Intellectual Property: CREATIVE PURPOSE SDN. BHD. & ANOR. V. INTEGRATED TRANS CORPORATION SDN. BHD. & ORS. HIGH COURT MALAYA, KUALA LUMPUR

CREATIVE PURPOSE SDN. BHD. & ANOR. V. INTEGRATED TRANS CORPORATION SDN. BHD. & ORS.HIGH COURT MALAYA, KUALA LUMPURRK NATHAN JC[CIVIL SUIT NO: D5-22-165-1995]

24 JANUARY 1997JUDGMENT

RK Nathan JC:

Background

Both the 1st and 2nd plaintiffs are engaged in the business of designing, developing and marketing of software programs.

The 1st plaintiff was incorporated in Malaysia on 23 November 1993 and became a wholly owned subsidiary of the 2nd plaintiff on 17 March 1994 when the initial two paid-up shares were transferred to the 2nd plaintiff.

The Malaysian operations are currently conducted by the 1st plaintiff.

It is common ground between the parties that prior to the incorporation of the 1st plaintiff, the Malaysian operations had been conducted by another Malaysian incorporated company called Creative Software (M) Sdn. Bhd. (CSM) which was incorporated on 18 May 1990.

It is also common ground that CSM was wound up by a Court order on or about April 1994.

Unlike the 1st plaintiff which is a wholly owned subsidiary of the 2nd plaintiff, CSM had common directors and shareholders with the 2nd plaintiff.

The two shareholders of CSM at all material times were Guyler Magruder and Rachel Swee Mei Ting who were also respectively the technical director/chairman and managing director of CSM. Fact Relied on by the Plaintiffs

In or around January 1991 the 2nd plaintiff first published for sale and distribution in Malaysia the software program called MEP3. This particular software was never published in Singapore or elsewhere.

The 2nd plaintiff subsequently allowed the 1st plaintiff to improve on the MEP3 program, such that each improved version appeared as a new and upgraded version of MEP3.

There have so far been four upgrades, namely MEP 3.30, MEP 3.31, MEP 3.32 and MEP 3.33. It is the contention of the plaintiffs that the copyright in each of the new upgrades or versions as a whole resides in the 1st plaintiff. The Mechanics of the Software Program

The plaintiffs’ case is that the software programs were designed as comprising two main modules, namely:

(a) a ‘loader program’, and (b) the ‘main program’.

The loader is encoded with a special protection code as a deliberate protection against unauthorised copying.

The loader functions to start up the main program, but the main program cannot be accessed if the special code in the loader fails to detect the presence of a particular copy protection device.

Between 1985 up till June 1994, the copy protection device used was the “key diskette”. In mid 1994, the “key diskette” was replaced by a new method of protection involving the use of a “dongle”, a hardware attachment fitted to the printer part of a computer.

The dongle functions in the same way as the key diskette.

Instead of detecting the presence of the key diskette, the protection code in the loader program looks for the presence of the dongle.

In January 1995 MEP 3 version 3.32 was released by the 1st plaintiff with enhanced features.

An advanced protection code was incorporated preventing access into an option or function program known as “Initialise Payroll” unless a dongle was present. A feature called “Potongan Cukai Berjadual” was incorporated in the program, and access into the “Potongan Cukai Berjadual” program could only be achieved through the “Initialise Payroll” function.

From January 1995 all registered users of the plaintiffs were converted to the dongle-based copy protection system.

The plaintiffs’ case is that the 1st and/or 2nd and/or 3rd defendants infringed the copyright in MEP 3, 3.32, 3.33 by reproducing without licence or consent, these software programs, and distributing the infringing copies to the public.

They also submit that the defendants have modified these softwares to circumvent the dongle. Matters Relied on by the Defence

The defendants deny that any copyright subsists in the Easy Series software, or that the 2nd plaintiff is the creator or owner of the copyright.

They also deny that the 2nd plaintiff published the Easy Staff, Easy Cash, or Easy Asset softwares simultaneously in Malaysia and Singapore.

In respect of Easy Pay 3, the defendants deny that it was first published in Malaysia in or around 1991 or that it was never published in Singapore at all.

The defendants also contend that the improved versions are the joint works of the 1st plaintiff and the 1st and 2nd defendants and that therefore the 1st and 2nd defendants were joint owners of the copyright.

The defendants further contend that they had the licence or consent of the plaintiffs to make reproductions of MEP 3, 3.32 and 3.33 by virtue of the terms of an alleged oral distributorship agreement made between the 2nd plaintiff and the 1st defendant in or about June 1987.

Further it was the contention of the defence that the plaintiffs had acquiesced in the various acts done and as such were estopped and precluded from denying the implied licence of the defendants in reproducing, distributing and modifying the Easy Series and the improved versions.

In particular, with reference to the copy protection device it was contended that the 2nd plaintiff had agreed since the inception of the oral agreement, to incorporate security features as developed by the 3rd defendant and as such it was agreed that the 3rd defendant would be allowed to modify the 2nd plaintiff’s Easy Series so as to ensure that the Easy Series are compatible and could work with the said security features.

The defendants contend that there is no evidence implicating the 2nd and 3rd defendants. The Computer Program

In order for me to assess the level to which copyright protection can extend, and how such materials can be infringed it is necessary to understand the essential nature and characteristics of a computer software program.

The Copyright Act 1987 (‘the Act’) defines “computer program” as follows:

“computer program” means an expression, in any language, code or notation, of a set of instructions (whether with or without related information) intended to cause a device having an information processing capability to perform a particular function either directly or after either or both of the following:

(a) conversion to another language, code or notation;

(b) reproduction in a different material form; (s. 3)

Jacob J in Ibcos Computers Ltd & Anor. v. Barclays Mercantile Highland Finance Ltd. & Ors. [1994] FSR 275, 285 very graphically described the workings of a computer and I can do no better than reproduce the same:

Computers only work in binary code, a code made up of O’s and 1’s. So all data held in a computer or held on a computer storage device (such as a RAM, disc or tape) must be so coded.

