Reverse engineering of competitor’s software cost company big

Companies developing software to mimic the functionality of competitors’ products should beware the broad scope of what may constitute reverse engineering. A recent federal case from the Fourth Circuit underscores this idea.

Background – the Development Process

Plaintiff SAS and defendant WPL are competitors in the market for software used to manage and analyze large and complex sets of data. Plaintiff for many years has distributed its proprietary software applications (the SAS System) that run programs written in the eponymous language SAS. WPL sought to create an application to compete with the SAS System, namely, an application it could take to market that would run programs written in SAS. It successfully developed such an application (called the WPS), and customers began dropping the SAS System in favor of the WPS.

As part of its efforts to develop the WPS, defendant obtained a license to use the “Learning Edition” provided by plaintiff – an environment designed for programmers to learn how to code in SAS. Among the provisions in the software license agreement for the Learning Edition was a restriction against reverse engineering the software.

In developing the WPS, defendant did not try to decompile the Learning Edition, or otherwise “tear it down” or “look under the hood.” Instead, it would run SAS code through both the Learning Edition and the WPS, evaluate the outputs from both systems, and tweak the C++ code comprising the WPS to get the outputs to match.

Trial Court Litigation

Plaintiff sued defendant in both U.S. federal court and the U.K. alleging a number of claims, including copyright infringement, breach of contract, deceptive trade practices, and fraud. Of particular importance was the breach of contract claim – plaintiff claimed that defendant’s method of developing the WPS, through adjusting the WPS code based on output compared with Learning Edition output – was reverse engineering prohibited under the terms of the Learning Edition license agreement.

The lower court agreed with plaintiff, and found defendant liable for breach of contract due to reverse engineering, at the summary judgment stage. The case proceeded to trial on other issues where, along with the damages for breach of contract and for deceptive trade practices, the court awarded almost $80 million in damages to plaintiff. Defendant sought review with the Fourth Circuit. On appeal, the court affirmed the lower court’s decision on the reverse engineering issue.

Appellate Court: This Was Reverse Engineering

More specifically, defendant had argued on appeal that the lower court’s summary judgment on the breach of contract/reverse engineering claim was improper because the term “reverse engineering” in the license agreement was ambiguous. Plaintiff and defendant offered competing definitions for what they thought reverse engineering ought to mean. Defendant proposed a narrow definition – essentially, that reverse engineering must have as its objective the re-creation of source code. Plaintiff, however, offered a broader definition, encompassing other efforts to “analyze a product to learn the details of its design, construction, or production in order to produce a copy or improved version.”

The differences in definitions were important – defendant had not sought to, nor did, access or copy the source code of the Learning Edition. If the definition of reverse engineering were limited to the re-creating of source code, then the development of the WPS should be okay.

But the court did not agree with defendant. Finding the language in the software license agreement to be unambiguous, the court observed that “nontechnical words are to be given a meaning consistent with the sense in which they are used in ordinary speech, unless the context clearly requires otherwise.” The court then consulted dictionary definitions for the term “reverse engineer” and also evaluated the broad vs. narrow definitions proposed by the parties in light of other prohibitions (e.g., against “reverse assembly” and “decompilation”) in the same provision of the license agreement. Simply stated, the court found that the agreement was clear on what conduct constitutes reverse engineering, and defendant’s actions fit within that scope.

SAS Institute, Inc. v. World Programming Ltd., — F.3d —, 2017 WL 4781380 (4th Cir. October 24, 2017)

See also:

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Court orders transfer of domain name at preliminary injunction stage of trademark case

Plaintiff sued a competitor under the Anticybersquatting Consumer Protection Act (15 U.S.C. 1125(d) (“ACPA”)) and brought other trademark-related claims concerning the competitor’s alleged online scam of selling infringing nutritional supplement products. Plaintiff also sued the domain name privacy protection service Namecheap, which the competitor had used to register the domain name. As part of the order granting plaintiff’s motion for preliminary injunction, the court ordered Namecheap to transfer the domain name to plaintiff.

The court noted that a preliminary injunction “is an extraordinary remedy never awarded as of right,” and that the “traditional purpose of a preliminary injunction is to protect the status quo and to prevent irreparable harm during the pendency of the lawsuit.” Given these parameters, one may be reasonably surprised that the court went so far as to transfer the domain name before the case could be taken all the way through trial. Usually the transfer of the domain name is part of the final remedy awarded in a cybersquatting case, whether under the ACPA or the Uniform Domain Name Dispute Resolution Policy.

