On 1 April 2020, the Supreme Court of Appeal (“SCA”) granted an appeal against an order of Acting Justice Kose in the Cape Town High Court in favour of The Agricultural Research Council (ARC) (Bergh and Others v The Agricultural Research Council (Case no 93/2019) [2020] ZASCA 30).

The appeal was against an order interdicting the appellants from infringing the ARC’s copyright in the BeefPro computer program and from unlawfully competing with the ARC.

At the heart of the matter was the question of which party owned the copyright in the BeefPro program.

The matter is yet another example of unsuccessful litigation being financed from public funds. It contains scathing comment on AJ Kose’s judgement and looks in some depth at the ownership of copyright in computer programs and specifically the concept of “control” as used in the Copyright Act 98 of 1978 (as amended) (the “Act”) to define authorship.

With the judgement issued on 1 April, the ARC – and AJ Kose – may have hoped that this was no more than an April fool’s joke. But when publicly financed institutions choose to pursue legal action against private sector companies – and individuals – it is no laughing matter.

The matter followed a rather unfortunate path to the SCA. The order of the High Court was issued close to two years after oral argument had been presented by the parties and, when granted, contained no reasons for the granting of the order. Repeated requests for reasons for the order were met with silence.

What appears to have transpired is that around 2005, the ARC approached one of the appellants, Mr Pauw, a software developer, to explore the possible development of a software program for beef cattle management. Mr Pauw was on the ARC’s radar as a software developer as it was aware of his work in having created a cattle management program for dairy farmers. It turned out, however, that the ARC was unable to finance the development of the required software. Nevertheless, Mr Pauw was willing to develop the software without payment, but on the condition that he would retain the copyright therein. In this way, the “risk of failure, in attempts to develop a viable program, considering the time and effort required, was entirely [Mr Pauw’s]. This was especially so since it was agreed that he would not be remunerated at all. The benefit for the ARC of such an arrangement was that the bureaucratic constraints of seeking approvals and acquiring funding did not apply.”

Mr Pauw explained how he went about developing what became known as the BeefPro program and stated that “the ARC had no interest in how he went about developing [it]”. Mr Pauw submitted that an oral agreement came into effect between him and the ARC around March 2005 and during October 2005 he received a draft written agreement from the ARC confirming that the copyright in the BeefPro program would be retained by his close corporation. Although Mr Pauw indicated that he accepted the material terms of the agreement, it was never signed.

During March 2007, another draft agreement was sent to Mr Pauw containing the same terms as the October 2005 draft agreement. Again, Mr Pauw indicated that he accepted the material terms of the agreement, but it was never signed. During 2009, the ARC wanted to renegotiate the agreement with Mr Pauw, but he was not interested. Mr Pauw submitted to the court that up to this point, the ARC had never laid claim to the ownership of the copyright in the BeefPro program.

Against the background of these facts, the question then is on what basis the ARC claimed to be the lawful owner of the copyright in the BeefPro program.

In terms of the Act, where a work is made in the course of the employment of the author of a work, the employer is the first owner of the copyright in such a work. On this basis, the ARC claimed that it was the owner of the copyright in the BeefPro program to the extent that one of the other appellants, Mr Bergh, who was an employee of the ARC, was an author of the program. However, the SCA found that “the problem is that it is clear that Mr Bergh did not develop the program. He was emphatic in his support of Mr Pauw’s assertion of how the latter had developed the program, based on his skill and experience”.

With respect to the concept of “control”, the Act provides that, subject to a few exceptions, the ownership of the copyright in a work vests in the author of the work. The author of a computer program is defined in the Act as the person who exercises control over the making of the computer program. The Act does not, however, provide any definition of the concept “control” and it was left to the SCA in the case of Haupt v Brewers Marketing Intelligence (Pty) Ltd [2006] SCA 39 (RSA) to give substance thereto. For those interested in the complexities of copyright law and the intrigues of doing business with family, this is a “must read”.

In the Haupt case, the SCA commented as follows on the control that Haupt exercised over the developer Coetzee, finding that Haupt was indeed the author of the relevant software: “In this case Haupt instructed Coetzee as to the end result that was to be achieved, Coetzee then did the technical work required to achieve that end result... However, Coetzee was all along in constant contact with Haupt and he accepted and executed detailed instructions from Haupt. As he progressed he submitted his work to Haupt for it to be checked and approved by him. In the properties section of the… program Coetzee indicated that the copyright was owned by Softcopy, the name under which Haupt was trading. The allegation by Haupt in his founding affidavit that it was always agreed between the parties that Haupt was the owner of the program was not disputed. This being the understanding between the parties, Haupt could at any time direct in which direction the development of the program should proceed or could terminate further development if he wished to do so. Haupt was, therefore, in a position of authority over Coetzee insofar as the development of the program was concerned. He was in command and Coetzee subjected himself to such command. It is true that Haupt was in no position to instruct Coetzee as to how, technically, to achieve his requirements but I agree with the High Court that one does not need to be a computer programmer to be able to control the writing of a computer program. For these reasons I am of the view that Haupt controlled the writing of the computer programs…”

Having considered the above passage from the Haupt case, the court found that the “principal actors in relation to the commissioning of BeefPro… provided first-hand evidence as to how it came about… They all stated that Mr Pauw had developed the program, working independently and bringing his own skills and experience to bear, only seeking certain information from the ARC in order to ensure that the program served its purpose. He did not follow instructions from, or work under the supervision of Mr Bergh, or anyone else at the ARC. As the independent developer of the program he did not have to obtain, on an ongoing basis, the approval of anyone at the ARC.”

The court then continued to differentiate the ARC’s case from the Haupt case, finding that the ARC did not exercise control over Mr Pauw:“Mr Pauw did not take detailed instructions from Mr Bergh or anyone else at the ARC. His work was not subject to checking and approval and he was not being paid for his efforts. The program reflected [Mr Pauw’s close corporation] as the copyright owner, in line with what was asserted by Mr Bergh, Mr Pauw and Dr Van der Westhuize. I agree… the mere provision of functional requirements and a periodic review of progress being made in the development of the program and testing it finally to see if it met its purpose, without more, does not establish control over the making of it or vest authorship therein.”

Referring to certain exchanges of emails between the ARC and Mr Pauw and the draft agreements exchanged between them, Navsa JA concluded in no uncertain terms that “If anything, the exchange of emails and the contents of the draft agreement prepared by the ARC… give a lie to the ARC’s contention that it is the owner of BeefPro. In light of what is set out above, it is clear that the ARC failed to discharge the onus in relation to its claim of copyright. It failed to show that in developing the program, Mr Pauw acted under its control.”

The judgement in this case confirms the substance given to the term “control” by the SCA in the Haupt case. It crystallises again the importance of understanding that the concept of “control” is determined based on an analysis of the facts in a software development arrangement. For those who want to ensure control over the work of a software developer, all the contractual poetry in the world creating measures of control will have little meaning if factual control is not exercised over a software developer. However, ensuring appropriate and clear contractual assignment provisions are included in agreements should prevent a situation where the question of control has to be analysed at all.

It would seem almost inappropriate not to come back to the order given in the High Court. In the words of Navsa JA: “… it cannot be emphasised enough that it is indeed deplorable that the litigants were made to wait for approximately two years for an order to issue, at which point no reasons were supplied and requests for reasons were met with no response… It is hoped that [the SCA] will in the future not have to deal with circumstances such as these.”

We, like Justice Navsa, can only hope that in the future, litigants are not left to the mercy of judgments that are unduly delayed and given with no reasons provided.

Waldo Steyn Executive IP [email protected] +27 82 382 6404