THE COMPUTER LAW AND SECURITY REPORT 1 CLSR

upon the technical complexity involved, the agent can act as, or arrange for, an outside expert in the verification process.

- In te rmed ia ry

Most escrows provide a mechanism for settling disputes, usually by means of the court or arbitration. The escrow agent can also serve as an intermediary, but his role should be clearly defined in advance, preferably in the escrow agreement itself.

- Terminat ion

The termination of an escrow must be carefully completed in writing by the escrow agent. The escrow agent must also return all materials to the proper party.

Physical protection

The other principal function of an escrow agent is physically to protect and preserve the material deposited in escrow:

- Faci l i ty

Storage ideally should be in a vault or custom vital records room designed to protect computer media over long periods of time. Climate control and fire protection are normal features of such depositories.

- Segregat ion o f escrows

To preserve the integrity of each escrow, the documentation

should be stored in individual safe deposit boxes or containers. Escrow materials should not be commingled, both to prevent errors and to provide accurate transaction records.

- St r ic t access con t ro l

The escrow agent should be able to maintain absolute control of access to the vault or storage area, so that permanent logs of every access can be created. Authorization for any access should be in writing in advance.

Conclusion

Escrow agreements can provide a viable, effective means for satisfying the sometimes conflicting needs of the parties to a software licensing agreement. Although, as noted, the reliability of the escrow procedure in the event of bankruptcy is uncertain, escrow agreements still provide a measure of protection for the parties to a software license agreement which is difficult to achieve by any other means.

Reginald H. Weller, President of the National Safe Depository of San Jose, California. Shelley F. Wall, Associate at the law firm of Fenwick, Davis & West in Palo Alto, California.

TELECOMMUNICATIONS

M E R C U R Y A N D B R I T I S H ' T E L E C O M INTERCONNECTION PART I1: REGULATION AND COMPETITION

Customer benefit As I have mentioned before, one of the main purposes of providing a legal basis for Mercury to claim connection with the BT system was to accelerate the opportunity for Mercury to offer a comprehensive alternative service at reasonable cost. The two principles inherent in the policy behind interconnection are what is known as ' any to any', the ability of any customer of one system to call any customer of another, and ' cus tomer choice' , the right for a customer to choose the particular operator he wishes to carry his calls, Whether voice or data. These principles are the inspiration for interconnection and are reflected at various points in the Determination. In particular, ' any to any ' means that the messages which are to be passed over the points of connection between the BT and Mercury systems may come not only from BT or Mercury customers, but also from customers of other systems and equally they may be destined for such other systems' customers. This will mean of course that it should be possible for the customers of licensed private network operators to make calls into and over the Mercury and BT systems once these networks have interconnection arrangements with BT and Mercury. This should at least be one of the consequences of the new class licence to cover data communication systems and services, recently issued. Already, it is possible for cable television systems to connect with the Mercury and BT systems and of course, in this way, local distribution could be provided for Mercury messages. Equally cable television customers could utilise the cable television system of which they are customers in order to access the Mercury system and call either Mercury customers or BT customers. When it is fully developed, the national public telecommunication

systems in the UK should therefore offer something very akin to what British Rail used to call their Rail Rover ticket; once into the system, for the price of the ticket (in this case the call charge) the customers' messages should be able to go anywhere.

Enforcement of interconnection agreement Now a brief look at the implementation of the Determination. I believe it may be a quite widely-held perception that it is the Determination itself which is the interconnection bible. In one sense this is correct, but in another it is not, for the Determination actually required that BT and Mercury should enter into an agreement embodying the terms scheduled to the Determination. It is this Agreement, which was in fact signed on 18th March this year, that is now the binding legal basis for interconnection and the Determination has therefore been transformed into a private contract between the two parties. This new contractual basis for interconnection is significant not only because in the event of dispute the whole panoply of legal procedure can be brought into play to ensure proper enforcement of the Agreement, but allied to this the Director- General remains on the sidelines as the referee for the future. If BT fails in some way to perform its obligations under the Agreement, BT's Licence provides that the Director-General may issue a direction requiring such performance and if this direction is not complied with, BT will be deemed in breach of its Licence. Contravention of a PTO's Licence is a serious matter. Mercury in such a case would have a claim not only for the loss suffered as a result of the breach by BT, but also under the normal rules applicable to breach of contract, entitling Mercury to damages and equitable relief (e.g. injunction). All this may seem rather close to the sledge-hammer approach and ther.e is no reason why matters should ever reach the stage of licence compliance orders or court proceedings. It is much more likely that some of the

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subordinate dispute-solving procedures set out in the Determination and now embodied in the new Interconnection Agreement will be brought into use. In particular, the procedure for agreeing connection charges and the timing for the completion of connections is to come before a special committee of three people, one appointed by BT, the other appointed by Mercury and the third appointed by both of them or if they cannot agree by OFTEL. It seems quite likely that this committee could be busy in the early stages of operation of the Interconnection Agreement.