The opinion did not address the issue of whether the domain name transfer prior to trial might go further than to “protect the status quo”. It would seem the court could have just as easily protected the status quo by ordering the domain name not be used. The court apparently found the evidence to be drastically in favor of plaintiff. And since the defendant-competitor did not show up for the hearing, plaintiff’s evidence went unrebutted.

Nutramax Laboratories, Inc. v. Nutra Max Labs, Inc., 2017 WL 4707447 (D.S.C. October 20, 2017)

See also:

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Google and YouTube protected by Section 230

The case of Weerahandi v. Shelesh is a classic example of how Section 230 (a provision of the Communications Decency Act (CDA), found at 47 USC 230) shielded online intermediaries from alleged tort liability occasioned by their users.

Background Facts

Plaintiff was a YouTuber and filed a pro se lawsuit for, among other things, defamation, against a number of other YouTubers as well as Google and YouTube. The allegations arose from a situation back in 2013 in which one of the individual defendants sent what plaintiff believed to be a “false and malicious” DMCA takedown notice to YouTube. One of the defendants later took the contact information plaintiff had to provide in the counter-notification and allegedly disseminated that information to others who were alleged to have published additional defamatory YouTube videos.

Google and YouTube also got named as defendants for “failure to remove the videos” and for not taking “corrective action”. These parties moved to dismiss the complaint, claiming immunity under Section 230. The court granted the motion to dismiss.

Section 230’s Protections

Section 230 provides, in pertinent part that “[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” 47 U.S.C. § 230(c)(1). Section 230 also provides that “[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.” 47 U.S.C. § 230(e)(3).

The CDA also “proscribes liability in situations where an interactive service provider makes decisions ‘relating to the monitoring, screening, and deletion of content from its network.’ ” Obado v. Magedson, 612 Fed.Appx. 90, 94–95 (3d Cir. 2015). Courts have recognized Congress conferred broad immunity upon internet companies by enacting the CDA, because the breadth of the internet precludes such companies from policing content as traditional media have. See Jones v. Dirty World Entm’t Recordings LLC, 755 F.3d 398, 407 (6th Cir. 2014); Batzel v Smith, 333 F.3d 1018, 1026 (9th Cir. 2003); Zeran v. Am. Online, Inc., 129 F.3d 327, 330 (4th 1997); DiMeo v. Max, 433 F. Supp. 2d 523, 528 (E.D. Pa. 2006).

How Section 230 Applied Here

In this case, the court found that the CDA barred plaintiff’s claims against Google and YouTube. Both Google and YouTube were considered “interactive computer service[s].” Parker v. Google, Inc., 422 F. Supp. 2d 492, 551 (E.D. Pa. 2006). Plaintiff did not allege that Google or YouTube played any role in producing the allegedly defamatory content. Instead, Plaintiff alleged both websites failed to remove the defamatory content, despite his repeated requests.

Plaintiff did not cite any authority in his opposition to Google and YouTube’s motion, and instead argued that the CDA did not bar claims for the “failure to remove the videos” or to “take corrective action.” The court held that to the contrary, the CDA expressly protected internet companies from such liability. Under the CDA, plaintiff could not assert a claim against Google or YouTube for decisions “relating to the monitoring, screening, and deletion of content from its network. ” Obado, 612 Fed.Appx. at 94–95 (3d Cir. 2015); 47 U.S.C. § 230(c)(1) (“No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”). For these reasons, the court found the CDA barred plaintiff’s claims against Google and YouTube.

Weerahandi v. Shelesh, 2017 WL 4330365 (D.N.J. September 29, 2017)

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

YouTubers get fair use win in copyright suit brought over reaction video

Plaintiff makes videos and posts them to YouTube. Defendants took snippets of one of plaintiff’s videos, interspersed those snippets with their own commentary about the content of those snippets, and posted that to their YouTube channel. Plaintiff sued for copyright infringement. Defendants moved for summary judgment, arguing they were entitled to the affirmative defense of fair use.

The court granted the defendants’ motion for summary judgment. It found that “[a]ny review of the defendants’ video leaves no doubt that it constitutes critical commentary of the [plaintiff’s] video.” It also found there is “no doubt that the [defendants’] video is decidedly not a market substitute for the plaintiff’s video.” Leaning on these elements – the first and fourth elements of the Copyright Act’s four-factor analysis – the court found in favor of defendants on their fair use defense.

Hosseinzadeh v. Klein, No. 16-CV-3081 (S.D.N.Y., August 23, 2017)

More coverage at TechCrunch.

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Toilet paper bearing Trump tweets a copyright problem?

This report from Fox News discusses toilet paper available via Amazon printed with Donald Trump tweets. It raises the question of whether the president would be able to stop the sale of this product and seek damages for copyright infringement. Assuming the tweets are printed without his permission, could he make a claim?

tp_tweets

There are a number of issues to consider here.

