Minor infringements can have major consequences for software developers

The Federal Court’s recent finding against Pavetest Pty Ltd (Pavetest) in IPC Global Pty Ltd v Pavetest Pty Ltd serves as a stark reminder to software or firmware developers of the dangers of using third party software without a licence. What may appear to be a ‘minor’ or ‘insignificant’ use of third party software, may in fact have major consequences.

This important lesson came at a significant cost to a former employee of IPC Global Pty Ltd (IPC) who, in starting up rival company Pavetest with another former IPC employee, provided a software developer with copies of IPC’s firmware (‘IMACS’) and software (‘UTS’) that remained on his personal computer after he left the company.

When will copying source code amount to copyright infringement?

Under the Copyright Act, copyright in a work will be infringed if the work is reproduced in whole or in ‘substantial part’ without a licence.

In this case, only a very small portion of the UTS software program had been reproduced. While the UTS software program comprised approximately 250,000 lines of source code, the Court heard that only 800 lines of that code was reproduced. Notwithstanding this, the Court considered the UTS software had been reproduced in ‘substantial part’ and found against Pavetest and the two former IPC employees as follows:

  • The two individual former employees of IPC had breached their duties of confidence to IPC by receiving confidential information in circumstances that imparted an obligation of confidence, and subsequently misusing that confidential information; and
  • Pavetest had infringed IPC’s copyright in copying the source code.

The Court restrained the offending parties from offering to sell the software and ordered that the software be delivered up or destroyed. The Court also ordered that Pavestest and the individuals pay IPC’s costs of and incidental to the court proceeding.

Important Lessons

Retaining and using copyright materials created under a previous employment is fraught with danger. This case highlights the need for anyone copying code to be cautious and to re-write anything that could be deemed to be a substantial copying.

Companies that engage developers as contractors to create firmware or software should also manage this risk by ensuring there is an appropriate contract in place that excludes liability if the developer breaches a third party’s copyright.

It is also important to ensure that any employees involved in developing software have a clear understanding of their intellectual property and confidentiality obligations during their employment as well as their continuing obligations when they leave.