A recent case in the Ninth Circuit Court of Appeals demonstrates the high risks that software licensees take if they use their software outside the scope of the license. According to the facts in Wall Data Incorporated v. Los Angeles County Sheriff's Department (Copybites Case Summary available here), the LA Sheriff's Department had purchased 3,633 RUMBA software licenses from Wall Data. Rather than take the tedious route of installing software manually, which it used initially, the LA Sheriff's Department decided to put the Rumba software on a master hard drive that was then copied onto 6,007 new computers. To supposedly keep within the bounds of the software license, the Sheriff's Department installed a password-based security system that one had to log into before using RUMBA. Unsurprisingly, the plaintiff, less than thrilled with the Sheriff’s Department’s approach, sued for copyright infringement.

Generally speaking, the Ninth Circuit consistently flayed apart the Sheriff's Department’s fair use defense. According to the Sheriff’s Department, its use of RUMBA software in this unusual manner was protected by fair use, “because it has done nothing more than apply technology to make the broadest authorized use of its license.” The Ninth Circuit saw things otherwise, as the verbatim copying was performed by the Sheriff's Department and used for the same purpose as provided for in the software license. Consequently, the Ninth Circuit saw no reason to favor the Sheriff's Department's arguments under any of the traditional factors considered in fair use analysis. The court's justification here was that if the Sheriff's Department had wanted to install software in this manner, it could have easily negotiated for a license to achieve that result. In contrast, if the court provided the Sheriff's Department with its fair use defense, it would negate the commercial importance of licensing without promoting creativity or advancing public knowledge. Hence, the fair use defense advocated by the Sheriff’s Department would harm creative incentives provided to the copyright holder, without any corollary benefit to the public, thereby making it contrary to the purpose of Copyright law to promote creativity.

Of particular interest within this case is the appeals court's view on the heightened vulnerability of computer software to copyright infringement. Citing a lower court opinion, the Ninth Circuit stated, "One of the primary advantages of software, its ability to record, concentrate and convey information with unprecedented ease and speed, makes it extraordinarily vulnerable to illegal copying and piracy. [Thus,] it is important to acknowledge these special characteristics of the software industry and provide enhanced copyright protection for its inventors and developers."

While one could dismiss this as court dictum, it is nonetheless an interesting position taken by the Ninth Circuit. First, one could interpret this comment as the Ninth Circuit signaling to litigants and lower courts alike that a heightened standard of fair use must be satisfied for computer software use, as opposed to other creative endeavors, such as book publishing. More importantly, this reasoning could have important fair use consequences for other digital content outside the realm of software. For example, if a person displays a digital film recording outside the scope of his or her license, will any claims of fair use also be subject to a heightened standard of analysis? Considering the ease with which software publishers can impose licensing terms on consumers (see, e.g., ProCD), one might wonder if the same licensing approach in digital media could also limit fair use defenses by consumers. For instance, a consumer who purchases a CD that contains an explicit shrink-wrapped license could, under a heightened fair use standard and ProCD-like standard, face serious consequences for activities not permitted by the license. Of course, whether the Ninth Circuit or other courts will go this far is an open question, but nonetheless Wall Data Incorporated provides persuasive arguments on fair use exemptions that a future court might have to contend with when examining fair use and digital media in general.

NOTE: This post was written by Cory Hojka and is purely for informational purposes. Mr. Hojka is the editor of Copybites, a law blog focused on copyright law. He is also a third year student at the University of Chicago Law School.