1997 James A.D. White.

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, July 1, 1996 at 25.

146. Louis Connor, Can You Trust Web Transactions?; Digital Signatures And Other Security Measures Can't Prevent Crime-But They Can Deter It, COMMUNICATIONS WEEK, Jan 15, 1996 at 41.

147. Lasercomb, 911 F.2d 970 (4th Cir. 1990).

148. See discussion in Part II.B.2. supra.

149. See supra note 137.

150. While reverse engineering cases are the most visible software fair use cases, other courts have applied fair use principles in other contexts. See Mitel, Inc. v. Iqtel, Inc., 896 F. Supp. 1050 (D. Colo. 1995) (finding that even if telephone call controllers' software program command codes were copyrightable, competitor's use of same command codes was "fair use" despite its commercial nature because manufacturer controlled between 75% and 90% of call controller market and competitor needed to copy the codes in order to be competitive); Triad Systems Corp. v. Southeastern Express Co., 31 U.S.P.Q.2d 1239 (N.D. Cal. 1994) (finding that if service organization can show that it needs to make backup copies of plaintiff's copyrighted software while reformatting customers' computer hard drives, it is likely to prevail on copyright infringement claim as a fair use, but summary judgment is not appropriate when a factual dispute over the necessity exists. While the court later found at 36 U.S.P.Q.2d 1028 that it was not fair use to load the plaintiff's diagnostic software into RAM while servicing the computer, the court did not appear to find a copyright violation with regard to the backup copies). See also Nimmer, supra note 53, at 23 (arguing that it should be fair use for an independent service organization to make temporary copies of diagnostic software in RAM while performing repair or maintenance of customers' computers).

151. See supra note 124.

152. Id.

153. Sega, 977 F.2d at 1514.

154. Id. at 1514-16.

155. Id. at 1517.

156. "We conclude that where disassembly is the only way to gain access to the ideas and functional elements embodied in a copyrighted computer program and where there is a legitimate reason for seeking such access, disassembly is a fair use of the copyrighted work, as a matter of law." Id. at 1527-28. In addition, the court stated that the 4-letter code was undeserving of protection due to its functionality and its shortness. Id. at 1524-25.

157. It would appear that the court was limited by the pleadings of the parties-while copyright misuse was argued at the district court level, it did not appear to be an issue on appeal. 785 F. Supp. 1392 (N.D. Cal. 1992). In the Atari case, the Federal Circuit did consider the copyright misuse defense, but the willfully deceptive practices of the defendant in that case provided the plaintiff with a stronger equitable case. In the recent Bateman v. Mnemonics case involving reverse engineering of software, the 11th Circuit raised the possibility of misuse sua sponte, but concluded that infringement had not occurred due to the necessity to allow software compatibility without making an express finding on the legal doctrine used. 79 F.3d 1532, 1547 (11th Cir. 1996) and infra note 164.

158. Section 107 of the Copyright Act lists factors to be considered in determining whether a particular use is a fair one. Those factors 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. See 17 U.S.C. 107 (1997). The statutory factors are not exclusive.

The Sega court stretched the limits of reason in concluding that the first, third, and fourth factors all supported Accolade. The court argued that while Accolade copied the Sega code for the commercial purpose of creating a competing product, it was "a legitimate, essentially non-exploitative purpose, and that the commercial aspect of its use can best be described as of minimal significance." Sega, 977 F.2d at 1522-23. In addition, despite the statement by the court that if "the copying resulted in the latter effect [diminishing potential sales, interfering with marketability, or usurping the market], all other considerations might be irrelevant," the court concluded that there was no evidence of harm to Sega since consumers might buy Sega's games as well as Accolade's (even if they are of the same genre, like a football game). Id. at 1523.

As the court itself admitted, "[w]e are not unaware of the fact that to those used to considering copyright issues in more traditional contexts, our result may seem incongruous at first blush. To oversimplify, the record establishes that Accolade, a commercial competitor of Sega, engaged in wholesale copying of Sega's copyrighted code as a preliminary step in the development of a competing product." Id. at 1527.

