By: James Kachmar
Liability for copyright infringement can result when one downloads protected software without the copyright owner’s authorization. The Ninth Circuit was recently tasked with exploring the scope and reach of copyright protection in such cases in Design Data Corp. v. Unigate Enterprise, Inc.
Design Data is the creator of a computer aided design (CAD) software program SDS/2. SDS/2 is promoted by Design Data as offering a high quality steel in connection design and drawing production for 3D steel detailing. It uses building and engineering codes to produce detailed drawings and models of steel structural components for use in construction. A user in creating a steel component design on SDS/2 would create what is called a “job file” that would contain all the information and files related to a particular project.
Unigate Enterprise is located in California and offers outsourced steel detailing services by marketing detailed CAD files created by contractors in China. At least one of its Chinese contractors had used an unauthorized copy of SDS/2 and sent the resulting job files (“output”) to Unigate Enterprise. Unigate Enterprise then sold those images to clients in the U.S. Unigate Enterprise advertised on its website that it uses the SDS/2 program “if required;” however, it apparently never purchased a license to use SDS/2 from Design Data.
Unigate Enterprise also claimed that it had downloaded a free demo version of SDS/2. Design Data does not offer a free demo of its software. Design Data visited Unigate Enterprise’s California offices after it grew suspicious that Unigate Enterprise was using its SDS/2 software without a license. Although there was no evidence that Unigate Enterprise had actually installed SDS/2 on the computers that Design Data were allowed to inspect; those computers did contain SDS/2 generated images and job files suggesting that the CAD program had been used in some fashion and that there were installation files for two versions of SDS/2 in addition to patch files that would allow a user to work around the software’s license protection on the Unigate Enterprise computers.
Based on this evidence, Design Data sued Unigate Enterprise for copyright infringement because of its alleged use of the SDS/2 software and its importation and distribution of SDS/2 generated images and files from outside the United States. The trial court granted summary judgment to Unigate Enterprise on both of these claims and Design Data appealed this decision to the Ninth Circuit.
The Ninth Circuit began by noting that the unauthorized use of copyrighted software does not impose liability unless it is “significant enough to constitute infringement.” The Ninth Circuit held that the lower court had erred in deciding that no infringement had occurred because the facts surrounding the alleged infringement were disputed. For instance, Unigate Enterprise claimed that he had downloaded a “free demo” of the SDS/2 software but Design Data had offered evidence that it did not offer any such demos. Design Gate further argued that the evidence that there had been SDS/2 generated files suggested that Unigate Enterprise had in fact put the SDS/2 software to use.
The Ninth Circuit found that there was a triable issue of fact as to whether infringement had occurred. For instance, the evidence showed that Unigate Enterprise had intentionally downloaded a complete copy of SDS/2 and three patch files allowing it to circumvent the software’s licensing protection. Unigate Enterprise had also advertised that it would use SDS/2 software on client jobs “if required.” Finally, there was evidence that Unigate Enterprise’s computers contained SDS/2 generated files and images. The Ninth Circuit concluded that this evidence “raises a factual question whether [Unigate Enterprise’s] download was more than an ‘insignificant violation’ of Design Data’s copyright.” Given that there had been numerous cases that have held upheld copyright infringement “under circumstances in which the use of the copyright work is of minimal consequence,” the Ninth Circuit concluded that it was error to grant summary judgment as to Design Data’s claim.
The Ninth Circuit however did affirm the granting of summary judgment as to Design Data’s importation and distribution claim. The Ninth Circuit focused its inquiry here as to whether the copyright protection of the SDS/2 software program extended to the program’s output of images and job files. The Ninth Circuit noted that there was a dispute among various courts as to how far the copyright protection should extend but noted that some authorities had suggested “that the copyright protection afforded a computer program may extend to the program’s output if the program `does the lion’s share of the work’ in creating the output and the user’s role is so `marginal’ that the output reflects the program’s contents.” The Ninth Circuit decided to avoid having to resolve the split among authority because it concluded that, even assuming the most favorable legal authority applied, Design Data had not established that the SDS/2 program did the “lion’s share of the work” in creating the job files and images located on the Unigate Enterprise computers. Given that, the Ninth Circuit affirmed the summary adjudication as to the importation and distribution claim brought by Design Data.
James Kachmar is a shareholder in Weintraub Tobin Chediak Coleman Grodin’s litigation section. He represents corporate and individual clients in both state and federal courts in various business litigation matters, including trade secret misappropriation, unfair business competition, stockholder disputes, and intellectual property disputes. For additional articles on intellectual property issues, please visit Weintraub’s law blog at www.theiplawblog.com.