Lengthy litigation, short shrift: Court of Appeal unmoved by SAS appeal

Much ado about ... not so much?  SAS Institute Inc v World Programming Ltd [2013] EWCA Civ 1482 is a Court of Appeal, England and Wales, ruling from last week on an action that seems to have been going on for rather a long time -- which indeed it has.  This copyright infringement action, involving computer software and a manual used (or abused) by the defendant licensee, commenced in September 2009.  The 12-day trial led to a judgment in July 2010 in which Mr Justice Arnold referred at least nine questions (more if you include subquestions) to the Court of Justice of the European Union (CJEU) for a preliminary ruling.  The Advocate General's Opinion was published in November 2011. Once in receipt of the CJEU's ruling in Case C-406/10 at the beginning of May 2012, the parties consumed another two days arguing the toss before Arnold J gave judgment in January 2013 which was almost entirely in favour of the defendant.

To recap: SAS developed its own SAS software programs, in the SAS language, for data processing and analysis, together with technical manuals.  World Programming ('WP'), a competitor, predicted that there would be considerable market demand for competing software which could execute application programs written in the SAS language and accordingly penned its own software ('WPS') for that purpose.  WP sought to emulate much of the functionality of the component's of the SAS programs in order to ensure that its applications worked the same way whether they ran on WPS and on SAS components. SAS sued for infringement of its copyright in pretty well everything it could think of.

After a thorough review of the law and the facts (and it's a brave man who says Arnold J is anything but thorough), Arnold J dismissed all SAS's copyright infringement claims except those relating to WP's reproduction of the SAS manuals through a process elegantly described as "linguistic reproduction".

While WP was a competitor of SAS, it was also curiously a licensee.  This is because SAS developed a "learning edition" of its software in order to educate users as to its full functionality. The use of this learning edition governed by a contractual licence.  After holding that WP had breached the licence by using the software for "non-production" purposes and by allowing use by employees who had not "clicked through" the licence and therefore fell outside the definition of "customer", Arnold J nonetheless referred a question to the CJEU as to whether WP's use of that edition was permitted by Article 5(3) of the Software Directive. By that provision
"The person having a right to use a copy of a computer program shall be entitled, without the authorisation of the right­ holder, to observe, study or test the functioning of the program in order to determine the ideas and principles which underlie any element of the program if he does so while performing any of the acts of loading, displaying, running, transmitting or storing the program which he is entitled to do".
Said the CJEU, copyright in a computer program could not be infringed where, as here, the lawful acquirer of the licence did not have access to the source code but merely studied, observed or tested the program in order to reproduce its functionality in a second program. Arnold J accordingly held that, while use of the learning edition was restricted to specific employees who had entered into licence agreements, WP had still lawfully acquired the right to use the program. On that basis, Article 5(3) invalidated any term of the licence that restricted the manner in which that right could be enjoyed.

SAS appealed, arguing that WP had used its manuals as a technical specification and copied a substantial part of them, that it also infringed copyright in thems by reproducing a substantial part of them in its own WPS manual and that WP infringed SAS's copyright in the learning edition and was in breach of contract by repeatedly using it outside the scope of the applicable licence to obtain information about the SAS system and to check that the operations of WPS precisely replicated those of the SAS components.

The Court of Appeal (Lord Justice Lewison, who delivered the judgment, together with Lords Justices Tomlinson and Vos) dismissed the appeal in its entirety.  Why?

* In deciding whether the reproduction of elements described in the SAS manuals was a reproduction of the expression of the intellectual creation of the author of the user manual (this being the CJEU's Infopaq formulation), what was relevant was not the intellectual creation, but the expression of the intellectual creation of the author of the manual.

* The functionality of a computer program was not a form of expression (which was capable of being protected by copyright), but was more like an idea (which wasn't).

* For an infringement of copyright to exist, the allegedly infringing work had to represent the claimant's work in some real sense.

* It would be contrary to the policy of not only the Software Directive but also the InfoSoc Directive if SAS could secure copyright protection for the functionality of its program indirectly via its manual, which simply explained that functionality.

