† J.D. 1997, Boalt Hall School of Law, UC Berkeley. The author also holds a Masters degree in Computer Science from Stanford University, and has over 10 years of experience as a software engineer. The author is an attorney at the Seattle law firm of Seed & Berry LLP, where he practices computer-related intellectual property law with an emphasis on software patent prosecution.
1. See 17 U.S.C. §§ 101-1101 (1997).
2. See 35 U.S.C. §§ 1-376 (1997).
3. During the sixteenth century, the English Crown was notorious for granting "letters patent" to individuals, which conveyed exclusive rights to produce, import, or sell items within the kingdom (extending even to common items such as salt and vinegar). In response to abuses, Parliament passed the Statute of Monopolies in the early seventeenth century, which permitted patents to be granted only to the creator of a new invention and only for fourteen years. In a similar manner, the Crown in the sixteenth century granted to the Stationers' Company an exclusive right to publish and print all published works. Parliament revoked that right by passing the Statute of Anne in the early 1700s, which gave authors the exclusive right to publish their works for twenty-eight years. See 1 ERNEST B. LIPSCOMB, LIPSCOMB'S WALKER ON PATENTS §§ 1:1-1:2, 1:5-1:6 (3d ed. 1984) [hereinafter WALKER ON PATENTS]; WILLIAM F. PATRY, LATMAN'S THE COPYRIGHT LAW, 2-5 (1986).
4. The term "creators" as used in this paper is intended to include both authors and inventors, and "creative works" is intended to include both original works of authorship and novel inventions.
5. U.S. CONST. art. I, § 8, cl. 8 (emphasis added).
6. [The unusual inclusion of the reason for the grant of the power in the copyright/patent clause] doubtlessly was due to the fact that those who formulated the Constitution were familiar with the long struggle over monopolies so prominent in English history, where exclusive rights to engage even in ordinary business activities were granted so frequently by the Crown for the financial benefits accruing to the Crown only. It was desired that in this country any Government grant of a monopoly for even a limited time should be limited to those things which serve in the promotion of science and the useful arts.
In Re Yuan, 188 F.2d 377, 380 (C.C.P.A. 1951).
7. It is significant, we think, that the framers of our Constitution continued the English development of intellectual property law and considered in tandem those property rights protectable by copyrights and those protectable by patents. In giving Congress the power to create copyright and patent laws, the framers combined the two concepts in one clause, stating a unitary purpose to promote progress ¼
. [A] comment in The Federalist papers indicates the public policy behind the grant of copyright and patent powers is essentially the same.
Lasercomb America, Inc. v. Reynolds, 911 F.2d 970, 975 (4th Cir. 1990).
8. The intellectual property doctrine that arose in England emphasized the utilitarian nature of the intellectual property rights granted to inventors and authors. By granting a limited monopoly to these creators, they were given an incentive to produce inventions and works because the monopoly presumably allowed the creators to reap benefits from a useful creation that would compensate them for their effort and risk taken in producing the useful creation. Thus, benefits received by creators serve as an incentive to produce rather than as a reward for creations.
Conversely, the intellectual property doctrines that arose in continental Europe are often referred to as based on a moral rights theory. This theory grants rights to creators not as an incentive to produce, but as a recognition of the ownership in the creation that results from the labor and ingenuity in producing the creation, and stems in part from Locke's theory of property. See generally Jane C. Ginsburg, A Tale Of Two Copyrights: Literary Property In Revolutionary France And America, 64 TUL. L. REV. 991 (1990).
9. See Mazer v. Stein, 347 U.S. 201, 219 (1953); see also Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 349-50 (1991) ("The principal objective of copyright is not to reward the labor of authors, but 'to promote the Progress of Science and useful Arts'"); United States v. Paramount Pictures, Inc., 334 U.S. 131, 158 (1948); United States v. Loew's, Inc., 371 U.S. 38, 44-51 (1962); United States v. Dubilier Condenser Corp., 289 U.S. 178, 186 (1933); WALKER ON PATENTS, supra note 3, § 1.6.
10. It would be more accurate to state that rights are granted to a particular invention or work of authorship, and that these rights generally subsist in the current owner of the invention or work. For the sake of brevity, I will refer in this paper to the rights granted to creators.
11. The patent statute conveys rights to owners as a negative grant-while the owner can generally exclude others from engaging in prohibited activities, an owner is not statutorily entitled to practice his or her own invention. Thus, external limitations, such as regulations from an administrative body such as the Food and Drug Administration or legal restrictions from an inventor with a blocking patent, can prevent an inventor from practicing his or her own invention.
12. (a) Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.
(b) Whoever actively induces infringement of a patent shall be liable as an infringer.
(c) Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer.
