What compensation should be paid for storing computer programs after license expiration?
What compensation should be paid for storing computer programs after license expiration?
Background
One company entered into two agreements with the City of Malmö (city), a main agreement and a support and maintenance agreement.
The content of the main contract concerned at least the right of use of a computer program developed by the company on behalf of the city.
The support and maintenance agreement concerned the computer program in question.
The agreements were terminated by the company to expire on 31 December 2013.
However, the city continued to use the program, despite the dismissal.
The company saw the continued use as unlawful and therefore brought an action against the City for violating the Copyright Act (URL).
The City responded with a determination appeal because it considered that it had acquired either the right of disposal (i.e. both the right of origin and use) or at least a fixed-term right of use for the programme under the main contract.
District court
To begin with, the District Court (TR) examined what kind of right to the program the city had acquired.
It was initially found that the programme in question had the height of the work and was thus covered by the protection of computer programs in the URL.
According to the rules of the Copyright Act, the copyright for computer programs created under employment conditions falls to the employer, a client can only acquire such rights through explicit or implied agreements.
The Court therefore found that the right of disposal belonged to the company unless otherwise agreed, and therefore had to interpret the parties’ agreements.
Since, according to the court, one of the points of the contract could not be interpreted other than that the contract concerned the right of use, it was excluded that it was a transfer of the right of disposal.
The Court then went on to examine whether it was a fixed-term right of use.
TR found clauses whereby both contracts were limited in time, which would have been meaningless in the main contract if it intended to make a time-limited transfer.
In that case, it would have been sufficient to enter into only the support and maintenance agreement for a limited time.
The City, for its part, argued that it would have been unfavourable for them to conclude the contract for a limited period of time, since the company would have been able to increase the price at each renegotiation until the City had again had time to go through the cumbersome process of acquiring a new tailor-made programme.
In particular, with the content of the abovementioned clauses, the Court nevertheless chose to interpret the contract as limited in time, and the use of the programme after the end of the contract period would therefore have been unlawful.
TR therefore placed the greatest importance, in accordance with principles of contract interpretation, on the wording of the agreement.
The City appealed against TR’s judgment in its entirety, but withdrew its action on the content of the agreement.
The Court of Appeal (HovR) left to decide where the city would pay the company.
Court of Appeal
First of all, the Court examined the period during which the programme had been used.
The city claimed to have stopped using the program on January 12, 2015, which was supported by witness interviews.
The Court of Appeal accepted the information and went on to examine whether the mere storage of the programme had infringed copyright.
It emerged from witness interviews that the city had knowingly kept the copies of the programme in the event that the new system would not work well enough.
Since it indicated that it had been important for the city to retain the program, HovR also saw passive storage as an infringement of the company’s copyright.
For the unlawful use of other people’s works, reasonable remuneration shall be paid (URL Chapter 2.
Section 54), therefore, was left to examine what was reasonable.
The company claimed that the compensation corresponded to what the City had to pay in the event of a renegotiation, which they said would have meant that the contract had been extended to last all of 2015.
However, the Court did not find it possible to draw that conclusion without further ado.
It was therefore decided that compensation should be paid for the period of unlawful use, i.e. until 28 September 2015.
HovR also did not consider that it could have determined the price on its own without regard to its contracting party, even though the City had put itself in a bad position for negotiation.
Therefore, the company did not let the sum itself be determined.
In general, reasonable remuneration under URL can be determined at the market value of the use.
Since there was no evidence available in the form of tariffs or the like, it was up to the Court to decide what was market-correct.
In order, inter alia, to ensure that the company had been able to take advantage of its advantageous position at a hearing, the court concluded that a fair remuneration for 2014 would exceed the annual fee paid by the City to the company in 2013.
On the other hand, since storage has been passive for most of 2015, HovR found that the remuneration would be significantly lower than in 2014.
The company appealed to the Supreme Court (HD) and, among other things, sought higher compensation than that imposed.
HD granted leave to appeal as to whether the passive storage was unlawful and how the compensation would be determined if it had been.
The Supreme Court
In order to answer which compensation is to be paid, HD starts by examining whether the passive storage has infringed the company’s copyright.
First, it should be noted that copyright implies the exclusive right to use a work, in this case the computer programme, for the production of copies or making available to the public.
However, there are some limitations to that exclusive right in law.
Restrictions on the exclusive rights to computer programs (URL Chapter 2, section 26 (g) means that the person who has acquired the right of use also has the right to produce both utility copies and also backups if necessary for the intended use.
On the other hand, the actual storage of a computer program constitutes a copy production that is prohibited for those who do not have access rights, passive storage is not covered by HD.
In the preparatory work for the law, the introduction of an obligation to destroy copies of programmes when the right of use has ceased has been discussed, but it was not seen as appropriate or necessary by the legislator.
Since the relevant paragraph of the URL is part of the implementation of the European Union Directive on the Legal Protection of Computer Programs, hd then proceeds to examine whether an obligation to delete the programmes exists under EU law.
In the Swedish language version of the Directive, the Court finds that there is a prohibition on reproduction without the permission of the rightholder.
The term reproduction is deemed here to include either copying or making available to the public, but nothing else.
According to HD, the meaning of the Swedish version is also consistent with the French and English versions.
According to the Directive, HD does not therefore find that storage, without the production of copies, constitutes a copyright infringement.
According to the case-law of the Court of Justice of the European Union, there may be situations where there is an obligation to delete copies after the expiry of the useful life (UsedSoft case).
However, HD does not see this as relevant because the judgment does not concern what should happen to utility and backup copies that are stored passively.
Overall, the Court finds that Swedish law complies with EU law.
The city’s storage of the program after 12 January 2015 has thus not been illegal, and they therefore only need to reimburse the company for the use of the program until then.
HovR’s decision on the remuneration to be paid is upheld.