Intellectual Property
The New Brazilian Software Proposal
Denis Borges Barbosa
LL.B (RIO DE JANEIRO STATE) LLM (GAMAFILHO) LLM (COLUMBIA)
Choosing the middle way - neither patent nor copyright - seems to be the Brazilian final stand as regards the protection of computer software. A Bill submitted to the Senate last November 1 is a clear indication of this: it protects software owners against copying, but goes further by preventing the unauthorised use of the software, for instance, in the employment of a program to feed hardware other than that originally allowed, or the sale of the copy to a third party.
On the other hand, the proposed legislation grants a 15-gear tem of protection, a much shorter period than that provided by thecopyright laws (but the same extension as a Brazilian patent), and creates a rather complex compulsory licence mechanism both on the grounds of relevant national interest and plain non working. At the end of the term of protection, thesoftware (in source coda) is published and enters into public domain.
The Brazilian bill follows to some extent the December 1983 proposal by the Japanese MITI,2 which similarly advances short periods and compulsory licensing. A 1983 study of the French Patent Office,3 also proposed a "middle way" protection but as an alternative to the other forms of protection already in force as was proposed in the 1978 WIPO Model Law for software.4
A Tough Problem
Since the 1969 Galbi-IBM proposal 5 (five to ten years' protection with mandatory registration), the advisability of a new kind of intellectual property right is being extensively discussed throughout the world. Andre Lucas, in his outstanding 1975 book, 6 remarked thatthe creation of computer software is markedly different from the classical industrial invention to the extent that it does not result in transforming or reducing a subject matter into another state or thing.7 On the other hand, the prevailing industrial, or more properly economical, purpose of software creations seems to distinguish it from the scientific, literary or artistic works usually considered as being copyrightable matter. Therefore, as Professor Lucas puts it in a rather paradoxal expression, software is an abstract industrial creation.
To follow a more practical line of reasoning, neither copyright nor patents fulfil thesoftware owner's needs nor comply with thegeneral interests of the public. The inventive level or novelty in a software creation is usually much lower than that required for granting a patent: Since the US Supreme Couri decision in the Diehr case 8allowing for obtain software patents, a relatively small number of applications had passed through the siringent standards applied generally by the US Patent and Trademark Office.
On theother hand, copyright protection only covers actual copying. A developing doctrine states that every utilisation of software within a computer constitutes copying, therefore encompassing use and copy of software under the same rules. However, using the basic concepts of a program to create new programs does not infringe the principle thatcopyright covers expressions and not ideas. This disadvantage has not prevented copyright becoming the most common form of protection used nowadays in the developed countries.
From the standpoint of the public interest, as opposed to the software developer's interests, copyright seems to be an excessive and unreasonable form of protection, totally unbalanced in favour of the software owner. The very long term of protection, the form of acquiring the right (in most countries without any registration requirement) and the moral rights issue seem to weigh against the use of copyright as a conscionable form of protection. Under the moral rights principle, in force in many Civil Law Jurisdictions, the titleholder to a copyrighted work ma), withdraw an already sold or licensed work from publication, irrespective of the prior commitments to buyer or licensee eg in Brazilian Copyright Law, Art 25, IV.
Furthermore, a literary or artistic work-design legislation does not provide for the legitimate needs of the community, as for example, compelling the software owner to work his right in the country under pain of revocation or compulsory licensing. The development of a new, locally-produced computer industry could be impaired if the foreign software owner could prevent adaptations of an existing library to the new hardware product.
Thus, the complexity of questions involved has rendered the issue an extremely taxing problem for legal practitioners and technicians alike. Basically, the question has been approached in the developed countries as one to be solved by stretching as far as possible the existing legal structure. Therefore, the developments in the USA, as shown in the Diamond case and in the 1980 amendments to the copyright law,9 and in many other countries, consisted in declaring software as patentable or copyrightable matter, disconsidering its peculiar nature and problems.
The trade secret protection, formerly extensively used, has not shown to be adequate to all requirements of a consumer-product software age.
The Brazilian Environment
Brazil has shown a very particularapproach as ii regards the computer industry (significantly, called locally "informatics industry"). Since 1972, 10 the Brazilian Government has been controlling hardware and (to a certain extent) software imports and striving for the creation of a Brazilian-owned computer industry. With the establishment in 1979 of the Special Secretariat for Informatics (SEI) within the National Security Council (Decree 84067 of October 8, 1979), the hardware and software branches of the industry were brought within direct governmental influence, and the production of certain lines of products - generally, allhardware except the largest (mainframes) - was reserved to Brazilian-owned firms. At this moment, 144 hardware producers maintain a lively competition within the Brazilian market, shielded against the multinational colossuses by the SEI rules.