Likewise computer programs – the instructions to the processor as to what to do with data – must be in binary form. A binary program code is called an “object code” or, more graphically, “machine code”. Computers

are given so-called “operating systems”. These are a kind of basic program concerned with essential computer functions.

Popular operating systems are, for instance, MS-DOS, and Unix.

There are a number of others.

These systems are themselves, when in the computer, in binary code.

When an applications program (i.e. one which will be used for a particular application) is loaded into the computer it is loaded, as it were, on top of the operating system.

The applications program speaks to the operating system which speaks to the computer.

Now binary form is practically impossible for a human to read or write.

Humans write programs in a particular language called a higher level language.

That language must have a perfect syntax and grammar.

Computers are unforgiving: there is no room for irregular verbs with them.

Programming languages are a mixture of words of English and a system of a kind of algebraic instructions.

There are many such languages. A popular language of some antiquity is COBOL. A variant of this usable only on digital computer company’s (DEC’s) products is DIBOL and a later variant of DIBOL, usable on other companies’ machines is DBL.

The program the human writes is called the “source code”. After it is written it is processed by a program called a compiler into binary code.

That is what the computer uses.

All the words and algebraic symbols become binary numbers.

Now when a human writes he often needs to make notes to remind himself of what he has done and to indicate where the important bits are.

This is true of life generally and for programmers.

So it is possible to insert messages in a source code. A reader who has access to it can then understand, or understand more readily, what is going on. Such notes, which form no part of the program so far as the computer is concerned, are called “comments”. They are a kind of sidenote for humans.

In the DIBOL and DBL programs with which I am concerned, a line or part of a line of program which is preceded by a semi-colon is taken by the compiler as a comment.

That line is not translated by the compiler into machine code.

The program would work without the comment.

It follows that although the computers are unforgiving as to spelling in their programs, they do not care about misspelt comments in the source code.

If a line of operational code (a ‘command line’) is modified by putting a semi-colon in front of it, it ceases to be operational.

The computer treats the code as a mere comment.

Computer programmers sometimes do this with a line which pre-exists when they no longer want that line, but are not sure they may not need it in the future.

Or, if the programmer thinks he may want to add a feature to his program in the future he may put in a comment allowing for this.

He is unlikely in the latter instance to put in detailed code only to comment it out. A general note will do.

Source code, being what humans can understand, is very important to anyone who wants to copy a program with modifications, for instance to upgrade it. It is the source code which shows the human how it all works, and he or she will also get the benefit of all the comments laid down by the original programmer.

Software houses not surprisingly normally keep their source code to themselves and confidential.

Page 287:

Most programs are complicated and have a history of growth. A typical applications program will in fact consist of a number of individual programs linked in various ways, accessing data held in the computer for various purposes. … Moreover most applications programs undergo a more or less continuous process of organic growth.

Individual programs are updated, features are added or modified and so on. Large software houses issue new versions of their programs from time to time.

Sometimes the upgrade is given a new number: lesser modifications tend to be given an old number with a new decimal place.

Is There Copyright Protection for Software Program

Having considered the numerous cases cited by both parties, it is possible to sieve from the numerous judicial observations, that copyright protection for software program is strongly entrenched, and that the Courts have shown a willingness to extend the protection to both the object as well as the source codes.

In fact, a set of instructions which is embedded into an integrated circuit is conferred protection as well.

It is my finding that the definition under s. 2 of the Act should be read broadly so as to include all manifestations of that set of instructions which can be read by a computer in whatever converted form.

This would therefore clearly cover the “dongle” device of the plaintiffs. The Technics of the Malaysian Easy Series Program

PW2, whose evidence was uncontroversial, said that each of the Easy Series software packages is divided into two components, namely:

(a) the main program, and (b) the loader.

Both are instructions for the computer.

The loader functions to initialise and load and execute the main program into the memory of the computer.

The main program for MEP3 is an application program for payroll management, being the specific function it sets out to perform.

Essentially it is a valuable database program, being an ordered collection of payroll data.

When sold, the complete package of MEP3 consists of two diskettes and a user manual.

The two diskettes contain the loader and the main programs, the loader being the smaller of the two.

When an update (an improvement) is done, an update disk is supplied to the user.

The update disk only carries files containing changes to the existing main program.

In itself it is not a complete program.

When installed, the update disk will refresh the existing copy of the main program. MEP3. Com and Bpayroll.ovl

MEP3. COM is the name of the loader program which loads and executes the MEP3 main program, named BPAYROLL.OVL. The plaintiffs contend that the defendants infringed not only the loader, but also BPAYROLL.OVL, the main program. The Copy Protection Device

PW2 gave evidence to the effect that when a copy protection device is included in the software package, a protection code is wrapped around the loader program, namely the loader would then have two programs.

By June 1994 there was introduced the dongle form of protection which consists of two main components: the hardware device and a software component.

The latter component is a computer program as well. PW2 said he had to write two separate programs for the dongle protection system, that is, first, a program to insert a coding into the dongle and second, a program to wrap a corresponding coding around the loader, which will check for the presence of the dongle before the loader allows access into the main program.

In respect of MEP 3.32, another coding was added to the main program to allow for a check to be done during the operation of the main program itself.

The plaintiffs therefore contended that the defendants infringed this particular computer program when they ‘patched’ or modified the MEP3. COM file and BPAYROLL.OVL file.

The defendants in reply argue that there is no evidence adduced to show who owns these two components of the MEP software. I reject this argument because in the case of MEP 3.30, 3.31, 3.32 and 3.3, since copyright will vest in the entire work, it is only logical that copyright in the entire enhanced BPAYROLL.OVL file as well as MEP3. COM file will vest with the plaintiffs. Circumvention of the Dongle Protection Device is Infringement

The plaintiffs submit that the facts of this case establish that the defendants had actually “hacked” and “patched” the plaintiffs’ copyright programs directly and flagrantly.