35 U.S.C. § 271 (1997).
13. See 35 U.S.C. § 283 (1997).
14. See 35 U.S.C. § 284 (1997).
15. See 35 U.S.C. § 285 (1997).
16. See 35 U.S.C. § 101 (1997).
17. See 35 U.S.C. § 102 (1997).
18. See 35 U.S.C. § 101 (1997).
19. See 35 U.S.C. § 103 (1997).
20. See 35 U.S.C. §§ 154, 173 (1997).
21. For example, a patent owner cannot prevent another from using the owner's invention if it is in a vessel that is temporarily in the country. See 35 U.S.C. § 272 (1997). This is also true if the use of the invention is "solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products," or if the patent owner ties the use of the invention to a separate product and the patent owner has market power in the relevant market. See 35 U.S.C. § 271(d) & (e)(1) (1997).
22. Subject to sections 107 through 120, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work ...;
(4) ¼ to perform the copyrighted work publicly;
(5) ¼ to display the copyrighted work publicly; and
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.
17 U.S.C. § 106 (1997).
23. See 17 U.S.C. § 106A (1997).
24. See 17 U.S.C. § 1101 (1997).
25. (a) Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device ¼ .
(b) In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.
17 U.S.C. § 102 (1997).
26. (a) In General.-Copyright in a work created on or after January 1, 1978, subsists from its creation and, except as provided by the following subsections, endures for a term consisting of the life of the author and fifty years after the author's death ¼ .
(c) Anonymous Works, Pseudonymous Works, and Works Made For Hire.-In the case of an anonymous work, a pseudonymous work, or a work made for hire, the copyright endures for a term of seventy-five years from the year of its first publication, or a term of one hundred years from the year of its creation, whichever expires first.
17 U.S.C. § 302 (1997).
27. See 17 U.S.C. § 108, §§ 110-120 (1997).
28. See 17 U.S.C. § 108 (1997).
29. See 17 U.S.C. § 110 (1997).
30. Notwithstanding the provisions of section 106, it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided:
(1) that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner, or
(2) that such new copy or adaptation is for archival purposes only and that all archival copies are destroyed in the event that continued possession of the computer program should cease to be rightful.
Any exact copies prepared in accordance with the provisions of this section may be leased, sold, or otherwise transferred, along with the copy from which such copies were prepared, only as part of the lease, sale, or other transfer of all rights in the program. Adaptations so prepared may be transferred only with the authorization of the copyright owner.
17 U.S.C. § 117 (1997).
31. The owner of a lawfully made copy can sell or dispose of the copy (i.e., distribute it) or publicly display it without authorization of the owner of the copyright. See 17 U.S.C. § 109 (1997).
32. Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, 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.
The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.
17 U.S.C. § 107 (1997).
33. See 17 U.S.C. § 102 (1997).
34. It is not unusual for foreign copyright systems to vary the duration of the right granted based on the class of the work. See ROBERT A. GORMAN & JANE C. GINSBURG, COPYRIGHT FOR THE NINETIES 316 (4th ed. 1993). Even in the U.S., different terms are granted for utility and design patents, as well as for works of authorship depending on the situation under which the work was created. See supra notes 20 and 26.
35. The nonobviousness requirement, now codified in the patent statutes, creates a limitation on the rights of inventors by raising the standard necessary for an invention to achieve patentability. See supra note 19; Graham v. John Deere Co., 383 U.S. 1, 3-4 (1966) ("We have concluded that the 1952 Act was intended to codify judicial precedents.").
36. The doctrine of equivalents enhances the rights of patent holders by extending the scope of patented claims to cover products that have only insubstantial differences from the claimed invention. See Hilton Davis Chemical Co. v. Warner-Jenkinson Company, Inc., 62 F.3d 1512, 1516-17 (Fed. Cir. 1995), rev'd on other grounds and remanded, 1997 U.S. LEXIS 1476 (Mar 3, 1997).
37. See id. at 1519 (finding the doctrine of equivalents is an objective standard); Texas Instruments Inc. v. United States International Trade Commission, 988 F.2d 1165, 1178 (Fed. Cir. 1993) (holding the nonobvious requirement is an objective standard).
38. See supra note 32.
39. The factors enumerated in the section are not meant to be exclusive: "[S]ince the doctrine [of fair use] is an equitable rule of reason, no generally applicable definition is possible, and each case raising the question must be decided on its own facts." H.R. REP. NO. 94-1476, at 65 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5679.
40. "In essence, the traditional concept of fair use excused reasonable unauthorized appropriations from a first work, when the use to which the second author put the appropriated material in some way advanced the public benefit, without substantially impairing the present or potential economic value of the first work." GORMAN & GINSBURG, supra note 34, at 548. Judge Birch wrote:
Although the traditional approach is to view "fair use" as an affirmative defense, this writer, speaking only for himself, is of the opinion that it is better viewed as a right granted by the Copyright Act of 1976 ¼ . As a statutory doctrine, however, fair use is not an infringement. Thus, since the passage of the 1976 Act, fair use should no longer be considered an infringement to be excused; instead, it is logical to view fair use as a right.
Bateman v. Mnemonics, Inc., 79 F.3d 1532, 1542 n.22 (11th Cir. 1996).
