IP rights in XML formats and schemas and guidance on awarding additional damages (Software Solutions v 365 Health and Wellbeing)- LexisNexis

17 / 02 / 2021

IP analysis: The Intellectual Property Enterprise Court (IPEC) has handed down a judgment on litigation over a suite of computer software involving mental health self-help tools. At issue were not only the ownership of the software, but also a series of allegations of copyright and database right infringement. The ruling casts further light on the extent to which intellectual property rights can be protected in the context of extensible mark-up language (XML) formats and schemas. It also contains valuable guidance on the factors to be assessed by the court when presented with a claim for additional damages for copyright infringement, together with a ‘cautionary tale’ on the need for precise drafting when excluding retained rights from the scope of IP assignments. Written by Dr Jonathan Cornthwaite, solicitor, consultant at Wedlake Bell LLP, and a member of the University of Bournemouth’s Department of Law.

What are the practical implications of this case?
For lawyers tasked with advising on software the ruling is an important one for a number of reasons, including in particular its analysis of copyright and database right in the XML context—it demonstrates that though XML schemas may attract literary copyright, they will fall outside the definition of ‘database’ in the Copyright and Rights in Databases Regulations 1997 (the Database Regulations) unless they can be shown to be a ‘collection of independent data’.

The ruling also gives valuable teaching on how courts will assess a claim for additional damages for copyright infringement under section 97(2) of the Copyright, Designs and Patents Act 1988 and under Regulation 3 of the Intellectual Property (Enforcement, etc) Regulations 2006 (SI 2006/1028) which transposes Article 13 of the Enforcement Directive, including a helpful ‘cut out and keep’ list of seven principles applicable to such a claim under section 97(2)—for example, two allegations against the defendants, 365 Health and Wellbeing Ltd and another (365 Health), of flagrant infringement were upheld by the court even though 365 Health’s conduct had been merely reckless rather than deliberate.

A ‘masterclass on drafting’ is also provided by the judgment: having found that (in its own words) ‘something had gone wrong with the language’ of the instrument on which the copyright case of the claimants—Software Solutions and others (Software Solutions), rested, the court sided with Software Solutions’ interpretation only after having construed the relevant clauses at length. This underscores the crucial lesson that, when drafting an IP assignment from which the assignor wishes to carve out retained rights, imprecision can be fatal.

What was the background?

This was a trial before the IPEC.

Software Solutions asserted ownership of the IP rights in a computer application development framework known as the ‘Integrated Development Environment for Applications’ (IDEA System). At its heart lay a suite of authoring software, allowing the author-user creating an application to define its ‘frames’ and ‘trees’ and make XML files conforming to the data formats developed as part of the IDEA System, and referred to in the pleadings and the evidence collectively as the ‘XML Schema’. Software
Solutions alleged infringement of these IP rights by marketing an application called Beating the Blues (BTB), a mental health self-help tool which provides end-users with a clinical programme aimed at treating depression by means of a series of eight self-guided sessions.

The complexity of the case was mitigated by the fact that, by the time it came to trial, most of the issues in suit had been conceded by 365 Health during the course of its four-year litigation. But thorny questions remained for the court to decide, including whether the claimants owned the rights in the XML Schema, whether database right was capable of subsisting in it, and whether the claimants were in principle entitled to additional damages for copyright infringement.

What did the court decide?
Software Solutions failed at trial to establish that the XML Schema was a ‘database’ as defined in the Databases Regulations, for the court doubted that it cleared the first hurdle of the definition in Regulation 3A, which requires a database to be ‘a collection of independent works, data or other
material’. The court held that:

‘the XML Schema provides a structure or framework for arranging independent data in a systematic or methodical way which are then individually accessible by electronic means, but it is not clear to me that it is itself a collection of independent data so arranged. I remind myself that ‘independent’ data are data which are ‘separable from one another without their informative, literary […] or other value being affected.’

The question appears to be whether they have autonomous informative value […]. The claimants in this case have not drawn my attention to any evidence which can satisfy me that the various elements making up the XML Schema have autonomous informative value. Much as the individual words in a literary work cannot be separated without losing their literary value (per [29] of Fixtures), it seems to me (in the absence of any submissions otherwise) that the individual categories of what elements, attributes and data are validly contained in the XML Schema cannot be separated without losing the informative value of the rules as a whole’ (at para [136]).

Fortunately for Software Solutions, their case was grounded on two separate IP rights. Though they lost on database right, they won on copyright. The court found that the first claimant owned the rights to the XML Schema, which (by reference to a pre-trial admission) meant that the copyright in the XML Schema had been infringed by 365 Health’s exploitation of BTB. Furthermore, the court ruled that those infringements had, by virtue of 365 Health’s reckless disinclination to investigate Software
Solutions’ allegations of infringement sufficiently, been flagrant, having both caused distress to two of the claimants, and allowed benefit to accrue to 365 Health. In arriving at this finding, the court considered a summary of the principles applicable to a claim under section 97(2) (at para [141]) as
follows:

  • the award is discretionary, and there must normally be some special circumstances to justify them, such as profit: Pro Sieben Media AG v Carlton UK Television Ltd [1998] FSR 43 at para [61] (Mr Justice Laddie)
  • flagrancy normally involves a calculated infringement. It need not be dishonest, but should be outside the norm: Ravenscroft v Herbert [1980] RPC 193 at 206, and New English Library Ltd [1980] RPC 192 at para [206] (Mr Justice Brightman)
  • for this purpose, the infringement can either be reckless or deliberate, and a ‘couldn’t care less’ attitude will suffice: Nottinghamshire Healthcare National Service Trust v News Group Newspapers Ltd [2002] RPC 49, at paras [52] and [54] (Mr Justice Pumfrey)
  • given the breadth of the discretion, all the circumstances should be considered: the court is also permitted to take into account other factors, such as injury to pride and dignity, distress, etc: Nottinghamshire v NGN at para [33]
  • where the defendant has been pursuing a profit, additional damages can take account of any benefit by the defendant: Nottinghamshire v NGN
  • another relevant factor is whether a defendant has attempted to destroy evidence of infringement: Nottinghamshire v NGN
  • also relevant are any attempts by the defendant to conceal the infringement through disingenuous correspondence: Peninsular Business Services Ltd v Citation plc [2004] FSR 17

In determining the benefit accrued to 365 Health the court stated—‘I accept that I cannot make specific findings about the quantum of any benefit the defendants may have accrued from the infringement, but I do not need to. What I must do is decide whether on the balance of probabilities on the evidence before me the defendants have accrued any benefit from the infringement. I accept the claimants’ submissions and I find that they have, as I am satisfied that it is more likely than not that the first defendant would not have exploited BTB v5, a stable and existing albeit aging product with an existing customer base, for at least four years if it did not gain any benefit in doing so’ (at para [176]).

In summary, the court found that Software Solutions was entitled to an award of additional damages, though determining quantum fell beyond the jurisdiction of a court tasked (as in this judgment) with ruling on liability alone.

Case details
• Court: The Intellectual Property Enterprise Court
• Judge: HHJ Melissa Clarke sitting as a Judge of the High Court
• Date of judgment: 9 February 2021

This analysis was first published on Lexis®PSL on 16/02/2021 and can be found here (subscription required)