National Futrax Pty Ltd v Share Trend Software Pty Ltd
[1996] FCA 239
•11 APRIL 1996
CATCHWORDS
COPYRIGHT - Infringement - authorship - ownership - computer software program
Copyright Act 1968 s10 s32(4)(1)(b) s35(6)
Copyright (International Protection) Regulations reg4 Part 1 Schedule 1
National Futrax Pty Ltd v Share Trend Software Pty Ltd and Robert Szatmary and Ian Thour
No QG 157 of 1995
Kiefel J Canberra 11 April 1996
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION No. QG 157 of 1995
BETWEEN:
NATIONAL FUTRAX PTY LTD
Applicant
AND:
SHARE TREND SOFTWARE PTY LTD
First Respondent
AND:
ROBERT SZATMARY
Second Respondent
AND:
IAN THOUR
Third Respondent
JUDGE MAKING ORDER: Kiefel J.
DATE OF ORDER: 11 April 1996
WHERE MADE: Canberra (Heard in Brisbane)
MINUTES OF ORDERS
THE COURT ORDERS THAT:
Further hearing of the matter be adjourned.
NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION No. QG 157 of 1995
BETWEEN:
NATIONAL FUTRAX PTY LTD
Applicant
AND:
SHARE TREND SOFTWARE PTY LTD
First Respondent
AND:
ROBERT SZATMARY
Second Respondent
AND:
IAN THOUR
Third Respondent
CORAM:Kiefel J.
DATE:11 April 1996
PLACE:Canberra (Heard in Brisbane)
REASONS FOR JUDGMENT
These proceedings concern infringement of copyright in a computer software program which is said to analyse historical performances of shares on the Australian Stock Exchange and then to offer forecasting to investors. It seems that considerable sums of money are paid for these programs. The applicant markets and sells such a program under the name "XS401" and the respondent under the name "Share Trend" or "Share Trend-V2". Each claim ownership of the copyright in the program.
At an early stage of the proceedings a report prepared for the applicant by an expert in computer programming, Dr Stephen Sugden, concluded that the programs provided to him as the applicant's XS401 and the first respondent's Share Trend were
remarkably similar. It could then be concluded that one was the copy of the other, but the question remained which was the original program.
Competing Contentions
The applicant alleges that it engaged Mr Colin French for reward and that he undertook compilation of the program between May and October 1994, and for part of this time, in Australia. Mr French resides in the United Kingdom. Mr French gave evidence in these proceedings and explained that he used as the basis for this program one he had earlier devised, known as CACTUS (Computer Aided Commodity Trading Utility System), when he worked in the commodities industry in London. The applicant marketed its program as XS401 from at least February 1995 and still does. It then sold the program for $7,800.00 a copy. It undertakes updating of the program through Mr French who retains the original source code necessary to make any changes to the program itself. As an example of that updating Mr French referred to the changes made by the Australian Stock Exchange to the reporting price which necessitated changes to the program.
The second respondent, Mr Szatmary, purchased a copy of the applicant's program on 10 February 1995. Prior to that time he had attended at the applicant's premises for a demonstration which was conducted by the third respondent, Mr Thour, who was then the applicant's employee. Mr Thour was named as a respondent to these proceedings but further proceedings were stayed as against him subject to the applicant obtaining leave. Following purchase of the program Mr Thour and another employee
took it to the Mr Szatmary's home. This appears to have taken place at some time between February and late May 1995. It was not entirely clear whether Mr Szatmary alleged he had not thereafter operated the program or whether he was saying he could not copy it onto the hard disk of his home computer. He made reference to some technical difficulties encountered by the applicant's salesman. It does seem likely that he had viewed the program and operated it, for his later letter of complaint to the applicant when he returned the disk, after having cancelled the cheque in payment of it, conveys dissatisfaction with its operation. In any event he had earlier seen it in operation at the applicant's premises. He says that this was the first time he realised the applicant's program was a copy of that which he had purchased overseas.
