Ipr In Licensing Of Banking Software.
IPR IN-LICENSING OF BANKING SOFTWARE
(With Detailed Case Law Analysis)
1. Meaning of IPR In-Licensing in Banking Software
IPR in-licensing refers to an arrangement where a bank (licensee) acquires the legal right to use intellectual property owned by a software developer or technology company (licensor). In the banking sector, this usually involves core banking systems, payment gateways, mobile banking apps, cybersecurity tools, AI-based credit scoring software, and fraud detection systems.
Since banks rarely develop all software in-house, they rely heavily on licensed proprietary software, making IPR protection crucial.
2. Intellectual Property Rights Involved in Banking Software
(a) Copyright
Protects source code, object code, databases, UI designs
Governed under the Copyright Act, 1957
Automatically arises once software is created
(b) Patents
Protect novel technical processes (e.g., encryption algorithms, transaction verification systems)
Must satisfy novelty, inventive step, and industrial applicability
(c) Trade Secrets
Includes algorithms, business logic, security architecture
Protected through NDAs and confidentiality clauses
(d) Trademarks
Brand names of software platforms (e.g., payment apps, banking suites)
3. Importance of IPR In-Licensing in Banking
Ensures legal use of software
Prevents copyright infringement liability
Protects banks from cybersecurity and data breach risks
Defines scope, duration, customization, and ownership of modifications
Clarifies liability in case of system failure or fraud
DETAILED CASE LAWS
Below are six important cases, explained in depth, relevant to banking software licensing and IPR.
CASE 1: Tata Consultancy Services v. State of Andhra Pradesh
(2005) 1 SCC 308
Facts:
TCS supplied customized banking software to various clients. The State of Andhra Pradesh sought to levy sales tax on software, claiming it was “goods.”
Issue:
Is software intellectual property or goods?
Does licensing software involve transfer of IPR?
Judgment:
The Supreme Court held that:
Software (both canned and customized) is “goods”
However, copyright in software remains with the developer
Licensee only gets the right to use, not ownership
Relevance to Banking Software:
Banks do not own software merely because they paid for it
Copyright remains with the licensor unless expressly assigned
Reinforces importance of clear IPR licensing clauses
Legal Principle:
A software license is a limited right to use intellectual property, not a sale of ownership.
CASE 2: Infosys Technologies Ltd. v. Jupiter Infosys Ltd.
(2010) Delhi High Court
Facts:
Infosys licensed proprietary software solutions. A former partner allegedly copied banking-related software modules and used them commercially.
Issue:
Whether unauthorized copying of licensed software amounts to copyright infringement.
Judgment:
The court held:
Source code and object code are protected under copyright
Licensee cannot exceed the scope of permitted use
Reverse engineering without permission is infringement
Relevance to Banking:
Banks cannot:
Share licensed software with third parties
Modify source code without permission
Strengthens protection for core banking solutions
Legal Principle:
License terms strictly define the extent of lawful use of banking software.
CASE 3: Citicorp International Ltd. v. K. Venkata Rao
(1996) Andhra Pradesh High Court
Facts:
Citibank licensed proprietary banking software and operational manuals. Former employees used confidential software-related information after leaving employment.
Issue:
Whether confidential software information can be protected as trade secrets.
Judgment:
The court recognized:
Banking software architecture and processes are trade secrets
Unauthorized disclosure is actionable even without patent or copyright
Relevance:
Protects algorithms, security protocols, transaction processing logic
Emphasizes NDAs in software licensing agreements
Legal Principle:
Confidential banking software information enjoys protection even without formal IP registration.
CASE 4: SAS Institute Inc. v. World Programming Ltd.
(Court of Justice of the European Union, 2012)
Facts:
SAS licensed analytical software to banks. WPL created a competing product by observing SAS’s behavior without copying source code.
Issue:
Can software functionality and programming language be copyrighted?
Judgment:
The court held:
Functionality and ideas are not protected
Only expression (source code) is protected
However, copying manuals or documentation is infringement
Relevance:
Banks may develop interoperable systems
Cannot copy licensed code or documentation
Highlights limits of IPR in software licensing
Legal Principle:
Copyright protects expression, not functionality.
CASE 5: American Express Bank Ltd. v. Priya Puri
(2006) Delhi High Court
Facts:
A senior executive accessed proprietary banking software systems and shared confidential operational data after leaving employment.
Issue:
Whether software-based confidential information deserves protection.
Judgment:
The court restrained the defendant from using:
Confidential banking systems
Software-enabled customer data
Relevance:
Reinforces the protection of banking software data
Strengthens post-employment restrictions
Legal Principle:
Banking software systems and data are critical IP assets deserving injunctive relief.
CASE 6: Microsoft Corporation v. Yogesh Papat
(2005) Delhi High Court
Facts:
Unauthorized use of licensed Microsoft software by businesses, including financial service entities.
Issue:
Whether unlicensed use amounts to infringement even if software is internally used.
Judgment:
The court held:
Use without license is infringement
Commercial entities must maintain proper licensing
Relevance:
Banks must ensure:
Valid licenses
Compliance audits
Heavy damages possible for infringement
Legal Principle:
Internal commercial use without license violates copyright law.
4. Key Legal Issues in Banking Software Licensing
Ownership of customizations
Right to modify source code
Data ownership vs software ownership
Liability for software failure
Exit clauses and vendor lock-in
Compliance with RBI cybersecurity norms
5. Conclusion
IPR in-licensing of banking software is central to modern banking operations. Courts consistently uphold that:
Banks are licensees, not owners
Copyright, trade secrets, and confidentiality are strongly protected
License terms define rights and liabilities
Misuse can result in injunctions and damages
A well-drafted software license agreement is therefore as important as the software itself.
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