1.  The Defend Trade Secrets Act is a federal statute.

2.  The Uniform Trade Secrets Act has been enacted (sometimes with minor variations) in 48 states, D.C., Puerto Rico, and U.S. Virgin Islands.

A party claiming that particular informatin is a trade secret must introduce legally-sufficient evidence — and persuade the judge or jury by a preponderance of the evidence — of the following:

1. Reasonable efforts were made to maintain confidentiality.
2. The information in question "derives independent economic value, actual or potential, from [i] not being generally known to, and [ii] not being readily ascertainable through proper means by, another person [iii] who can obtain economic value from the disclosure or use of the information" — from the Defend Trade Secrets Act definition, 18 U.S.C. § 1839(3).

Published information can't be a trade secret.

Patented information is (by definition) published.

Rule 1: Lock It Up — within reason.

Rule 2. Label It — ditto: Marking of confidential information is important: Courts help those who help themselves, when it comes to protecting confidential information.

Rule 3. "Safe Sex":

• Be choosy about the "partners" to whom you disclose — or from whom you receive — confidential information;
• Use "protection," in the form of a confidentiality agreement ("NDA") OR a no-confidentiality agreement.

Employees generally don't need to sign NDAs to be legally obligated to protect their employers' confidential information — the law automatically imposes such an obligation (referred to as an "implied-in-fact" obligation).

But it's a good idea for companies to have their employees sign at least a bare-bones confidentiality agreement (for use as a sound bite).

1.  Two-way NDAs, protecting each party's (eligible) information, are usually better than one-way NDAs that protect only one party's information.

2.  Marking: Requiring marking of confidential information (e.g., in an NDA) can be problematic, because compliance isn't always 100%.

Upon proof of misappropriation, a court might:

• award compensatory damages such as:
  • the trade secret owner's lost profits;
  • possibly the misappropriator's profits from the infringement ("disgorgement");
  • possibly a reasonable royalty;
• award punitive damages;
• injunctive relief, e.g., ordering the misappropriator to stop selling / using the misappropriated information.

(Optional further reading: Marylee Robinson and Neil Eisgruber, Trade Secret Damages: A Look at Available Remedies (2016).

FACTS: Alice, an experienced BBQ cook, goes to work for the Baade Company BBQ restaurant and is taught how to make that restaurant's sauces and meat rubs. After working for Baade Company for three months, Alice leaves to take a better-paying job at Crusty Meats, another BBQ restaurant,

Optional reading (totally unrelated): Obituary of Hans Baade (pronounced "BAA-daa"), one of my favorite professors at UT Law.

1. QUESTION: Could Baade Company sue Alice for misappropriation of trade secrets? Why or why not?
2. QUESTION: Could Baade company sue Crusty Meats for misappropriation? Why or why not?
3. QUESTION: What sorts of facts might Baade Company's trial counsel want to put in front of the jury as indirect evidence of misappropriation?
4. QUESTION: At trial — with 20-20 hindsight — what sorts of actions might Baade Company wish it had taken earlier to provide more evidence for its trade-secret case?
5. QUESTION: If Baade Company were to successfully sue Alice and/or Crusty Meats for misappropriation of trade secrets, what might the court order as "remedies" for the misappropriation?

DIFFERENT FACTS: The experienced BBQ cook leaves Baade Company and opens her own BBQ restaurant. She uses her own, different recipes but closely copies the architecture and kitchen-equipment layout of the Baade Company restaurant.

6. QUESTION: Could Baade Company successfully sue for misappropriation of trade secrets?
   • Optional reading: Taco Cabana Int'l, Inc. v. Two Pesos, Inc., 932 F.2d 1113, 1123 (5th Cir. 1991), aff'd as to trade-dress issue, 505 U.S. 763 (1992). See especially the Fifth Circuit's discussion of the standard of review, i.e., how little latitude an appellate court has in reviewing a jury verdict.

Consider sports plays:

1. QUESTION: In basketball, would a pick-and-roll play be considered a trade secret? Why or why not?
2. Would the Houston Rockets' playbook be considered a trade secret? How about the Los Angeles Dodgers' pitcher-catcher hand "signs"? (Too soon?)

Optional reading: Rice Ferrelle, Combating the Lure of Impropriety in Professional Sports Industries: The Desirability of Treating a Playbook as a Legally Enforceable Trade Secret, 11. J. Intell. Prop. L. 149, parts III, IV (2003).

FACTS:

• For a popular line of keyed locks, duplicate keys can be made by "reverse engineering" the tumbler combinations (something locksmiths can do).
• A locksmith reverse-engineers the tumbler combinations for that line of keyed locks and publishes a book of the combinations, allowing locksmiths to make duplicate keys for the locks.
• The manufacturer of the line of locks sues for misappropriation of trade secrets.
• QUESTION: What result?
• Optional reading: Chicago Lock Co. v. Ely, 676 F.2d 400, 403-04 (9th Cir. 1982).

Under copyright law, making copies; distributing copies; creating "derivative" works; public display or -performance

Fair use: Eric Goldman cheat sheet. Two Live Crew

This law-firm summary

This law-firm summary

• Security interest in IP?

What can be "copyrighted"

How long does copyright last

Who is the "author"

• Recapture rights for copyright

Royalties

• Royalty stream - record keeping, audit rights

Assignability

• Export restrictions
• Former employers
• Invention assignment agreement
• Joint development agreement
• License  - out, in
• FOCUS ON RESOURCES?
  • Talent
  • Secrets
  • Authorship
  • Inventions
  • Data
  • Non-rivalrous
  • How to stop others from using yours
    • Deadlines - patent, copyright
    • Monitoring
  • How to use others’ resources
    • Reverse-engineering
    • Invalidate their legal rights
    • Buy access - what price?
• DIAGRAMS?

• Check out everyone's previous contracts
  • NDAs
  • Noncompetes
  • IP assignment agreements
  • Set to experimenting?
  • Corporate officer?
• Look for trade secrets
  • Three Rules
  • NDAs
• Look for copyrightable material
  • [LIST]
• Patentable inventions
  • Deadlines for filing
  • Under the hood?
• Look at things from the former employer's perspective

What would an acquirer want? An investment bank?

1. IP is protected.
2. IP is owned.
3. No third-party IP threats.

• Can go to court / arbitration to sue someone doing things.

Preliminary injunction: Jump through hoops: California software-development case: Integrated Dynamic Solutions, Inc. v. VitaVet Labs, Inc., 6 Cal. App. 5th 1178 - Cal: Court of Appeal, 2nd Appellate Dist., 2nd Div. 2016

How much second-guessing? Election results

Jury verdict

Bench trial

De novo

Discretion / arbitrary and capricious - see https://scholar.google.com/scholar_case?case=2399151225087672871&hl=en&as_sdt=6,44&as_vis=1 (Fed. Cir. discussion of Zurko, arb. & capr. vs. subst. evid.)

Administrative determination

Genericness - Booking.com SCOTUS case - genericness - from ABA IPL summary: The Court held that a “generic.com” term is only generic for a class of goods or services if consumers perceive the term as the name of the class of goods or services. The Court rejected the USPTO’s argument that, like “Generic Company,” every “generic.com” term is generic, regardless of consumer perception. Instead, the Court held that because “Booking.com” is not a generic name to consumers, it is not generic and therefore qualifies for trademark protection. The Court also rejected the USPTO’s argument that trademark protection for “generic.com” marks would hinder competitors, noting that the registration of “Booking.com” would not give Booking.com a monopoly on the term “booking,” preventing competitors from using the word “booking” to describe their own services.

From ABA IPL summary: Sock It To Me, Inc. v. Aiping Fan, Opposition No. 91230554, 2020 U.S.P.Q.2d 10611 (T.T.A.B. June 3, 2020). Applicant Aiping Fan filed a trademark application for registration of SOCK IT UP in connection with socks in class 25. Opposer Sock It To Me opposed Aiping Fan’s application, alleging that SOCK IT UP was likely to cause confusion under section 2(d) with its registered mark SOCK IT TO ME for socks and stockings. The opposer also claimed that the applicant, an individual residing in China, did not own the mark when the application was filed, and therefore the application was void ab initio. The opposer alleged that a different entity (JY Instyle) used the mark in the U.S. and was the true owner of the mark. The applicant indicated that it had selected the mark for use in the U.S. and had granted JY Instyle an oral license to use the mark on socks. Thus, according to the applicant, use of the mark by JY Instyle was attributable to the applicant, as JY Instyle was a related company and such use inured to the benefit of the applicant. The Trademark Trial and Appeal Board (TTAB) considered whether the applicant (as licensor) exercised sufficient control over the quality of the goods produced under the SOCK IT UP mark by its licensee (JY Instyle). Based on the evidence, the TTAB found that the applicant had established quality control over the source of manufacturing and type of fabrics used to make the socks, and that JY Instyle had inspected the goods to ensure that they complied with the applicant’s standards. Thus, the TTAB concluded that the applicant owned the SOCK IT UP trademark when it was filed.

From ABA IPL update: Dana-Farber Cancer Institute, Inc. v. Ono Pharmaceutical Co., 964 F.3d 1365 (Fed. Cir. 2020). The Federal Circuit affirmed the district court’s inventorship conclusion, finding that the alleged joint inventors made numerous significant contributions to the claimed subject matter. The Federal Circuit noted that conception is the touchstone of the joint inventorship inquiry. The Federal Circuit also explained that reduction to practice does not need to occur at the moment of conception for purposes of identifying correct inventors and that joint inventorship does not depend on whether a claimed invention is novel or nonobvious over a particular researcher’s contribution.

ITC exclusion order

Royalties

Lost profits

Injunction

Apple case - Van Os: https://scholar.google.com/scholar_case?case=5701159846054719385&hl=en&as_sdt=6,44&as_vis=1

Adidas v. Nike: https://scholar.google.com/scholar_case?case=16362290740445716484&hl=en&as_sdt=6&as_vis=1&oi=scholarr

From ABA IPL summary: Packet Intelligence LLC v. NetScout Systems Inc., 965 F.3d 1299, 2020 U.S.P.Q.2d 10776 (Fed. Cir. 2020). The Federal Circuit reversed and vacated the district court’s presuit damages award and enhancement thereof, finding that the district court’s jury instruction on the marking requirement conflicted with an intervening Federal Circuit case, Arctic Cat Inc. v. Bombardier Recreational Products Inc., 876 F.3d 1350, 1368 (Fed. Cir. 2017). Specifically, Arctic Cat held that the patentee must prove that the products practiced the patent; however, the jury instruction placed the burden on NetScout to show that certain products did not practice the asserted patent. After properly placing the burden on the patentee, the Federal Circuit found that Packet Intelligence failed to present substantial evidence to the jury that the unmarked MeterFlow product practiced any asserted patent claim. The Federal Circuit also rejected Packet Intelligence’s attempt to preserve the damages award through the direct infringement of the related, and also asserted, method patent. The Federal Circuit held that (1) there was no evidence supporting damages from NetScout’s presuit internal use and testing of the patented method; and (2) Packet Intelligence could not circumvent § 287 by arguing that NetScout’s infringement of the related method claims drove accused product sales. The Federal Circuit affirmed the district court’s judgment in all other respects.

Slim Jims KFC Coke

If you patent a trade secret formula, will it still be entitled to protection as a trade secret?

9th Cir. - Dr. Seuss v. Star Trek guys re "O the places you'll boldly go"

ABA IPL article: In Solid Oak Sketches, LLC v. 2K Games, Inc., a Manhattan federal judge dismissed a tattoo licensing company’s copyright infringement claim against two video game companies that developed and published basketball simulation games depicting realistic renderings of NBA players and their tattoos.1 Across the bridge in Brooklyn, another federal judge, in LMNOPI v. XYZ Films, LLC, dismissed a copyright action against a film production company that had depicted a mural in the opening scene of a film without the artists’ permission.2 There are many more decisions of this ilk that tend to float under the radar but warrant a brighter spotlight, some of which are discussed below. * * *  On the defendants’ summary judgment motion, the court held that Solid Oak’s copyright infringement claim must fail for a number of reasons, including because the defendants established that the tattoo artists had previously granted the players nonexclusive licenses to use the tattoos as part of their likenesses. The court concluded that the facts before it, based on the declarations of two of the tattoo artists and one of the game developers, strictly satisfied the three-factor test: (1) the players each requested the tattoos, (2) the tattoo artists created the tattoos and inked them on the players’ bodies, and (3) the tattoo artists intended that the players would copy and distribute the tattoos as elements of their likenesses. In discussing the intent element, the court found that each tattoo artist knew that the players were likely to appear “in public, on television, in commercials, or in other forms of media.”21 Because no limitations on the display or depiction of the tattoos were discussed, the players therefore had implied licenses to use the tattoos as elements of their likenesses, and the artists even admitted as much in their sworn statements. And by the players giving the NBA the right to license their likeness to third parties, including for use in the video games, the license extended to the defendants.

From ABA IPL summary: Zindel v. Fox Searchlight Pictures, Inc., No. 18-56087, 2020 WL 3412252, 2020 U.S.P.Q.2d 10688 (9th Cir. June 22, 2020). Zindel sued for copyright infringement of his father’s play, Let Me Hear You Whisper, against the defendants for the film and book, The Shape of Water. The district court dismissed the complaint on the ground that the film and book were not substantially similar to the play as a matter of law. The Ninth Circuit found that the district court erred and reversed, concluding that reasonable minds could differ as to whether there could be substantial similarity between the works. The Ninth Circuit determined that while the works were properly presented to the district court, additional evidence, such as expert testimony, would aid in deciding whether there are similarities in the protectable elements of the works.

From about 1969 to 1981, the Court of Customs and Patent Appeals (CCPA) battled the Supreme Court on the issue of software patentability. The CCPA, notably in a series of opinions by Judge Giles S. Rich (one of the two principal drafters of the 1952 Patent Act), held that software-related technology could be patented if it met the usual tests of novelty, utility, and non-obviousness. See, e.g., In re Musgrave, 431 F.2d 882 (CCPA 1970) (Rich, J.) (reversing PTO rejection of claims to a method of correcting seismogram signals received back from geological formations in the earth's crust); In re Tarczy-Hornoch, 397 F.2d 856 (CCPA 1968) (Rich, J.) (reversing rejection of claims directed to a method for sorting or counting electrical pulses).

But in its famous Benson and Flook opinions, the Supreme Court slapped down the CCPA, each time holding that software technology was “nonstatutory subject matter” that could not be patented. See Gottschalk v. Benson, 409 U.S. 64 (1972) (Douglas, J.) (reversing CCPA and approving PTO rejection of claims to method for performing a particular mathematical operation), reversing In re Benson, 441 F.2d 682 (CCPA 1970) (Rich, J.); Parker v. Flook, 437 U.S. 584 (1978) (reversing CCPA and approving PTO rejection of claims to method of updating an alarm limit in a catalytic conversion process). Interestingly, the Court did not deign even to cite, let alone discuss, any of the CCPA's body of work in this area.

The Court started to change its tune in its 5-4 Diehr decision of

1. See Diamond v. Diehr, 450 U.S. 175 (1981). Citing Chakrabarty,

supra, the Court held that a method for curing rubber was not necessarily unpatentable just because it was implemented in software.

Even so, for over a decade the CCPA – perhaps still smarting from the previous confrontations – took a fairly conservative approach to software patentability. The result was what became known as the “/Freeman-Walter-Abele/” test (now obsolete as discussed below). See In re Freeman,@BEGINFreeman@END 573 F.2d 1237, 1243‑45 (CCPA 1978); In re Walter, @BEGINWalter@END 618 F.2d 758, 767 (CCPA 1980); In re Abele, 684 F.2d 902 (CCPA 1982).

In 1982 the CCPA was succeeded by the newly-created Court of Appeals for the Federal Circuit, which was given jurisdiction over appeals in essentially all patent cases in order to develop a uniform body of patent law. See 28 U.S.C. § 1295(a)(1); Cable Electric Products, Inc., v. Genmark, Inc., 770 F.2d 1015, 1032 (Fed. Cir. 1985) (Congress created the Federal Circuit with the specific mission of achieving doctrinal uniformity in patent law). Beginning in the late 1980s, the Federal Circuit was forced to confront the difficulties of the Freeman-Walter-Abele test and to reexamine the issue of software patentability. The major cases from this era include:

• In re Grams, 888 F.2d 835 (Fed. Cir. 1989) (affirming PTO rejection of claims to method of diagnosing an abnormal condition in an individual);
• In re Iwahashi, 888 F.2d 1370 (Fed. Cir. 1989) (reversing PTO rejection of patent application for auto-correlation unit in voice recognition);
• Arrhythmia Research Technology, Inc., v. Corazonix Corp., 958 F.2d 1053 (Fed. Cir. 1992) (reversing summary judgment of invalidity of patent on a “number crunching” method of analyzing EKG signals to predict whether a heart attack patient might suffer from ventricular tachycardia);
• In re Schrader, 22 F.3d 290 (Fed. Cir. 1994) (affirming PTO rejection of claims to system for managing bids for parcels of land);
• In re Warmerdam, 33 F.3d 1354 (Fed. Cir. 1994) (affirming pertinent PTO rejections of patent application for robot control system);
• In re Trovato, 42 F.3d 1376 (Fed. Cir. 1994) (affirming PTO rejection of patent application for method for determining the shortest path over which an object could be moved between two points), vacated and remanded, 60 F.3d 807 (Fed. Cir. 1995) (en banc);
• In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994) (en banc) (reversing PTO rejection of patent application for a rasterizer, i.e., means for creating a smooth waveform display in a digital oscilloscope);
• In re Lowry, 32 F.3d 1579 (Fed. Cir. 1994) (reversing PTO obviousness rejection [there was no statutory-subject-matter rejection] of claims directed to “[a] memory for storing data . . . comprising: a data structure stored in said memory” where the data structure was organized in a useful and nonobvious way).

In evaluating the nonobviousness of a claimed invention, the ultimate question is whether the prior activities and publications of others would have made the claimed invention obvious to a hypothetical person of ordinary skill at the time it was invented. The phrase “hypothetical person of ordinary skill” is an important one. What counts is not what would have been obvious to the inventor (who may be of far greater – or lesser – skill than those of ordinary skill), but instead what would have been obvious to those who were practicing the art or arts in question. See generally, e.g., Custom Accessories, Inc., v. Jeffrey-Allan Industries, Inc., 807 F.2d 955, 962‑63 (Fed. Cir. 1986) (factors involved in determining level of ordinary skill); Bausch & Lomb, Inc., v. Barnes-Hind/Hydrocurve, Inc., 796 F.2d 443, 447 (Fed. Cir. 1986) (inventor's subjective belief of obviousness not dispositive of the issue).

A shorthand metaphor sometimes used by the courts is: Consider a worker of “ordinary” skill in his workshop. Hanging on the workshop walls are all the prior patents, publications, known devices, etc., that such a worker might consult and study if he were diligently researching a problem and how to solve it. Assume that this worker is familiar with all of these materials. The worker is assumed to be an ordinary worker and not someone who seeks to innovate. See Standard Oil Co. v. American Cynamid Co., 774 F.2d 448, 454 & n.3 (Fed. Cir. 1985), citing In re Winslow, 365 F.2d 1017 (CCPA 1966), and In re Antle, 444 F.2d 1168 (CCPA 1971).

Generally speaking, the question is: would these materials have suggested or taught, to such a worker, the subject matter that is being claimed by the patent owner, as set forth in the claim's checklist of elements? If so, the claimed subject matter would have been obvious and is unpatentable to the claimant; otherwise not. E.g., ACS Hospital Systems, Inc., v. Montefiore Hospital, 732 F.2d 1572, 1577 (Fed. Cir. 1984).

The Supreme Court laid down the basic analytical requirements for determining nonobviousness in Graham v. John Deere & Co., 383 U.S. 1 (1966). A decisionmaker inquiring into the nonobviousness question must ascertain (1) the scope and content of the prior art; (2) the level of ordinary skill in the art; and (3) the differences between the prior art and the claimed subject matter as a whole. Giving due weight to any circumstantial evidence, the decisionmaker must rule whether the claimed subject matter would have been obvious. See id. at 17‑18; Panduit Corp. v. Dennison Mfg. Co., 810 F.2d 1561, 1567 (Fed. Cir. 1987). The ultimate question of obviousness is one of law. Panduit, 810 F.2d at 1566‑67.

Evaluating the obviousness of an invention in retrospect can be difficult. As noted above, the courts have held that hindsight is not the proper perspective — hindsight reconstruction of the claimed invention, “using `the patent in suit as a guide through the maze of prior art references, combining the right references in the right way so as to achieve the results of the claims in suit,'“ is impermissible. Grain Processing Corp. v. American Maize-Products Corp., 840 F.2d 902, 907‑08 (Fed. Cir. 1988) (citation omitted). Once the invention is known, however, by definition a certain amount of hindsight is involved. Add to this difficulty the fact that judges and juries are frequently untrained in technological matters.

Consequently, the courts attempt to look at “objective” evidence, which can aid in deciding the obviousness question by viewing it through the eyes of others. Nonobviousness can be (but is not necessarily) objectively indicated in a number of ways:

• commercial success that is linked with the specific subject matter being claimed by the inventor;
• unexpected results or -properties;
• copying by others;
• accolades from others in the field;
• initial skepticism on the part of those skilled in the art;
• satisfying a long-felt need;
• solving a problem that had stumped others;
• licenses showing industry respect.

"These objective considerations can protect against the prejudice of hindsight bias, which often overlooks that the genius of invention is often a combination of known elements which in hindsight seems preordained."

Objective evidence of this kind often can be the most probative evidence of the nonobviousness of the claimed subject matter. Commercial success in particular can provide strong evidence of nonobviousness, because:

• Commercial success implies that there was money to be made with the invention;
• If the invention had in fact been obvious, the chances are that someone would have done it before;
• By hypothesis, the invention is novel (otherwise for that reason alone it would be unpatentable);
• Therefore, the commercial success indicates that the invention also was nonobvious.

BUT: Courts won't give any weight to objective evidence of nonobiousness unless the patent owner shows a nexus (a connection) between, e.g., the commercial success and the merits of the claimed invention. For example, evidence of gross sales alone won't establish commercial success — market share is what counts. And in any case, the patent owner must show that the commercial success was due to the technical quality of the patented subject matter and not to other factors such as extensive advertising or the patent owner's preexisting leadership in the market.

Note that the absence of objective evidence of nonobviousness does not establish the obviousness of the invention and is only a “neutral” factor.

In the United States (but not in most other countries), inventors have one year – no extensions can be obtained – in which to get a patent application on file after any of a number of events occur. See 35 U.S.C. § 102(b) (list of events that start the one-year clock running). The rationale for the grace period arises from a balance of two competing factors. The law regards it as undesirable policy to allow an inventor to take a long time to build up the market for his or her invention, and to wait until then to apply for years of patent protection. On the other hand, not every invention will be commercially significant enough to justify the cost of immediately preparing a patent application. Accordingly, U.S. law makes a compromise: it allows inventors a limited, one-year grace period in which to file a patent application.

A single offer for sale (or license) of the claimed subject matter in the U.S. can start the clock running. The offer, however, must be “objectively manifested” and “definite.” E.g., Envirotech Corp. v. Westech Eng'g Inc., 904 F.2d 1571, 1574, 1575 (Fed. Cir. 1990) (party asserting the bar “must prove by clear and convincing evidence … that there was a definite sale or offer to sell more than one year before the application for the subject patent”).

In some circumstances, simply exploring the market might not be enough to start the one-year clock running. E.g., Seal‑Flex, Inc. v. Athletic Track & Court Constr., 98 F.3d 1318, 1321 (Fed. Cir. 1996) (noting that “summary disposition is negated” when there is a genuine question “whether the inventor was merely exploring the market or had made an unconditional offer to sell ….”). /See also Articulate Systems, Inc.

1. Apple Computer, Inc./, No. 96-10345-RGS, 1999 WL 307928 (D. Mass. May

11, 1999) (denying summary judgment; fact issue existed as to whether voice-recognition software developer's meetings with prospective purchasers involved sufficiently definite offers to constitute “offers for sale”).

An invention can be the subject of an offer for sale, even though it has not actually been built yet. Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 119 S. Ct. 304 (1998) (affirming Federal Circuit reversal of district court's holding that invention was invalid because it was on sale more than one year before the critical date, but rejecting Federal Circuit's test for determining whether an invention was on sale).

In Pfaff, the Supreme Court adopted a two-part test for determining whether an invention had been offered for sale:

• First, the invention must be the subject of a “commercial offer for sale,” and second, the invention must be “ready for patenting.”

  • The second element, readiness for patenting, can be proved by proof of “reduction to practice before the critical date.” Id., 119 S. Ct. at 307 n.2 (citation omitted). Alternatively, readiness for patenting can be proved by showing that prior to the critical date, the inventor had prepared drawings or other descriptions of the invention that were sufficiently specific to enable a person skilled in the art to practice the invention. Id., 525 U.S. at __ & n.14, 119 S. Ct. at 312 & n.14.

Granting a license to a third party to commercialize an invention, without more, does not trigger the on-sale bar. In re Kollar, 286 F.3d 1326 (Fed. Cir. 2002) (reversing PTO rejection of patent application).

Sales or licenses to beta testers may come within an “experimental use” exception, but also might not qualify for such an exception. See § 3.5[c][5].

Any “public” use of the claimed subject matter in the U.S. can bar a patent if more than a year goes by. Use of invention is “public” if it is for gain, even if secret. Kinzenbaw v. Deere & Co., 741 F.2d 383 (Fed. Cir. 1984), citing Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516 (2d Cir.) (L. Hand, J.).

Thus, an e-commerce company's internal use of a new computer program to control its own Web site is probably public use.

“Experimental” use devoted to proving the concept might not be public use, but use that is primarily commercial and only incidentally experimental may well be public use, as discussed above.