Mr Szatmary's story concerning the purchase of the program and its authorship is somewhat more colourful. Mr Szatmary says that he became aware of the existence of the program in 1988 when one Zanelli told him of its creation by a Hungarian mathematician, Rado, and of its purchase by Merchant Bank Del Medditerraneo. He negotiated for its purchase from January 1993 and ultimately a written agreement recording that purchase was made on 6 January 1994. Although a large sum of money was originally sought for the program ultimately he paid nothing for it, the Merchant Bank accepting that he had already outlaid something in the order of $78,000 for hotel and travel expenses during the course of negotiations. During the hearing, when he appeared for himself, Mr Szatmary also produced copy documents said to evidence his negotiations during 1993 with respect to trade in gold bullion and involving the Italian merchant bank. He says that at this time he also pursued negotiations for the purchase of
the program. A review of those copy documents does not however reveal any reference to negotiations regarding a computer program. The source code for the program was said to have been retained by the author Rado who however kept no record of it. When Mr Szatmary approached his family in mid-1994 seeking the code, he was told that Mr Rado had Alzheimer's disease and that the family were unable to assist him. In the latter part of the hearing however Mr Szatmary asserted that he could now have alterations to the program made since the code was now held by someone overseas, either Zanelli or the Rado family although he was not clear about just who it was. None of the persons referred to in Mr Szatmary's account was called by him and it was not sought to tender any statement made by them.
In explanation of the obvious question which arises, as to why Mr Szatmary had not marketed the program before the applicant did, given that he is said to have had it in 1994, Mr Szatmary explained that he had difficulty in doing so because he did not have the source code.
The first respondent company was incorporated in May 1995 and Mr Szatmary and Mr Thour became directors of it. Sometime after that Mr Szatmary engaged the services of a programmer, Mr Muggeridge, to write an installation program. It was not explained why it was necessary to do so and whether the program purchased was absent such a program, although I inferred that Mr Szatmary simply wished to add special features by a new installation program. That devised by Mr Muggeridge on his instructions had the ability to discern whether a copy of the program had been made onto
a C: drive and if it had then to refuse further access to the program. The Share Trend program was sold after May 1995. In June 1995 the applicant's representatives purchased a copy from Mr Thour for $1,000. Other sales by the first respondent have been for prices as low as $500.
Mr Szatmary also explained that he did not bring legal proceedings against the applicant when he became aware of the infringement of his program because he believed that, by reason of undertakings required by the Australian Securities Commission of the applicant company concerning its advertising of the program, it would no longer be marketing it.
That the program is a literary work (s10 Copyright Act1968) and that copyright subsists in it have not been matters in dispute. The case has been conducted to date without full pleadings. Whilst the applicant relies upon ownership of copyright deriving from the employment of Mr French (s35(6)) the basis for subsistence of copyright has not been gone into. Mr French's status as a "qualified person" is not revealed (s32(4) and (1)(b)), although it may be reliance is placed upon the Copyright (International Protection) Regulations. The respondents' position is less clear. Whilst it might be that the work is said to have been made or first published in Hungary or Italy (see Part I Schedule 1 and reg4) it is unclear, particularly given Mr Szatmary's evidence that he was advised by Mr Thour that the program was "widely available in Europe".
The Question for Hearing
It is necessary, for questions which later arose during the course of the hearing, to make reference to how the matter came to be set down for the determination of one question.
On 15 December 1995, Dr Sugden's report having been made available to the respondents, the legal representatives for the parties appeared before Drummond J and confirmed that the only issue as between them was: Who it was that invented the program. At that time the respondents' solicitor, Mr Preston, said:
"I agree that a fairly simple question could be formulated because there is no substantive dispute that the two programs are effectively identical."
Those solicitors had written the previous day to the applicant, in the context of a dispute concerning discovery and pointed out that
"... the primary issue for determination in these proceedings is not whether the Share Trend program is effectively identical to the XS401 program. Rather, the real issue to be determined is the original ownership and authorship of the program itself".
