Repair Company Likely to Prevail in Defense of Claims on Copying of Software and Circumvention of Access Codes for Maintenance

Case: Storage Tech. Corp. v. Custom Hardware, No. 04-1462 (Fed Cir. 8/24/05)

The One Sentence Summary: In reversing a district court's grant of a preliminary injunction, the Federal Circuit held that the making of copies of software as part of the process of repairing tape drives was not copyright infringement, the circumvention of access codes as part of the repair did not violate the DMCA, and there was no trade secret violation where the codes had been previously distributed without protection.


What They Were Fighting About: Plaintiff Storage Technology sued defendant Custom Hardware ("CHE") for copyright infringement from the maintenance and repair of Storage Technologies' tape storage units. The repair and maintenace required that CHE make copies of maintenance software in the machines, and to crack an access code. The parties disputed the applicability of section 117(c) of the Copyright Act which provides a safe harbor for copying of software for maintenance or repair:

it is not an infringement for the owner or lessee of a machine to make or authorize the making of a copy of a computer program if such copy is made solely by virtue of activation of a machine that lawfully contains an authorized copy of the computer program, for purpose only of maintenance or repair of that machine, if --
(1) such new copy is used in no other manner and is destroyed immediately after the maintenance or repair is completed; and
(2) with respect to any computer program or part thereof that is not necessary for the machine to be activated, such program or part thereof is not accessed or used other than to make such new copy by virtue of the activation of the machine.

Federal Circuit Holdings:

• The district court erred in holding that section 117(c) did not apply because the copy of the software was not destroyed immediately after the repair. The statutory section allowed the copy to remain until "maintenance" was complete which in this instance was the end of the maintenance contract.
• The maintenance code was "necessary for the machine to be activated" as provided in section 117(c) because it was entangled with the functional code and needed to be booted in order to start the computer.
• Section 117(c) protected CHE's actions to circumvent the protection on the maintenance program in order to run the maintenance software.
• CHE was likely to prevail on the defense afforded by section 117(c).
• CHE's actions in copying the maintenance code for repair were protected because it was acting as the agent of the owner of the tape drive who was given a license to copy the software by operation of the drive.
• The license restricted the customer from using the maintenance code, but this did not create a claim for copyright infringement. At most, it created a claim for breach of the license contract: "Second, StorageTek’s argument conflates a claim based on copyright infringement and an action based on breach of contract. To succeed in a copyright action, "the copying must be beyond the scope of a license possessed by the defendant," Stenograph, 144 F.3d at 99, and the source of the copyright owner’s complaint must be grounded in a right protected by the Copyright Act, such as unlawful reproduction or distribution. See 17 U.S.C. § 106. In contrast, the rights granted by contract can be much broader. As an example, consider a license in which the copyright owner grants a person the right to make one and only one copy of a book with the caveat that the licensee may not read the last ten pages. Obviously, a licensee who made a hundred copies of the book would be liable for copyright infringement because the copying would violate the Copyright Act’s prohibition on reproduction and would exceed the scope of the license. Alternatively, if the licensee made a single copy of the book, but read the last ten pages, the only cause of action would be for breach of contract, because reading a work does not violate any right protected by copyright law. Likewise, in this case, the copying of the maintenance code is permitted by the license. The use of the code may violate the license agreement, but it is not forbidden by copyright law and cannot give rise to an action for copyright infringement. See United States Naval Inst. v. Charter Communications, Inc., 936 F.2d 692, 695 (2d Cir. 1991) ("[a] licensee of any of the rights comprised in the copyright, though it is capable of breaching the contractual obligations imposed on it by the license, cannot be liable for infringing the copyright rights conveyed to it"). "
• Language in the license prohibiting assignment did not bar CHE from protection as the agent of the licensee in booting the machine - the restriction was intended to prevent free-standing assignment of the software license, but did not prohibit operators of the tape library from booting it with permission of the licensee. The court distinguished other cases such as MAI Systems which involved more restrictive licenses that permitted only certain authorized users to boot the software.
• CHE was likely to prevail in showing that it did not violate the DMCA (Digital Millenium Copyright Act) restrictions of 17 U.S.C. § 1201(a)(1) by circumventing the access code feature of the software. The DMCA section must be tied to an infringement of copyright, and does not create an independent right of action for circumvention with copyright infringement. Here, the court had decided that CHE's actions in creating copies of the software for purposes of maintenance and repair were not copyright infringement because they were protected by 17 U.S.C. § 117(c).
• CHE was likely to prevail on the claim that it misappropriated trade secrets in accessing fault symptom codes. The fault symptom codes were in the public domain because before implementation of the "GetKey" access code, the fault symptom codes were freely transmitted by the library components.
• The district court abused its discretion in granting the preliminary injunction for plaintiff.