41. See Robert P. Merges, Of Property Rules, Coase, And Intellectual Property, 94 COLUM. L. REV. 2655 (1994); Wendy J. Gordon, Fair Use as Market Failure: A Structural and Economic Analysis of the Betamax Case and Its Predecessors, 82 COLUM. L. REV. 1600 (1982).
42. Harper & Row, Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 560-69 (1985).
43. For example, a court could effectively pronounce that a book review quoting 100 words or less from a full length novel is per se fair use. See Part V.B. infra for additional discussion.
44. The United States "Constitution, and the Laws of the United States which shall be made in Pursuance thereof ¼ shall be the supreme Law of the Land; ¼ any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. CONST. art. VI, cl. 2.
45. 376 U.S. 225 (1964).
46. 376 U.S. 234 (1964).
47. Sears, 376 U.S. at 229.
48. 489 U.S. 141 (1989).
49. Id. at 152.
50. See Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974).
51. Id. at 489.
52. Id. at 480-81.
53. [C]opyright owners are given power by virtue of a congressionally-sanctioned monopoly; users are safeguarded under the same statute by at least some congressional solicitude for their interests (e.g., the fair use doctrine, limited terms, § 117). The proprietor's use of her property power to force a user to forego the rights that Congress intended him to have is the evil against which the misuse defense is aimed.
David Nimmer, Brains And Other Paraphernalia Of The Digital Age, 10 HARV. J.L. & TECH. 1, 24 n.103 (1996).
54. For a detailed look at the history of the patent misuse doctrine, see generally James B. Kobak, Jr., A Sensible Doctrine Of Misuse For Intellectual Property Cases, 2 ALB. L.J. SCI. & TECH. 1 (1992).
55. 243 U.S. 502 (1917).
56. Id. at 506.
57. Id. at 518.
58. 314 U.S. 488 (1942).
59. Id. at 491.
60. Id. at 490-91.
61. Equity may rightly withhold its assistance from such a use of the patent by declining to entertain a suit for infringement, and should do so at least until it is made to appear that the improper practice has been abandoned and that the consequences of the misuse of the patent have been dissipated.
Id. at 493.
62. It is the adverse effect upon the public interest of a successful infringement suit in conjunction with the patentee's course of conduct which disqualifies him to maintain the suit, regardless of whether the particular defendant has suffered from the misuse of the patent. Similarly equity will deny relief for infringement of a trademark where the plaintiff is misrepresenting to the public the nature of his product either by the trademark itself or by his label.
Id. at 494.
63. The Court of Appeals for the Seventh Circuit [found for the plaintiff] ¼ because it thought that respondent's use of the patent was not shown to violate § 3 of the Clayton Act, 15 U.S.C. § 14, 15 U.S.C.A. § 14, as it did not appear that the use of its patent substantially lessened competition or tended to create a monopoly in salt tablets ¼ . [However, we reverse.] The Clayton Act authorizes those injured by violations tending to monopoly to maintain suit for treble damages and for an injunction in appropriate cases. 15 U.S.C. §§ 1, 2, 14, 15, 26, 15 U.S.C.A. §§ 1, 2, 14, 15, 26. But the present suit is for infringement of a patent. The question we must decide is not necessarily whether respondent has violated the Clayton Act, but whether a court of equity will lend its aid to protect the patent monopoly when respondent is using it as the effective means of restraining competition with its sale of an unpatented article ¼ . It is unnecessary to decide whether respondent has violated the Clayton Act, for we conclude that in any event the maintenance of the present suit to restrain petitioner's manufacture or sale of the alleged infringing machines is contrary to public policy and that the district court rightly dismissed the complaint for want of equity.
Id. at 490-94 (emphasis added).
64. See 5 DONALD S. CHISUM, ON PATENTS § 19.04[3] (1996) [hereinafter CHISUM] (noting twelve types of situations in which patent misuse has been considered, and speculates that the acts which will be viewed as constituting misuse will shift over time. The twelve situations are tying arrangements, covenants not to compete, package licensing, post-expiration royalties and restraints, royalties based on total sales (unrelated to amount of sales including patented item), refusals to license including excessive or discriminatory royalties, price fixing, territorial limitations including resale restraints, field-of-use and customer limitations, grant-back clauses, restraints on the patentee including covenants not to license, and suppression including compulsory licensing.).
65. See id.
66. Pub. L. No. 100-73, 102 Stat. 4674 (1988).
67. See 35 U.S.C. § 271(d) (1997); Lasercomb America, Inc. v. Reynolds, 911 F.2d 970, 976 n.15 (4th Cir. 1990) ("The primary effect of the Patent Misuse Reform Act is to eliminate the presumption that use of a patent license to create a tie-in is per se misuse.").
68. 334 U.S. 131 (1948).
69. "[E]nlargement of the monopoly of the copyright was condemned below in reliance on the principle which forbids the owner of a patent to condition its use on the purchase or use of patented or unpatented materials. [Citations omitted]." Id. at 157.
70. 371 U.S. 38 (1962).
