12 August, 2016

One, Not the Other - Misuse of Confidential Information is Not (Necessarily) Copyright Infringement

Many areas of IP infringement often intersect, with one aspect potentially leading to the next. It can be difficult to distinguish these separate acts, and even harder to judge for one to have been committed and not the other. This separation, however, can be a crucial aspect of protecting both parties' interests, even if it could logically (in its non-legal definition) make sense to bundle the acts together. A recent case was dealt with by the Federal Court of Australia that touched on the intersection of breach of confidentiality and copyright infringement, tackling the aforementioned separation head on.

The case of TICA Default Tenancy Control Pty Ltd v Datakatch Pty Ltd dealt with the provisions of services relating to background checks for prospective tenants, conducted by TICA, showing any defaults on previous leases and other tenancy applications they might have made. This is conducted via the company's website for an annual fee, or, for non-corporate entities, possibly on a one-off fee as well. What the case mainly concerned were the databases and the software that underpinned the service. Former employees, Anthony Nounnis, Reginald Joshua and Nathan Portelli, after leaving the company under varying circumstances, set up their own company called Datakatch Pty Ltd. After its incorporation, it came to light that the company might have copied the database and software used from TICA, who subsequently took them to court over breach of confidence and copyright infringement.

Copying software is nothing like the Matrix, Adam realized
The first question addressed by the Federal Court was whether the TICA system was indeed taken by the respondents in the matter. Justice Perram extensively discussed the circumstances and pleadings surrounding the case, additionally focusing on the similarities and dissimilarities of the source code and the stylesheets for each system. There were two things to note, which were highlighted by the judge. Mr Joshua and Mr Nounnis were deemed to have accessed the TICA website using some clients' login details, specifically for the purpose of assisting in the design of the Datakatch website. This included accessing the HTML code, which was subsequently modified heavily in its use in Datakatch's system. Even with access to the website they still were deemed to have not accessed and copied the source code, due to the circumstantial nature of the evidence put forth on this point. Justice Perram determined that the only aspect that was directly copied was the HTML code.

The judge then moved onto the question of copyright infringement, prior to dealing with the issue of a breach of confidentiality. This would be assessed, as many would be aware, as whether there was a substantial copying of the materials by Datakatch or not. A further layer was added in the decision in CA Inc v ISI Pty Limited, where the substantiality of any copying of computer software would be assessed looking at the "...taking into account the importance of function" of the software and its code. Justice Perram quickly concluded that the copyright in the work had not been infringed as "[t]he amount of code copied is trivial from a quantitative point of view" and no functional analysis was done. Although unnecessary after a finding on non-infringement, the judge still looked at the ownership aspect of the copyright issue, i.e. whether TICA owned the copyright in the works allegedly copied. He concluded that they did own the copyright in the works.

Justice Perram finally took on the issue of breach  of confidence against the defendants, who, as stated above, had clearly used usernames and passwords to access confidential information on TICA's systems, which were deemed to have the necessary protectable quality of confidentiality in them. After some discussion, the judge concluded that only Mr Nnounis had breached confidentiality, although only under section 183 of the Corporations Act 2001 (which prevents officers of a company to use information acquired through their position for their own personal gain). He additionally imposed an injunction against Datakatch over the use of the usernames and passwords, as Mr Joshua is a shareholder and director of the company.

The case shows clearly the distinction between intellectual property rights and confidential information, and how an infringement of one right does not necessarily automatically bring about an infringement of the other. Although not by any means a landmark case, this writer still found it interesting, and wonders where the case would've gone had the claimants argued their case differently (and admittedly, better, by the looks of the comments made by the judge).

Source: Davies Collison Cave

2 comments:

  1. there is a part two for the case to be heard shortly

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    Replies
    1. I'll have to be on the look out for that one.

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