Any description of the claimed subject matter in a “printed publication” anywhere in the world, and in some circumstances a description in an issued patent anywhere in the world, will usually start the one-year clock running. See 35 U.S.C. § 102(b). The key to whether a given paper, master's thesis, on-line database item, etc., qualifies as a printed publication is usually whether the document is indexed so as to be locatable by a diligent researcher in the field of art in question.

And of course, if any of these events took place before the inventor's invention of his invention (that sounds awkward, but is basically how it is set forth in the patent statute), then the invention may be unpatentable anyway because the inventor was not the first. See 35 U.S.C. § 102(a).

In any given case, the date on which the clock starts running is often extremely fact-intensive (and hard-fought in litigation). In particular, the term “experimental,” as applied to public use or commercial use, is one that depends heavily on the facts of the case.

Beta testing of software may or may not start the one-year clock running, depending on what the specific beta-testing arrangements are. In some circumstances, beta testing may be “experimental” use that does not begin the one-year grace period. In proving the experimental nature of the use, it helps if the beta testers are subject to a written obligation of confidence (but confidentiality alone will not necessarily establish experimental use). In other situations, use of software by beta testers might, or might not, be “public” or “commercial” use that starts the one-year clock running. The deadline for filing a patent application might be a year after the first such use, even though the general release of the software might have been months thereafter. The safest bet is ordinarily to assume the worst, and to file a patent application less than one year after the first beta shipment or beta use of any kind.

Selected cases:

City of Elizabeth v. American Nicholson Pavement Co., 97 U.S. 126 (1878): In this “granddaddy” of experimental-use cases, the Supreme Court held that a patent owner's use of a patented road paving material on privately owned toll road, for six years prior to filing of application for patent, was “experimental” and did not bar the patent.

Paragon Podiatry Laboratory, Inc. v. KLM Laboratories, Inc., 984 F.2d 1182, 1185-87, 1190-93 (Fed. Cir. 1993): The Federal Circuit affirmed a summary judgment that patent was invalid. The patented orthotic device had been sold prior to one year before the application filing date. The court held that such sales were not “experimental,” despite inventor's affidavit to that effect. The patent owner had published price lists and sales letters that did not mention testing but did refer to “exhaustive clinical testing” and “lifetime guarantee.” In addition, the patent owner had not retained control of the orthotic devices, nor restricted their use. In addition, the court affirmed a summary judgment of inequitable conduct (see § 3.5[g][2]) for knowing failure to disclose the barring sales to patent examiner.

Manville Sales Corp. v. Paramount Systems, Inc., 917 F.2d 544, 551 (Fed. Cir. 1990): The Federal Circuit described the distinctions between barring “public” use vs. nonbarring “experimental” use.

Kinzenbaw v. Deere & Co., 741 F.2d 383 (Fed. Cir. 1984): The Federal Circuit held that secret use of a patented process for gain prior to the critical date was a barring “public” use.

TP Laboratories, Inc., v. Professional Positioners, Inc., 724 F.2d 965 (Fed. Cir. 1984): The court held that pre-critical-date use of a patented dental appliance on orthodontal patients had been experimental use.

Most foreign countries do not allow the one year grace period that is provided by the United States. Consequently, if protection is desired in other countries, publication and commercialization efforts, and even beta testing, usually should be held up until after the U.S. application is filed. And for some countries (notably Taiwan), such efforts should be delayed until the application is filed in that country.

However, most countries will recognize each others' patent application filing dates for up to one year. For example, filing a patent application in the U.S. gets the inventor a priority date for France, as long as a French application is filed within one year after the U.S. filing date.

Two additional points should be noted about applying for patent protection in other countries:

(i) A foreign-filing license from the U.S. Patent and Trademark Office, similar to an export license, is required before filing in foreign countries. See 35 U.S.C. §§ 184‑185 (foreign-filing licensing requirement).

(ii) Many foreign countries do not allow patent protection for software to begin with.

A company filing a patent application can take advantage of at least two opportunities for creating useful trial exhibits in the body of the patent itself:

(i) Flow charts, included as part of the drawings of the patent application, can be used by a technical expert witness at trial in talking the jury through how the invention actually works. Because the patent itself will go back into the jury room during the jury's deliberations, the drawings can be a helpful aid to the jury.

(ii) Pseudocode, i.e., a quasi-English description of the functions performed by the software, can also be used as a teaching tool by an expert witness who talks through the pseudocode for the jury.

Because disclosure of source code in a patent application is not required, see § 3.4[c], many applicants elect not to disclose source code because of a real or imagined concern that competitors would learn more from the source code than is required to be disclosed by statute. But inclusion of source code in a patent application can have some distinct advantages.

(i) A patent application with source code is probably cheaper and quicker to write than the same application without source code. When source code is disclosed, the drafter of the patent application can focus on explaining the significance of the program steps and need not spend time elaborating on details already disclosed in the code.

(ii) If the prior art turns out to be closer than previously thought, inclusion of source code can permit the patent attorney to draft new claims directed to specific implementation details that are disclosed in the source code but not in the actual patent-application text.

(iii) Source code can be an insurance policy against substantive errors in explaining the invention in the patent application. The statute provides that “new matter” cannot be added to a patent application after it is filed. See 35 U.S.C. § 132(a). If the patent attorney who drafts the patent application makes a mistake in describing some aspect of the invention, and if the inventor does not catch the mistake until after the application is filed, a source-code appendix can be used to support a later post-filing amendment to correct the mistake despite the new-matter prohibition.

(iv) Disclosure of source code can help shield a patent application and any subsequent patent against challenges on best-mode or enablement grounds (see § 3.4[a] and § 3.4[b]). A jury is less likely to be convinced that the patent contains an insufficient disclosure if the source code is included.

Actual code (source or executable) can be disclosed in several different ways. An appendix can be submitted either in microfiche (if more than 10 printout pages) in accordance with specified standards, see Submission of computer program listings, 37 C.F.R. § 1.96(b), or in hard copy. Id. at § 1.96(a)(2). If hard copy is submitted, it should either come after the specification and before the claims and be numbered accordingly, see id. (some examiners take literally the requirement of 35 U.S.C. § 112 that the specification “conclude” with one or more claims), or it can be submitted as drawings if ten pages or less. See id.

The competitive dangers of including source code in a patent application will vary with the circumstances. Patent applications normally are kept secret by the Patent and Trademark Office (PTO) unless and until a patent issues (or unless a foreign counterpart patent application is filed, in which case the U.S. application will be published approximately 18 months after its filing date under recent amendments to 35 U.S.C. § 122(b)). See Patent applications preserved in secrecy, 37 C.F.R. § 1.14. Public disclosure of the source code therefore is probably some time off. Unless the source code's owner does nothing to improve the code during the intervening period, a competitor studying the code may well be studying old technology — and probably will have committed to its own design by that time anyway. (The potential influence on competitors of the not-invented-here syndrome also should not be underestimated.) Because disclosure of source code is not required, it can be considered on a case by case basis. Business risks are involved either way; the proprietor of the software can determine which risk it prefers to take.

A company that files a patent application can “strengthen” any resulting patent by aggressively disclosing prior art to the PTO. By statute, a patent is presumed to be valid, and each claim is presumed valid independently of the validity of any other claims. See 35 U.S.C. 283; see also § 3.8[d] . In addition, patent owners usually benefit from a real-world psychological bias, on the part of judges and especially jurors, in favor of believing that the PTO did a good job.

But the PTO's search library is far from perfect; the patent examiner might well have been unaware of important prior art. This is especially true in the software field, where much prior art is not documented in patents or printed publications.

With that in mind, now suppose that an accused infringer claims that a patent is invalid because of prior art. The court, and especially the jury, will naturally take into account whether or not the PTO considered the prior art in question during the patent-examination proceedings:

(i) If the accused infringer can point only to prior art that was already considered by the patent examiner, it will have a very tough time convincing the jury that the patent is invalid.

(ii) On the other hand, if an accused infringer is able to come up with significant prior art that was not considered by the patent examiner, then the accused infringer's trial counsel will surely beat the drum about the fact that the PTO did not know about it.

A company filing a patent application can therefore consider doing a prior-art search of its own, with an eye toward stealing a defendant's thunder at trial. Some possible places to search include:

• Software Patent Institute database: http://www.spi.org/
• PTO database: See http://www.uspto.gov/patft/index.html
• EPO worldwide database - See http://ep.espacenet.com/
• Gregory Aharonian: http://www.patent-software.com/STO.htm

Disclosing known material prior art and other known material information to the PTO is more than just a good idea; it's the law. A patent applicant (as well as certain others associated with the prosecution of the patent application) has an affirmative legal duty to disclose to the PTO all known “material” information. Failure to comply with that duty can render the patent unenforceable for “inequitable conduct” in the PTO. See 37 C.F.R. § 1.56; see generally, e.g., Paragon Podiatry Laboratory, Inc. v. KLM Laboratories, Inc., 984 F.2d 1182, 1190-93 (Fed. Cir. 1993) (affirming summary judgment of inequitable conduct and patent unenforceability for knowing failure to disclose barring sales to patent examiner).

Even if litigation never occurs, a company that obtains a questionable patent may find itself attracting undesired publicity. Consider the famous Compton's multimedia-encyclopedia patent, “Multimedia search system using a plurality of entry path means which indicate interrelatedness of information,” U.S. Patent No. 5,241,671. At Fall Comdex 1993, Compton's announced a licensing program in which it sought royalties from publishers of CD-ROM encyclopedias and similar products. The announcement touched off a firestorm in the computer industry. See, e.g., John Eckhouse, Key Patent To Shake Multimedia Industry, San Francisco Chronicle, Nov. 15, 1993, posted at http://www.base.com/software-patents/articles/compton.html. The patent was soon recalled for reexamination by the PTO; eventually it was invalidated in view of numerous prior-art references that had never been considered by the patent examiner.

More recently, the PTO recalled a much-noted patent on the so-called windowing approach to dealing with the Y2K problem of two-digit year dates. See U.S. Patent & Trademark Office, “Patent and Trademark Office Orders Reexamination of Y2K Fix Patent,” Dec. 21, 1999, at http://www.uspto.gov/web/offices/com/speeches/99-51.htm.

Patents and invention rights can be assigned by employees to their employers, see 35 U.S.C. § 262, and likewise can be the subject of contractual duties to assign.

Ordinarily, no duty to assign attaches to inventions made by non-fiduciary employees, absent a written assignment agreement or hired-to-invent status. This is in contrast to the rule about copyrights belonging to employers when the work is created within the scope of employment – even inventions made in fields relating to the employment are usually exempt from assignment to the employer:

[I]f the employment be general, albeit it covers a field of labor and effort in the performance of which the employee conceived the invention for which he obtained a patent, the contract is not so broadly construed as to require an assignment of the patent.

United States v. Dubilier Condenser Corp., 289 U.S. 178, 187 (1933).

(Most of the leading cases dealing with ownership of employee inventions are pre-Erie R.R. v. Tomkins, 304 U.S. 64 (1938), and thus are technically of doubtful authority as to state law; they nevertheless continue to be cited and followed by both federal and state courts.)

Employees who are “hired to invent” normally will be required to assign their inventions and patent rights. E.g., /Standard Parts Co.

1. Peck/, 264 U.S. 52 (1924); Solomon v. United States, 137 U.S. 342,

346 (1890). As the Supreme Court said in Solomon:

An employe[e], performing all the duties assigned to him in his department of service, may exercise his inventive faculties in any direction he chooses, with the assurance that whatever invention he may thus conceive and perfect is his individual property. . . .

But this general rule is subject to these limitations: If one is employed to devise or perfect an instrument, or a means for accomplishing a prescribed result, he cannot, after successfully accomplishing the work for which he was employed, plead title thereto as against his employer.

That which he has been employed and paid to accomplish becomes, when accomplished, the property of his employer. Whatever rights as an invididual he may have had in and to his inventive powers, and that which they are able to accomplish, he has sold in advance to his employer.

Solomon, 137 U.S. at 346 (paragraphing supplied).

Assign

:CUSTOM_ID: exception-employees-who-were-set-to-experimenting-probably-must-assign

Likewise, employees who are “set to experimenting” to solve a specific problem will be required to assign their invention rights, even though they might not have been originally hired to invent. Teets v. Chromalloy Gas Turbine Corp., 83 F.3d 403 (Fed. Cir. 1996) (reversing declaratory judgment that employee owned invention; parties had implied-in-fact assignment agreement); Houghton v. United States, 23 F.2d 386 (4th Cir. 1928); Forberg v. Servel, Inc., 88 F. Supp. 503 (S.D.N.Y. 1949); cf. Moore v. American Barmag Corp., 693 F. Supp. 399, 401‑03 (W.D.N.C. 1988) (reviewing case law; material fact issue existed whether employee had been directed to work on solving problem), subsequent proceeding, 710 F. Supp. 1050 (W.D.N.C. 1989) (fact issue existed as to whether employer entitled to shop right). It may not be necessary for an employer to make a formal directive that an employee commence experimenting; an informal request may suffice. See Miller v. GTE Corp., 1989 WL 258184 (S.D. Tex. 1989) (granting defendants' motion for summary judgment dismissing former employee's claim for misappropriation of invention; former employee had a duty to assign invention rights to employer).

(iv) In some circumstances, an inventor associated with a company as an officer (or director) may have an equitable duty to assign his or her patent rights to the company. Corporate officers and directors may have a fiduciary obligation to assign inventions to their corporation when the inventions relate to the business or occupation of the corporation. Kennedy v. Wright, 676 F. Supp. 888, 893 (C.D. Ill. 1988) (collecting cases; patent infringement suit by former president of corporation against successor to corporation dismissed; successor owned equitable title to patents because of plaintiff's fiduciary duty to assign to corporation); Great Lakes Press Corporation v. Froom, 695 F. Supp. 1440 (W.D.N.Y. 1987) (granting partial summary judgment requiring former president of company to assign two patents to company); Davis v. Alwac International, Inc., 369 S.W.2d 797, 802 (Tex. Civ. App.—Beaumont 1963, writ ref'd n.r.e.); /North Branch Products, Inc.

1. Fisher/, 131 U.S.P.Q. (BNA) 135 (D.D.C. 1961) (corporation owned

equitable title to inventions made by inventor who was shareholder, officer, director, and general manager of corporation), aff'd, 312 F.2d 880 (D.C. Cir. 1962), cert. denied, 373 U.S. 913 (1963); compare with National Waste Co. v. Spring Packing Co., 200 F.2d 14, 15, 16 (7th Cir. 1952) (mechanic did not have confidential relationship to corporation and thus no legal duty existed), cert. denied, 395 U.S. 905 (1953).

One early Texas case seemingly indicates that no such fiduciary duty exists. See North v. Atlas Brick Co., 2 S.W.2d 980, 984 (Tex. Civ. App.—El Paso 1928), reversed on different grounds, 13 S.W.2d 59 (Tex. Comm'n App. 1929, opinion adopted); prior proceedings, 281 S.W.2d 608 (Tex. Civ. App.—El Paso), modified, 288 S.W.2d 146 (Tex. Comm'n App. 1926, opinion adopted). The holding in that case may be fact-dependent (the departed officer apparently was a troubleshooter who took over in conjunction with a planned acquisition of the company). Compare id., 281 S.W. at 609 (first court of appeals opinion) (company alleged it hired former president because it had needed new brickmaking methods to survive increasing competition); with id. at 610‑11 (former president alleged that he assumed that office only in conjunction with agreement to buy all stock in company). The case has never been expressly overruled, but has not noticeably been followed on that particular point. See Davis, 369 S.W.2d at 802 (citing but apparently ignoring rationale of Atlas Brick).

Employees' Duty to Assign Invention Rights

:CUSTOM_ID: state-statutory-regulation-of-employees-duty-to-assign-invention-rights

Most companies that develop technology require all employees to execute written employment contracts that call for assignment of all inventions related to the company's business. Some forms of contract require assignment of even broader categories of invention.

A number of states, however, limit by statute the types of inventions which an employer can require an employee to assign. California's employee invention-ownership statute includes perhaps the most detailed provisions in some respects. Cal. Lab. Code §§ 2870‑2871. That statute provides that:

    (a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either:

   (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer.

    (2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

Id. § 2870.

No employer shall require a provision made void and unenforceable by Section 2870 as a condition of employment or continued employment.

Nothing in this article shall be construed to forbid or restrict the right of an employer to provide in contracts of employment for disclosure, provided that any such disclosures be received in confidence, of all of the employee's inventions made solely or jointly with others during the term of his or her employment, a review process by the employer to determine such issues as may arise, and for full title to certain patents and inventions to be in the United States, as required by contracts between the employer and the United States or any of its agencies.

Id. § 2871 (paragraphing supplied).

Some other states have statutes that are similar in their line-drawing between permissible and impermissible assignment provisions, and in their prohibition against the imposition of such provisions by employers:

Delaware's law does not include California's safe-harbor provisions for employers, in the last quoted paragraph above. See Del. Code Ann. § 805.

· Illinois, Minnesota, and Washington go further in their restrictions: they impose an affirmative duty on employers who require invention-assignment covenants to notify their affected employees of the statutory limitations on those covenants. See Ill. Ann. Stat., ch. 140, para. 302; Minn. Stat. § 181.78; Wash. Rev. Code § 49.44.140.

· North Carolina's statute expressly places the burden of proof on employees who assert their individual ownership of their work-related inventions. See N.C. Gen. Stat. § 66‑57.1.

The starting point of any patent claim construction is the ordinary meaning of the claim language itself, to those in the field of the invention. “The appropriate starting point … is always with the language of the asserted claim itself.” Phonometrics, Inc. v. Northern Telecom Inc., 133 F.3d 1459, 1464, 45 USPQ2d 1421 (Fed. Cir. 1998) (affirming summary judgment of noninfringement of patent for “[a]n electronic solid state long-distance telephone call cost computer apparatus for computing and recording the cost of each long-distance telephone call initiated from a given calling telephone”) (citations omitted). “It is the person of ordinary skill in the field of the invention through whose eyes the claims are construed. Such a person is deemed to read the words used in the patent documents with an understsanding of their meaning in the field, and to have knowledge of any special meaning and usage in the field.” /Multiform Desiccants, Inc.

1. Medzam, Ltd./, 133 F.3d 1473, 1477, 45 USPQ2d 1429 (Fed. Cir. 1998)

(affirming judgment of noninfringement). “[T]he words of a claim ‘will be given their ordinary meaning, unless it appears that the inventor used them differently.'”

Must Be Clearly Stated in the Patent.

:CUSTOM_ID: departures-from-the-ordinary-meaning-must-be-clearly-stated-in-the-patent.

An inventor is permitted to define his (or her) own meanings for words, as long as he does so clearly. As the courts sometimes put it, a patent applicant is free to be his or her own lexicographer, but “any special definition given to a word must be clearly defined in the specification.” Markman, 52 F.3d at 980 (citations omitted). Any such re-definition of a word or phrase “must be sufficiently clear in the specification that any departure from common usage would be so understood by a person of experience in the field of the invention.” Multiform Dessicants, Inc., 133 F.3d at 1476. “Without an express intent to impart a novel meaning to claim terms, an inventor's claim terms take on their ordinary meaning.” Sage Products, Inc. v. Devon Industries, Inc., 126 F.3d 1420, 1423, 44 USPQ2d 1103 (Fed. Cir. 1997) (affirming summary judgment of noninfringement) (citation and internal quotation marks omitted).

In interpreting a patent claim, the first evidence to be considered is the “intrinsic” evidence, namely the words of the patent itself and its prosecution history (i.e., the written record of the examination proceedings in the Patent and Trademark Office). If a patent specification does not explain the meaning of a claim element, then dictionaries, technical treatises, competent expert testimony from those skilled in the art, and similar evidence can be used to clarify the meaning. Such “extrinsic” evidence, however – not even the testimony of experts in the field – cannot be used to contradict a meaning that is clearly revealed by the intrinsic evidence. Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1584 n.6, 39 USPQ2d 1573 (Fed. Cir.

1. (reversing and remanding judgment of noninfringement).

The scope of an inventor's patent rights is not necessarily limited to the embodiments of the invention disclosed in the written-description portion of the patent. But those embodiments can be used in determining the inventor's intended meaning of the claim language. “Although claims are not necessarily restricted in scope to what is shown in a preferred embodiment, neither are the specifics of the preferred embodiment irrelevant to the correct meaning of claim limitations.” Phonometrics, Inc., 133 F.3d at 1466.

Patent owners are free to use claim language of their choosing, but they must live with the language that they do choose. “If [the patent owner], who was responsible for drafting and prosecuting the patent, intended something different, it could have prevented this result through clearer drafting. . . . It would not be appropriate for us now to interpret the claim differently just to cure a drafting error made by [the patent owner]. That would unduly interfere with the function of claims in putting competitors on notice of the scope of the claimed invention.” Hoganas AB, 9 F.3d at 951.

They Make During Prosecution

:CUSTOM_ID: patent-owners-also-must-live-with-the-arguments-and-amendments-they-make-during-prosecution

A patent owner cannot have its cake and eat it too; if it argues to the patent examiner that the claims should be interpreted in a particular way so that they will not be invalidated by a prior-art reference, then it (the patent owner) is stuck with that particular interpretation later on and cannot change the interpretation just because it wants to. Warner-Jenkinson Co., 117 S. Ct. at 1049. As the Supreme Court said more than a century ago in a famous turn of phrase, a patent claim is not a “nose of wax, which may be turned and twisted in any direction.” White v. Dunbar, 119 U.S. 47 (1886).

“Arguments and amendments made during the prosecution of a patent application and other aspects of the prosecution history, as well as the specification and other claims, must be examined to determine the meaning of terms in the claims. The prosecution history limits the interpretation of claim terms so as to exclude any interpretation that was disclaimed during prosecution. Claims may not be construed one way in order to obtain their allowance and in a different way against accused infringers.” Southwall Technologies, Inc. v. Cardinal IG Co., 54 F.3d 1570, 1576 (Fed. Cir. 1995) (citations omitted)

The patent attorney's comparison of a prior-art reference to the claimed invention can result in a limiting interpretation of the claim language. For example, in the Wang v. AOL case, “[i]n an Information Disclosure Statement filed by Wang during the prosecution of the parent application, Wang distinguished a reference (Fleming) describing the NAPLPS system by stating that the reference ‘encodes pictorial information … on the pel [picture element] level, rather than on the character level.'” The Federal Circuit held that this language reinforced an interpretation of the Wang claims as being limited to character-based systems. Wang Laboratories, Inc., v. America Online, Inc., 197 F.3d 1377, 1383-84 (Fed. Cir. 1999) (affirming summary judgment that AOL and Netscape Web browsers did not infringe).

Any amendment could result in narrowing the claims, but that will not necessarily be the result. In Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., _ U.S. _, 122 S.Ct. 1831 (2002), the Supreme Court unanimously held that:

the patentee should bear the burden of showing that the amendment does not surrender the particular equivalent in question…. The patentee, as the author of the claim language, may be expected to draft claims encompassing readily known equivalents.

A patentee's decision to narrow his claims through amendment may be presumed to be a general disclaimer of the territory between the original claim and the amended claim…. There are some cases, however, where the amendment cannot reasonably be viewed as surrendering a particular equivalent. The equivalent may have been unforeseeable at the time of the application; the rationale underlying the amendment may bear no more than a tangential relation to the equivalent in question; or there may be some other reason suggesting that the patentee could not reasonably be expected to have described the insubstantial substitute in question. In those cases the patentee can overcome the presumption that prosecution history estoppel bars a finding of equivalence.

This presumption is not, then, just the complete bar by another name. Rather, it reflects the fact that the interpretation of the patent must begin with its literal claims, and the prosecution history is relevant to construing those claims.

When the patentee has chosen to narrow a claim, courts may presume the amended text was composed with awareness of this rule and that the territory surrendered is not an equivalent of the territory claimed. In those instances, however, the patentee still might rebut the presumption that estoppel bars a claim of equivalence. /The patentee must show that at the time of the amendment one skilled in the art could not reasonably be expected to have drafted a claim that would have literally encompassed the alleged equivalent./

Festo, 122 S.Ct. at 1842 (paragraphing and emphasis added).

the Narrower Meaning Might Have to Be Used

:CUSTOM_ID: if-two-meanings-of-the-words-in-a-claim-are-equally-reasonable-the-narrower-meaning-might-have-to-be-used

Sometimes a claim element could have two possible meanings, but the specification is not clear which meaning is the right one. When a word in a claim can equally well be given either of two meanings, the court might be required to use the narrower meaning, because that serves the purpose of requiring a claim to give fair notice to competitors. “Where there is an equal choice between a broader and a narrower meaning of a claim, … we consider the notice function of the claim to be best served by adopting the narrower meaning.” Athletic Alternatives, Inc., 73 F.3d at 1581.

Where possible, courts try to construe claims so that it will not be necessary to hold them invalid. But a court cannot redraft a claim; the claim must stand or fall as written. “Although we construe claims, if possible, so as to sustain their validity, it is well settled that no matter how great the temptations of fairness or policy making, courts do not redraft claims.” Quantum Corp. v. Rodime, PLC, 65 F.3d 1577, 1584 (Fed. Cir. 1995) (affirming judgment of invalidity of patent claims that had been improperly broadened in reexamination).

Language are Presumed to be Significant

:CUSTOM_ID: claim-differentiation-differences-in-language-are-presumed-to-be-significant

“There is presumed to be a difference in meaning and scope when different words or phrases are used in separate claims. To the extent that the absence of such difference in meaning and scope would make a claim superfluous, the doctrine of claim differentiation states the presumption that the difference between claims is significant. Where some claims are broad and others narrow, the narrow claim limitations cannot be read into the broad whether to avoid invalidity or to escape infringement.” United States v. Telectronics, Inc., 857 F.2d 778, 783-84 (Fed. Cir. 1988); see also Wang Laboratories, Inc., v. America Online, Inc., 197 F.3d 1377, 1384 (Fed. Cir. 1999) (affirming summary judgment that AOL and Netscape Web browsers did not infringe Wang-owned patent for videotex frame processing system; claim differentiation did not support Wang's desired interpretation of claim language).

