Legal Updates - Software Copyright Infringement

Copyright Infringement - Intellectual Property – Copyright – Lloyds TSB Insurance v Shanley

In the case of Lloyds TSB Insurance Services Ltd and another v Shanley, Lloyds TSB Insurance
brought proceedings against Shanley for copyright infringement. Shanley won his case despite the appeal by Halifax and Lloyds TSB Insurance to the Court of Appeal.

Background

In 2006, Shanley created a computerised claims management system for repairing properties, which incorporated and used a scoping tool. He is a building contractor and software developer.
In September 2006, Shanley agreed with Halifax to re-write the Halifax scoping tool using the proprietary software of Shanley to build and deliver the scoping tool. It was further agreed that Shanley would not charge Halifax for testing and evaluation.
In March 2007, a pilot scoping tool was delivered to all contractors of Halifax. The tool was improved and by May 2008 the updated tool was delivered to all contractors of Halifax.
When Lloyds TSB Insurance took over Halifax, Lloyds TSB Insurance started using the pilot scoping tool. It was not until there was an audit meeting in June 2011 that Shanley discovered that Lloyds was using the pilot scoping tool without permission. In October, Shanley complained to Halifax that Lloyds TSB Insurance were using the pilot scoping tool without his permission.
In November, Shanley sent a letter before action to Halifax and Lloyds TSB Insurance, claiming that there was an oral licence with Halifax for the use of the pilot scoping tool by Halifax, which had expired in November 2006 and they had infringed the copyright in the pilot scoping tool by continuing to use it.
In March 2012, Shanley issued proceedings.
In January 2013, Shanley contended during the hearing that in September 2006, an oral agreement had been entered into with Halifax to use the pilot scoping tool for the purposes of testing and evaluation only. Any further use would amount to use for its business purposes in which case the parties would negotiate terms for such use in good faith.
Halifax and Lloyds TSB Insurance argued that Lloyds had an implied licence to use the scoping tool.

Decision

In February 2013, the judge held:

That the claimant had granted the pilot scoping tool to Halifax and the licence was personal to Halifax and there was no reason to suppose that he had granted any wider consent.
That Halifax had infringed Shanley's copyright and had misused his confidential information by using, in the course of its business, the scoping tool.
Lloyds TSB Insurance had infringed Shanley's copyright and had acted in breach of its duty of confidence to him by supplying the scoping tool to Lloyds. The Halifax and Lloyds TSB Insurance appealed.

Appeal

The court of appeal had to determine:

Whether it was correct for the judge to direct that the onus was on Shanley to prove that the acts of which he complained had not been licensed;
Whether the judge had erred in his approach to the claimant's persistent falsehoods, including that his second case had been a complete fabrication and that Halifax's purported signature on an agreement had been a forgery; and
Whether the judge had erred in finding the date of Shanley 's knowledge of Lloyds TSB Insurance’s use of the pilot scoping tool.

The appeal was dismissed. The court ruled that Shanley had licensed Halifax to use the tool that Shanley had developed, but no wider consent had been given. Halifax and Lloyds TSB Insurance appealed to the Court of Appeal.

The Court of Appeal, Civil Division dismissed the appeal and held that:

Shanley's lies had been fatal to his claim in respect of the activities of Lloyds TSB Insurance, but not Halifax.
Shanley had not misdirected himself in law and had arrived at conclusions which had been open to him on the evidence.
The burden of proof rest with Shanley to establish his claim which necessarily involved, establishing that Lloyds TSB Insurance had used his copyright materials and that such use had taken place without his consent.
The judge knew that Shanley had lied and had done so persistently which rendered his oral evidence wholly unreliable and the judge had quite rightly not placed any weight upon this evidence.
The judge had been perfectly entitled to adopt the approach he did and to reach the conclusion that he did.
He was not bound to infer from the Shanley's falsehoods that Lloyds TSB Insurance had an implied licence.
On the facts, the judge had a proper evidential basis for ruling that Shanley had not known about the use of the scoping tool by Lloyds TSB Insurance until after the audit meeting.

For any advice on intellectual property matters including copyright infringement, you may contact us by email [email protected]. Visit http://www.rtcoopers.com/practice_intellectualproperty.php.

© RT COOPERS, 2014. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.