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Software Copyright Litigation After Oracle v. Google

· January 9, 2017

Many observers, including me, predicted that the 2014 decision of the U.S. Court of Appeals for the Federal Circuit (“CAFC”) in Oracle America v. Google would provoke a new wave of litigation concerning copyright and interoperability. In particular, we worried that the decision would encourage dominant vendors to bring copyright claims against competitors that replicated interface specifications for the purpose of interoperating with the dominant vendors’ products. We were right.

Sure enough, Oracle America has factored into at least four cases so far. One of these cases settled, one is on appeal, and the other two likely will be appealed in the near future. The latter two cases also involve patent claims, so appeals will be heard by the CAFC. (The CAFC has nearly exclusive appellate jurisdiction over cases with patent claims.) One can assume that the plaintiffs added the patent claims to ensure CAFC jurisdiction.

GDC v. Dolby Laboratories

This is the case that settled. Dolby Laboratories provides advanced motion picture theatre sound systems. GDC Technology develops software and hardware that interoperates with the Dolby systems. Dolby facilitated this interoperability by making its interface specifications available to GDC. It appears that Dolby stopped providing this information after it acquired Doremi, a media server manufacturer. Evidently, this acquisition made GDC a more direct competitor. Emboldened by the CAFC’s Oracle America decision, Dolby demanded that GDC stop using Dolby interface specifications to interoperate with Dolby products. Furthermore, Dolby insisted that GDC cease telling customers that GDC had the right to use this interfaces information to interoperate with Dolby products.

Dolby’s conduct prompted GDC in April 2016 to bring a declaratory judgment action in federal court in California against Dolby Laboratories seeking a declaration that Dolby does not own a copyright in the “protocols and interconnection codes” Dolby developed for digital cinema systems. In the alternative, GDC sought a declaration that fair use permitted it to use the specifications for the purpose of achieving interoperability. The parties settled the dispute in November 2016. According to the joint press release, “as part of the resolution, GDC will dismiss its lawsuit against Dolby, and GDC and Dolby will grant each other licenses that will allow their respective theater management systems to interoperate with the other party’s digital cinema servers.” The other terms of the settlement agreement were not made public.

SAS Institute v. World Programming

This case currently is on appeal to the Fourth Circuit, and has the most complex procedural history. The district court ruled that the input and output formats the defendant copied were not protectable under copyright, but found that the defendant breached license restrictions on reverse engineering. A jury subsequently assessed damages of $26 million, which the court then trebled to $79 million under North Carolina’s unfair trade statute.

SAS, a company based in North Carolina, creates an integrated suite of business software products known as the SAS System. The SAS System allows users to perform a variety of data access, management, analysis, and presentation tasks. The SAS System can run on various kinds of computers ranging from PCs to mainframes. Users can perform tasks on the SAS System by writing programs in the SAS Language. Additionally, SAS developed a version of the SAS System called SAS Learning Edition to help users learn how to program in the SAS Language.

World Programming Limited (“WPL”), a U.K. company, developed World Programming System (“WPS”), which can run SAS Language programs and produce similar outputs. Thus, WPL provides users with a competing platform on which they can run the programs they have written in the SAS Language, thereby avoiding being locked-in to the SAS environment.

To develop WPS, WPL reverse engineered copies of the SAS Learning Edition. However, the license under which WPL obtained SAS Learning Edition prohibited reverse engineering of the software. It appears that WPL’s development activities occurred in the U.K., but it distributed its software in the United States.

SAS sued WPL in the U.K. in 2009 and in the U.S. in 2010. The U.K. case proceeded more quickly. The U.K. High Court requested guidance from the highest court in the European Union, the Court of Justice of the European Union (“CJEU”), on whether software functionality, programming languages, and data formats were protectable under the EU Software Directive. The CJEU ruled in 2012 that these elements were not protectable. On the basis of this ruling, the U.K. court entered final judgment for WPL in 2013.

In April 2014, WPL moved for summary judgment in the U.S. action in North Carolina, arguing that the U.K. judgment had preclusive effect on many issues under theories of comity and collateral estoppel. In other words, WPL argued that SAS couldn’t re-litigate in the United States what it had already lost in Europe.

The district court ruled on the summary judgment motion in October 2014. The district court held that it was not bound by the U.K. court’s conclusion that the EU Software Directive rendered unenforceable the SAS Learning Edition license terms restricting reverse engineering. This is because the district court found that North Carolina law differed significantly from EU law on the question of the validity of the contractual provisions prohibiting reverse engineering. Thus, the district court granted summary judgment to SAS on its breach of contract claim.

With respect to SAS’s copyright infringement claim, the district court refused to give preclusive effect to the U.K court’s ruling that copyright did not protect the program elements WPL copied on the ground that WPL failed to demonstrate the similarity of U.S. and U.K. law on this issue. This is a questionable ruling. The U.K. court and the CJEU based their decisions on the Software Directive’s articulation of the idea/expression dichotomy. The idea/expression dichotomy is a fundamental principle of copyright law worldwide, including U.S. copyright law. Therefore, there is no reason to conclude that a program element the CJEU considers to be unprotectable under Article 1(2) of the Software Directive also is not protectable under section 102(b) of the U.S. Copyright Act.

Despite refusing to grant preclusive effect to the U.K. court’s determination that WPL’s copying did not infringe, the district court ultimately reached the same conclusion based on its own analysis of U.S. copyright law. It was undisputed that WPL had no access to SAS’s source code, and thus WPL did not copy any SAS code, nor the structure, sequence, and organization of that code. Instead, SAS based its copyright claim on WPL’s copying of the SAS System’s input and output formats. The district court rejected the claim, reasoning that SAS in essence was “asking the court to find that defendant’s software infringes its copyright through its processing of elements of the SAS Language….” This meant that “plaintiff seeks to copyright the idea of a program which interprets and compiles the SAS Language….” The court refused to allow such broad protection.

