FEDERAL COURT OF AUSTRALIA

CA Inc v Independent Systems Integrators Pty Ltd (No 3) [2009] FCA 1176

CA INC and CA (PACIFIC) PTY LIMITED v INDEPENDENT SYSTEMS INTEGRATORS PTY LTD

NSD 1572 of 2008

PERRAM J

16 OCTOBER 2009

SYDNEY

THE COURT ORDERS THAT:

1.                  The motion is dismissed.

2.                  Macquarie Bank Limited is to pay the Respondent’s costs of the motion.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

Background

1                     On 7 September 2009 I ordered the respondent (“ISI”) to provide preliminary discovery to the applicants (together “CA”).  The reasons which explain why those orders were made were delivered by me on 18 August 2009, sub nom CA Inc v Independent Systems Integrators Pty Ltd (No 2) [2009] FCA 900.  Macquarie Bank Limited (“MBL”), who was not a party to those proceedings, now applies to be joined as a party, to be granted leave to make submissions regarding the withdrawal or reconsideration of my reasons for judgment and for the provision by ISI of further preliminary discovery.

Argument

2                     MBL’s basic complaint is that it has been adversely referred to in CA Inc (No 2) without having been given an opportunity to put its position.  In my previous decision, I concluded that there was reason to suppose that CA had, or might have, a right to obtain damages for infringement of copyright by ISI or MBL.  More particularly, I concluded that since Mr Richards (of ISI) had worked for MBL at the relevant time it was possible, indeed on a preliminary basis probable, that CA’s software had been directly copied by Mr Richards to produce 2BDB2, its manuals used to the same effect or its software reverse engineered.

3                     Since Mr Richards worked for MBL at the relevant time, I concluded that such a case might exist against MBL.

Consideration

4                     I do not think that it is necessary to consider the nature of the procedural right infringed by adverse comment in a judgment on preliminary discovery.  I proceed on the assumption that a sufficient interest is shown. 

5                     It seems to me that MBL has been adversely named without having been heard.  In that circumstance it is entitled to be heard to put its side of the matter.  On the present application MBL led evidence which established the following two propositions:

(a)        the software ultimately sold by ISI was not the same software originally developed by MBL; and

(b)       the process of development by which MBL created its software did not involve a review of CA’s software or any attempt to disassemble or reverse engineer it.

6                     Proposition (a) was borne out by a fee dispute which arose between ISI and MBL.  In CA (No 2) I explained that initially MBL licensed its software to ISI and then subsequently assigned that software to ISI.  It now appears from the evidence prepared by MBL that ISI contested MBL’s entitlement to the license fee due under that license.  It did so because ISI contended that the software it was distributing was different to MBL’s software, with the consequence that no fee was due.  That dispute was eventually resolved with MBL’s assignment of the rights in the software to ISI. 

7                     This evidence does not lead me to alter my previous conclusions.  It does not disclose the way in which MBL’s software differed from ISI’s software, save that one was written in a language known as PL/1 code, and the other in a language known as Assembler.  For myself, the fact that the two programs were written in different languages shows little.  For all one knows, one may have been compiled from the other. 

8                     Further, the explication given by MBL of how it had generated the code remains, at least to me, opaque.  An officer of MBL, Mr McLennan, explained the matter this way:

I recall that there was a layer of software sitting between the application programming code and the underlying database (the Intermediate Layer), in this case, Datacom.  In a simplistic sense, the Intermediate Layer was a set of application calls or commands, known as API’s, which could be rewritten to communicate with any database (in this case DB2).

The Conversion Software developed by the project team functioned by changing the Intermediate Layer to communicate with DB2 instead of Datacom.  It did this by changing the Datacom commands (API calls) in the Intermediate Layer to now interact with DB2.

The Conversion Software performed in the Intermediate Layer, rather than interacting directly with Datacom APIs.

Because the conversion was performed through the Intermediate Layer, there was, to the best of my recollection and understanding, no need to review, disassemble, reverse engineer, or copy the underlying Datacom source code nor access it.  I did not engage in any review, reverse engineering or copying of the underlying Datacom source code, nor did I observe any other member of the project team do any such acts.

9                     The previous problem I identified in CA (No 2) was the impossibility of understanding how 2BDB2 could take the output from customer applications and translate that output into instructions that CA Datacom could understand without someone (or something) knowing or understanding the CA Datacom instruction set and/or its syntax.  Mr McLelland’s evidence merely shunts that issue off to the “Intermediate Layer”.  There was no explanation of who wrote the Intermediate Layer, how it operated or what it was.  One remains, therefore, uninformed as to how software was written which could interact with CA Datacom without someone knowing something about its instructions set.  It may be that the Intermediate Layer is the answer but, if it is, that only begs the question of its nature. 

10                  In those circumstances, I do not think, having heard from MBL, that my previous reasoning requires recall.  Part, no doubt, of MBL’s sense of aggrievement at the present circumstances is driven by the assurance given to it by ISI that 2BDB2 was not the same product as that developed by Mr Richards at MBL.  One can readily understand, having received that assurance from ISI, some sense of aggravation at having been drawn into a dispute where the truth of that proposition appears to be in question.  Further, that sense of aggravation has, no doubt, been exacerbated by the inaccurate reporting of this case which has appeared in the Australian Financial Review.  For example, the headline to the article about this case on 25 August 2009 read “Court tells Macquarie to reveal software material”.  That headline was, of course, wholly inaccurate.  MBL was not a party to the proceedings and I made no such order.  Be that as it may, there is no need to revise my earlier judgment. 

Joinder of MBL

11                  I do not consider that it is necessary for MBL to be joined to these proceedings in order for it to make the complaint of not having been heard.  It was sufficient for it to apply by motion for the relief as to revision that it sought.  I put to one side, therefore, the question of whether the present proceedings are a “proceeding” within the meaning of s 4 of the Federal Court of Australia Act 1976 (Cth). 

Further preliminary discovery

12                  MBL also sought orders, which if made, would have the effect of requiring ISI to provide further preliminary discovery to CA.  That material was designed to underscore the disconnection between MBL’s software and ISI’s software.  MBL also sought access to all of the documents ordered to be provided by ISI to CA on 7 September 2009. 

13                  Mr Nicholas SC, who with Mr Hennessy appeared for MBL, submitted that this was an appropriate course to take because MBL was entitled to know if adverse statements were to be made about it or its employees.  As to the source of the power to make such orders, Mr Nicholas submitted that they were merely in the nature of variation of interlocutory orders already made. 

14                  I dismissed this part of MBL’s application at the hearing.  My reasons for doing so were twofold.  First, O 15A imposes strict limits on the circumstances in which preliminary discovery may be granted.   By seeking the orders in the present way – that is by way of notice of motion – those strict requirements are circumvented; secondly, MBL did not suggest that it needed more information to determine whether to sue someone; rather, it claimed to wish to know what might be said about it or its employees.  That purpose is, so it seems to me, alien to O 15A.  It was for those reasons that I dismissed prayers 3 and 4 of MBL’s notice of motion at the hearing. 

Disposition

15                  The motion is dismissed.  CA did not oppose the orders sought in the notice of motion; ISI did particularly in relation to the suggestion that there should be further preliminary discovery.  In those circumstances MBL is to pay ISI’s costs of the motion.

Associate:

Dated:         16 October 2009