Read up before you backup

A recent court case provides a rare clarification of NZ users' rights to back-up applications

New Zealand’s Copyright Act 1994 allows a user to make a backup copy of their computer programs for certain purposes.

These purposes are to preserve the original copy or if the original is “lost, destroyed, or rendered unusable”.

When this law was originally introduced, computer programs typically existed on floppy disks and other removable media. Today, it is equally applicable to backing up programs on hard drives and cloning entire systems.

Unsurprisingly, allowing users to make legitimate backups has not been controversial. It is often necessary to make full copies of computer programs in order to maintain workable backups, and it would be uncommercial for licensors to demand a new licence be obtained for each backed-up program.

However, what is the position of a user who makes (and occasionally tests) a full offsite replica of their system as part of a high-availability disaster recovery solution? Is a new licence required for the cloned programs and does the cloning breach copyright?

These were two of several questions that arose in an Australian case earlier this year: Racing & Wagering Western Australia v Software AG (Australia) Ltd. The case is relevant in New Zealand because of our similar copyright laws.

RWWA was the licensee of a highly specialised, multi-million dollar mainframe computer program from SAG. The program processed betting data and was part of a mission critical system. RWWA contracted a service provider to set up and maintain a fully operational stand-by replica of the system at a separate location. This necessarily involved copying the mainframe program and related configuration data on to the replica system.

Importantly, the replica system was a “cold site” — data was regularly copied to the offsite location, but the system would only be turned on, besides occasional testing, if disaster befell the original system.

SAG claimed that by copying the mainframe program to the replica system, RWWA had breached both the licence agreement and the Copyright Act, and needed to pay for a second licence — an expensive proposition.

RWWA sought a declaration by the court that the licence agreement and the backup right in the Copyright Act entitled it to create the backup system.

The licence agreement authorised RWWA to copy the program “for archival or emergency restart purposes”. It also said that the program could only be used at an authorised location (RWWA’s headquarters).

RWWA contended that the licence permitted it to maintain an offsite replica backup system, despite only being licensed to use the software at their headquarters, because creating and testing the replica was not “using the software”, and if it was used, it would only be for permitted “emergency restart purposes”.

SAG contended that even if the licence did allow copying, it did not allow RWWA to test the replica system, as it had on several occasions, because this would be to “use the system” at an unauthorised location.

The Court rejected SAG’s argument. It accepted expert evidence that testing was an important part of a backup regime. It would be “unreasonable and inconvenient” if RWWA was not able to test the backup system, and testing was not a restricted use but was permitted by the licence as an “emergency restart purpose”.

The Court also said that the backup provisions of the Copyright Act should be interpreted broadly to permit occasional testing of a backup.

A key factor in the decision was that the replica system was a “cold site”, which, besides the occasional test, would only be turned on and used if the original system failed. The decision would have been different had the replica system been a “hot site” providing continuous, real-time fail-over capability.

This was the first time that an Australian or New Zealand court had considered backup rights in detail, and it is likely a New Zealand court will arrive at the same conclusion, although the specific wording of a licence agreement will be an essential factor in any future case. The case involved considerable input from IT expert witnesses, and it highlights a court’s willingness to consider accepted industry practices in interpreting a contract.

However, our Copyright Act contains an important exception not found in the Australian act. Section 80(3) states that the right to make a backup does not apply where it would be contrary to an express direction by the vendor, given to the licensee at the time of purchase or earlier. If the vendor expressly stated (for example, in a pre-sale notice included on the software, or in a purchase agreement) that making a backup was not permitted or imposed conditions, the licensee’s right to create a backup would be excluded or limited to that extent.

Licensors should make sure that the permissible backup rights of their computer programs are clearly set out in the licence, unless the default rights are to apply. For example, a licensor who wishes to prevent a customer from maintaining a replica system backup without charge should clearly state this under the licence.

Licensees should make sure that software licence terms permit the particular form of backup they wish to employ. It is also necessary to check any notices, labels or other directions outside of the licence terms, which purport to limit the licensee’s right to make backups. These directions could include statements on a website, provided that the direction was properly given before the licensee acquired their licence.

In the absence of any licence term or pre-licence direction to the contrary, users are generally able to copy computer programs to maintain a “cold site” backup replica of their system.

Burgess is a lawyer specialising in IT law at Clendons barristers and solicitors. He can be reached at guy.burgess@clendons.co.nz

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