* Since the CJEU had unequivocally held that the fact that WP had used the learning edition for a purpose which was not permitted by the terms of the licence did not mean that it could not rely on Article 5(3) of the Software Directive, a contractual restriction was invalid to the extent that it prohibited the observation, study or testing of the functioning of the program in order to determine the ideas and principles underlying it.

* It was possible for the "customer" entering into the licence agreement to be a company and, being a licensed company, WP was entitled to use the learning edition and there was no restriction on the number of employees whom WP might authorise to observe, study and test the program.

This Kat notes the Court's reiteration at [108] of a rule of contractual construction that seems to him to have fallen a little out of favour in these days of bending over backwards to accommodate the real or imagined intention of the parties to a contract -- he's talking of the contra proferentem rule. As the Court said (and incidentally disagreeing with Arnold J who reached his conclusions without feeling the need to invoke it):
"... one cannot forget that the licence agreement is offered on a take-it-or-leave-it basis. The purchaser has only two choices: click on the "Yes" button or click on the "No" button. There is no room for negotiation. If there were any doubt about the meaning of the licence at this stage, in my judgment the application of the contra proferentem principle would tip the balance in WPL's favour".
In the wrong blog ...?
Merpel, who nurses a deep and longstanding affection for Latin, is thrilled to see that the courts are still allowed to say "contra preferentem", even though so many Latin terms were excised from English legal terminology in the wake of the Woolf reforms. As to this lengthy and costly litigation, she has only this to say, quoting the sage words of Horace:
"Parturient montes, nascetur ridiculus mus".
Lengthy litigation, short shrift: Court of Appeal unmoved by SAS appeal Lengthy litigation, short shrift: Court of Appeal unmoved by SAS appeal Reviewed by Jeremy on Tuesday, November 26, 2013 Rating: 5


  1. "what was relevant was not the intellectual creation, but the expression of the intellectual creation of the author of the manual."

    I still wonder whether this is the correct approach in the light of the CJEU's case law(See Eva Maria Painer where the CJEU did not opine expressly on the points raised by the AG on the transformation of the photo) or whether it is correct when only confined to computer programs. Does this mean that so called transformative use of another type of literary work such as a book is not an infringement and only literal copying of that book would be an infringement?

  2. Add in the recent result on the Google book project (tagging and being able to search for individual words - inherent in a digitized version - were considered 'transformative' enough, and ALL of the video and music works are now easily subjectable to such 'transformation' and subsequent open (legal) copying.

  3. I would say a computer program is only functionality (not protected) expressed in code (protected), whereas a book still may have a protected creative work "behind" its expression in words. Transforming the book will normally leave that creative work intact.

    Of course a computer program just as well can implement a book, movie or video game, and those would be protected as a book, movie or video game (and not as a "computer program").

  4. I am not sure I understand the last remark and whether "transforming the book" is a copyright infringement or not. One would assume that it is -in the absence of a particular exception such as e.g for parody Harry Potter/Tanjar Grotter in the Netherlands, Cleopatra/Carry on Cleo albeit these were film posters in the UK, Gone with the Wind/The Wind Done Gone in the US.I would prefer to think there is no read across of the CJEU SAS/WPL judgment beyond computer programs especially to works which fall within Directive 2001/29. Separately, there seems to be a move to argue that anything with a computer program in it is covered by Directive 2009/24 and not Directive 2001/29in order to benefit from the broader exceptions to the author's rights (e.g. videogames).

    Returning to the question of "functionality", this word assumed a life of its own in the national proceedings and the CJEU did not see fit to curb this.

    Finally, is the WPL product now to be considered an original work in its own right as being the fruit of its authors' own intellectual creation albeit a creation inspired by another authors' intellectual creation? If so, it is presumably a computer program which is a derivative work. As another computer program, the WPL product too can, therefore, be subject to the same acts without restriction by third parties as regards its functionality. This rather vacates Directive 2009/24 of any substance if the CJEU SAS judgment has been correctly applied by the Court of Appeal and even more so when read together with the UsedSoft judgment.

  5. Very interesting case. Will be interesting to see what kind of effect it will have on future e-discovery.


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