not a cat," she says. "She's a cartoon character. She is a little girl. She is a friend. But she is not a cat. She's never depicted on all fours. She walks and sits like a two-legged creature. ..."
... She's actually British. She has en entire backstory that sees her living at home outside London with her parents, George and Mary White. Her full name is Kitty White. She has a twin sister called Mimmy White, a cool grandpa called Anthony and a sweet grandma called Margaret. She's a Scorpio. She loves apple pie. As well as her own pet cat, Charmmy, she has a hamster called Sugar, given to her by her friend Dear Daniel."
Merpel notes that there is a seamier side to Hello Kitty's existence. Like all valuable intangible assets, she is the subject of a thicket of trade mark registrations. This is quite normal: while brand extensions can be lucrative, they are most attractive to invest in when the shifting of a popular brand or icon from one product to another is underpinned by legal protection. However, some of these registrations are for quite surprising goods. For example, Community trade mark EU000103721 (a figurative mark, depicted on the left) is registered for a large number of products that even a pretty imaginative reader would not immediately associate with Hello Kitty. The list includes:
Class 3 cleaning, polishing, scouring and abrasive preparationsAnother of Hello Kitty's Community trade mark registrations, EU003142247 covers some even more unpromising products:
Class 5 preparations for destroying vermin; fungicides, herbicides
Class 8 side arms; razors
Class 9 fire-extinguishing apparatus
Class 11 apparatus for ... sanitary purposes
Class 18 whips
To the best of this Kat's knowledge, the Hello Kitty portfolio of IPs has not been licensed for use on any of these products, and he doubts that they will be.
Class 6 materials of metal for railway tracks
Class 10 artificial limbs, eyes and teeth; tongue scrapers.
Class 12 non-skid devices for vehicle tires.
Class 34 tobacco; smokers' articles.
Here's one further little-known fact about Hello Kitty: "Goodbye Cathy: Hello Kitty and Miffy settle copycat case", penned in June 2011 by Catherine Lee ("Cat the Kat") and available here, is the all-time most-visited blogpost on this weblog. As of this morning, this post has been visited no fewer than 238,983 times.
Thursday, 28 August 2014
The second factor, the nature of the copyrighted work, also weighed in favor of defendant, as it was of creative and expressive nature, which provides “a greater leeway… to a claim of fair use” (Cariou v. Prince, Second Circ. 2013 at 709).
|Is This Fair Use?|
|Mother knows best|
1709 Blog's sidebar poll on the ideal resolution of the copyright issues relating to the now celebrated selfie taken by a black-crested macaque is now close to receiving its 300th response. At present, marginally more than half those who have participated are of the opinion that there should be no copyright at all in such a work. This is the position taken by Wikipedia and endorsed by the US Copyright Office. However, there are still four days to go and there is not inconsiderable support for the proposition that copyright should subsist and be enjoyed by what one might describe as the nearest available human. Do please participate if you have not done so already!
here, is now pretty well full to capacity. We have however opened a reserve list for people who can come if someone else has to cancel (there are are usually a few on-the-day cancellations as work, illness and unexpected occurrences take their toll) so, if you've not yet signed up there might still be a chance for you. In contrast, the dialogue on Tuesday 16 September between IAM editor Joff Wild and IP guru Neil Wilkof about the impact of patent litigation on patent values, a joint IPKat-IP Finance blog production which is detailed here, still has spaces available. If you'd like to come, just sign up!
|Question 1: "How many|
European Courts are there?"
|PAEs: do they come in|
peace -- and should they
go in pieces ...?
