Year 2000 Self-Help: Two Possible Defenses To Charges Of Copyright Infringement When A Software Licensee Performs Its Own Y2K Fix

Many software licensees are now investigating ways to ensure that their software does not fall victim to the Year 2000 problem. If the manufacturer is either unwilling to fix the software or is willing to do it only for a fee, the licensee may prefer to remedy the problem itself, by either hiring an outside contractor to do the work or having its MIS staff perform the fix. The fix will involve entering into and altering the source code of the software. (The source code is the specialized alphanumerical language that computer programs are written in, like FORTRAN. Translated from the source code, the object code is a binary code that the computer reads.) Depending on the cost of the fix, the licensee may wish to sue the manufacturer under a products liability or warranty theory. Since software is copyrightable in both source and object code form as a "literary work," the manufacturer could assert in response that the licensee has violated the owner's copyright by entering and altering the source code.

The Copyright Act grants a copyright owner exclusive rights to reproduce the copyrighted work, to prepare "derivative works" based upon the work, and to distribute copies of the work to the public by sale or other transfer of ownership, or by rental, lease, or lending. A derivative work consists of "editorial revisions, annotations, elaborations, or other modifications, which as a whole, represent an original work of authorship . . . ." 17 U.S.C. §101.

In a copyright owner's countersuit against a licensee for performing a Year 2000 fix, the owner will likely contend that the licensee improperly created a derivative work. For example, in CMAX/Cleveland, Inc. v. UCR, Inc., 804 F. Supp. 337 (M.D. Ga. 1992), the Court illustrated the meaning of derivative work within the context of computer software. There, the court held that the software licensee, UCR, infringed the copyright of the developer, Computermax. UCR had decided to modify Computermax's software after Computermax refused to do so. UCR argued that its work was substantially different from that of Computermax because a number of data fields not in the Computermax work appeared in the UCR System file formats, screens and reports. The Court concluded that the UCR system infringed on the Computermax system and that the UCR system was at a minimum a derivative work and therefore infringing:

Any contribution by the Defendants is irrelevant because the Court has concluded that the UCR System was based upon the RMAX Remote Store System. As indicated, even Defendant's expert indicated that there were "shadows" of the RMAX Remote Store System throughout the UCR System.

Id. at 355-56.

Defenses to the Copyright Claim

If a Court were to decide that a licensee's Year 2000 fix is a derivative work, the licensee could raise at least two defenses: fair use and 17 U.S.C. §117 (which provides limitations on exclusive rights relating to computer programs).

Fair Use

The fair use doctrine is defined in the Copyright Act:

. . . the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by another means specified by that section, for purposes such as criticism, comment, news re- porting, teaching (including multiple copies for classroom use), scholarship, or research is not an infringement of copyright.

17 U.S.C. §107. The Act lists four facts that should be considered:

17 U.S.C. §107.

The Ninth Circuit has held that the disassembly and re-compilation of source code is a form of reverse engineering and can constitute fair use. Sega Enterprises Ltd. v. Accolade, Inc., 977 F.2d 1510, (9th Cir. 1992). In that case, the defendant, Accolade, sought to make its own computer games compatible with the Sega-Genesis system. To do that, it reverse-engineered Sega's video game programs. The court said that Accolade's actions constituted fair use. Analyzing the four factors, it concluded that (1) the purpose was legitimate, even if commercial, and ruled that no other method of studying the compatibility requirements was available to Accolade; (2) it was the only way that Accolade could understand the functional requirements for Genesis compatibility; (3) because Accolade's ultimate use was limited to the compatibility aspect, the fact that Accolade copied the entire program carried little weight; and (4) the entire program was not entitled to protection. Those elements that were functional were not protected expression. The court concluded, "where disassembly is the only way to gain access to the ideas and functional elements embodied in a copyrighted computer program and where there is a legitimate reason for seeking such access, disassembly is a fair use of the copyrighted work, as a matter of law." Id. at 1527-28.

By contrast, in Atari Games Corp. v. Nintendo of America, Inc., 975 F.2d 832 (Fed. Cir. 1992), the Federal Circuit held that Atari infringed Nintendo's copyright when it reverse- engineered Nintendo's computer games to allow it access to a Nintendo system. Like the Ninth Circuit in Sega, the court recognized that "reverse engineering object code to discern the undetectable ideas in a computer program is a fair use". Id. at 844. Before filing suit, however, Atari had obtained from the Copyright Office a copy of Nintendo's source code by misrepresenting that it was already in litigation with Nintendo. The court rejected Atari's bid to invoke the fair use doctrine. The court observed that "[f]air use to discern a work's ideas … does not justify extensive efforts to profit from replicating protected expression." Furthermore, because Atari was not authorized to have a copy of the source code, it was not entitled to invoke the fair use doctrine. Id. at 843. "The Copyright Act permits an individual in rightful possession of a copy of a work to undertake necessary efforts to understand the work's ideas, processes and methods of operation." Id. at 842.

As noted, Section 107(2) of the Act specifically directs that the Court examine the nature of the work when determining if a reproduction of it is fair use. Presuming that the software at issue is materially non-compliant, there is good ground to argue that correction of the software constitutes fair use. This would also presume, however, that the customer does not then market the revised software for the customer's own financial benefit and that the customer was working from an authorized copy or copies.

Section 117 – Use of Computer Program

17 U.S.C. §117 provides that it is not infringement when the owner of a copy of a computer program makes another copy or adaptation of that computer program provided:

(1) that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner . . . .

One reason why Section 117(1) was added to the Copyright Act was "because the placement of any copyrighted work into a computer is the preparation of a copy since the program is loaded into the computer's memory." Sega, 977 F.2d at 1520. However, according to the Sega court, "Section 117 does not purport to protect a user who disassembles object code, converts it from assembly into source code and makes photocopies of the refined source code version." Id. The Sega court's comments should be kept in context because Atari improperly obtained Nintendo's source code from the Copyright Office.

An opinion by the Second Circuit offers another perspective. If the rightful owner of a copy cannot use that software copy with their computer, Section 117 probably gives the owner of the copy a right to adapt the software. Aymes v. Bonelli, 47 F.3d 23 (2d Cir. 1995). There, the court held that a corporation did not infringe a programmer's copyright when it altered a program to keep the program current from year to year. The court said, "The changes made . . . were necessary changes" to permit "continuing use of the software." Id. at 26. The Court quoted extensively from the report of the National Commission on New Technological Uses of Copyrighted Works, a report which led to the promulgation of Section 117.

Because of a lack of complete standardization among programming languages and hardware in the computer industry, one who rightfully acquires a copy of a program frequently cannot use it without adapting it to that limited extent which will allow its use in the possessor's computer. The copyright law, which grants to copyright proprietors the exclusive right to prepare translations, transformations, and adaptations of their work, should no more prevent such use than it should prevent rightful possessors from loading programs into their computers. Thus, a right to make those changes necessary to enable the use for which it was both sold and purchased should be provided.

Id. (emphasis added).

In today's environment when many businesses are requiring their vendors to provide Year 2000 compliance letters, it would seem hard to argue that Year 2000 fixes are unnecessary to enable the use of software or ongoing commerce. Section 117 can therefore be invoked as a defense against a software maker's counterclaim of infringement, as the fix involved constitutes "changes necessary to enable the use" for which the software was sold.