The doctrine of equivalents was created by the courts, not by Congress, to prevent an infringer from escaping liability because of insubstantial differences with the literal claimed subject matter. The doctrine serves “to balance the purpose of fairness to inventors lest the patent be unjustly circumvented, against the purpose of patent claims to state clear boundaries of the patent grant, in fair notice of its scope.” Multiform Dessicants, Inc., 133 F.3d at 1480 (citation omitted).

*• An equivalent must be proved for each missing element in a claim. The Supreme Court has held that “the doctrine of equivalents, when applied broadly, conflicts with the definitional and public‑notice functions of the statutory claiming requirement.” The Court ruled that to resolve that conflict, “the doctrine of equivalents must be applied to individual elements of the claim, not to the invention as a whole.” Warner-Jenkinson, 117 S. Ct. at 1049.

*• Known interchangeability may be important in determining equivalence. “An important factor [in determining whether there is an equivalent to a claim element] is whether persons reasonably skilled in the art would have known of the interchangeability of an ingredient not contained in the patent with one that was.” Warner-Jenkinson, 117 S. Ct. at 1047 (citation omitted). The Court emphasized that, in applying this test, “a skilled practitioner's knowledge of the interchangeability between claimed and accused elements is not relevant for its own sake, but rather for what it tells the fact-finder about the similarities or differences between those elements.” Id. at

In the software area, the Federal Circuit has held on at least two occasions that hardware and software can be, but need not be, interchangeable. Compare Pennwalt Corp. v. Durand-Wayland, Inc., 833 F.2d 931, 933‑39 (Fed. Cir. 1987) (patented apple sorting apparatus relying on “hardwired” logic circuitry not infringed by microprocessor-controlled sorter that performed different functions) with Overhead Door Corp. v. Chamberlain Group, Inc., 194 F.3d 1261, 1270 (Fed. Cir. 1999) (vacating and remanding summary judgment of noninfringement; fact question existed as to whether software-based system component for selecting garage-door transmitter codes was equivalent to patented mechanically-based component).

According to the Supreme Court, the proper time for evaluating equivalency – and thus the proper time for assessing knowledge of interchangeability between elements – is at the time of infringement, not at the time the patent was issued; the substitution of a later-developed element does not insulate the accused product or process from a finding of equivalence. See Warner-Jenkinson, 117 S.Ct. at 1052-53.

*• Identity of function, way, and result can indicate equivalence. “[T]he substantial equivalent of a thing, in the sense of the patent law, is the same as the thing itself; so that if two devices do the same work in substantially the same way, and accomplish substantially the same result, they are the same, even though they differ in name, form, or shape.” Warner-Jenkinson, 117 S. Ct. at 1052 (citation omitted). According to one Federal Circuit panel, courts must take care not to merge “function” and “way.” Overhead Door Corp. v. Chamberlain Group, Inc., 194 F.3d 1261, 1271 (Fed. Cir. 1999) (vacating and remanding summary judgment of noninfringement). One judge's “way,” however, might be another judge's “function.”

*• “Pioneering” inventions and the doctrine of equivalents. Patent claims for “pioneering” subject matter may be entitled to a broad range of equivalents. At the other end of the spectrum, however, claims representing only narrow improvements in an already crowded art will be entitled to a correspondingly narrow range of equivalents. See generally, e.g., Perkin-Elmer Corp. v. Westinghouse Electric Corp., 822 F.2d 1528, 1532 (Fed. Cir. 1987) (affirming judgment of noninfringement), and cases cited therein.

The pioneering status of an invention was not mentioned as a relevant factor in the Warner-Jenkinson majority opinion by the Federal Circuit. Judge Lourie's dissenting opinion, however, pointed out that pioneering status “was mentioned by the [Supreme] Court in Graver [Tank] and must be considered when relevant.” Warner-Jenkinson, 62 F.3d at 1549 (Lourie, J., dissenting). The subsequent Supreme Court opinion in Warner-Jenkinson indicated that the Court's 1950 Graver Tank opinion is still good law. See Warner-Jenkinson, 117 S. Ct. at 1052 (citing Graver Tank). So it is distinctly possible that a court would look at whether an invention was “pioneering” in determining infringement under the doctrine of equivalents.

Just what is a pioneering invention? A century ago the Supreme Court characterized a pioneering invention as one that represented “a distinct step in the progress of the art, distinguished from a mere improvement or perfection of what had gone before.” Texas Instruments, Inc. v. Unitd States Int'l Trade Com'n, 846 F.2d 1369, 1370 (Fed. Cir. 1988), quoting Westinghouse v. Boyden Power Brake Co., 170 U.S. 537, 562, 18 S. Ct. 707, 718, 42 L. Ed. 1136 (1898). The Court of Appeals for the Federal Circuit gave an example of what makes a “pioneering” invention in a case involving fiber optic technology and a patent owned by Corning Glass Works:

Dr. Maurer first publicly reported the achievement of a 20 db/km optical waveguide fiber at the Conference on Trunk Telecommunications by Guided Waves held in London, England. That announcement created enormous interest and was the subject of many articles in both technical and general publications. The inventors' advancement in technology won them accolades from various societies and institutes, for which they were presented with many prestigious awards and honors. In addition, the invention of the '915 patent has achieved impressive commercial success on a worldwide basis. The district court determined that “[t]he 915 patent clearly covers a basic, pioneering invention.”

Corning Glass Works v. Sumitomo Elec. U.S.A., Inc., 868 F.2d 1251, 1255 (Fed. Cir. 1989).

*• If the accused device is itself patented, that can (but need not) indicate non-equivalence. The fact that a device accused of infringing a patent is itself patented might – but does not necessarily – mean that the device does not infringe the first patent. If the patent examiner determined that the accused device was patentable after reviewing the first patent, that can indicate that the accused device is substantially different from the claimed subject matter of the first patent. Zygo Corp. 79 F.3d at 1570 (reversing finding of infringement under the doctrine of equivalents).

The law imposes certain restrictions on a patent owner's ability to assert infringement under the doctrine of equivalents. Some of the principal limitations are discussed in this section.

• The doctrine of equivalents cannot undo a claim amendment. Because of the public-notice function of patent claims, if a patent applicant amended a claim during the examination of the patent application, the law “place[s] the burden on the patent‑holder to establish the reason for an amendment required during patent prosecution. … Where no explanation is established, however, …. prosecution history estoppel would bar the application of the doctrine equivalents as to that element.” Warner-Jenkinson, 117 S. Ct. at 1051.

*• The doctrine of equivalents cannot undo an argument the inventor made to the patent examiner. A patent owner cannot assert that something is equivalent to a claim element if the inventor previously argued otherwise to the patent examiner. See, e.g., Southwall Technologies, Inc., 54 F.3d at 1583-84.

*• The doctrine of equivalents cannot be used to eliminate a claim element. “It is important to ensure that the application of the doctrine [of equivalents], even as to an individual element, is not allowed such broad play as to effectively eliminate that element in its entirety.” Warner-Jenkinson, 117 S. Ct at 1049. “[T]he doctrine of equivalents is not a license to ignore or erase … structural and functional limitations of the claim limitations on which the public is entitled to rely in avoiding infringement.” Athletic Alternatives, 73 F.3d at 1582 (internal quotation marks and citation omitted).

*• Foreseeable but unclaimed variations might be ineligible to be considered “equivalents” of the claimed subject matter. If variations on a claim element are foreseeable, a patent owner and its patent attorney are responsible for drafting the claim language to encompass those variations. “[A]s between the patentee who had a clear opportunity to negotiate [with the patent examiner to obtain] broader claims but did not do so, and the public at large, it is the patentee who must bear the cost of its failure to seek protection for this foreseeable alternative of its claimed structure.” Sage Products, Inc., 126 F.3d at 1425.

(Other Federal Circuit panels have distinguished Sage Products on this point, however, so the efficacy of this doctrine may be questionable. For example, one panel held that “the proposed application of the doctrine in Sage Products would have utterly written out of the claim not one, but at least two (maybe more) express limitations of the claim.” Overhead Door Corp. v. Chamberlain Group, Inc., 194 F.3d 1261, 1271 (Fed. Cir. 1999) (vacating and remanding summary judgment of noninfringement).)

*• Embodiments disclosed but not claimed are dedicated to the public and cannot be “equivalents.” In 2002, the en banc Federal Circuit resolved a seeming split between two prior panel decisions. In essence, the court held that, if a patent application discloses variations A, B, and C of an invention, but only claims variations A and B, then variation C is dedicated to the public and cannot be covered by the doctrine of equivalents. “[W]hen a patent drafter discloses but declines to claim subject matter, as in this case, this action dedicates that unclaimed subject matter to the public. Application of the doctrine of equivalents to recapture subject matter deliberately left unclaimed would conflict with the primacy of the claims in defining the scope of the patentee's exclusive right.” Johnson & Johnston Associates Inc. v. R.E. Service Co., Inc., 285 F.3d 1046, 1054 (Fed. Cir. 2002) (en banc) (citations and internal quotation marks omitted).

*• The prior art limits the permissible scope of equivalents. The prior art restricts the scope of equivalency that a patent owner can assert in alleging infringement under the doctrine of equivalents. One way of determining the extent of such restriction is to draft a hypothetical patent claim, sufficient in scope to literally cover the accused product. Such a hypothetical claim is sometimes referred to as a “/Wilson Sporting Goods/ claim,” after the name of the case in which the Court of Appeals for the Federal Circuit first used that term. “The pertinent question then becomes whether that hypothetical claim could have been allowed by the PTO over the prior art. If not, then it would be improper to permit the patentee to obtain that coverage in an infringement suit under the doctrine of equivalents.” Conroy v. Reebok Int'l Ltd., 14 F.3d 1570, 1576 (Fed. Cir. 1994).

In some circumstances, but not in others, a means-plus-function claim that is not literally infringed can still be infringed under the doctrine of equivalents:

• The patent owner is likely to be precluded from asserting infringement under the doctrine of equivalents if the lack of literal infringement is due to the accused device's use of a structure that is more than insubstantially different from the structure described in the patent; Chiuminatta Concrete Concepts, Inc. v. Cardinal Indus., Inc., 145 F.3d 1303, 1309-11 (Fed. Cir.

  1. (reversing summary judgment of infringement and remanding with

  instructions to grant summary judgment of noninfringement).

  • On the other hand, if the lack of literal infringement is due to the accused device using identical or equivalent structure to perform a different function than is recited in the means-plus-function claim, then infringement can still exist under the doctrine of equivalents if the different function is nevertheless an equivalent of the function recited in the claim. WMS Gaming, Inc. v. Int‘l Game Technology, 184 F.3d 1339, 1352-54 (Fed. Cir. 1999) (reversing trial court's holding of literal infringement, but affirming holding of infringement under the doctrine of equivalents).

In infringement litigation, a patent owner need not prove that the patent is valid, because by statute it is presumed to be valid, and each claim is presumed valid independently of the validity of any other claims. See 35 U.S.C. 283, first paragraph. Moreover, the burden of establishing the invalidity of a patent claim is expressly placed, not on the patent owner as plaintiff, but on the party asserting such invalidity. See id.

The Court of Appeals for the Federal Circuit has held that a party seeking to establish that a claim is invalid must prove facts by clear and convincing evidence – not merely by a preponderance of the evidence – to support a conclusion that the claim is invalid. See, e.g., American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1359-60 (Fed. Cir. 1984) .

The same court has noted that, where the PTO has considered a piece of prior art, and has issued a patent notwithstanding that prior art, the courts owe some deference to the PTO's decision. See Minnesota Mining & Mfg. Co. v. Johnson & Johnson Orthopaedics, Inc., 976 F.2d 1559, 1572 (Fed. Cir. 1992).

It is the courts, however, that are the final arbiters of patent validity. Although courts may take note of, and benefit from, the examination proceedings before the patent examiner, the question of patentability is ultimately for the courts to decide, without deference to the rulings of the patent examiner. See Quad Environmental Technologies Corp. v. Union Sanitary District, 946 F.2d 870, 876 (Fed. Cir. 1991).

The PTO's search library is far from perfect; the patent examiner might well have been unaware of important prior art. This is especially true in the software field, where much prior art is not documented in patents or printed publications. Consequently, infringement defendants will usually spend a great deal of time and money to scour every available source of prior art.

If a challenger to the validity of a patent produces prior art or other evidence not considered in the PTO, there is no reason to defer to the PTO so far as that prior art or other evidence is concerned. In fact, new prior art not considered by the patent examiner may so clearly invalidate a patent that the challenger's burden is fully sustained merely by proving the existence of the prior art. See American Hoist & Derrick Co., 725 F.2d at 1359-60 (Fed. Cir. 1984); see also WMS Gaming, Inc. v. Int'l Game Technology, 184 F.3d 1339 (Fed. Cir. 1999) (affirming judgment that patent was not invalid; two of three prior-art references cited at trial had not been considered by the patent examiner)..

A patent claim can be found to be invalid even if the prior art produced by the challenger is not more significant than the prior art considered by the PTO, see Surface Technology, Inc. v. U.S. Int'l Trade Comm'n, 801 F.2d 1336, 1339-40 (Fed. Cir. 1986), or for that matter even if the exact prior art in question was actually considered by the patent examiner. See, e.g., Celeritas Technologies, Inc. v. Rockwell Int'l Corporation, 150 F.3d 1354, 1360-61 (Fed. Cir. 1998) (reversing in pertinent part denial of JMOL; holding that no reasonable jury could have found that patent claims were not anticipated by prior-art reference, even though reference had been considered by patent examiner). In part, this is because it is not the examiner's technical expertise (which may or may not be considerable) that gives his (or her) decisions a presumption of correctness; it is the authority duly vested in him by his appointment as a patent examiner. See Western Electric Co. v. Piezo Technology, Inc., 860 F.2d 428, 433 (Fed. Cir. 1988).

Invalidation of a patent is a one-way trap door: once a patent claim is held invalid in a final judgment, the patent owner is estopped from ever denying its invalidity against anyone else (unless he shows that he did not have a full and fair opportunity to litigate). See Blonder-Tongue Laboratories, Inc., v. University of Illinois Foundation, 402 U.S. 318, 333‑34 (1971). As noted above, different claims in the same patent live or die independently, however, so the loss of one claim in a patent would not necessarily be fatal to all claims. See 35 U.S.C. § 282.

Infringers are under no such handicap. True, if one infringer fails to prove invalidity, he may be estopped from rearguing the matter unless new evidence is produced, under conventional principles of res judicata. Other infringers are not estopped, however, and can raise the same or new challenges to the patent. (As a practical matter, however, a patent claim that has survived litigation against an adequately-defended opponent is likely to be treated with more respect by courts than an untested claim.)

An infringer may be subject to an injunction against further infringement – possibly putting the infringer out of business. See 35 U.S.C. § 283. As Barnes & Noble found out the hard way, courts can grant preliminary injunctive relief in patent cases. /See Amazon.com, Inc.

1. Barnesandnoble.com, Inc./, 73 F.Supp.2d 1228 (W.D. Wash. 1999)

(granting preliminary injunction); cf. Chrysler Motors Corp. v. Auto Body Panels of Ohio, Inc., 908 F.2d 951, 953-54 (Fed. Cir. 1990) (affirming denial of preliminary injunction where trial court found patented invention obvious); Illinois Tool Works, Inc., v. Grip-Pak, Inc., 906 F.2d 679, 682 (Fed. Cir. 1990) (affirming denial of preliminary injunction; stressing that irreparable harm is presumed, but only rebuttably).

The infringer may be ordered to pay damages. The damages are potentially equal to the patent owner's lost profits (if proved). See generally Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995) (in banc); see also, e.g., Kalman v. Berlyn Corp., 914 F.2d 1473, 1484 (Fed. Cir. 1990) (enumerating factors to be proved by patentee to be entitled to lost profits).

By statute, damages are not less than a reasonable royalty. See 35 U.S.C. § 284; see generally, e.g., Trell v. Marlee Electronics Corp., 912 F.2d 1443, 1445 (Fed. Cir. 1990); Polaroid Corp. v. Eastman Kodak Co., 16 USPQ (BNA) 1481 (D. Mass 1990) (total award, based on lost profits and reasonable royalty plus prejudgment interest, in excess of $900 million).

As noted in § 3.8[b], the damage award may be increased up to treble damages in the case of “willful” infringement or in other exceptional circumstances. Individuals involved in the infringement can be subject to personal liability in some circumstances, as discussed in § 3.8[f].

Matthew Bender & Co., Inc. v. West Publishing Co., 158 F.3d 674, 682‑83 (2d Cir. 1998) (affirming summary judgment in favor of Matthew Bender): The Second Circuit rejected West's attempt to protect the pagination of the published judicial opinions in its case reports. (West Publishing is a part of West Group, the publisher of this treatise.) The court set out a fact-dependent test for creativity in selection and arrangement of preexisting materials: “[C]reativity in selection and arrangement therefore is a function of (i) the total number of options available, (ii) external factors that limit the viability of certain options and render others non‑creative, and (iii) prior uses that render certain selections ‘garden variety.'”

The court held that “when it comes to the selection or arrangement of information, creativity inheres in making non‑obvious choices from among more than a few options.” Id., 158 F.3d at 622. However, “selection from two or three options, or of options that have been selected countless times before and have become typical, is insufficient.” Id. According to the court, this is because “[p]rotection of such choices would enable a copyright holder to monopolize widely‑used expression and upset the balance of copyright law.” Id. The court suggested that in cases where originality had been found in selection, the facts showed that “the compiler selected from among numerous choices, exercising subjective judgments relating to taste and value that were not obvious and were not dictated by industry convention.” Id. at 689.

Previously, West had enjoyed better luck on its home turf of Minnesota and the Eighth Circuit:

West Publishing Co. v. Mead Data Central, Inc., 799 F.2d 1219 (8th Cir.1986): The Eighth Circuit affirmed a preliminary injunction prohibiting Mead from using West's internal “pinpoint cites” or “star pagination” citations in Mead's proposed LEXIS star pagination computer research product.

Oasis Publishing Co. v. West Publishing Co., 924 F. Supp. 918, 920-21, 925 (D. Minn. 1996): Oasis sued for a declaratory judgment that West's compilation copyright did not extent to the “star pagination” of West's published opinions, but only to the physical compilation itself. The court granted West's motion for summary judgment.

Codes, etc., in Computer‑Based Systems

:CUSTOM_ID: copyright-protection-of-compilations-of-codes-etc.-in-computerbased-systems

Other courts have had to address claims of copyright protection in data stored on, or used in, computer-based systems. For example:

Mitel, Inc. v. Iqtel, Inc., 124 F.3d 1366, 1373-74 (10th Cir. 1997): The Tenth Circuit affirmed a denial of a preliminary injunction against the defendant's use of the plaintiff's telephone call controller commands in competing telephone equipment. The court held that the plaintiff had used such minimal effort and judgment in selecting its command codes that the codes were unoriginal and thus unprotectable.

Compaq Computer Corp. v. Procom Technology, Inc., 908 F. Supp. 1409, 1415-16, 1418 (S.D. Tex. 1995): The district court held that Compaq's selection of a specific set of hard-disk operational parameter values, used to trigger display of on-screen message suggesting replacement of the disk, was sufficiently original to be protectable. The court also held, however, that the order in which the values were stored on the disk was necessary to the proper functioning of the display program and therefore was not protectable.

Atari Games Corp. v. Nintendo of America Inc., 30 USPQ2d 1401, 1404-05 (N.D. Cal. 1993), prior proceedings, 18 USPQ2d (BNA) 1935 (N.D. Cal.

1. (granting preliminary injunction; see § 2.7[e]), affirmed,

975 F.2d 832 (Fed. Cir. 1992): The court held that a signal stream transmitted between a game cartridge and a game machine was not the result of specific “choices as to selection and arrangement” of data and therefore did not meet Feist's originality requirement for protection.

County of Suffolk, New York v. First American Real Estate Solutions, 261 F.3d 179 (2nd Cir. 2001): The Second Circuit held that a series of original “tax maps” created by Suffolk County, New York was copyrightable, and therefore reversed dismissal of a copyright-infringement complaint. (Note the difference with the statutory provision that works created by the U.S. Government are not copyrightable, as discussed in § 2.3[c].)

Veeck v. Southern Building Code Congress Int'l, Inc., 241 F.3d 398 (5th Cir. 2001), overruled, _ F.3d _, 2002 WL 1270117 (5th Cir. June 7, 2002) (en banc): A non-profit organization developed a series of model building codes, some of which were enacted into law by municipalities. A Web site operator purchased a disk copy of the model building codes from the non-profit organization. The license agreement accompanying the disk copy stated that the codes could not be copied and distributed. The Web site operator, however, copied and pasted the text of the building codes into his Web site, and accurately identified them as the building codes of two small towns in Texas.

The Web site operator sought a declaratory judgment that he had not infringed the copyright in the building codes. The non-profit organization counterclaimed for copyright and breach of contract. The district court granted summary judgment for the organization, including a permanent injunction and an award of damages against the Web site operator.

In Veeck, the judgment against the Web site operator was affirmed by the Fifth Circuit panel, but the en banc court reversed. The en banc court held that, when the building codes were enacted into law, the law passed into the public domain, but that as model codes, the organization's works retained their protected status. The court distinguished the situation in which the law referred to, but did not incorporate, external standards such as the American Medical Association's CPT coding system (citing among other cases the Ninth Circuit's Practice Management opinion and the Second Circuit's CCC Information Services holding, both discussed below).

(The non-profit organization's claim against the Web site operator for breach of the license agreement was not before the Veeck court. Under the Seventh Circuit's ProCD holding, discussed in detail in Chapter 13, the contract claim would seem to remain viable even for uncopyrighted material. See ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 39 USPQ2d (BNA) 1161 (7th Cir. 1996) (reversing summary judgment in favor of copyright infringement defendants; shrinkwrap license agreement was effective to preclude copying of collection of telephone listings).

Practice Mgt. Info. Corp. v. American Med. Ass'n ("Practice Management "), 121 F.3d 516 (9th Cir.), cert. denied, 522 U.S. 933 (1997), opinion amended by 133 F.3d 1140 (9th Cir.1998): The Ninth Circuit held that the American Medical Association did not lose the right to enforce its copyright when the use of its promulgated CPT coding system was required by government regulations.

CCC Information Services, Inc. v. MacLean Hunter Market Reports, Inc., 44 F.3d 61 (2d Cir. 1994): The Second Circuit reversed a summary judgment that a computerized database of used-car values was uncopyrightable. The court also held that the database did not lose its copyright protection by virtue of the fact that various states had mandated its use by insurance companies.

Bellsouth Advertising & Publishing Corp. v. Donnelley Info. Publishing, Inc., 999 F.2d 1436, 1442-46 (11th Cir. 1993): The en-banc Eleventh Circuit held that the classification categories of a business yellow-pages telephone directory were one of limited number of ways of classifying businesses and thus were insufficiently original to warrant protection.

Victor Lalli Enterprises, Inc., v. Big Red Apple, Inc., 936 F.2d 671 (2d Cir. 1991): The Second Circuit held that a compilation of information gleaned from horse racing statistics was not entitled to copyright protection. According to the court, the copyright claimant had arranged factual data in conventional format according to “purely functional grids that offer no opportunity for variation,” exercising neither selectivity in what was reported nor creativity in how it was reported.

Kregos v. Associated Press, 937 F.2d 700 (2d Cir. 1991), after remand, 3 F.3d 656, 663-64 (2d Cir. 1993): The Second Circuit vacated a summary judgment that a baseball pitching form was uncopyrightable. After remand, the court affirmed the lower-court judgment that the defendant's pitching form was not substantially similar to the plaintiff's form, especially in view of the limited number of ways of expressing the idea.

Under U.S. copyright law, a copyright notice is no longer required on copies distributed to the public after March 1, 1989. See 17 U.S.C. § 401(a). Certain exceptions exist, however, relating to cure of previous no-notice distributions, as discussed in § 2.3[f]. In addition, a notice may be required to preserve copyright in some non-U.S. countries.

To preserve a claim to copyright in a “published” pre-Berne program or other copyrightable work, the Copyright Act requires that a legend giving reasonable notice of the claim be placed on all copies of the program that were publicly distributed before March 1, 1989. See 17 U.S.C. § 401(a); see also § 2.3[f] (rescuing a copyright after no-legend publication). “Publication” is defined in the Act as “the distribution of copies . . . of a work to the public by sale or other transfer of ownership, or by rental, lease, or lending.” 17 U.S.C. § 101. The Act also provides that “[t]he offering to distribute copies . . . to a group of persons for purposes of further distribution . . . constitutes publication.” Id.

The term “copies” includes floppy disks, hard-copy printouts, and other “tangible medi[a] of expression from which the work can be perceived, either directly or with the aid of a machine or device.” Id. (definition of “copies”).

The term “copies,” for purposes of the copyright-notice requirements, arguably may also include copies in RAM, at least under the rationale of the cases discussed in § 2.7[c], holding that making copies of a computer program in RAM (e.g., for purposes of running the program) constitutes infringement.

Requirements for Pre‑Berne Works?

:CUSTOM_ID: what-constitutes-publication-triggering-the-copyright-notice-requirements-for-preberne-works

The legislative history of the Copyright Act seemingly indicates that “publication” – which triggered the copyright-notice requirements for pre-Berne works – does not include distribution of copies under an obligation of confidence. See H.R. Rep. No. 94‑1476, 94th Cong., 2d Sess. 138 (1976), reprinted in 4 Nimmer on Copyrights App. 4‑108 (1989). That arguably implies that such copies need not bear a copyright notice.

