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No implied copyright licence following takeover, rules Court of Appeal

Out-Law News | 15 Apr 2014 | 10:41 am | 2 min. read

A businessman who forged a document and lied about its authenticity has won a legal battle against a major financial institution over copyright.

The Court of Appeal in London ruled that Lloyds TSB Insurance Services (Lloyds) did not have an implied licence to use software that had been licensed to Halifax General Insurance Services (Halifax) and that the company had therefore infringed the rights holder's copyright. Lloyds bought Halifax in 2009.

Prior to the merger, businessman James Shanley had supplied software to Halifax for use in a pilot. The software helped in the scoping of property repairs at the instruction of building insurers. Shanley claimed that Halifax had infringed his copyright by using the software he supplied beyond the terms which he said had been agreed to by Halifax in a written, signed document.

However, Shanley subsequently admitted that he had forged the signature of a Halifax representative on the document and a High Court judge accepted Halifax's argument that it had a legitimate licence to use the software Shanley supplied.

The High Court judge, however, ruled that Lloyds could not rely on having an implied licence to use the software when it acquired Halifax and made use of Shanley's software. Lloyds therefore infringed Shanley's copyright by using his software without his permission, the High Court had ruled.

On appeal, Lloyds argued that the High Court had erred in the way it came to its judgment. In particular, the company argued that it should not have had to show that it held a licence to use the software in the same way as Halifax had. Instead, it argued that the burden should have been on Shanley to prove that it did not have a licence. However, the Court of Appeal dismissed Lloyds' argument.

"The [High Court] judge had nothing before him to explain how Lloyds came to have access to the scoping tool," Lord Justice Kitchin said in the Court of Appeal judgment. "It was, however, plain that it had not been supplied by Shanley. In those circumstances it was entirely natural for Lloyds and Halifax to conclude that they needed to advance the positive case to which I have referred and for the judge to explain ... the evidential burden would lie upon them to establish it."

Lloyds also claimed that the High Court had not properly considered Shanley's "persistent falsehoods" when forming its judgment. It argued that Shanley's document forgery and subsequent lying had shown that the businessman needed to "conceal the truth" to win the case. However, the Court of Appeal rejected Lloyds' claim that the High Court's approach was wrong.

"This is a most unusual case," Lord Justice Kitchin said. "Shanley has prevailed in his claims in respect of the use of the scoping tool by Lloyds despite his manifest and repeated dishonesty. But, as the [High Court] judge himself observed, the fact that a claimant tells lies does not necessarily lead to the conclusion that the whole of his case is without substance. That was the position here."

"Shanley's lies were fatal to his claim in respect of the activities of Halifax but not in respect of the activities of Lloyds. The judge did not misdirect himself in law and arrived at conclusions which were open to him on the evidence before him. I would therefore dismiss this appeal," the judge said.