Recent 9th Circuit copyright misuse case
A recent case in the 9th Circuit reinforces limitations on the copyright misuse doctrine. In Altera v. Clear Logic,Download file, Clear Logic claimed that Altera's software license agreements contained terms that constituted copyright misuse, but the Court held that this could only be raised in the context of an infringement claim.
Altera and Clear Logic compete in the semiconductor industry. Altera manufactures programmable logic devices (PLDs), and licenses its software to customers to assist them in developing their chips. Clear Logic, on the other hand, sells Application Specific Integrated Circuits (ASICs). PLDs can be programmed and reprogrammed to refine the chip, whereas ASICS are generally cheaper but cannot be programmed. Therefore, customers will often start with PLDs and then switch to ASICs once they have refined their chip design.
Clear Logic asked its customer send them the output of their PLD programming efforts derived from use of the Altera software. This output was a bitstream file that could be used to produce ASICs that were compatible with Altera chips. Because of the competitive threat this posed, Altera sued Clear Logic for violating its mask work rights under the Semiconductor Chip Protection Act of 1985, as well as for inducing its customer to breach their software license agreements and for tortious interference with those contracts.
Copyright Misuse Defense Rejected
The Altera license agreement restricted use of the software to "programming logic devices manufactured by Altera and sold by Altera". Clear Logic challenged this restriction as copyright misuse, on the basis that Altera's license agreements operated an as illegal tying arrangement to control competition in an area outside the copyright, i.e., Altera's chip hardware.
The district court held, and the 9th Circuit affirmed, that the copyright misuse defense could not lie because there was no allegation of copyright infringement. The Court reviewed its prior copyright misuse rulings in Practice Management v. American Medical Association (9th Cir. 1998) and A&M v. Napster (9th Cir. 2001), and Sony Computer Entertainment v. Connectix Corp. (9th Cir. 2000), in which the doctrine was specifically described as a defense to copyright infringement.
"Because the remedy for copyright misuse is equitable, it makes little sense to allow Clear Logic to proceed on an independent claim for copyright misuse when there has been no allegation of copyright infringement."
"We cannot now void the license agreements under the pretext of refusing to enforce a copyright that has not been asserted. Copyright misuse is not a defense to the state law claims asserted by Altera."
This ruling suggests that so long as a copyright holder seeks state law redress to enforce its contracts rather than alleging copyright infringement, the terms of its contract could be immune from a misuse challenge. For useful background see article on patent misuse by Robin Feldman, which among other things surveys cases involving breach of contract and infringement claims.
However in the 9th Circuit's ruling in the Practice Management case, a publisher and distributor of medical books sought declaratory relief against the AMA. It successfully argued that the AMA misused its copyright by entering into an agreement with a government agency that required use of a copyrighted medical code taxonomy to the exclusion of any other code. Thus it appears that declaratory relief could be a path to assert copyright misuse even in the absence of a pending infringement claim.
Copyright Preemption Defense Rejected
The Court also followed existing precedent that Altera's state law claims based on its license contracts were not preempted by the Copyright Act, citing Summit Machine Tool v. Victor CNC Systems, (9th Cir. 1993), Bowers v. Baystate, (Fed. Cir. 2003), National Car Rental v. Computer Associates, (8th Cir. 1993), and ProCD v. Zeidenberg (7th Cir. 1996). The Court found Altera's contract similar to that in ProCD, in which a shrinkwrap license put restrictions on use of information obtained through the license.
"Likewise, Altera's customers use software to create a bitstream (which is essentially information) and provide that information to Clear Logic, despite the terms of the agreement that restrict the customers to using that information for programming Altera products. The right at issue is not the reproduction of the software as Clear Logic argues, but is more appropriately characterized as the use of the bitstream."
"We find these cases compelling. A state law tort claim concerning the unauthorized use of the software's end product is not within the rights protected by the federal Copyright Act, and accordingly, we affirm the district court's ruling rejecting preemption."
A Rare Ruling under Semiconductor Chip Protection Act
The case is also noteworthy because it is only the second reported case interpreting the Semiconductor Chip Protection Act, 17 U.S.C. Sections 901-914, which created sui generis protection for mask works embodied in semiconductor chips. The first case was Brooktree Corp. v. Advanced Micro Devices, Inc., (Fed. Cir. 1992). With two cases in twenty years, this reflects that mask work rights are clearly not a meaningful type of intellectual property protection for the semiconductor industry.
Cathy Kirkman is a partner at Wilson Sonsini Goodrich & Rosati in Palo Alto, California. Her practice focuses on intellectual