The cases are mixed on that point, however. Some federal district courts have ruled that software whose pre-Berne distribution was restricted in this manner was not subject to the copyright notice requirement. In each case, however, the courts emphasized the limited nature of the no-notice distribution that had occurred. For example:

Gates Rubber Co. v. Bando American, Inc., 798 F. Supp. 1499 (D. Colo. 1992), reversed on other grounds, 9 F.3d 823 (10th Cir. 1993): The court held that the copyright in the plaintiff's computer program had not been forfeited through no-notice use of the program by the owner's sales force to help customers determine which specific products to order. The court said that “if any publication occurred, it was a limited publication, which communicated the content of the program to a definitely selected group for a limited purpose, without the right of diffusion, reproduction, distribution, or sale.” Id. at

Williams v. Arndt, 626 F. Supp. 571 (D. Mass 1985): The court held that the copyright in a manual was not forfeited by no-notice distribution of eleven copies, where the distribution had been “limited to a definite, very selective group for a limited purpose on the condition that the contents not be disclosed or further disseminated ….” Id. at 578.

In other cases, courts held that the no-notice distributions in question were not “limited,” and that failure to utilize the Copyright Act's cure provisions resulted in forfeiture of the copyrights:

D.C.I. Computer Systems, Inc. v. Pardini, 978 F.2d 1265 (table; unpublished), 1992 Copr. L. Dec. ¶ 27,005 (9th Cir. 1992): The Ninth Circuit affirmed a trial-court holding of copyright forfeiture. It held that widespread, pre-Berne, no-notice distribution of copies of a computer program under a trade-secret licensing program, for pecuniary gain, to any automobile or recreational vehicle dealership in the country that would agree to enter into the license agreement, constituted “general publication,” triggering the notice requirements.

Unix System Laboratories, Inc., v. Berkeley Software Design, Inc., slip op. at 32-34, Civ. No. 92-1667 (D.N.J. March 3, 1993), reprinted in Comp. Industry Lit. Rptr. (Andrews) 16704 (Apr. 15, 1993) (designated “not for publication”): The court denied a motion for preliminary injunction, holding that the plaintiff was unlikely to succeed on the merits of its copyright-infringement claim. The court held that AT&T's no-notice distribution of the source code of UNIX, under license, to virtually any qualified licensee, was not made a “limited publication” by AT&T's screening of potential licensees; such screening was merely to confirm that licensees would pay the required license fees and protect AT&T's intellectual property.

For on-screen displays, the c-and-parentheses or “(c)” symbol should be used in addition to, and not in place of, the word “Copyright.” By statute, the c-in-a-circle symbol may be used in place of the word “Copyright.”

Because there is no ASCII symbol for the c-in-a-circle symbol ©, the character sequence “(c)” is often used on terminal-screen displays. The U.S. Copyright Office will accept registration applications in which the accompanying deposit contains the c-in-parentheses notice. U.S. Copyright Office, Compendium of Copyright Office Practices [“Compendium II”] § 1005.01(c) (1984). There is a possibility, however, that in U.S. infringement litigation a court might rule that “(c),” by itself, is not a proper substitute for the word “Copyright.”

Selected cases:

Videotronics, Inc., v. Bend Electronics [Corp.], 586 F. Supp. 478, 481 (D. Nev. 1984): /T/he Nevada district court ruled that the on-screen letter “c” within a hexagonal figure was an acceptable substitute for © because letter “c” was completely surrounded by a hexagon.

Forry, Inc., v. Neundorfer, Inc., 837 F.2d 259 (6th Cir. 1988): The Sixth Circuit acknowledged, but did not finally answer, the question whether a (C) notice is a proper substitute for the c-in-a-circle symbol ©. The case was an appeal from the grant of a preliminary injunction, in which the trial court had ruled that a “(C)” notice on a microprocessor chip “substantially complied with the statute and … was adequate to give notice that the Plaintiff owned a copyright on the program in the chip.” Id. at 266. The Forry court noted the similar result in Videotronics; it observed that “[t]he trial of this action may provide a better record” on which to finally decide whether a “(C)” would suffice. 837 F.2d at 266.

It thus is unclear whether anything less than substantial compliance with the c-in-a-circle requirement will preserve the U.S. copyright, if a notice is needed at all. To be safe, therefore, the word “Copyright” or “Copr.” should appear on all on-screen copyright notices.

Furthermore, the Universal Copyright Convention might not give a safe harbor in its member states to anything other than a c-in-a-circle symbol ©. Part of that convention is directed to member states that require copyright notices. The convention requires such states to give full faith and credit, so to speak, to notices on works published by nationals of other countries if those notices include the c-in-a-circle symbol © (plus the year of first publication and the name of the copyright owner). It is not clear whether anything less will suffice in countries that are not members of the Berne Convention but are members of the UCC (as was the U.S. until March, 1989).

On printed matter, the c-in-a-circle symbol ©, as opposed to “(c)”, should definitely appear in addition to the word “Copyright” on matter, e.g., program listings, diskette labels, and documentation.

The copyright notice should bear the name of the owner of the copyright, see § 2.6, although an error in the name does not affect the validity or enforceability of the copyright. See 17 U.S.C. § 406(a). If the name is erroneous, an infringement defendant who proves good-faith reliance on the erroneous name (e.g., by taking a license from the named owner) has a complete defense to the infringement action unless the name of the true owner is of record in the Copyright Office. See id.

The copyright in any original work can be assigned by a written instrument. See generally 17 U.S.C. §§ 204‑205; see also 0 (sample copyright-assignment form). The copyright notice for a software package written by an outside contractor but assigned over to the hiring party will thus normally bear the hiring party's name as owner.

The “year of first publication” is the year the work was first “published” and not the year it was created or completed. If an updated version of a software package is published, it is desirable to include the year of first publication for the original as well as the updated version. This may not be essential, because by statute “in the case of compilations or derivative works incorporating previously published material, the year date of first publication of the compilation is sufficient.” 17 U.S.C. § 401(b)(2). On the other hand, an updated version might not contain enough change to qualify it as a distinct work of authorship and thus as a derivative work. See § 2.1[b]. If this were found to be the case, including only the update year might be insufficient.

A prudent compromise might be to include all years of first publication. An example of a legend for updated works might be: “Copyright © 1982, 1983 XYZ, Inc.” If the package has been updated many times, an alternative might be: “Copyrights © 1980‑1986 ABC, Inc.” (note the plural).

Use of the correct publication year is important. The Copyright Act provides that the lifetime of the copyright in “works for hire,” among others, runs from the year of first publication; the work passes into the public domain after the end of the copyright term. See 17 U.S.C. § 302.

Use of a year more than one year after the actual first publication year is the same as omitting the year entirely. This in turn is the same as omitting the notice itself, see 17 U.S.C. § 406, which has the consequences discussed above.

Under section 405(a)(2) of the Copyright Act, an effort to cure an omission of the copyright notice from pre-Berne copies need not be exhaustive, only “reasonable.” See /Shapiro & Son Bedspread Corp.

1. Royal Mills Associates/, 764 F.2d 69, 73‑74 (2d Cir. 1985). However,

a certain display of contrition and penance may be required to make an effort appear reasonable in the eyes of a court. In Videotronics, supra, the court ruled that “[i]mplicit in the concept of a `reasonable effort' under § 405(a) is the expectation that an expenditure of time and money over and above that required in the normal course of business.” 586 F. Supp. at 483 (D. Nev. 1984).

Courts may look for prompt action by a copyright proprietor to cure an omission of a notice from pre-Berne copies. In NEC Corp. v. Intel Corp., the court enumerated four factors to be examined in determining the reasonableness of a curative effort:

1. When discovery of the failure to add the notice occurred;
2. The time that elapsed between such discovery and the commencement

of corrective action;

1. The reasonable sufficiency of the corrective action;
2. The extent of any follow-up to determine implementation by

licensees; and

1. The quantity of copies distributed to the public between discovery

and corrective action.

NEC Corp. v. Intel Corp., 10 USPQ2d (BNA) 1177, 1180 (N.D. Cal. 1989).

The NEC court held, in effect, that Intel's efforts were too little too late. For example, Intel was found to have allowed a licensee to ship some 240,000 no-notice copies in the seven months between the date on which Intel claimed to have discovered the omission (and the court gave Intel the benefit of the doubt in this regard) and the date on which the first copies with a notice were shipped by the licensee. Intel also failed to offer to defray the cost of adding the notice. The court summarized Intel's efforts as to that licensee:

Intel's efforts with respect to Fujitsu were substantially less than reasonably could have been expected. . . . This situation required of Intel a frank acknowledgement to Fujitsu as to the nature of the problem, a request for full assistance in causing the copyright notice to be affixed on all products before final sale to the consumer, and an offer to help defray the cost of marking.

Instead, Intel did substantially nothing for two months and then waited an additional three months for an equivocal reply from Fujitsu. Its only other action was to send stickers without a reasonable expectation that they would be affixed, and it never did make inquiry to ascertain whether or not the stickers had been used. In the meantime, several hundred thousand unmarked copies of Intel's microcode had been scattered among the public.

Id. at 1182 (paragraphing supplied). On the basis of this and similar circumstances, the court ruled that Intel had forfeited its copyrights in the microcode. Id. at 1182‑83; see also Valve & Primer Corp. v. Val-Matic Valve & Mfg. Corp., 730 F. Supp. 141, 143‑44 (N.D. Ill. 1990) (copyrights in customer bulletins forfeited where omission of legend not cured until reprinting of bulletins, months after omission discovered).

The reasonableness of a curative effort may be judged in light of the equities perceived by a court in an infringement lawsuit. In Manufacturers Technology, Inc., v. CAMS, Inc., the copyright plaintiff had left off the notice from a brochure containing reproductions of program screen displays. The defendant asserted that the copyright in those screen displays had been forfeited. The court, reviewing the limited evidence concerning the plaintiff's curative efforts, noted that the defendants “were on notice of plaintiff's proprietary interest in its programs . . . .” Based in part on defendants' actual knowledge of the copyright claim, the court found that the plaintiff's curative efforts had been reasonable. Manufacturers Technology, Inc., v. CAMS, Inc., 706 F. Supp. 984, 999-1000 (D. Conn. 1989),

A question may exist whether the copyright notice must be applied to no-notice copies already in the hands of the public. The courts seem to be split on this question. See M. Kramer Mfg. Co. v. Andrews, 783 F.2d 421, 444‑45 (4th Cir. 1986); Donald Frederick Evans & Associates, Inc. v. Continental Homes, Inc., 785 F.2d 897, 910-12, 911 & n.22 (11th Cir. 1986).

As the Eleventh Circuit noted, “[t]he statutory language is ambiguous and could support either interpretation,” but “[t]he legislative history lends support to the latter [no such requirement] interpretation.” Id. On the other hand, the Second Circuit has ruled that no-notice copies in the hands of distributors have not yet been “distributed to the public,” and so the “reasonable effort” must encompass those copies. Shapiro, 764 F.2d at 74; see also NEC, 10 USPQ2d at 1180‑83.

It may be prudent not to take a chance: many companies go ahead and mail copyright stickers to dealers and end-users, together with letters asking that the stickers be affixed to the no-notice copies. See, e.g., Williams v. Arndt, 626 F. Supp. at 576 (D. Mass. 1985). The letters often include a premium offer or something else that can be introduced as indirect evidence of the likelihood that the stickers were in fact affixed. The NEC case, of course, indicates that even more aggressive measures may be required to ensure that the stickers are applied to copies that remain in the hands of dealers. See NEC, 10 USPQ2d at 1180‑82.

It is not completely clear whether intentional omissions of copyright notices can be cured in the same manner as unintentional omissions.

Selected cases:

Hasbro Bradley, Inc., v. Sparkle Toys, Inc., 780 F.2d 189, (2d Cir. 1985): The Second Circuit held that both intentional and unintentional omissions could be cured. Id. at 195‑96; see also Flag Fables, Inc., v. Jean Ann's Country Flags and Crafts, Inc., 730 F. Supp. 1165, 1183 (D. Mass. 1989) (citing Hasbro Bradley and denying defendant's motion for summary judgment that plaintiff had forfeited copyrights by intentional omission).

Innovative Concepts in Entertainment, Inc., v. Entertainment Enterprises Ltd., 576 F. Supp. 457, 461‑62 (E.D.N.Y. 1983): The district court held that a manufacturer/distributor of coin-operated miniature hockey games was not barred from curing an omission because he did not know that copyright protection was available..

Beacon Looms, Inc. v. Lichtenberg & Co., 552 F. Supp. 1305, 1310‑11 (S.D.N.Y. 1982): The district court ruled that an intentional omission could not be cured, given that the copyright owner in question “copyrighted” some of his designs but not others, thus presumably knowing about the availability of copyright protection.

Data Cash Systems, Inc., v. JS&A Group, Inc., 628 F.2d 1038, 1043‑44 (7th Cir. 1980): In a ROM-chip case arising under the 1909 Copyright Act, the Seventh Circuit ruled against a copyright owner who omitted a notice in the mistaken belief that the ROM chips physically could not be copied.

The potential penalty for wrong guessing is severe  forfeiture of the copyright. The prudent rule would thus seem to be: when in doubt about pre-Berne copies, assume that a copyright notice was required.

Later Versions Can Still Be Protectable

:CUSTOM_ID: even-if-an-earlier-versions-copyright-is-forfeited-later-versions-can-still-be-protectable

Forfeiture of the copyright in an earlier version of a computer program does not mean that later versions will be unprotected. So said the Eleventh Circuit in its 1999 Montgomery opinion, discussed in § 2.1[b].

Early registration of a software copyright is ordinarily desirable and carries distinct benefits. As the most obvious example, at this writing registration is a prerequisite to the filing of a copyright infringement suit by U.S. residents and by nationals of non-Berne Convention states. See 17 U.S.C. § 411. When clients discover that infringement is taking place, they usually want a lawsuit filed yesterday and will not be pleased at having to take the time to generate “identifying portions” of the software, see § 2.4[b][3], and then to wait for a belated registration application to be processed by the Copyright Office.

A copyright owner who fails timely to register its copyright may forfeit two important rights, namely statutory damages and prevailing-party attorneys' fees in the discretion of the court. Under the Copyright Act, a copyright owner may elect, at any time before final judgment, to receive an award of statutory damages in lieu of having to “prove up” its actual damages or the infringer's profits arising from the infringement. Statutory damages is a monetary award made by the court; the award can be in an amount up to $100,000 in cases where the infringement is found to be willful. See 17 U.S.C. § 504(c).

To be eligible for either of these remedies, the copyright owner must timely register the copyright in the work. Timely registration means either (i) /before a particular infringer begins his illegal activities or /(ii) for published works only, within three months of publication of the work. See 17 U.S.C. § 412. A copyright owner's failure to register timely carries a two-pronged disadvantage: it is ineligible for a fee award even if it is the prevailing party, see id., but the accused infringer could recover fees if it is the prevailing party.

Selected cases:

Aerospace Services Int'l v. LPA Group Inc., 57 F.3d 1002 (11^th Cir. 1995): The court affirmed a denial of statutory damages and attorneys' fees. The court held that a limited distribution of airport security system performance specification was not “publication” under § 412; thus, the copyright owner did not qualify for the statutory three-month grace period in which to register copyright. Since the registration had not been obtained before the infringement began, the copyright owner therefore was not eligible for an award of attorneys' fees.

Getaped.com, Inc. v. Cangemi, 188 F. Supp. 2d 398 (S.D.N.Y. 2002 (awarding statutory damages and attorneys' fees to copyright owner): The court held that a copyright owner's posting of a Web page to its Web site constituted “publication” of the page and therefore made the copyright owner eligible for the three-month, post-publication grace period in which to register the copyright. The plaintiff had created a Web site to sell Go-Ped ® brand motorized scooters. The defendants copied the Web site source code for their own site – after the plaintiff registered its copyright, but before three months after the plaintiff's Web site first went “live.” The magistrate judge held that the Web site had been displayed, not published, and therefore was not eligible for the three-month grace period. The district judge overruled the magistrate judge on this point, noting that the source code of the Web site could be readily viewed and saved to a permanent file by Web surfers.

[Compare Getaped with Kelly v. Arriba Soft Corp., 280 F.3d 934 (9^th Cir. 2002) (reversing, in pertinent part, summary judgment of fair use). In Kelly, the defendant's search engine linked and “framed” the plaintiff's copyrighted photographs, that is, the search engine caused the photographs to be imported directly to the end-user's browser from the plaintiff's Web site. The Ninth Circuit held that this did not constitute copyright infringement based on the reproduction of copyrighted works, but that it did infringe the plaintiff's exclusive right of public display of the works.]

Data General Corp. v. Grumman Systems Support Corp., 795 F. Supp. 501 (D. Mass. 1992), subsequent proceeding, 825 F. Supp. 340 (D. Mass.

1. (upholding jury verdict of $27.4 million), /affirmed in pertinent

part, remanded on other grounds,/ 36 F.3d 1147 (1st Cir. 1994): Data General had obtained registrations for later versions of its software before the infringement of the later versions began. It had failed, however, to register earlier versions before infringement of those versions began. The court granted partial summary judgment that Data General would not be entitled to statutory damages in respect of infringement of later versions of software. See 795 F. Supp. at 503-04. The court held that Data General would be entitled to attorneys' fees in respect of infringement of the later versions of software.

Registration is all but required if a program or other work of authorship was published without a proper copyright notice before the U.S. implementation of Berne: one of the best methods of “rescuing” the copyright in such a work entails obtaining a registration no later than five years after the no-notice publication (in addition to making a reasonable effort to add the notice to all copies that are distributed to the public in the United States after the omission has been discovered). See § 2.3[f].

Disclosure of trade secrets can happen because when any copyright is registered, copies of the “original work of authorship” in question (i.e., the program), or copies of “identifying portions” of the work in some circumstances, must be deposited with the Copyright Office when the registration application is filed. That allows Copyright Office personnel to verify that the material appears to be a work of authorship and is entitled to registration. See generally U.S. Copyright Office, Compendium of Copyright Office Practices [“Compendium II”], §§ 108.01, 324.04 (1984).

The public has access to deposited materials, thus creating the danger to trade-secret information. See Information Given by the Copyright Office, 37 C.F.R. § 201.2. If source code is deposited, anyone who can understand the language in which the software is written could theoretically analyze the program's structure and logic while studying the code in the Copyright Office. (“Object code,” i.e., machine-readable executable code, presumably would be more difficult to analyze in this way; see § 2.7[e] concerning reverse engineering.)

Copyright Office regulations, however, prohibit deposited materials from being copied except with the permission of the copyright owner, unless the copy is made for use in litigation or pursuant to a court order. See Information Given by the Copyright Office, 37 C.F.R. § 201.2(d)(4).

Falsely representing to the Copyright Office that litigation is pending, in order to obtain a copy of a registration deposit, can lead to trouble. In Atari Games Corp. v. Nintendo of America Inc., 18 USPQ2d (BNA) 1935 (N.D. Cal. 1991), affirmed, 975 F.2d 832 (Fed. Cir. 1992), Atari, as part of its reverse-engineering of the software embedded in Nintendo's Game Boy system, obtained a copy of Nintendo's object-code deposit from the Copyright Office. The court found that Atari had lied to the Copyright Office in stating that it needed to obtain the copy for use in defending against a pending infringement suit, when in fact no such suit had been brought at that point. The court granted a preliminary injunction against Atari.

It is unclear whether registration of a copyright automatically destroys secrecy in the registered work, and with it any possibility of asserting trade-secret rights.

Selected cases:

Compuware Corp. v. Serena Software Int'l, Inc., 77 F. Supp.2d 816 (E.D. Mich. 1999): The district court denied a motion for summary judgment that the plaintiff's software had lost its trade-secret status. In registering the copyrights for its software, the plaintiff apparently filed the entire source code, largely unredacted, with the Copyright Office (the court's opinion is not entirely clear as to exactly what was filed). The defendant contended that this action had destroyed the secrecy of the software. The court rejected that argument, on grounds that “there is no evidence that the products or their contents were known to persons inside or outside of the industry or among the general public during any of the times at issue. There is no evidence that anyone outside of the Compuware corporate structure, its customers, or the Copyright Office viewed the material prior to the commencement of this litigation.” Id. at 818.

Tedder Boat Ramp Systems, Inc. v. Hillsborough County, 54 F. Supp.2d 1300 (M.D. Fla. 1999): The plaintiff was in the business of designing boat ramps. It registered a copyright in one such design; it also submitted the design to a county agency for consideration for possible use in two public-park boat ramps. The court granted judgment on the pleadings that by registering the copyright (and by submitting the plan to the county agency), the plaintiff had negated secrecy: “It is difficult to reconcile the conflict between the Copyright Office making the copyrighted material available to the public, versus the holder's right to keep his works secret. … [S]ince it is always possible, even if not certain, that copyrighted materials are available to the public, the element of secrecy is not established.” Id. at 1303.

Warrington Associates, Inc., v. Real-Time Engineering Systems, Inc., 522 F. Supp. 367 (N.D. Ill. 1981): The district court denied the accused infringer's motion for summary judgment that the copyright owner had forfeited its trade-secret rights through registration. The court observed that “the fact that [the copyright owner] registered its User's Manual for a copyright [sic] might well affect the continued secrecy of the ideas in that manual for which Warrington seeks trade secret protection. However, on the basis of the record before the court, no final determination on this issue can be made at this time.” Id. at

If source code is being deposited, it may be possible to obtain a registration without depositing the entire source code. The Copyright Office has promulgated special procedures for depositing computer software to allow software developers to avoid revealing their trade secrets.

If a software package is distributed only in machine-readable form (e.g., on a floppy disk), the Copyright Office will permit a single hard copy, e.g., a printed listing, of “identifying portions” of the software to be deposited instead of the entire package. See Deposit of Copies and Phonorecords for Copyright Registration, 37 C.F.R. § 202.20(c)(2)(vii), reproduced in Appendix A. If a program is very short, however, it may not be possible under these special provisions to deposit anything less than a complete source-code listing.

In the 1997 Fonar case, the practice of filing only identifying portions of source code was implicitly approved by the Second Circuit. Fonar Corp. v. Magnetic Resonance Plus Inc., 105 F.3d 99 (2d Cir. 1997), reversing and remanding 920 F. Supp. 508 (S.D.N.Y. 1996). The copyright owner had filed only the first 29 pages and the last 34 pages of the 2,000-page source code of its program, which comprised a large number of code modules. The district court granted summary judgment for the defendants, holding that

plaintiff's mass filing of the source code as a single collection without sufficient identifying materials failed to identify the works that are the subject of the copyright. Because plaintiff's copyright registration fails to identify the material covered by the copyright, sufficient doubt has been cast on the validity of the copyright registration, and thus “validity will not be assumed.”

920 F. Supp. at 516 (citation omitted). The Second Circuit reversed and remanded for trial, holding that:

Whether Fonar had to submit source code for each of the many subprograms (and possibly sub‑subprograms) is a question we are content to leave to the judgment, expertise, and practices of the Copyright Office. … The alternative—requiring Fonar to submit 50 pages of code (and an additional filing fee) for each of the programs that compose the maintenance software—would impose burdens on Fonar and on the resources of the Copyright Office that the Copyright Office may deem unnecessary or excessive.

Id., 105 F.3d at 105.

A work of authorship must be distributed in machine-readable format only to qualify for such a partial deposit. A printed manual or a program published in a magazine does not qualify; two copies of the entire work must be deposited if the work is to be registered. See 37 C.F.R. § 202.20(c)(2)(vii); Compendium II at § 324 (“NOTE”).

If a software package is distributed only in object-code form, it may be desirable — but it may also affect subsequent infringement litigation — to deposit “identifying portions” of the object code instead of source code. The basic advantage of an object-code deposit is the reduced risk of disclosing trade secrets, as discussed in § 2.4[b][1]. The Copyright Office, however, encourages deposits of source code. Compendium II, supra note at § 324.03. If object code is deposited, the Copyright Office will usually require that the registration application include a separate letter stating that the program is an original work of authorship. Id. at § 324.04. The Office has taken the position that its personnel will not attempt to determine whether object code, which is normally unreadable for all practical purposes, is a protectable work. See id. The Office therefore accepts object code deposits only under the rule of doubt. See 37 C.F.R. § 202.20(c)(2)(vii)(B).

Selected cases:

Apple Computer, Inc., v. Franklin Computer Corp., 714 F.2d 1240, 1255 & n.9 (3rd Cir. 1983): The Third Circuit refused to decide whether registration under the rule of doubt affects the validity of a copyright.

Compaq Computer Corp. v. Procom Technology, Inc., 908 F.Supp. 1409, 1417-18 (S.D. Tex. 1995): The court held that Compaq's rule-of-doubt registration, of its copyright in a compilation of a specific set of hard-disk operational parameter values, placed the burden of proof of validity on Compaq.

Software screen displays ordinarily will not be registered apart from the computer program that generates them. In June, 1988, the Copyright Office published a policy decision to that effect. See Notice of Registration Decision, 53 Fed. Reg. 12817 (Jun. 10, 1988), reprinted in 36 Pat, Trademark, & Copr. J. (BNA) 152 (Jun. 9, 1988). “The Office determined that all copyrightable expression owned by the same claimant and embodied in a computer program, or first published as a unit with a computer program, including computer screen displays, is considered a single work and should be registered on a single application form.” See 54 Fed. Reg. 13173, 13175 (Mar. 22, 1989), reprinted in 37 Pat, Trademark, & Copr. J. (BNA) 609, 611 (Apr. 6,

1. (emphasis supplied).

Interestingly, a district court had previously ruled in the Softklone case that a separate registration was necessary to claim the copyright in screen displays, because the same screen display can be created by a variety of different computer programs. Digital Communications Assoc., Inc., v. Softklone Distributing Corp., 659 F. Supp. 449, 455‑58 (N.D. Ga. 1987).

In response to the Copyright Office's decision to issue only one registration notwithstanding Softklone, another court chose to treat such a single registration as performing the function of two registrations, one for the computer program, one for the screen displays. Manufacturers Technology, Inc., v. CAMS, Inc., 706 F. Supp. 984, 993 (D. Conn. 1989). The latter court stated that “[t]his approach creates the legal fiction of two separate registrations. It recognizes that a computer program and its screen displays are, for copyright purposes, fundamentally different.” Id.

