Re Accounting Systems 2000 (Developments) Pty Limited and CCH Australia Limited v CCH Australia Limited; Castle Douglas Pty Limited; Accounting Systems 2000

Re Accounting Systems 2000 (Developments) Pty Limited and CCH Australia Limited v CCH Australia Limited; Castle Douglas Pty Limited; Accounting Systems 2000 - [1993] FCA 265 - FCA 1993 case summary — Zoe

[34]

WHEREAS:

A The Assignor is the proprietor of certain accounting

software products known as the "Client Accounting System",

the "Office Management System", and the "Client Management

System".

B The Assignor has agreed to sell and the Assignee has agreed

to purchase the copyright in the accounting products

referred to in recital A on the basis set out below.

NOW IT IS AGREED:

1 DEFINITIONS

1.1 In this Agreement unless the context otherwise requires:

(a) "Accounting Products" means the software products

owned by the Assignor and intended for use by

accounting practitioners and known as the "Client

Accounting System", the "Office Management System",

and the "Client Management System" and includes all

Associated Documentation, all other related and

ancillary documents, programs and other supplementary

material;

(b) "Associated Documentation" includes all operating

manuals, user manuals, programming manuals,

modification manuals, flow charts, drawings and

software listings.

2 ASSIGNMENT

2.1 The Assignor hereby assigns to the Assignee absolutely all

of the Assignor's right, title and interest in and to the

copyright in the Accounting Products.

2.2 In consideration of the assignment the Assignee agrees to

allot to the Assignor two hundred thousand "B" Class

Ordinary shares of one dollar each in the Capital of the

Assignee.

3 WARRANTIES

3.1 The Assignor warrants that:

(a) it is the sole beneficial owner of the copyright in

the Accounting Products, that it has not granted any

licence in respect of any or all of the Accounting

Products to any person except certain licences to use

the object code of the Accounting Products or

mortgaged or otherwise encumbered the same in any

way;

(b) it is entitled to assign such copyright to the

Assignee without the consent of any person

whomsoever;

(c) there is no claim or potential claim against the

Assignor of any person whomsoever for infringement or

breach of copyright in respect of any or all of the

Accounting Products.

3.2 The Assignor hereby indemnifies and agrees to keep

indemnified the Assignee from and against all claims,

demands, actions, proceedings, costs, expenses and

liabilities whatsoever and howsoever arising in connection

with or incidental to any actual or alleged infringement of

copyright resulting from the use or exploitation by the

Assignee of the Accounting Products."

[45]

Question

"3. ... whether, as at 23 December 1988 there was no claim or

potential claim against the first respondent or any person

whatsoever for infringement or breach of copyright in

respect of any or all of the Accounting Products."

Answer

3. No

Question

"4. In the event that all or part of the questions 1 or 3 above

is answered negatively, whether the respondents or any of

them knew the true state of affairs as at 23 December

1988."

Answer

4. No

Question

"5. Whether as at December 1988 or January 1989 the respondents

knew that:

a) it was the intention of the first applicant to grant

licences in Australia to any persons to do acts

comprised in the copyright in the Accounting Products

and the computer programs;

b) the applicants believed that the second applicant

would be entitled, following the execution of the

agreements referred to in paragraph 5 of the

statement of claim (the agreements referred to in the

order of

10 July 1992 plus other agreements not necessary to

refer to) to grant to any person whatsoever a licence

to do any act comprised in the copyright in the

Accounting Products or any of the computer programs

without the licence or consent of any other person;

c) the applicants believed that the second applicant

would be entitled following the execution of the

agreements referred to in paragraph 5, to grant an

assignment of the copyright in the Accounting

Products or any of the computer programs to the first

applicant without the licence or consent of any other

person ;

and

d) the applicants believed that, upon the assignment of

the copyright in the Accounting Products or the

computer programs by the second applicant to the

first applicant, the first applicant would have the

right to grant an assignment of such copyright to any

persons whatsoever without the licence or consent of

any other person."

Answer

5. (a) Yes

(b) Yes

(c) Yes

(d) Yes

Question

"6. If the answer to any of the questions 1, 3 or 4 above is in

the negative, whether the giving of the written warranties

(being 3.1 (a), (b) and (c) of the Copyright Assignment

Agreement) or any of them is as a matter of law capable of

constituting misleading conduct within the meaning of the

s52 of the Trade Practices Act."

Answer

6. Yes

Questions

"7. Whether the computer programs and the Accounting Products

(the AS2000 programs) are reproductions in a material form

of the whole or a substantial part of computer programs

which together form the Focus program.

8. Whether in the alternative the (AS2000 programs) are

adaptations of the whole or a substantial part of the Focus

programs.

9. Whether copyright, or in the alternative, part of the

copyright in the Focus programs was in December 1988 and

January 1989 owned by Focus Business Systems Pty Limited or

some person other than the first respondent.

10. If the questions numbered 7, 8 and 9 above are answered in

the affirmative, whether, by reason of the matters set out

in paragraphs 7, 8 and 9 above the licence or consent of

Focus Business Systems Pty Limited or its successors in

title or some other person was required before the

respective applicants could do any of the acts referred to

in sub-paragraphs 5(a) to (d) of question 5."

Answers

7. Yes

8. Yes

9. Yes

10. Yes

Question

"11. Whether the respondents knew each of the matters referred

to in paragraphs 7 to 10 above."

