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The shift to technology that was seen at the turn of the 21st century has made it essential to protect the Intellectual Property Rights (IPR) enshrined in programs and softwares. Contrary to how goods usually work, the selling of a software gives a license to the buyer to use the software along with certain terms and conditions attached to the license.
Due to this licensing mechanism, computer programs and software face fierce rivalry in the market and are pretty susceptible to suffer unwarranted economic loss as their software might be used without payment and is vulnerable to piracy and illegal copying.
Copyright Law and Software
According to Sec. 2 (o) of the Copyright Act, 1957, computer programs come within the domain of literary works. However, the Act does not differentiate between the source codes and object code and so, both are recognised under the literary work of the computer program. However, for a software or computer program to be given copyright protection, it is crucial that the work is unique.
In the Hon’ble Supreme Court judgement in case of Gramophone Company of India Ltd v. Birendra Bahadur Pandey and Others (Appeal (Civil) Nos. 3216 to 3218 of 1983), the Court held that viewing Section 53 and Section 11 of the Customs Act, importing pirated works would fall under the purview of both legislations and would be considered a copyright infringement regardless of it being does as importation of commerce.
With regards to software and other copyrights being downloaded through torrent, in the case of Star India Pvt Ltd. v. Moviestrunk.com and Others (CS(COMM)-408/2019), it was held by the Hon’ble Delhi High Court that defendants were using rogue websites to host and stream their content and it would therefore, amount to copyright infringement. This argument would therefore extend to all websites and torrent applications that are used to distribute content at no cost.
As a common rule, the owner of the copyright is the author of the work himself. Still, in case of employee-employer relationship, an agreement is signed to the contrary, if the work is made during the course of the employment, employer is the first owner of the work. Only the owner of the copyrighted software has the right to store and replicate the software. Any third party doing the same without proper legal permission will be responsible for copyright infringement. Thus, the best legal advice would be to always execute a proper agreement before starting development of any work and have firm legal rights over any development of technologies respectively.
Patent Law and Software
While copyrighting of the expression of methods of programming is possible, patent becomes vital for safety of software as scope of work is relevant and not how it was developed. However, for being given a patent, it is compulsory that the program is not simply an algorithm but is a technical creation that is entitled for such grant of patent. According to Sec. 3 (k) of the Patent Act, 2002, a software cannot be patented per se.
The term “per se” has been a source of argument ever since but in the imperative case of Ferid Allani v Union of India W.P. (C) 7 of 2014. the Court took a simpler approach as it allowed patentability to computer software. It is stated that if the software contains a technical effect it shall be given patent. It was further stated that if the invention establishes a technical effect or technical contribution it is patentable despite the fact that it may be based on a computer program.”
For a computer program to be entitled to a grant of patent, it must not be –
- Business method, mathematical method or algorithm
- A software that cannot be patentable
Nevertheless, a software can be patented if it comes along with an invention and that it is a element of such invention. To avoid the claim of sec. 3 (k) it is important to show that a hardware is an indispensable part of the invention along with the software or computer program.
Another comparable judgment was in the case of Telefonaktiebolaget LM Ericsson v. Intex CS (OS) No. 1045 of 2014 where Ericsson was granted injunction against Intex for any device infringed with eight of its Standard Essential Patents (SEPs).
As is the case with copyright, patent laws also permit the patent owner to give license or assign his patented work to any individual or third party allowing them certain rights over patented work. Such license is to be given by a written agreement wherein all the terms and conditions are properly highlighted.
Minimum Enhancement of Same Coding
The most common issue plaguing the lives of programmer(s) is that by basic alteration and/or adjustment to the same coding can become a distinct claim for the third party in wholeness which infringes the rights of the original developer.
However, to deal with these situations the concept of “flavour of minimum requirement of creativity” was brought before Court in the case of Eastern Book Company & Ors v. D.B. Modak & Anr, (2008) 1 SCC 1 in this case, the Hon’ble Supreme Court held that there should be a significant amount of creativity that is essential for a distinct claim of ownership over such copyright. The expression that is in the form of coding is safeguarded and also stops substantial copying of the expression in the infringed work.
What is Copyright Infringement, Non-literal Copying and Derivative Work?
Copyright infringement is essentially exercising any of the rights of the original copyright owner without any permission to do so. In cases of computer programs, the main rights are copying the code, and producing derivative works.
It is a case of exact copying when a creative, and substantial part of code is copied almost identically. Creativity does not mean that the code needs to be intricate or of superior quality; it simply refers to the programmer’s imagination and an exclusive way of writing the code. Substantiality is something that is considered on a case-by-case basis by courts.
Non-literal Copying in case of Computer Software
Non-literal copying means the replication of the structure, sequence and organisation of the code. Again, the existence of originality and substantial is compulsory for it to be held as an infringement. The concept of non-literal copying brings a lot of doubts with it as copyright is not designed to defend functionality, but then it is held to be an infringement if a code means to achieve the same functionality with a slightly different method.
