One of the issues with which the open source software movement is constantly grappling is how to ensure a contractual nexus between the originator of the software and later users. For example, one often hears asked the question of whether the open source licence creates a ius quaesitum tertio. The Profile Software case at first sight has nothing to do with anything except good old-fashioned copyright, yet, hidden within it may be the seed of an answer to the open source question.
The Facts and Ruling
The background was that Coranta Corporation had a call centre software suite known as “Profile” which was designed to be tailored to individual customer’s requirements. It enjoyed modest success and was licensed to a number of customers. Then, in an all-too familiar turn of events in the software industry, Coranta got into financial difficulties and went into liquidation. The liquidator sought to dispose of the Company’s principal asset, the intellectual property in the Profile software. This did not prove difficult as one of the customers, MGT plc, was willing to buy the intellectual property and each of the other existing customers, including Becogent, were content with taking a fresh licence. The need for new licences arose because, since the liquidator had not been prepared to go on providing support, customers needed an extended licence (together with a copy of the source code) to allow them to arrange their own support.
The way in which the arrangement was given effect was for the liquidator (with the full knowledge and consent of MGT) to grant the new licences immediately prior to granting an Assignation of the IPR in favour of Profile Software, a wholly-owned subsidiary of MGT.
Some time later, Profile came to suspect that Becogent was in breach of the terms of the licence by using the source code to make more extensive changes in the functionality of the software than was permitted in terms of the licence. Following investigation, Profile raised an action in the Court of Session seeking, as copyright proprietor, certain remedies under the Copyright, Designs and Patents Act 1988 and also seeking certain special remedies which were provided under the terms of the licence.
The defenders raised, as a Preliminary Issue, a defence of “no title to sue” and the case went to a preliminary Proof before Answer before the intellectual property judge, Lord Kingarth.
Although the defenders originally disputed the title of the pursuers to sue for any of the remedies claimed, during the course of the proof they conceded the pursuers’ title as copyright owner in respect of the statutory remedies. However, in respect of the rights under their Licence, their argument was that since the Assignation did not, in terms, assign the Licensor’s right under the Licence, that had remained unassigned and the title to sue for the contractual remedies still resided with the liquidator.
The decision of the court was that Profile Software did, indeed, have title to sue. In the event, the ratio of this decision was founded on the interpretation of the words of the Licence, Missives and Assignation, and the inherent improbability, in the view of the court, that the parties could have deliberately sought to engineer a result in which pursuers had interest but no title to enforce the Licence, whereas the liquidator had title but no apparent interest to do so.
The Nature of the Right
As the pursuers’ Senior Counsel, I also addressed to the court an argument founded in a wider principle: copyright is a proprietary right to prevent others from copying the work. The essence of a licence is that it is a permission given to the licensee to perform an act or acts (copying) which would otherwise have been unlawful as an infringement of the copyright. That permission is, however, a conditional permission, ie it is granted subject to the conditions contained in the licence. Therefore, the granting of a licence by the licensor falls to be seen not as a process by which he gains contractual rights (which, indeed, might require to be the subject of separate assignation) but rather as a process by which he surrenders rights (specifically the right to prevent copying) – though that surrender is, as explained, a conditional surrender of those rights.
In other words the licensor’s rights under the licence are not an addition to his rights, but are in the form of the conditions attaching to a subtraction from his rights. Put another way: the action is an action not for breach of the licence, but rather for breach of copyright. The copyright owner can pursue it because, by breaching the conditions attached to the permission, the licensee can no longer claim the protection of the permission.
When the original granter of the licence grants an assignation of his copyright, he plainly cannot do so other than subject to the terms of the licence (nemo dat quod non habet), which is to say subject to the conditional permission, and the corollary is that the licensee cannot sever the permission from its conditions.
The bottom line is that the copyright owner’s right is a matter of proprietary right and not personal contractual right.
Curiously, there does not appear to have been any previous reported case in the field of copyright in which the matter has been addressed expressly, but there is a ready analogy with the right of a landlord under a lease, which, being a proprietary right, runs with ownership of the property and does not need to be the subject of separate assignation.
Commenting on this argument, Lord Kingarth said that given his interpretation of the documents, it was:
“… unnecessary to form a concluded view on counsel for the pursuers’ proposition that this result would, in any event, have flowed from transfer of ownership in the copyright, but I found his submission on this matter to be entirely persuasive.”
The point might appear to be an obvious one, though it does not hitherto appear to have been the subject of express consideration, and it is obviously a point which is in danger of being lost sight of in the whole “open source” licensing debate. There is little point in trying to apply an analysis relying upon personal contractual rights to what are in substance real proprietary rights. To ask about ius quaesitum tertio may be to ask the wrong question.
Iain G Mitchell QC is Vice-Chairman of the Scottish Society for Computers & Law.