His Honour was assured that it was the first respondent company Share Trend Software Pty Ltd who claimed ownership in the copyright and that no alternative claim was to be made to ownership, for instance by Mr Szatmary. His Honour then ordered, pursuant to O29 r2, that the question "who of the applicant, National Futrax Pty Ltd and the first respondent Share Trend Software Pty Ltd, is the owner of copyright in computer program XS401 be determined separately from any other question in the action".
Questions Raised at the Hearing
When the matter came on for hearing Mr Szatmary was no longer legally represented, his solicitors having withdrawn shortly before the hearing. He explained that he was not financially able to afford legal representation, although when the question as to whether he ought be permitted to appear for the first respondent arose, he made submissions to the effect that although the company had no money he had personal assets. He also appears to be carrying on business in one or more capacities. At the commencement of the hearing Mr Szatmary claimed ownership of the program himself and contended that Share Trend had simply been marketing the program for him. Further, in his submissions at the conclusion of the hearing, he also contended that Mr Zanelli, previously referred to, was the true owner of the copyright, although it is not entirely clear whether he meant that he presently is or had been at some earlier time.
The other matter raised by Mr Szatmary at an early point in the hearing was that what Dr Sugden had referred to as the Share Trend program, which became Exhibit 5 in the proceedings, was not the true Share Trend program and alleged that it had been tampered with. This allegation, not previously made, led to Mr Szatmary attempting to introduce what was said to be the true Share Trend program (as Exhibit 6) and which was said to be different from the applicant's program (Exhibit 4). A deal of the proceedings was spent with the question as to whether there were any differences between the applicant's program and what was said now to be the Share Trend program. Moreover Mr Szatmary did not now accept the conclusions reached by Dr Sugden. A further complication to the proceedings, though little more was necessary to take it well beyond
the question contemplated for hearing, was introduced by the loss of the files on the original Exhibit 6.
Differences if any between the Programs
Exhibits 4 and 5
Although Mr Szatmary raised questions as to some matters in Dr Sugden's report concerning the XS401 program (Exhibit 4) and what was said to be Share Trend program (Exhibit 5) they were, as Dr Sugden confirmed in evidence "virtually identical". Moreover I was not satisfied with Mr Szatmary's explanation as to how his solicitors, on his behalf, had clearly accepted that conclusion. It would also follow that they accepted that what became Exhibit 5 was in fact the Share Trend program.
Dr Sudgen, accepted as an expert in the field by even Mr Szatmary, had reported that his conclusion was arrived at by reference to:
the user interface of the Share Trend Executable being identical with the applicant's program save for some minor variations, for example, in screen positions of text, colours used and the style of menu;
the installation programs being the same, again with only cosmetic changes;
the textual messages within the program, the "strings", being common in large part and importantly there were many common application-specific messages;
the accounting reports being identical.
With respect to some differences in the strings it is clear from the evidence that it is a simple enough matter to alter them, for example by writing over them. It does not require alteration of the program itself and access to the source code.
Subsequent to Dr Sugden giving evidence, Mr Szatmary alleged that the examination of the strings amounted to only a small percentage of the total program. This was never put to Dr Sugden who was clearly satisfied that he had observed sufficient similarity to enable a conclusion to be drawn. Even if it were the case, it would not impinge upon the other point made by Dr Sugden, that whilst one may expect some similarity in textual messages one would not expect it of application-specific messages peculiar to individual programs.
Although I advised Mr Szatmary to put to the witnesses called by the applicant any allegations as to differences between the program he did not suggest to them, as he also later asserted, that the programs might not in any event work in the same manner because internal commands within the strings of the code "may be" quite different. That is, in any event, inconclusive.
