Copyright in macros

Posted by Nick Liau ● Partner: Paul Kallenbach

In CA v ISI [2012] FCA 35, the Federal Court found that copyright can subsist in macros. The Court held that copyright in macros made by CA was infringed by another set of macros made by ISI.  The case highlights the difficulties faced by courts in copyright infringement cases involving software, especially when determining whether an infringement of copyright has occurred.

Facts

CA makes a database software package known as 'Datacom'.  'DB2' is a competing piece of software.  The two database systems are incompatible, and migration from one to the other would ordinarily be an onerous task for an organisation.  ISI, another software company, markets a product known as '2BDB2', which enables customers to migrate their databases from Datacom to DB2 far more easily.

Businesses usually run applications that need to access information within their Datacom databases; one step of this process involves the use of macros specifically designed for use with Datacom software (the CA Macros).  Macros are commands that when executed, cause a larger and more complex set of instructions to be undertaken within a computer program.

In order for the 2DBD2 software to successfully migrate data from the Datacom system, it has to replicate the functionality of some of the CA Macros.  ISI developed its own set of macros (the ISI Macros) for use in 2DBD2, which were similar to the CA Macros. CA alleged that the ISI Macros infringed copyright in the CA Macros, and the Court agreed (at least in relation to some of the macros). There were other issues in the case, but this post focuses on the copyright issues.

Are macros subject to copyright?

The Copyright Act 1968 (Cth) recognises that copyright may subsist in computer programs. In this case, the Court held that the CA Macros fell within the definition of 'computer program' and accordingly, copyright subsisted in them.

Macros would not usually be considered to be computer programs in their own right – they are, by definition, unable to perform any function in the absence of another piece of software.  However, the Federal Court held that, for the purposes of the Copyright Act, a macro need not be able to perform any function in its own right, and it was enough that a macro could be used bring about a particular result indirectly.

Was copyright infringed in this case?

The Court found that some of the ISI Macros infringed copyright in the CA Macros because they reproduced a 'substantial part' of the CA Macros.  As with many copyright cases, the Court had to carefully tread the line between ideas (which are not protected by copyright) and the particular expression of those ideas (which are).  The ISI Macros were actually updated a number of times over the years and each of these revisions was considered separately for potential copyright infringement by the Court.

A series of earlier ISI Macros were held to have reproduced a substantial part of the CA Macros, thereby infringing copyright. To determine whether a substantial part of the CA Macros was taken, the Court compared these macros with their respective ISI Macros. The Court accepted that it was necessary for the ISI Macros to be functionally similar to the CA Macros for the 2BDB2 program to work properly.  The functional similarity did not necessarily mean that copyright had been infringed. 

The bigger concern for the Court was the textual and logical similarity between the ISI Macros and the CA Macros.  The Court found that the earlier ISI Macros were literal copies of the CA Macros.  Although ISI had deleted some pieces of irrelevant code, and had made some minor improvements to the macros, there were strong similarities in the text and logical structure of the macros. It was because of these similarities that the Court found the ISI Macros infringed copyright of the CA Macros.

In 2011, the ISI Macros were completely re-written.  Their functionality was still virtually identical to that of the CA Macros.  However, there was enough difference in the text of the Macros, and the logical way in which they worked, for the Court to find that they did not infringe the copyright of the CA Macros.  Importantly, the Court held that 'there must also be sufficient similarity of ... expression, form or parameters' for a finding of infringement to be made.

Comment

The Court seemed willing to accept that functional similarity was a necessary feature of the ISI Macros, although this functional similarity was not in and of itself enough to give rise to copyright infringement. Interestingly, certain pieces of code within the ISI Macros needed to be textually identical to the equivalent code within the CA Macros for them to work (for instance, code that referred to certain named features of the Datacom software). When determining textual similarity, the Court accepted that it was necessary to copy some words of the code, and did not find infringement based on this particular type of copying. 

It will be interesting to see how far the courts are willing to accept textual similarity (where that textual similarity is necessary for functional similarity) before this gives rise to copyright infringement.  For example, in the extreme case, where a piece of code had to be exactly the same as that in an existing macro for the new macro to function, would a court be willing to excuse infringement on the basis of functional similarity?