159. [W]e are free to consider the public benefit resulting from a particular use notwithstanding the fact that the alleged infringer may gain commercially ¼ . Public benefit need not be direct or tangible, but may arise because the challenged use serves a public interest. In the case before us, Accolade's identification of the functional requirements for Genesis compatibility has led to an increase in the number of independently designed video game programs offered for use with the Genesis console. It is precisely this growth in creative expression, based on the dissemination of other creative works and the unprotected ideas contained in those works, that the Copyright Act was intended to promote.

Id. at 1523.

160. In light of the public policies underlying the Act, we conclude that, when the person seeking the understanding has a legitimate reason for doing so and when no other means of access to the unprotected elements exists, such disassembly is as a matter of law a fair use of the copyrighted work.

Id. at 1514. After Sega and Atari, it is now a commonly-held belief that reverse engineering of software is not copyright infringement if the reverse engineering is necessary to discover underlying software interfaces in the code that are required to build competing or compatible products. Thus, a right to prevent what would otherwise be copyright infringement has been withdrawn from software copyright owners as a class. See Leaffer, supra note 127, at 1087 ("Sega Enterprises, Ltd. v. Accolade, Inc. ¼ held that reverse engineering for purposes of developing non-infringing competing or compatible software is a fair use of copyrighted software").

161. Early in its opinion, the Sega court stated that "consideration of the unique nature of computer object code thus is more appropriate as part of the case-by-case, equitable 'fair use' analysis authorized by section 107 of the Act." Sega, 977 F.2d at 1520.

162. "[A]n attempt to monopolize the market by making it impossible for others to compete runs counter to the statutory purpose of promoting creative expression and cannot constitute a strong equitable basis for resisting the invocation of the fair use doctrine." Id. at 1523-24.

Here, both parties agree that there is a misuse of a trademark, both agree that there is unlawful mislabeling, and both agree that confusion may result. The issue, here, is-which party is primarily responsible? Which is the wrongdoer-the violator? ¼ The facts are relatively straightforward and we have little difficulty answering the question. ¼ [W]e hold that Sega is primarily responsible for any resultant confusion. ¼ Sega seeks once again to take advantage of its trademark to exclude its competitors from the market. The use of a mark for such purpose is inconsistent with the Lanham Act.

Id. at 1528-30. "Sega argues that ¼ section 117 of the Act ¼ constitutes a legislative determination that any copying of a computer program other than that authorized by section 117 cannot be considered a fair use of that program under section 107. That argument verges on the frivolous." Id. at 1520-21.

163. [N]ot all copyrighted works are entitled to the same level of protection. ¼ Computer programs pose unique problems for the application of the "idea/expression distinction" that determines the extent of copyright protection ¼ . Because of the hybrid nature of computer programs, there is no settled standard for identifying what is protected expression and what is unprotected idea in a case involving the alleged infringement of a copyright in computer software ¼ computer programs are also unique among copyrighted works in the form in which they are distributed for public use¼ . Because Sega's video game programs contain unprotected aspects that cannot be examined without copying, we afford them a lower degree of protection than more traditional literary works.

Id. at 1524-26.

164. 79 F.3d 1532, 1547 (11th Cir. 1996).

165. [A]ll legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103, ¼ are governed exclusively by this title. ¼ [N]o person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.

17 U.S.C. 301(a) (1997).

166. 86 F.3d 1447 (7th Cir. 1996).

167. While the telephone listings were not copyrightable, they were within the "subject matter" of copyright, and thus subject to 301 preemption.

