The Court confirmed that the way computer programs operate is not copyrightable. This is because computer program functionality is not "a form of expression" and therefore does not qualify for protection it said, ruling on a dispute involving rival software developers SAS Institute (SAS) and World Programming Limited (WPL).

"The ruling means that it will now be very difficult for software developers to challenge a competitor’s software with identical functionality unless the underlying code for their software has been copied," intellectual property law expert Indradeep Bhattacharya of Pinsent Masons, the law firm behind Out-Law.com, said. "Even the general design, program interfaces and non coding structural elements of software are not protected by copyright. It is also not an infringement to take the ideas behind a computer program from its accompanying documents such as user manuals and technical specifications, though copying non technical descriptions would still be an infringement."

The Court of Appeal considered the distinction between ideas, which cannot be copyrighted, and the expression of ideas that can. It confirmed that 'intellectual creations' on their own do not qualify for copyright protection, even where "considerable intellectual effort" goes into creating something as complex as a computer program using programming language. Only expressions of an intellectual creation are copyrightable, it said.

"What is protected is the form of expression of an intellectual creation," Lord Justice Lewison said in the leading judgment in the case. "The intellectual creation itself is not protected; and the functionality of a computer program does not count as a form of expression. The functionality of a computer program (in the sense of what it does and how it responds to particular inputs) falls on the ideas side of the line. It falls on that side of the line whether one is considering the Software Directive or the Information Society Directive."

The Court of Appeal also ruled that a software developer cannot, in the terms of a licensing agreement, prevent legitimate licensees from using their access to the developer's software to carry out "observation, study or testing of the functioning of the program in order to determine the ideas and principles underlying it". Those rights apply under the EU's Software Directive also known as the Computer Programs Directive and cannot be erased via contract, it said.

The judges also examined the particular licensing arrangement SAS had agreed with WPL and found that different WPL staff could rely on a single licence belonging to the company to conduct their observation, studying and testing of SAS's software. This was because of how SAS worded its licensing agreement, the judges said. It determined that SAS had not made it clear enough that any agreement to the terms of the licensing contract applied solely to a single human user.

"There is no restriction on the number of employees whom WPL may authorise to observe, study and test the program, provided that they do so one at a time and at a single workstation at a time," Lord Justice Lewison said. "It follows, therefore that WPL were not in breach of the licence by authorising multiple employees to use the program for the purposes of observation, testing and study."

"In order to try to limit who can access learning or development editions of software products, companies may want to think about restricting who is the 'lawful user' of their software," Bhattacharya said. "This can be done by entering into the licence with individual users rather than the company. Doing this would help restrict the ability of rivals to have dedicated teams of people observing, studying and testing your software to develop alternative programs."

The Court also appeared to question whether the legal test under common law in the UK for assessing whether an expressed intellectual creation itself qualifies for copyright protection is aligned with EU copyright law.

The UK test for determining whether an intellectual creation qualifies for copyright protection requires an assessment to be made as to whether skill, judgment and labour has gone into bringing about a work. However, the Court of Justice of the European Union (CJEU), in a case involving Danish clippings service Infopaq in 2009, ruled that a part of a copyrighted work is entitled to the same level protection as the whole of a copyrighted work if that part is an expression of an intellectual creation.

Lord Justice Lewison suggested applying both the UK test on skill, judgment and labour and the case law established in the Infopaq case when considering whether an intellectual creation qualifies for copyright protection could lead to a different conclusion than if the Infopaq test was applied on its own.