71. The requisite economic power is presumed when the tying product is patented or copyrighted. [Citations omitted]. This principle grew out of a long line of patent cases which had eventuated in the doctrine that a patentee who utilized tying arrangements would be denied all relief against infringements of his patent. Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502; [citations omitted], Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488; [citation omitted]. As the District Court [in Paramount Pictures] said, the result is to add to the monopoly of the copyright in violation of the principle of the patent cases involving tying clauses ¼ . Accommodation between the statutorily dispensed monopoly in the combination of contents in the patented or copyrighted product and the statutory principles of free competition demands that extension of the patent or copyright monopoly by the use of tying agreements be strictly confined.
Id. at 45-50.
72. See Mitchell Bros. Film Group v. Cinema Adult Theater, 604 F.2d 852, 865 n.27 (5th Cir. 1979), cert. denied, 445 U.S. 917 (1980) ("It is ¼ likely that the public monopoly extension rationale of Morton Salt ¼ is applicable to copyright."); F.E.L. Publications, Ltd. v. Catholic Bishop of Chicago, 214 U.S.P.Q. 409, 413 n.9 (7th Cir. 1982) ("[I]t is copyright misuse to exact a fee for the use of a musical work which is already in the public domain"); United Telephone Company v. Johnson Publishing Co., 855 F.2d 604 (8th Cir. 1988); Broadcast Music, Inc. v. Moor-Law, Inc., 691 F.2d 490 (3rd Cir. 1982); Supermarket of Homes, Inc. v. San Fernando Valley Board of Realtors, 786 F.2d 1400 (9th Cir. 1986); BellSouth Advertising & Publishing Corp. v. Donnelley Information Publishing Co., Inc., 719 F. Supp. 1551 (S.D. Fla. 1988), rev'd on other grounds, 999 F.2d 1436 (11th Cir. 1993).
73. One district court case in 1949, M. Witmark & Sons v. Jensen, 80 F. Supp. 843 (D. Minn. 1948), appeal dismissed, 177 F.2d 515 (8th Cir. 1949), had previously upheld a copyright misuse defense and also found an antitrust violation in a situation involving the blanket-license practices for musical compositions of the American Society of Composers, Authors and Publishers (ASCAP).
74. 911 F.2d 970 (4th Cir. 1990).
75. Id. at 971.
76. Id.
77. Id.
78. Id.
79. Licensee agrees during the term of this Agreement and for one (1) year after the termination of this Agreement, that it will not write, develop, produce or sell or assist others in the writing, developing, producing or selling computer assisted die making software, directly or indirectly without Lasercomb's prior written consent. Any such activity undertaken without Lasercomb's written consent shall nullify any warranties or agreements of Lasercomb set forth herein. The "term of this Agreement" referred to in these clauses is ninety-nine years.
Id. at 973.
80. Id.
81. 911 F.2d at 978.
82. Id.
83. Although the patent misuse defense has been generally recognized since Morton Salt, it has been much less certain whether an analogous copyright misuse defense exists ¼ . We are of the view, however, that since copyright and patent law serve parallel public interests, a "misuse" defense should apply to infringement actions brought to vindicate either right. As discussed above, the similarity of the policies underlying patent and copyright is great and historically has been consistently recognized. Both patent law and copyright law seek to increase the store of human knowledge and arts by rewarding inventors and authors with the exclusive rights to their works for a limited time. At the same time, the granted monopoly power does not extend to property not covered by the patent or copyright ¼ . Thus, we are persuaded that the rationale of Morton Salt in establishing the misuse defense applies to copyrights.
Id. at 976-77.
84. [A]gain analogizing to patent misuse, the defense of copyright misuse is available even if the defendants themselves have not been injured by the misuse. In Morton Salt, the defendant was not a party to the license requirement that only Morton-produced salt tablets be used with Morton's salt-depositing machine. Nevertheless, suit against defendant for infringement of Morton's patent was barred on public policy grounds.
Id. at 979.
85. So while it is true that the attempted use of a copyright to violate antitrust law probably would give rise to a misuse of copyright defense, the converse is not necessarily true-a misuse need not be a violation of antitrust law in order to comprise an equitable defense to an infringement action. The question is not whether the copyright is being used in a manner violative of antitrust law (such as whether the licensing agreement is "reasonable"), but whether the copyright is being used in a manner violative of the public policy embodied in the grant of a copyright.
Id. at 978.
86. The 4th, 5th, and 9th Circuits have explicitly recognized the doctrine of copyright misuse, while the 1st and Federal Circuits have cited Lasercomb with approval but have not applied the doctrine. DSC Communications Corp. v. DGI Technologies, Inc., 81 F.3d 597 (5th Cir. 1996); Triad Systems Corp. v. Southeastern Exp. Co., 64 F.3d 1330 (9th Cir. 1995); Data General Corp. v. Grumman Systems Support Corp., 36 F.3d 1147 (1st Cir. 1994); Atari Games Corp. v. Nintendo of America Inc., 975 F.2d 832 (Fed. Cir. 1992).
