Code Wars: Protecting Software from Copyright Infringement Battles

A recent landmark judgment – Emisha Software (Pty) Ltd v Servsol Software Solutions CC and Others (2023/069011) [2024] ZAGPPHC 615 – required the High Court of South Africa to deal with crucial aspects of copyright infringement in the context of software development. This case provides invaluable insights for businesses that engage external providers for programming and software development services. Understanding the intricacies of copyright ownership, the importance of clear agreements, and the principles guiding copyright infringement can help companies safeguard their intellectual property and avoid legal pitfalls.

The case involved Emisha Software, which developed the Insurance Guard System (IGS) computer program. Emisha alleged that Servsol Software Solutions and other respondents infringed its copyright by loading new clients into the program without Emisha’s consent. Emisha contended that it had exclusive ownership of the IGS program, having paid Servsol for the coding and development services.

The court had to determine whether Emisha had exclusive copyright ownership or if Servsol could claim co-ownership. The judgment hinged on the principles of copyright law, focusing on the concepts of originality and ownership.

Originality and ownership: The court reaffirmed that copyright protection extends to original works, including computer programs. The originality of the IGS program was attributed to Emisha, the first author. Despite Servsol’s role in coding, the overall function and design of the program were directed and controlled by Emisha. This distinction underscored that the developer (Servsol) did not automatically acquire ownership rights.

Exclusive rights: Emisha’s control over the creation and functionality of the IGS program established its exclusive rights to reproduce, adapt, and broadcast the software. The court emphasised that the person or entity exercising control over the making of a computer program is regarded as its author under the Copyright Act 98 of 1978.

The court granted an interdict, preventing Servsol from infringing Emisha’s copyright by accessing or using the IGS program without authorisation. However, the court dismissed the request for an audit of Servsol’s systems, finding it unnecessary and potentially intrusive. Emisha demonstrated the urgency of the matter by highlighting the short-lived value of software in the insurance industry and the potential loss of a significant deal with Hollard Insurance. The court recognised the urgency but clarified that urgency claims should not be self-created or exaggerated.

This matter underscores several critical considerations for businesses engaging external providers for software development:

1. Clear Service Level Agreements (SLAs): Always formalise relationships with detailed SLAs. These agreements should clearly outline the scope of work, payment terms, ownership of intellectual property, confidentiality obligations, and dispute resolution mechanisms. The absence of a formal agreement between Emisha and Servsol led to ambiguities regarding ownership.
2. Ownership and Rights Clauses: Ensure that contracts specify ownership of the developed software. Clearly state that the commissioning party (client) retains all rights to the software, including copyright, unless otherwise agreed upon. This clarity helps prevent disputes over co-ownership and unauthorised use.
3. Control and Direction: Maintain control over the project’s design and functionality. As demonstrated in this case, the party directing the development process and making key decisions is often regarded as the author and owner of the software. Regularly document instructions and approvals to establish a clear trail of control.
4. Confidentiality and Non-Compete Agreements: Include confidentiality and non-compete clauses in contracts with developers. These clauses can protect sensitive information and prevent developers from using or sharing the software with competitors or unauthorised parties.
5. Regular Audits and Monitoring: While the court dismissed Emisha’s request for an audit, regular monitoring and audits can help ensure compliance with contractual terms. Implementing access controls and monitoring usage can detect unauthorised activities early.
6. Dispute Resolution Mechanisms: Incorporate mediation and arbitration clauses to resolve disputes amicably. The court highlighted the potential of Rule 41A, which encourages mediation as a voluntary, non-binding process. Early mediation can prevent protracted litigation and preserve business relationships.
7. Understanding Legal Frameworks: Stay informed about the relevant legal frameworks governing copyright and intellectual property. Awareness of statutes like the Copyright Act 98 of 1978 and the principles outlined in case law can guide businesses in protecting their rights.

The Emisha Software v Servsol Software Solutions case serves as a crucial reminder of the complexities involved in software development and copyright ownership.

Businesses must take proactive steps to safeguard their intellectual property by establishing clear agreements, maintaining control over development processes, and understanding the legal protections available. By doing so, companies can mitigate risks, avoid disputes, and ensure the integrity of their software assets.

By Gaby Meintjes | Director