From: [ac w f] at [doc.ic.ac.uk] (Anthony Finkelstein) Newsgroups: misc.legal.computing Subject: CyberLaw/Lex 5/93 Date: 9 Jun 93 11:09:28 GMT [CyberLaw (tm) 5/93] REPAIR DEEMED UNLAWFUL I. Service as Infringement According to a recent decision by the Ninth Circuit, an independent service company may violate copyright law where in the course of repairing a customer's computer and diagnosing a problem or confirming that a repair has been successful, the company's technician turns on the computer and views an error message displayed by the computer's operating system. (__MAI Systems Corp. v. Peak Computer, Inc., et al.__, Nos. 92-55363, 93-55106 (9th Cir. 4/7/93).) This decision shocked independent service providers, who believe the Ninth Circuit's decision may well destroy the market for third-party service of high-technology equipment. It is also notable because it holds that the mere loading of computer software into random access memory ("RAM") may violate copyright law, and indicates that a software company may severely restrict the use of its product by a purchaser. The legal action itself well illustrates the growing pressure on copyright law exerted by high-technology companies seeking new ways to protect their enterprises. II. MAI Files Suit MAI Systems Corp. is a former manufacturer of microcomputers and designer of software to run its computers; MAI is now in the business of servicing its computers and software. In 1990, Peak Computer, Inc. began to maintain and repair MAI computer systems owned by more than 100 customers in Southern California. Peak's maintenance and repair service necessarily involves turning on customer computers, which causes the automatic loading of MAI operating system software into RAM. In March 1992, MAI filed suit in federal court against Peak alleging copyright infringement, among other things. This led to the issuance of a permanent injunction against Peak and its employees, which includes the following language: "Peak [and certain others] are permanently enjoined from copying ... or otherwise infringing MAI's copyrighted works .... The "copying" enjoined herein specifically __includes the acts of loading, or causing to be loaded, directly or indirectly, any MAI software from any magnetic storage or read only memory device into the electronic random access memory of the central processing unit of a computer system__. As used herein, "computer system" means an MAI central processing unit in combination with either a video display, printer, disk drives, and/or keyboard." (Emphasis added.) III. Peak Appeals Peak appealed, and a 3-judge panel of the Ninth Circuit Court of Appeals reviewed the claim, among others, that Peak violated MAI's copyright by running MAI software licensed to MAI's customers. To prevail, stated the Ninth Circuit, MAI had to prove "'copying' of protectable expression" beyond the scope allowed MAI customers. The Ninth Circuit observed that MAI customers were licensed to use MAI software for their own internal information processing. (MAI software licenses allegedly state that "Customer may use the Software ... solely to fulfill Customer's own internal information processing needs on the particular items of Equipment ... for which the Software is configured and furnished by [MAI].") The loading of software by MAI customers into RAM was allowed under the license. However, the licenses given by MAI do not, according to the Ninth Circuit, allow third parties to use or copy the licensed software. "Any 'copying' done by Peak," the Ninth Circuit held, "is 'beyond the scope' of the license." IV. RAM Copies Under the Copyright Act, one of the exclusive rights of a copyright owner is to reproduce copyrighted works in copies and to authorize others to do so. (17 U.S.C. Section 106.) "Copies" are defined by the Act as "material objects ... in which a work is __fixed__ ... and from which the work can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." (17 U.S.C. Section 101; emphasis added.) "A work is 'fixed' in a tangible medium of expression," explains the Act, "when its embodiment in a copy ..., by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration." (17 U.S.C. Section 101.) The Ninth Circuit noted that the district court's judgment for MAI reflected that court's "conclusion that a 'copying' for purposes of copyright law occurs when a computer program is transferred from a permanent storage device to a computer's RAM." The Ninth Circuit found this conclusion to be supported by the record in this case and by the law. The Ninth Circuit observed that "As part of diagnosing a computer problem at the customer site, the Peak technician runs the computer's operating system software [which is automatically loaded into RAM when an MAI computer is turned on], allowing the technician to view the system error log, which is part of the operating system, thereby enabling the technician to diagnose the problem." In the opinion of the Ninth Circuit, the ability of the Peak technician to view the system error log adequately demonstrates that the "representation created in the RAM is 'sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.'" On this issue of fixation, the Ninth Circuit also looked to a 1984 decision holding that "the copying of copyrighted software onto silicon chips and subsequent sale of those chips is not protected by Section 117 of the Copyright Act." (Under Section 117, "the 'owner' of a copy of a computer program [is allowed] to make or authorize the making of another copy ... [provided that it] is an essential step in the utilization