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Article: May 2017: Trademark & Copyright Litigation Update

Business Litigation Reports

Ninth Circuit Weighs in on Copyright Protectability of Downloads and Software Output. Copyright practitioners concerned about software, electronic data, and computer protection have long debated two questions (among many, many others):

  1. Is the mere downloading of a software program without authorization by the copyright holder an actionable and damage-generating copyright infringement?
  2. Is the distribution of the output of a software program, which was itself an unauthorized copy, a separate copyright infringement, where the output was a function of a user engaging in more than “marginal” creative effort or where the program’s user did the “lion’s share” of the creative work associated with the output?

In Design Data Corp v. Unigate Enterprise, Inc., Civ. No. 14-17317 (Feb. 9, 2017), the Ninth Circuit issued a precedential decision that seems to have answered “no” to both questions (although only obliquely).

Design Data is the copyright owner of a CAD program (called SDS/2) that generates data and drawings used to produce steel structural components, used in the building trades. The output of the SDS/2 program is contained in electronic job files.

Unigate outsources steel-detailing services by selling steel-detailing CAD files created by contractors in China. One of Unigate’s Chinese contractors created CAD files using an unauthorized copy of SDS/2 (which Unigate claims it did not know) and sent the output to Unigate, and Unigate in turn sold those files to US clients. Unigate never purchased a license to use SDS/2 and claims it never actually used the program, although it admitted that it downloaded a demo copy of SDS/2 just too see what the program was all about. The evidence, however, showed that two versions of SDS/2 were loaded onto Unigate’s computers. Although there was no evidence that Unigate actually installed SDS/2, there was evidence that SDS/2 files had been generated and suggested that the CAD program had been used.

Design Data sued Unigate, claiming Unigate has committed infringement in two ways, by (1) downloading and using the unauthorized version of SDS/2, and (2) by importing and distributing SDS/2-generated files. The district court granted Unigate’s motion for summary judgment, finding that its download of SDS/2 was de minimis copyright infringement, that any infringement by Unigate’s Chinese contractor was beyond the reach of U.S. copyright law, and that Design Data failed to show that SDS/2’s copyright protected the SDS/2-generated files.

The Ninth Circuit reversed in part and affirmed in part. The Circuit first reversed the district court’s finding of de minimis infringement, holding that there was a triable issue of fact as to whether Unigate’s download was more than an “insignificant violation” of Design Data’s copyright, because there was evidence supporting a claim of use (and commercial use at that) by Unigate. By implication, the opinion suggests that if there were no triable issue of fact regarding such actual use, then the mere downloading of the software without authorization would be only a de minimis reproduction and infringement.

The Ninth Circuit affirmed the district court’s grant of summary judgment on the claim of copyright infringement based on importation and distribution of the work product of SDS/2. The court observed that other courts and authorities “afforded a computer program’s copyright protection to the program’s output only if the program ‘does the lion’s share of the work’ in creating the output and the user’s role is so ‘marginal’ that the output reflects the program’s contents.” The court then ruled that, “[a]ssuming, without deciding, that copyright protection does so extend, we nonetheless conclude that Design Data did not raise a question of material fact that the imported SDS/2- generated images and files reflected the contents of its program. Design Data did not present evidence establishing that SDS/2 ‘does the lion’s share of the work’ in creating the steel detailing files or that the user’s input is ‘marginal.’”

Although it took great pains to avoid committing to hard, blackletter-law propositions, the Ninth Circuit’s decision in Design Data will be used by copyright infringement defendants to support the view that the mere downloading of a software product, although technically a reproduction in RAM of the program, is a de minimis, non-damage-yielding event, and the distribution of a program’s output, where the output is materially the result of a user’s creative efforts, will not be a basis for a separate claim of infringement.