In the 2nd, 3rd, 6th, 7th, 8th, 10th, 11th, and DC Circuits the existence of the doctrine is an open question (either the issue has not been raised since Lasercomb or the courts have not had to rule on the issue). The 3rd, 7th, 8th, and 11th Circuits, however, have previously indicated approval of the doctrine. See supra note 72.
87. See supra notes 63 and 85; see also Timothy H. Fine, Misuse and Antitrust Defenses to Copyright Infringement Actions, 17 HASTINGS L.J. 315 (1965); Richard Stitt, Copyright Self-help Protection as Copyright Misuse: Finally, the Other Shoe Drops, 57 UMKC L. REV. 899 (1989); Julie E. Cohen, Reverse Engineering And The Rise Of Electronic Vigilantism: Intellectual Property Implications Of "Lock-Out" Programs; 68 S. CAL. L. REV. 1091 (1995); David Scher, Note, The Viability of the Copyright Misuse Defense, 20 FORDHAM URB. L.J. 89 (1992).
88. Lasercomb, 911 F.2d at 970.
89. See supra note 63.
90. See 15 U.S.C. §§ 12-27 (1997).
91. See 15 U.S.C. §§ 1-7 (1997).
92. "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal." 15 U.S.C. § 1 (1997); "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony ¼ ." 15 U.S.C. § 2 (1997);
It shall be unlawful for any person engaged in commerce ¼ to lease or make a sale or contract for sale of goods, ¼ or fix a price charged therefor, ¼ on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, ¼ or other commodities of a competitor or competitors of the lessor or seller, where the effect ¼ may be to substantially lessen competition or tend to create a monopoly in any line of commerce.
15 U.S.C. § 14 (1997).
93. For a more detailed discussion of antitrust law doctrine, see William M. Landes & Richard A. Posner, Market Power In Antitrust Cases, 94 HARV. L. REV. 937 (1981).
94. While five circuits have indicated approval of the copyright misuse doctrine and it is an open issue in the other circuits, the question remains whether or not the copyright misuse defense is considered to be independent of an antitrust analysis. The 1st, 4th, 5th, 9th, and Federal Circuits appear to agree with the Lasercomb and Morton Salt proposition that misuse is independent of antitrust law, while the 7th Circuit appears to favor requiring an antitrust approach to misuse. See supra note 86 and Reed-Union Corp. v. Turtle Wax, Inc., 77 F.3d 909 (7th Cir. 1996).
95. See supra note 66.
96. The Act is a compromise between the Senate and the House over the necessity for and content of reform of the misuse doctrine. A Senate-passed bill would have provided that no patent owner would be deemed guilty of misuse 'by reason of his or her licensing practices or actions or inactions relating to his or her patent, unless such practices or actions or inactions, in view of the circumstances in which such practices or actions or inactions are employed, violate the antitrust laws.'
5 CHISUM § 19.04(1)(f) at 19-294 (citing S. Rep. 100-492, 100th Cong., 2d Sess. (Aug. 25, 1988)).
97. For additional discussion on the Chicago School of Economics, see Toshiko Takenaka, Extending The New Patent Misuse Limitation To Copyright: Lasercomb America, Inc. v. Reynolds, 5 SOFTWARE L.J. 739, 746-48 (1992); Kobak, supra note 54, at 27-28.
98. See USM Corp. v. SPS Technologies, Inc., 694 F.2d 505, 511-12 (7th Cir. 1982), where Judge Posner argued:
The [patent misuse] doctrine arose before there was any significant body of federal antitrust law, and reached maturity long before that law ¼ attained its present broad scope ¼ . [T]here is increasing convergence of patent-misuse analysis with standard antitrust analysis ¼ . One still finds plenty of statements in judicial opinions that less evidence of anticompetitive effect is required in a misuse case than in an antitrust case ¼ . But apart from the conventional applications of the doctrine we have found no cases where standards different from those of antitrust law were actually applied to yield different results ¼ . If misuse claims are not tested by conventional antitrust principles, by what principles shall they be tested? Our law is not rich in alternative concepts of monopolistic abuse; and it is rather late in the day to try to develop one without in the process subjecting the rights of patent holders to debilitating uncertainty.
See also infra note 168.
99. See Takenaka, supra note 97; Tony Paredes, Copyright Misuse And Tying: Will Courts Stop Misusing Misuse?, 9 HIGH TECH. L.J. 271 (1994); Roger Arar, Note, Redefining Copyright Misuse, 81 COLUM. L. REV. 1291, 1311 (1981); Byron A. Bilicki, Standard Antitrust Analysis and the Doctrine of Patent Misuse: A Unification Under the Rule of Reason, 46 U. PITT. L. REV. 209 (1984); J. Dianne Brinson, Patent Misuse: Time for a Change, 16 RUTGERS COMPUTER & TECH. L.J. 357 (1990); Scott A. Miskimon, Divorcing Public Policy From Economic Reality, 69 N.C. L. REV. 1672 (1991); Philip Abromats, Comment, Copyright Misuse and Anticompetitive Software Licensing Restrictions: Lasercomb America, Inc. v. Reynolds, 52 U. PITT. L. REV. 629 (1991).