It is noteworthy that a somewhat similar set of circumstances occurred in Autodesk Inc. & Anor. v. Dyson & Ors. [1992] AIPC 38, 182, 183, 184.

The appellants held the copyright in a computer-aided design program called AutoCAD, which was sold with a hardware protection device called an AutoCAD lock.

The AutoCAD program was a compilation of programs, one of which was a program known as Widget C. Widget C would send out a set of instructions to the AutoCAD lock, and the response from the AutoCAD lock must correspond to a “look-up” table in its memory.

Only where the correct response was received would the main program run.

By observing the electronic signals passing between the computer and the AutoCAD lock, the third respondent managed to work out the sequence of correct responses and thereafter devised a substitute for the AutoCAD lock which he called “Auto Key lock”. The High Court of Australia on appeal from the Full Federal Court held there had been infringement, although the substitute device was created without direct copying or reproduction of the written computer program. Originality Issue

Both parties concede that the relevant programs for my consideration are as contained in the Easy Pay Series.

The defence argue that there is no dispute that the original Easy Pay 3 program was developed by the 2nd plaintiff, a Singaporean and that the subsequent versions are based on this original version.

The defendants contend that the plaintiffs have failed to establish that the later versions are original works protectable under the Act. The crux of the question, submitted the defendants, is whether the plaintiffs have revised the original Easy Pay 3 program sufficiently to attract fresh copyright for the subsequent versions of Easy Pay 3 program.

It was the submission of the defendants that the plaintiffs had not led evidence to make the relevant software Easy Pay 3.30, 3.31 or 3.33 original in character.

It was contended that even in the case of the Easy Pay 3.32 the evidence showed that there was insufficient effort done to render the same original of the plaintiffs.

In any event, the defendants relied on Warwick Film Productions Ltd. v. Eisinger [1969] Ch 508 and submitted that the person who does the improvement is only entitled to copyright protection for the improved version.

In the Warwick Film the plaintiffs alleged that the defendants had infringed their copyright in two books, namely The Trials of Oscar Wilde and Oscar Wilde: Three Times Tried. In his account of the proceedings of the trials, the author of the first book, Hyde, had copied substantially from the account in the second book.

Hyde, however, also did a good deal of editing.

The first defendant who wrote the alleged infringing work did not make any direct use of the second book; instead he copied parts of the proceedings as reproduced in the first book.

It was held that both books were entitled to copyright.

However, in so far as the first defendant had copied Hyde’s unedited copying, and very little of his edited copying, there was no reproduction of a substantial part of the work and therefore no infringement.

It was urged upon me to hold by way of implication that the Warwick Film suggests that a person who subsequently improves an existing work is only entitled to sue for his improved portion and not the part of the work which is copied.

Therefore by comparison to the present case it was submitted that unless the plaintiffs could show that the improved portion of the Easy Pay 3.2 is original to the plaintiffs and that the defendants have infringed this portion as well, there ought to be no case for infringement of copyright.

The defendants argue that the changing of commands from one program language to another language could be effected by special program tool and rather mechanically.

In such a case there is no creativity involved at all.

Thus it was contended that Easy Pay 3.32 is not original and did not therefore attract fresh copyright.

In response the plaintiffs relied on the judgment of Jacob J in Ibcos Computers (supra) wherein the learned Judge said at p. 289:

Logically therefore the claim in copyright calls to be tested in the following order:

(1) What are the work or works in which the plaintiff claims copyright?

(2) Is each such work “original”?

(3) Was there copying from that work?

(4) If there was copying, has a substantial part of that work been reproduced?

The plaintiffs pointed out that by virtue of s. 3 of the Act the definition of “literary work” includes:

(h) computer programs and compilations of computer programs,

I was also referred to s. 7(2) of the Act which states:

(2) Works shall be protected irrespective of their quality and the purpose for which they were created.

The plaintiffs referred to the decision of Costello J in Allibert S.A. v. O’Connor & Anor. [1981] FSR 613, 621 wherein he opined:

These authorities also illustrate the principle that copyright protection is given to the work and not to the idea and that it is not originality of thought that has to be established to obtain copyright protection but original skill and labour in execution.

So, copyright protection can exist in a product drawing even though it is based on an earlier product drawing.

What the court has to determine in a disputed case is whether the designer has performed sufficient independent labour to justify copyright protection for the drawing he has produced …

Having considered the various cases cited by both parties, I am of the view that s. 7(2) of the Act is more relevant to the present case.

This sub-section provides that although the quality of a work is unimportant, a literary work is eligible for copyright only if the following requirements of sub-s. (3) are fulfilled, in that:

(a) sufficient effort has been expended to make the work original in character; and

(b) the work has been written down, recorded or otherwise reduced to material form.

In the circumstances, I hold that each individual program in a whole package comprising a composite computer program attracts individual copyright subject to it being “original”. I am supported in this view by the decision of Jacob J in the Ibcos case (supra) wherein the learned Judge said at p. 289:

Accordingly in my judgment the copyright works include not only the individual programs but the whole package.

Moreover in every case where a program was revised or modified enough for a fresh copyright to be created, that copyright is also a relevant work.

I accept as good law the proposition of Costello J that copyright protection is given to the work and not to the idea and that so long as original skill and labour is extended, copyright protection must prevail. A computer program, as a species of “literary work”, under Malaysian law, is eligible for copyright if “sufficient effort” has been expended on it to render the work “original” and the work is “reduced to material form”. It is the case of the defendants which I shall come to later, that the plaintiffs had infringed CSM’s copyright in MEP 3.24 or whatever earlier relevant version authorised by CSM’s employees.

However, s. 7(4) of the Act which reads,

(4) A work shall not be ineligible for copyright by reason only that the making of the work, or the doing of any act in relation to the work involves an infringement of copyright in some other work.

provides the answer to this contention.