SAS resisted the conclusion that WPL did not copy protected expression by arguing that “this case is on all fours” with Oracle America. The court rejected this argument. The court noted that in Oracle America, Google had copied strings of Java code. Here, by contrast, “there is no evidence that defendant has copied specific strings of SAS language, or specific strings of source code for plaintiff’s software, only that its software can function with these SAS Language elements.”

A trial was held on damages for WPL’s breach of the SAS Learning Edition license; fraudulent inducement in obtaining the Learning Edition; and violation of North Carolina’s Unfair and Deceptive Trade Practices Act (“UDTPA”). In 2015, the jury found SAS was damaged by WPL’s breach of the license in the amount of $26 million; WPL fraudulently induced SAS to enter into the license agreement; and WPL’s conduct violated the UDTPA. On account of the violation of the UDTPA, the district court trebled the actual damages to a total of $79 million.

WPL and SAS cross-appealed. Because SAS did not bring any patent infringement claims, the appeal will be heard by the Fourth Circuit rather than the CAFC. SAS and its amici, MathWorks and BSA | The Software Alliance, have recently filed briefs. In their briefs, SAS and its amici completely ignore what the copyright aspect of this case is really about: whether copyright enables SAS to lock its users into the SAS System after they have invested millions of dollars writing their own programs in the SAS Language.

Synopsys v. ATopTech

In our third case following Oracle America, a jury in California found that the defendant infringed the command set in the plaintiff’s software. Because the case also involves patent claims, the CAFC will hear the appeal of this dispute as well.

Both Synopsys and ATopTech develop software for the “place-and-route” function in the design of computer chips, i.e., software that plans the layout of a chip and the electrical connections among its various components. Synopsys also produces “sign-off” or “static timing analysis” software, which checks the timing of the chip design created by the place-and-route software.

Synopsys claimed in federal court in California that ATopTech had copied into ATopTech’s place-and-route product, Aprisa, part of the command set from Synopsys’s sign-off product, PrimeTime. Command sets include the names and syntax of commands, options, parameters, variables, objects, and attributes. ATopTech filed a motion for summary judgment that it did not copy protectable expression, but the court in a terse ruling found that Synopsys “raised a triable issue” as to whether the copied elements were expressive. Similarly, the court found there were triable issues relating to ATopTech’s merger and fair use defenses. After trial in March 2016, the jury found that ATopTech infringed Synopsys’s copyright in its command set, and awarded Synopsys $30 million in damages.

The court then conducted a bench trial on ATopTech’s equitable estoppel defense. ATopTech argued that Synopsys encouraged its usage of the command set “in order to meet customer demand for improved interoperability between place-and-route and sign-off products when the two types of products are offered by different vendors.” The court denied the defense, finding that there was no evidence that Synopsys had actual or constructive knowledge that ATopTech had copied the command set. The court also rejected ATopTech’s assertion that Synopsys by its conduct misled ATopTech to believe that it would not assert its copyright in its command set.

As noted above, Synopsys brought patent infringement claims against ATopTech in addition to its copyright claims. This means that any appeal in this case will also be heard by the CAFC.

Cisco v. Arista

In our last post-Oracle America case, a jury in California recently found that the Cisco command line interfaces copied by Arista were not protected by copyright under the scenes a faire doctrine. Because Cisco also brought patent claims against Arista, the CAFC will hear this appeal as well.

Arista Networks develops switches and other network products that compete with the market leader, Cisco Systems. In 2014, after the CAFC’s decision in Oracle America, Cisco sued Arista for allegedly copying 500 of Cisco’s command line interface (CLI) commands when developing its EOS network operating system. The CLI is the primary mechanism for network engineers to interact with switches and routers in which Cisco operating systems are installed. The 500 commands consist of two, three, or four words reflecting multi-level textual hierarchies. Before trial, the district court ruled that four “building blocks” of the CLI (the multiword command line expressions, modes and prompts, command responses, and help descriptions) could be protected as a compilation, and left it to the jury to consider whether merger or scenes a faire rendered Arista’s copying noninfringing. The court further ruled that because the individual elements of each of these building blocks were not protectable, the compilations were entitled only to thin protection. Under Ninth Circuit precedent, this meant that infringement could be found only if there was virtually identical copying.

At trial, Arista’s lawyers—who also represented Google in its litigation with Oracle America—argued that the CLI was an industry standard Cisco encouraged others to use. Arista raised three defenses: merger, scenes a faire, and fair use. In December 2016, the jury rejected the merger and fair use defenses, but agreed that Arista’s use did not infringe under the scenes a faire doctrine. Under the scenes a faire doctrine, courts deny protection to expression that is standard, stock or common to a particular topic or that necessarily follow from a common theme or setting. Granting copyright protection to the necessary incidents of an idea would effectively afford a monopoly to the first programmer to express those ideas.

As noted above, any appeals in the case will be heard by the CAFC because Cisco’s complaint also alleged patent infringement (a claim the jury rejected).

Of the three cases that did not settle, two will be appealed to the CAFC. Given the random nature of judicial assignments, there is a good chance these appeals will be heard by different panels from that in Oracle America. Hopefully these panels will not feel too constrained by the Oracle America opinion. After all, CAFC panels often disagree with one another in patent cases.

(These cases, and the Oracle America decision, are discussed in greater detail in my book Interfaces on Trial 3.0: Oracle America v. Google and Beyond.)

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.