100. See Paredes, supra note 99, at 275; Donald F. Turner, Basic Principles in Formulating Antitrust and Misuse Constraints on the Exploitation of Intellectual Property Rights, 53 ANTITRUST L.J. 485, 485 (1984).
101. See Paredes, supra note 99, at 291.
102. See Ramsey Hanna, Note, Misusing Antitrust: The Search For Functional Copyright Misuse Standards, 46 STAN. L. REV. 401, 419-21 (1994) (while antitrust and intellectual property laws both have the ultimate objective of enhancing public welfare, they reach this objective through different intermediate goals which lead to different conclusions as to what practices to allow); Scher, supra note 87, at 98.
103. See Hanna, supra note 102, at 435-44 ("[T]he Supreme Court's current interpretation of antitrust law would hold harmless copyright holders engaging in a broad range of practices aimed at stifling product-based competition," particularly certain types of predatory pricing and non-pricing techniques in the software industry); Note, Clarifying The Copyright Misuse Defense: The Role Of Antitrust Standards And First Amendment Values, 104 HARV. L. REV. 1289 (1991); see also discussion in Part IV.A.3. infra.
104. See Hanna, supra note 102, at 431-32 ("[A]ntitrust analysis is particularly inadequate at measuring economic power in innovative dynamic industries, due to the difficulty of defining markets in industries with differentiated but highly substitutable goods."); Stephen J. Davidson & Nicole A. Engisch, A Survey Of The Law Of Copyright Misuse And Fraud On The Copyright Office: Legitimate Restraints On Copyright Owners Or Escape Routes For Copyright Infringers?, 448 PLI/PAT 489 (1996) (defining the relevant market for an antitrust analysis of most copyrighted works may be impossible, and the law of antitrust doesn't produce certain results because it varies by circuit and over time).
105. See Paredes, supra note 99, at 298, 309-15 ("[Software creators] are notorious for tying hardware, maintenance, and servicing to their software"). But see Thomas M. Jorde and David J. Teece, Rule Of Reason Analysis Of Horizontal Arrangements: Agreements Designed To Advance Innovation And Commercialize Technology, 61 ANTITRUST L.J. 579 (1993) (arguing that horizontal arrangements can be pro-competitive and a legitimate business strategy).
106. See discussion in Part IV.A.3. infra.
107. See Paredes, supra note 99, at 309-15; Kobak, supra note 54, at 25-32.
108. [T]he fixed sum [argument] is ¼ that a firm with market power may be able to gain its profit all from its own market, all from another, or from any combination thereof, but the total amount of restriction that the monopolist will profitably be able to impose is fixed regardless of the practice that is used.
Louis Kaplow, Extension Of Monopoly Power Through Leverage, 85 COLUM. L. REV. 515, 517-18 (1985).
109. See Kobak, supra note 54, at 28-30.
110. See generally Mark A. Lemley, Antitrust and the Internet Standardization Problem, 28 CONN. L. REV. 1041 (1996); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be A Concern Of Antitrust Policy?, 9 HARV. J.L. & TECH. 283 (1996); Thomas A. Piraino, Jr., The Antitrust Analysis Of Network Joint Ventures, 47 Hastings L.J. 5 (1995); Kenneth W. Dam, Some Economic Considerations In The Intellectual Property Protection Of Software, 24 J. LEGAL STUD. 321 (1995).
111. Id.
112. Commentators at the Berkeley School of Law and Economics have pioneered much of this work. See Michael A. Cusumano, Strategic Maneuvering And Mass Market Dynamics: The Triumph Of VHS Over Beta (Consortium On Competitiveness And Cooperation, Haas School of Business, U.C. Berkeley Working Paper No. 90-95, 1990); Joseph Farrell, Standardization and Intellectual Property, 30 JURIMETRICS J. 35, 37 (1989); Peter S. Menell, Tailoring Legal Protection for Computer Software, 39 Stan. L. Rev. 1329 (1987); PAMELA SAMUELSON ET AL., A Manifesto Concerning the Legal Protection of Computer Programs, 94 COLUM. L. REV. 2308 (1994).
113. See discussion in Part V.A. infra.
114. Different grants for different classes of works are not unusual. See supra text accompanying note 34.
115. 17 U.S.C. § 101 (1997) (added definition of "computer program"); 17 U.S.C. § 117 (1997) (added section entitled "Limitations on exclusive rights: computer programs"); see also supra note 30.
116. Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240 (3rd Cir. 1983).
117. 101 U.S. 99 (1879).
118. Apple, 714 F.2d at 1250-51.
119. Id.
120. See Whelan Associates v. Jaslow Dental Laboratory, Inc., 797 F.2d 1222 (3rd Cir. 1986), cert denied, 479 U.S. 1031 (1987); Computer Associates International, Inc. v. Altai, Inc., 982 F.2d 693 (2nd Cir. 1992).