In the end result it appeared that Mr Szatmary's real contention about Exhibit 5 not being the Share Trend program was that it had been tampered with. What he said alerted him to this was that the words "XS401" appeared as a string in the Share Trend program but not in the applicant's program. This, he said, showed that the program said to be the Share Trend program had been tampered with. The submission itself implies acceptance of Exhibit 5 as Share Trend's, save for this feature and perhaps one other I shall advert to. It would certainly be odd for an alleged infringer to add a feature positively identifying it as the applicant's, but which feature did not appear on the applicant's own program. On the other hand one cannot conclude by its mere presence that there had been deliberate alteration of the strings by the applicant to implicate the respondents. There may be a simple explanation. Dr Sugden considered that Exhibit 5 may simply be a copy of an earlier XS401 program which subsequently deleted the textual message. Exhibit 4 might then be a copy of a later version. It is further noteworthy that this was a matter raised earlier in Dr Sugden's report and available to Mr Szatmary and his legal advisors from the end of 1995 and in respect of which no issue was taken. The other matter raised by Mr Szatmary in submissions, referred to the applicant as having moved strings around, I take it on Exhibit 5. This is said to be observable because the binary numbers shown to the left of the string (in Dr Sugden's report) do not match on the two programs. There was, again, no evidence about this, what is to be deduced from it, and as to whether if one can alter the strings, their position might also be altered.
Nothing raised by Mr Szatmary and arising from the evidence persuades me that I should doubt the conclusions reached by Dr Sugden or doubt the acceptance of those conclusions, at an earlier time, by the parties.
I conclude therefore that Exhibits 4 and 5 are so similar that one must be the copy of the other. Subject to consideration of further evidence I also incline to the view that Exhibit 5 is Share Trend's program.
Exhibit 6
The differences apparent in Exhibit 6 at the outset are that it has the new installation program written by Mr Muggeridge and that it has another file into which are now contained a number of other files. That is to say, all the other files have been collapsed into one. It would seem that some of the data files such as HIST.CAT have been altered to become a user manual and not, as in XS401, an historical record of trading. Two other files, PRICE.CAT and the maintenance file, are somewhat larger. Whilst the files are now held within one large expandable file, when Mr French looked at them he found that they had the same file names as appear in the XS401 program. To that he was able to add that, for the most part, they appeared to be of the same size and have the same format.
Further examination of what was put forward as the true Share Trend program, Exhibit 6, (which later became Exhibit 6A) was rendered impossible it would seem because Mr Szatmary had Mr French, during cross-examination, place the files from it onto the C: drive. The next day Dr Sugden could not install the program and the files could not be retrieved from the C: drive. In one sense the attempts to retrieve or install what Mr Szatmary had first produced and then later identical copies of it (Exhibits 6B and 6C), all of which were unsuccessful, were of no consequence to any issue in the proceedings, save that it might operate to prevent him from establishing that there was another Share Trend program different from Exhibit 5. However that was put out of the question by his own witness, Mr Muggeridge, who installed another copy (Exhibit 6D) and at Mr Szatmary's request was able to instal eight catalogue files from this Share
Trend program into XS401 (Exhibit 4). On later questioning Mr Muggeridge agreed that this would not have been possible unless the two operating systems of the executables were virtually identical. Were that not sufficient evidence that Exhibit 6 (in its various incarnations) and Exhibit 5 were substantially the same, he also later added that the file sizes in Exhibit 5 were the same as those in the Share Trend program that Mr Szatmary had produced to him as current when he devised the installation program.
I therefore conclude that Exhibit 6 is substantially the same as Exhibit 4 and Exhibit 5.
The Author and Owner of the Program
One of the factors strongly indicative of authorship is the retention of a source code which can be shown to create an executable (which is to say a program file which can be used). Whilst copies can be made from executables themselves, it is only the source code which can alter the program. The source code cannot readily be obtained from the executable, unless one is a specialist in "reverse engineering", as it was referred to, this process being complex and extremely time-consuming. The only way, as I understand it, of determining if something is the source code for a program is to create an executable from it. At the commencement of the hearing each party tendered what was said to be the source code for the program. The code produced and identified by Mr French as written by him was checked by Dr Sugden in evidence. He was able to generate an executable from it of similar size and appearance to XS401, the applicant's program. Mr Szatmary later however pointed out that Dr Sugden had not gone further
and actually operated the program, although he did not explain what he expected to find from this exercise. As I have said, it was an unfortunate feature of the hearing that Mr Szatmary often raised matters which had not been put to Dr Sugden or the other witnesses for comment. Whilst a person without legal representation, he struck me as a shrewd man and one likely to appreciate, as was explained to him, the need to give opportunity for comment if there was a matter arising which he considered of importance. If he had considered anything could be gained from running the program, he could easily have asked Dr Sugden to do so since he knew the password. Indeed it was readily available in the Court since it was written on the disk, Exhibit 4. It is not readily apparent to me how Dr Sugden came to the view he expressed, that the executable was of similar size and appearance, since the matter was not gone into. After undertaking various procedures with the same code he was presented with an opening screen and a request for the password, beyond which he did not proceed. It may be however that when he copied the files onto the hard disk and expanded them, and before he used the compiler to generate the complete source code and the executable program, that he made the observations necessary to found the opinion. There are, in any event, other bases for concluding that Mr French was the author of the program.
