Copyright issues

The work of many of ITIC’s members, particularly those involved in design, such as naval architects, involves intellectual property rights and obligations. Obviously, members cannot deliberately infringe the copyright, patent or design rights of others but if they do so inadvertently while performing their insured services they would be covered by ITIC. The following scenarios are examples of claims that the Club has dealt with:

1. The member was a marine software provider to the shipmanagement industry. It formed a joint venture with another company to sell individually developed software to companies in the marine sector. The arrangement came to an end in 2003.

Subsequently, the member developed and marketed its own fleet maintenance software package, which was sold as a “software suite” to the shipping industry.

In March 2005, lawyers appointed by the former joint venture partner wrote to the member alleging that programming lines used within the new product infringed the ex-partner's copyright material. The ex-partner issued a writ demanding an injunction preventing the member from selling further copies of their new product and giving up all existing copies of the new product and written material relating to it. In addition the ex-partner claimed damages, interest and costs. The member instructed lawyers to defend their interests.

The dispute involved a highly technical comparison of the underlying programming code. It was agreed that it would be appropriate for the matter to be referred to a recognised expert in the field. The expert produced a report stating that, in its opinion, the member's product had infringed the ex-partner’s copyright by using some lines of computer code from the ex-partner's software from the time of their cooperation. Although the expert's report was not binding it was clearly likely to be accepted by the court. The copyright infringement was inadvertent but it was likely that the member would have a legal liability.

In the circumstances the lawyers negotiated a settlement. This involved the payment of USD 250,000 in damages. In addition the Member was responsible for legal fees, including those of the expert, and the claim therefore amounted to US$305,000, which was paid by ITIC.

2. A surveying company recruited a senior staff member from a rival who brought a major client to his new firm. The surveyor used an existing reporting format. Shortly after the surveyor started his new job his employers received a threat of an injunction and a claim for damages from the rival firm. The rival firm alleged that they had developed the reporting format and owned the copyright. The surveyor was advised that there was an argument that the client, and not the rival firm, owned the copyright. The surveyors did not wish to become involved in a protracted legal dispute. They therefore designed a new reporting format to match the client's requirements and gave a formal undertaking not to use the previous format. A small contribution to the rival's legal costs was made by way of settlement.

3. Many firms of shipbrokers publish reference works for sale to their clients and others. One shipbroker member recently received a letter from lawyers representing one of their clients. The letter stated that the client was involved in arbitration and part of their argument before the arbitration panel referred to the contents of the shipbroker’s reference book. They had been very surprised to receive a request from the opponents that they photocopied the entire reference work (at least 850 pages). The request was not simply for a single copy for the opponents but also one for each of the three man arbitration panel. The lawyers noted however that at the beginning of the reference word there was a notice forbidding its photocopying. In the circumstances they stated that they would like permission to make the photocopies. They also pointed out that their opponents had alleged that under copyright legislation it was not a breach of copyright if the materials copied were for the purposes of legal proceedings. The member felt that it was totally unreasonable that the lawyers, who presumably were invoicing huge legal fees, were not prepared to pay for a few copies of a reference work. ITIC drafted a letter that was placed before the arbitration panel objecting to the wholesale photocopying of the reference work and asking for the identity of the opponent’s lawyers to be provided. Ultimately the opponent’s lawyers decided that it would be better to purchase copies.