15 February 2018

Dutch Supreme Court limits copyright protection for preparatory material of software

Recently, the Dutch Supreme Court ruled that copyright protection for preparatory design material in software has its limitations. The material will not be protected against infringement at every stage in software development. De Brauw successfully represented Forax N.V in the proceedings against DC SA before the Supreme Court. As a consequence of the decision, we advise IT companies to safeguard the effort and capital that goes into the process of software development. It might also be necessary for companies to assess whether they can rely on other types of protection, such as trade secret protection.

 

Background

The dispute between DC SA and Forax concerned partially-developed software for fuel cards. These post-paid cards allow diplomats and employees of international institutions to fuel up their vehicles tax-free. To set up the software of these cards, DC had contracted with third party software developers. After these contracts with DC ended, some of the developers continued to use similar software in their newly-founded company, Forax.

Ruling

DC accused Forax of copyright infringement for using the preparatory software of the fuel cards in their own business. The Supreme Court needed to assess the scope of protection for software, and whether this covered the preparatory material in this case. According to the EU Software Directive, copyright protection includes preparatory design work if the nature of this preparatory work is such that a computer program can result from it at a later stage. However, it follows from case law of the Court of Justice of the European Union that protection of preparatory material is not unlimited (see the decisions SAS/WPL and Softwarová). The Supreme Court referred to the CJEU’s reasoning that the scope of protection covers ”preparatory design work capable of leading, respectively, to the reproduction or the subsequent creation of such a program”. Subsequently, the Supreme Court stated that if the material requires further translation into a computer program by means of creative steps in programming, it cannot qualify as protected preparatory design material. As the software material in this case still required this kind of translation, the Supreme Court concluded that it was not protected, and Forax could freely use the material.

What does this mean?

The ruling emphasises the Supreme Court’s aim of preventing monopolisation of ideas at the cost of technical and industrial progress. Mere functionalities of a computer program, however advanced, will not be granted protection if they are not (yet) the creative expression of an idea. Companies and software developers should keep in mind that copyright protection for preparatory material does not extend to every stage of the process in developing software. Making proper arrangements for intellectual property rights and specific non-compete and confidentiality clauses, to prevent conflicts related to unfinished or preparatory work, is recommended. It will be interesting to see if the prospective new legislation on trade secret protection will cover some of the material which, in these scenarios, does not satisfy the requirements of copyright protection; you can read more about the current status of trade secret legislation here and here.

Click here for the Dutch version of the Supreme Court’s ruling.