121. Lotus Development Corp. v. Borland International, Inc., 49 F.3d 807 (1st Cir. 1995), aff'd by an equally divided Court, 116 S. Ct. 804 (1996).
122. Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435 (9th Cir. 1994), cert denied, 115 S. Ct. 1176 (1995).
123. MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993).
124. See Sega Enterprises v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992); Atari Games Corp. v. Nintendo of America, Inc., 975 F.2d 832 (Fed. Cir. 1992); see also infra Part V.B.
125. ProCD v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996).
126. Computer Assoc., 982 F.2d at 712 (2nd Cir. 1992).
127. Marshall Leaffer, Engineering Competitive Policy and Copyright Misuse, 19 U. DAYTON L. REV. 1087, 1090 (1994) (arguing that computer software differs significantly from other types of literary works); Paredes, supra note 99, at 309-15 (1994) (noting that research and development costs are higher for software than for other types of copyrighted works).
128. See Samuelson, supra note 112, at 2315-19; Hanna, supra note 102, at 409-10 ("[U]nlike other types of copyrightable subject matter, software serves a functional purpose" and superior functionality gives its producer a competitive edge); Leaffer, supra note 127; Note, Clarifying The Copyright Misuse Defense: The Role Of Antitrust Standards And First Amendment Values, 104 HARV. L. REV. 1289, 1299 (1991) ("Computer software, however, differs from other works of authorship in ways that make it more like a patented invention. What users value most in a computer program is rarely the expression contained in its coded instructions; rather, it is the utility of the program in accomplishing some purpose."); see also qad. inc. v. ALN Associates, Inc., 770 F. Supp. 1261, 1265 (N.D. Ill. 1991).
129. See infra Part IV.B.3.
130. Computer software may be characterized as a "cumulative technology," an attribute it shares with other rapidly developing areas of technology. In "cumulative technology" industries, future advances build incrementally on previous recent developments ¼ . If protection is given too broad a scope, it may retard the advancement of innovation in an industry (like the software industry) in which innovation proceeds through sequential development. Many economists would agree that getting technology to the market sooner will raise consumer welfare and encourage further development of new generations of products, particularly in industries with cumulative technological characteristics.
Leaffer, supra note 127, at 1095.
131. See Samuelson, supra note 112.
132. Many observers point to Microsoft as an example of this network economic phenomenon in the software industry. Microsoft received a dominant position in the personal computer operating system market with its MS-DOS® product (this initial dominant position arose from the endorsement by the then-dominant hardware manufacturer IBM, who did not at the time recognize the increasing importance of the software industry). Microsoft then used that near-monopoly in MS-DOS to leverage a near-monopoly in the Windows(tm) operating system market, which in turn provided a near-monopoly in the productivity applications market (such as Office, Word, Excel). Now, Microsoft is attempting to leverage its near-monopoly into dominance in the network and Internet arenas. A commentator sums up the industry's mix of admiration, jealousy, and disdain of Microsoft well:
Microsoft is inevitable. It will dip into endlessly deep pockets to buy anything, or anyone, to feed its infinite appetites. It will out-work, under-price, and out-last any competition. It will own any market it chooses, and punish customers who buy from the competition. Whether you are a competitor or a customer, you will be assimilated. Resistance is futile.
Dan Gillmor, Microsoft Empire Lacks Jedi Adept At Striking Back, SAN JOSE MERCURY NEWS, Mar 24, 1997 at E1.
133. See Hanna, supra note 102, at 409-10, 427-32 ("Rivals may not be able to effectively compete by introducing functionally equivalent products if they lack access to necessary productive resources or expertise, or if they fear offending a dominant software producer's copyrights." In particular, if copyright law prevents a rival from reverse engineering software, significant market power can result.)
134. Id. at 415-16 ("Computer applications and operating systems, while considered 'literary works' for purposes of copyright, resemble patented inventions in that consumers value such computer programs for their functional utility, not their artistic expression."); P. Samuelson, CONTU Revisited: The Case Against Copyright Protection for Computer Programs in Machine-Readable Form, 1984 DUKE L.J. 663 (1984); Paul Goldstein, Infringement of Copyright in Computer Programs, 47 U. PITT. L. REV. 1119, 1128 (1986) (arguing that misuse should apply in the software context where the protection is for many practical purposes the same as patent law); Peter S. Menell, An Analysis of the Scope of Copyright Protection for Application Programs, 41 STAN. L. REV. 1045, 1102 (1989) (noting that courts should not allow owners of copyrights in user interfaces from misusing them).
135. The Court has historically treated tie-ins involving intellectual property more harshly than ties involving other goods or services.¼ [T]he Court presumed that patents and copyrights provided the seller with sufficient economic power over the tying product to foreclose competition in the tied market.¼ With regard to copyrights, this presumption of anticompetitive effects was not justified.
Paredes, supra note 99, at 302-03; "Since the requirements for a patent are more demanding than for copyrights, patents confer more market power than copyrights." Id. at 305; "[B]ased on the reduced scope of exclusionary power, at least in theory, of many copyrights, an inquiry into market power would seem even more germane for copyrights than for patents." Kobak, supra note 54, at 34 .