Wednesday, 27 August 2014
|New Billy Bluejay |
(U.S. Application Serial No. 86067719)
|Toronto Blue Jays Logo|
(U.S. Registration No. 4314078)
Old Billie Bluejay
(U.S. Registration No. 3080408)
Having had the opportunity to see this book ahead of publication, when asked to give an approbation of it for the website and back cover, this Kat has to confess that he had some reservations about agreeing to do so. Too many China IP books in his experience have suffered from the three vices, listed in increasing degrees of severity, of being (i) out of date to the point at which they were of more historical than practical value, (ii) often unclear in terms of their description and analysis of Chinese law and its applicability to the sort of problems that regularly beset IP owners whose rights have been (or are alleged to have been) infringed and (iii) dull. In the event, this Kat was pleasantly surprised. He wrote:
"Chinese intellectual property law has been one of the fields in which it has been most difficult to obtain an accurate, reliable and intelligible perspective. The achievement in putting together Patent Law in Greater China is therefore all the more laudable. Chapters from practitioners, administrators, academics and the business world give this work a degree of relevance and immediacy and show how the complex and initially puzzling interplay of law and practice in China and the economies within her orbit can be depicted and understood".This is how the publishers describe it, in part:
"This book provides a comprehensive introduction to patent policy, law and practice in Greater China [which for these purposes includes Taiwan, Hong Kong and Macau] and will be a go-to book for patent practitioners who have client interests in that region. Features [include]:Not listed by the publishers but of potential interest and value to the reader are the book's coverage of design patents and utility models; the text is also replete with references and further reading -- in a wider variety of languages than this Kat can cope with. The presentation of this volume has a genuine practitioners'-work feel to it, with numbered paragraphs and a handsome font. Well done, everyone!
• Introduction to Chinese patent policy.
• Detailed coverage of technology transfer and substantive patent law in China, including prerequisites for protection, exceptions and limitations.
• Practical analysis of patent law relating to three specific fields of invention: employee inventions, biotechnological and pharmaceutical inventions, and software inventions.
• Overview of the patent application and examination procedure, with a particular view on PCT applications.
• Insight into specific characteristics of enforcement mechanisms and jurisprudence in China, including the dual enforcement system, claim interpretation, infringement types, and invalidity procedures.
• Invaluable section on the relationship between patent and antitrust law, including practical realities in the sphere of anticompetitive licensing. ...
Bibliographic data: Hardback. li + 469 pages. Hardback ISBN 978 1 78195 483 6; ebook ISBN 978 1 78195 484 3. Price: hardback $230 (online from the publisher, $207). Rupture factor: substantial. Book's web page here.
This Kat has received information concerning the publication in a national Dutch newspaper of a double page item calling for crowd-funding of opposition proceedings against a European patent. The patent in question, granted last year to Syngenta, relates to EP2140023 relating to insect-repellent pepper plants. Or, to put it another way:
EP2140023 has generated a good deal of interest, not to mention controversy; it has even been the subject of a question before the European Parliament which recites that 34 non-governmental organisations (NGOs) and farmers' and breeders' bodies are united in their opposition to it. So it is not surprising that Bionext (a Dutch organisation of organic farmers and food-growers) should be campaigning against it in the following terms:
Thanks to Google Translate, this Kat can bring you the following information (which you can read in the original Dutch here) about Bionext and its objection to EP 2140023:
Pig and pepper here
Peppa pig here
Tuesday, 26 August 2014
Jeremy kindly informed me of a very interesting case about the ownership of the “likes” generated by a social media account created by a fan of the television show The Game. Spoiler alert: the fan lost.
On August 20th, the Southern District Court of Florida granted Defendant Black Entertainment Television LLC (BET)’s motion to dismiss in a case where the network was sued by Stacey Mattocks over the control of her Facebook fan page dedicated to The Game television show. The case is Stacey Mattocks v. Black Entertainment Television LLC., 0:13-cv-61582.
|This Kat Has to Ask: Is this Alsatian Pinot ?|
The Game is a dramatic comedy about the lives of professional football players, their wives and girlfriends, and was originally broadcast by the CW Network from 2006 to 2009. In 2008, Plaintiff Stacey Mattocks created a The Game Fan Page on Facebook (the FB Page). According to Facebook’s Terms of Service, an individual may create such page, even if not affiliated with the brand or entity featured there, as long as it is not deceptive and that the page “make[s] clear that the Page is not the official Page of the brand, entity (place or organization) or public figure.” Fan pages are public. The FB Page did not contain any BET-owned or third-party-owned content and Plaintiff did not present the FB Page to be an official fan page.
