Canadian Federal Court Addresses Copyright in Software

In lengthy reasons for judgment, Madam Justice Heneghan of the Federal Court in Harmony Consulting Ltd v GA Foss Transport Ltd et al, 2011 FC 340, has dismissed an action by Harmony Consulting Ltd (Harmony) for software copyright infringement by Foss Transport Ltd (Foss). Chari, the owner of Harmony, had developed dispatching and invoicing software and licensed it through a corporation, Atrimed Medical Supply Inc (Atrimed), to third parties. This software, with additional software developed by Chari, was licensed by Harmony to Foss for use in its petroleum haulage business. The parties’ relations eventually became acrimonious, leading Chari to place “time bombs” in the software, after which it ceased to function. Foss was forced to decompile and modify the software in order to re-enable it. Citing Delrina Corp v Triolet Systems Inc (2002), 58 OR (3d) 339 (CA), Justice Heneghan found, with some exceptions, that copyright subsisted in the software as a whole, being a protectable compilation of program modules, without considering whether copyright subsisted in the individual modules. However, because they involved insufficient skill and judgment, she rejected Harmony’s argument that modifications and “fixes” to the software attracted independent copyright protection. Chari claimed to have made a “mental assignment” of the copyright to Harmony, but only nine years later, a week before the trial, executed a nunc pro tunc assignment to Harmony, attempting to give it retroactive effect. The mental assignment was held to be irrelevant because of the requirement of subsection 13(4) of the Copyright Act that requires an assignment to be in writing. Based on Chari’s lack of credibility, Heneghan J found that there was insufficient evidence to establish that an assignment had in fact occurred, and therefore the nunc pro tunc assignment was found to be inoperative and irrelevant. On the facts, Heneghan J also found that the copyright in some of the software belonged to Atrimed rather than to the author or Harmony, since the author was an employee of Atrimed and there was no written agreement governing the ownership of the copyright. As for the remaining software for which the copyright was held by Harmony, Justice Heneghan found that there was no infringement. Harmony had made copies for backup purposes, but this was authorized by agreements between the parties. She also found that none of these acts (breach of related licensing agreements, mere use of a program, making of backup copies necessary to make modifications to the software, making modifications and then saving the modified file, and upgrading the software to use a newer version of Access) constituted infringement. Some of these actions might infringe the author’s moral rights, but the author was not a party to the action, nor did Harmony plead infringement of moral rights. For the full text of the reasons for judgment, visit: http://decisions.fct-cf.gc.ca/en/2011/2011fc340/2011fc340.html Summary by: Tom Feather