Who owns innovation?

A Supreme Court ruling on a titanic 16-year legal battle is being seen as just the tip of the iceberg in defining Canada’s rules for entitlement to copyright in computer software creation.

The David and Goliath battle — a major first step in clarifying how copyright ownership is separated

between individual creators and the companies they work for — moves Canada closer to the U.S. on the issue. But experts say additional precedents are required before businesses and programmers radically change the way they operate.

“”This is the most important copyright case in the computer field since a Supreme Court ruling on Apple in the late 1980s,”” said Barry Sookman, head of Internet and e-commerce law at McCarthy Tétrault and co-counsel for Brian Duncombe, the software creator at the heart of the case.

Employed by Carolian Systems, Duncombe created a computer performance monitoring program for the company in 1984. Leaving soon after, he established his own business to create a similar product.

“”I had an idea of the best product for this market in 1984. In 1986, I also had an idea of the best product for the market. Each product was clearly written by the same person, but they were not the same product,”” said Duncombe.

Carolian disagreed. Afraid of losing ground in a hot market, the Toronto-based firm sued Duncombe for copyright infringement and software copying, winning an injunction that prevented him from developing, supporting or marketing his product.

“”The injunction stopped me from operating in this market. I went to work for another company, but they got an injunction against them, too. Eventually, I threw up my hands and went and did other things,”” said Duncombe.

But he also contested the case. In 1992, the courts found against Carolian — now owned by Delrina Corp. — and a subsequent ruling stated that Duncombe had neither copied Carolian’s software nor infringed upon its copyright.

In 1998, damages of $6.9 million plus costs were awarded to Duncombe and his company Triolet Systems as a result of the effects of the six-year injunction; a decision upheld when the Supreme Court dismissed Delrina’s appeal application in November 2002.

For Sookman, a key question of the landmark ruling was, When does an employee own the information they work with and when is it owned by the employer?

“”We often get questions on this, particularly from employees asking what they can use when they move to another company,”” he said. “”There’s a tension because employees typically carry software knowledge in their heads when they move around and employers want to protect their intellectual property.””

The case established that Duncombe’s programs were designed to accomplish a common technical and commercial purpose, so much of their content could be expected to be similar rather than unique.

“”Companies developing similar products to those already on the market will be able to look to this case and see what is protected. It will give them a better understanding of what they can and cannot do in software creation,”” said Sookman.

He added that Duncombe’s case clarifies several issues for software companies. They should have non-compete agreements with their employees. They must ensure that their intellectual properties remain trade secrets. And, if necessary, they must go to trial early to avoid liability.

“”For employees, the case shows that individuals can leave a company and set up in competition, but there are risks involved. Anyone moving to a competitor must be careful not to be seen to be copying,”” said Sookman.

According to Richard Gold, Bell Chair in e-governance at McGill University’s faculty of law, Duncombe’s case brings Canada closer to legal precedents in other countries.

“”This is the first time the courts have been willing to fully embrace the U.S. approach to copyright law in computer programming,”” said Gold, who added that this case alone has not produced a clear set of principles on high-tech intellectual property rights.

“”More cases are needed to clarify the rules. One problem is that technology is fast moving and the law is reactive — we will be deciding in 10 years on questions raised today,”” said Gold.

Comment: info@itbusiness.ca

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