168. The court spent several pages reviewing economic theory, explaining why the restrictions in the shrink-wrap contract allowed price discrimination ("[t]o make price discrimination work, however, the seller must be able to control arbitrage") which was beneficial to consumers. ProCD, 86 F.3d at 1449-52. The court's statements indicating that "[c]ompetition among vendors, not judicial revision of a package's contents, is how consumers are protected in a market economy" and that "[t]erms and conditions offered by contract reflect private ordering, essential to the efficient functioning of markets" demonstrate the 7th Circuit's laissez-faire approach to intellectual property. Id. at 1453, 1455. One assumes that even the Seventh Circuit would still uphold traditional restrictions on contractual extensions of intellectual property rights, despite being "consensual" private orderings, such as the disallowance of required royalty payments that extend beyond the term of the intellectual property right. See Brulotte v. Thys Co., 379 U.S. 29 (1964) (holding that a patent owner cannot require royalty payments beyond the end of the patent term); F.E.L. Publications, Ltd. v. Catholic Bishop of Chicago, 214 U.S.P.Q. 409, 419 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." (citing Mercoid Corp. v. Mid-Continent Investment Co., 320 U.S. 661, 60 U.S.P.Q. 21 (1994))).

169. Contracts that are consistent with the copyright law's goals of self-protection should be upheld. Rightful owners should be able to define the limits of permissible copying or modification of their works. ¼ It is only when a contract erects a barrier on access to information that under copyright law should be accessible that 301 operates to protect copyright law from individually crafted evasions of that law. ¼ Plaintiff's license agreement is an attempt to avoid the confines of copyright law and of Feist, 499 U.S. 340, 111 S. Ct. 1282, 113 L. Ed. 2d 358. Its prohibition on the distribution of public information cannot be squared with the purposes of copyright law or with plaintiff's own compilation of data ¼ . Plaintiff cannot use a standard form contract to make an end run around copyright law. Its contract claim is preempted by 301.

908 F. Supp. 640, 658-59 (W.D. Wis. 1996); see also Rice, supra note 138, at 658-59 (explaining that the far-reaching public policy Section 301 implements clearly requires preemption of contract-based protection of expression where the effect is to secure rights in that expression which are greater than, equal to, or supplemental of those which section 106 secures); Robert P. Merges, Intellectual Property and the Costs of Commercial Exchange: A Review Essay, 93 MICH. L. REV. 1570, 1611 (1995) (stating that reverse engineering clauses in standard form software contracts, such as shrink-wrap licenses, should be preempted by patent law because they unduly protect trade secrets and act as a form of private legislation); Christopher Celentino et al., Vault Corp. v. Quaid Software Ltd.: Invalidating Shrink-Wrap Licenses?, 2 J.L. & TECH. 151, 162 (1987) (noting that Vault opinion has merit if it means that contracts providing rights greater than or equivalent to those under copyright law are preempted).

170. See supra note 139.

171. LA. REV. STAT. ANN. 51:1961 (West 1987).

172. 1964(2) of the SLEA prohibits copying "for any purpose." This section is in direct violation of the Copyright Act which permits the making of archival copies from copies of computer software and permits copying which is "an essential step in the utilization of the computer program." 17 U.S.C. 117. The SLEA has granted greater protection than the Copyright Act.

In addition, 1964(3) prohibits "translating, reverse engineering, decompiling, disassembling, and/or creating derivative works based on the computer software." The Copyright Act grants the owner of the copyright the right to prepare derivative works based upon the copyrighted work. 17 U.S.C. 106(2). The right to prepare derivative works is an exclusive right under the federal Copyright Act and the SLEA cannot provide "an equivalent right." 17 U.S.C. 301(a). ...

¼ .

... Congress has taken action to afford copyright protection to computer software. In this situation the Sears-Compco preemption doctrine, as well as 301 of the Copyright Act, are both applicable.

The Louisiana Software License Enforcement Act creates a perpetual bar against copying any computer program licensed pursuant to its provisions. The federal Copyright Act, on the other hand, grants protection against unauthorized copying for the life of the author plus fifty years. 17 U.S.C. 302(a). The Louisiana act also places no restrictions on the programs which may be protected under its provisions. However, under Section 102 of the federal Copyright Act, only "original works of authorship" can be protected. The Louisiana Software Act allows any computer program, original or not, to be protected from copying.

Since the Louisiana Software Act has "touch[ed] upon the area" of the federal patent and copyright law, the provisions of the PROLOK licensing agreement are unenforceable to the extent they are contrary to the policies of the federal Copyright Act. Fantastic Fakes, Inc. v. Pickwick International, Inc., 661 F.2d at 481-83.