In case of Zenimax v. Oculus (N.D. Tex. Civil Case No. 3:14-CV-01849-P), the jury found infringement of the right to produce derivative works. It was an example of nonliteral copying. If a company has provided technological contributions that offered minor enhancements and modifications to a technology, thereby increasing its utility, they have IP rights over those technological contributions.
In the case of Apple Inc. v. Samsung Electronics Co. (580 U.S. 137 S. Ct. 429; 196 L. Ed. 2d 363; 120 U.S.P.Q.2d 1749; 85 U.S.L.W. 4019), it was held that for the purpose of calculating damages in a patent infringement action, the infringing “article of manufacture” may be defined as either an end product sold to a consumer or as a part of that product. The relevant text of US Patent Law encompasses both an end product sold to a consumer as well as a part of that product. The fact that a part is ultimately incorporated into the larger end product does not place it outside the category of an “article of manufacture.”
Minor alterations or enhancements over any existing technology which has already been developed and is under usage by the Original Developer does not give rise to a new development and thus no new Intellectual Property Rights (IPR) can be claimed over the same enhancement.
Trade Secrets and Software
Idea, structure or design description of software may be contained within a trade secret. Trade secret protection rests on on the nature of the software and how it is circulated. A software which is circulated only as an object code can be protected partly if the source code is kept private.
However, there are more than a few restrictions to trade secret involved as a method of protection. The owner can in no way, exercise a legal remedy against any individual or third party who is successful in reverse engineering the trade secret from the data made accessible online. It is further imperative to indicate that if software or computer technology is susceptible and can be simply copied, then such technology cannot be considered a trade secret.
In the case of Financial Software and Systems v. Mudassir Naik (O.A. Nos 321, 322, 326 of 2016), it was that customer details are not trade secrets or property and having access to a software that stored names, addresses and financial details of individuals and then using that elsewhere would not constitute divulging of trade secrets if the information was used as it is and nothing innovative was done with it. Furthermore, it was also noted that contracts with employees should have specific sections to prevent spilling of trade secrets during and after termination of contract.
Trade Secrets are safeguarded under contract and tort laws in India. However, such predetermined protection is restricted to the parties that sign the contract and thus, does not have any consequence on the parties who are not involved in the contract on condition that they act with bonafide intention.
In the case of Sungro Seeds Ltd. v. Dr. S.K. Tripathi (CS (OS) No.1163/2013), it was held by the Hon’ble Delhi High Court that trade secrets stop being trade secrets if the technological innovation associated with them is now in public domain and not under copyright or patent law.
Thus, the best way out to protect one’s Intellectual Properties (IP) over a new invention or a technology is to have water tight agreements during their developments and to immediately file for their registration once the technology is developed.
Licensing Agreement
A rightful owner can in no way be stopped from granting access to his work to any other party, it has been noted that the owners of software favour giving way licenses to the buyers rather than selling the software to one. This is favoured for the reason that license is overseen by Intellectual Property laws and also, license offer a possibility of retention of some extensive and significant rights relating to the software and allows for a higher chance of monitoring the software with the owner of the software.
Software licenses can largely be fit into the following categories: –
• Proprietary software is computer software which is the legal possession of one party. The terms of use for other parties is demarcated by contracts or licensing agreements. These terms may include various rights to share, modify, dissemble, and utilise the software and its code.
In the case of Microsoft Corporation ORS v. Satveek Gaur ANR CS(COMM)-1324 of 2016, the Delhi High Court ordered an injunction on the defendants for using pirated copies of the software and violating the End-User License Agreement attached to the Windows Operating System.
• A free software license is a software license which gives receivers the rights to change and redistribute the software which would else be forbidden by copyright law. A free software license gives, to the recipients, rights in the form of approvals to alter or dispense copyrighted work.
• Open source software refers to any program whose source code is made accessible for usage or alteration by users and is made easily available. Open Source allows the users to view and change the source code.
There are basically two types of Software Licensing Agreements: –
• Click Wrap Agreements: Click-Wrap Agreements are those through which a party after reading through the terms and conditions given in the website or program has to basically show agreement to these terms and conditions, by way of clicking on an “I Agree” icon or decline the same by clicking “I Disagree”. These types of contracts are broadly used on the Internet, whether it be giving permission to access a site or downloading of software or selling something by way of a website.
• Shrink Wrap Agreements: Shrink-wrap agreements find their origins in “shrink-wrap” packings that commonly holds the CD Rom of softwares. The shrink-wrap cover of the CD contains the terms and conditions associated and the buyer after reading through the same tears the cover to access the CD Rom. From time to time, added terms are also levied in such licenses which are written on the screen only when the CD is read by the computer. The user at all times, has the choice of giving back the software if the new terms are not to his preference for a full refund.