Subsequently, in Lotus v. Borland, the district court rejected the defendants' assertion that the plaintiff's copyright registration for its 1‑2‑3 program covered only the literal program code and not the screen displays. See Lotus Development Corp. v. Borland Int'l, Inc., 740 F. Supp. at 79‑82, rev'd on other grounds, 49 F.3d 807, 34 USPQ2d 1014 (1st Cir. 1995), aff'd without opinion by an equally divided Court, 516 U.S. 233, 116 S. Ct. 804, 133 L.Ed.2d 610 (1996).

In the Harbor Software case, the court held that a copyright registration of the code extends to the screen displays, and that the screen displays in question were sufficiently original to be protectable. See Harbor Software, Inc. v. Applied Systems, Inc., 925

1. Supp. 1042, 1046, subsequent proceeding, 936 F. Supp. 167 (S.D.N.Y.
2. (granting in part and denying in part defendant's motion for

summary judgment).

If the copyright in a screen display is owned separately from that in a computer program which can generate the display (e.g., if the display was created first by one author and the program was written later by another as a means of implementing the display), then a separate registration should be available. This situation could arise where a sophisticated end-user creates a dummy prototype of a desired program, then hires an outsider to actually write the program.

Registration of copyright claims in screen displays can be useful. In Digital Communications Associates, 659 F. Supp. 449 (N.D. Ga. 1987), a federal district court in Atlanta enjoined the sale of a communications program which used similar menu screens and command structure of Crosstalk, a popular communications package. The court ruled that the selection and arrangement of command terms and status information on a computer screen was a protectable compilation. Id. at 457‑62.

The Whelan court held that similarity in screen displays can constitute evidence supporting a finding of “substantial similarity” between the underlying programs, although the defendant is free to show that the similarity is not probative for some reason). See Whelan Associates, Inc., v. Jaslow Dental Laboratories, 797 F.2d 1222, 1243‑44 (3d Cir. 1986).

In an interesting screen-display ruling, the Fourth Circuit held that an audiovisual work generated by a computer program can be said to be “fixed” in the program code itself. M. Kramer Mfg. Co. v. Andrews, 783 F.2d 421, 441 (4th Cir. 1986). A registered copyright in the audiovisual display might thus “protect the computer program which implements the audiovisuals” because the program is a “copy” of the audiovisual displays. Id.

In a later case, another court ruled that the converse is not true. The Digital Communications Associates court noted that a given screen display could be generated by a wide variety of computer programs; it held that, consequently, a screen cannot be a “copy” of many different programs, and a computer program's copyright protection thus does not extend to the program's screen displays. Digital Communications Associates, 659 F. Supp. at 455‑56. This holding should be compared, however, with more recent cases (e.g., Manufacturers Technology and Lotus, discussed above) in which similarity of screen displays helped copyright plaintiffs prevail.

If the screen displays of a computer program are being claimed in a copyright registration application for the program, the application form must include a statement to that effect. This statement is usually written in Block 2 of the application form, where the description of the nature of authorship can be along the lines of “Computer program statements and associated screen displays.”

In such a case, the deposit materials must include (in addition to the identifying portions required for the hard-copy visual reproductions of the copyrightable expression in the screen displays, in the form of “printouts, photographs, or drawings no smaller than 3x3 inches and no larger than 9x12 inches.” See Deposit of Copies and Phonorecords for Copyright Registration, 37 C.F.R. § 202.20(c)(2)(vii)(C)(1).

If the authorship in the screen displays is predominantly audiovisual (e.g., a computer game), the deposit material should be “a one-half inch VHS format videotape reproducing the copyrightable expression.” However, if the computer screen material “simply consists of a demonstration of the functioning of the computer program,” then hard-copy visual reproductions, as discussed above, must be submitted instead. Id. § 202.20(c)(2)(vii)(C)(2).

The Streetwise Maps case is an illustration of the first situation. The Second Circuit held that a copyright registration for a later-version street map, which was a derivative work of an earlier version, would support a claim for infringement of the earlier version. Streetwise Maps Inc. v. Van Dam, Inc., 159 F.3d 739 (2d Cir. 1998).

The district court had dismissed the copyright infringement suit because the allegedly infringed earlier version had not been registered. Id. at 746. The appellate court reversed, saying that “because Streetwise is the owner of the copyright of both the derivative and pre-existing work, the registration certificate relating to the derivative work in this circumstance will suffice to permit it to maintain an action for infringement based on defendants' infringement of the pre-existing work.” Id. at 747 (citations omitted).

(Unfortunately for the Streetwise Maps plaintiff, the Second Circuit compared the plaintiff's map with the defendant's map and concluded that “because the total concept and overall feel created by the two works may not be said to be substantially similar, the district court's dismissal of Streetwise's copyright infringement claim must be affirmed.” Id. at 747-48.)

Similarly, in Bishop v. Wick, the district court rejected the defendant's contention that the plaintiff's copyright registration was supposedly invalid for that reason:

The Program registered with the Copyright Office was substantially identical to the Program taken from the plaintiffs in 1987, in terms of function, operation, and purpose. Further, the relatively minor modifications and corrections incorporated in plaintiffs' registered Program “could not have affected the action of the Copyright Office [and] will not invalidate the copyright nor deprive the registrant of the right to bring an infringement action.” Finally, defendants have, in essence, admitted copyright infringement and thus come before the Court with unclean hands; they therefore may not contest the effectiveness of plaintiffs' copyright registration procedures.

Bishop v. Wick, 11 USPQ2d (BNA) 1360, 1362 (N.D. Ill. 1988) (citations omitted).

The second situation, in which the version infringed is later than the version registered, is the subject of a seeming split among the circuits.

In the 1999 Montgomery case, discussed in § 2.1[b], the plaintiff filed suit based on a registered early version, but it was a later version that was allegedly infringed. Montgomery v. Noga, 168 F.3d 1282, 1292 (11th Cir. 1999) (affirming denial of JMOL and judgment of infringement). The Eleventh Circuit noted that the evidence at trial showed that the later version incorporated over seventy percent of the original source code from the registered earlier version. After reviewing statutory provisions and legislative history, the court concluded that, by making unauthorized copies of the later version, the defendants infringed the copyright in the earlier version, which had indeed been registered prior to the commencement of the lawsuit. Id., at 1292-93 & n.17, citing inter alia Central Point Software, Inc. v. Nugent, 903 F. Supp. 1057, 1060 & n.5 (E.D. Tex. 1995) (granting summary judgment on plaintiffs' copyright infringement claim).

In another, non-software case with colorful facts, the Sixth Circuit took the opposite view. In Murray Hill Productions, Inc. v. ABC Communications, Inc., 264 F.3d 622 (6th Cir. 2001), the copyrighted work in question was a brief jingle composed by a friend of a radio morning-show host and used by the host for over five years, with the composer's permission, as his theme song. After the host's sudden death, his radio station compiled and marketed a “best of” CD that included the jingle, with the proceeds going to charity. The composer's company sued the radio station's parent company for infringement, among other claims. The district court granted summary judgment in favor of the defendant and awarded attorneys' fees. The Sixth Circuit, while reversing the fee award, affirmed the dismissal; it held that “before an infringement suit can be sustained based on the derivative work, that derivative work must be registered. . . . Because a derivative work is cumulative of the earlier work, it is logical that the registration of the derivative work would relate back to include the original work, while registration of the original material would not carry forward to new, derivative material.” Id. at 630-31.

Focusing on the Right to Control the Means and Manner of the Work

:CUSTOM_ID: the-supreme-courts-reid-decision-focusing-on-the-right-to-control-the-means-and-manner-of-the-work

In its unanimous 1989 Reid decision, the Supreme Court announced a relatively strict  but possibly unpredictable  test of ownership when copyrightable works are created by putative “employees.” Community for Creative Non-Violence v. Reid, 490 U.S. 730, 109 S. Ct. 2166 (1989), affirming 846 F.2d 1485 (D.C. Cir. 1988).

Reid involved a sculpture created by an independent-contractor sculptor; a dispute arose between the sculptor and the hiring party about ownership of the copyright, with the hiring party claiming that it was entitled to an employer's title. The Court ruled that the copyright belonged to the sculptor and not the hiring party. After reviewing the legislative history, Justice Marshall concluded that the 1976 Copyright Act's provisions governing works made for hire were the result of “an historic compromise” among competing economic interests, id., 490 U.S. at 745, 109 S. Ct. at 2175, and that “[s]trict adherence to the language and structure of the Act is particularly appropriate where, as here, a statute is a result of a series of carefully crafted compromises.” Id., 490 U.S. at 748 n.14, 109 S. Ct. at 2177 n.14.

The Court held that, if the statutory requirements for a specially commissioned work by an outside author are not met (as they had not been met in Reid), then the initial ownership of a copyright is determined solely by whether the individual author was an employee acting within the scope of his employment. Id., 490 U.S. at 742, 109 S. Ct. at 2174. In turn, the Court said, the outcome of the scope-of-employment question was intended by Congress to depend on the hiring party's right to control the manner and means by which the work is created, which the Court declared to be a matter governed by the general common law of agency (as opposed to the agency law of any particular state). Id., 490 U.S. at 740, 109 S. Ct. at 2173.

Justice Marshall's Reid opinion laid down a number of traditional factors to be considered in determining an “employer's” right to means-and-manner control:

In determining whether a hired party is an employee under the general common law of agency, we consider the hiring party's right to control the manner and means by which the product is accomplished. Among the other factors relevant to this inquiry are

1. the skill required;

2. the source of the instrumentalities and tools;

3. the location of the work;

4. the duration of the relationship between the parties;

5. whether the hiring party has the right to assign additional projects to the hired party;

6. the extent of the hired party's discretion over when and how long to work;

7. the method of payment;

8. the hired party's role in hiring and paying assistants;

9. whether the work is part of the regular business of the hiring party;

10. whether the hiring party is in business;

11. the provision of employee benefits; and

12. the tax treatment of the hired party.

See Restatement [of Agency] § 220(2) (setting forth a nonexhaustive list of factors relevant to determining whether a hired party is an employee). No one of these factors is determinative.

Id., 490 U.S. at 751-52, 109 S. Ct. at 2178‑29 (extensive footnotes omitted; numbering and paragraphing added).

of Benefits and Tax Payments in Determining “Employee” Status

:CUSTOM_ID: the-second-circuits-aymes-v.-bonelli-the-crucial-role-of-benefits-and-tax-payments-in-determining-employee-status

To some observers, Reid seemed to dash any hope that bright-line predictability might help define when an employer would own the copyright in employee-created works. In what seems likely to become a seminal case providing at least some of the bright lines Reid did not, the Second Circuit in Aymes v. Bonelli considered whether a computer program created for a company by an putative independent-contractor programmer was a work made for hire, and thus whether the company could be sued for infringement by the programmer for having expanded its use of the program. Aymes v. Bonelli, 980 F.2d 857 (2d Cir. 1992). Some of the most significant holdings in the opinion were:

1. that the Reid factors should be weighed according to their relative importance, not simply tallied;
2. the right to control the manner in which the work is conducted is not necessarily dispositive,
3. computer programming of the kind engaged in by the contractor is a highly skilled craft, and
4. perhaps most importantly, the company's failure to provide benefits to and and pay Social Security taxes for the contractor was all but fatal to its work-for-hire infringement defense.

As a preliminary matter, the Second Circuit criticized the trial court for giving equal weight to the twelve factors of the Reid test; the appellate court held that those factors “should not merely be tallied but should be weighed according to their significance in the case.” Aymes, 980 F.2d at 861 (extensive citations omitted). The court also remarked that it seemed clear from the record that the company had the right to control the manner in which the program in question was created, and that this factor “weighs heavily in favor of finding that Aymes was an employee.”

The court disagreed with the district court about the significance of the computer programmer's comparative youth and inexperience. The district court had held that this factor weighed in favor of an employment relationship. In contrast, the Second Circuit concluded that “Aymes's work required far more than merely transcribing Bonelli's instructions. . . . In this case, Aymes was clearly a skilled craftsman. Consequently, this factor weighs heavily in his favor.” Aymes, 908 F.2d at 861-62 (citations omitted).

It appears that in the Second Circuit's view, perhaps the most important factor weighing against the company's work-for-hire defense was that the company never paid payroll and Social Security taxes. The court asserted that the company “should not in [the tax] context be able to claim that [the programmer] was an independent contractor and ten years later deny him that status to avoid a copyright infringement suit.” Id. at 862. Indeed, the court pointed out, “every case since Reid that has applied the test has found the hired party to be an independent contractor where the hiring party failed to extend benefits or pay social security taxes.” Id. at 863 (extensive citations omitted).

The Second Circuit concluded that “on balance, application of the Reid test requires that we find Aymes to be an independent contractor when he was creating CSALIB for Island. Consequently, we hold that CSALIB is not a work for hire. Aymes therefore owns the copyright as author of the program.” Aymes, 980 F.2d at 864.

Kirk v. Harter, 188 F.3d 1005, 1008 (8th Cir. 1999): The court reversed a judgment on jury verdict, holding that a copyright-infringement defendant who had developed a computer program for the plaintiff was in fact the owner of copyrighted program because he was an independent contractor. The plaintiff had paid the defendant as an outside contractor and had not withheld taxes or provided benefits for defendant.

Sasnett v. Convergent Media Systems, Inc., No. C.A. 95-12262-NG, 1997 WL 33142149 (D. Mass. Aug. 29, 1997): The court, while noting that the hiring party had not withhold taxes or pay benefits to the contract programmer, nevertheless concluded that the hiring party was likely to succeed in proving that the software in question had been developed as a work made for hire; the court granted a preliminary injunction in favor of the hiring party against the programmer's subsequent assignee.

Innovative Networks, Inc. v. Satellite Airlines Ticketing Centers, Inc., 871 F. Supp. 709 (S.D.N.Y. 1995): The court granted partial summary judgment that a copyrighted floor plan was a work made for hire owned by the plaintiff, notwithstanding nonpayment of withholding taxes and benefits.

MacLean Assocs., Inc. v. Wm. M. Mercer-Meidinger-Hansen, Inc., 952 F.2d 769 (3d Cir. 1991): In this pre-Aymes case, the court reversed a directed verdict that a company that had hired a programmer was the owner of the resulting software. It held that a computer programmer could be found to be an independent contractor without taking into account all of the Reid factors.

Section 101 of the Copyright Act provides that the definition of “work made for hire” includes a work specially ordered or commissioned for use as any of the following, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire:

 a contribution to a collective work,

 a part of a motion picture or other audiovisual work,

 a translation,

 a supplementary work,

 a compilation,

 an instructional text,

 a test,

 answer material for a test, or

 an atlas.

These statutory categories represent a conscious compromise by Congress as to when the rights of non-employee authors can be permanently appropriated in advance by hiring parties. See Community for Creative Non-Violence v. Reid, 490 U.S. 730, 745-46, 109 S. Ct. 2166, 2175 (1989); see also infra § 2.6[g] (rights assigned to a hiring party, as opposed to rights owned ab initio by virtue of hiring party's “authorship,” can be reclaimed by author or heirs 35 years after assignment).

Section 101 of the statute further provides that a “supplementary work,” as used in the above laundry list, is a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes, and an “instructional text” is a literary, pictorial, or graphic work prepared for publication and with the purpose of use in systematic instructional activities. See 17 U.S.C. § 101 (definition of “work made for hire”).

The statute does not say when the written instrument must be executed. The Seventh Circuit expressly held that execution must take place in advance, but the Second Circuit held that execution could occur after the work is created if the parties intended a work-for-hire relationship before the work was created. Compare Schiller & Schmidt, Inc., v. Nordisco Corp., 969 F.2d 410, 412-13, 23 USPQ2d (BNA) 1762 (1992) (holding that a signed statement that hiring party owned copyrights in previously taken photographs was ineffective to confer work-made-for-hire status on photographs) with Playboy Enterprises, Inc. v. Dumas, 53 F.3d 549 (2d. Cir. 1995) (holding that author's endorsement of a series of checks, each having a legend stating that payment was for a work made for hire, could be sufficient to establish intent), vacating and remanding 831 F. Supp. 295 (S.D.N.Y. 1993), on remand, 960 F. Supp. 710 (S.D.N.Y. 1997) (holding that illustrations paid for by checks containing work-for-hire language were works made for hire if checks were endorsed by illustrator, but not if checks were endorsed by painter's agent).

Most computer programs normally do not fit within any of the nine statutory work-made-for-hire categories. Thus, they cannot qualify as works made for hire even if they're specially ordered or commissioned from an outside software developer. (Many software development contracts and similar documents inappropriately state that the software in question, being developed by an independent programmer or firm, is to be deemed a work made for hire. Except in the circumstances set out in the statute, however, merely saying so will not make it so, no matter what the parties recite in their agreement.) Some exceptions may exist, however:

• A section of computer code, commissioned to form part of a larger program might qualify as a contribution to a collective work. But see § 2.6[h], concerning whether such a larger program might be a joint work jointly owned by the authors.
• A routine commissioned for a computer program that involves pictorial images might constitute a part of an audiovisual work.
• Software documentation written by outside technical writers (e.g., on-line help screens or printed user manuals) may qualify as a supplementary work or instructional text.
• A “porting” of an existing program (roughly, a translation), to another language or for use on a different computer, might arguably qualify as a specially commissioned translation.
• Contributions to a data compilation, e.g., one used by a computer program, could qualify for copyright protection as a compilation under the statute. See 17 U.S.C. § 101 (definition of “compilation”), § 102 (extent of copyright in compilations). See also § 2.2 for a discussion of the scope of copyright protection in data bases; cf. Digital Communications Assocs., Inc., v. Softklone Distr. Corp., 659 F. Supp. 449, 457‑62 (N.D. Ga. 1987) (concluding that status screen of plaintiff's Crosstalk program was a protectable compilation of commands and status information).

A written instrument is required to assign a copyright. 17 U.S.C. § 204(a). If the instrument is properly acknowledged, it serves as prima facie evidence of the transfer. 17 U.S.C. § 204(b). If an assignment is to include the right to sue for past infringement, that fact should be expressly recited in the instrument. A sample copyright assignment is set out below in 0.

Selected cases:

Tiffany Design, Inc. v. Reno‑Tahoe Specialty, Inc., 55 F. Supp.2d 1113, 1117-18 (D. Nev. 1999): The court held that a signed letter which stated that a photographer “release[d] all copyrights attached to the Las Vegas poster to Grant Gresser of Tiffany Design” was sufficient to convey the copyright.

Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 557 (9th Cir.1990), discussed in § 2.6[j]: Judge Kozinski's opinion noted in passing that “[i]f the copyright holder agrees to transfer ownership to another party, that party must get the copyright holder to sign a piece of paper saying so. It doesn't have to be the Magna Charta; a one‑line pro forma statement will do.”

Konigsberg Int'l, Inc. v. Rice, 16 F.3d 355, 356-57 (9th Cir. 1994): The court affirmed a judgment that a letter by the defendant licensor, confirming the existence of a two-year oral exclusive license agreement, written after the two-year term, was ineffective as transfer of rights to the plaintiff licensee.

Eden Toys, Inc. v. Florelee Undergarment Co., 697 F.2d 27, 36 (2d Cir.1982): The court held that a memorandum of transfer made within a year of an oral agreement and during the term of an exclusive license validated the agreement ab initio.

Arthur Rutenberg Homes Inc. v. Drew Homes Inc., 29 F.3d 1521, 1533 (11th Cir. 1994): The court reversed a holding that the plaintiff did not own valid copyright at time of alleged infringement and that the registration was invalid because it incorrectly recited that registered work was a work made for hire. A third-party author's oral agreement that the plaintiff would own title to the work, subsequently followed up by written assignments, gave the plaintiff sufficient ownership interest to obtain a registration and to sue the defendant for infringement.

Friedman v. Stacey Data Processing Services, Inc., 17 USPQ2d (BNA) 1858 (N.D. Ill. 1990): The court held that extrinsic evidence may be considered in determining whether ambiguous particular language in software development agreement constituted assignment of copyright.

In an interesting but seemingly isolated ruling, a Louisiana federal court held that transfers of copyrights must comply with the formalities requirements of state contract law, possibly including the Louisiana law governing “donations of incorporeal movables.” According to the court, “[t]he material question is whether the transfer [of the copyrights] was a donation or a transfer for consideration”; in the former case, notarization and witnessing would be required. In response to the defendants' motion for summary judgment, the court held that a genuine issue of material fact existed whether the plaintiff had a valid chain of title to the copyrighted posters in question. N & D E Co. Inc. v. Gustings, 23 USPQ2d (BNA) 1049, 1051-52 (E.D. La. 1992) (denying, in pertinent part, defendant's motion for summary judgment).

As with most forms of property, assignments of copyrights must be recorded in order to be valid against subsequent good faith purchasers or mortgagees for value (BFPs). Recordation of a copyright transfer serves as constructive notice against subsequent BFPs if :

1. the transfer is recorded within one month of its execution in the U.S., or within two months of its execution outside the U.S., or before recordation of the subsequent transfer; and
2. if the recorded instrument specifically identifies the work to which it pertains so that, after it is indexed by the Copyright Office, it would be revealed by a reasonable search under the title or registration number of the work; and
3. a copyright registration has been obtained for the work itself.

17 U.S.C. § 205.

Any document relating to copyright will be recorded by the Copyright Office, as permitted by section 205 of the copyright statute. See Recordation of transfers and certain other documents, 37 C.F.R. § 201.4(a)(2). A note or memorandum of a transfer may be recorded as well as the instrument of conveyance itself. Id. § 201.4(c). The term “relating to a copyright” is broadly construed. See id. (providing in part that “[a]ny transfer of copyright ownership . . . or any other document pertaining to a copyright, may be recorded in the Copyright Office” if it is accompanied by the required fee).

To be recordable, a document must either (i) bear the actual signature of the person or persons who executed it, or (ii) be a legible photocopy or other legible facsimile reproduction, accompanied by a sworn certification signed by at least one of the parties to the signed document or by an authorized representative of that person. Id. § 201.4(c)(1).

Documents to be recorded can identify other documents or incorporate them by reference, but they cannot refer to exhibits, appendixes, or attachments that are not included for recordation. Id. § 201.4(c)(2).

of a Joint Work

:CUSTOM_ID: co-authors-who-intend-a-unitary-whole-work-are-deemed-coowners-of-a-joint-work

The copyright statute provides that “[t]he authors of a joint work are coowners of copyright in the work.” 17 U.S.C. § 201(a). The statute defines a joint work as “a work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole.” Id. § 101.

The authors' intention to create a joint work apparently must exist at the time that they do their respective work. Moreover, the authors' intentions apparently must be judged by whether they intend to collaborate to produce one work. If the intent of either putative joint author is to produce his or her own separate work, independently of the other author, then the end product probably will not be a joint work.

Selected cases:

Weissmann v. Freeman, 868 F.2d 1313 (2d Cir. 1989): The Second Circuit approved of its 1944 holding to that effect, which in the court's view was still consistent with the language and legislative history of the 1976 Copyright Act. “[A]s Judge Hand stated it, ‘when both [authors] plan an undivided whole . . ., their separate interests will be as inextricably involved, as are the threads out of which they have woven the seamless fabric of the work.'” Id. at 1318‑19, citing /Edward

1. Marks Music Corp. v. Jerry Vogel Music Co./, 140 F.2d 266 (2d Cir.
2. (L. Hand, J.) and H.R. Rep. No. 1476, 94th Cong., 2d Sess. 1, 120,

reprinted in 1976 U.S. Code Cong. & Admin. News 5659, 5736.

The Weissman court viewed the critical fact governing the authors' intentions as having been that “both [authors] were equally aware that their individual authorship efforts would have to be combined in order to create the final integrated producta commercially viable song.” Id.

Childress v. Taylor, 945 F.2d 500, 507 (2d Cir. 1991): In an infringement case brought by the author of a play about the life of “Moms” Mabley, the defendant, an actress accused of infringing the copyright in the play, claimed that she was as joint author of the play. She apparently had suggested that the play be written, contributed facts and ideas, and played the title role in the initial production. Affirming a summary judgment of infringement, the Second Circuit held that there was no evidence from which a trier of fact could infer that the playwright had the requisite state of mind that is required for joint authorship.

Avtec Systems, Inc. v. Peiffer, 805 F. Supp. 1312 (E.D. Va. 1992), vacated and remanded, 21 F.3d 568 (4th Cir.), on remand 1994 U.S. Dist. LEXIS 16946 (E.D. Va. Sept. 12, 1994): The district court held that a company was not a joint author of a computer program that had been developed by a former employee largely on his own time with his own computer. “There is slight evidence of collaboration and less evidence of intent to merge separate efforts into a unitary whole.” 805

1. Supp. at 1319.

Whelan Associates, Inc., v. Jaslow Dental Laboratory, Inc., 609 F. Supp. 1307, 1319 (E.D. Pa. 1985), aff'd, 797 F.2d 1222 (3d Cir. 1986): The court held that “[t]here is not a scintilla of evidence that the parties ever intended that Rand Jaslow's contributions, whatever they may have been, should merge into the final computer system and design.”

Must Itself be Copyrightability

:CUSTOM_ID: a-would-be-joint-authors-contribution-must-itself-be-copyrightability

Not just any contribution to the development of a copyrightable work will give rise to a co-ownership interest. The courts have held that such a contribution must itself rise to the level of copyrightability. See also § 2.1[a][1] (authorship requirements).

Selected cases:

Childress v. Taylor, 945 F.2d 500, 507 (2d Cir. 1991), summarized on page 2: The Second Circuit adopted what it characterized as the prevailing view, endorsed by Copyright Office, which requires contributions by putative joint authors to rise to the level of copyrightability. The court observed that insistence on copyrightable contributions by putative joint authors might serve to prevent some spurious claims by those who might otherwise try to share the fruits of the efforts of a sole author of a copyrightable work. It pointed out that a person with noncopyrightable material who proposes to join forces with a skilled writer to produce a copyrightable work is free to make a contract to disclose his or her material in return for an assignment of part ownership of the resulting copyright. See id. at 507; see also Erickson v. Trinity Theatre, Inc., 13 F.3d 1061, 1070-71 (7th Cir. 1994) (same).