Vault, 655 F. Supp. at 762-63 (emphasis added), aff'd, Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988).

173. Vault, 655 F. Supp. at 762-63.

174. Id.

175. Id.

176. Vault, 847 F.2d at 270.

177. Section 102(b) states that copyright protection does not extend to any idea, procedure, process, system, or method of operation. See supra note 25.

178. Matthew Bender & Co. v. West Pub. Co., No. 94 Civ. 0589, 1997 WL 266972 (S.D.N.Y. May 19, 1997) (holding that West may not attempt to use copyright in its pagination to prevent its Hyperlaw competitor from entering the market); United States v. Thomson Corp., 949 F. Supp. 907, 928 (D.D.C. 1996) (upholding the requirement that West license its electronic pagination service because it is unlikely that the pagination is copyrightable after Feist, and even if it is copyrightable, the enforcement of the right "might significantly impede access to the text of court decisions, discourage the publication of secondary law products and hamper competition in the print, CD-ROM, and online research services markets").

179. See supra Part III.A.

180. In a data-centric model of computing, being increasingly embraced as one aspect of object-oriented programming, the data is the focal point and various operations are performed on the data to manipulate it as needed. For example, if office suites had originally been created around this notion, it is likely that a single document type would have been created by the suite. If a user desired to add words to the document, then word-processing functions would be used, and if a user desired to perform calculations or add graphics, then other corresponding functions would be used. Even if these different types of functions were in fact embodied in different application programs (which wouldn't be required), this would be transparent to the user.

181. See supra Part III.B.

182. See Tamburo v. Calvin, No. 94 C 5206, 1995 WL 121539 (N.D. Ill. Mar. 17, 1995) (finding that a software license agreement which required licensees to forgo developing "any product, whether or not it is computer-based, that competes with [the TBS software]" constituted copyright misuse).

183. See supra note 123 and infra Part VI.B.3.

184. Arguably, even authorized users of most software products are actually infringers, because their shrink-wrap licenses rarely allow RAM copies to be made. However, companies have little incentive to charge legitimate customers with copyright infringement, and commentators have pointed out that a strong argument can be made for an implied license in these situations. See Nimmer, supra note 53, at 20-21 (noting that "any sane observer of the copyright scene would say that [loading a legitimate copy of software into computer RAM] has been implicitly licensed and is therefore noninfringing" despite the literal act of reproduction); ProCD, supra note 125, at 648-50 (finding that 17 U.S.C. 117 allows copies of software created as an essential step in the utilization of the computer program in conjunction with a machine, and this includes both copies made in RAM and copies on the computer hard disk when made by a legitimate user).

185. There is a form of client-server computing in which the program is loaded into the RAM of a host computer and executed there, while the results of the execution display on the user's computer as if the user's computer were executing the program (this idea is used by some versions of the network computer or NetPC concept that has recently been popularized in the press, although other versions download an application from a host computer but run it locally). Even in this situation, a RAM copy is created somewhere, and the mere act of displaying results on the user's computer may create an infringing copy in a frame buffer or video RAM on the user's computer.

While outside the scope of this paper, other issues arise with respect to Web browsers. Any time that a web page is accessed, a copy of the page is made in the RAM on the local computer. Increasingly, copies of images, sound recordings, and even executable applets are included in this process. It is only a matter of time before someone attempts to treat a browser-based copy as an infringing copy under copyright law to restrict some type of activity.

186. 81 F.3d 597 (5th Cir. 1996).

187. Id. at 598-99.

188. Id. at 599.

189. Id.

190. DSC seems to be attempting to use its copyright to obtain a patent-like monopoly over unpatented microprocessor cards. ¼ In order to ensure that its card is compatible, a competitor such as DGI must test the card on a DSC phone switch. ¼ If DSC is allowed to prevent such copying, then it can prevent anyone from developing a competing microprocessor card, even though it has not patented the card. The defense of copyright misuse "forbids the use of the copyright to secure an exclusive right or limited monopoly not granted by the Copyright Office," including a limited monopoly over microprocessor cards. ¼ Of course, we do not hold that DGI will successfully avail itself of the copyright misuse defense. After a trial on the merits, the district court may well decide that DSC did not commit copyright misuse, or that DGI cannot avail itself of the defense because it has "unclean hands."