After a very heated discussion period, the Brazilian Congress voted last October a comprehensive statute on the informatics industry, confirming the market reserve previously established by SEI through administrative measures and creating a toplevelInformatics Council, headed by the President of the Republic, to propose and execute the National Policy in the matter. This law, however, did not deal with software protection, butstated that further legislation would provide for the protection of computer programs and related documentation (Law 7232 of October 29, 1984, Art 43).
Many proposals for such legislation were already being discussed at this date. The Brazilian Association of Software Producers (ASSESPRO) supported a proposal whereby software would be granted protection for an indefinite period of time, without any registration requirement except for commercial purposes.11 Another proposal, prepared jointly by the Brazilian Patent Office, the Brazilian Copyright Office and SEI's General Counsel on the basis of a prior version prepared by the Institute of Brazilian Lawyers, developed into the Bill submitted to Congress last November. It is anticipated that a more civilized version of ASSESPRO's proposal will be also submitted to the Congress in the new legislative session.
Both main proposals accept the "middle way" approach, in different forms. In the International Seminar on Software Protection held in Brasilia in July 1984, the almost unanimous Brazilian position on the issue was that granting copyright protection to software was against the best interests of the country, and that a new kind of protection was required. Therefore, it is assumed that any future Brazilian law will take the "Third Kind of Intellectual Property" approach regarding software.
It is interesting to note that no court decision was issued on the matter of software protection under the law already in force, namely whether the copyrightlaw extends protection to software. The first suit, filed by the British Sinclair Corporation against the Brazilian Microdigital, is to be decided by late January 1985. 'z In an October 1984 decision, the Copyright Office Board considered the copyright protection incompatible with the national interest, without passing any decision on the copyrightability of software under the law in force.
The New Proposed Law
The November 1984 Bill, which the author, as representative of the Patent Office, has helped to draft, is expected to be the most significant contribution to the future law. Furthermore, the impact of the Brazilian law on other third world legal systems can be easily anticipated: it is the first "middle way" software legislation under discussion within a legislative body and therefore exceeds mere local interest.
The Bill provides for one encompassing form of protection in lieu of copyright and patent protection; the protection is acquired by registration, but trade secret protection is assured to unregistered software, and self-destruction or cryptographic means are allowed. Unregistered software is generally subject to all obligations imposed on registered software, except publication. Under the proposal, the legislation covers both program and ancillary documentation as well as its derivative works even though the exclusive right is restricted to programs and its versions.
Foreign-produced programs are admitted to registration if their pertinent national legislation grantsa comparable protection to Brazilian-produced software under any form; otherwise, protection will be assured in equal terms under any future convention on software protection. It is understood that no treaty in force covers the entire field of protection provided for by the proposed law and that a copyright-plus-right-of-use mechanism reaches outside both the Paris Convention and the Berne or Universal Conventions.
The exclusive rights assured by the laws comprise using the program within the machine, and creating new versions; copying; and commercialising the software. The extent of protection thus goes much further than the present Brazilian (and most foreign) laws granted to either copyrighted or patented matters. on the other hand, the following are considered to be fair use of software: (a) the copying already allowed under the 1980 US Copyright Law;'3 (b) partial quotation of software for didactic purposes. There is no infringement in the case of autonomous creation of the same software where the likeness results from the characteristics of the hardware, from the observance of legal provisions or technical standards, or from the employment of public domain algorythms, mathematical models or formal processes. Finally, the protection does not cover theoretical concepts, algorythms, ideas and technological concepts inherent to the software; and software, the purpose or the result of which is contrary to morals, public safety or the religious faiths.
The employee or contractor has title to the software produced outside the scope of his employment or contract provided that no resources of the employer are utilised. In case some resources of the latter are employed, title is shared (a mutual legal licence is provided) and, in the cases where the contract or employment was agreed specifically for the development of software, titles vests exclusively in the employer.
No novelty (in the sense of patent laws) is required for registration, but the right to apply for registration expires after one year of (a) the beginning of commercialisation, use, copying for commercialisation in other cases in Brazil or abroad; or (b) the granting of protection under a foreign law. An interim provision extends this term to five years before the date that the new law is enacted. in case of already existing
The registration procedure is very simple and is limited to the examination of the documents, in such a way as to ensure full publication at the end of the period of protection. Deposit of source code is required in certain cases. Suits on the grounds of nullity can be filed any time in case of lack of originality, unallowed development of versions, prescription of the right to apply or insufficiency of disclosure. Nullity can be claimed by means of counterclaim.
