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.   




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