Generate Group Pty Limited v Sea-Tech Automation Pty Limited

Generate Group Pty Limited v Sea-Tech Automation Pty Limited - [2007] NSWSC 226 - NSWSC 2007 case summary — Zoe

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(c) Bevlink gaming interfaces. 8 The defendant has opposed the granting of any relief. 9 The case of each party has been that it will suffer dire consequences should the other succeed on the interlocutory application. It is certainly common ground that determination of the interlocutory proceeding will be a matter of special significance regardless of which party succeeds. 10 Naturally there is no issue but that the Court does not determine disputed issues of fact on an interlocutory hearing. The background 11 Bevlink products are used in the hospitality industry for measuring beverages when served, integrating beverage (and other bar service) and gaming machine functions with point of sale stock control and accounting systems, and operating membership loyalty points programs (where points are earned and may be redeemed by purchase of beverages and operation of gaming machines). 12 Bevlink version 5 is the Bevlink version currently used by the plaintiff's customers. There are at least 150 customers throughout Australia ranging from very large providers of hospitality to small licensed clubs. 13 Bevlink gaming interfaces are the interfaces between Bevlink version 5 and the various types of gaming machines found in licensed premises. 14 There is evidence before the Court that the parties agreed in early 2004 that there would be no further major updates to Bevlink version 5, that the next release of the Bevlink software would be Bevlink version 6, that agreement being that Bevlink version 6 would be based on a database product known in the computer software industry as SQL, which had been under development since 2004 or 2005 by the plaintiff and defendant [but which was not yet ready to be supplied to customers of the plaintiff]. Parameters of this evidence are apparently in issue but as earlier observed, it is inappropriate for the Court to determine disputed questions of fact on an application such as the present. The development of the computer programs 15 There is evidence that the plaintiff had early versions of its Bevlink computer programs developed by software developers other than the defendant and commenced distributing and licensing them in the mid 1990s. 16 The plaintiff's case is that:

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iii. A claim that the plaintiff holds an exclusive non revocable licence to the copyright (including future copyright) in all programs developed under it to the plaintiff; and that that licence extends to every code version of any computer program developed under it, including each source code version. iv. A claim that the plaintiff is entitled, by reason of clause 24(5) of the Agreement to custody of the physical media on which every code version of any of the programs developed under the Agreement are recorded. Source code and compiled versions or object code 20 Both parties have relied upon a number of authorities which are extremely useful in terms of the underlying analysis of the mechanisms for the writing of computer code. One of the real difficulties which faced the parties on the interlocutory hearing and which will face the parties on the final hearing, concerns the simple fact that the Software Development and Support Agreement to which they signed, did not descend into the detail of defining [or seeking to define], which parts, if any, of the source code was to be made available to the plaintiff. As will appear from what follows the definition of "software" utilised by the parties was general in its terms and did not distinguish between any language or form of code in which the computer program might be recorded. 21 In other circumstances, solicitors negotiating the terms of contracts dealing with source code may [where there is a concern of the customer to obtain access to the source code and a correlative concern in the software supplier to closely monitor the security attached to the source code], make provision for the appointment of an escrow agent. The material conditions upon which the customer may obtain access to the document from the escrow agent can then be carefully defined. Other attempts to treat with the detail are not uncommon. 22 In Data Access Corporation v Powerflex Services Pty Limited (1999) 202 CLR 1 (at 10 -11) Gleeson CJ, McHugh, Gummow and Hayne JJ quoted Gibbs CJ in Computer Edge Pty Ltd v Apple Computer Inc (1986) 161 CLR 171 at 178-179 who had addressed the mechanisms for writing of computer code:

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"So far as payment of the moneys due to our client, we note your letter indicated the sum of $133,853.33 would be paid on or before 31 January 2007 (this includes the adjustment for the double counting of the invoices 11542 and 11514, which is correct). We note these monies have been paid ." [emphasis added] 48 The plaintiff contends that on the evidence given by Mr Harris called for the defendant, work upon version 6 has been the only work which the defendant has carried out by way of performance of its obligation to enhance the software since 2005, in which time the plaintiff has paid to the defendant some hundreds of thousands of dollars, likely in the order of $800,000. The consequential submission is that the defendant has indeed been paid for the work that it has carried out in developing version 6 and that in terms of clause 24(5), the defendant has been paid for the work which it has written in the performance of that work. 49 Broadly the plaintiff's contention is that standing back from the particular words of the subject agreement, the agreement is seen to have been one whereby the plaintiff came with some software, furnished it to the defendant and did so upon terms that the parties would share the revenue derived from the software from the point where the plaintiff furnished its existing software to the defendant. In return for that share, the agreement provided that the defendant would perform its obligations under the agreement to enhance that software as reasonably required by the customer. Hence the payment which was made was of development fees as defined, as meaning "the fees for software development, support and maintenance, as detailed in this agreement, to be calculated and paid in accordance with this agreement". 50 The contra-submission put by the defendant is that there is no common ground between the parties to the effect that payment has been made to the defendant in respect of development fees qua version 6 as provided for in clause 2. The proposition is that the agreement provided for there to be no payment whatsoever by the plaintiff to the defendant until such time as the software was licensed. The proposition is that through the whole of the development, the defendant was never paid in respect of any work carried out on version 6. The proposition is that upon the proper construction of the agreement, the defendant is not entitled to any such payment up to and until version 6 is licensed out to end users. 51 The defendant's counsel indicated from the Bar table that her instructions were that the moneys acknowledged [in the letter from the defendant's solicitors to the plaintiff's solicitors of 31 January 2007] as having been paid to the defendant, were paid in respect of licence fees concerning versions 3 through to 5, but never with respect to version 6. This is an unsatisfactory manner in which to leave the evidence on an interlocutory hearing and simply means that there is another factual issue for close examination during a final hearing. Conclusion on serious/prima facie case qua the construction issues 52 There is at least arguably a key difficulty with the defendants suggested construction of the agreement for the simple reason that the agreement expressly deals in terms, with the question of title to the software but nowhere expressly deals with a licence to use the software. One observation with respect to the defendants submissions is that they contend that the above notwithstanding, the agreement is nevertheless to be interpreted as conferring a licence to use as opposed to dealing with title. 53 There are also other areas of some complexity which arise by reference to the need to construe a number of provisions applying the usual principles of construction. 54 Summarising the usual principles the following observations may be made:

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viii. Hence I take it as axiomatic that: · the Court endeavours to give primacy to unambiguous words used in a written contract, this matter generally being approached in the manner outlined by McColl JA in Peppers Hotel Management supra; · the proper approach seeks the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably been available to the parties in the situation in which they were at the time of the contract" (Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at 188 citing Lord Hoffmann, Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912; [1998] 1 All ER 98 at 114; Peppers Hotel Management Pty Ltd supra at [66 et seq]; · commercial contracts should be construed so as to be given a sensible commercial operation: Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; Hide and Skin Trading v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-4; Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 per Giles JA at [64]. Discharge of the onus resting upon the plaintiff 55 For the above reasons in my view the plaintiff has discharged the onus upon it of demonstrating the requisite degree of likelihood of success: namely "that which the Court thinks sufficient in the particular case to warrant consideration of where the balance of convenience lies": cf McLelland J in the Appleton Papers Inc v Tomasetti Paper [1983] 3 NSWLR 208 at 214 . This passage followed a number of propositions put by McLelland J as to the principles to be applied upon an application for interlocutory relief generally outlined in Hungry Jacks Pty Ltd v Burger King Corporation, (unreported, Supreme Court of New South Wales, Einstein J, 7 December 1998) at [187]-[199]. Those propositions have been followed for the purpose of the present decision. 56 McLelland J quoted from Eng Mee Yong v Letchumanan [1980] AC 331 at 337 where the Privy Council had expressed the relevant principle in terms derived from the American Cyanamid Co v Ethicon Ltd [1975] AC 396 case as follows:

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Cases Cited (17)