New Zealand: Copyright law and computer software – retreating from the trivial?

Brief Counsel
Last Updated: 4 September 2014
Article by Justin Graham, Jack Hodder QC, Kelly McFadzien, Matt Sumpter and Chris Dann
Most Read Contributor in New Zealand, September 2016

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New Zealand's Court of Appeal, in a careful and reasoned judgment, has added to the slow retreat from copyright law being a protector of the mundane and the trivial.

The decision may have implications for the structure of software licensing arrangements.

The case

At issue in Karum Group LLC v Fisher & Paykel Financial Services Ltd1 were the rights to a credit management software system (CMS) which Fisher & Paykel considered were included in the acquisition of a company it had bought but to which Karum also laid claim.

Fisher & Paykel and Karum did a deal, which broke down, and Karum sued Fisher & Paykel for a number of things, including copyright infringement. The Court of Appeal found for Fisher & Paykel but, in reaching that conclusion, had to address some of the big issues in copyright law: the idea/expression dichotomy, originality in works of "low authorship" and the protection of computer software.

Computer software

It has long been the case that computer software attracts copyright protection. Source code and object code are recognised as literary works reflecting the skill, labour and judgement of their authors.

In Karum's case, however, what was copied was not the source code or object code, but the structure of the computer program – the programmer's choice of subroutines. In particular, Karum sought to protect structural elements such as the CMS payment calendar, delinquency calendar and aged debt components.

The Court accepted that copyright could exist in subroutines in principle, drawing on UK authority that copyright may extend to a program's "structure, sequence and organisation", but not where (as here) those items were utilitarian or functional in nature, or dictated by compatibility requirements, design standards, industry demands and standard programming practices.

It also emphasised that a program may implement "business rules" (in the sense of a client's policies and procedures) but these are not original and fall into the category of ideas.2 And what remains must be substantial in a copyright sense to attract protection, which requires an assessment of the skill and labour expended by the programmer.

The Court concluded that, while protection for a subroutine is possible, it may be difficult to specify non-literal elements of a computer program which merit protection.

Comparison with "database" cases

Although not overtly considered by the Court of Appeal in this instance, there is a strong analogy with the "database" cases with which copyright law has long grappled.

The US Supreme Court, in a case about telephone directories, famously found that copyright in a compilation of data is "thin" and there is no copyright in "fact".3 The High Court of Australia applied a similar substantiality test to that proposed by our Court of Appeal when looking at copyright in electronic programme guides for television.4

Idea/expression and originality

Because databases are so tricky to protect under copyright law, the EU has a specific database "right". That approach reflects the fact that copyright does not protect ideas, but only their expression. This distinction (or dichotomy as it is known academically) can be particularly difficult to draw in the case of databases, which are useful and worth protecting, but are often put together in very similar, even unoriginal, ways.

The originality standard in copyright law has always been low. Copyright law does not require novelty and it does not judge aesthetic merit. It rewards effort. Copyright has been found to exist in betting forms, weed sprayer instructions and even short business slogans – "Field Friendly – the best choice for fieldwork". These types of work have been described in commentaries as works of "low authorship".

Originality has been interpreted over the years not to mean "creativity" but "authorship". A work was original if it originated from its author and was not itself copied.

As with many things in copyright law, technology has forced a (partial) rethink. Courts are now looking for something worth protecting, beyond the mere fact of authorship. The US Supreme Court described this as the search for a minimum spark of creativity.

Back to software

So what does this mean for the standard software licence? The Karum case confirms that beyond source and object code, it will be difficult to fall back on copyright law to prevent unlicensed copying. Contractual responses will be required.

And it may be worth spelling out the original and non-functional aspects of any subroutines that the licensor especially wants to protect, to lay the foundation for that minimum spark.


1[2014] NZCA 389

2The court could probably have stopped at the word "original" rather than grappling with the idea distinction.

3Feist v Rural Telephone Service (1991) 499 US 340

4IceTV Pty Ltd v Nine Network Australia Pty Ltd [2009] HCA 14

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

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Justin Graham
Chris Dann
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