of the computer program, or ... that such new copy is for archival purposes only....") As stated by the court in that case, "RAM can be simply defined as a computer component in which data and computer programs can be temporarily recorded. Thus, the purchaser of [software] desiring to utilize all of the programs on the diskette could arrange to copy [the software] into RAM. This would only be a temporary fixation. It is a property of RAM that when the computer is turned off, the copy of the program recorded in RAM is lost." While recognizing this language not to be dispositive, the Ninth Circuit found it to support the proposition that a "copy made in RAM is 'fixed' and qualifies as a copy under the Copyright Act." Although no court decision specifically holds that the loading of software into RAM creates a "copy" under the Copyright Act, the Ninth Circuit stated that it is "generally accepted that the loading of software into a computer constitutes the creation of a copy under the Copyright Act." The Ninth Circuit acknowledged, however, that its authority for such general acceptance is "__troubling__ since they do not specify that a copy is created regardless of whether the software is loaded into the RAM, the hard disk or the read only memory ('ROM')." (Emphasis added.) In light of the above, the Ninth Circuit held that Peak violated MAI's copyright by running MAI software belonging to Peak's customers. Two weeks later, on April 21, 1993, Peak filed a petition requesting that the case be reheard by the Ninth Circuit as a whole. V. Request For Rehearing In its petition, Peak alleges that important public policy considerations have been neglected. Peak asserts that if the decision in this case were to be allowed to stand, it "would fundamentally change the nature of the [entire industry of independent third-party computer maintenance and repair services] and would essentially create a monopoly in favor of the computer manufacturers, who would now be able to garner the computer repair and service market by simply obtaining a copyright on their software. ... In the wake of the Court's decision, nothing would prevent manufacturers from licensing the software in products that are commonly 'owned' by the buyer, such as cameras, cars or computers." Peak also urges that, among other things, the fair use doctrine applies to protect its activities. VI. Public Policy & Antitrust Independent Service Network International ("ISNI"), an organization of over 200 independent service organizations in the business of servicing equipment manufactured by others, also filed a petition for rehearing as a "friend of the court." Echoing Peak, ISNI warns that "[i]f [independent service organizations] cannot turn on a customer's computer and load its operating system into RAM, they cannot test the operation and functioning of the computer; only very limited servicing of the computer, if any, can be performed." The ultimate impact would be, "the destruction of a large part of the independent service industry for high-technology equipment, forcing owners and users of computer systems and other high-technology equipment with operating systems to use only manufacturer-provided service, even if it is more costly and less efficient." Such a result, argues ISNI, is contrary to the public policies underlying the Copyright Act, a consideration ignored and not well served by the Ninth Circuit 3-judge panel that considered this case. According to ISNI, four factors related to public policy support the need for rehearing. First, "the effect of the decision may very well be to destroy aftermarkets of service of high technology equipment," the importance of which was recently recognized by the U.S. Supreme Court. Second, "the Copyright Act was never intended to confer a patent-like monopoly over a copyrighted product, let alone confer monopoly power with respect to a product that is not copyrighted such as a computer." Third, Section 117 of the Copyright Act should be recognized to allow the "__rightful possessor__ of computer programs to use them if such use is 'essential' to the operation of the computer system." (Emphasis added; in this case the Ninth Circuit held that Peak customers do not "qualify as 'owners' under Section 117 because MAI only licensed its software.) Fourth, "turning on a [computer] and loading the operating system into ... RAM in order to use and maintain the computer -- the very function for which the operating system was created -- constitutes fair use under the Copyright Act." Although the underlying intent of the Copyright Act is to encourage the creation of works of authorship by ensuring that authors are fairly compensated, ISNI claims that this goal is "served so long as additional copies of software are not proliferated, such as in this instance, where only a temporary copy is made in order to use and maintain the associated computer system." Citing to the U.S. Supreme Court, ISNI notes that "the 'reward' to the author is a 'secondary consideration' to the primary objective - that of the benefits derived by the public from those works of authorship." On May 26, 1993, a number of computer maintenance companies filed suit in Virginia against MAI alleging violations of antitrust laws. The plaintiffs allege, among other things, that MAI threatens to drive them out of the market. (Copies of the arguments filed with the Ninth Circuit and of that court's opinion were kindly made available to the author by James W. Miller, Esq., of Musick, Peeler & Garrett, attorneys for Peak Computer, Inc. and the