Hard Stance On Software Infringement

SAP (M) Sdn Bhd & Anor v I World HRM Net Sdn Bhd & Anor [2006] 2 MLJ 678.

 

 

INTRODUCTION.

The above decision by the High Court (“HC”) concerned an application for an Interlocutory Injunction to prevent infringement of copyright in the well-known SAP business application software programme and breach of a License Agreement relating to the said software.

 

 

FACTS

The second  plaintiff (“SAP AG”) was the owner of the copyright in a business application software programme known as SAP R/3 software and the 1st Plaintiff was their exclusive distributor in Malaysia. The first plaintiff had entered into an individual end user license agreement with the Defendant (“the License Agreement”).

 

The plaintiffs brought an action against the defendants (I World HRM Net Sdn Bhd and I World Sdn Bhd) alleging that the defendants had breached the License Agreement by distributing the SAP R/3 software to third parties and extended its use beyond the extent permitted by the License Agreement and infringed the copyright in the SAP R/3 software by communicating the software to third parties without the Plaintiffs’ consent.

 

The plaintiffs also applied for an interim injunction to restrain the defendants from using the plaintiffs’ software and to stop the defendants from infringing the plaintiffs’ copyright in the software.

 

 

DECISION

The H.C found that the Plaintiffs had fulfilled the requirements for obtaining an interlocutory injunction namely that :

 

  1. (i) there were serious questions to be tried;
  2. (ii) the balance of convenience favoured the Plaintiffs; and
  3. (iii) monetary compensation was not an adequate remedy.

 

 

The interlocutory injunction was granted as the Court was of the view that based on the facts of the case, the plaintiffs had made out a plausible case that the defendants had infringed the plaintiffs copyright in the SAP R/3 software by producing and downloading the software on to computers/servers of third parties without permission and this raised a serious issue to be tried.

 

The H.C was satisfied that the balance of convenience favored   the plaintiffs for two reasons. Firstly , the defendants were allowed to continue distributing the plaintiffs’ SAP R/3 software to third parties by way of licensing without the plaintiffs’ permission, such third parties would suffer a disruption of services in the event that the plaintiffs succeeded at trial. This would in turn result in customers losing confidence in the plaintiffs software.  Secondly, the uncontrolled licensing of the software would irreparably destroy the value of the copyright in the software and such loss cannot be remedied by monetary compensation.

 

During the course of proceedings, the defendants had also made an application to cross examine the deponents of the affidavits in support of the plaintiffs’ application for interlocutory injunction.

 

The application was dismissed on the ground that at the stage of an application for interim injunction the court is only required to determine whether there is a serious issue to be tried  and not to make a decision on the merits of the entire case. Besides, such application would merely delay the plaintiffs application for interim injunction.

 

 

IMPLICATIONS OF THE DECISION

The court placed great importance on the need for prompt determination of the application for interim injunction and refused to assist endeavors to delay the swift outcome of the matter.

 

Although this decision merely concerns an application for interim injunction, it raises some interesting issues. Firstly, that the court recognized that downloading software on to computers /servers of third parties could amount to reproduction of the software and therefore regarded as an infringement of the copyright in the software. Secondly, the court acknowledged that the uncontrolled licensing of software without the copyright owners’ permission would destroy the value  of the copyright in the software which was considered to be irreparable damage which could not be remedied by monetary compensation. Most importantly, this decision signifies that the court recognized the need for a swift resolution in cases of copyright infringement and deprecated vexatious applications designed to unreasonably delay the fair and speedy determination of the matter.

 

 

LEELA BASKAREN ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

 
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