Answer

11. No

[52]

"I have come to that conclusion for two reasons. First, I am

overwhelmed by the extent of the exact copying (that is not a

quantitative statement; the extent is so great that it takes on a

qualitative mantle). And if to that, there is added some part

only of the close copying, the case for the applicants is the

stronger. In some of the files the extent of the copying was

extreme; for example, 7 of the 29 files showed copying ranging

from 82.2% to 100%. The respondents would prefer to emphasise

that all but 1 of the 99 files had some changes or alterations

but it is necessary to bear in mind that those changes or

alterations can range from minor modifications to new works. To

the extent to which they might be minor modifications, the Privy

Council said in Interlego A.G. v Tyco Industries Inc (1989) AC

217 at 256:

"In the nature of things the original drawings come to be

reproduced, probably many times, and updated from time to

time as minor modifications are made in design or methods of

manufacture. To accord an independent artistic copyright to

every such reproduction would be to enable the period of

artistic copyright in what is, essentially, the same work to

be extended indefinitely."

This, in turn, leads me to the second reason for rejecting the

respondents' witnesses. In my opinion they have concentrated too

much on the work done by AS2000 in 1988 and too little on the

extent to which original Focus work was retained in the AS2000

program. No amount of new or additional work will compensate for

the retention of a substantial and material part of the Focus

program. (Ladbroke Football) Ltd v William Hill (Football) Ltd

(1964) 1 All ER 465; Blackie and Sons Ltd. v Lothian Book

Publishing Co Proprietary Ltd [1921] HCA 27; (1921) 29 CLR 396.

I am satisfied that my acceptance of Mr Grouse's evidence

justifies, and leads to, the finding that the AS V2.1E program was

a reproduction (and if not a reproduction, then an adaptation) of

the FBS V1.3 program. Hence, AS2000 did not own and was not able

to assign copyright to the CCH group without the assistance of

Focus ..."

[64]

"The present case is a pioneering step into a technically and

conceptually complex world. That is partly because the 1984

amendments to the Copyright Act 1968 (Cth) extended copyright

protection to computer programs on the footing that they were

literary works and is one reason why there has been difficulty in

ascertaining precisely how the appellants presented their case.

Autodesk was the first decision of this court dealing with the

amendments made to the Copyright Act in 1984. It was only the

second decision of this court dealing with the issue of copyright

protection for computer programs, the decision in Computer Edge

Pty Ltd v Apple Computer Inc [1986] HCA 19; (1986) 161 CLR 171 being made on the

basis of the law as it stood before the 1984 amendment. And the

precise interpretation of the legislation and its application in

this case are likely to have a significant effect on the future

development of the computer industry in Australia.

The decision in Autodesk confirmed two fundamental principles.

First, the definition of a "computer program" by reference to "an

expression ... of a set of instructions" should be understood as

conferring protection upon the set of instructions itself - which

must be identified with some precision - but as doing so in a way

which is adapted to the nature of copyright. Thus, the protection

of computer programs is to conform to the dominant principle of

copyright law that protection is given not for ideas, but only for

the form of expression. However, as the judgment of Mason CJ,

Brennan and Deane JJ makes clear, this distinction must not be

applied too strictly. A distinction needs to be drawn between the

relevant set of instructions and the form of storage or

representation of the instructions, so that a person who

reproduces a set of instructions in a different form - such as by

turning source code into object code - does not escape

infringement. The object of protection is the computer program,

not just the particular form of storage or representation chosen

by the author.

The second fundamental proposition confirmed in Autodesk derives

from the first. Functionality is not the proper object of

copyright protection. As Dawson J stated in Autodesk, the purpose

or function of a utilitarian work is its idea, while the method of

arriving at that purpose or function is the expression of the

idea."

[200]

transfer of common law concepts to the construction of the

statute. It arises from a misconception as to the nature of the

general law. Representations are generally perceived as

extra-contractual, that is to say if fraudulent, as tortious, and

whether innocent or fraudulent, as providing a ground in equity of

rescission of the transaction entered into as a consequence

thereof. There has been debate as to whether the equity

jurisdiction is lost if the representations become contractual

terms, whether conditions or warranties; see Academy of Health and

Fitness Pty Ltd v Power [1973] VicRp 25; (1973) VR 254; Simons v Zartom

Investments Pty Ltd (1975) 2 NSWLR 30. On the other hand,

the term "warranty" generally is perceived as identifying (i) a

species of contractual affirmation of fact or promise or,

alternatively, (ii) not as a promise but as a representation of

fact, the truth of which is a condition precedent to the

obligation of the other party to perform the contract. (As to

this latter use of "warranty", see McRae v Commonwealth Disposals

Commission [1951] HCA 79; (1951) 84 CLR 377 at 407-410; Corbin on Contracts,

1963, para. 14.) As to the former use of "warranty", Williston

points out, after giving several definitions:

"It should be observed that under these

definitions, a warranty is not necessarily a

promise or contract. The law of warranty is

older by a century than special assumpsit, and

the action on the case on a warranty was in part

the foundation of the action of assumpsit. An

action on a warranty was regarded for centuries

as an action of deceit, and it was not until the

second half of the eighteenth century that the

first reported decision occurs of an action in

assumpsit on a warranty. And it is still

generally possible where a distinction of

procedure is observed between actions of tort

and of contract to frame the declaration for

breach of warranty in tort.

It is probable that most persons instinctively

think of a warranty as necessarily a contract or

promise, but though frequently warranties are

true promises and contracts, in other cases they

are merely representations which induce a sale .

. ."

(Williston on Contracts, 3rd ed., 1964, section 970)

At a glance

Court

Decision date

Before

Source

Judgment (257 paragraphs)

Re Accounting Systems 2000 (Developments) Pty Limited and CCH Australia Limited v CCH Australia Limited; Castle Douglas Pty Limited; Accounting Systems 2000 (Developments) Pty Limited and Gregory Stokes [1993] FCA 265 (3 June 1993)

Parties

Legislation Cited (3)

Cases Cited (26)