Whelan Associates, Inc., v. Jaslow Dental Laboratories, 609 F. Supp. 1307 (E.D. Pa. 1985), aff'd, 797 F.2d 1222 (3d Cir. 1986): The copyright infringement defendants claimed at trial that defendant Rand Jaslow was a joint author and co-owner of the plaintiff's dental laboratory management software. They alleged that Jaslow “originated the concept” of developing the software, that he “disclosed to Elaine Whelan in detail the operation and method of Jaslow Laboratory in conducting its business, [and] that he explained to Elaine Whelan the functions to be performed by the computer and helped design the language and format of some of the screens that would appear on the computer's visual displays.” Id. at 1318. The Whelan court rejected the defendants' contentions, finding that “Rand Jaslow did little more than explain the operations of the dental laboratory business and define the information he wanted to be able to obtain from the computer. . . . Such general assistance and contributions to the fund of knowledge of the author did not make Rand Jaslow a creator of any original work, nor even the co-author.” Id. The court's perception of the nature of Rand Jaslow's work was the final blow to the defendants' joint-authorship contention: “The only suggested merger into the whole might be the wording and the abbreviations contained on some of the visual screens. His contributions were not of sufficient significance to constitute him a co-author of the system.” Id.

S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081 (9th Cir. 1989): The software in question had been custom-developed, apparently as part of a hardware-software procurement contract. The developer had licensed only the executable version (not the source code) to the customer, and for use only on hardware provided by the developer. Id. at 1082‑83. Two of the developer's employees – who had been the principal authors of the software in question – left to set up their own competing company, offering to write an improved version of the software for use on the customer's own hardware. The customer agreed; the ex-employees then obtained unauthorized “back door” access to their former employer's computer (by circumventing the password system) and took a copy of the source code of the software. The next week, the former employees installed the purloined software on the customer's newly purchased in-house hardware. Id. at 1084. In the Ninth Circuit, a joint-authorship claim was rejected as an alternative ground for affirming a summary judgment in favor of the customer. The trial court had granted summary judgment in favor of the customer on the developer's copyright-infringement claims; on appeal, the customer made a joint-authorship argument as an alternative ground for affirming summary judgment. See id. at 1084, 1086. The customer argued that its own employee had been a joint author and thus that it was a co-owner. Id. at 1086. The Ninth Circuit disagreed; citing Whelan, it said that the customer's employee “did nothing more than describe the sort of programs Payday wanted S.O.S. to write. A person who merely decribes to an author what the commissioned work should do or look like is not an author for purposes of the Copyright Act.” Id. at 1087, citing Whelan, 609 F. Supp. at 1318‑19.

Ashton-Tate Corp. v. Ross, 728 F. Supp. 597 (C.D. Cal. 1989), affirmed, 916 F.2d 516 (9th Cir. 1990): The court gave short shrift to allegations of joint authorship and co-ownership. The alleged joint author had worked on a spreadsheet program with a third party; he developed a list of user commands that he felt a spreadsheet program should implement. The third party disclosed parts of the spreadsheet program to the alleged infringer (and declaratory-judgment plaintiff), which went on to built a working spreadsheet program in collaboration with the third party. The Ross court treated the alleged joint author's contribution to the spreadsheet program as an unprotectable idea, not as a part of the protectable expression in the program. The court said that a contribution of only “ideas” to the development of a work, without reducing those ideas to an expression is insufficient to acquire an interest in the work. Id., 916 F.2d at 521‑22. After acknowledging the difficulty of drawing lines between ideas and expressions, the court held that “Ross merely told Wigginton what tasks he believed the [spreadsheet] interface should allow the user to perform. This list of commands is only an idea that is not protected under federal law.” Id., 728 F. Supp. at 599.

Holtzbrinck Publishing Holdings, L.P. v. Vyne Communications, Inc., No. 97 CIV. 1082 (KTD), 2000 WL 502860 at *26-27 (S.D.N.Y., Apr 26, 2000): The parent company of Scientific American magazine hired a consultant to develop a Web site. The court held, in denying a motion for partial summary judgment, that the company likely was a joint author and thus co-owner of the Web site, but fact issues remained as to whether the company's contributions were copyrightable.

Query: Are judicial notions of equity offsetting the result that might otherwise obtain under copyright law? The courts seem to be dismissing the quality of the work contributed by the asserted joint-author. Under the copyright statute, however, a joint author's contribution need rise only to the level of “authorship,” See 17 U.S.C. § 101 (defining joint work as work prepared by two or more “authors”). and that level is quite low in copyright law. See, e.g., NEC Corp. v. Intel Corp., 10 USPQ (BNA) 1177, 1178‑79 (C.D. Cal. 1982); see also § 2.1[b].

The Ashton-Tate v. Ross decision in particular is puzzling in view of the copyright protection given to compilations of commands in Digital Communications Associates, Inc., v. Softklone Distr. Corp. 659 F. Supp. 449 (N.D. Ga. 1987). Ross's list of commands resembles, at least superficially, DCA's compilation of commands and status information that was held to be copyrightable in Softklone. If it was infringement for Softklone to copy DCA's compilation, it seems as though it might well have been infringement for Ashton-Tate to build a spreadsheet program on Ross's compilation. This of course assumes, however, that Ross's compilation had the requisite originality; the Ross court may have regarded that compilation as having come from the “prior art” and therefore not copyrightable to Ross. Cf. Computer Associates International, Inc., v. Altai, Inc., 982 F.2d 693, 706 (2d Cir. 1992) (affirming holding of noninfringement, setting out “successive filtration” test to separate unprotectable elements from protectable ones; see also § 2.7[g]).

The Whelan and Ross decisions may indeed be explainable in equitable terms. It seems that when one party does the lion's share of what is perceived as the “real work” in developing a finished software product, courts are prone to find that a purported joint author's contribution fails to rise to the requisite level of originality.

Selected other cases:

Forward v. Thorogood, 985 F.2d 604, 607 (1st Cir. 1993): A band recorded some tapes in a studio. It sued the owner of the physical tapes for copyright infringement; the tape owner claimed that he had the right to make commercial use of the tapes on grounds that he had been a “joint author.” The First Circuit affirmed an injunction against such use, holding that the tape owner had made no musical or artistic contribution to the recording and thus was not a joint author.

M.G.B. Homes, Inc., v. Ameron Homes, Inc., 903 F.2d 1486, 1492‑93 (11th Cir. 1990): An architect's client made a thumbnail sketch of a desired floor plan, and subsequently had approval authority over the architect's final plan. The court held that this did not make the client a joint author.

Rubloff Inc. v. Donahue, 31 USPQ2d (BNA) 1046 (N.D. Ill. 1994): A company hired a contractor to write a real-estate training manual, then later sued the contractor, claiming in part that the company had been a joint author with the contractor. The court granted summary judgment against the company, holding that the company's editorial corrections, suggestions for changes, formatting, and contribution of a foreword did not make the company a joint author.

Aitken, Hazen, Hoffman, Miller, P.C., v. Empire Construction Co., 542 F. Supp. 252, 259 (D. Neb. 1982): The court held that contribution of design ideas and directions to an architectural firm did not give rise to joint authorship in the resulting architectural plans.

Work

:CUSTOM_ID: copyright-co-owners-must-account-to-one-another-for-any-uses-of-the-work

@BEGINOwnership, joint copyright owners' accounting duty@ENDWhile co-owners of a copyright in a work can each make any use they desire of the work, they must account to one another for the proceeds of such uses. This is true not just of joint authors, but of co-owners who acquire their rights by other means. See Oddo v. Ries, 743 F.2d 630, 632‑33 (9th Cir. 1984) (under California law, partners were co-owners of partnership copyright assets; copyright law thus required partners to account to each other for their uses of those assets).

How will proceeds be divided among co-owners absent an agreement on the issue? One court held that, absent evidence of a contrary intent, the ownership interest, and thus the right to share in proceeds, will be presumed to be divided equally among the co-owners. /Sweet Music, Inc.,

1. Melrose Music Corp./, 189 F. Supp. 655, 659 (S.D. Cal. 1960). The

Sweet case apparently has been cited only once, and then not on the point noted above. In Korman v. Iglesias, 736 F. Supp. 261 (S.D. Fla. 1990), the court noted that if parties were joint authors of a song, they would stand in a relationship akin to tenants in common. Absent an agreement specifying otherwise, any profits earned would be divided equally, “even where it is clear that [the] respective contributions to the joint work are not equal,” quoting Community for Creative Non-Violence v. Reid, 846 F.2d 1485, 1498 (D.C. Cir. 1988) (dictum), aff'd, 490 U.S. 730, 109 S. Ct. 2166 (1989) (see § 2.6[b][1]).

Another court, however, ruled that a plaintiff-joint author must establish what a proper pro rata share of profits would be; the court expressed considerable skepticism whether the plaintiff, who had taken one photograph which constituted “only one element” of a promotional insert used by the defendant (and the insert in turn constituted “probably only a small portion” of the defendant's total advertising), would be able to prove more than nominal damages of $1.00. Strauss v. Hearst Corp., 8 USPQ2d (BNA) 1832, 1838, (S.D.N.Y. 1988).

For example, software developers will sometimes engage an outside technical writer or firm to write user instructions or other documentation for a new software package. Such documentation may be eligible for work-for-hire treatment as a specially-commissioned work (see § 2.6[e]); but absent a work-for-hire agreement or a covenant to assign by the outside writer, the copyright law's provisions regarding ownership will control.

Very commonly, such documentation will be a joint work that is coauthored by the outsider and the software developer. An outside author who collaborates with a hiring party's employee to develop software or documentation may be a joint author and co-owner with the hiring party, not with the employee. The two parties will co-own the copyright. The outsider thus would have the right to make any use desired of the work, subject to the duty to account to the software developer.

The absence of a written agreement could also tempt an outside documentation writer to demand an accounting of profits arising from the use of the documentation with the software. Such a claim might conceivably be dismissed on grounds of an implied agreement for royalty-free use of the documentation by the software developer (cf. the discussion of implied licenses in § 2.6[j]). Frequently, however, the facts in cases like this will be messy and are likely to preclude a summary judgment; trial of such a case would of course be inconvenient and the outcome always at least somewhat uncertain. The outside author of a “one-off” user manual might have little to lose professionally by making such a demand.

@BEGINLibraries of routines, joint ownership@ENDAnother potential ownership concern for software developers: Could the authors of prewritten (“canned”) program modules for screen management, communications, etc., incorporated by design into other software, assert a co-ownership claim as joint authors of the other software? The question may not be an idle one, inasmuch as a great deal of software is developed using such prewritten, reusable libraries, which are widely advertised in trade journals. In fact, virtually any software written in a high-level language and compiled and linked into executable form will include substantial portions of prewritten programming from the compiler program package.

Software developed using such libraries appears at first glance to qualify as a “joint work” under the copyright statute. The authors of the prewritten portions definitely intended that their contributions be merged into some unitary whole (for that matter, the prewritten portions will often have little if any standalone value); likewise, the authors of the end-product software intended their contributions to be similarly merged. This may be enough to satisfy the joint-authorship requirement.

Somewhat similar circumstances led to a holding to this effect (under the 1909 Copyright Act) in Donna v. Dodd, Mead & Co. 374 F. Supp. 429 (S.D.N.Y. 1974). In that case, a children's book, Boy of the Masai, included photographs by one person and text by another; when the photographer used the same text format for subsequent children's books, the text author sued for infringement. The court found that the photographer had taken his photographs with the intent that they become part of a joint work with text from another source, even though the text author had not yet been selected. The photographer was thus a joint owner of the complete book, and was entitled to use substantially the same text format in subsequent books (e.g., Boy of Nepal). Id. at 430‑31.

So, would end-product software be a joint work under the Donna rationale, and the library-software author a co-owner of the end product? Arguably not. In Donna, the photographer seems to have had a much more specific notion of what the end-product would look like than do the authors of software libraries. This difference could provide a basis for distinguishing Donna.

Moreover, the more recent decisions under the 1976 Copyright Act appear to focus on whether the putative joint authors intended to collaborate in the creation of the end product, not merely on whether they intended their individual contributions to be combined. See supra § 2.6[h][1].

Finally, as a practical matter the problem is probably academic. While co-owners of a copyright in a work must account to one another for any proceeds of their uses of the work, the licenses for many if not most prewritten libraries expressly state that the licensee can use the prewritten programming on a royalty-free basis. Such a statement would seem to take care of the licensee's duty to account.

Technically, of course, if the author of a prewritten library were indeed a co-owner, he would have the right to make and distribute copies of the joint work, i.e., of the end-product software. Thus, theoretically the library author could go into competition with the end-product developer. This is unlikely to happen for purely business reasons, however:

• First, the library author would have to account to the other co-owner, namely the developer of the end-product software.
• Second, the library author probably would have no rights in the end-product documentation, without which the end-product software could be useless.
• Third, the library author could be certain that the end-product developer would make use of someone else's library routines for the next version of the end-product software (assuming he discovered the library author's competing activities). Eventually the new version would drive the joint work out of the marketplace.
• Finally, the word would probably get around the notoriously active software industry grapevine about the library author's activities (e.g., in outraged letters to trade journals and on various computerized “bulletin boards”); his library-software business would be likely to suffer as a result.

Data General Corp. v. Grumman Systems Support Corp., 825 F. Supp. 340 (D. Mass. 1993), affirmed in pertinent part but remanded for redetermination of possibly-duplicative damage award, 36 F.3d 1147 (1st Cir. 1994): The First Circuit affirmed a holding that an ISO's use of Data General's diagnostic software constituted copyright infringement. It upheld judgment on a verdict for $27.4 for copyright infringement and an equal amount for trade-secret misappropriation, which the trial judge increased by $9 million because of willful misappropriation.

Service & Training Inc. v. Data General Corp., 963 F.2d 680, 688-89 (4th Cir. 1992) (affirming holding of copyright infringement), affirming 737 F. Supp. 334 (D. Md. 1990): Data General was likewise successful in obtaining a nearly $64 million judgment against an ISO that apparently was using over 200 unlicensed copies of Data General's software.

MAI Systems Corp. v. Peak Computer Inc., 991 F.2d 511 (9th Cir. 1993): The Ninth Circuit similarly held that use by a nonlicensee ISO of a copy of diagnostic computer software, licensed to a customer on terms excluding third-party use, on the customer's computer in the course of maintaining the computer for the customer, constituted copyright infringement. The court affirmed summary judgment and an injunction against the third-party maintenance provider's unauthorized use of the software. The court's holding included the point that the ISO's copying of the program into the computer's working memory (RAM) to run the program created an embodiment that could be “perceived, reproduced, or otherwise communicated” under section 101 of the Copyright Act, 17 U.S.C. § 101, and consequently was sufficiently “fixed” to qualify as a “copy,” giving rise to infringement liability. 991 F.2d at 518-19; see also Vault Corp. v. Quaid Software Ltd., 847 F.2d 255, 260 (5th Cir. 1988) (“the act of loading a program from a medium of storage into a computer's memory creates a copy of the program”), cited in MAI Systems Corp.

Advanced Computer Systems v. MAI Systems Corp., 845 F. Supp. 356 (E.D. Va. 1994) (granting MAI's motion for summary judgment of copyright infringement; rejecting fair use defense): MAI was likewise successful in a Virginia district court against another ISO. That court also rejected the ISO's argument that its use of MAI's software constituted fair use. See

Triad Systems Corp. v. Southeastern Express Co., 64 F.3d 1330 (9th Cir. 1995): The Ninth Circuit rejected a contention that similar use of a customer's software by an ISO constituted fair use..

NLFC Inc. v. Devcom Mid-America Inc., 45 F.3d 231 (7th Cir. 1995): In this somewhat peculiar case, the Seventh Circuit affirmed summary judgment of noninfringement in favor of a defendant third-party maintenance provider. The court based its decision on the ground that there was no evidence the defendant had done more than operate licensed copies of the software in question on the licensees' computers. The NLFC plaintiff's copyrighted software had “contained many bugs (among other assorted problems).” Id., 45 F.3d at 233. The defendant had originally been hired by one licensee, with the plaintiff's agreement, to fix the problems, which it did. Another licensee subsequently hired the defendant to do the same. Apparently recognizing a market opportunity, the defendant sent out solicitation letters to other licensees. The plaintiff sued for copyright infringement. It evidently based its case on the defendant's alleged copying of the software to the defendant's own computers. The Seventh Circuit agreed with the district court that the plaintiff had failed to put forth evidence of such copying (and observed in a footnote that even if such copying had occurred it might have been authorized by the plaintiff's license agreements with its licensees). Id., 45 F.3d at 235 & n.5. The NLFC court cursorily cited MAI Systems for the proposition that loading software into memory to execute it constitutes “copying.” 45 F.3d at 235. Strangely, the Seventh Circuit apparently did not consider that under MAI Systems, a nonlicensee is liable for infringement if it runs licensed software on a licensee's computer, even though the defendant had apparently admitted doing just that. Id., 45 F.3d at 233. Nor did the appellate court seem to regard as significant the fact that the defendant conceded printing out a copy of the source code of the software for reference purposes. Id.

Hogan Systems, Inc. v. Cybresource Int'l, Inc., 158 F.3d 319 (5^th Cir. 1998), affirming 1997 WL 311526 at *3 (N.D. Tex. June 2, 1997): The language of the license agreement made all the difference in the Fifth Circuit's Hogan Systems case. The language in question prohibited the licensee from making the licensed software available to anyone “except to [Norwest's] employees or [the licensor's] employees or to other persons during the period such other persons are on [Norwest's] premises for purposes specifically relating to [Norwest's] authorized use of the licensed program.” (granting defendant's motion for summary judgment). The district court concluded that the license agreement “authorizes third‑party contractors to provide consulting services to Norwest on Hogan‑produced software, including use, copying, and modification. What Norwest could itself do under the License, Norwest may use a contractor to do. In other words, while they are engaged in consulting services on behalf of Norwest, Defendants' activities are ‘sheltered under' Norwest's license rights.” 1997 WL 311526 at *4. The Fifth Circuit agreed; the court even endorsed the proposition that the third-party contractor's remote access to the software by remote-control software had not been shown to constitute infringement. See 158 F.3d at 322-24.

In 1998, Congress effectively overruled the MAI Systems line of cases by adding a new paragraph (c) to section 117 of the Copyright Act. The new paragraph provides as follows:

(c) Machine maintenance or repair.–Notwithstanding the provisions of section 106, it is not an infringement for the owner or lessee of a machine to make or authorize the making of a copy of a computer program if such copy is made solely by virtue of the activation of a machine that lawfully contains an authorized copy of the computer program, for purposes only of maintenance or repair of that machine, if–

(1) such new copy is used in no other manner and is destroyed immediately after the maintenance or repair is completed; and

(2) with respect to any computer program or part thereof that is not necessary for that machine to be activated, such program or part thereof is not accessed or used other than to make such new copy by virtue of the activation of the machine.

(d) Definitions.–For purposes of this section—

(1) the “maintenance” of a machine is the servicing of the machine in order to make it work in accordance with its original specifications and any changes to those specifications authorized for that machine; and

(2) the “repair” of a machine is the restoring of the machine to the state of working in accordance with its original specifications and any changes to those specifications authorized for that machine.

Absent a license, unauthorized use of computer software constitutes copyright infringement, because the act of copying the software into the computer's working memory (RAM) to run the software itself constitutes infringement. See MAI Systems Corp. v. Peak Computer Inc., 991 F.2d 511 (9th Cir. 1993), summarized on page 2: The Ninth Circuit held that the defendant's copying of the plaintiff's computer program into a computer's working memory (RAM) to run the program created an embodiment that could be “perceived, reproduced, or otherwise communicated” under section 101 of the Copyright Act, 17 U.S.C. § 101, and consequently was sufficiently “fixed” to qualify as a “copy,” giving rise to infringement liability. 991 F.2d at 518-19; see also Vault Corp. v. Quaid Software Ltd., 847 F.2d 255, 260 (5th Cir.

1. (“the act of loading a program from a medium of storage into a

computer's memory creates a copy of the program”), cited in MAI Systems Corp.

May Be Simply a Breach of Contract

:CUSTOM_ID: but-use-beyond-the-scope-of-a-license-may-be-simply-a-breach-of-contract

What if the putative infringer has a license but is using the software beyond the scope of the license? The Second Circuit has promulgated a test for determining whether the copyright owner's claim is for copyright infringement (which creates federal-question jurisdiction) or simply for breach of contract (which does not):

1. the copyright owner's putative copyright claim against the licensee must not be “merely incidental” to what would otherwise be characterized as a contract claim for breach of the license agreement, nor purely a consequence of resolving the contract dispute; and

2. the alleged breach that gives rise to the claim must be:

3. for breach of a condition precedent, in which case the license recited in the license agreement was never effectively granted in the first place, or
4. for breach of a covenant in the license agreement that would justify rescission of the agreement, in which case again the license is deemed not effective.

If the above conditions are met, then the licensor's claim sounds in copyright, and a federal court would have federal-question jurisdiction. See Shoenberg v. Shapolsky Publishers, Inc., 971 F.2d 926, 932 (2d Cir. 1992), subsequent proceeding, 916 F. Supp. 333, 335-36 (S.D.N.Y. 1996).

Selected cases:

National Car Rental System, Inc. v. Computer Assoc. Int'l, Inc., 991 F.2d 426 (8th Cir. 1993): The court held that a licensee's use of a licensed computer program beyond the scope of the license did not involve unauthorized “copying” of program, and that the licensor's claim of breach of license agreement was not equivalent to claim under exclusive rights arising under Copyright Act, and thus was not preempted.

Computer Assocs. Int'l, Inc. v. State St. Bank & Trust, 789 F. Supp. 469, 475 (D. Mass. 1992). The court held that “[a] use of an authorized copy of copyrighted subject matter ordinarily is not infringing. . . . Therefore, applicable limitations on State Street's use of the programs, if any, must be derived initially from the license agreements, not copyright law.”

USAR Systems Inc. v. Brain Works Inc., 887 F. Supp. 84 (S.D.N.Y. 1995): The court dismissed a copyright-infringement action for lack of subject matter jurisdiction. It held that the putative copyright infringement claim was “merely incidental” to a contract-law claim for breach of license agreement.

Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992): Disassembly was held by the Ninth Circuit technically to constitute infringement, but to be fair use when “disassembly is the only way to gain access to the ideas and functional elements embodied in a computer program and where there is a legitimate reason for seeking such access,” e.g., to facilitate entry into the marketplace by a competitor creating similar but noninfringing programs. Id. at 1527.

Atari Games Corp. v. Nintendo of America Inc., 975 F.2d 832 (Fed. Cir. 1992), affirming 8 USPQ2d (BNA) 1935 (N.D. Cal. 1991): Atari, the declaratory plaintiff, evidently went too far for the court's comfort in disassembling a copyrighted Nintendo program embedded in a computer chip. When Atari was only partially successful in physically peeling away the layers of its rival Nintendo's computer chip to study the embedded programming, Atari obtained a copy of the program from the Copyright Office, stating that it needed the copy for use in defending against a pending infringement suit (see discussion of requirements for obtaining access to copyright registration deposits in § 2.4[b][1]). In fact, no such suit had then been brought. Id., 975 F.2d at 836. The Federal Circuit noted that scope of nonliteral copyright protection for software was limited. Id. at 838-40 (citing Treatise). It held that it would have been fair use for Atari to disassemble an object-code copy of the Nintendo program “to understand [that] program and to distinguish the protected from the unprotected elements of [the] program,” if the copy had been lawfully acquired. The court held that under the circumstances, Atari's unclean hands precluded it from asserting a fair-use defense. Id. at 843-44 (affirming preliminary injunction).

Sony Computer Entertainment, Inc. v. Connectix Corp., 203 F.3d 596 (9th Cir. 2000), reversing 48 F.Supp.2d 1212, 1214 (N.D. Cal. 1999) (granting preliminary injunction): This was a case similar in some respects to Sega v. Accolade, discussed supra on page 2, and ultimately with a similar outcome. Plaintiff Sony was the manufacturer of the Sony PlayStation and PlayStation games. Defendant Connectix developed an “emulator,” a software program which could be installed on a computer and used to run PlayStation games. Id., 48 F. Supp. at

In developing its emulator, Connectix bought a PlayStation, broke it apart, and copied its BIOS (the basic input-output software) from an internal ROM chip to a disk. Connectix's engineers then used this disk to continue their development of the Connectix emulator. It was undisputed that an early version of the emulator contained the complete, unchanged Sony BIOS. Eventually, Connectix replaced the Sony BIOS code with its own BIOS code. 48 F. Supp. at 1216. Connectix engineers admitted in deposition that they used copies of the Sony BIOS code to gradually convert Sony's code to their own code. 48 F. Supp. at 1218.

Sony conceded that the finished emulator did not contain any part of Sony's code. 48 F. Supp. at 1214. Its copyright infringement claim was based on a theory of intermediate infringement — it asserted that Connectix “repeatedly duplicated Sony's BIOS code in its entirety and used those copies while it developed a computer program that emulates the hardware components of the PlayStation console,” and that it “disassembled Sony's BIOS in order to develop its own VGS BIOS by gradually replacing elements of Sony's code with its own.” Id. at

1. The district court granted a preliminary injunction against

Connectix's distribution of the emulator, even though there was no infringing code left in it, on the theory that “the only effective remedy for such intermediate infringement is to enjoin the end product. If not, an intermediate infringer could always avoid the consequences of illegal copying and use by editing the protected code out of its final product.” 48 F. Supp. at 1224 (paragraphing edited).

