Profile Software Limited V. Becogent Limited
| Jurisdiction | Scotland |
| Judge | Lord Kingarth |
| Neutral Citation | [2005] CSOH 28 |
| Court | Court of Session |
| Published date | 16 February 2005 |
| Year | 2005 |
| Date | 16 February 2005 |
| Docket Number | A1340/03 |
| OUTER HOUSE, COURT OF SESSION [2005] CSOH 28 | |
| A1340/03
| OPINION OF LORD KINGARTH in the cause PROFILE SOFTWARE LIMITED Pursuers; against BECOGENT LIMITED Defenders: ________________ |
Pursuers: I G Mitchell QC, Weir; Burness
Defenders: Johnston; Brodies
16 February 2005
[1]In this action the pursuers, who are the owners of copyright in certain computer software, make claims against the defenders who, it is said, have infringed the copyright and are in material breach of a licence granted in their favour. The defenders' first plea-in-law is one of "No title to sue", and the action came before me for proof in respect of that preliminary plea. Evidence was led from three witnesses, Mr Craig Baxendale, Technical Director of MGt Plc ("MGt") (of which company the pursuers are a wholly - owned subsidiary), Mr Scott Gaillie, Insolvency Practitioner with Kroll Limited and Mr Alistair Orr, Solicitor, presently a partner in Brodies and formerly a partner in Maclay Murray & Spens. A number of matters were agreed in a Joint Minute. At the end of the proof the essential factual background was not, it seemed to me, seriously in dispute.
[2]Prior to July 2001 Coranta Corporation Limited ("Coranta") owned the copyright in a computer program, relating to customer relationship management, known as "Profile" (and formerly, until March 2000, known as "Call-IT"). Indeed, the intellectual property rights in that software formed the company's principal assets. "Profile" consisted of a suite of modules (one of which was known as "Call-IT") designed principally to capture and store information from and about a company's customers in a way that made such information speedily available to anyone who required, for example, to field telephone calls from such customers. In or about July 2001 Coranta went into liquidation. Fraser G Gray of Kroll Limited was appointed liquidator. The liquidator wished to realise, as soon as he reasonably could, as much of the company's assets for the benefit of the creditors as he could. Much of the day to day work was done by Mr Gaillie on his behalf. Although consideration was initially given to the disposal of the business as a going concern these efforts proved unsuccessful. A number of potential purchasers of the assets were approached, including in particular a number of companies who had been licensed by Coranta to use versions of "Profile" which had, in ordinary course, been customised to suit them. Amongst these companies were MGt and the defenders.
[3]It became apparent that MGt wished to acquire the intellectual property rights for the whole "Profile" product (and indeed all corporeal media on which the software was stored, together with certain other information). This, it appeared to Mr Gaillie, was in part a defensive exercise to make sure that their own business operation was not materially affected by the liquidation of Coranta. Mr Gaillie also recognised that MGt could have contemplated future exploitation of the intellectual property rights. MGt soon became the preferred bidders. It became apparent too that numbers of other companies (including the defenders) were prepared to pay fees (in the form of a single, one off payment) for licences to use parts of the software, essentially to enable them to continue the business uses which they then currently enjoyed. Their objectives could be said to have been defensive. They also wished to be in a position, notwithstanding the demise of Coranta, who had previously carried out maintenance of the program when required under separate contracts, to be able to do, or to arrange, such maintenance themselves. Specifically the object of the defenders appeared to Mr Gaillie to relate to the continued use of part of the application for their own business for a period of six to nine months, pending a potential move to use of a different platform. MGt were asked by the liquidator if they would consent to the grant of licences to the other companies so that these other companies would not be materially disadvantaged by the proposed sale to MGt. To this they agreed.
[4]It was therefore agreed that Coranta would (a) grant relevant licences to the defenders (and to Rangers FC, Response Handling Limited and Carnegie Information Systems Limited), and that thereafter, albeit as part of the same overall deal to be completed on the same date, that they would (b) enter missives agreeing to sell the assets which MGt wished to purchase and (c) formally assign all intellectual property rights in the software to the pursuers. The terms of each of the proposed licences were adjusted as a three way process between the liquidator (in particular assisted by Mr Orr), the relevant licensees, and the pursuers represented by their legal advisors (Burness). According to Mr Orr the wish of the proposed assignees was to keep the relevant licences as tight as possible. They did not, he thought, want any licensee to be able to use the software save within clearly understood parameters.