Competition How will interconnection promote competition between BT and Mercury and indeed generally in the market place for telecommunication services? First, as I have already pointed out, interconnection transforms Mercury from an emerging specialised operator with the means only of providing leased facilities between the major cities into one which can immediately offer full national switched service, using BT lines and facilities where, as yet, Mercury has been unable to install its own. Second, the charging arrangements, certainly so far as inland services are concerned, are such that sufficient margin is afforded to Mercury so that even where it is obliged to make use of BT's system, there is still sufficient flexibility in the pricing to enable Mercury to offer a discounted service if it wishes. Third, the combination of both direct and indirect connection of Mercury customers to the Mercury system creates an immediate perception of a viable alternative operator and it is this ability to enable Mercury to offer service to customers and in areas where direct connection may not yet be feasible or economically sensible, which is perhaps the most significant feature of the new interconnection arrangements.

Interruption Some of you might remember that in the early days of Mercury's existence and at the time when BT's eventual privatisation and indeed the whole liberalisation process was being vehemently opposed by the unions, the Post Office Engineering Union as it was then called, (now the Union of Communication Workers) waged a campaign against providing connection of Mercury customers both directly to Mercury (where BT maintained or controlled the PBX

involved), or by use of BT private circuits to reach the Mercury system. Eventually, after litigation which ended in Mercury's favour in the Court of Appeal, an interlocutory injunction was granted and the Union entered into a permanent undertaking not to interfere with Mercury's business. The 1984 Act provides yet further protection against such disruption. There it is provided that any act which prevents BT performing its licence obligations and which causes a person, e.g. Mercury, to sustain loss or damage and which is done wholly or partly for that purpose is to be actionable. This would mean that if BT was unable to provide interconnection under the new Agreement and the Director- General was prepared to issue a licence compliance order which was frustrated by the action of the Union, then the result could well be an action arising in Mercury's favour against the union concerned. There are further provisions in the Act about disruption. For example, anyone working for a Public Telecommunications Operator who intentionally modifies or interferes with the contents of a message, is guilty of an offence, as is anyone who, outside the call of his duty, intentionally intercepts a message or intentionally discloses the contents of a message which has been intercepted

Future interconnections Finally, the Determination is certainly not the whole story as regards interconnection and may indeed only be the beginning. Under the Determination it only extends to connection to the BT telephone system, i.e. public switched telephone network, and does not cover interconnection with other parts of BT's system such as the packet switchstream and telex. There will thus in all probability be further negotiations and agreements on such interconnections in the future and again, if these negotiations are unsuccessful, the Director-General can be called upon to make his determination. It is also quite conceivable that Mercury may ask for further connections with the BT telephone system which, if not covered by the existing Agreement, could also lead to additional determinations there. Rather like the China of Mao Tse Tung's time, we appear to be promised "continuous revolution." Colin Long, Solicitor. Report Correspondent

SOFTWARE PIRACY

S O F T W A R E P IRACY IN T H E U.K. - A R E V I E W

The Federation Against Software Theft was the organisation responsible for seeking and obtaining an amendment to the Copyright Act, 1956 thereby clarifying once and for all that copyright subsists in computer software. In addition it was also felt that existing penalties under the 1956 Act were inadequate to deal with persons found guilty of trading in infringing copies of computer software.

The 1985 Amendment The Copyright (Computer Software) Amendment Act 1985 received the Royal Assent on 16 July 1985 and passed into law three months later. The Act applies to computer programs made before the commencement of the new law but was not otherwise retrospective. The following is a summary of the Act and its effects:- Section 1(2) establishes that the 'translation' of a computer

program from one programming language into another is a restricted act requiring the consent of the copyright owner e.g., where a program is converted into a higher level language such as from BASIC into FORTRAN or from a source code to an object code or vice versa.

Section 2 establishes that the storage of any copyright material in a computer is sufficient to be a 'material form' for the purposes of fixing the time at which a copyright work is made and thus establishing the existence of an infringing copy. NB., any work such as a prog,am or a literary work, written directly into a computer, obtains copyright protection from the moment of its creation within the computer, even though it was not first reproduced in ordinary written form. It also establishes that the mere loading of a program into a computer is, of itself, an infringement of copyright unless carried out with the consent of the copyright owner. Section 3 of the Act lays down the penalties which Crown

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