Diyora & Bhanderi v Sarine Technologies: The Indian Supreme Court on Software Copyright

If copyright attaches to a work upon creation, what is the value in registering a copyright?

There are several ways to slice this question but, earlier today, the Indian Supreme Court offered an interesting spin on it in Diyora and Bhanderi Corporation v. Sarine Technologies.

A Breathless Run Through Lower Courts

A copyright infringement action over proprietary software under the Claimants’ ‘ADVISOR’ trademark triggered this dispute early last year before a district court in Surat, Gujarat.

A rare, lightning quick escalation through the appellate process took the claim through several judicial stages at a breathless pace. These included:

• Two opinions by the Gujarat High Court in June 2017 and July 2017;

• A September 2017 Surat order confirming an interim injunction for the Claimants;

• A December 2017 Gujarat High Court order setting aside the September injunction and remitting the case to Surat for fresh determination after appointing an expert to evaluate the parties’ software codes;

• A March 2018 Supreme Court order declining special leave to challenge the December order;

• A May 2018 order by Surat permitting the Defendants’ motion to restrict the Claimant from leading material other than its registered copyright to persuade the expert witness of the tenability of the infringement claim;

• A June 2018 Surat order seemingly running counter to its May order and expanding its scope to permit the Claimant to lead the additional material in support of its registered copyright; and

• A July 4, 2018 order by the Gujarat High Court rejecting the Defendants’ objections on a technicality.

Before the Supreme Court

Against the July 4 order, these Supreme Court petitions were filed on July 10, and first listed on July 12.

The Supreme Court confronted the issue four days later, together with a holdover order binding the parties to status quo. The July 16 order also directed that the expert in question — whose testimony had commenced — be compensated in the event a full judgment merited his dismissal. Parties were heard on July 24, ahead of judgment today. (On the issue of the appointment of the expert, the Court opts to overrule the Claimants’ objection to the expert on perceived bias. It rules, in broad terms, that the expert has requisite credentials to discharge duties, and that this predominates over affiliation biases.)

Principally, though, the Supreme Court is asked whether the basis of the comparison for determining copyright infringement needs to be constrained to a specific version (‘Version 6.0’) of the Claimants’ ADVISOR software since this is the only version protected under their Berne Copyright.

The Ruling

The Court agrees with the May 2018 Surat order and confirms the Defendants’ motion.

It reasons that though the Claimants’ action rests on registered copyright as well as common law rights, the prima facie case set up to secure the September 2017 interim injunction in Surat was supported by just the registered copyright. It observes, further, that the May 2018 order — which stopped the Claimants from relying on anything other than the comparison of the source code and object code in respect of the Claimants’ registered version of their software — was never actually challenged by the Claimants.

As such, says the Supreme Court, there was no occasion for the Surat Court to expand the scope of the earlier order. To do so without being prodded by the Claimants, therefore, was an error.

There are immediate objections to both planks of the Supreme Court’s reasoning.

On the first reason, it is clear that the comparison sought to be facilitated by the Defendants’ motion was for the purpose of a de novo consideration of the interim injunction. There is no reason why the prima facie case at the interim stage in the first hearing, which relied only on the iteration of the Claimants’ software under registration, should bind the Claimants in a de novo interim injunction hearing. A fuller examination of the issue would require the Claimants’ case to be judged on all material, anchored by its written claim and its motion for interim injunction. The Claimants’ written claim here, notably, does rely on registered copyright as well as proprietary common law rights.

On the second reason, the difficulty lies not so much in the Surat Court’s June order expanding the scope of its May order but on why the scope of the order was expanded. The June order is simply a reminder to the expert that he “may compare” the Defendants’ allegedly infringing software with the Claimants’ software “(all previous and existing), whether registered or otherwise”.

The Supreme Court does not make clear why the available material within the expert’s field of vision ought to have been tethered to a corresponding objection by the Claimants. If it was simply a revision or clarification of the May order, surely the Surat Court was within its rights to do so. If it was for a reason undisclosed in this decision, labelling it an “error” without discussion is unsatisfactory.

Any view setting these objections aside can only assert that the decision to revive the Surat Court’s original directions is a narrow but permissible one. Its consequences for similarly placed copyright infringement actions, however, could be far greater.

Potential Consequences: Procedural Changes and Reopening Copyright Under Statute

For one, the Supreme Court ruling offers ample room for copyright Defendants to insist that all such infringement inquiries, which are usually tied to a requirement of substantial similarity, must rely solely on the registered version of the Claimants’ copyright.

This, in turn, will likely have at least two major procedural consequences.

First, it hardly makes too fine a point to note that it is no accident that this ruling is the product of software copyrights. The industry it speaks to represents a furrow of innovation whose intellectual property protection options are already hamstrung by the “per se” prohibition that deeply laces the fabric of Section 3(k) of the Patents Act.

As such, it puts immense pressure on innovators and those advising them to broadly and exhaustively capture versions of software in copyright applications. This is no small burden since these applications, once crystallized into registrations, will invariably be pressed into service against Defendants’ use that might be far from foreseeable at the time of protecting the innovation.

Second, the Supreme Court’s decision to deploy the basis of the claim in an interim injunction motion to throttle the range of evidence-based claims that can be made as part of the same proceeding is intriguing. Whatever its motivation, given how front-loaded Indian copyright infringement litigation has proven to be, I suspect it will likely invite a trend of overbroad interim injunctions. At a minimum, it ought to encourage Claimants to frame interim injunction motions in such cases in more liberal language. It ought also to push such Claimants to ensure that all the bases of those claims are faithfully captured in interim injunction orders.

The other big-picture shift that could result from today’s decision is the reopening of the copyright under statute discussion. This long-running conversation is, of course, of particular interest in the case of in-between categories of innovation such as software, which escape neat classification under copyright law.

Relative to the Indian Copyright Act, the last significant step in this direction was a five-paragraph discussion by Mr Justice Endlaw’s September 2016 opinion in Rameshwari Photocopy Services. As I had noted at the time, Mr Justice Endlaw’s opinion was clear in its finding but hesitant in its construction on the point. It is this hesitation that could be settled going forward. The opportunity certainly exists now that the Supreme Court has offered space to invalidate software copyright claims that are not captured under registered copyright.

However, my sense is that, given the categories of software copyright cases that most frequently visit Indian courts, such actions will quicker revert to classic ‘copyright plus’ setups. (This would, for instance, cover more comprehensive copyright actions based on infringement of registered copyrights combined with common law-based breach of confidential information, breach of trust, and breach of trade secrets claims.)

It may still be possible to press copyright claims that rely on common law, either for infringement tests or for supporting material. These would, however, be heavily hemmed in by the limits of the Supreme Court’s observations here.

Nevertheless, to answer the question I opened with — one that has often been answered by a famously meaningless statutory salvo — the Indian Supreme Court has, at the very least, hammered home a rather useful lesson today: the existence, scope, and precision of a copyright registration can be vital.

Oh, and always, always claim all your reliefs in a motion for interim injunction.