136. As many commentators have previously described, computer software is normally developed in a high-level computer language such as C++, Lisp, or Java. These languages are readable to a trained developer, and the resulting source code allows significant expression in such things as choices of names for variables and functions, or the specific manner in which a result is achieved. Generally, this source code is then compiled into object code, which is composed of 1s and 0s, and which can be executed by a computer but which does not convey useful information to a human. If only the object code is distributed by the software copyright owner, which is the normal practice, then a user will never be able to see the original source code that produced the object code. For more detail, see cases cited supra note 124.
137. It is sometimes possible to engage in a form of reverse engineering called decompilation whereby the goal is to produce the object code from the original source code. This is typically time-consuming and very difficult, and it is not possible to retrieve all of the original expression. Since reverse engineering of software will typically involve creating at least interim copies of the object code or code that is derived from the object code, this reverse engineering is arguably an act of copyright infringement. See Leaffer, supra note 127, at 1090-91 ("To develop either competitive or compatible products, interim copying into an intelligible medium may therefore be necessary to study a program's sequence and logic ¼ . Prohibition of reverse engineering through decompilation would erect a serious obstacle to developers who legitimately desire to create compatible software, which many would argue is essential to innovation in the computer industry."); see also infra Part V.B.
138. "[T]he unique attributes of computer software [allows] ¼ an author [to acquire] ¼ patent-like protection by putting an idea, process, or method of operation in an unintelligible format and asserting copyright infringement against those who try to understand that idea." Leaffer, supra note 127, at 1094.
Courts have also recently made broad statements, albeit at least partially in dicta.
As discussed above, the fact that computer programs are distributed for public use in object code form often precludes public access to the ideas and functional concepts contained in those programs, and thus confers on the copyright owner a de facto monopoly over those ideas and functional concepts. That result defeats the fundamental purpose of the Copyright Act-to encourage the production of original works by protecting the expressive elements of those works while leaving the ideas, facts, and functional concepts in the public domain for others to build on.
Sega, 977 F.2d at 1527;
An author cannot acquire patent-like protection by putting an idea, process, or method of operation in an unintelligible format and asserting copyright infringement against those who try to understand that idea, process, or method of operation. [Citations omitted.] The Copyright Act permits an individual in rightful possession of a copy of a work to undertake necessary efforts to understand the work's ideas, processes, and methods of operation.
Atari, 975 F.2d 842; see also David A. Rice, Public Goods, Private Contract and Public Policy: Federal Preemption of Software License Prohibitions Against Reverse Engineering, 53 U. PITT. L. REV. 543, 611 (1992) (noting that reverse engineering clauses in software licenses should be constitutionally preempted by copyright law).
139. In Vault Corporation v. Quaid Software Ltd., 655 F. Supp. 750 (E.D. La. 1987), aff'd Vault Corporation v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988), a case criticized by some commentators, the court preempted a software license, which disallowed reverse engineering of the software, in part because the contractual provision would prevent access to unprotectable trade secrets and thus was violative of patent law.
Vault's cause of action based on the Louisiana trade secrets act is not preempted by the federal Copyright act, on its face. See Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 94 S. Ct. 1879, 40 L. Ed. 2d 315 (1974). State trade secret protection is much less effective than copyright and patent protection, and so is not preempted by federal law. One of the major weaknesses is the inability of trade secret laws to protect the owner against discovery of the trade secret by independent invention, accidental disclosure, or reverse engineering.
Id. at 475-76, 94 S. Ct. at 1883. "The Louisiana Software License Enforcement Act ¼ has gone beyond trade secrets law by outlawing reverse engineering." Vault, 655 F. Supp. at 763; see also Foresight Resources Corp. v. Pfortmiller, 719 F. Supp. 1006 (D. Kan. 1989) (finding that trade secret protection achieved through license restriction on decompiling program code was preempted, because it granted greater rights than Copyright Act in precluding exercise of section 117 rights); Rice, supra note 138, at 611-13 (arguing that reverse engineering clauses in software licenses should be preempted by patent law because they unduly protect trade secrets).
140. See supra note 74.
141. While the introduction of the IBM PC in the early 1980s is sometimes considered to be the beginning of the personal computer industry, the Apple II computer, as well as other computers with more limited uses such as the Altair and the Radio Shack TRS-80, were available in the late 1970s.
142. Server Market Is The Sweet Spot, ASIA COMPUTER WEEKLY, July 29, 1996.
143. Mark S. Basham, Computer Software Stocks: Core Segment Holdings In A Growth Stock Portfolio, EMERGING & SPECIAL SITUATIONS 4, March 15, 1991.
144. Jim Mitchell, Software Battle Entering Round 2: Copyright Trouble Looms Again, THE DALLAS MORNING NEWS, May 25, 1985 at G1.
145. Margaret Ryan, Midyear Forecast/ Annual Report, ELECTRONIC ENGINEERING TIMES