The Ninth Circuit reversed the preliminary injunction. It held that “[t]he intermediate copies made and used by Connectix during the course of its reverse engineering of the Sony BIOS were protected fair use, necessary to permit Connectix to make its non‑infringing Virtual Game Station function with PlayStation games. Any other intermediate copies made by Connectix do not support injunctive relief, even if those copies were infringing.” 203 F.3d at 599. The appellate court focused on the evidence showing that the making of intermediate copies was in fact necessary under the specific circumstances; it rejected Sony's argument that the reverse engineering could have been accomplished with less intermediate copying, because such a rule “would require that a software engineer, faced with two engineering solutions that each require intermediate copying of protected and unprotected material, often follow the least efficient solution.” Id. at 605.

DSC Communications Corp. v. DGI Technologies, Inc., 898 F. Supp. 1183, 1189-92 (N.D. Tex. 1995) (partially vacating ex parte seizure order), aff'd on other grounds, 81 F.3d 597 (5th Cir. 1996): In this case, disassembly and reverse-engineering of software was not, in and of itself, the cause of the defendant's difficulty — apparently it was the defendant's surreptitious copying of other software owned by the plaintiff that got the defendant into trouble. The defendant did not use a “clean room” approach; that is, the individuals who disassembled the plaintiff's firmware were not walled off from the individuals who developed the defendant's firmware. In an early proceeding partially vacating its own ex parte seizure order, the district court noted that while failure to use a clean room meant that the defendant could not negate access, that failure did not rule out a fair-use defense. Id. at 1189 n.3.

What sank the DGI defendant's fair-use defense was its surreptitious copying of other software. Plaintiff DSC had developed operating-system software that it provided to its customers under a license agreement that prohibiting giving access to the software to third parties. The software was not otherwise available for purchase or licensing. DSC v. DGI, 898 F. Supp. at 1192. An agent of the defendant visited a customer that owned circuit boards of both the plaintiff and the defendant, and which possessed a licensed copy of the plaintiff's operating-system software. Without asking permission, the defendant's agent surreptitiously made a copy of the plaintiff's operating-system software and brought it back to the defendant, allegedly for study and reverse-engineering. Id. The DSC trial court came down hard on the defendant. It refused to believe the defendant's testimony that it was unaware of the licensing agreement for the plaintiff's operating system software. Id. at 1194. Analogizing to Atari, the court held that it was not fair use for the defendant to disassemble and reverse-engineer a copy of the operating-system software because it was not authorized to possess the copy. Id.

(The subsequent trial and appeal apparently focused on the defendant's liability for contributor infringement, for inducing customers to infringe plaintiff DSC's copyright by using DSC's software with defendant DGI's circuit boards, and not on the reverse-engineering fair-use defense. The later proceedings, after DSC's acquisition by the French telecommunications company Alcatel, are reported in Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772 (5th Cir. 1999).)

DSC Communications Corp. v. Pulse Communications Inc., 976 F. Supp. 359, 363-64, 43 USPQ2d 1589 (E.D. Va. 1997) (granting judgment as a matter of law), aff'd in part, rev'd in part, vacated in part, and remanded, 170 F.3d 1354 (Fed. Cir. 1999): DSC's competitor Pulse Communications (“Pulsecom”) had reverse engineered certain digital switching software in a DSC “Litespan” switching product to develop a competing product. The district court cited Sega and Atari in granting judgment as a matter of law (JMOL), at the close of plaintiff DSC's case, that “[s]uch copying for reverse engineering of a lawfully acquired system is permissible fair use.” But the Federal Circuit vacated that part of the judgment on grounds that, at least as shown by plaintiff DSC's evidence, defendant Pulsecom's activity in question did not constitute fair use, and as a result the grant of a judgment as a matter of law was impermissible:

On the basis of DSC's evidence at trial, Pulsecom's activities in creating copies of the POTS‑DI software on its POTS cards by using the RBOCs' Litespan systems does not qualify as “fair use” under the Sega analysis. DSC's evidence showed that Pulsecom representatives made copies of the POTS‑DI software on Pulsecom POTS cards as part of the ordinary operation of those cards, not as part of an effort to determine how the Litespan system worked. Rather than being part of an attempt at reverse engineering, the copying appears to have been done after Pulsecom had determined how the system functioned and merely to demonstrate the interchangeability of the Pulsecom POTS cards with those made and sold by DSC. 170 F.3d at 1363.

The Federal Circuit noted, however, that defendant Pulsecom had not put on its own evidence (because the trial court granted judgment as a matter of law at the close of DSC's case). The appeals court remanded the case for a new trial. Id.

NEC Corp. v. Intel Corp., 10 USPQ2d (BNA) 1177, 1186 (N.D. Cal. 1989): The court found that NEC's engineer did not infringe the copyright in Intel's microcode by disassembling the microcode for study, when the ultimate NEC end product was not infringing.

Bateman v. Mnemonics, Inc., 79 F.3d 1532, 1548 (11th Cir. 1996): The defendant had been found liable for copyright infringement and misappropriation of trade secrets in reverse engineering a circuit board, including disassembling its associated software. The district court had instructed the jury that only nonliteral copying could be the subject of an Altai filtration defense (see § 2.7[g]). The appeals court reversed, holding that that even literal copying might be permissible under Altai; the court also hinted strongly that the defendant's disassembly had been a fair use. Id., 79 F.3d at 1539 nn. 17-18.

Cadence Design Systems, Inc. v. Avant! Corp., 125 F.3d 824, 830-31 (9th Cir. 1997): The appeals court reversed and remanded the lower court's refusal to enjoin the defendant's distribution of its software. It held that the district court was required to determine whether the software produced by the defendant's clean-room process infringed the copyright in the plaintiff's software.

E. F. Johnson Co. v. Uniden Corp., 623 F. Supp. 1485 (D. Minn. 1985): The court found that the defendant had infringed the copyright in the plaintiff's computer software. It noted that “[the] fact that defendant's engineers dumped, flow charted, and analyzed plaintiff's codes does not of itself establish pirating”; it observed that if the defendant had “contented itself with surveying the general outline of the program, thereafter converting the scheme into detailed code through its own imagination, creativity and independent thought, a claim of infringement would not have arisen.” Id. at 1501‑02 n.17.

Digital Millennium Copyright Act

:CUSTOM_ID: the-reverse-engineering-exception-in-the-digital-millennium-copyright-act

As discussed in § 2.7[h], the Digital Millennium Copyright Act (DMCA) added new section 1201 to Title 17, prohibiting circumvention of technological measures that control access to copyrighted works. Section 1201(f) contains a specific exception to liability for some, but not all, reverse engineering activities:

a person who has lawfully obtained the right to use a copy of a computer program may circumvent a technological measure that effectively controls access to a particular portion of that program /for the sole purpose of identifying and analyzing those elements of the program that are necessary to achieve interoperability of an independently created computer program with other programs/ … to the extent that any such acts of identification and analysis do not constitute infringement under this title.

17 U.S.C. § 1201(f)(1) (emphasis added).

In any given case, the abstraction step is likely to be heavily dependent on the imaginativeness of the plaintiff's trial counsel and expert witness in discerning “creative” elements of the computer program. The Gates Rubber court set out a series of factors that could be regarded as creative elements, which it referred to as “at least six levels of generally declining abstraction: (i) the main purpose, (ii) the program structure, (iii) modules, (iv) algorithms and data structures, (v) source code, and (vi) object code.” Gates Rubber Co., 9 F.3d at 835, quoted in Baystate Technologies, 946 F. Supp. at 1089. Other courts appear to be using these six levels at least as a starting point. See, e.g., Baystate Technologies, 946 F. Supp. at 1089; Harbor Software, Inc. v. Applied Systems, Inc., 925 F. Supp. 1042, 1046-47, subsequent proceeding, 936 F. Supp. 167 (S.D.N.Y. 1996) (granting in part and denying in part defendant's motion for summary judgment).

The abstraction step is likely to be unnecessary if the copyright owner specifically identifies the non-literal program elements that allegedly are infringe (perhaps in response to contention interrogatories propounded by the defendant). The MiTek court noted that “the district court took at face value MiTek's representations as to what elements of the ACES program MiTek considered to be protectable expression. In accepting MiTek's representations, the district court committed no error.” MiTek, 89 F.3d at 1555; see also Mitel, 124 F.3d at 1372 (“[n]ot every case requires an extensive abstraction‑filtration-comparison analysis”).

The filtration step in the Altai analysis is perhaps the most critical one, and arguably the most problematic. Perhaps for that reason, in the 1996 Harbor Software opinion, a district court ruled that the filtration process is a matter for the court, not for the jury, reasoning by analogy to the Supreme Court's Markman decision in the patent arena. See Harbor Software, 925  F. Supp. at 1046-47.

Filtration of externally-dictated factors: The Altai court noted that aspects of a program might be unprotectable if they are constrained by efficiency considerations, by factors external to the program itself (e.g., features required by specifications of the computer and supporting software, or by industry standards and customary programming practices), or by the existence of a limited number of ways to design the program in relevant respect. See Altai, 982 F.2d at 707-10. Other courts have followed Altai's lead on that point. See, e.g., MiTek, 89 F.3d at 1557 n.20 (alternative holding; even if ACES program's menu structure were not unprotectable as a method of operation, it was unprotectable because it tracked the way in which human workers did job in question); Engineering Dynamics, 46 F.3d at 410 (directing district court to determine on remand whether data formats were so influenced by industry practice as to be unprotectable); Baystate Technologies, 946 F. Supp. at 1088-89 (holding that selection of data-structure names was driven by industry-standard practice and by efficiency considerations and therefore was unprotectable); Harbor Software, 925 F. Supp. at 1049-52 (some aspects of program were protectable, others not because dictated by externalities). But see Control Data Systems, Inc. v. Infoware, Inc., 903 F. Supp. at 1323 (rejecting defendant's contention that externalities limited the range of choices available to programmers).

Filtration of mathematical constants: The Gates Rubber court likewise ruled that a number of the factors considered by the trial court in that case were not permissible evidence of substantial similarity, at least not without further analysis and explanation. “Mathematical constants” in particular were disapproved by the appellate court as an impermissible factor bearing on substantial similarity. The court held outright that the mathematical constants in question were unprotectable facts and the district court therefore should not have treated similarity in constants as evidence of infringement. Gates Rubber Co., 9 F.3d at 844; see also § 2.2 (cases discussing copyrightability of data).

Filtration applied to functional characteristics: The Gates Rubber appellate court also called for further explanation, “in light of the process-expression dichotomy, merger and scenes à faire doctrines,” of other similarity factors that the lower court had used, e.g.:

• menus and sorting criteria,

• control and data flow,

• engineering calculation and design modules,

• common errors,

• fundamental tasks, and

• install[ation] files.

Gates Rubber Co., 9 F.3d at 844-47/; see also/ e.g., Ashton-Tate Corp. v. Ross, 916 F.2d 516, 521-22 (9th Cir. 1990) (affirming holding that list of typical spreadsheet commands to be implemented in spreadsheet program did not rise to the level of copyrightable subject matter; plaintiff therefore was not a joint author); Healthcare Affiliated Services, Inc. v. Lippany, 701 F. Supp. 1142, 1151-52 (W.D. Pa. 1988) (refusing to enter preliminary injunction; evidence of similarities in gross-level methodology choices was insufficient to warrant finding of substantial similarity of protectable elements); NEC Corp. v. Intel Corp., 10 USPQ2d (BNA) 1177, 1183 (N.D. Cal. 1989) (crediting testimony of expert witness that many similarities were functional in nature and in some instances inevitable; finding that similarities between accused microcode and defendant's copyrighted microcode were not a result of copying of protectable elements); Q-Co Industries, Inc. v. Hoffman, 625 F. Supp. 608, 615 (S.D.N.Y. 1985) (refusing to enter preliminary injunction on copyright infringement claim on grounds that similarities between teleprompter programs were limited to elements that would have been part of any program of that kind).

Filtration as applied to screen displays: Whether screen-display similarity should be filtered out is an often-disputed point. This was one of the principal issues in Apple v. Microsoft as well as in /Lotus

1. Borland/, and has arisen in other cases as well. See, e.g., MiTek,

89 F.3d at 1557-58 (program menus merely followed the same general steps that would be taken by a draftsman designing a roof truss by hand and were therefore unprotectable); Harbor Software, 925 F. Supp. at 1052 (holding that “sufficient expressive choices were made in the selection and arrangement of [screen-display elements] to satisfy the minimal requirement of originality and warrant protection”); Productivity Software Int'l Inc. v. Healthcare Technologies, Inc., 1995 WL 437526, 37 USPQ2d 1036 (S.D.N.Y. 1995) (granting summary judgment of noninfringement; “[a]ny similarity between the two menu bars is due only to the fact that industry standards dictate the limited number of command labels available”); Manufacturers Technologies, Inc. v. CAMS, Inc., 706 F. Supp. 984 (D. Conn. 1989) (holding that some screen displays and sequences of displays were protectable but others were dictated by external or functional concerns and were not protectable; Digital Communications Assocs., Inc. v. Softklone Distrib. Corp., 659 F. Supp. 449, 455‑56 (N.D. Ga. 1987) (holding that defendant's arrangement of command prompts and status displays on computer screen infringed copyright in plaintiff's program).

Protectability of combinations of otherwise-unprotectable elements: A copyright defendant will not necessarily win just because individual “elements” of a copyrighted program are unprotectable. The court is still required to determine “whether the manner in which [the copyright owner] combined the various design elements in its software was protectible expression, and, if it was, whether [the defendant] infringed that expression.” Softel, Inc. v. Dragon Medical and Scientific Communications, Inc., 118 F.3d 955, 966-67, 43 USPQ2d 1385 (2d Cir. 1997) (vacating and remanding judgment of noninfringement).

Conventional copyright analysis requires a showing a substantial similarity between a copyrighted work and an accused infringing work. As a practical matter, a software copyright owner asserting nonliteral infringement may be required to demonstrate that the similarities are significant in the context of the content, purpose, use, or operation of the copyrighted program and accused program as a whole. Baystate, 946 F. Supp. at 1090.

An even more stringent standard may be imposed if a Feist copyright is claimed in an original selection or arrangement of otherwise-unprotectable elements. In that case, the copyright owner is likely to be required to demonstrate that in that respect the accused software is “virtually identical” to the copyrighted software. MiTek, 89 F.3d at 1558-59 (holding that where copyright is claimed in a compilation of otherwise-unprotectable elements, accused program must meet “virtual identicality” standard), citing with approval Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435, 1446 (9th Cir.1994) (noting that, in the case of alleged infringement of a work as a whole (i.e., a compilation), “there can be no infringement unless the works are virtually identical”). MiTek, 89 F.3d at 1558-59 (holding that where copyright is claimed in a compilation of otherwise-unprotectable elements, accused program must meet “virtual identicality” standard).

Access‑Control or Copy‑Protection Measures

:CUSTOM_ID: the-prohibition-against-circumvention-of-accesscontrol-or-copyprotection-measures

The Digital Millennium Copyright Act (DMCA) added a new chapter 12 to Title 17 of the U.S. Code, in which the Copyright Act is codified. In the new chapter, section 1201 implements an obligation to provide adequate and effective protection against circumvention of technological measures used by copyright owners to protect their works.

Section 1201 divides technological measures into two categories: (i) /measures that prevent unauthorized /access to a copyrighted work, and (ii) /measures that prevent unauthorized /copying of a copyrighted work. Making or selling devices or services that are used to circumvent either category of technological measure is prohibited in certain circumstances, described below. As to the act of circumvention in itself, the provision prohibits circumventing the first category of technological measures, but not the second. This distinction was employed to assure that the public will have the continued ability to make fair use of copyrighted works.

Since copying of a work may be a fair use under appropriate circumstances, section 1201 does not prohibit the act of circumventing a technological measure that prevents copying. By contrast, since the fair use doctrine is not a defense to the act of gaining unauthorized access to a work, the act of circumventing a technological measure in order to gain access is prohibited.

In particular, section 1201(a)(2) provides that:

No person shall … offer to the public, provide or otherwise traffic in any technology … that–

(A) is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to a work protected under [the Copyright Act];

(B) has only limited commercially significant purpose or use other than to circumvent a technological measure that effectively controls access to a work protected under [the Copyright Act]; or

(C) is marketed by that person or another acting in concert with that person with that person's knowledge for use in circumventing a technological measure that effectively controls access to a work protected under [the Copyright Act].

17 U.S.C. § 1201(a)(2).

The statute defines “circumvent a technological measure” to mean descrambling a scrambled work, decrypting an encrypted work, or “otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner.” 17 U.S.C. § 1201(a)(3)(A).

The statute explains further that “a technological measure ‘effectively controls access to a work' if the measure, in the ordinary course of its operation, requires the application of information or a process or a treatment, with the authority of the copyright owner, to gain access to a work.” Id. § 1201(a)(3)(B).

Selected cases:

RealNetworks, Inc. v. Streambox, Inc., No. 2:99CV02070, 2000 WL 127311 (W.D. Wash. Jan. 18, 2000) (granting order for preliminary injunction) [summary adapted from opinion]: RealNetworks offered “RealPlayer” software that enable consumers to access audio and video content, in “RealMedia” format, over the Internet through a process known as “streaming.” When an audio or video clip is “streamed” to a consumer, no trace of the clip is left on the consumer's computer, unless the content owner has permitted the consumer to download the file. Streaming is contrasted with “downloading,” a process by which a complete copy of an audio or video clip is delivered to and stored on a consumer's computer. Once a consumer has downloaded a file, he or she can access the file at will, and can generally redistribute copies of that file to others. The court noted that to guard against the unauthorized copying and redistribution of their content, many copyright owners do not make their content available for downloading, and instead distribute the content using streaming technology in a manner that does not permit downloading.

The Streambox VCR software enabled end‑users to access and download copies of RealMedia files that are streamed over the Internet. In order to gain access to RealMedia content located on a server running RealNetworks' server software (“RealServer”), the VCR software mimicked RealPlayer software and circumvented the authentication procedure, or Secret Handshake, that a RealServer required before it would stream content. In other words, the Streambox VCR was able to convince the RealServer into thinking that the VCR was, in fact, a RealPlayer. Having convinced a RealServer to begin streaming content, the Streambox VCR, like the RealPlayer, acted as a receiver. However, unlike the RealPlayer, the VCR ignored the Copy Switch instruction that told a RealPlayer whether an end‑user was allowed to make a copy of (i.e., download) the RealMedia file as it is being streamed. The VCR thus allowed the end‑user to download RealMedia files even if the content owner had used the Copy Switch instruction to prohibit end‑users from downloading the files. The Streambox VCR thus circumvented both the access control and copy protection measures.

The court held that the Streambox VCR software met two of the three alternative tests for liability under the DMCA, because (i) at least a part of the Streambox VCR software was primarily, if not exclusively, designed to circumvent the access control and copy protection measures that RealNetworks afforded to copyright owners, and (ii) the portion of the VCR software that circumvented the Secret Handshake so as to avoid the Copy Switch instruction had no significant commercial purpose other than to enable users to access and record protected content and did not appear to have any other commercial value. Id., 2000 WL 127311 at *7.

The anti-circumvention prohibitions contained in section 1201 are subject to a number of exceptions. One is an exception to the operation of the entire section, for law enforcement, intelligence and other governmental activities. (Section 1201(e)). The others relate to section 1201(a), the provision dealing with the category of technological measures that control access to works.

The broadest of these exceptions, section 1201(a)(1)(B)-(E), establishes an ongoing administrative rule-making proceeding to evaluate the impact of the prohibition against the act of circumventing such access-control measures This conduct prohibition does not take effect for two years. Once it does, it is subject to an exception for users of a work which is in a particular class of works if they are or are likely to be adversely affected by virtue of the prohibition in making noninfringing uses.

The applicability of the exemption is determined through a periodic rulemaking by the Librarian of Congress, on the recommendation of the Register of Copyrights, who is to consult with the Assistant Secretary of Commerce for Communications and Information.

The six additional exceptions are as follows:

1. Nonprofit library, archive and educational institution exception (section 1201(d)). The prohibition on the act of circumvention of access control measures is subject to an exception that permits nonprofit libraries, archives and educational institutions to circumvent solely for the purpose of making a good faith determination as to whether they wish to obtain authorized access to the work.

2. Reverse engineering (section 1201(f)). This exception permits circumvention, and the development of technological means for such circumvention, by a person who has lawfully obtained a right to use a copy of a computer program for the sole purpose of identifying and analyzing elements of the program necessary to achieve interoperability with other programs, to the extent that such acts are permitted under copyright law.

3. Encryption research (section 1201(g)). An exception for encryption research permits circumvention of access control measures, and the development of the technological means to do so, in order to identify flaws and vulnerabilities of encryption technologies.

4. Protection of minors (section 1201(h)). This exception allows a court applying the prohibition to a component or part to consider the necessity for its incorporation in technology that prevents access of minors to material on the Internet.

5. Personal privacy (section 1201(i)). This exception permits circumvention when the technological measure, or the work it protects, is capable of collecting or disseminating personally identifying information about the online activities of a natural person.

6. Security testing (section 1201(j)). This exception permits circumvention of access control measures, and the development of technological means for such circumvention, for the purpose of testing the security of a computer, computer system or computer network, with the authorization of its owner or operator.

Selected cases:

Universal City Studios, Inc. v. Reimerdes, 82 F. Supp.2d 211 (S.D.N.Y.

1. (granting preliminary injunction), subsequent proceeding,

111 F. Supp. 294 (S.D.N.Y. 2000) (granting permanent injunction), affirmed sub nom. Universal City Studios, Inc. v. Corley, 273 F.3d 429 (2d Cir. 2001): In this early case brought under the DMCA, several of the foregoing exceptions to liability were held not to shield “content crackers” from liability. The Reimerdes case was another episode in the continuing battle of the movie industry against unauthorized copies; cf. Sony Corp. of America v. Universal City Studios, 464 U.S. 417, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984) (holding that home use of video cassette recorders (VCRs) for “time-shifting” recording of movies and other programming broadcast on television did not infringe copyrights in the programming).

The Reimerdes defendants had posted, on the Web, software known as DeCSS. That software could crack the Content Scramble System (“_CSS_”) encryption that provides anti-copying protection for movies distributed on DVD (digital versatile discs). Several movie studios filed suit against them. The defendants claimed that they were entitled to the benefit of the reverse-engineering, encryption-research, and security-testing exceptions to liability. The court had no trouble rejecting the defendants' claims, see 82 F. Supp.2d at 217-20; it granted a preliminary injunction and later a permanent injunction. The permanent injunction prohibited even linking to other Web sites containing the DeCSS code; the Second Circuit had no trouble affirming that prohibition against a free-speech challenge. See 273. F3d art 455-58.

DVD Copy Control Ass'n v. Bunner, 2001 WL 1340619 (Cal. App. 6 Dist. Nov. 1, 2001): In a trade-secret case under state law, a California appellate court looked to the First Amendment in reversing a preliminary injunction that had prohibited the defendant from posting DeCSS source code on his Web site. The appellate court held that “DeCSS is a written expression of the author's ideas and information about decryption of DVDs without CSS.” Id. at __. The court then held that “the trial court's preliminary injunction barring Bunner from disclosing DeCSS can fairly be characterized as a prohibition of ‘pure' speech.” Id. at __.

Without deciding whether the defendant had engaged in misappropriation of trade secrets, the Bunner court held that the plaintiffs' trade-secret interests were trumped by the defendant's First Amendment free-speech rights. Whereas the DMCA's copyright-based prohibitions were constitutionally grounded in the Copyright Clause, trade-secret law “lacks any constitutional foundation. Consequently, a clash between the trade secrets law and the First Amendment does not involve a balancing between two constitutional interests.” Id. at __. Moreover, “injunctions in copyright infringement cases have been upheld on the ground that First Amendment concerns are protected by and coextensive with the [Copyright Act's] fair use doctrine.” Id. at __ (citation and internal quotation marks omitted). Finally, “the statutory prohibition on disclosures of trade secrets is of infinite duration rather than ‘for limited Times.' While the limited period of copyright protection authorized by the United States Constitution ensures that copyrighted material will eventually pass into the public domain, thereby serving the public interest by increasing its availability to the general public, the [Uniform Trade Secrets Act] bars disclosure of a trade secret for a potentially infinite period of time, thereby ensuring that the trade secret will never be disclosed to the general public.” Id. at __.

The Bunner court distinguished cases where injunctions were granted to enforce nondisclosure agreements: “The enforcement of a contractual nondisclosure obligation does not offend the First Amendment. A voluntary agreement not to disclose a trade secret ordinarily waives any First Amendment protection for an ensuing disclosure.” Id. at __.

As discussed in the RealNetworks opinion summarized in § 2.7[h][1], the DMCA does not provide a “time-shifting” fair-use defense under the Sony “Betamax” doctrine in traditional copyright law (see § 2.9[a]). See RealNetworks, Inc. v. Streambox, Inc., No. 2:99CV02070, 2000 WL 127311 at *7-9 (W.D. Wash. Jan. 18, 2000) (granting order for preliminary injunction) (reviewing statutory language).

In Religious Technology Center v. Netcom On-Line Communication Services, Inc., 907 F. Supp. 1361 (N.D. Cal. 1995), the court indicated that if the ISP did no more than provide facilities that happened to be used for infringing purposes, it probably would not be liable for direct copyright infringement:

[T]he mere fact that Netcom's system incidentally makes temporary copies of plaintiffs' works does not mean Netcom has caused the copying. The court believes that Netcom's act of designing or implementing a system that automatically and uniformly creates temporary copies of all data sent through it is not unlike that of the owner of a copying machine who lets the public make copies with it. Although some of the people using the machine may directly infringe copyrights, courts analyze the machine owner's liability under the rubric of contributory infringement, not direct infringement.

Plaintiffs' theory would create many separate acts of infringement and, carried to its natural extreme, would lead to unreasonable liability. . . . [P]laintiffs' theory further implicates a Usenet server that carries [the infringing user's] message to other servers regardless of whether that server acts without any human intervention beyond the initial setting up of the system. It would also result in liability for every single Usenet server in the worldwide link of computers transmitting Erlich's message to every other computer.