individual defendants, and William J. Robinson, Esq., of Graham & James, attorneys for MAI Systems Corp. Additional assistance was received from Ronald S. Katz, Esq., of Coudert Bros., attorneys for ISNI and the plaintiffs in the Virginia action.) CyberLaw (tm) is published solely as an educational service. The author may be contacted at [j r s n r] at [well.sf.ca.us]; [c--er--w] at [aol.com]; questions and comments may be posted on America Online (go to keyword "CYBERLAW"). Copyright (c) 1993 Jonathan Rosenoer; All Rights Reserved. CyberLaw is a trademark of Jonathan Rosenoer. CyberLex (tm) [5/93] Notable legal developments reported in May 1993 include t he following: # High-tech thieves installed a bogus ATM machine in a shopping mall in Connecticut, using it to record the card numbers and personal identification numbers (PINs) of hundreds of customers that sought to use the machine. Using counterfeit cards and the stolen numbers, the thieves later took at least $50,000 from an ATM network in New York. In an earlier case in Brooklyn, New York, thieves used a video camera to record PINs and match them with discarded receipts. (New York Times, May 13, 1993, A1; San Jose Mercury News, May 12, 1993, 13A, and May 22, 1993, 11D.) # The copyright infringement case brought by Apple Computer, Inc. against Microsoft Corp. and Hewlett-Packard Corp. was removed from the court's trial calendar after the court narrowed the case to whether the appearance of Microsoft's Windows program is virtually identical to that of Apple's Lisa, the predecessor to the Macintosh. (New York Times, May 13, 1993, A1; San Jose Mercury News, May 12, 1993, 13A, and May 22, 1993, 11 D.) # A federal appeals court ruled that regional Bell telephone companies are allowed to own information services and to offer them over their phone lines. (New York Times, May 29, 1993, p.13; San Jose Mercury News, May 29, 1993, 11D.) # A federal court ruled that the Telephone Consumer Protection Act's ban on automated calls to deliver prerecorded commercial messages is unconstitutional, violating the First Amendment guarantee of free speech. (Wall Street Journal, May 24, 1993, B7; New York Tim es, May 23, 1993, p.11.) # Five companies, including Adobe Systems Inc., have filed suit in federal court against SWFTE International Ltd., alleging that SWFTE copied their software codes to make SWFTE's Typecase and Typecase III programs that allow users to switch among a variety of fonts and typefaces. This case will test the Copyright Office's decision that software that produces fonts and typefac es is not subject to copyright protection. (Wall Street Journal, May 19, 1993, B5.) # The Digital Privacy and Security Working Group, a coalition of computer and communications companies and consumer and privacy advocacy groups, presented to White House officials and key members of Congress detailed technical and civil liberties questions about the Clipper Chip and the government's policy regarding the encryption of digital communications. The 28-member Computer and Business Equipment Manufacturers Association also issued a statement criticizing the economic viability of the Clipper Chip proposal, saying it would effectively handicap American computer and telecommunications equipment makers overseas. (New York Times, May 7, 1993, C3, and May 29, 1993, p.15; San Jose Mercury News, May 15, 1993, 11D, and May 29, 1993, 10D.) # A federal court cited the White House and the acting archivist of the United States for civil contempt for failure to protect and preserve the computer records of the Bush and Clinton Administrations. Fines starting at $50,000 and rising to $200,000 a day will last until the Administration takes action to preserve those records. (New York Times, May 22, 1993, p.6; San Jose Mercury News, May 22, 1993, 7A.) # The nation's largest computer companies, advocating a "progressive scanning" system for high-definition television, warned the federal Communications Commission that they would develop a separate standard if the Government endorsed the interlaced systems favored by broadc asters. (New York Times, May 21, 1993, C5.) # The U.S. Supreme Court has ruled that in patent cases where it is found that the patent has not been infringed, the U.S. Court of Appeals for the Federal Circuit is not to automatically set aside a lower court's ruling on the issue of whether the patent itself is valid. (Wall Street Journal, May 18, 1993, A4.) # Intel Corp. has requested that the International Trade Commission ban U.S. imports of a Taiwan-made notebook computer because of alleged patent infringement concerning memory-management technology by use of microprocessors made by Advance d Micro Devices and Cyrix Corp. (New York Times, May 14, 1993, C3.) # Accolade, Inc. and Sega of America, Inc. have settled out of court a legal action that looked to whether companies may rever se engineer each other's software. (San Jose Mercury News, May 1, 1993, 11D.) # A federal court has ruled that Atari Games infringed a copyright and patent by copying and using software codes built into Nintendo of America games. (San Jose Mercury News, May 19, 1993, 13D; New York Times, May 19, 1993, C4.) # The U.S. is investigating Brazil's intellectual property rights protections in a process that could lead to sanctions. (San Jose Mercury News, May 29, 1993, 11D.) CyberLex (tm) is published solely as an educational service. Copyright (c) 1993 Jonathan Rosenoer; All Rights Reserved. CyberLex is a trademark of Jonathan Rosenoer. -- /home/gummo/users/acwf/.signature: No such file or directory