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SAS Institute Inc v World Programming Limited

01/07/2012

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United Kingdom

SAS Institute Inc v World Programming Limited (C-406/10)

This article first appeared in Intellectual Property Magazine 1 July 2012

SAS Institute Inc v World Programming Limited (C-406/10)

Following the decision in SAS v WPL, developers should be cautious when copying the functionality of a program.  Even if a developer does not access or copy source code, there may be an infringement if other copyright-protected elements of a program's user manuals, specifications or preparatory designs are copied. 

Facts:

SAS owns the copyright in a widely used software environment called Base SAS.  Users can use Base SAS to write and run applications in "SAS Language".  SAS has a large user community that has written thousands of applications in SAS Language. 

World Programming Limited ("WPL") developed a system – the World Programming System ("WPS") - to compete with SAS's system.  WPL's developers strove to emulate the functionality of the SAS system, offering users a substitute system. Before WPS came onto the market, SAS Language applications could only be executed through SAS's system, effectively tying users to an SAS licence, unless they were willing to re-write their programs in another language.  WPS offered an alternative because it could execute applications written in SAS Language, and delivered substantially the same outputs from the same inputs. 

In developing WPS, WPL did not have access to SAS source code.  Instead, its developers studied and observed a limited, "Learning Edition" of SAS's system and referred closely to SAS manuals.  These contained exhaustive details of the SAS functionality and its external behaviour including details of the necessary inputs and expected outputs.  

SAS claimed copyright infringement against WPL.  SAS alleged that WPL had replicated a large part of the functionality of the SAS System in WPS, and that it had done so firstly, by copying the SAS Manuals into the source code of WPS and secondly, by indirectly copying the SAS System through its use of the SAS Manuals and the Learning Edition. SAS also claimed that WPL's had breached the licence terms for Learning Edition.

A number of legal questions were referred by the English High Court to the Court of Justice of the European Communities (CJEU), which issued its ruling on May 2nd.

Functionality

The CJEU had to decide whether program functionality can be protected by copyright.  Copyright protects the expression of ideas, but not the ideas themselves.  This principle is long-established under English law, and is reflected in TRIPS, the WIPO Copyright Treaty and the EU Software Directive Article 1(2).   

The CJEU confirmed that the functionality of a computer program is an "idea", not an "expression of an idea", and so is not protected by copyright.  If the law allowed copyright protection of functionality, ideas would be monopolised and this could stifle innovation.    The CJEU also looked at the legislative background to the EU Software Directive and noted that European Commission had favoured copyright protection for software (over other forms of protection) because copyright left room for others to create similar or even identical programs provided that they copied only unprotected ideas and refrained from copying protected expression .  The CJEU ruling in this respect is consistent with the UK decisions in Navitaire Inc v Easyjet Airline [2004] EWHC 1725 (Ch) and Nova Productions Limited v Mazooma Games Limited EWCA Civ 1044. 

Programming languages 

The CJEU confirmed that programming languages are not protected by copyright "as computer programs" under the Software Directive.  However, the court said that it did not rule out that a programming language might be copyright-protected as another type of "work" under the Information Society Directive (1). That will depend on whether the programming language is "the author's own intellectual creation" (Case C-5/08 Infopaq International and Case C-393/09 Bezpecnostní softwarová asociace.)   The English High Court will now have to decide whether SAS Language qualifies for copyright under the EU Information Society Directive.

Data formats 

The English High Court asked the CJEU whether copyright in a program is infringed if another program is written so as to read and write to data files in the same format.   The CJEU concluded that there was no copyright protection under the Software Directive, but there might under the Information Society Directive, if the format constitutes the author's own intellectual creation.  This is a matter which will now have to return to the English High Court for decision.

Copyright can protect elements other than source and object code

The source code and object code are not the only elements of a program that qualify for copyright protection.  Reproducing parts of a user manual in another program or in a manual for another program will infringe copyright if the parts copied are the author's own intellectual creation.  Even if elements of a program or user manual do not qualify for copyright protection individually – for example ideas, procedures, methods of operation or mathematical concepts are all excluded from copyright - the CJEU ruled that an author might express his or her intellectual creativity through the choice, sequence or combination of elements such as keywords, syntax, commands, combinations of commands, options, defaults and iterations.  The English High Court will now have to decide whether the elements of the SAS manuals copied by WPL were copyright protected.

Observing, studying and testing

SAS's licence terms restricted use of the Learning Edition to non-production purposes.  The issue was whether SAS could rely on that restriction to prevent WPL from observing, studying or testing the Learning Edition to find out its underlying ideas. 

Under Article 5(3) of the Software Directive, a software licensee may observe, study and test the functioning of the software to determine the ideas and principles that underlie it.  There are two conditions to the exercise of this right:

  • The right may be exercised only in the course of performing acts that the licensee is entitled to do.  The CJEU concluded that these are (i) acts authorised under the licence terms and (ii) loading and running necessary for the use of the program. (These latter use rights are guaranteed under the Software Directive and cannot be excluded by contract or under the licence terms.)
  • The licensee must not infringe any of the proprietor's exclusive rights.

Provided the licensee stays within these parameters, the proprietor cannot restrict use the licence terms to restrict a licencee's Article 5(3) rights. 

Impact

The CJEU's ruling on programming languages and data file formats leaves both proprietors and developers with some uncertainty.  The CJEU has not completely closed the door on copyright protection for these elements.   That will have to be decided by national courts on a case-by-case basis according to whether the relevant language or data file format meets the required threshold of intellectual creativity under the Information Society Directive.  The leading UK decisions on programming languages pre-date the Information Society Directive, so it remains to be seen what line the UK courts will take.  Software proprietors and developers in the UK will be looking to the High Court to provide some guiding principles on copyright in programming languages and data file formats that can be applied beyond SAS.  

The CJEU's ruling that there is no copyright in functionality will be welcomed by developers.  However, the ruling does not mean that a developer who copies the functionality of rival software without accessing the source code will be immune to an infringement claim.  Developers need to be aware that other materials that they use in the development process to replicate the functionality of another program (such as another software owner's user manuals, functional specifications or detailed designs) might be copyright-protected and/or contain copyright-protected elements.  Businesses that develop software should review their development processes and ensure that their employees and contractors are aware that, since this ruling, software proprietors have wider scope to challenge developers that have cloned their software, even if the developer has not used or had access to the proprietor's source code.

The ruling does not extend software developers' rights to decompile software.  Developers can still rely on the exception under Article 6 of the Software Directive – the "decompilation" exception – that allows code to be copied or translated for the purposes of enabling an independently created program to interoperate with another program; but the exception is narrow and subject to stringent conditions.

At the same time, software proprietors cannot use their licence terms to prevent licensees from observing, studying or testing a program to determine the ideas and principles that underlie the program.  The CJEU has stated that a licensee's rights in this respect are conditional on the licensee not infringing any of the proprietor's exclusive rights.  Software proprietors should consider whether their licence terms give them adequate practical opportunities to identify licensee infringements, for example, through audit rights. Developers who want to observe, study or test a program must ensure that they hold a valid software licence, and that they observe the scope of the licence (for example, by not exceeding the number of permitted users or workstations). 

Hamish Sandison is a Partner, and Emily Parris is a Senior Associate (PSL) in the Technology & Outsourcing Group at Fieldfisher.


(1) Directive on the harmonisation of certain aspects of copyright and related rights in the information society (2001/29/EC)

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