Even if such an allegation is true, the resultant program of the plaintiffs, if “original” will attract separate copyright by virtue of this subsection. PW3 said in evidence that he had to write a new series of command lines and put that in another file.

He then had to create another file incorporating the formula given by the government and program the necessary command lines so that when executed it would apply the correct formula.

He admitted that it was not an easy task as he had to insert, add or modify nearly 4,000 lines of commands in C language.

This evidence I find has not been disproved by the defendants who merely attempted to highlight similarities between MEP 3.32 and 3.24 through the evidence of DW3. Further, when exh. P11(a) was demonstrated to me in open Court, the very clear statement of copyright ownership, vesting in the 1st and 2nd plaintiffs in the opening screen display puts paid to any claim to ownership by CSM.

In so far as this Court is concerned what is in issue is the copyright ownership in MEP 3.32 and 3.33, not 3.24 and any other earlier version done by CSM.

Referring to the Warwick Film (supra) relied on heavily by the defendants to back up their submission that a person who subsequently improves an existing work is only entitled to sue for his improved portion, I cannot agree that that was the view of the learned Judge.

The learned Judge said at p. 530:

Counsel also submitted the alternative argument that, as a matter of law, copyright can subsist in some parts of a literary work without subsisting in other parts, and that no copyright will be held to subsist in those parts which consist of copied raw material on which no labour and skill have been expended.

In support of these propositions Counsel cited Low v. Ward ([1868] LR 6 Eq. 415), Leslie v. J. Young & Sons ([1894] AC 335 HL) and Macmillan & Co. v. Cooper ([1923] 40 TLR 186 PC).

I do not, however, propose to refer to these cases in any further detail because recently the House of Lords has preferred a different approach to the problem which arises where a literary work includes unoriginal or pirated material. I refer to Ladbroke (Football) Ltd. v. William Hill (Football) Ltd. ([1964] 1 WLR 273; [1964] 1 All ER 465, HL(E)).

Plowman J then referred at length to the Ladbroke case, particularly the judgments of Lords Hodson, Devlin and Pearce, where the principle laid down clearly rejects the “dissection” argument (that is, that one could dissect parts of a work and attribute copyright only to parts and not the whole, in cases where a work builds upon a prior existing work). His Lordship continued at p. 532 by quoting Lord Hodson:

The defendants have sought to argue that the coupons can be dissected and that upon analysis no copyright attaches to any of their component parts and accordingly no protection is available.

In my opinion, this approach is wrong and the coupons must be looked at as a whole.

Issue of Ownership of the Program

It is the plaintiffs’ case that the 2nd plaintiff is, and was at all material times, the copyright owner of the original programs in the following business application software products, namely:

(a) Easy Staff, a human resource management software.

(b) Easy Cash, a cash flow software.

(c) Easy Asset, an asset depreciation management software.

(d) Easy Pay 3, a payroll processing software designed solely for the Malaysian market.

These are collectively called the Easy series.

Except for Easy Pay 3 (MEP3) which was designed and published solely in Malaysia in or around January 1991 the plaintiffs contend that the other Easy Series products were published for sale and distribution both in Malaysia and Singapore.

The plaintiffs’ central claim on the pleadings is copyright infringement in that there has been infringement by the defendants of the 1st plaintiff’s copyright in various relevant versions of the MEP3 software, and likewise, the 2nd plaintiff’s copyright in MEP3. It is the plaintiffs’ contention that copyright in the MEP3 series’ later versions and upgrades are jointly owned by the 1st and 2nd plaintiffs and that the fact of joint ownership is supported by a statutory presumption in the Copyright Act 1987; see s. 26(4)(a) which states that the name on a work purporting to be the name of its author shall be considered as such, unless the contrary is proved.

It was the plaintiffs’ submission that although they have pleaded the infringement issue in terms of unauthorised reproduction and distribution of the Easy Series, the thrust of their claim rests on infringement of the MEP3 software, in particular Easy Pay Versions 3.30, 3.31, 3.32 and 3.33. This, the defendants agree in their submission.

The defendants submitted that even if the 1st plaintiff had proved that the Easy Pay 3.32 program was their original work, they had failed to establish that they are the rightful owners of the same.

It is common ground that the Easy Pay 3 program was first developed by the 2nd plaintiff in Singapore.

But it was argued that unless there is sufficient publication within Malaysia, such Singaporean program is not protected in Malaysia.

This was because the 2nd plaintiff being incorporated in Singapore and a non-Berne Convention country, could only claim copyright protection if the conditions relating to first publication as laid down in s. 10(2) of the Act are fulfilled.

The defendants relied on a passage from Copyright Law in Malaysia by Khaw Lake Tee 1994 Edn. pp. 23-24:

Under s. 10(2), all works, with the exception of works of architecture and broadcasts, to which special rules apply, are entitled to copyright if they are first published in Malaysia, that is, they are made available to the public. A work is also deemed to be first published in Malaysia if it was first published elsewhere but was subsequently published in Malaysia within 30 days of that first publication.

This means that if a work was first published in Singapore and was subsequently published in Malaysia within 30 days of that publication in Singapore, the work would be protected under the Copyright Act 1987.

As from 1 October 1990, all works first published in any of the Berne Union countries are also entitled to copyright protection in Malaysia, regardless of whether they are published in Malaysia itself.

It was the submission of the defence that the plaintiffs had not produced any evidence of the first publication of the Easy Pay 3 program in Malaysia.

The plaintiffs replied stating that whilst the original Easy Pay software program was created by the 2nd plaintiff, evidence had been led by the plaintiffs that MEP3 was designed specifically for the Malaysian market and was published and released in Malaysia in and around January 1991.

It is my finding that whilst the plaintiffs have led evidence to prove publication in Malaysia, the defendants have not at all introduced any evidence to show otherwise.

