Karum Group LLC v Fisher & Paykel Financial Services Ltd
(2014 NZCA 389; 13th August 2014)
In Karum Group LLC v Fisher & Paykel Financial Services Ltd the Court of Appeal upheld the High Court judgment that Fisher & Paykel had not infringed any copyright in Karum’s CMS software after modifying its own credit software.
In 2004 Fisher & Paykel made a business acquisition, where the business assets included the use of software licensed by Karum. Fisher & Paykel obtained a temporary license from Karum while it developed its own software. However, Karum alleged that Fisher & Paykel’s eventual software copied non-literal design elements and logic of Karum’s software. Karum did not claim its CMS source code had been copied.
As non-literal copyright infringement had not been considered by New Zealand courts the Court of Appeal drew on foreign precedent. The Court of Appeal approved of US precedent which held that copyright could extend beyond program code to cover software ‘structure’, provided that it did not extend to any ideas behind the structure. It also approved of English precedent which held that software functionality can be replicated in another program since functionality is not protected by copyright, as it lies on the ideas side of the line between idea and expression.
The Court of Appeal held that the alleged elements of copied software were purely functional or business rules as the codes were not distinctive and were not literary works whether taken apart or together. The Court of Appeal also held that even if it was wrong in that conclusion Fisher & Paykel would not be found to have copied a substantial part of the work as required by the Copyright Act 1994. Karum was also unsuccessful in arguing that Fisher & Paykel had incorporated Karum’s trade secrets into its own software.