These parties, who are liable under plaintiffs' theory, do no more than operate or implement a system that is essential if Usenet messages are to be widely distributed. There is no need to construe the Act to make all of these parties infringers. Although copyright is a strict liability statute, there should still be some element of volition or causation which is lacking where a defendant's system is merely used to create a copy by a third party.

Id. at 1369-70 (footnotes and citations omitted, paragraphing supplied).

The Netcom court went to great lengths to distinguish Playboy Enterprises, Inc. v. Frena , 839 F. Supp. 1552, 1554 (M.D.Fla.1993). In that case, the defendant operated a small computer bulletin board system (BBS) whose system contained files of erotic pictures, uploaded by users of the BBS. He was held liable for copyright infringement, the Netcom court said, not because he had any involvement in making the copies, but because he had distributed copies in violation of a separate statutorily-enumerated right of the copyright owner. See Netcom, 907 F. Supp. at 1370; cf. Playboy Enterprises, Inc. v. Webbworld, Inc., 968 F. Supp. 1171, 1175 (N.D. Tex. 1997) (granting summary judgment of copyright infringement against Web site operator that provided fee-based access to collection of copied photographic images, despite operator's claim that it had no control over which images were posted by its user).

In contrast, Netcom was accused of reproducing the copyrighted work, not of distributing it. The court apparently focused on that fact, and on the fact that when Netcom's computers retransmitted copies of infringing works, they did so in response to commands from persons other than Netcom: “[T]he storage on a defendant's system of infringing copies and retransmission to other servers is not a direct infringement by [Netcom] of the exclusive right to reproduce the work where such copies are uploaded by an infringing user. Playboy does not hold otherwise.” Id. at 1371.

In any event, the holding in Playboy v. Frena, distinguished in Netcom, was later overruled by Congress, and that of Netcom was essentially codified, in the safe-harbor provisions of the Digital Millennium Copyright Act, discussed in Section § 2.8[i]. See generally ALS Scan, Inc. v. RemarQ Communities, Inc., 239 F.3d 619, 621-22 (4th Cir.2001) (following Netcom and noting safe-harbor provisions of DMCA; affirming dismissal of claim of direct infringement); CoStar Group Inc. v. LoopNet, Inc., 164 F. Supp. 2d 688 (D. Md. 2001) (granting partial summary judgment of no direct infringement).

A separate question in Netcom, however, was whether the defendant ISP could be liable for contributory infringement, as distinct from direct infringement, by virtue of its having provided the facilities for the infringement to occur. The cases seem to be going in the direction of requiring “substantial participation” in the infringing activity — but for an ISP, that can take the form of failing to block transmission of infringing materials after learning about the infringement. As stated in Netcom:

If plaintiffs can prove the knowledge element, Netcom will be liable for contributory infringement since its failure to simply cancel [the infringing user's] infringing message and thereby stop an infringing copy from being distributed worldwide constitutes substantial participation in [his] public distribution of the message.

Id. at 1374 (emphasis supplied).

The court thus indicated that to avoid liability, an ISP must take steps to block reproduction and distribution of a copyrighted work as soon as it “knows” of the infringement. It rejected Netcom's argument that it did not have unequivocal knowledge of the infringement (but it did suggest that an ISP might not have to take immediate action to cut off an allegedly infringing use if the use might qualify as a “fair use”):

Netcom argues that its knowledge after receiving notice of Erlich's alleged infringing activities was too equivocal given the difficulty in assessing whether registrations are valid and whether use is fair. Although a mere unsupported allegation of infringement by a copyright owner may not automatically put a defendant on notice of infringing activity, Netcom's position that liability must be unequivocal is unsupportable. While perhaps the typical infringing activities of BBSs will involve copying software, where BBS operators are better equipped to judge infringement, the fact that this involves written works should not distinguish it.

Where works contain copyright notices within them, as here, it is difficult to argue that a defendant did not know that the works were copyrighted. To require proof of valid registrations would be impractical and would perhaps take too long to verify, making it impossible for a copyright holder to protect his or her works in some cases, as works are automatically deleted less than two weeks after they are posted.

The court is more persuaded by the argument that it is beyond the ability of a BBS operator to quickly and fairly determine when a use is not infringement where there is at least a colorable claim of fair use. Where a BBS operator cannot reasonably verify a claim of infringement, either because of a possible fair use defense, the lack of copyright notices on the copies, or the copyright holder's failure to provide the necessary documentation to show that there is a likely infringement, the operator's lack of knowledge will be found reasonable and there will be no liability for contributory infringement for allowing the continued distribution of the works on its system.

Netcom, 907 F. Supp. at 1374 (paragraphing supplied).

In the subsequent Sega Enterprises, Ltd. v. Maphia, 948 F. Supp. 923 (N.D. Cal. 1996), the defendant was the system operator for MAPHIA, an electronic bulletin board (BBS). Sega allegedly received an anonymous tip that the MAPHIA BBS contained and distributed pirated and unauthorized versions of the plaintiff's video game software. At the time it was seized, the MAPHIA BBS contained unauthorized copies of 12 Sega games developed by Sega, ten Sega‑licensed games, and six Sega pre‑release or “beta” version games, developed in‑house by Sega.

The Sega court was persuaded by Netcom, and held that the defendant was not liable for direct infringement even though he knew that infringing activity was occurring. See id. at 932.

The court went on to hold, however, that Sega could prevail on a contributory-infringement theory if it established that “the users of Sherman's MAPHIA BBS directly infringed Sega's copyright [and] that (i) with knowledge of the users' infringing activity, (ii) Sherman induced, caused, or materially contributed to their infringing activity.” Id. The court spent little time on the first issue, namely the defendant's knowledge that his customers were in fact infringing.

The Sega court then proceeded to the second issue, namely the defendant's active participation in the alleged infringement. The court pointed out that the defendant “actively solicited users to upload unauthorized games, and provided a road map on his BBS for easy identification of Sega games available for downloading. Additionally, through the same MAPHIA BBS medium, he offered copiers for sale to facilitate playing the downloaded games.” This, the court said, established a prima facie case of contributory infringement of copyright. Id.; accord, Sega Enterprises Ltd. v. Sabella, 1996 WL 780560 (N.D. Cal. 1996) (granting plaintiff's motion for summary judgment that defendant BBS operator was liable for contributory copyright infringement, but holding that she was not a “direct” infringer notwithstanding her providing of facilities to BBS users who engaged in direct infringement).

A party seeking the benefit of the limitations on liability in Title II must qualify as a “service provider.” For purposes of the first limitation, relating to transitory communications, “service provider” is defined in section 512(k)(1)(A) as “an entity offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user's choosing, without modification to the content of the material as sent or received.” For purposes of the other three limitations, “service provider” is more broadly defined in section 512(k)(l)(B) as “a provider of online services or network access, or the operator of facilities therefor.” [/See A&M Records, Inc. v. Napster, Inc/., No. C 99-05183 MHP, 2000 WL 573136, 54 USPQ2d 1746 (C.D. Cal. May 12, 2000) (refusing to grant summary adjudication that Napster was entitled to assert section-512 defense because it had not established that it was a service provider and it had not established its compliance with the policies described in the text), subsequent proceedings, 114 F. Supp. 2d 896 (N.D. Cal. 2000), aff'd in pertinent part, rev'd in part and remanded, 239 F.3d 1004 (9th Cir. 2001).]

In addition, to be eligible for any of the limitations, a service provider must meet two overall conditions: (1) it must adopt and reasonably implement a policy of terminating in appropriate circumstances the accounts of subscribers who are repeat infringers; and (2) it must accommodate and not interfere with “standard technical measures.” (Section 512(i)). “Standard technical measures” are defined as measures that copyright owners use to identify or protect copyrighted works, that have been developed pursuant to a broad consensus of copyright owners and service providers in an open, fair and voluntary multi-industry process, are available to anyone on reasonable nondiscriminatory terms, and do not impose substantial costs or burdens on service providers.

In general terms, section 512(a) limits the liability of service providers in circumstances where the provider merely acts as a data conduit, transmitting digital information from one point on a network to another at someone else's request. This limitation covers acts of transmission, routing, or providing connections for the information, as well as the intermediate and transient copies that are made automatically in the operation of a network.

In order to qualify for this limitation, the service provider's activities must meet the following conditions:

• The transmission must be initiated by a person other than the provider.
• The transmission, routing, provision of connections, or copying must be carried out by an automatic technical process without selection of material by the service provider.
• The service provider must not determine the recipients of the material.
• Any intermediate copies must not ordinarily be accessible to anyone other than anticipated recipients, and must not be retained for longer than reasonably necessary.
• The material must be transmitted with no modification to its content.

Section 512(b) limits the liability of service providers for the practice of retaining copies, for a limited time, of material that has been made available online by a person other than the provider, and then transmitted to a subscriber at his or her direction. The service provider retains the material so that subsequent requests for the same material can be fulfilled by transmitting the retained copy, rather than retrieving the material from the original source on the network.

The benefit of this practice is that it reduces the service provider's bandwidth requirements and reduces the waiting time on subsequent requests for the same information. On the other hand, it can result in the delivery of outdated information to subscribers and can deprive website operators of accurate “hit” information — information about the number of requests for particular material on a website — from which advertising revenue is frequently calculated. For this reason, the person making the material available online may establish rules about updating it, and may utilize technological means to track the number of “hits.”

The limitation applies to acts of intermediate and temporary storage, when carried out through an automatic technical process for the purpose of making the material available to subscribers who subsequently request it. It is subject to the following conditions:

• The content of the retained material must not be modified.
• The provider must comply with rules about “refreshing” material—replacing retained copies of material with material from the original location— when specified in accordance with a generally accepted industry standard data communication protocol.
• The provider must not interfere with technology that returns “hit” information to the person who posted the material, where such technology meets certain requirements.
• The provider must limit users' access to the material in accordance with conditions on access (e.g., password protection) imposed by the person who posted the material.
• Any material that was posted without the copyright owner's authorization must be removed or blocked promptly once the service provider has been notified that it has been removed, blocked, or ordered to be removed or blocked, at the originating site.

or Networks at the Direction of Users

:CUSTOM_ID: limitation-for-information-residing-on-systems-or-networks-at-the-direction-of-users

Section 512(c) limits the liability of service providers for infringing material on websites (or other information repositories) hosted on their systems. It applies to storage at the direction of a user. In order to be eligible for the limitation, the following conditions must be met:

• The provider must not have the requisite level of knowledge of the infringing activity, as described below.
• If the provider has the right and ability to control the infringing activity, it must not receive a financial benefit directly attributable to the infringing activity.
• Upon receiving proper notification of claimed infringement, the provider must expeditiously take down or block access to the material.

In addition, a service provider must have filed with the Copyright Office a designation of an agent to receive notifications of claimed infringement. The Office provides a suggested form for the purpose of designating an agent (http://www.loc.gov/copyright/onlinesp/) and maintains a list of agents on the Copyright Office website (http://www.loc.gov/copyright/onlinesp/list/).

Under the knowledge standard, a service provider is eligible for the limitation on liability only if it does not have actual knowledge of the infringement, is not aware of facts or circumstances from which infringing activity is apparent, or upon gaining such knowledge or awareness, responds expeditiously to take the material down or block access to it.

The statute also establishes procedures for proper notification, and rules as to its effect. (Section 512(c)(3)). Under the notice and takedown procedure, a copyright owner submits a notification under penalty of perjury, including a list of specified elements, to the service provider's designated agent.*^[*[1]*^]* Failure to comply substantially with the statutory requirements means that the notification will not be considered in determining the requisite level of knowledge by the service provider. If, upon receiving a proper notification, the service provider promptly removes or blocks access to the material identified in the notification, the provider is exempt from monetary liability. In addition, the provider is protected from any liability to any person for claims based on its having taken down the material. (Section 512(g)(1)).

In order to protect against the possibility of erroneous or fraudulent notifications, certain safeguards are built into section 512. Subsection (g)(1) gives the subscriber the opportunity to respond to the notice and takedown by filing a counter notification. In order to qualify for the protection against liability for taking down material, the service provider must promptly notify the subscriber that it has removed or disabled access to the material. If the subscriber serves a counter notification complying with statutory requirements, including a statement under penalty of perjury that the material was removed or disabled through mistake or misidentification, then unless the copyright owner files an action seeking a court order against the subscriber, the service provider must put the material back up within 10-14 business days after receiving the counter notification.

Penalties are provided for knowing material misrepresentations in either a notice or a counter notice. Any person who knowingly materially misrepresents that material is infringing, or that it was removed or blocked through mistake or misidentification, is liable for any resulting damages (including costs and attorneys' fees) incurred by the alleged infringer, the copyright owner or its licensee, or the service provider. (Section 512(f)).

Section 512(d) relates to hyperlinks, online directories, search engines and the like. It limits liability for the acts of referring or linking users to a site that contains infringing material by using such information location tools, if the following conditions are met:

• The provider must not have the requisite level of knowledge that the material is infringing. The knowledge standard is the same as under the limitation for information residing on systems or networks.
• If the provider has the right and ability to control the infringing activity, the provider must not receive a financial benefit directly attributable to the activity.
• Upon receiving a notification of claimed infringement, the provider must expeditiously take down or block access to the material.

These are essentially the same conditions that apply under the previous limitation, with some differences in the notification requirements. The provisions establishing safeguards against the possibility of erroneous or fraudulent notifications, as discussed above, as well as those protecting the provider against claims based on having taken down the material apply to this limitation. (Sections 512(f)-(g)).

Nonprofit Educational Institutions

:CUSTOM_ID: special-rules-regarding-liability-of-nonprofit-educational-institutions

Section 512(e) determines when the actions or knowledge of a faculty member or graduate student employee who is performing a teaching or research function may affect the eligibility of a nonprofit educational institution for one of the four limitations on liability. As to the limitations for transitory communications or system caching, the faculty member or student shall be considered a “person other than the provider,” so as to avoid disqualifying the institution from eligibility. As to the other limitations, the knowledge or awareness of the faculty member or student will not be attributed to the institution. The following conditions must be met:

• the faculty member or graduate student's infringing activities do not involve providing online access to course materials that were required or recommended during the past three years;
• the institution has not received more than two notifications over the past three years that the faculty member or graduate student was infringing; and
• the institution provides all of its users with informational materials describing and promoting compliance with copyright law.

Section 107 of the Copyright Act provides the underpinning for the assertion of fair-use defenses by accused infringers. It states that:

[F]air use of a copyrighted work, including such use by reproduction in copies or phonorecords … for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include:

(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

(2) the nature of the copyrighted work;

(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) the effect of the use upon the potential market for or value of the copyrighted work.

17 U.S.C. § 107.

Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 114 S. Ct. 1164 (1994) (Souter, J.): In Campbell, the Supreme Court explained some of the jurisprudence underlying the fair-use doctrine. In that case, the song “Pretty Woman,” by the rap group 2 Live Crew, was accused of infringement of the copyright in the Roy Orbison hit “Oh Pretty Woman.” The district court granted summary judgment of noninfringement on grounds of fair use, but the Sixth Circuit reversed. See 972 F.2d 1429 (6th Cir. 1992), reversing 754 F. Supp. 1150 (M.D. Tenn. 1991).

Examining the four factors prescribed in the Copyright Act for evaluating putative fair uses, the Campbell Court characterized the “central purpose” of the investigation into first factor—the purpose of the use—as:

to see, in Justice Story's words, whether the new work merely “supersede[s] the objects of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is “/transformative/.”

Although such transformative use is not absolutely necessary for a finding of fair use, the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works. Such works thus lie at the heart of the fair use doctrine's breathing space within the confines of copyright, and the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.

Campbell, 510 U.S. at 579 (emphasis and paragraphing added, citations and footnote omitted). The Court rejected the Sixth Circuit's reading of the Court's own Betamax decision, Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 451 (1984), that commercial purpose in a copyright infringement almost automatically establishes a presumption of unfair use. Apparently seeking to dispel a perceived anti-commercial bias in the courts, the Court quoted Samuel Johnson's pronouncement that “‘[n]o man but a blockhead ever wrote, except for money.'” Campbell, 510 U.S. at 584 (citation omitted). The Court announced held that “[n]o ‘presumption' or inference of market harm … is applicable to a case involving something beyond mere duplication for commercial purposes.” Id., 510 U.S. at 591 (citation omitted).

The Court suggested in dictum that injunctive relief might not be available against copyright infringers who engage in “transformative” uses of copyrighted works:

Because the fair use enquiry often requires close questions of judgment as to the extent of permissible borrowing in cases involving parodies (or other critical works), courts may also wish to bear in mind that the goals of the copyright law, “to stimulate the creation and publication of edifying matter,” are not always served by automatically granting injunctive relief when parodists are found to have gone beyond the bounds of fair use. …

[There may be cases] “raising reasonable contentions of fair use” where “there may be a strong public interest in the publication of the secondary work [and] the copyright owner's interest may be adequately protected by an award of damages for whatever infringement is found” ….

Id., 510 U.S. at 578 n.10 (paragraphing supplied, citations omitted).

Sony Computer Entertainment, Inc. v. Connectix Corp., 203 F.3d 596 (9th Cir. 2000), reversing 48 F.Supp.2d 1212 (N.D. Cal. 1999): The defendant succeeded in its transformative fair-use defense, but only on appeal to the Ninth Circuit. Connectix was a vendor of emulation software for the Sony Playstation, which was held to infringe Sony's copyrights. It argued that its emulation was transformative because it operated on a different platform, i.e., a computer instead of a television. The district court rejected that argument because “[Connectix's] VGS supplants Sony's prior invention. … The VGS does not do anything new, anything different, or anything unique from the PlayStation.” 48 F.Supp.2d at 1219. The Ninth Circuit disagreed, holding that

Connectix's Virtual Game Station is modestly transformative. The product creates a new platform, the personal computer, on which consumers can play games designed for the Sony PlayStation. This innovation affords opportunities for game play in new environments, specifically anywhere a Sony PlayStation console and television are not available, but a computer with a CD‑ROM drive is. More important, the Virtual Game Station itself is a wholly new product, notwithstanding the similarity of uses and functions between the Sony PlayStation and the Virtual Game Station. The expressive element of software lies as much in the organization and structure of the object code that runs the computer as it does in the visual expression of that code that appears on a computer screen.

Id. 203 F.3d at 606; see also supra § 2.7[e] (discussion of reverse-engineering aspects of the case).

Sony Computer Entertainment America, Inc. v. Bleem, LLC, 214 F.3d 1022 (9th Cir. 2000) (vacating preliminary injunction): This Sony case also led to a successful fair-use use defense, although on different factual grounds. The defendant marketed a software emulator for playing PlayStation games on a regular computer. The defendant used screen-shot images to show how a game would actually look if played on a PlayStation console versus how it would actually look if played using the defendant's software emulator. The Ninth Circuit characterized such use as competitive advertising and held that it was fair use.

Kelly v. Arriba Soft Corp., 280 F.3d 934 (9^th Cir. 2002) (affirming, in pertinent part, summary judgment of fair use): The plaintiff posted graphic images of photographs on his Web site. The defendant's search-engine database created and stored “thumbnail” images of the photographs and, when the photographs matched an end-user's search query, would cause the thumbnails to be displayed on the end-user's browser. The Ninth Circuit analyzed the four factors of fair use and concluded the creation and display of thumbnails qualified as transformative use. The court observed that:

the thumbnails were much smaller, lower-resolution images that served an entirely different function than Kelly's original images. Kelly's images are artistic works used for illustrative purposes. His images are used to portray scenes from the American West in an esthetic manner. Arriba's use of Kelly's images in the thumbnails is unrelated to any esthetic purpose. Arriba's search engine functions as a tool to help index and improve access to images on the internet and their related web sites. In fact, users are unlikely to enlarge the thumbnails and use them for artistic purposes because the thumbnails are of much lower resolution than the originals; any enlargement results in a significant loss of clarity of the image, making them inappropriate as display material.

the Licensor's Competitor?

:CUSTOM_ID: can-a-software-licensee-claim-to-be-an-owner-when-dealing-with-the-licensors-competitor

When the issue is one of duplication of a plaintiff's software by a licensee, e.g., for use with hardware not provided by the plaintiff, the courts have generally declined to find that the licensee was an “owner” of a copy of the software.

Selected cases:

MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1995)./:/ The plaintiff was a computer manufacturer and also provided after-the-sale service for its computers. It owned a copyright in software that performed diagnostic functions for the computers. A non-licensee service provider, which competed with the plaintiff for after-the-sale service business, used a customer's licensed copy of the diagnostic software when doing maintenance on a customer's computer. The customer's license agreement for the software prohibited the customer from permitting third parties to use of the software. The Ninth Circuit held that the non-licensee service provider's use of the software constituted copyright infringement (see § 2.7[c][2] re legislation overturning this specific holding). The court held that the customer was not an “owner” of the copies of the software for purposes of section 117 and thus did not enjoy the right to copy conferred on owners by the statute. See id. at 518 n.5 (9th Cir. 1995). The court stated that it reached the conclusion that the customer was not an owner because the customer had licensed the software from MAI. See id.; see also Advanced Computer Services of Michigan v. MAI Systems Corp., 845

1. Supp. 356, 367 (E.D. Va. 1994) (“MAI customers are not ‘owners' of

the copyrighted software; they possess only the limited rights set forth in their licensing agreements”). That rationale, however, was later rejected as too broad in DSC v. Pulsecom, discussed below.

DSC Communications Corp. v. Pulse Communications, Inc., 170 F.3d 1354 (Fed. Cir. 1999): DSC was a manufacturer of digital loop carrier equipment for telephone systems, including interface cards that were plugged into the equipment. It sold its equipment to the regional Bell operating companies or “RBOCs.” DSC provided software for controlling the interface cards; the software was “downloaded,” i.e., copied, from the equipment to the interface cards each time the equipment was powered up. The defendant, Pulse Communications (Pulsecom), also sold interface cards, which were designed to be compatible with DSC's equipment and to be controlled by DSC's software. See 170 F.3d at 1357-58. (The reverse-engineering aspects of the Pulsecom case are discussed in § 2.7[e].)

Each time a Pulsecom customer powered up its DSC equipment with a Pulsecom interface card installed in it, the DSC equipment automatically downloaded a copy of DSC's controller software to the Pulsecom interface card, in violation of the license agreement. See 170 F.3d at 1359. This was a violation of DSC's license agreement, which prohibited the customers from using the controller software except with DSC-provided hardware. See 170 F.3d at 1361. According to DSC, Pulsecom's customers were thereby infringing DSC's copyright in its controller software, and Pulsecom was thus a contributory infringer.

Initially, Pulsecom prevailed at trial on a section-117 theory. The district court noted that DSC's customers obtained a right to possession of DSC's controller software for an unlimited period by making a single payment. According to the district court, this made the transaction a “sale” and made DSC's customers the owners of copies of the software; that in turn gave the customers the right to make copies of the software in connection with using Pulsecom's competing interface cards. See 170 F.3d at 1360-61.

The Federal Circuit, however, rejected the district court's ownership analysis. Looking to the legislative history, the appellate court held that “it is clear from the fact of the substitution of the term ‘owner' for ‘rightful possessor' that Congress must have meant to require more than ‘rightful possession' to trigger the section 117 defense.” Although the Federal Circuit disagreed with MAI Systems's view that the mere existence of a license agreement implied a lack of ownership, see 170 F.3d at 1360, the court did hold that the specific license agreements in question “characterize the [customers] as non‑owners of copies of the software, [and] the restrictions imposed on the RBOCs' rights with respect to the software are consistent with that characterization,” and that the license agreements “severely limit the rights of the [customers] with respect to the [software] in ways that are inconsistent with the rights normally enjoyed by owners of copies of software.” Pulsecom, 170 F.3d at 1361. Pulsecom was thus unsuccessful in attempting to assert its section-117 defense.

Some opinions have addressed the extent to which customers have the right to modify their copies of software. At least some courts have been inclined to be sympathetic to customers who modified software that they had paid for.

Aymes v. Bonelli, 47 F.3d 23 (2d. Cir. 1995): According to the Second Circuit, the owner of a copy of a computer program can modify the program for its own use, even though the modification amounts to creation of a derivative work. In Aymes, an independent-contractor programmer sued his former customer for copyright infringement after the customer modified the software. The Second Circuit had no trouble agreeing with the district court that the programmer, who had been paid $70,000 to design a computer program specifically for the customer, had sold the customer a copy of the program. The court then relied on 17 U.S.C. § 117 to hold that the customer, as rightful owner of a copy of the program, “did not infringe upon Aymes's copyright, because the changes made to [the program] were necessary measures in their continuing use of the software in operating their business.” Id., 47 F.3d at 26. Id., 47 F.3d at 26. The court said that an owner's right of adaptation “includes ‘the right to add features to the program that were not present at the time of rightful acquisition,' and was intended to apply to modifications for internal use, as long as the adapted program is not distributed in an unauthorized manner.” Id. (citations omitted). (The Aymes case's holding concerning ownership and the work-made-for-hire doctrine is discussed supra at § 2.6[b][2].)

Synergistic Technologies, Inc. v. IDB Mobile Communications, Inc., 871 F. Supp. 24 (D.D.C. 1994) (granting defendant's motion for summary judgment of no copyright infringement): In this case a similar result to that in Aymes was reached, although on different grounds. The plaintiff had sold the defendant computer hardware, with software installed, for use in a satellite communications earth station. The system malfunctioned; the defendant discovered that the source code had been deleted and hired a third party to fix the software problems. The plaintiff thereupon sued for copyright infringement. The court first held that under section 2-401 of the Uniform Commercial Code, “[t]he parties not having explicitly agreed otherwise, title to the hardware and to a copy of the software passed to IDB at the time of delivery of the goods. Accordingly, IDB is the owner of a copy of the computer program and is entitled to copy and adapt the program in the limited manner described in § 117.” Id. at 29 (emphasis supplied). (The court granted summary judgment for the defendants on other grounds, namely that the plaintiff had failed, in response to the defendants' summary judgment motion, to establish a prima facie case that any potentially impermissible copying had occurred. Id. at 29-30.)