Whilst I accept as trite law that the overall burden of proof lies on the plaintiffs, the evidential burden in relation to this particular issue, as it has been raised by the defendants, has to be discharged by the defendants.

Since I have found that the defendants have failed to discharge that burden, such a contention remains a bare allegation unsupported by evidence.

The evidence led by the plaintiffs is through PW2 who had stated how MEP3 program came to be developed (sometime in January 1991) and that the first sales were recorded in February of the same year and these items of evidence were tendered as part of the agreed bundle of documents (ABD1).

The defendants then contended that there was no evidence that the subsequent versions of Easy Pay 3.1, 3.2, 3.24 were created and owned by any of the plaintiffs.

In fact evidence showed that these versions of Easy Pay 3 were created by CSM, now wound up. Since there was no evidence of any subsequent divesting of these programs to the plaintiffs, it was the defence submission that the copyright in these versions should still remain in the liquidators of CSM. Pointing out that the 1st defendant was only incorporated in 1994, it is not possible for it to own copyright in computer programs which were created prior to its formation unless there was a valid assignment of these programs from the previous owner.

The plaintiffs’ reply to this is that their claim to ownership and on which there is evidence of infringement by the defendants, are MEP 3.30, 3.31, 3.32 and 3.33. Earlier versions of the MEP series authored by CSM are not in issue.

They contended that whether copyright in versions 3.1, 3.2 and 3.24 vests in the liquidator of CSM or otherwise, is irrelevant for purposes of the present suit.

Likewise it is irrelevant for purposes of the present suit to consider whether these versions created by CSM have been divested to the plaintiffs.

I agree.

It is my finding that since CSM is not a party to this instant suit, it is impermissible to assume questions of ownership of these earlier versions without proper evidence being led and the issues proven.

In any event, I find no claim by the plaintiffs that the 1st plaintiff owns copyright in programs created prior to its incorporation in 1994.

From the entire pleadings and the evidence adduced the plaintiffs claim joint ownership of the copyright in MEP 3.30, 3.31, 3.32 and 3.33. Statutory Presumption Under s. 26(4) of the Act

The said subsection reads:

(4) Subject to subsection (3) –

(a) the name on a work purporting to be the name of its author shall be considered as such, unless the contrary is proved;

(b) in the case of an anonymous or pseudonymous work, the publisher whose name is indicated in the work as such shall be deemed to be, unless the contrary is proved, the legal representative of the anonymous or pseudonymous author and shall be entitled to exercise and protect the rights belonging to the author under this Act;

(c) in the case of unpublished work where the identity of the author is unknown, but where there is every reason to presume that he is a citizen of Malaysia, the copyright conferred by this Act shall be deemed to vest in the Minister charged with the responsibility for culture.

The plaintiffs argue that there is a statutory presumption in favour of the ownership being vested in the 1st and 2nd plaintiffs under s. 26(4). The defendants contend otherwise and say that s. 26(4) provides for name of the “author” of a work appearing on the work and that the said subsection is not concerned with the name of an owner.

The defendants urged upon me that authorship of a work is entirely different from “ownership” of the work.

The defendants relied again on Dr. Khaw Lake Tee’s text earlier referred to at p. 66 where she states:

Under copyright law, there is a distinction between authorship and ownership.

The author generally refers to the creator of the work while the owner is the person who is entitled to control the doing of the various restricted acts.

The author and owner of a copyright may not necessarily be the same person.

Relying on the definition of “author” in s. 2 of the Act the defendants argue that the “author” of a work must refer to a natural person.

This submission is refuted by the plaintiffs who contend that it is improper for the defendants to read that the entire subsection deals with the question of authorship and not ownership.

With regard to the defendants’ submission that s. 26(4) could only refer to natural persons the plaintiffs contend that if at all the word “writer” in s. 26(4)(a) can be read as limited to natural person, the word “maker” is of wider import and ought to be read as referring to corporate entities as well.

The submission of the defendants fails to consider the full import of s. 26. Section 26 reads “First ownership of copyright”. It is obvious therefore that where there is a claim to authorship which claim to authorship can even be presumed by the name of the author appearing on the works, then by virtue of sub-s. (3), which reads,

(3) Copyright conferred by s. 11 shall vest initially in the government, government organisation or international body and not in the author.

the claim to ownership (subject to s. 11 of the Act where the copyright in works shall vest initially in the government, government organisations and international bodies and not in the author), shall be presumed to also vest with the authorship.

Further the overall context and purpose of this s. 26 has to be considered.

Whilst the term “author” is defined in s. 2, the term “owner” is not.

It is also important when considering the question of statutory presumption of ownership under s. 26(4) to consider s. 10(1) of the Act, which reads:

(1) Copyright shall subsist in every work eligible for copyright of which the author or in the case of a work of joint authorship, any of the authors is, at the time when the work is made, a qualified person.

Section 10(1) makes it abundantly clear that “author” and “qualified person” share a common meaning. Section 3 defines “qualified person” as:

(a) in relation to an individual, means a person who is a citizen of, or a permanent resident in, Malaysia; and (b) in relation to a body corporate, means a body corporate established in Malaysia and constituted or vested with legal personality under the laws of Malaysia;

In the circumstances, if an “author” can also mean a “qualified person” and “qualified person” is defined by the Act as including a body corporate, it cannot be right to read the word “author” in s. 26(4) as referring only to natural persons.

By the same token it is my judgment that the presumption raised cannot be limited to mere authorship, but should be properly read to cover the issue of ownership.

In Berjasa Information System Sdn. Bhd. v. Tan Gaik Leong (Trading as Jurukur Berjasa) & Anor. [1996] 2 BLJ 337 , I had found copyright ownership on the plaintiffs, a corporate entity.

Although this issue of the presumption of ownership as arising under s. 26(1)(4) was not raised as an issue in that case, I said this at p. 348:

I find from the documentary evidence and the affidavits, a clear intention to vest the copyright ownership on the plaintiffs.

