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When is the output of a copyright-protected software program itself protected by copyright? This is a case of first impression for any court of appeals which is pending at the Ninth Circuit. The case is Design Data Corporation v. Unigate Enterprise, Inc., 14-16701. On 17 October, 2016, counsels for both parties presented their arguments at the Ninth Circuit to a three-judge panel, composed of Judge Consuelo M. Callahan, Judge Michael Daly Hawkins and Judge Andrew D. Hurwitz.

Design Data Corporation (DDC) has created a computer aided design (CAD) steel detailing software, SDS/2, which can be used to draw 2-D and 3-D drawings and models of structural steel components. The designs can only be viewed through the SDS/2 software, the SDS/2 Viewer software, and in electronic images exported from SDS/2. Unigate Enterprise (UE) is a company which provides steel detailing CAD files to its clients in the U.S. It does not produce the files itself, but instead outsources their production to contractors in China.

DDC believed that UE had used the SDS/2 software illegally. Representatives of DDC visited UE’s office in August 2012 and UE allowed the representatives to search UE’s computers and copy some files. They found a folder containing installation files for SDS/2 and three patch files which can be used to circumvent SDS/2’s licensing requirement. Defendants admitted during discovery that one of its co-owners downloaded a copy of SDS/2 to an external hard drive, but that she believed this copy to be a free demonstration copy of the software, and that she did not install the software, nor did she try to use it. UE admitted that SDS/2 had been used to create files and drawings in five of its projects, but argued that they were made by contractors in China.

DDC sued UE for direct copyright infringement, claiming it had illegally downloaded a copy of the software and also had copied files and images which are output of the SDS/2 software protected by copyright. It also sued UE for contributory copyright infringement claiming that UE imported from China infringing files and images generated by SDS/2 in violation of 17 U.S.C. §602.

UE moved for summary judgment, claiming that merely downloading a software program without installing or using is de minimis copying and that therefore not direct infringement. UE also argued that it cannot be held liable for contributory infringement, as “wholly extraterritorial acts of infringement cannot support a claim under the Copyright Act even when authorized by a party in the United States,” quoting Subafilms, Ltd. v. MGM-Pathe Communications Co., 24 F.3d 1088, 1092, 1995 (9th Cir.1994).

On August 6, 2014, Judge William Orrick from the Northern District Court of California granted Defendants’ motion for summary judgment both for contributory infringement and direct infringement. Defendants had correctly argued that they could not be sued for contributory infringement. Judge Orrick also found that downloading a copy of SDS/2 “without any evidence that the copy was installed or used… amount[ed] at most to a de minimis ‘technical’ violation that is not actionable as a matter of law.”

DDC appealed to the Ninth Circuit, asking the Court to reverse summary judgment. DDC’s counsel argued before the Ninth Circuit that UE did “consciously implement a business model… that was designed to exploit a breach in the copyright protection afforded to software developers by shifting its infringement of [Plaintiff’s software] overseas.” However, as UE cannot be sued for contributory infringement, DDC argued instead that UE directly infringed its copyright by downloading the software and by reproducing the output of the software program which is protected by copyright.

Direct infringement: did UE violate copyright law by copying DDC’s software?

Judge Callahan and Judge Hurwitz were both troubled by the fact that UE had advertised on its site that it used the SDS/2 software. UE’s counsel answered that UE was counting on contractors to use it, but admitted that UE had never asked DDC if it was indeed true that the contractors were legally using the software. UE admitted it had downloaded the software, and therefore copied it, but argued it had not used it and therefore this de minimis copying was not actionable. DDC argued that, by downloading the software, UE had copied the entire SDS/2software code and therefore the copying was not de minimis.

Judge Hurwitz asked UE’s counsel whether the de minimis doctrine should apply each time someone copies a work protected by copyright, even if he does not use it, and the UE’s counsel answered in the affirmative.

Direct infringement: is the output of the software protected by copyright?

DDC argued also that UE has directly infringed the SDS/2 software because it has copied the steel component designs which are a visual display of the software, and are as such output of the software also protected by copyright. For Judge Hurwitz, this is the “really interesting issue in this case.” However, not every output of a software is protectable by copyright. The question of when the output of a computer program is protectable by copyright has not yet been answered by any court which makes it an issue of first impression.

Software’s source code, which is human-readable, and its object code, which is machine-readable, are both protectable by copyright as literary works, if they are original and fixed in a tangible medium of expression. However, the functional elements of the software, such as its systems or procedures, are not protected by copyright since copyright law does not protect process, system, and method of operation. Judge Orrick had quoted Altai and found that the “job files” and the other documents produced by the SDS/2 software “are data not covered by copyright.”

Courts often use the abstraction-filtration-comparison test, first coined by the Second Circuit in Computer Assocs. Int’l v. Altai, to assess which parts of a software program are protected by copyright. The Second Circuit specified that the decision “[did] not control infringement actions regarding categorically distinct works, such as… products of computer programs.” There is no case where a court used the abstraction-filtration-comparison test to determine whether the output of a software has been infringed.

Judge Hurwitz asked DDC’s counsel what makes in her view a particular output protectable by copyright. She offered a test: an output would be protected by copyright if one can tie some sort of creative expression that is included in that output as having emanated from the software. Judge Hurwitz asked her what percentage of creative expression would trigger copyright protection. What if 80% of the creative expression originates from the software user? She conceded that in this case the output would “probably not” be protected by copyright. Judge Callahan found this test too complicated.

UE’s counsel then proposed another test. The output would be protected to the extent that it includes creative expression that has been fixed in the software and embodied in the output. However, if there is additional creative content added to the output by a user, and therefore the proportionality is too imbalanced and weights too heavily in favor of the user, it could be found under the abstract-filtration-comparison test not original and thus not protected. Judge Hurwitz said, that while there is no case addressing the issue, some seem to suggest that the output of a software program may be, in some instances, so substantially similar to the software program that it deserves protection. Judge Hurwitz noted, however, that plaintiff must show substantial similarity.

DDC’s counsel argued that there is not only substantial similarity, but even identity, because, if one inputs the same data into the software, one gets the same design out of it, in an expression which is fixed. But Judge Callahan quoted paragraph 721.6 of the Compendium of U. S. Copyright Office Practice about the “Relationship Between a Computer Program and a Work Created with a Computer or a Computer Program,” which explains that “ownership of the copyright in a work is distinct from ownership of any material object that may be used to create that work.” Judge Callahan asked DDC’s counsel whether this was relevant to the case and she answered that DDC owns the copyright in the software and also owns a copyright in “unnecessary creative expression that accompanies that.” She specified that DDC is not arguing that it owns the copyright in the entire design of the component, only in the expression that accompanies it. DDC considers this to be direct infringement, as it is a derivative work of the component of the software image files.

On rebuttal, Judge Hurwitz asked again DDC’s counsel to explain the relationship between both the creative input of the software and the creative input of its users, and how and when the ratio of these two creative inputs would trigger, or not, the copyright protection of the output. DDC’s counsel answered that DDC is focused on expressive content that is not in the actual design of the component, such as the font or the colors used, the shape of a comment box, or the placement of certain components around the design which appear in the design file, but which are not the design itself. She argued that these elements must be identified using the abstraction-filtration-comparison test to find out whether some elements are protected by copyright, but conceded that there was not any computer software case which used this test.

Image is courtesy of Flickr user Rick Kimpel under a CC BY-SA 2.0 license.

This article was first published on the the TTLF Newsletter on Transatlantic Antitrust and IPR Developments published by the Stanford-Vienna Transatlantic Technology Law Forum.

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