Mr Szatmary also produced what was said to be a "source code" in response to a notice to produce. It later however appeared to be only the installation program for Exhibit 6 and I was left to wonder why Mr Szatmary had so clearly relied upon it as a source code for his program when he obviously knew it was not. The balance of Mr
Szatmary's case relied principally upon attacks upon Mr French's understanding of his own program.
Mr French had said in his earlier affidavit that he thought the program would operate only when the HIST.CAT file was present and that it would not work without the Borlands Graphic Driver. In his later evidence Mr French conceded that the former file might be deleted without effect, as apparently it can. Dr Sugden was able to operate the program apparently without the graphics driver file. Mr French said however that he could not recall all of the details of the program, written in mid to late 1994, and it seems to me that that is a plausible explanation, although it would seem he had not taken the trouble to familiarise himself with it again prior to giving evidence. I do not think that affects his credit. The fact that Mr Szatmary appears to now know more of its operation is indicative only that he has become familiar with the program.
Mr French was also alleged to have falsely claimed as "personal signatures" the command to provide no border ("no frame") and the denotation of ".CAT" for file extensions. What Mr Szatmary seemed to be at pains to show was that removing "no frame" as an instruction did not affect the ability of the program to put a border around a report. However I did not understand Mr French to say that it would. With respect to the ".CAT" files, Mr French said that ".CAT" was short for "Cactus" from which I infer he believed he was the only one who attributed those letters to his data files. He denied, and no one otherwise proved, that TAFE Colleges instruct in the use of those letters for such files although they might with respect to catalogues.
Mr Szatmary also submitted that Mr French did not know how many lines of code were in the program and says that Mr French testified on three different occasions to three different amounts of lines of codes. The submission however was not one which does Mr Szatmary credit. It is apt to mislead. The witness did not, when referring to the differing numbers of 150,000, 18,000 and 20,000, speak always of lines of code or lines of code in the program itself. He spoke at different points of the number of bytes, the lines of code in the source code and in the executable programs.
The program said to be written by Mr French was DOS based and not Windows based and Mr Szatmary sought to make the point that it is then more likely to have been an older program, as was the one purchased by him, rather than one written in 1994. However it seems to me that the choice made by Mr French was explicable upon the basis that the program needed to be suitable to as many machines as possible and it was perceived that many clients would have older machines. On the other hand it is worth observing that Share Trend's program contains data current to April 1994, months after Mr Szatmary is said to have purchased it and absent explanation as to how it came to be in that state.
Mr Szatmary made an oblique reference to being the only person who has the "full mathematical formulae" which allows the program to work. I did not understand this submission and there was no evidence upon it.
Mr French had said that the XS401 had the capacity to allow for Australian Government taxes on shares by which it later appeared he was referring to a calculation of stamp duty on transactions. It was not clear after cross-examination of him whether the program did include this feature or whether it had once been the case but there had been a change to the program. All that one could say after cross-examination was that he was uncertain about it.
