Copyright licence agreements – is the devil always in the definitions?

Linnea Harnesk

Rättsfall | Sverige | PMT 16282-20 | 1/21/2022

The idiom "the devil is in the detail" alludes to a hidden catch or mysterious element: something that might seem simple at first, but that takes more time and effort to complete than expected. Among lawyers, it is often said about agreements and contract law that "the devil is in the definition". This could be the catchphrase of a recent case from the Swedish Patent and Market Court(1) regarding the assessment relating to copyright licences for software in a public procurement.

Copyright licence agreements – is the devil always in the definitions?

The idiom "the devil is in the detail" alludes to a hidden catch or mysterious element: something that might seem simple at first, but that takes more time and effort to complete than expected. Among lawyers, it is often said about agreements and contract law that "the devil is in the definition". This could be the catchphrase of a recent case from the Swedish Patent and Market Court⁽¹⁾ regarding the assessment relating to copyright licences for software in a public procurement.

Facts

In 2015-2016, the Swedish Migration Office (SMO) conducted a public procurement regarding biometric and passport readers. A "biometric reader" is a device that can read and process biometric data, such as fingerprints. The SMO uses biometric readers to identify people and create documents that confirm people's identity. Biometric readers consist of equipment to detect biometric data and software that processes, refines and controls the quality of the data. The software is installed in the biometric readers and backup computers.

Company S entered into and won the bidding, and thus entered into the procurement and an agreement with the SMO. The agreement was in force between 2016 and 2019 with the possibility to enter into subsequent 12-month extensions. No explicit extension of the agreement was made, and the SMO was still using company S's biometric readers and backup computers after 2019.

The facts that the software was protected under copyright law and that company S had the sole rights thereto were undisputed. The case revolved around the agreement and what it entailed. The Swedish Patent and Market Court had to decide how to interpret the meaning of the definitions and the overall content of the agreement in order to answer whether the SMO had committed copyright infringement by continuing to use the biometric readers and backup PCs after the agreement had been terminated.

Decision

The Court framed the matter at issue as a case relating to the interpretation of a public procurement agreement with a copyright licence. First, the Court had to determine exactly what the agreement comprised. The Court found that the agreement clearly stipulated that the main agreement was the central one , should there be any disputes about the content and definitions. The annexes, procurement questionnaire and offer were to be considered as a part of the overall agreement and consequently included to the same extent.

In line with company S's first claim, the Court had to assess first-hand whether the agreement had been extended. If the agreement had been extended, company S would be entitled to royalties for the SMO's use of company S's biometric readers and backup computers after the end of the agreement.

The Court concluded that, first and foremost, it was the wording of the agreement that would determine whether an extension had been made. Interpretations of copyright agreements should be made with the "principle of specification" as a reference. This means that a lease shall never include more than what explicitly follows by the agreement and that unclear leases shall be interpreted restrictively and to the advantage of the copyright holder.

Due to the public procurement, the SMO was the party that had set out the outline and demands of the agreement. A common denominator between the parties' demands and requirements was therefore hard to determine. The parties were, however, in agreement that the hardware belonged to the SMO and that an extension of the agreement should have been made in writing. The parties were not in agreement about the terms and conditions pertaining to the perpetual use of the software that was set out in a part of the procurement questionnaire.

The clauses of the agreement that regulated intellectual property were in the main agreement, but the clause relating to the licence for and use of the software was in the procurement questionnaire. The SMO testified that it had wanted a specific wording relating to the licence and use of the software and that it had set out a special clause for a long-term use of the software in order to not be dependent on the renewal of licences. The procurement questionnaire stated that the SMO would be granted a "complete, perpetual licence regarding the software in the backup PC". The Court stated that the terms in the main agreement and in the procurement questionnaire were not in conflict; instead, they complemented each other. By confirming the part about the perpetual licence in the questionnaire, company S had agreed to this term as a part of the parties' overall agreement.

The Court could therefore not find that the SMO had been aware that company S had wanted a time-limited software licence, as this was not stipulated in the agreement.

The Court also assessed which software was covered by the agreement. The Court found that all software should be included, not just the software pertaining to the backup computers. This was because the backup computers mirrored the biometric readers and was to be considered one and the same.

Consequently, the Court found that the SMO had received a perpetual licence to all the software and that the SMO therefore did not have to extend the agreement to continue using the software legally. The SMO had not committed copyright infringement, and in any case, the agreement had not been extended.

Comment

This case is a reminder that parties should be careful when entering into an agreement where one part thereof contains definitions that are valid for the overall agreement. In this case, the definitions in the procurement questionnaire were to be considered as a complement to the main agreement as the main agreement had no definitions or wording pertaining to the licensing of the software but only a general clause regarding the intellectual property.

Endnotes

(1) PMT 16282-20

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