From the time the software system was developed the plaintiffs’ claim to copyright was displayed prominently at

the start of the software system as copyright notice.

Neither of the defendants, registered a protest.

Indeed if the first defendant had only commissioned the plaintiffs to prepare the software system it was his duty to have claimed ownership forthwith and to move the Court promptly for an injunction to restrain the plaintiffs from so advertising.

In the fast developing sphere of corporate ownership it is incongruous to hold that a corporate body cannot claim entitlement to copyright ownership.

It is my finding that once there is a display on the program the name of a person, or a corporate body, then by virtue of s. 10 of the Act read together with s. 26(4) of the Act, copyright ownership shall vest in that said person or corporate body. Is There Joint Ownership by the Plaintiffs

It is the plaintiffs’ contention that copyright in the MEP3 series’ later versions and upgrades are jointly owned by the 1st and 2nd plaintiffs and that this joint ownership is supported by the statutory presumption arising from s. 26(4)(a) of the Act which spells out that the name on a work purporting to be the name of its author shall be considered as such, unless the contrary is proved.

The defendants deny that the 2nd plaintiff has established its ownership to the later versions of the MEP series.

The defendants argue that joint ownership can only arise from joint creation of the works or by assignment by one owner to the subsequent joint owners and that the plaintiffs had proved neither of these facts.

Since PW3, an employee of the 1st plaintiff had admitted in evidence that Easy Pay 3.32 was created by him, it was submitted that by virtue of s. 26(2) of the Act the rightful owner of the copyright, if any, should be the 1st plaintiff.

In any event, there is no evidence of subsequent divesting of the copyright to the 2nd plaintiff.

I find that it is the plaintiffs’ case that the MEP series is built upon an original version designed by the 2nd plaintiff.

Evidence has been led in any event, on how the development of the later versions of the MEP series received effort and input not merely from employees of the 1st plaintiff but of the 2nd plaintiff as well.

Notwithstanding the fact that the substantive work on the enhancement was essentially done by two programmers of the 1st plaintiff, PW3, a trained programmer of the 1st plaintiff, said in evidence:

For Versions 3.30, 3.31 and 3.32, there were two, myself and one Kamen Chia.

Chan Chee Kian acted as consultant.

Chan Chee Kian was PW2 and he is the computer programmer and analyst in the software department of the 2nd plaintiff since January 1991 and was made the software manager of the 2nd plaintiff in October 1993.

It is therefore my judgment that the need for, or the lack of an assignment, on this issue of joint ownership is irrelevant.

The issue as I see it relates to the creation of copyright in the later versions of MEP; not in the devolution of the same.

Be that as it may, in any event, since both the plaintiffs are agreed among themselves to have the copyright jointly-owned, it is not incumbent upon the defendants to deny this, unless the defendants can lead me to a clear statutory provision in the Act, that this cannot be done.

On the contrary, I am constrained to hold that sub-s. (5) of s. 27 of the Act, favours the plaintiffs’ argument since it provides,

… persons shall be deemed to be co-owners if they share a joint interest in the whole or any part of a copyright.

Implied Licence Granted by the Plaintiffs to the Defendants

It was the defence submission that in any event they had not infringed the copyright of any of the plaintiffs’ because there was an oral agreement between the plaintiffs and the defendants allowing the defendants to reproduce the relevant programs for the agreed purpose. DW1 (Chong Sun Foo) who was the director of all three defendants and DW2 (Rachel Swee Mei Ting) who was the former managing director of the 2nd plaintiff and CSM gave evidence regarding the existence of an oral agreement.

From the evidence adduced by these two witnesses the defendants argue that the said oral agreement, amongst others, provided that the defendants had the licence or consent of the plaintiffs to make copies, reproduce or modify the Easy Pay Series computer programs’ new enhancements, upgrades, updates, releases and versions whether developed or produced by the 2nd plaintiff or by any other parties authorised by it, in order to provide maintenance services to the ultimate purchasers/users of the Easy Pay Series computer programs including but not limited to the Malaysian Easy Pay Version 3 (MEP3). It was the further contention of the defendants that the said oral distributorship agreement was never terminated by the 2nd plaintiff, CSM or the 1st plaintiff and that it is therefore still valid and subsisting.

The plaintiffs replied by pointing out that DW1 under cross examination had said that the 1st defendant had no right to the source code.

If such is the case then the 1st defendant and indeed any of the other defendants as well, cannot really maintain that the defendants had the consent to modify the MEP 3.32 software so as to circumvent the dongle, since this could only be done if the defendants were provided access to the relevant source code.

Pressed in cross examination, DW1 referred to the terms in the software maintenance agreements signed between the 1st defendant and CSM. But it is clear from the terms of the software maintenance agreements that “all general enhancements and product updates aimed to improve the current version of the system” would be provided, but for new versions they had to be paid for, albeit at a 50% discount.

Apart from these software maintenance agreements, there is no written evidence to support and prove the alleged oral agreement.

I find that the evidence of DW2 in cross examination contradicted in material particulars the evidence of DW1. In cross examination DW1 conceded that the 1st defendant was not entitled to receive the source code of the programs. DW1 also agreed that the 1st defendant was not allowed to make changes to the files in the main programs, but was only allowed to “customise”. Even under reexamination DW1 again replied that the 1st defendant could not make changes to the main program, but could only customise in the sense of writing an external program to effect calculations to suit the needs of particular customers. I find on the evidence led by the plaintiffs that the 1st and 2nd defendants “hacked” files in the source code, and the main program. Acquiescence, Implied Consent and Estoppel

Alternatively the defendants submit that this action is wholly uncontestable by reason of the conduct, consent or acquiescence of the plaintiffs, of the defendants’ acts of reproducing and distributing the said improvements.

It was the submission of the defendants that the terms of the oral distributorship agreement have been put into effect by both the plaintiffs and the defendants since 1987 in the course of their business transactions.