The first is the long-kicked-around question of whether tweets are copyrightable. In other words, do they contain enough and the kind of content to rise to the level of originality that copyright law requires? One would be hard pressed to argue that a tweet not comprised just of facts is outside copyright’s protection. Though only 140 characters, there is plenty of room for originality. If a tweet is not copyrightable, then neither would The Red Wheelbarrow.

The second issue is whether the tweets may not be subject to copyright because they are a work of the federal goverment. Section 105 of the Copyright Act says that “[c]opyright protection . . . is not available for any work of the United States Government.” This splits out into a couple of other issues. Are the tweets from when their author was president? And even if they are, would tweets from a personal account be a “work of the United States Government”?

The article gives us an answer to the first question, which postpones the opportunity to answer the second one. The tweets are from before he became president. So there does not appear to be much standing in the way of the Donald fighting these on copyright grounds if he were to so choose.

But not so fast. What about fair use? Obviously the nature of the product is a commentary on the content printed upon it.

What a crappy situation. Maybe Amazon will just flush this product from its site before we get there.

Online terms of service restricting competitor access to website were unenforceable

If you are in the habit of reading online terms and conditions, you may have encountered a provision that looks something like this:

You may not use the site to gain competitive intelligence about [Provider] to compete with [Provider] or its affiliates.

A court recently held that a provision containing essentially this language was not enforceable against a competitor accused of accessing and copying website content. The court found the provision to be an overly broad non-compete covenant under applicable state law, and likely against public policy. For this reason (among others), the court denied the plaintiff website owner’s motion for a temporary restraining order against the defendant competitor.

The court observed that the restriction was without any geographic or temporal limit. Nor was the provision saved by the requirement that use of “competitive intelligence” be the subject of restricted use. In this particular case, plaintiff was complaining of defendant’s use of information on the publicly-visible portions of plaintiff’s website. Under Illinois law, in order for a covenant not to compete be enforceable, the covenant must secure some “protectable interest” such as a trade secret. For purposes of denying the motion for a temporary restraining order, the court found that a covenant restricting the use of such widely disseminated, freely available information is likely unenforceable.

TopstepTrader, LLC v. OneUp Trader, LLC, 2017 WL 2798397 (N.D. Ill. June 28, 2017)

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Reports to advertisers about website content were protected speech

Plaintiff sued defendant in California state court for trade libel and other business torts over confidential reports that defendant provided to its customers (who advertised on plaintiff’s website) characterizing plaintiff’s websites as associated with copyright infringement and adult content.

Defendant moved to dismiss under California’s anti-SLAPP statute which, among other things, protects speech that is a matter of public concern. The trial court granted the anti-SLAPP motion. Plaintiff sought review. On appeal, the court affirmed the anti-SLAPP dismissal.

The court held that the communications concerning plaintiff’s websites (as being associated with intellectual property infringement or adult content) were matters of public concern, even though the communications were not public.

FilmOn.com v. DoubleVerify, Inc., 2017 WL 2807911 (Cal. Ct. App., June 29, 2017)

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Instagram DMCA case over removal of copyright notice moves forward

Linking to the source will not keep you out of copyright trouble.

Defendant clothing company copied and cropped one of plaintiff photographer’s images, making plaintiff’s watermarked copyright notice no longer visible. Defendant posted the cropped version to Instagram and included a link to plaintiff’s Instagram post that contained the original image.

Plaintiff sued for copyright infringement and for unauthorized removal and/or alteration of copyright management information (“CMI”) under 17 U.S.C. 1202(b) (a portion of the Digital Millennium Copyright Act).

Defendant moved to dismiss the action. The court granted the motion as to copyright infringement, but denied the motion as to removal of CMI.

The court dismissed the copyright infringement claim because plaintiff only alleged that she had applied for registration of the copyright in the image but had not yet received the registration certificate. (We covered this issue in a previous post.)

But the court held that registration was not a requirement for the CMI claim under the DMCA. And the court also rejected defendant’s argument that the inclusion of a link to plaintiff’s work undermined any assertion on plaintiff’s part that defendant’s conduct was intentional. (The relevant section of the DMCA concerning CMI includes a requirement that the removal be done “intentionally”).

Gattoni v. Tibi, LLC, 2017 WL 2313882 (S.D.N.Y. May 25, 2017)

Image courtesy of Flickr user Igor Putina under this Creative Commons license. Image cropped.

