http://www.law.com/jsp/article.jsp?id=1111572311393
Mark Hamblett
New York Law Journal
03-24-2005
The meaning of the term "owner" in a federal law that provides an
exception to copyright protection for computer programs is not limited
to the title holder, the 2nd U.S. Circuit Court of Appeals has ruled.
Clarifying an issue that has split at least two courts in the circuit,
the panel said that formal title is "not an absolute prerequisite," for
an alleged infringer to assert an affirmative defense under 17 U.S.C.
§117 (a).
The statute provides an affirmative defense against copyright
infringement for anyone who owns a physical copy of a computer program,
makes an adaptation "as an essential step in the utilization of the
computer program in conjunction with a machine," and uses it "in no
other manner."
In Krause v. Titleserv Inc., 03-9303, William Krause alleged
infringement by Titleserv on eight software programs he designed for the
company between 1986 and 1996.
Krause had left executable versions of the software programs on
Titleserv's file servers when he terminated his relationship with the
company in 1996, but he "locked" them with a command that prevented the
executable versions from being converted back into source code. He told
Titleserv it could continue to use the versions as they existed but
insisted the company had no right to modify the source code.
Nonetheless, Titleserv managed to unlock the versions and make several
modifications, including cleaning up the source code by formatting it,
fixing bugs, adding new customers to the lists and changing customer
addresses. All of these measures, the company insisted, were taken to
keep the system functioning until it could be replaced.
Based on the recommendation of Magistrate Judge William Wall, Eastern
District Judge Thomas Platt granted summary judgment for Titleserv.
On the appeal, Krause contended that Congress' decision to use the word
"owner" in the statute instead of the term "rightful possessor" showed
that Congress wanted to have the affirmative defense available only to
title owners.
However, while that interpretation has been accepted by one court in the
Eastern District, 2nd Circuit Judges Pierre Leval and Robert Katzmann
disagreed.
Krause claimed Titleserv possessed the copies as a licensee pursuant to
an oral agreement. Titleserv countered that it owned the copies because
it paid Krause to create them and had a clear right to use them
permanently.
Judge Leval said the legislative history of §117 is "sparse and provides
limited guidance" on when and how the possessor of a copy of a software
program is no longer considered its owner.
But in the court's view, he said, Congress could not have intended to
limit protection to the holders of formal title.
Had the broad term "rightful possessor" been used, he said, "the
authority granted by the statute would benefit a messenger delivering a
program, a bailee, or countless others in lawful possession of a copy."
"Congress easily could have intended to reject so broad a category of
beneficiaries without intending a narrow, formalistic definition of
ownership dependent on title," he said.
'INCIDENTS OF OWNERSHIP'
From a policy perspective, Leval said, requiring formal title would
undermine some of the uniformity achieved by the Copyright Act because
the question of whether a party owns formal title is usually a question
of state law.
"Second, it seems anomalous for a user whose degree of ownership of a
copy is so complete that he may lawfully use it and keep it forever, or
if so disposed, throw it in the trash, to be nonetheless unauthorized to
fix it when it develops a bug, or to make an archival copy as backup
security," Leval said.
Instead of requiring formal title, he said, courts should "inquire into
whether the party exercises sufficient incidents of ownership over a
copy of the program to be sensibly considered the owner of the copy for
purposes of §117(a)."
In Titleserv's case, he said, that standard has been met and, although
Krause claimed he told Titleserv it had no right to modify the programs
after he left the company, "Titleserv's entitlement to do what it did
arose as a matter of law and Krause's expression of his opinion that it
had no entitlement to do these things has no significance whatsoever."
The modifications made by Titleserv were also "essential" to the
company's continued use of the software, he said. The court rejected a
definition argued by Krause that would have the term "essential" apply
only to a modification without which the program could not function.
And as to the issue of whether the modifications were made "in
conjunction with a machine," Leval said, "we see no reason why the
modest alterations to Titleserv's copies should not qualify."
The third member of the circuit's panel who heard oral arguments was
Judge Ellsworth A. Van Graafeiland, who died in November 2004.
Eugene D. Berman and Scott J. Fine of Fine, Fine & Berman in Melville
represented Krause. Ronald J. Rosenberg and Kenneth E. Aneser, of
Rosenberg Calica & Birney in Garden City, represented Titleserv.
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