Starbuck v Patsystems (UK) Ltd

In construing a written contract, the court identifies the meaning a reasonable person with the parties’ relevant background knowledge would have understood the language to bear. Commercial common sense and surrounding circumstances cannot displace clear contractual language or be applied retrospectively. Subjective intentions and private understandings are irrelevant. Copyright in a computer program protects the author’s expression of intellectual creation, not its functionality or other unprotectable technical features. A claimant alleging infringement must prove reproduction of protected expression. Source-code evidence is not invariably essential, but the court will not infer infringement from speculation or evidence showing only the reproduction of ideas.

Mr Starbuck claimed copyright in version 3.1 of software known as NSA. Patsystems admitted infringement if Mr Starbuck owned the copyright, but relied on a 1999 assignment under which it said all versions of NSA had been transferred to it. Mr Starbuck contended that the assignment covered only earlier Pascal versions.

Patsystems counterclaimed that, if it owned the copyright, Mr Starbuck had infringed it by using NSA to create and use software known as ACE. The court therefore had to determine the scope of the assignment, the ownership of certain later modifications, and whether ACE reproduced protected expression from NSA version 3.1.

1. Assignment. The 1999 Assignment transferred copyright in all versions of NSA, including version 3.1. The definition of “Software” was general and referred to the NSA software by functionality rather than to particular versions. The parties knew before contracting that several versions existed, including version 3.1, and knew that version 3.1 had strategic importance.

2. The contractual interpretation approach in Arnold v Britton [2015] AC 1619 applied. Commercial common sense and surrounding circumstances could not undervalue the language used. Only facts existing when the contract was made and known or reasonably available to both parties could be considered. Subjective evidence of what the parties thought the assignment meant was irrelevant. The recitals, other documents and arguments based on the amount of consideration did not alter the natural meaning of the operative definition.

3. The evidence did not establish that Mr Starbuck owned copyright in the modifications made while he was employed by Patsystems. In any event, the pleaded issues meant that ownership of those modifications did not affect the outcome.

4. ACE counterclaim. Copyright protection concerned reproduction of “the expression of the intellectual creation” of the author, applying the guidance in SAS Institute v World Programming [2013] EWCA Civ 1482. Functionality, keywords, syntax, commands, options, defaults and iterations fell on the ideas side of the idea-expression distinction and were not protected.

5. The limited inspection evidence showed only apparently minor similarities in two programs and did not prove reproduction of protected expression. The absence of source code was not automatically determinative, since infringement could be proved by other evidence. However, the court would not speculate about similarities that could have been established by proper source-code comparison or expert evidence. Patsystems therefore failed to prove infringement.

6. Mr Starbuck’s claim failed because Patsystems owned the copyright in all versions of NSA under the 1999 Assignment. Patsystems’ counterclaim also failed.

First-instance decision. The judgment records no appeal or earlier merits decision.