The defendants have, since 1987 been reproducing the said improvements for the purpose of providing maintenance services to the ultimate purchasers or users of the Easy Pay series computer programs with the full knowledge of the plaintiffs at all material times.

It was also the defendants’ contention that the plaintiffs have at all material times tacitly recognised the relationship of principal and distributor entered into between the 1st defendant and the 2nd plaintiff initially, and thereafter with CSM until it was wound up and finally with the 1st plaintiff for a period of more than eight years and the said oral distributorship agreement has yet to be terminated until to date.

The defendants also submitted that during the eight years the plaintiffs and CSM have never by conduct objected to the reproduction and distribution of any of the improvements, including MEP3 whether it was developed or produced by the plaintiffs or CSM for the purposes of servicing the legitimate purchasers or users of the Easy Pay series computer software.

The defendants argue that the plaintiffs are thus estopped and precluded from denying and contradicting the implied licence of the defendants as granted by the plaintiffs and CSM. DW2 testified that the plaintiffs terminated the relationship of distributor and principal between the plaintiffs and the 1st and 2nd defendants when there was a change of management in the 1st plaintiff company and after the winding up of CSM.

As to why there is no documentary proof of any distributorship agreement, DW2 said that DW1 had sent a draft agreement but since it was only a standard draft agreement devoid of the peculiar arrangements already existing between the parties, the 1st defendant did not agree to it. Also since in the initial stages the business was not too big the defendants did not pay too much attention to the need for legal documentation. I was urged to accept this explanation.

The plaintiffs replied by stating that if the 1st and 2nd defendants can reproduce even new versions containing enhanced features, including enhanced security features such as the dongle, what possible protection would the plaintiffs have when new security features are introduced, if they can, with the same supposed tacit consent, be circumvented.

Further, I do not consider that there was such an oral agreement at all and in the circumstances this submission of the defence fails. No Case as Against 2nd and 3rd Defendants

The defence contended that there was no evidence whatsoever implicating the 2nd and 3rd defendants.

In fact DW2 had stated that the 3rd defendant had nothing to do with this case.

It was the defence contention that the plaintiffs had sued the wrong party.

The plaintiffs denied this and submitted that the evidence showed that the infringing copies of MEP 3.2 were distributed through the 2nd defendant as shown in exh. P3 which is a sample container in which the infringing diskettes are delivered to customers of the defendants.

The labels of these containers carry the name of the 2nd defendant.

These have not been denied by the defendants.

It was further submitted that DW2 in his evidence in chief had stated that the 2nd defendant is the appointed customer support service arm of the 1st defendant.

I find that the purchasers of MEP 3 who purchased from the 1st defendant signed maintenance contracts with the 2nd defendant for maintenance services in relation to MEP 3 including provision of updates for an annual fee.

In fact a copy of such a maintenance agreement with the 2nd defendant was exhibited at p. 34 of the agreed bundle of documents (ABD). The defendants all share the same registered addresses and have common directors and shareholders, in particular, DW2. The production and distribution of the infringing goods took place on the shared premises of all the defendants where some of the infringing items were seized, upon the execution of the Anton Piller Order dated 7 April 1995 issued by this Court.

There is also evidence to suggest that payments of maintenance fees for MEP3 were paid for and collected by the 3rd defendant.

In the circumstances, I hold that the plaintiffs are not misplaced in citing the 2nd and 3rd defendants as defendants herein. “Hacking”

Over the course of the decade, advances in technology have created the computer industry and consequentially this new industry, needless to say, has also spawned new and complex issues.

Throughout this case the term “hacking” has been used by the plaintiffs.

It is therefore necessary for me to see if its usage connotes the meaning attributed to it. It is pertinent to note that the term “hacking” can on the one hand signify the free-wheeling intellectual exploration of the highest and deepest potential of computer systems.

It describes the determination to make access to computers and information as free and open as possible.

However, on the other hand, it means intruding into computer systems by stealth and secrecy and the term “hacker” would refer to a computer intruder.

Hacking can also refer to the unauthorised access to computer systems by those who simply enjoy using computers and experimenting with their abilities in trying to invade a computer system as innocent hobbyists.

It could also refer to a youngster imbued with the thrill of challenge and just for the heck of it, hacks into a computer system.

In the software world hacking means computer programming.

It may also involve the decompilation or reverse engineering of computer programs with the aim of changing the behaviour of the program.

Computer hacking therefore, is an attempt to gain access into someone else’s computer account or data.

Coming to the case at hand from the evidence of the witnesses, I find the use of this term by the plaintiffs, justified. Damages

The plaintiffs submitted that the depreciation to the value of the copyright caused by the infringement was a chose in action.

In support of this proposition Ariff relied on Caxton Publishing Co. v. Sutherland Publishing Co. [1939] LR 179 HL where the House of Lords held in an infringement of copyright action that the act of binding together the infringing sheets with the innocent sheets so as to form the volume produced by the appellants, constituted the act of conversion in respect of which the respondents were entitled to damages.

On the question of damages the defendants submitted that as the Easy Pay 3.32 is partly derived from a work which belonged to CSM, a wound up company, and not the plaintiffs solely, the plaintiffs have themselves in fact infringed the copyright of CSM in reproducing the same without consent of the liquidator of CSM and that therefore the Court should not condone such unlawful act.

Therefore in the event the plaintiffs succeeded in proving infringement I was asked to deny the plaintiffs a right to damages.

Section 37(2) of the Act allows for the Court to assess damages in cases of infringement.

However, the same Act allows for additional damages where the Court has taken into consideration:

(a) the flagrancy of the infringement, and (b) any benefit shown to have accrued to the defendant by reason of the infringement.

The burden is on the plaintiff to prove damage, but not to a degree of certainty.