After The Game was canceled in 2009, Plaintiff nevertheless, according to the complaint, “continued to aggressively promote [it] on the FB Page in hope that a network would eventually pick it up and return it to air.” At the time, the FB Page had over 750,000 “likes.” Plaintiff’s wishes came true when Defendant began producing and broadcasting new episodes of the show in January 2011. Plaintiff alleged in her complaint that this decision was made “due in large part to [her FB Page.]”
BET contacted Mattocks in the Fall of 2010, when the FB Page had about 1.3 Million “likes” and hired her part-time in January 2011 to manage the FB Page. BET then “prominently displayed its trademarks and logos in the top header of the FB Page, encouraged BET’s viewers to “like” the Page, and provided Mattocks with exclusive content, including links to video clips and photographs, to post on the Page.” Plaintiff could chose not to post some material, but posted most of it. The two parties entered into a letter of agreement in 2011 where BET could have access to the FB Page and Mattocks would not lose her administrative rights. All these efforts paid off as the number of “likes” on the FB Page went from around two million to more than six million.
After signing their letter of agreement, BET and Mattocks also discussed full-time employment, but Mattocks suspended BET’s administrative access to the FB Page pending further agreement. BET then asked Facebook to “migrate” fans of the page created by Mattocks to an official FB Page created by BET. Facebook also shut down Mattock’s FB Page. Further, BET successfully asked Twitter to shut down the account Mattock used to promote the series for BET.
|I Could Have Been A Contender...|
BET informed Mattocks that it had rescinded “any and all rights that may have been previously granted to you directly, implicitly or otherwise, to use BET intellectual property (“BET Material”). You are respectfully directed to cease and desist from using all BET Material in any and all media immediately and further advised that BET expressly reserves its various rights and remedies as copyright and trademark owner in connection with willful infringement of our intellectual property.”
Mattocks sued BET, alleging inter alia that BET wrongfully deprived her of “certain rights” by disabling the FB Page and her Twitter account. She also claimed tortious interference with her contractual relationships with Facebook and Twitter, breach of agreement and conversion of her business interest in the FB Page. Defendant moved for summary judgment. The court granted defendant’s motion on all counts. The court found no tortious inference with a contractual relationship as, under Florida law, the interfering defendant must be a stranger to the business relationship, unless it is done for malicious reasons. The court found that BET was not a stranger to the relationship as it exercised control over both social media accounts. It did not act maliciously either as it had been deprived of “control over its intellectual property on the [FB] Page and how [The Game] was officially promoted there.” The court found that BET acted to have these two social media accounts closed down under “companies’ policies protecting brand owners’ rights.” As for the breach of contract, the court found that Mattock’s material breach by blocking administrative access excused performance of the agreement by BET.
Mattocks also claimed that BET converted a business interest she had in the FB Page. This interest was all the “likes” on the FB Page which provided her with business opportunities with companies paying her for redirecting visitors to their sites. But the court found no property interest in the “likes” on the FB Page, as ““liking” a Facebook Page simply means that the user is expressing his or her enjoyment or approval of the content.“ As users are free to revoke their “likes” anytime, the court concluded that “if anyone can be deemed to own the “likes” on a Page, it is the individual users responsible for them.“
The case is interesting as it raises the issue of ownership of a social media account. The issue is not novel when the case involves an employer and an employee‘s arguing over the ownership of an account [see here and here], but I believe this is the first time a court had to examine a case where a fan is claiming ownership rights over an account promoting a show, a sports team or an artist (if you know of such case, please let us know!).
