Software infringement caselaw
If your business or company is using software without paying for the proper licenses, you can find yourself engulfed in a BSA or SIIA audit. The audit can lead to either a settlement, or a copyright infringement lawsuit filed in Federal Court. But what is the case law that applies to these types of cases? Here is a general legal overview.
What constitutes Copyright infringement of software?
In Adobe Sys. Inc. v. Feather, 895 F. Supp. 2d 297, 301-02 (D. Conn. 2012) the Court laid down the general rule in regard to what Plaintiff must show to establish a copyright infringement claim:
“There are two elements to every claim of copyright infringement: (1) possession of a valid copyright, and (2) copying of those elements of the work that are copyrightable.” RBC Nice Bearings, Inc. v. Peer Bearing Co., 676 F.Supp.2d 9, 20 (D.Conn.2009) (quoting Key Publ'ns, Inc. v. Chinatown Today Pub. Enters., Inc., 945 F.2d 509, 514 (2d Cir.1991)). Here, plaintiffs have established that Feather is liable for copyright infringement: (1) the plaintiffs possessed valid copyrights for the twenty-eight Software Programs identified in the complaint; and (2) Feather infringed on those copyrights by marketing, selling, and distributing unauthorized copies of the software. In BSA software defense cases, this is usually the case with the BSA and it's lawyers claiming they have evidence of your unlawful software use, and that you are infringing their federally registered trademarks.
I have been charged with “willful infringement of copyright” what does that mean?
This is something you will see in almost every software licensing case. The representative of the software company will allege that they can seek enhanced damages since the alleged copyright infringement is “willful.” But of course they often say this with no proof whatsoever. Here is a case illustrating this legal principle under federal copyright law. In Island Software & Computer Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 262-63 (2d Cir. 2005) the Court held: “Once an act of infringement under the Copyright Act has been proven, a plaintiff may, in lieu of an award of actual damages and profits, request that statutory damages under 17 U.S.C. § 504(c) be awarded. If a plaintiff so elects, the district court will grant anywhere between $750 and $30,000 for each copyright infringed. See 17 U.S.C. § 504(c)(1). If the defendant's infringement was willful, however, the district court may also, in its discretion, enhance the statutory damages award to as much as $150,000 per infringed work. 17 U.S.C. § 504(c)(2).” Of course, this could get quite expensive if you have 100 computers with upgraded software (ex. Microsoft or Autodesk software that has not been paid for). But what does it take for a Plaintiff alleging copyright infringement to actually PROVE willful infringement? The Island Software v. Microsoft court continued: “To prove “willfulness” under the Copyright Act, the plaintiff must show: (1) that the defendant was actually aware of the infringing activity, or (2) that the defendant's actions were the result of “reckless disregard” for, or “willful blindness” to, the copyright holder's rights. See In re Aimster Copyright Litigation, 334 F.3d 643, 650 (7th Cir.2003); Lipton v. Nature Co., 71 F.3d 464, 472 (2d Cir.1995); N.A.S. Import Corp. v. Chenson Enters., Inc., 968 F.2d 250, 252 (2d Cir.1992); see also Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 112 (2d Cir.2001) (“Willfulness in this context means that the defendant recklessly disregarded the possibility that its conduct represented infringement.”
Can officers of a company be held personally liable for federal copyright infringement?