Id. at 601.

191. See Nimmer, supra note 53, at n.108 (arguing that the plaintiff's attempt in MAI to prevent defendant from committing acts of software reproduction that were essential for the proper competitive purpose of performing hardware diagnostics is analogous to the plaintiff's attempt in DSC to prevent the defendant from committing acts of software reproduction that were essential for the proper competitive purpose of developing a competing microprocessor card); Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451 (1992) (finding that a genuine issue of material fact existed on whether micrographic equipment manufacturer unlawfully monopolized and attempted to monopolize sale of service and parts for machines, when manufacturer's policies limited availability to independent service organizations (ISOs) of replacement parts for its equipment, and made it more difficult for ISOs to compete with the manufacturer in servicing such equipment).

192. 991 F.2d 511 (9th Cir. 1993).

193. Id. at 513.

194. Id. at 518.

195. Peak concedes that in maintaining its customer's computers, it uses MAI operating software "to the extent that the repair and maintenance process necessarily involves turning on the computer to make sure it is functional and thereby running the operating system." It is also uncontroverted that when the computer is turned on the operating system is loaded into the computer's RAM. As part of diagnosing a computer problem at the customer site, the Peak technician runs the computer's operating system software, allowing the technician to view the systems error log, which is part of the operating system, thereby enabling the technician to diagnose the problem. [FN4]

FN4. MAI also alleges that Peak runs its diagnostic software in servicing MAI computers. Since Peak's running of the operating software constitutes copyright violation, it is not necessary for us to directly reach the issue of whether Peak also runs MAI's diagnostic software.


196. Once the temporary RAM copy was created, the use of the copy would not seem to implicate any of the exclusive rights accorded the copyright owner.

197. One commentator argues that not only should such a software copy be considered a necessary copy under section 117 (one created when employing someone to run diagnostic software that is too complicated to be run by oneself), but that "a party who offers both hardware and software should be construed to have conveyed an implicit license to engage in diagnostics ¼ in order to make it function appropriately" and "[r]equiring customers to forego by contract the right that Congress accorded them by statute ¼ constitutes misuse." Id. at 23-25.

198. Several other courts have considered similar situations, and those who have considered a copyright misuse defense have rejected it. See Triad Sys. Corp. v. Southeastern Express Co., 64 F.3d 1330 (9th Cir. 1995); Service & Training, Inc. v. Data Gen. Corp., 963 F.2d 680 (4th Cir. 1992); Advanced Computer Services of Mich., Inc. v. MAI Sys. Corp., 845 F. Supp. 356 (E.D. Va. 1994). But see Data General Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147, 1169-70 (1st Cir. 1994) ("Although DG correctly notes that the misuse in Lasercomb (conditioning a copyright license on a non-competition agreement) is not identical to the misuse alleged in this case (tying access to ADEX to the purchase of DG service and refusing to license ADEX to [third-party maintenance companies]), the reasoning of Lasercomb does not turn on the particular type of anti-competitive behavior alleged"). However, since Grumman had not argued a non-antitrust copyright misuse claim, the court declined to find one). In addition, at least one commentator has criticized these rulings. See Nimmer, supra note 53, at n.98 ("Yet none [of the courts that have considered copyright misuse in connection with a diagnostic computer service case] articulates a satisfactory formulation of what constitutes misuse in order to find the conduct outside its scope").

199. If "writings" can include three-dimensional sculptures, sound recordings, mask works, object code that is unreadable to humans, and buildings, it is difficult to see why it cannot include innovative computer maintenance services. Computer maintenance services are a particularly apropos example because of the creativity needed to diagnose and repair a complex system such as a computer.