The parties in the cases involving an employee and an employer both struggled to prove which party was indeed the source of a particular social media account’s success. In our case, before BET got involved in the FB Page, Mattocks could not, and did not, post any BET-owned or third-party-owned content from The Game. The FB Page got many more “likes” after “official content” was regularly posted and that content, protected by copyright and trademark, undoubtedly played an important role in the FB Page’s success. However, Plaintiff was certainly emotionally involved with the show and that passion may have attracted “likes” of users touched by an individual’s work of love, which may have contrasted with corporate promotional efforts. But, at the end of the day, it is the corporation which owns the IP rights over the content, not the fans.
Sharks in the courtroom are nothing new according to some critics of the legal system, but they are usually referring to the lawyers who appear there, charging inflated fees and ruining their clients. In this note, occasional guest blogger Paul England (senior associate, Taylor Wessing, and definitely not a shark) gives us the low-down on a recent fairly economical patent dispute in which the only things inflated were the products made by the respective parties. This is what he tells us:
Sharks and Jets here
The recent decision of His Honour Judge Hacon in the Intellectual Property Enterprise Court, England and Wales, in William Mark Corporation & Another v Gift House International Ltd  EWHC 2845 (IPEC) is a very largely fact-based patent action concerning flying fish toys. The first claimant devises and markets toys and is the proprietor of the two patents in suit: GB 2482275 ("275") and a divisional of 275, GB 2483596 ("596"). Both are entitled "Flying shark", the invention of which is described in 275 in these terms: "flight of the toys can be controlled in both horizontal and vertical direction. Most preferably, such flying toys simulate with a high degree of realism movement of a fish in its natural habitat". The most important features of these are:
The Great White Infringer
* 275, claim 1 - this can be summarised as a flying toy, comprising a body that includes a portion filled with lighter than air gas, in order to give neutral buoyancy; a moving surface and tail assembly, coupled to a first actuator and the body portion by an elastic element, such that it can move at variable and different angles to the forward motion of the body portion (ie a moving tail fin, but not necessarily one that propels the fish forward); a second actuator coupled to the body that can move a weight so as to change the pitch of the toy to allow for controlled ascent and descent (ie the fish can point its head down or up);The defendant also devises toys, and imports for sale in the UK a flying fish known as a “Mega Flier”, which the claimants alleged, infringed its patents. The defendant argued that the patents were invalid.
* 275, independent claim 9 - concerned with the tail fin assembly for a flying toy this can be summarised as comprising: a base plate with an actuator coupled to a moving surface such that the surface can move as described in claim 1; an elastic element that allows reversible coupling of the tail fin assembly to an inflatable and compressible body portion of the toy; and, configuration to allow application of a compressive force to the body via the elastic element (so as to maintain rigidity between body and tail fin);
The patented Mark Shark
* 596, claim 1 – primarily concerned with the movement of the weight to control pitch and provide for the weight element to comprise removable ballast;
* 596, claim 2 – contains the additional feature that "…the toy has a moving surface that is configured to move side-by-side for forward propulsion of the toy".
Further to an Order of Mr Justice Birss following this action's Case Management Conference, there were two issues to be decided on infringement, one of which was argued: did the defendant's products have an 'elastic element' within the meaning of claim 1 of 275? Judge Hacon held that the defendant's toys had plastic strips which were sufficiently elastic to serve as elastic strips as required by claim 1 of 275.
Our guest blogger has left his mark
Invalidity was alleged on grounds of lack of inventive step over two items of prior art:
* Slater – disclosing an anchoring means on a full-sized airship. This comprises a magnet which, when the airship is brought to rest, attaches to an anchoring member on the ground. The airship also has a track support mounted lengthways along the underside of the main body, which allows the airship's gondola to slide forwards or backwards.The judge held that claim 1 (and dependent claims) of 275 was not obvious over Kinishita, particularly as regards the second actuator and moving weight to control pitch claimed in 275. Further, there was no expert evidence to suggest that it was obvious on the basis of Slater to add a flapping tail to a toy. As regards independent claim 9, there was no evidence that it was obvious to adapt the base plate and plastic strip in Kinoshita to make the plastic strip elastic and have the surface move at variable and different angles. Slater also did not render claim 9 obvious. The result was that all claims of 275 were valid and the defendant's product infringed claim 1.
