FEATURE

UK E-commerce Bill - - Progress?

Nigel Miller

Partner in the City law firm, Fox Williams

T he Select Committee on Trade and Industry published its report on Building Confidence in

Elec tronic Commerce: The Government ' s Proposals. The report can be viewed in full at http:www.parliament.the-stationery-office.co.uk/ pa/cm199899/cmselect/cmtrdind/187/18702.htm#ev idence.

The report concluded that "Now that key escrow has been dropped by the Government, the rationale for an electronic commerce Bill is open to Question" and it recommended that "the Government think twice about the content of its fo r thcoming Elec t ronic Commerce Bill and only include in the Bill measures that will promote electronic commerce, rather than measures discarded from the previous key escrow policy which are concerned with controlling, not facilitating, electronic commerce".

Infringement of Copyright in Computer Programs

Copyright infringement cases are few and far between but activity in this field in the High Court in recent weeks has thrown up two interesting cases.

In Cantor Fitzgerald v Tradition and Others (1999) the High Cour t cons ide red a c la im brought for infr ingement of copyright in computer programs which formed part of a bond broking system and for breach of confidence in relation to those programs.

The case looks at the important question: how much copying does there need to be to bring a claim for copyright infringement?

Following his dismissal, the managing director of the c la imant had taken some of the c l a iman t ' s programmers with him and had set up in competition. Within three months the programmers had written a

front office system which worked on the same family of computers as those used by the claimant. The claimant brought his claim on the basis that it was impossible to have written such a system in the time available.

It was found that no more than 2% of the claimant's programs was copied. One of the defendants also admitted to loading the source code for the claimant's front office program onto its computers.

The cour t held that that the de fendan t s had breached the claimant 's copyright by copying the program: it did not matter how little of the program was copied so long as what was copied was a part of the work on which a substantial part of the author's skill and labour was expended.

The claimant also succeeded in his separate claim for breach of confidence: by consulting the source code and using it as a r eminde r dur ing their programming, the defendants were guilty of breach of confidence.

The court found that while it was poss ible to recognize that copyright could be infringed in a novel or play when the plot rather than the part icular expression of the work had been taken, in relation to computer programs this analogy lay in the algorithms or sequences of operations designed to achieve a particular object.

In another recent case the High Court considered a claim for breach of copyright and breach of confidence brought by Mars UK Limited against Teknowledge Limited. Mars UK Limited were leaders in the design and manufacture of coin receiving and changing mechanisms, which included discriminators whose func t ion was to de te rmine the au thent ic i ty and d e n o m i n a t i o n of a coin fed into the mach ine . Teknowledge had successfully reverse engineered the c la imants ' most sophis t ica ted discriminator , the Cashflow, which included an encryption system, and freely admitted doing so.

The defendant admitted that it had breached Mars' copyright but it was for the court to determine whether r everse eng inee r ing a m o u n t e d to a b reach in confidence.

12 Computer Fraud & Security November 1999 3723•99•520.00 © 1999 Elsevier Science Ltd. All rights reserved

FEATURE

The court found that the encrypted information in the Cashflow did not have the necessary quality of conf idence , as the owner had the ful l r ight of ownership, including an entitlement "to dismantle the machine to find out how it works and tell anyone he leases". The mere fact of encryption did not make that which was encrypted confidential where there was no other relationship between the source and the de- encryptor. There was nothing surreptitious in taking a thing apart to find out how it was made.

information society, to the benefit of both right holders and users.

Internet Lotteries

Lotteries are big business on the Internet. But is it legal to promote an online lottery in the UK? The Lotteries and Amusements Act 1976 regulates lotteries in the UK. Case law has defined a 'lottery' as comprising three points:

Contracts (Rights of Third Parties) Bill

This Bill is currently before the House of Lords and could have important implications for IT contracts.

The Bill would reform the English law rule of 'privity of contract'. Under this rule, a person can only sue or be sued under a contract if he is a party to it. Even if a contract attempts to confer a benefit on a third party, that third party will not be able to sue for breach of contract. For example, in a contract between A and B, A promises to pay £100 to C. C, not being a party to the contract, has no right to sue A for the money.

The Bill provides for circumstances in which a third party is to have a right to enforce a contract, i.e. where the contract expressly provides that he should have that right or where the term purports to confer a benefit on him and he is expressly identified. The third party need not be in existence when the contract is made (for example, a company that has not yet been incorporated).

This development may be important in software l icences where, for example , the vendor of the software (e.g. a VAR) is not always the licensor of the software. The l icensor may wish to benefit from provisions of the contract even though not a party to it.

Amended Proposal for Copyright Directive

An amended proposal for a Directive on copyright in the I n f o r m a t i o n Soc ie ty was p resen ted by the European Commission on 21 May 1999. The proposed Directive is intended to adjust and complement the existing EU framework on copyright and related rights to respond to the new challenges of technology and the

• the distribution of prizes; • the fact that this was to be done by means of a

chance; and • there must be some actual contribution made by

the participants in return for their obtaining a chance to take part in the lottery.

There is a key distinction between a lottery and a lawful competition. It will be a competition where, for example, the game involves an element of skill (and not just pure chance) or the competition can be entered free.

Under the Act it is unlawful to promote or be concerned in a lottery in Great Britain unless it is part of the National Lottery or one of the other limited exceptions. Infringement of the statute is a criminal offence. The Act also provides that it is unlawful in Britain to be concerned in a foreign lottery.

This means that, even though a lottery may be legal in another country, it would be illegal to promote it in the UK. It may be that the mere fact that a lottery is on the Web would be regarded as promotion in the UK, since the Web site would be accessible here. In any event, active promotion of an Internet lottery in other media (TV, radio, newspapers) would certainly be illegal.

Electronic Fundraising, a company promoting Millions 2000, an Internet lottery, brought a case of judicial review of the Act on the basis that it conflicts with European law, specifically Article 59 of the Treaty of Rome guaranteeing free movement of goods and service within the EU. This case was brought following the Schindler case last year, in which the Dutch High Court ruled that German lottery tickets could be sold in the Netherlands. The initial Court application failed on 14 June 1999. An application for leave to appeal is being considered.

Computer Fraud & Security November 1999 3723/99/$20.00 ~ 1999 Elsevier Science Ltd. All rights reserved

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