Flagrancy implies scandalous conduct, deceit including deliberate and calculated infringement where a defendant reaps a pecuniary advantage in excess of the damages he would have been found liable for; see Ravenscroft v. Herbert & Anor. [1980] RPC 193, 206. However I find that this is a proper and fit case for me to order an inquiry as to damages for infringement of copyright and an order for payment of all sums found due upon taking such an inquiry, together with interest thereon. I however declined to award for additional damages as I did not find the need to do so. The Counterclaim

Relying on the oral agreement between the 1st defendant and the plaintiffs that they should provide the free releases and upgrades to the defendants, the defendants claim breach of contract by the plaintiffs.

In the circumstances, they claim for damages.

The defendants relied on the evidence of DW2 which was to the effect that the plaintiffs had procured and induced a number of purchasers to buy direct from the plaintiffs the Easy Pay Series and their improved versions.

It was also the evidence of DW2 that the plaintiffs had copied the list of the 1st and 2nd defendants’ list of customers and have spread rumours that the defendants were resorting to unethical and unprofessional conduct which statements were all untrue.

Based on these the defendants claimed that they had made out a case for injurious falsehood and conspiracy.

The reply of the plaintiffs was that the defendants had failed to support the allegations of breach of contract, injurious falsehood and conspiracy with evidence.

The allegations of DW2 was unsupported by cogent evidence.

I find that this counterclaim by the defendants was a lacklustre effort, devoid of purpose and lacking in merit.

The defendants have not at all provided any or any sufficient credible evidence to support the bare assertions raised in their counterclaim and repeated in Court by DW2. In so far as the claim for breach of contract is concerned, since I had already found against the defendants on the question of the existence of the oral contract, the claim for breach of contract as pleaded in the counterclaim must perforce, fail.

In Wilts United Dairies Ltd v. Thomas Robinson Sons & Co. Ltd. [1957] RPC 220 Stable J very succinctly categorised the requirements to be made out for a case of injurious falsehood.

In that case it was alleged that the defendants, knowing what they were doing, purchased a large quantity of the plaintiffs’ “British Maid” tinned condensed milk, which they knew was old stock and stale stock, and put that milk into circulation through various wholesalers and retailers as being the normal standard of “British Maid” milk.

The plaintiffs complained that that was an injurious falsehood, or that it was a passing off, as being milk of the current production, milk that had, in the course of time, been relegated to a class of old or stale milk.

It was held that there had been passing off and injurious falsehood.

On the meaning of malice, Stable J said at p. 237:

As I understand the law it is this that you publish a defamatory statement about a man’s goods which is injurious to him, honestly believing that it is true, your object being your own advantage and no detriment to him, you obviously are not liable.

If you publish a statement which turns out to be false but which you honestly believe to be true, but you publish that statement, not for the purpose of protecting your own interests and achieving some advantage to yourself but for the purpose of doing him harm, and it transpires, contrary to your belief, that the statement that you believed to be true has turned out to be false, notwithstanding the bona fidesof your belief because the object you had in mind was to injure him and not to advantage yourself, you would be liable for an injurious falsehood.

The third proposition which I derive from the cases is this, that if you publish an injurious falsehood which you know to be false, albeit that your only object is your own advantage and with no intention or desire to injure the person in relation to whose goods the falsehood is published, then provided that it is clear from the nature of the falsehood that it is intrinsically injurious – I say ‘intrinsically’, meaning not deliberately aimed with intent to injure but as being inherent in the statement itself, the defendant is responsible, the malice consisting in the fact that what he published he knew to be false.

Whilst the pleadings bear out the requirements propounded by Stable J, with which categorisation I wish to totally associate myself, I am unable to find any line of testimony other than the mere unsupported assertion of DW2, to even suggest any evidence that could bear out the defendants’ claim on this ground.

In the circumstances, I dismissed the counterclaim with costs.

Taking into account all the circumstances of this case and after evaluating the evidence of the witnesses and the submissions of Counsel, and here I must express my gratitude to both Counsel for their thoroughness, I find that there has been clear infringement by the defendants who actually indulged in impermissible self help when “hacking” the files in the computer program owned by the plaintiffs.

It cannot be plausible to conclude, as the defendants venture to argue that they have the right to circumvent the dongle protection device, since otherwise all attempts by the plaintiffs to produce enhancements and strengthen security features will come to nought.

In the circumstances and in respect of the claim proper I granted the plaintiffs’ prayers for:

(a) A declaration that the 1st and/or 2nd and/or 3rd defendants have infringed the 1st and/or 2nd plaintiff’s copyright in Easy Pay 3 and its upgrades, and the 2nd plaintiff’s copyright in Easy Asset, Easy Pay and Easy Staff and its upgrades;

(b) A permanent injunction restraining the defendants or any one of them through their directors, officers, servants, agents, nominees or any one of them or otherwise howsoever from doing the following acts without the 1st and 2nd plaintiffs’ or the 2nd plaintiff’s (as the case may be) prior consent or licence, that is to say:

(i) modifying, varying or otherwise altering and/or reproducing copies (including such modified, varied and/or altered copies) or any part thereof of the 1st and 2nd plaintiffs’ computer software, Easy Pay 3, and of the 2nd plaintiff’s computer software, namely Easy Staff, Easy Cash and Easy Asset and/or any upgrade or upgrades and/or version or versions of the same, past, present or future (collectively, “the plaintiffs’ works”); and/or

(ii) selling, exposing and/or offering for sale or otherwise distributing by way of trade or otherwise the items aforesaid in para. (i) above;

(iii) decoding, tampering or otherwise interfering with the operation of any copy protection device accompanying the plaintiffs’ works; (iv) infringing in any manner whatsoever the 1st and/or 2nd plaintiffs’ copyright in the plaintiffs’ works;

(v) facilitating, causing, procuring and/or otherwise assisting in the doing of any of or all such acts aforesaid in paras. (i), (ii), (iii) and (iv) above.

(d) an inquiry as to damages for infringement of copyright;

(e) an order for payment of all sums found due upon taking such an inquiry as in (d) above together with interest thereon;

(f) costs.