Softlanding Systems, Inc v KDP Software Ltd & Anor

Contractual obligations arising after expiry of a fixed-term commercial agreement must be identified from the parties’ conduct and commercial context. Continued performance may support implied terms, but it does not ordinarily imply perpetual maintenance obligations, continuing exclusivity, or transfer of valuable intellectual property. The court should imply only terms necessary for business efficacy and commercial coherence.

Where software licences include maintenance and disaster-recovery rights, those rights may involve authorisation to reproduce the software. Under Copyright Designs and Patents Act 1988, s 16(2), authorisation of an infringing act may itself constitute infringement, even where the authorisation is given outside the United Kingdom.

SoftLanding claimed damages, declarations and delivery of source code from KDP in relation to the SET/TURN and DOCUMENTOR software products. It contended that a 1995 distributor agreement, which expired in 1998, continued to govern the parties’ relationship and required continuing technical support, source-code access and, in some circumstances, transfer of ownership.

KDP denied those contentions and counterclaimed for unpaid royalties, copyright infringement and injunctive and declaratory relief. The court also considered SoftLanding’s application to maintain interim relief and KDP’s application to discharge the injunction because of material non-disclosure and misleading evidence.

1. Contractual construction. The 1995 agreements were construed in their commercial context, applying the principles stated by Lord Hoffmann in ICS Limited v West Bromwich BS [1998] 1 WLR 896. The agreements granted exclusive rights for three years and did not clearly impose perpetual obligations.
2. Post-expiry relationship. The parties’ continued dealings created implied terms governing the licences, royalties, reporting and maintenance. Those terms did not incorporate the original termination provisions or require KDP indefinitely to maintain, upgrade or rewrite the software. Routine technical support, bug fixing and compatibility with the original software and nominated hardware were required only for the relevant contractual and legacy maintenance periods. A reasonable six-month notice period was implied for termination of the continuing non-exclusive licensing arrangement.
3. Source code and ownership. There was no basis for implying a term requiring KDP to deliver the source code or transfer copyright when it declined to provide newer software versions. The court distinguished Harbinger (UK) Limited v GE Information Systems [2001] All ER (Comm) 166 because that agreement expressly provided for support in perpetuity, and distinguished Staffordshire Health Authority v Staffordshire Water Works Company [1978] 1 WLR 1387 on the contractual wording.
4. Copyright. SoftLanding and Unicom had granted licences and maintenance agreements outside the authority given by KDP. Maintenance included disaster-recovery authorisation to reproduce the software. Applying MCA v Charly Records [2000] EMLR 743, and the principles in ABKCO Music and Records Inc v Music Collection International [1995] RPC 657, authorisation was an infringement under s 16(2) even where given abroad for acts in the United Kingdom.
5. Interim injunction. The injunction was discharged under CPR r 3.1(7). The court had been materially misled about the parties’ arrangements, the 2007 assignment and the position of end users. The claim was dismissed. KDP was entitled to injunctions, declarations and damages, with quantum and costs to be assessed.

The judgment records an interim order made by Ramsey J on 19 December 2008 requiring KDP, subject to conditions, to provide temporary passwords and certain support. That injunction was continued until trial and was discharged by this judgment.