On 2 May, the European Union's highest court, the Court of Justice of the European Union (ECJ) made a landmark judgment that the functionality of computer software cannot be protected by copyright. The judgment was made in the keenly awaited case of SAS Institute Inc v World Programming Ltd.

The ECJ also ruled, in that case, that programming languages and file formats cannot be protected by copyright as computer programs. They can, however, be protected as copyright works if they are shown to be their author's own "intellectual creation", the standard test for copyright works.

Key facts of the case

SAS Institute developed the SAS System, an integrated set of programmes that enables users to carry out data processing and statistical analysis. A core component of the SAS System, called Base SAS, enables users to write and run their own application programs on the SAS System using a programming language known as the SAS Language. Users of the SAS System had no option but to continue to license the SAS System in order run their existing SAS Language applications and to create new applications.

World Programming Limited (WPL) believed that there would be demand for alternative software capable of executing application programs written in the SAS Language. With this in mind they developed a product called the World Programming System. In order to develop this, WPL lawfully acquired licensed copies of the Learning Edition of the SAS System and studied the functionality of its programs. Critically, WPL did not have access to or copy the source code of the SAS System.

SAS brought an action in the English High Court claiming that WPL had infringed its copyright and the terms of the Learning Edition software licence. The High Court subsequently referred a number of questions to the ECJ concerning the scope of the legal protection conferred by EU law on computer programs and whether that protection extended to programming functionality, language and file formats.

ECJ judgment

The ECJ substantially followed the earlier Advocate General's Opinion on this case. In summary, the ECJ held as follows:

(1) The functionality of the computer program is not protected by copyright under the relevant EU Software Directive (91/250/EC). Copyright protection should be limited to the form of expression of that program, that is, its source code and object code. The ECJ noted that to accept that functionality of a computer program could be protected by copyright would amount to making it possible to monopolise ideas. That is not the purpose of copyright.

(2) A person who uses a computer program in accordance with the terms of its licence is entitled - without requiring the consent of the copyright owner - to observe, study or test the program functions to determine the underlying ideas and principles of that program. This right is provided under the Software Directive.

(3) The programming language and format of data files used in a computer program to exploit its function are not protected by copyright under the Software Directive. The Court held that this finding did not affect the possibility that the SAS language and the format of SAS's data files might be protected as copyright works under the EU Copyright Directive (2001/29/EC) if they are the author's own intellectual creation, the test for copyright works. The ECJ did not produce any guidance on whether or not the SAS language and the format of SAS's data files might constitute their author's own intellectual creation. This will be a matter for the High Court to decide.

(4) Computer manuals may be protected by copyright to the extent that they are an expression of the intellectual creation of the author. Keywords, syntax and commands are not, in isolation, capable of protection by copyright. However, their choice, sequence and combination might amount to an intellectual creation and so might be capable of protection by copyright. Again, this will be a matter for the High Court to decide.

Implications for the software industry

Although the ECJ ruling was not unexpected (as it followed the earlier Advocate General's opinion), it is disappointing for SAS and other established software licensors looking to protect the significant investment they make in developing their products.

Although computer programs are not capable of patent protection, as such, under the European Patent Convention, we would expect to see established licensors increasingly investigating patenting options for inventions behind their software products. We would also expect to see greater focus on the use of confidentiality obligations and the protection of know-how. Finally, we expect this to further increase the trend towards 'Software-as-a-Service' (SaaS) with software companies looking to generate more fees through service provision rather than the grant of licences.

For smaller software developers, the ECJ ruling is very welcome. Had the ECJ ruled differently, the ECJ could have risked stifling innovation and competition. With the current ruling, software developers' right to create lawful competitive computer programs is confirmed.

Belinda Doshi is a partner and Louisa Dixon is an associate in the IP/IT practice at Nabarro LLP.