Copyright and Licensing: When is Copyright Infringement Not Infringement?

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The High Court in the UK recently considered whether a company should pay damages for copyright infringement and/or breach of contract where software was used without consent.

Copyright infringement in a commercial context is an increasingly important issue for business organisations. The expert copyright and commercial litigation lawyers at Bahamas law firm ParrisWhittaker are highly experienced in advising businesses on copyright disputes and other intellectual property matters.
The High Court in the UK recently considered whether a company should pay damages for copyright infringement and/or breach of contract where software was used without consent.

What’s the background to this case?

The defendant licensee (‘ZIP’) wanted a database service to replace its existing system. Following negotiations in 2006, ZIP understood it was entitled to license software for a few thousand pounds per year, invoicing it on that basis until 2010. The claimant company then re-assessed ZIP’s use, recalculated its fees – and sent ZIP a bill for £12 million plus VAT of £2.1 million.

What was the issue?

At issue was whether or not the defendant licensee could rely on statements made during the process of purchasing software, which were at odds with the terms actually set out in the software licence.

What did the court decide?

The judge effectively ‘ignored’ the actual contract terms and offered his view of what the bargain should have been. Critically, the fact that the use made of the software by ZIP was the same for which it had been using a previous solution led the judge to believe ZIP had explained what it needed the software to do. Having done so and been given a price, the bargain was concluded on the terms that ZIP believed were in place.

Copyright infringement – or not?

The judge ruled that it would be copyright infringement to use software without the owner’s consent, and ZIP’s use of the software did appear to breach the terms of the licence. However, he held that consent was given because of the confirmation provided by a senior manager in the claimant company that the use of the type required by ZIP was permitted for the price agreed, even though the licence terms themselves did not permit the use to which the software was put by ZIP.

Notably, the judge considered that ZIP’s witness evidence was stronger than the claimant’s. For instance, the claimant company’s witness evidence included ‘recollection’ from conversations that the witness later admitted had not been recalled, but had summarised the points he would like to have made.

What does this mean?

Companies should take note that the judge effectively looked at what the bargain should, in his view, have been – not what the actual contract terms were.  However, in practice the more explicit the contract terms and the terms of a licence, the less likely the courts will look beyond the contract terms and consider what the bargain between the parties should have been.

It is imperative to check your contractual and licensing terms and consider whether any variations need to be negotiated in light of the ruling.

How can we help?

At ParrisWhittaker, our expert commercial litigation lawyers will help you review your existing contracts and licenses and give you expert legal advice on your commercial relationships. We will also represent you in negotiating new contracts and licenses with other commercial organisations.

Contact the experienced commercial litigation lawyers at Bahamas law firm ParrisWhittaker for urgent, strategic advice.

¹ AFD Software Ltd v ZIP Address Ltd [2015] EWHC 453 (Ch)