Justice Fullerton of the New South Wales Supreme Court would not be the first person to struggle with the unstoppable march of technology – Australian Federal Communications Minister, Steven Conroy, is facing similar problems in trying to put labels on the internet and censor it accordingly.
The Internet is in many regards very new and novel, and the manner of contribution and interaction to the online world is such that attempting to create boundaries in which to contain and frame conduct are unlikely to be successful. British comedy The IT Crowd took the Mickey out of the problems of trying to understand the Internet in terms of offline conduct, two of the characters fooling a third into believing the internet was contained in a single black box with a red light on top.
Which brings me to the Justice Fullerton’s decision in April this year in the case Gammasonics Institute for Medical Research Pty Ltd v Comrad Medical Sysystems Pty Ltd.
The case concerned the sale of software by Comrad to Gammasonics. The contract between the two parties was for the delivery and installation of software designed to assist in the management of the workflow of clients by providing a system of patient registration and appointments, together with online referrals from medical practitioners and the processing of their Medicare claims.
Per the contract, the software package was ‘delivered’ to Gammasonics by means a remote internet download, straight to Gammasonics’ own server. Gamamsonics was the responsible for looking after acquiring and configuring the hardware and networking requirements specified by Comrad for the software package. After the software was downloaded, Gammasonics sought to terminate the contract for breach of a number of terms, including Comrad’s alleged failure to deliver a working software package, failure to provide goods of merchantable quality, and failure to deliver a software package that was fit for its intended purpose.
In examining these claims, the question arose as to whether software, in and of itself, was to be considered a ‘good’ under section 5(1) of the New South Wales Sale of Goods Act. Justice Fullerton concluded
The nature of property contained in a software program which exists in purely electronic format can only become a good under the Act in circumstances where it is transformed to a medium which gives it the qualities required to bring it within the jurisdiction of the Sale of Goods Act being qualities of tangibility and moveability. This is made clear by the authorities”.
And made clear it is – there are numerous precedents cited in the judgment that determine that software sold without hardware of some form, be it a computer or a disc, do not represent goods. Somewhat tellingly however, of the eleven cases cited in the decision, only three were decided within the last decade, and go as far back as 1976, when computers looked like something out of a dystopian video game, and bell bottom pants were still considered to be cool.
To provide an example of why this is an issue, the judgment makes reference to a 1991 decision Advent Systems Ltd v Unisys Corp, in which Justice Weis of the United States Court of Appeal stated:
“Computer programs are the product of an intellectual process, but once implanted in a medium are widely distributed to computer owners. An analogy can be drawn to a compact disc recording of an orchestral rendition. The music is produced by the artistry of musicians and in itself is not a “good”, but when transferred to a laser-readable disc becomes a readily merchantable commodity.”
The thing about implanting recordings in a medium of any description is it gives physical mass, while software out in the ether of the internet essentially weighs nothing (or at least, so little as to be considered insignificant – just ask Dr Karl). The question has to be asked then, would a similar statement be made today, given that iTunes downloads now account for about a quarter of total music sales in the US? It would seem unlikely that it would.
The reality of developing internet technology is that conduct is increasingly moving online, and physical mediums for transferring data becoming less popular. This can perhaps best be shown in the rise of Google Docs, and the scrapping of the venerable 3 ½ inch floppy disk. The problem arising from this change in conduct, is that the law is lagging well and truly behind technological developments. The legislature and judiciary continue to cling to offline paradigms, failing to recognize that software technology is no longer simply contained to a CD in a shrink wrapped cardboard box, although the implications of this decision do not stop here. The entire online commerce sphere is being affected by the attempted application of old world paradigms. In short, the internet is a game changer, but the rules haven’t been updated to match the state of play.
This is not to say that there has not been a realization of this short coming in the legislation and case law by those making the decisions. It is perhaps appropriate to give Justice Fullerton the last word, and give one last extract from her judgment:
“It may well be that there exists a level of dissonance engendered by the level of development and utilization of forms of property which were neither in existence, or in much contemplation, when the Sale of Goods legislation was drafted. However, the task of the court is to apply the statute in accordance with the established principles of statutory construction and binding precedent and, in absence of binding precedent, by giving due and proper consideration of obiter decisions of senior courts”.