The 15-year protection is shortened to 2 years in case of videogames and entertainment programs. The software program enters the public domain following the expiry of protection, denial of registration(for insufficiency of disclosure) or cancellation for not keeping an agent in Brazil. Some security and military software is not disclosed cven at the end of the term of protection.
The Bill provides for certain obligations, established for the benefit of the software user or the public. Listing of error corrections, software installation and maintenance and technical warranty both for the software and physical medium are to be provided by the owner, assignee or licensed distributor, on a joint and several basis. Entertainment software must be in the Portuguese language.
A compulsory licence system is provided; (a) in case it is necessary to develop new versions of a software for new applications of outstanding national interest; or (b) in case the software is not worked in Brazil for the two years preceding the request for licence. The licence is only granted after an administrative proceeding, with full defence rights assured to the softwareowners, and subject to judicial review.
Software infringement is a criminal offence and provides ground for civil actions. Preliminary procedural measures include seizing of infringing copies and injunctive relief inauditaparte, irrespective of evidence of probable damage. Actions are decided insecrecy to preserve the confidentiality of published software.
All international licensing is subject to the approval of both the SEI and the Brazilian Patent Office (who screens all international licence, technical assistance and engineering contracts). As is traditional under Brazilian law, no payment shall be allowed to a foreign software owner by an affiliated company domiciled in Brazil or in case of unauthorised contracts. The introduction of foreign-owned software into the Brazilian economy (commercialisation as different from passive protection) is contingent to the unavailability of a locally produced substitute and subject to economic priorities (import substitution and increasing exports) and fulfillment of antitrust, tax and other legal provisions.
In its tax provisions, the proposed law deems non-deductible as costs or expenses from the corporate income tax the payments related to unregistered softwareor those resulting from an international unauthorised contract. When they are allowed, the payments are subjected to maximum deductible limits. In a very curious provision, the Bill levies tariffs on the software imported, for instance, in a Read Only Memory Form.
New Model for Software Protection
The November 1984 Bill is clearly an example of the "middle way" approach to software protection. As in the case of copyrightable works, it provides for the protection of expression and not (as in the patent laws) of content. As in the case of patents, the use of work (and not only copying of it) is protected.
The proposed law assumes that software is an industrial creation, subject to the same conditions and obligations as areindustrial inventions under the existing law, particularly (a) under the exchange and tax rules used by Brazil to control the flow of foreign investment; (b) the industrial property laws; and (c) consumer and other laws designed to satisfy the general public interest.
What the Brazilian proposal basically intends is to provide Brazil with the means by which the national interest may be compatible with the need to protect the software developer's investment, both as regards local and the foreign-produced software. The specific characteristics of the software technology and its conflicting requirements have imposed a-new kind of protection within the general parameters of the existing intellectual property laws but which is, at the some time, closer to the developmental targets of a third world country.
Denis Borges Barbosa is Counsel with Briger & Associates, Rio de JaneiroBrazil, and was involved in preparing the new law for the Brazilian Government.
'Senate Bill. No 260/84 by Mr Virgílio Távora, Diário do CongressoNacional of December 4, 1984, p 4814.
2 lnformation Industry Committee, Industrial Structure Council, Protecting Software. Interim Report, December 1983 (unpublished).
3Vers une Protection des Logiciels Informatiques. situation actuelle et propositions, 100 Revue de La Propriété Industrielle 380, 1984.
4WIPO's Model Provisions on the protection of ComputerSoftware, 1978.
SE Galbi, Proposal for the Protection of Computer Programs, 17 Cop Soe Bul 280, 1970.
6 La Protection des Créations Industrielles Abstraites, Andre Lucas, Lib Techniques, 1975.
7 Cochrane v Deenes, 94 US 780.
8 Diamond v Diehr, 450 US 175, 1981.
9 PL 96-517, 94 STAT 3028-29; December 12, 1980.
10 The Brazilian Government created in 1972 an interdepartmental commission in charge of screening government purchases and leasing of computer products (CAFRE).
11 Arevised version of this proposal, already incorporating some of the characteristics of the November 84 Bill, was published in GazetaMercantil of Rio de Janeiro, in its October 26, 1984.
12 Sinclair Research Ltd v Microdigital Electrónica Ltda, 25th District Court of the city of S Paulo, file No 101183. ,4 preparatory suit was filed by IBM Corp against two other Brazilian hardware manufacturers during 1984, bus settlement was reached before decision on both cases.
13 PL 96-517, 94 STAR 3039-29; December 12, 1980, amending 17 USC 117 (this wording is almost a literal translation of the US law).