It is possible. In an unreported decision, the Court in Microsoft Corp. v. Maryland Micro.com, Inc., No. CIV. JFM-01-3797, 2003 WL 21805213, at *4 (D. Md. July 15, 2003) held:
“Microsoft contends that Youngblood and Cronk are liable along with Micro.com. Defendants have filed a motion for summary judgment in which they argue that under the facts of this case they cannot be personally liable for copyright infringement, Lanham Act violations, or common law unfair competition. Defendants' argument fails. Officers of a corporation may be held individually liable for the corporation's copyright infringement. See, e.g., Southern Bell Tel. & Tel. Co. v. Associated Tel. Directory Publishers, 756 F.2d 801, 811 (11th Cir.1985). See generally 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 12.04 [A][d] (2003). To be personally liable, a corporate officer must either: (1) have the ability to supervise the infringing activity and have a financial interest in the exploitation of the copyrighted material; or (2) personally participate in the infringing activity. Southern Bell, 756 F.2d at 811; Grey Computer, 910 F.Supp. at 1090–91. The Court discussed these principles: “Here, Youngblood and Cronk had the ability to supervise the infringing activity. Both men own one-third of the company and serve as corporate officers. Moreover, Youngblood manages the day-to-day operation of Micro.com, and both Youngblood and Cronk sell Microsoft products for Micro.com. Both men also have a financial interest in the company, and thus a financial interest in exploiting copyrighted material. In addition to owning one-third of Micro.com, Youngblood and Cronk receive a salary and commission that depends on the financial success of the company. Finally, Cronk participated in an act of copyright infringement when he personally sold a Microsoft investigator a counterfeit copy of Windows 98. Under these facts, Youngblood and Cronk are personally liable for Micro.com's copyright infringement.” In another case involving real estate software ( CoStar Realty Info., Inc. v. Meissner, 604 F. Supp. 2d 757, 769 (D. Md. 2009), a similar conclusion was reached. There, the Court held: “Officers of a corporate body may be held personally liable for the corporation's copyright infringement. Microsoft Corp. v. Maryland Micro.com, Inc., 2003 WL 21805213, (D.Md. July 15, 2003); see also Southern Bell Tel. & Tel. Co. v. Associated Tel. Directory Publishers, 756 F.2d 801 (11th Cir.1985). Liability arises when an “individual, including a corporate officer … has the ability to supervise infringing activity and has a financial interest in that activity, or … personally participates in that activity….” Lauratex Textile Corp. v. Allton Knitting Mills, Inc., 517 F.Supp. 900, 904 (S.D.N.Y.1981). Plaintiffs allege that they own valid, registered copyrights in the content in the databases. …..Plaintiffs allege that Defendant Meissner directly or indirectly provided her CoStar username and passcode to Arffa with knowledge that he would access CoStar's website. Plaintiffs also allege that Meissner facilitated and materially contributed to Arffa's infringement, committing contributory infringement. Plaintiffs further allege that Arffa paid Meissner for use of her CoStar username and passcode, thereby committing willful vicarious infringement. Accordingly, Plaintiffs have alleged sufficient facts to support a contributory and vicarious copyright infringement claim against Defendant.”
What happens if I just delete all the evidence of infringing software?
Deleting all the evidence of potentially infringing software might seem to make sense. However, keep in mind that spoiling what could be seen as potential evidence in a case may lead to negative inferences in case your copyright infringement lawsuit goes to Court. This could be deemed “spoilation” of evidence and could lead to several possible results. One case that discussed this principle is Computer Associates Int'l, Inc. v. Am. Fundware, Inc., 133 F.R.D. 166, 168 (D. Colo. 1990) which discussed: “This court has the inherent authority to enter sanctions for discovery abuses. Roadway Express, Inc. v. Piper, 447 U.S. 752, 765, 100 S.Ct. 2455, 2463, 65 L.Ed.2d 488 (1980). If the abuses are egregious, default judgment is appropriate. National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 643, 96 S.Ct. 2778, 2781, 49 L.Ed.2d 747 (1976). This inherent power has been reinforced by Fed.R.Civ.P. 37(b)(2). In pertinent part, that rule reads: “If a party … fails to obey an order to provide or permit discovery … the court in which the action is pending may make such orders in regard to the failure as are just, and among others the following: … (C) An order striking out pleadings or parts thereof … or rendering a judgment by default against the disobedient party.” Other courts have exercised this power to enter default judgments as punishment for a defendant's destruction of documents. Wm. T. Thompson Co. v. General Nutrition Corp., 593 F.Supp. 1443, 1455–56 (C.D.Cal.1984); Telectron, Inc. v. Overhead Door Corp., 116 F.R.D. 107 (S.D.Fla.1987).” Courts have held that the duty to preserve evidence can apply even BEFORE a lawsuit is filed (i.e. pre-litigation). See the Silvestra case, 271 F.3d 583 which stated: “Spoliation refers to the destruction or material alteration of evidence or to the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation.” See Silvestri v. Gen. Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001).
Contact a Copyright Infringement Law Firm to discuss your case.
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