'I'll just tweet this product recommendation': ASIC's thoughts on advertising financial products and advice services using social media (or, OMG!! DBEYR - ASIC's nu RG!!)

Posted by Anthony Oxley & Tony Dhar

The Australian Securities & Investments Commission (ASIC) recently released regulatory guidance in relation to advertising financial products and advice services.

ASIC's guidance was issued to assist promoters of such products and services comply with their legal obligations, including to not make false or misleading statements, engage in misleading or deceptive conduct and to not make representations about future matters without reasonable grounds. 

What kind of ads?

The guidance applies to any communication intended to advertise financial products or financial advice services. So, the form of media is not important to ASIC. Advertisements are treated the same whether they appear in:

• traditional media (newspapers, magazines, radio, TV)
• the internet (websites, banner ads, streamed videos)
• social media and internet discussion sites
• other media, including direct mail, telemarketing and seminars.

 

Will this compromise my innovative social media strategy? We worked so hard to reduce our advertisement to 140 characters!

ASIC's guidance does not require advertisements to be self contained (this did form part of ASIC's original proposal in this area).

Having said that, the guidance requires disclaimers or warnings to be comprehensible, and, where the chosen advertising medium has inherent content limitations (such as the 140 character limitation on Twitter), promoters must consider whether that medium is appropriate if it limits providing balanced information to consumers.

So – promoters may still devise engaging and interesting campaigns, subject to their overarching legal requirements, including against campaigns or catchy taglines (or tweets...) that might confuse.

In the social media context, this would for example require consideration of the overall impression given by:

• short/sharp banner ads;
• succinct tweets with over-reaching promises;
• words that have a particular meaning in the minds of consumers (such as free, secure, or guaranteed); and
• disclaimers on websites that flash up, and then immediately off.

Thinking about Twitter specifically, in light of ASIC's guidance relating to the requirement to provide balanced information, promoters should also be careful about disclaimers and warnings in tweets, including having regard to ASIC's view that 'consumers should not need to go to another website (or other page of the website) or document to correct a misleading impression'.

Example tweet	OK?
Fee free accounts at [YourBank]! [+ link to website, or t's & c's which say fee free accounts only available to new customers]	shouldn't need to go to another website to correct a misleading impression.
No annual fees on [YourBank] transaction accounts! [+ link to t's & c's which say there are monthly fees, the cumulative effect of which is an annual fee]	as above, shouldn't need to go to another website to correct a misleading impression.
Low introductory APR and free balance transfers! [YourBank credit card] [+ link to t's & c's which state that low APR and free balance transfer offers not available concurrently]	as above, shouldn't need to go to another website to correct a misleading impression.
[YourBank]. No fees - eligibility conditions apply. [link to t's & c's]	Maybe - depends on conditions, eg. does customer need a fee paying connected account, or a loan over a certain balance? If so, probably not ok as 'no fees' is not balanced.
Get a great deal on a home loan! [link to product website]

As the examples above show, in the context of Twitter, we think it would be difficult in practice to comply with ASIC's guidance within 140 characters. From a marketing perspective, it might be more likely that Twitter is used as a 'sign post' to refer people to a website for the product. So, tweets need to be more 'sales pitch neutral' so as to not create an impression that is then later qualified or disclaimed somewhere else.

 

Other examples of what you may need to be careful about!

Specific examples given in ASIC's guidance include:

• calculation of returns using foreign currencies (and not Australian dollars)
• overstating the security of a financial product
• insurers not making potential customers aware of conditions (such as the absence of at-fault claims, or age restrictions)
• comparisons that are not like for like, or that ignore other features
• implying that past performance will continue
• celebrity endorsements where the endorser actually knows very little about the product they are endorsing
• images that might imply the company is at a more advanced stage of development that is in fact the case (eg showing a working mine where the business is still at an exploratory stage)
• conflicted remuneration structures for financial advisers.

Recently, two financial institutions have been required to withdraw or modify marketing material relating to credit card limit invitations placed in various forms of media – including on a website, on physical credit card statements and email. Further, one financial institution agreed with ASIC to cease using 'stress free' in its marketing of certain geared investment strategies. At the time, ASIC's commissioner encouraged the financial services industry:

to strive to do more than simply meet the minimum requirement of not being misleading or deceptive. Rather, [ASIC encourages] industry to actually take a role in ensuring that advertising helps investors and consumers to make decisions that are appropriate for them.

