Thursday Law Report: `Spare parts' defence was not available

1 July 1999

Mars UK Ltd v Teknowledge Ltd

Chancery Division (Mr Justice Jacob) 11 June 1999

IN A claim of infringement of copyright in computer programs or databases, there was no common law "spare parts" defence available. De-encryption of encrypted information in a product available on the market did not amount to a breach of confidence.

The court rejected Teknowledge Ltd's "spare parts" defence in an action for infringement of copyright brought against it by Mars (UK) Ltd, but held that it was not liable for breach of confidence.

The claimant was a leader in the design and manufacture of coin receiving and changing mechanisms, which included discriminators whose function was to determine the authenticity and denomination of a coin fed into the machine. The claimant had designed a new discriminator called the Cashflow, and wished for commercial reasons to reserve to itself and its approved agents the re- calibration of Cashflow machines to take new kinds of coin or new variants of existing coins. It had therefore developed a data layout, a serial communications protocol and an encryption system.

The defendant had succeeded in reverse engineering the Cashflow, and the claimant commenced proceedings against it claiming, inter alia, infringement of copyright and database right, and breach of confidence in relation to the encryption system. The defendant admitted acts which would amount to infringement, but, in relation to the copyright and data claims, put forward a common law "right to repair" or "spare parts" defence, and denied breach of confidence as a matter of law rather than fact.

Michael Silverleaf QC and Richard Arnold (Clifford Chance) for the claimant; Mark Vanhegan (Blakesley Rice MacDonald) for the defendant.

Mr Justice Jacob said that section 19(9) of the Copyright Designs and Patents Act 1988 had the effect of retaining the common law "right to repair" or "spare parts" defence with respect to industrial designs, but not in relation to computer programs and database rights. The code in relation to computer programs was contained in section 50A-C of the Act, inserted by by the Copyright (Computer Programs) Regulations 1992 to implement Council Directive on the Legal Protection of Computer Programs (91/250/EEC), and nothing in either the Directive or the Act provided for any "repair" or update exception.

In relation to the database right added to the Act pursuant to the Directive on the Legal Protection of Databases (96/9/EC), although the Directive itself admitted of a defence "where other exceptions to copyright which are traditionally authorised under national law are involved", that provision was an option for member states to adopt by way of limitation of database rights, and section 173(2) of the Act could not be regarded as adopting such an option. There was, accordingly, no "spare parts" or analogous defence in relation to the rights relied upon in the present case and, in any event, the defendant's re-calibration activities would not have come within the scope of such a defence.

The "spare parts" exception was founded on public policy, and there was no overwhelming public policy reason entitling those who purchased machines with discriminators to use the claimants' copyright and database rights to convert those machines for new coins.

In order to establish a breach of confidence the information itself had to have the necessary quality of confidence about it, and had to have been imparted in circumstances importing an obligation of confidence. In the present case, the encrypted information in the Cashflow did not have the necessary quality of confidence, since anyone could buy the Cashflow, and anyone with the skills to de-encrypt had access to the information.

Furthermore, the encrypted information had not been imparted in circumstances importing an obligation of confidence. The mere fact of encryption did not make the encrypted information confidential, nor should anyone who de-encrypted something which was in code necessarily be taken to be receiving information in confidence.