Mr Szatmary also placed reliance upon an inconsistency said to arise in the evidence of Mr French who, when asked if he could open up an XS401 executable file with an assembler, answered in the affirmative but later said that he could not do so with a Share Trend executable file. I am not sure what other inference is said to arise other than an unexplained inconsistency, and I confess to some difficulty with this passage of the evidence. However it seems to me that it is most likely that, at this point, Mr Szatmary and the witness were at cross purposes. The answer appears in a longer passage of evidence when Mr French was attempting to explain that the executable created from the source code is in machine language, a language different from that in which the source code is written, Pascal. From this I infer that when an executable is created from the source code, it undergoes a process whereby it is written in different language. The process cannot be reversed however so that one can extract the source code from the executable for the very reason that it is written in a different language. So, when Mr French is saying that he cannot "open up", which is to say obtain a source code from the Share Trend executable file, he is saying that is because it is in a different language.
It is necessary for me to say something of the credit of Mr French on the one hand and Mr Szatmary on the other. I found no objective indication that Mr French deliberately misrepresented any feature and in the respects in which he was in error matters were either minor or explicable. His account of how the program came to be compiled by him is credible. The same cannot however be said for that put forward by Mr Szatmary. There were other factors which influenced the view I arrived at, that truth and accuracy were not present in much of what Mr Szatmary said. Whilst conscious of difficulties unrepresented persons have in the Court I came to the firm conclusion that his purpose in the proceedings was to create as much confusion as possible in the hope of deriving if not a victory, at least a defence and some delay out of it. I arrived at this conclusion partly because of what seemed to me to be an incredible story put forward by him concerning the acquisition of the program which no witness was called to support. His own solicitors, in their letter to him of 4 December 1994 which was tendered by Mr Szatmary for other purposes, advised him of the need to obtain their evidence. During the hearing I alerted Mr Szatmary to the inference which might be sought to be drawn against him if he did not produce at least statements from them, although this would, I consider have been apparent to him by what his solicitors had told him. His solicitors had only recently withdrawn and I infer that no statements had up to that time been obtained. Further opportunity was extended to Mr Szatmary in the short adjournment necessitated by the prolongation of the case and I did not consider any further adjournment when he said he had just contacted one, unnamed party because I did not believe that was likely the case. I do not accept that he could not have obtained something from a witness if it had been available.
My view of the unreliability of his evidence is confirmed by the number of matters raised by him in the proceedings which after considerable delay and confusion were found to have no substance. The "source code" produced by him is one good example and the disk produced as Exhibit 6 is another. His belated attacks upon Dr Sugden's report in the first place long after his report was available and then after his evidence, provides yet another.
Conclusion
I accept that Mr French was the author of the program in question and that the program marketed by Share Trend Software Pty Ltd is a copy of it.
With respect to the question posed for determination, which must now read "Who of the applicant, the first respondent or the second respondent, is the owner of copyright in the computer program marketed as XS401?" I would answer "the applicant" subject however to clarification of the basis upon which it contends for subsistence of copyright.
Consequent upon my finding of infringement, in the event that copyright is established, I would make some further orders sought by the applicant namely:
That the first and second respondents, by themselves, their servants or agents, be restrained from publishing, dealing with, copying, marketing, selling and/or distributing the Share Trend or Share Trend-V2 computer program;
that the proceedings stand adjourned for an assessment of damages and/or an account of profit;
that the first and second respondents provide discovery with respect to that issue within twenty eight days;
that within a further period of twenty eight days the applicant files particulars of its claim for loss and damages and/or for an account of profits;
that within a further period of twenty eight days the respondent file and serve their defence to that claim.
Counsel for the applicant also sought an order that costs of two days of the hearing be taxed on an indemnity or solicitor and client basis because much of that hearing time was spent upon the issues raised for the first time by Mr Szatmary, in conflict with the earlier representations of his legal advisors and which in the end result appeared to be entirely without merit on the evidence of his own witness. I shall hear further argument upon it.
I certify that this and the preceding eighteen pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel.
Associate
Date:11 April 1996
Counsel for the applicant: Mr B Kinsella
Solicitors for the applicant: Telford Gibbs & Co
Counsel for the first and second
respondents:In Person
Date of Hearing: 4-6, 12 March 1996
Place of Hearing: Brisbane
Place of Judgment Canberra
Date of Judgment: 11 April 1996
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