200. While there is nothing inherently unique about software that allows it to be licensed to the exclusion of other off-the-shelf consumer products, this licensing phenomenon has not yet widely occurred with other products. Thus, while it is possible that you could agree when you "license" a book in a bookstore that you could read it only once, not allow anyone else to read it and not transfer it to anyone else, there is a strong argument that such a "license" would not be allowed under copyright's "first-sale" doctrine (particularly if the terms of the "license" were not available to you when you made your purchase).

201. Of course, a distinction can be drawn between mass-market form licenses and those negotiated software contracts between two informed parties with relatively equal bargaining power, but these types of negotiated contracts are becoming increasingly rare in the software arena. Moreover, it is possible that some rights are too important to allow a contractual waiver. For example, a standard clause in a form contract that acknowledged and accepted the unconscionability of the contract is unlikely to be enforced.

202. Mass-market form licenses have been referred to in the past as "shrink-wrap" licenses, but this name is quickly losing its meaning in an on-line world where software is distributed electronically (some commentators have used the term "click-on" licenses more recently). The electronic means of contracting does provide some advantages, however. Not only can assent to contract terms be demonstrated more readily (even if they are unconscionable), the lower transaction costs in both locating customers and in providing a variety of products should presumably allow software manufacturers to price-discriminate on the basis of the rights received. While this author is not aware of any such products, it would be possible to pay one price for software that includes the right to resell the software to another after the purchaser is done with it, another price for software that includes the right to reverse engineer it, and still another price for software that allows use only by you on a single computer. To the extent that a licensee has some modicum of choice in the rights received, the inherent unconscionability of mass-market licenses in a world where as a practical matter there are often not substitutes available for the product is lessened.

203. Until the recent decision in the ProCD case by the Seventh Circuit, supra notes 125 and 168, most legal commentators believed that shrink-wrap licenses were unenforceable, particularly if the license could not be read before the sale was completed. See supra notes 169 and 172. Now, at least in the Seventh Circuit, "[c]ompetition among vendors" is the only protection for "consumers ¼ in a market economy." One of the underlying principles of the proposed Article 2B to the Uniform Commercial Code is that mass-market licenses should be broadly enforceable. U.C.C. 2B-308 (Proposed Draft 1996) ("(a) Except as otherwise provided ¼ , a party adopts the terms of a mass market license if, before or within a reasonable time after beginning to use the information pursuant to an agreement, the party signs or otherwise by its behavior manifests assent to a mass market license.").

204. See supra note 31.

205. See supra note 30.

206. See supra Part V.B.

207. See supra Part IV.B.3.

208. See supra Part II.C.

209. While trade secret law does not forbid the discovery of the trade secret by fair and honest means, e.g., independent creation or reverse engineering, patent law operates 'against the world,' forbidding any use of the invention for whatever purpose for a significant length of time ¼ . Where patent law acts as a barrier, trade secret law functions relatively as a sieve. The possibility that an inventor who believes his invention meets the standards of patentability will sit back, rely on trade secret law, and after one year of use forfeit any right to patent protection, 35 U.S.C. 102(b), is remote indeed. ¼ We conclude that the extension of trade secret protection to clearly patentable inventions does not conflict with the patent policy of disclosure.

Kewanee, 416 U.S. at 490-92.

210. Bonito Boats, 489 U.S. at 160-61.

211. Kewanee, supra note 50, at 479.

212. See also Robert P. Merges, Intellectual Property and the Costs of Commercial Exchange: A Review Essay, 93 MICH. L. REV. 1570 (1995).

213. Council Directive 91/250/EEC, 1991 O.J. (L122) 1-2.

214. "The making of a back-up copy by a person having a right to use the computer program may not be prevented by contract insofar as it is necessary for that use." Id. at art. 5, cl. 2.

215. Id. at art. 5, cl. 3.

216. Reverse engineering is allowed if it is indispensable to achieve interoperability with some program (even if not the program reverse engineered), provided that a) the acts are performed by someone having a legitimate copy of the software, b) the information necessary to achieve interoperability has not previously been readily available, and c) the reverse engineering is confined to the parts of the program which are necessary to achieve interoperability.

Id. at art. 6, cl. 1 and art. 9, cl. 1.