19 July 2011

Protecting ideas in the digital age

During April this year, the 9th US Circuit Court of Appeals rejected the request of two former classmates of Facebook founder Mark Zuckerberg, to overturn their settlement agreement reached on the creation of the social networking site.

Regardt Botes, senior associate in the Intellectual Property Practice at Cliffe Dekker Hofmeyr explains, "As sensationalized in the Hollywood blockbuster The Social Network, the two former classmates, commonly known as the "Harvard twins", alleged that Zuckerberg had stolen their idea to create Facebook and claimed compensation. The Harvard twins initially approached Zuckerburg to develop their social network site Harvard Connection, now known as Connect U and allegedly used this idea to create Facebook.

"It was reported that a settlement was reached in 2008, for an estimated $65 million, but the twins earlier the year sought to overturn the settlement, claiming that they had been misled about the stock value of Facebook at the time the settlement was reached.

"The court, however, ruled that the Harvard twins were sophisticated enough to understand what they were agreeing to during the settlement, especially since they brought half a dozen lawyers to the mediation. The Harvard twins initially indicated that they will appeal the 9th US Circuit Court's decision, but later reversed that decision.

However, just as Zuckerberg thought he heard the last of the twins, they, only a day after dropping their plans to appeal, refocused their energies on a separate Facebook matter against Zuckerberg in the Massachusetts federal court. In this case they are claiming that during the settlement negotiations Zuckerberg intentionally or inadvertently suppressed crucial evidence in discovery, namely certain sms exchanges between the parties during the development of Facebook. The battle now still rages on.

Botes says that although the settlement was based on the alleged "stealing of an idea" it needs to be highlighted that in terms of South African law, copyright cannot vest in an idea or business method nor can an idea or business method be patented in South Africa.

"It would usually be difficult to take legal action against a third party for "stealing" your idea in South Africa. In the United States it is in some circumstances possible to register a patent in respect of a business method," he says.

Botes says that the best manner in which a person can attempt to protect his/her business idea in South Africa is by entering into non-disclosure and confidentiality agreements with prospective and existing business partners. Although copyright cannot vest in the idea itself, it is possible for copyright to vest in the documents, computer programmes, drawings and/or illustrations relating to the business idea.

"Copyright protection would, however, not prevent third parties' use of the idea, but only prevent use of the copyrighted work," he says. "Another important copyright principle to take into account when dealing with computer programming and software development is that the default position in terms of the Copyright Act is that an independent contractor will be the owner of copyright in such works created, unless an agreement specifically determines otherwise. This is in contrast to an employer / employee relationship, where the employer will be the owner of such works created during the course and scope of an employee's employment".

Ilhaam Jakoet, an associate in the Technology, Media and Telecommunications Practice at Cliffe Dekker Hofmeyr, explains that "From a contract law perspective, catering for future rights in a digital sphere is challenging because it is not yet certain what those future rights will be and what they will entail. One of the requirements for a contract to be considered valid in South African law is that the contract must be certain."

"The constant, rapid development of new technologies can pose difficulties in forming an agreement in circumstances where it is unclear what precisely needs to be agreed. For example, whereas 15 years ago the phrase "electronic media" might have been limited to disk, CD-ROM, email and the internet generally, today it can include media such as smartphones, social networking sites and e-books," adds Jakoet.

"When it comes to protecting ideas or granting rights in the technology sector, a comprehensive contract should be drafted to reflect the parties' intentions. All known media at the time of drafting the contract should be covered. If future rights are required, the contract should provide for this by stating, for example, that the rights include rights to exploit future versions or derivations of whatever work forms the basis of the future work," Jakoet says.

Botes and Jakoet note that it should also be clear whether the right to exploit intellectual property includes a transfer of ownership of the intellectual property and whether licenses are given on a sole, exclusive or non-exclusive basis.

"It is important to ensure as much certainty in the contract as possible and avoid the tendency to use generic, "catch-all" phrases, as they are not guaranteed to include rights to new and emerging technologies," Jakoet adds.

Regardt Botes and Ilhaam Jakoet

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