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

Eleventh Circuit requires copyright owner to obtain registration certificate before filing suit

Although an author owns the copyright in a work the moment he or she creates the work, a court will not hear a case over infringement of the work until the work is registered with the Copyright Office. Here is relevant language from the Copyright Act:

[N]o civil action for infringement of the copyright in any United States work shall be instituted until . . . registration of the copyright claim has been made in accordance with this title.

17 U.S.C. 411(a). Since the Copyright Office issues a certificate of registration when it registers the copyright in a work, one view is that the statute requires a copyright plaintiff to have that registration certificate in hand before filing suit.

But that is not how courts have always applied the statute. Other language in the Copyright Act says that:

the owner of copyright or of any exclusive right in the work may obtain registration of the copyright claim by delivering to the Copyright Office the deposit specified by this section, together with the application and fee specified by sections 409 and 708 [of the Copyright Act].

17 U.S.C. 408(a). Notice how 408(a) does not talk about receiving a registration certificate – it seems to indicate that registration occurs simply by the owner submitting the application, fee and deposit. Some courts have read this portion of the statute this way, and allowed a plaintiff to file suit for copyright infringement after submitting the materials to the Copyright Office but before the registration certificate is issued.

So there is a split among the federal circuits on this issue, namely, between the “registration approach” (requiring certificate in hand) and the “application approach” (requiring only that the application, fee and deposit have been made).

Recently, the Eleventh Circuit Court of Appeals weighed in on the issue. It sided with the registration approach – holding that the plain language of the Copyright Act requires it.

Plaintiff owned the copyright in online articles to which it granted a license to defendant website operator under a subscription agreement. The agreement required defendant to discontinue publication of the licensed content when the agreement terminated. But after termination, the articles remained online. So plaintiff sued for copyright infringement.

The lower court dismissed the action on defendant’s motion because plaintiff had not alleged receipt of the copyright registration certificate in the works at issue. It had only alleged that it had filed the applications to register the copyright claims in the works. Plaintiff sought review with the Eleventh Circuit. On appeal, the court affirmed the dismissal.

The court concluded that the Copyright Act defines registration as a process that requires action by both the copyright owner and the Copyright Office. It relied heavily on language from Section 410 of the Copyright Act that reads as follows:

When, after examination, the Register of Copyrights determines that, in accordance with the provisions of this title, the material deposited constitutes copyrightable subject matter and that the other legal and formal requirements of this title have been met, the Register shall register the claim and issue to the applicant a certificate of registration under the seal of the Copyright Office.

17 U.S.C. 410 (emphasis added). Bolstered by the dictionary definition of “after,” the court held “that registration occurs only after examination of an application necessarily means that registration occurs ‘[l]ater in time than’ or ‘subsequent to’ the filing of the application for registration.”

Fourth Estate Public Benefit Corporation v. Wall-Street.com, LLC, —F.3d —, 2017 WL 2191243 (11th Cir. May 18, 2017)

See also: Is a copyright registration required before filing an infringement lawsuit?

Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.

UDRP complainant denied relief where disputed domain name also contained competitor’s trademark

A National Arbitration Forum panel denied relief to industrial manufacturer NSK (owner of the same mark) in a dispute over the domain name <skfnsk.com>. The panel found that the complainant did not meet the first element under the Uniform Domain Name Dispute Resolution Policy (UDRP) – the disputed domain name was not confusingly similar to the complainant’s NSK mark..

The case serves as an example of a panel departing from the ordinary determination that a disputed domain name incorporating the complainant’s mark as a whole will suffice to demonstrate confusing similarity.

The distinguishing fact in this case was that the other portion of the mark (SKF) is the trademark of one of the complainant’s competitors. The panel cited two other cases where complainants were denied relief in UDRP actions over disputed domain names containing both the complainant’s mark and that of another company. In NIKE, Inc. and Nike Innovate, C.V. v. Mattia Lumini and Yykk Snc, NAF Case No. FA1679233 (July 15, 2016), the panel denied relief to Nike over the disputed domain name <nikegoogle.com>. Similarly, in Dell Inc. v. Ionel Adrian Nicolae, NAF Case No. FA1683104 (August 22, 2016) the panel held that “Nvidia Corp. has not been joined as a Complainant in this matter and there is no nexus available through which Complainant can claim to have rights to the transfer of the <alienware-nvidia.xyz>”

NSK LTD. v. Li shuo, NAF Case No. 1683104 (February 16, 2017)

This post also appeared on UDRP Tracker.


Evan_BrownAbout the Author: Evan Brown is a Chicago technology and intellectual property attorney. Call Evan at (630) 362-7237, send email to ebrown [at] internetcases.com, or follow him on Twitter @internetcases. Read Evan’s other blog, UDRP Tracker, for information about domain name disputes.
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