 

I'm only a publisher, so should I worry?

While defences from prosecution for publishers are available if the publisher received the advertisement for publication in the ordinary course of their publishing business and did not know, and had no reason to believe, that its publication would amount to an offence, there are still residual legal and reputational risks for publishers, including aggregator and comparison sites.

Such publishers should closely monitor 'advertorial' type content and/or the disclosure of commissions and referral fees.

 

And finally, ASIC has embraced social media itself...

Finally, just a note in passing that the use of social media to engage directly with an audience hasn't escaped ASIC itself – see ASIC's moneysmart website, launched in March 2011, together with its Twitter feed (500+ tweets), Facebook page (800+ 'likes'), mobile apps for investment calculations and YouTube videos on home loans.  This use of social media is consistent with ASIC's aims to provide independent information to educate potential investors, and more broadly is part of the government's National Financial Literacy Strategy.

Mismanaging IT projects to failure

Partner: Ron Pila

This is the last in a series of articles (Just what is causing IT project failures? and Setting-up IT projects for failure) in relation to the issues identified in the report prepared by the Victorian Ombudsman in conjunction with the Victorian Auditor-General (Own motion investigation into ICT-enabled projects released November 2011) (Ombudsman's Report) which looked into the factors that contributed to the failure of public sector ICT projects.

We had earlier commented that the factors identified by the Ombudsman's Report can be divided into:

• things done at the outset that result in the project being set up for failure (see Setting-up IT projects for failure); and
• 'mistakes' made during the course of the project.

In this post, we consider the factors and mistakes made during the course of projects that lead to those projects failing.

Accountability

The Ombudsman's Report noted that in many of the projects reviewed there were no clear lines of accountability for the progress and success of those projects. It is essential that there are senior personnel who clearly 'own' the project and are accountable for key decisions made in the course of the project. While there can be a tendency to assume that the project 'owner' should reside within the organisation's IT department, it is often more appropriate for the project 'owner' to be a senior executive within the part of the business that will be the ultimate user of the system or services.

Lack of leadership

A related issue identified by the Ombudsman's Report is a lack of leadership on these major projects. Sometimes these projects require strong leaders to step up and make hard decisions. An absence of such leadership can result in a project drifting without clear direction.

Poor governance

Good governance arrangements are essential in the conduct of major projects. However, often this governance is lacking.

Large complex projects require well functioning committees made up of people with relevant experience and appropriate skill sets. These committees must be capable, and encouraged, to ask hard questions, to look behind project management decisions and to take action to bring the project back on track.

Risk management

'Risk management' has been a catch phrase in the ICT industry for many years now. Unfortunately, it is not uncommon for those undertaking major projects to only pay lip service to risk management.

While it is good practice to list indentified risks at steering committee meetings and to have and maintain a risk register, these alone are not enough. Active steps need to be taken to manage the risks that have been identified.

Probity/conflict of interest

The Ombudsman's Report identified instances where issues of probity were not sufficiently attended to. This led to the potential for a perception of lack of fairness or conflicts of interest. Without proper attention to these issues, it is very easy to fall into difficulty and extremely hard to extricate oneself from it.

A common example of a potential probity issue is the engagement of a vendor in a pilot or requirements development stage of a project and then allowing that vendor to be a tenderer for the project. While there is no hard and fast rule that prevents this, it does create a potential probity issue that needs to be very carefully managed.

Project management

The Ombudsman's Report identified issues with project management as being a key contributor to project failure. Of particular note was a lack of strong project management skills within many agencies and departments.

Vendor management

Vendor relationships can be challenging and do need to be carefully managed. It is up to management on both sides to ensure that all parties are pulling in the same direction. Like project management, vendor management is an undertaking that requires skill, expertise and experience.

Change management

Implementing new ICT systems and services will often require significant changes within an organisation and how it conducts its operations. Managing these changes is critical but, unfortunately, often does not receive the focus required. The change process should be treated as a project in itself, subject to appropriate project management, leadership and governance.

It is clear from the Ombudsman's Report that the management of major ICT projects could be significantly improved. While most of the recommendations and observations made in the Ombudsman's Report are not new, they are a timely reminder that ICT projects are failing as a result of the same mistakes being made over and over again.