* Kinoshita – disclosing a mechanism for propelling a floatable structure filled with lighter than air gas. Such as a flying toy (exemplified by a flying fish in the specification). A powered fin swings to and fro in a vertical plane propelling the toy forward.
Law to save sharks here
Shark recipes here
From Katfriend and long-time respected IP commentator Ken Moon (AJPark) comes news of a 13 August ruling of the New Zealand Court of Appeal (Harrison and Miller JJ) in a software copyright and trade secrets dispute, Karum Group LLC v Fisher & Paykel Finance  NZCA 389, which was heard this June. Ken takes us through the IP aspects of this dispute as follows:
This case, which relates to alleged copying and misuse of confidential information arising from a system integration and data migration project, is the first New Zealand case on non-literal software copyright infringement. In short, the Court of Appeal upheld the judgment of the High Court that Fisher & Paykel Finance (FPF), in modifying its own credit software, had not infringed any copyright in Karum’s CMS software; nor had Karum proved a claim of breach of confidence through FPF incorporating Karum's trade secrets into its own software.[Merpel adds: the Coco v Clark three-step test is as follows: (i) the information itself must have the necessary quality of confidence about it; (ii) that information must have been imparted in circumstances importing an obligation of confidence; (iii) there must be an unauthorised use of that information to the detriment of the party communicating it. This is hardly rocket science and it's scarcely even a test, but judges, lawyers and litigants alike have clung to it like limpets for generations, almost to the point of making excuses for it when it doesn't quite fit ...].
COBOL, had been supplied by California based Karum in 1994. FPF secured a licence from Karum to continue to operate CMS temporarily on RFS mainframes while FPF modified its own credit system software called "Lending" (written in Ingres) to support Farmers Card functionality and allow the two business systems to be integrated.
The court's reasoning
The Court of Appeal noted the duration of the trial in the High Court – eight weeks with numerous expert witnesses – and the complexity of the action due to its technical detail and the ‘novelty of the copyright claim’. The latter remark arose because Karum did not claim its CMS source code had been copied, but rather that FPF had copied non-literal design elements and logic.
• The underlying factor in deciding whether copyright protection could extend to something beyond or more abstract than program code was observed to be the principle that copyright did not protect ideas, but rather protected the expression of ideas. While this was trite law it was reinforced by the TRIPS Agreement, to which New Zealand had been a signatory since 1994.
Computer Associates v Altai which had agreed that, just as in traditional literary works, copyright could in principle extend beyond code to cover 'structure', although only to the extent that it was limited to structure as such and did not extend to any ideas or functions behind the structure – or for that matter at any other level of abstraction. The US Court of Appeals also said 'structure' referred to 'the functions of the modules in a program together with each module's relationships to other modules'.
• The judgments in SAS Institute v World Programming were then considered and the Court of Appeal observed that while the courts of England and Wales [here and, on appeal, here] and the Court of Justice of the European Union [here] had admitted the possibility of copyright protection for non-literal elements such as structure, the copied functionality in that case was not protectable expression.
[here] because a computer program has no plot, merely a set of operations intended to achieve desired functionality: that Court had held that such functionality may be replicated precisely in another program because functionality is not protected by copyright as it lies on the ideas side of the line between idea and expression. And nor were business rules or business logic, these not being original to the programmer and in any event falling into the category of functions or ideas.
• In summarising the English and US cases the Court of Appeal concluded that the scope of any copyright in non-literal elements is constrained: a plaintiff would likely find it difficult to distinguish expression from idea or to prove specified elements were not mere functionality or business rules.