[5]It was agreed in the Joint Minute that number 6/3 of process is a true copy of the Software Licence Agreement ("the Licence") entered into between Coranta ("the Company") and the defenders on the 27 July 2001. Clause 3.1 thereof provides that:-
"3.1Subject to the provisions of this Agreement, the Company shall grant to the Licensee with effect from the Commencement Date a non-exclusive, royalty free, non-transferable licence to use such rights as the Company may have, and be entitled to license, in and to the Licensed Materials for the Purpose and no other purpose whatsoever".
The Licensed Materials are defined as consisting of a source code version of the software listed in the schedule (a CD Rom of which was to be delivered), an object code version thereof (which, it was acknowledged, the defenders already possessed) and certain relevant documentation. It appears from Clause 2 that the CD Rom to be delivered in respect of the source code was to include the documentation. As explained to me in evidence (and to a degree in submission) the source code is that part of any program written in language capable of being understood by a computer programmer. It falls to be distinguished from a machine code (or object code) version of the program, which is in language which, generally speaking, only the computer is able to understand. It is enough for the present to note that "the Purpose" is defined, as meaning, broadly speaking, use of the software by the defenders in the ordinary course of their business as currently carried on by it. It includes any necessary maintenance and correction.
[6]Clause 4.1 provides:-
"4.1The Licensed Materials constitute the proprietary and confidential information of the Company and all copyrights, trademarks and other intellectual property rights of whatsoever nature in the Licensed Materials are, and remain, the exclusive property of the Company and this Agreement shall not operate so as to transfer any right, title or interest (other than expressly herein set out) in the Licensed Materials to the Licensee."
[7]Clause 4.4 provides:-
"Without prejudice to the Company's other rights hereunder and/or in law, if a material breach of this Agreement or of any confidentiality undertaking by the Licensee and/or any Authorised Person occurs or if the Company has reasonable grounds for believing that such a breach has occurred or will occur then the Company may require the immediate return of all the Licensed Materials in the hands of the Licensee and the Licensee agrees to return same (and any and all copies of same in its possession and/or in the possession of any Authorised Person and/or otherwise under its control) forthwith and the Company may immediately take possession of such Licensed Materials and any and all analyses of same conducted by the Licensee or any Authorised Person".
[8]Clause 4.5 provides:-
"The Licensee acknowledges that the Licensed Materials are important to the Company's business, that an award in damages may be insufficient to protect such business in the event of any breach of this Agreement and that the Company shall be entitled to an order for interdict, specific implement or such other relief or other action in whatsoever jurisdiction as the Company deems appropriate to restrain any breach".
[9]Clause 4.9 provides:-
"The obligations of the Licensee under this Clause 4 are entered into for the benefit of and are enforceable at the instance of the Company and any transferee of the Licensed Materials and in this Clause 4 the word "Company" includes any such transferee".
[10]Clause 5.1 provides:-
"In consideration of the Licensed Materials to be delivered hereunder and the licence to be granted hereunder the Licensee shall make payment to the Company of the Fee".
The fee was to be a one off payment of £25,000 payable on completion of the agreement, and which was, on the evidence, paid to the liquidator of Coranta.
[11]Clause 6.1 provides:-
"The Licensee hereby acknowledges and agrees that it is not entitled to any new version and/or upgrade of the Licensed Materials or any maintenance and/or support relative to the Licensed Materials in any circumstances whatsoever".
[12]Clause 12.3 provides:-
"The Licensee shall not assign or otherwise transfer all or any part of the Licensed Materials and/or this Agreement without the prior written consent of the Company. The Company shall be entitled to assign or otherwise transfer the Licensed Materials (with or without its right under all or any part of this Agreement) without the consent of the Licensee. No transferee of the Licensed Materials (with or without all or any part of this Agreement) shall be or come under any obligation of any kind whatsoever to the Licensee or any person claiming through the Licensee whether under this Agreement or otherwise relative to the Licensed Materials, but this is without prejudice to the duty...
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Management and Enforcement
...in chapter 2. 89 Guillot v. Arvic Search Services Inc. , 2001 FCT 799 at [7] (conceded). 90 Profile Software Ltd. v. Becogent Ltd. , [2005] CSOH 28 at [28] (Scot. Ct. Sess.). 91 JWH , above note 73 at [74]–[76] (sale of business and its “intellectual property” effective to transfer implied......