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Paymaster vs GKRS: Analysing the appeal court’s bill payment ruling

Published:Thursday | April 2, 2015 | 4:00 AM
Audrey Marks, CEO and founder of Paymaster Jamaica Limited.

It may yet head to the Privy Council for final resolution. But last week's ruling by the Court of Appeal in a case involving conglomerate GraceKennedy and Audrey Marks' bill payment company, Paymaster Limited, has, at least for now, clarified Jamaica's law on copyright ownership of computer software.

It also reinforced the

sanctity of a company's confidential information, in this case its business plan.

Moreover, it has many of the elements of a David and Goliath fight. As it was at the start of this saga in 1999, GraceKennedy was then, as it remains today, a multibillion-dollar company by sales and one of Jamaica's largest corporations. Paymaster at the time was a struggling start-up and Marks was hunting for investment, including from a GraceKennedy subsidiary, to help stabilise and grow her business.

What the Court of Appeal in a judgment written by Justice Hazel Harris concluded was:

That Paymaster, as Roy Jones in the lower court had ruled, didn't own the software on which its operations function, as Marks believed it did. That belonged to Paul Lowe, its developer, even though Paymaster may have expended "huge sums" and much time to have something fashioned to the specific requirements of its multi-payment platform. It had no contract with Lowe, written or implied, transferring his intellectual property to Paymaster; and that GraceKennedy, through its vehicle, GraceKennedy Remittance Services (GKRS), essentially used information from Paymaster's business plan to accelerate the establishment of its own bill payment service, Bill Express.

Absent a further appeal, which Grace-Kennedy has signalled it intends to make, or a negotiated settlement, the matter is to now go back to court for an assessment of damages. In Paul Lowe's case, the probable claim will be for injury suffered because of Paymaster's prevention of his commercial exploitation of the software, while for Paymaster, the argument will be the cost of GraceKennedy's actions to its business.

the beginning

The saga began in 1995, a year into Marks' effort to establish her business, on the advice of her consultant, Dr Maurice McNaughton - who had written the technical outlines for the architecture that would be required - she hired Lowe, who already had a software program which was felt to be a suitable foundation for Paymaster's operation. Lowe was paid $300,000.

Over the next year, in between stops and starts, while Marks negotiated with prospective clients, Lowe continued to work on the software and by early 1996, Marks opened her first store, demonstrating her multipayment system to utility companies.

Around the same time, Marks approached GKRS about being a subagent for the Western Union remittance service and months later invited GKRS, via its managing director, Brian Goldson, to invest in her business. Marks testified that her business plan was dispatched to GKRS as part of that effort, a fact that Goldson could not recall.

trouble with lowe

Over the next several months, even as development and testing of the software continued, the venture slowed down. The utility companies, which Marks apparently expected to be her big clients, had seemingly grown skittish, while McNaughton had withdraw from the project.

By October 1998, with 10 stores in operation and at least one big utility company as a client, Paymaster had the final version of the software in operation, but trouble would soon develop with its developer. Four months later, Lowe requested a specific contract for the maintenance of the software. Insisting that he was already engaged by Paymaster, Marks refused. Lowe's response was to disconnect the system.

Eventually, Paymaster relented.

However, in October 1999, a year after the Paymaster platform had been declared ready, Lowe licensed the system to GKRS, which used it to start Bill Express, and which a month later was negotiating contracts with utility companies in competition to Paymaster.

Marks, believing that Paymaster's right of ownership to the software had been breached and that Lowe, in the licensing arrangement, had transferred sensitive information about her company, went to court. The appeal judges, as Justice Jones had done in the lower court, flatly rejected Paymaster's claim to ownership of the copyright.

The justices gave particular weight to two sections of the Copyright Act - Section 8, which makes clear that 'Copyright protection does not extend to an idea, concept, process principle, procedure, system or discovery or things of a similar nature" and Section 22, which says:

n "(1) Subject to the provisions of this section, the author of a protected work is the first owner of any copyright in that work unless there is an agreement to the contrary;

n (2) Subsection (1) shall not apply to copyright subsisting in a work pursuant to section 146;

n (3) Where a protected work is a work of joint authorship the authors thereof shall be co-owners of the copyright in that work."

Noting the agreement between Paymaster and Lowe was verbal, Justice Harris stressed that the courts, in such circumstances, must "exercise great care in implying a covenant in an oral agreement" and concluded that the underlying works provided by Paymaster to Lowe "were insufficient to give rise to a copyright in the software".

She added that Lowe was assigned Paymaster's business requirements to convert into computer language which he would of necessity be required to augment, with the use of his modified CSSREMIT system; and that he was not engaged as a part of a team with other Paymaster employees to produce joint work.

Although Paymaster spent vast sums to develop the program, the judge said, that in itself was insufficient to accord Paymaster the right of ownership.

"This would have to be balanced against the effect which an assignment would have had on the second respondent, a computer programmer by profession. He had been engaged in the profession since the 1980s of manufacturing software. He has designed programs for several companies using his CSSREMIT as a base. It is also of significance that he created other programs which he licensed to other companies," the justice wrote.

"If an officious bystander, being conscious of the facts, were to be asked two pointed questions, namely, did Paymaster supply the second respondent with all the necessary material or material that attracts copyright, and did the second respondent intend to abdicate his right to ownership of the copyright in his CSSREMIT software? The answers to both questions would be in the negative."

Like the court below, Justice Harris accepted that GKRS received versions of Paymaster's business plan, but arrived at a different conclusion of how it was used. Justice Jones had ruled that it wasn't and that GraceKennedy had conducted its own research and due diligence of establishing its bill payment business.

Further, the appeal judge ridiculed evidence by Bill Express' CEO Joan Marie Powell, which referenced Goldson remarks that Paymaster's business plan was in the public domain as Marks searched for capital, and the claim that other bill payment entities were already in operation.

Said the judge: "It is astonishing that, in an effort to assist in showing that GKRS's marketing plan emanated from its own research, the two companies named in GKRS' marketing plan, Telemidas and Telescotia, to which Mr Goldson made reference, were not in existence when GKRS began operating its Bill Express as a multipayment concern in 2000.

"Even more amazing, is that the plans produced by GKRS were, in fact, created subsequent to

the commencement of these proceedings. This fact is bolstered by the evidence showing that the companies referred to in GKRS' marketing plan came into existence after the date of the commencement of these proceedings."

Despite the lower court's ruling to the contrary, the appeal judges held that the GKRS/Bill Express business plan produced at trial contained a "preponderance of similarities" with Paymaster's.

Justice Harris wrote: "The process governing the multi-payment system would have been embedded in the software which was in GKRS' possession notwithstanding ... (Lowe's) ownership of it. The concepts and ideas detailed in the multipayment system are of some value to Paymaster and were available to GKRS only, as there is no evidence that anyone other than GKRS was conversant with the contents of Paymaster's business plan.

"Paymaster's name and logo appeared on GKRS' computer system, in early 2000 when GKRS commenced operation. In all the circumstances of this case, it is reasonable to infer that GKRS used Paymaster's plan to create its own. It follows therefore that it would have been incumbent on the learned trial judge to have considered whether in light of the evidence, GKRS' marketing plan was created from Paymaster's business plan. I am firmly of the view that GKRS made use of Paymaster's business plan, obtained in confidence, and clearly, took an unfair advantage of Paymaster while it had it in its possession," said Justice Harris.

"Some of the information in the business plan would have been available to the public and GKRS would have been at liberty to have used such information. However, Paymaster's concepts and ideas in respect of the multipayment model were private and GKRS should have exercised special care not to have used the information contained therein, prejudicially to Paymaster."

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