Federal Court of Appeal Addresses Copyright in Software

On August 31, 2012, the Federal Court of Appeal upheld the decision in Harmony Consulting Ltd v Foss Transport Ltd, 2011 FC 340, regarding copyright ownership and infringement of computer software. A central issue in the case was whether the appellant, Harmony Consulting Ltd (Harmony) was in fact the owner of all the software it had licensed to Foss Transport Ltd (Foss). It was undisputed that Mr Chari, the owner of Harmony, had developed one of the software programs, the Petro program (Petro), prior to the incorporation of Harmony, and thus the legal presumption was that Harmony was not the owner and had no rights to Petro. Harmony attempted to assert ownership of Petro by arguing that the modifications and “fixes” it made to it for Foss attracted independent copyright protection and also that Chari had made a “mental assignment” of the copyright to the program prior to the licensing agreement between the parties which was evidenced by a nunc pro tunc assignment to Harmony signed a week before trial. The Federal Court (as previously reported by E-TIPS®) had rejected both these arguments, holding that the modifications and “fixes” lacked originality or skill and judgment in their execution, and thus no new copyright could attach to them. Additionally, the Court of Appeal commented that modifications to a program can be said to be “substantial” but this does not necessarily mean that such modifications are anything other than mechanical amendments that did not require any skill and judgment. The Federal Court rejected the nunc pro tunc assignment on the basis that there was insufficient evidence to establish that an assignment had actually taken place. This decision was largely dependent on the Court’s assessment that Chari was not a credible witness. In discussing whether there was an infringement of the programs actually owned by Harmony, the Court of Appeal, again upholding the lower court’s decision, stated that making copies of the programs by Foss for backup purposes was not infringement and that screen displays were not reproductions of the copyrighted object code. The last point contradicts Harmony’s assertion that Delrina Corp v Triolet Systems Inc (2002), 58 OR (3d) 339 (CA), held that screen displays are reproductions of object code in a different material form. In response, Gauthier JA of the Court of Appeal said this:

“In my view, the screen display on a user monitor is the result of such a set of instructions rather than a reproduction of the set of instruction in another form. To use the analogy of the Supreme Court of Canada in Cuisenaire v South West Imports Ltd, [1969] S.C.R. 208, 2 DLR (3d) 430, the screen display is the rabbit pie rather than the recipe (the recipe being the set of instructions).”

For the full text of the decision, visit: http://tinyurl.com/9hpjw9m Summary by: Thomas Wong