Outsourcing Agreements and Copyright
There is no law in India that specifically regulates outsourcing transactions. Multiple laws overlook different features based on the industry, jurisdiction of parties, preferred structure, and outsourcing possibility and that includes IPR laws for the safeguarding of intellectual property (IP) and rights. Having said that, the Indian Contract Act of 1872 can be termed as the parent law to cover these Outsourcing Agreements and Contracts.
Formalities attached to an Outsourcing Agreement
Looking at it from the viewpoint of the original developer, if its own IP is being shifted, it should always be through a written agreement. Dependent upon the nature of the IP, it may also be compulsory for it to be noted by the appropriate authority to affect the transfer. Yet, in many cases, the original developer should license their intellectual property rather than transferring. Even in those cases, the licencing terms and conditions have to be highlighted in a licence contract.
In case any equivalent technical training, manuals, system documentation, etc. also need to be transferred, the contract should note these with acceptable warranties and representations. The licence contract must also mention other aspects such as the purpose and scope of the licence in the sense that it must be elucidated whether it is worldwide, revocable, perpetual, exclusive etc. along with royalty, term and whether the Intellectual Property is registered or not. The assignment or licence agreement, is further legally responsible to the payment of stamp duty under the applicable state-specific Stamp Act.
How are Intellectual Property (IP) rights protected in an Outsourcing Agreement?
Based on the kind of Intellectual Property, it can be protected contractually or via registration with the appropriate authority, or both. Any Intellectual Property released during the transaction is typically covered as secret information and protected contractually. On the other hand, Intellectual Property such as trademarks and copyrights are either licensed, transferred, or specially recognized as non-transferable and belonging to either the outsourcing company or the original developer. The original developer should attempt to guarantee that all the Intellectual Property is either registered or led for registration. If not, rigorous warranties and representation ought to be taken. Furthermore, as per Indian law, ownership of all copyrightable work inevitably lies with the employer.
Hence, it is essential that all of the outsourcing company’s employees have parts approving this in their terms of employment. Insofar as the case of patents, there is no reflex assignment and, therefore, any new invention has to be specially assigned by everyone who have contributed to it, including any self-regulating consultants.
It has to be noted that there are no legal protections for know-how, trade secrets and private material. There are also no rights that are implied, for the supplier to carry on using licensed Intellectual Property rights after the termination of contract, without explicitly settled upon.
The question of determining the degree to which an original developer can gain access to the outsourcing company’s expertise after the termination and what use can be made of it rests entirely on the nature of the deal and the contractual terms.
For instance, if the contract specifies that the original developer shall have unconstrained access to all Intellectual Property, expertise, and private information relating to the transaction after contract termination, then it can claim these rights.
Still, if the outsourcing company decides that some data has no relation to the transaction and as such is not needed within the purpose of the agreement, it can stop the original developer from retrieving such data.
Important legal points to be considered by the Original Software Developer or Technology Developer are: –
• The original developer needs to decide how much, and in what manner, a work would have to be copied or used as inspiration by the author of a derivative work before that derivative work would be considered to have infringed the copyright subsisting in the original work.
• Registration of a copyright is not compulsory to give the author any of these rights, but, is mandatory for litigation and is a precondition for regaining certain remedies.
• When a software is obtained locally, it is only a copy of the ‘object code’, not the original ‘source code’. The object code, unlike the source code, does not expose the creative expression of the program’s developer. Therefore, by bringing out only the object code while keeping the source code as a trade secret, a software author can make and sell as many copies of their original work without ever exposing the contents of their creative expression to possible violators.
• A copyright author can decide to delay registration of the copyright, they may still keep their source code as a trade secret and may look to alternatives to safeguard their interests, such as the utilisation of nondisclosure agreements.
• The original developers, while outsourcing, should certify that the company writing the final software has contracts in place with its own programmers to guarantee that the company, rather than the programmers, owns rights to the software.
• Original developers should also use “version control systems” that are generally used by programmers to keep track of changes made to software both during its early development stages and later during reviews and updates. These systems give vital information including copies of previous versions, identities of programmers and of the software as well as important dates.
In conclusion, protection of computer software in India is already a part of copyright laws. It is further been decided that such programs can also be safeguarded under the patent laws given that it is not simply an algorithm-based software but is a unique invention ‘per se’. With no proper laws defining the trade secret and its scope for protection of software, trade secret seems as an incomplete and constrained option for protection of Intellectual Property with regards to software. In a time where piracy is high and innovation is low, and parties are finding new ways to replicate already existing ideas, it is crucial that all these legislations which are so disseminated and ambiguously defined, be further developed to consider these developments and be put in place for an improved protection of the original creator’s work.
Authored By: Adv. Anant Sharma & Parinay Gupta