• Applying this law to what Karum had claimed were copied by FPF (namely character string displays of payment and delinquency calendars, and the use of 'buckets' for storing aged debt with payments being assigned to the bucket containing the oldest debt), the Court said that the CMS calendars and aged debt module were no more than mere functionality or business rules as the codes used to represent age of debt or payments as a proportion to debt were not distinctive and were not literary works whether taken singly or together.
• In particular, on the facts this case could not be distinguished from the English cases even though -- unlike those cases -- FPF did have access to the CMS source code. The Court categorised this as 'a distinction without a difference' as the CMS source was not copied by FPF.
• The Court concluded its findings on copyright infringement by observing that, for copyright to be infringed, the Copyright Act required that a substantial part of the work must be copied. In this case, even if FPF had copied any original expression in CMS software, it was not a substantial part of the CMS software package.
Breach of confidence
• In addition to the calendars and aged debt, Karum's claim extended to FPF's use of what it called 'special codes' and 'intercept codes'. The first were some of the codes used in a customer account to indicate the status of the account, examples being '4' meaning 'account with a collection agency' and '7' meaning 'closed'. Some of the claimed codes were in fact mapped into CMS during the changeover from the Farmers previous software, F-Credit. The Court held all these codes to be non-substantive content: they were simply arbitrary characters representing business rules and did not amount to trade secrets.
Cats may be difficult to herd, but they respond
well to modern farming techniques if properly fed
• The intercept codes were codes sent with customer statements electronically to the agency retained to print and mail out the statements, such as '54' indicating hold the statement (and not mail it). FPF did use some of these codes because it used the same interface file with the printing agency that Farmers had used. There was no proof that the interface file format was owned by Karum as it was an agreed format worked out with the print agency by Farmers.
• The Court observed that Karum had chosen to sue FPF for breach of confidence in equity and had itself expressly cited the three-step test established in the 1969 English case of Coco v AN Clark (Engineers) [noted here] which had been long adopted by New Zealand courts.
It therefore rejected Karum's argument that establishing the necessary quality of confidence for the first step should solely be carried out by interpreting the relevant trade secret stipulations in the CMS software licence (which formed part of the settlement agreement). The Court added that, while the licence clauses should be taken into account, the determination was ultimately a question for the court, taking into account policy considerations as in Yates Circuit Foil Co v Electrofoils Ltd  FSR 345.
• The Court found that there was no disagreement between the parties that FPF was entitled to examine CMS for the purpose of identifying business rules and functionality and that entitlement extended to testing both systems to ensure nothing was lost in translation. In any event the Court agreed with the High Court judge that there was nothing confidential about the codes -- which were arbitrary and trivial, both singly and collectively.
• In assessing the third Coco test, misuse of information to Karum's detriment, the Court confirmed that equity would require a showing of detriment in commercial cases, as in such cases it was the normal measure of fairness. The Court did not accept that Karum had suffered detriment because equity would not intervene where FPF only did what it had the right to do so.
It was not surprising that the idea/expression dichotomy dominated the reasoning for the first time in New Zealand copyright case instead of the usual subsistence and infringement considerations. However, the Court of Appeal rejected the opportunity to elaborate on what protectable expression might lie above source and object code, simply holding that the non-literal elements of software it was presented with fell on the idea side of the dividing line as being either functionality or business rules.
On breach of confidence it could be argued that the Court of Appeal has raised the bar in New Zealand for the first Coco test in appearing to require a higher quality of confidence than simply that the information be more than mere trivia. The Court has ruled that at least for commercial cases in New Zealand, a showing of detriment is a required part of the third Coco test. It was interesting also that the Court of Appeal recognised that, in the interests of commercial efficiency courts should resist 'the attempts of legacy system owners to leverage intellectual property rights so as to inhibit competition from second comers'.
There are still a lot of legacy banking systems requiring replacement over the coming few years because of brittle over-modified third generation code and/or mainframe hardware well past its use-by date.Disclaimer of personal interest: Ken was part of the legal team representing Fisher & Paykel Finance.
Cold Comfort Farm here
Farm cats here
Earliest farm cats here