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A primer on software piracy cases in the courts
123
A Primer on Software Piracy Cases in the Courts Morrison
Bump,
1. Introduction
Jr. Esq.
to Software
Piracy
1. I. Definition As with much technological change, the law and judicial system have lagged behind in adapting to the changing world of computer and software development. Changes in software development have created new classes of criminals and contract violators, and new theories and techniques to catch them. This paper discusses the fate of one breed of computer criminal, the softunre pirate, before the courts. Software piracy is a relatively recent type of computer crime because software development or engineering is no longer a custom design operation for particular organizations on particular computers. Software is now being produced for mass consumption and the ‘generic’ software package is not far off. Software packages may be very valuable even though they may be stored in a compact place, (like Jewelry or money) such as on a microprocessor chip or a floppy disk. Software packages may vary in price from tens of dollars to millions of dollars. As with the related and booming practice of video disk piracy, it is often easy to make multiple copies of software for a miniscule fraction of the average original development cost. Despite the widely acknowledged existence of widespread software piracy. there have been very few cases reaching the civil courts and nearly none before the criminal courts. There are several explanations: few pirates are caught. few owners of software are willing or able to press a claim in court, most cases are settled out of court, and perhaps there is not so much software piracy after all; or a combination of all of them. This paper does not try to answer the question of why there are so few cases. Instead, it presents the bare facts from the existing cases and categorizes the source of the piracy. i.e. how did the pirate or alleged pirate come to possess the software in the first instance and what happened to him or her. The presentation of cases here is not complete, for the legal reporting systems are also not up-to-date. Indeed, the phrase, “software piracy” does not appear in legal reports’ indices, nor legal dictionaries. More research is needed, but the patterns found in the 31 cases here will probably continue as the sample increases. From such patterns, software owners and legal practttioners can better see what they are up against. Keywords; Computer crime, Software piracy. Copyright, terfeit software. Patent. Software, Trade secret.
North-Holland Computers & Security 0167-4048/84/$3.00
3 (1984) 123-134 B 1984. Elsevier Science Publishers
Coun-
This article concerns one subset of computer crime: software piracy. The focus is not, as is the case with most articles on software piracy, on how to prevent it technically or legally, but on the facts of actual cases as recorded in judicial proceedings. This article collects and organizes basic information about known or alleged software pirates who have been pursued in the criminal and civil courts. “Computer crime” fascinates us non-criminals who: obsession with technology 1. Share the American and are sure that there is a technological solution to all problems (except where the technological solutions become problems themselves); impressed by the amounts of 2. are justifiably money that can be acquired with the meager physical labor of a few short keystrokes; 3. are impressed with the cleanliness of computer crime, i.e. no blood, or bodies to dispose, 4. are captivated by the apparent ease of escaping unscathed by the law, unless conspicuous consumption occurs, and 4. don’t know how to commit computer crime. This fascination is illustrated by the recent popularity of the movie “War Games”, and the extensive media coverage given to instances of “comhave gained unputer trespass”, where individuals authorized entry into computer systems. The term piracy is borrowed from another world
Morrison Bump, Jr. is employed by Digital Equipment Corporation in Northboro, Massachusetts as a Commodity Manager. He was formerly a Software Commodity Manager for external software acquisition for Digital’s internal use. He came to his current position with a J.D. from Boston University Law School. and M.P.A. from Northeastern University and a B.A. from Yale University. He is currently studying for an M.B.A. at Babson College in Wellesley, Massachusetts, where he prepared the basis for this article for a computer course taught by Leslie Ball, a member of the editorial board of Computers and Security. The views expressed herein are solely those of the author, and not of his employer.
B.V. (North-Holland)
124
M. Bump / SoJtwure Ptrcrc:,
in another century. One wonders who first applied the term to software, with its connotated images of swashbuckling, eye-patched, wooden-legged sailors of the Caribbean and Mediterranean. However fascinating and romantic, computer crime and software piracy are serious matters in a country which leads the world in computerization. In the future, such piracy can be expected to grow exponentially (even from its uncertain current level) just as the use of computers is increasing exponentially. Piracy is defined here as: the unauthorized taking, appropriation, reproduction, or use of a softwure progrum for its intended function, where the progrum is recognized as un item of o&e. This paper focusses on cases where the software piracy is alleged or found to be a legal wrong. Not included are cases of software piracy where it was considered incidental due to the drama or magnitude of the other aspects of computer crime. The analogy to real pirates still holds, for it was considered piracy when a bucanneer “borrowed” a ship for a few days and returned, and it was also piracy when he stole the ship, forced the captain to walk the plank, kidnapped the crew, stole the cargo, drank the grog, and then went on to steal another ship (and buried some treasure along the way). Under both scenarios, the pirate was hanged if caught, but with the second scenario the mere use of the ship was lost in the legal fog surrounding murder, theft, and kidnapping. Regarding software piracy, this paper focusses on the ” unauthorized taking, appropriation, reproduction, or use” only, and not the other related actions or the products of that use. Recently, an informal computer club of about 12 people gained access to unclassified information in the computer at the U.S. Los Alamos, New Mexico, atomic research laboratory. They obtained access through the communications network, TELENET [l]. Although the FBI investigated the “raid,” it is unlikely that criminal prosecution will result. More likely, the authorities will ask the club how they did what they did in order to improve security on the relevant systems. However, if the club were brought to court, it would probably be for some definition of trespass or illegal access to the Los Alamos computers. If they had shut down the atomic energy laboratory, or otherwise interfered, then that would have been the major news, as in “WAR GAMES,” but it
would not have been piracy since the Los Alamos software would not have been used for an intended purpose. The only actual software piracy, as defined above, would have been for the unauthorized use of TELENET if they did not already have access rights. On the other hand, if. once inside the Los Alamos system, they had used the programs there to help solve nuclear physics problems for school homework, then that, too, would have been piracy as defined above. 1.2. Piracy crime
distinguished
from
“clussic” computer
The classic computer crime involves unauthorized access such as was committed by Mark Rifkin, who gained access to a bank’s computer system and made an unauthorized transfer of $10.2 million to another bank for his subsequent withdrawal [2]. The victims, of this and other notorious computer crimes, and the courts were primarily concerned with the resulting theft of money and not the unauthorized use of the software. In such cases, the software programs made relatively little difference as individual keystrokes were used to manipulate the subject of the software rather than appropriate the software itself, and because of the relatively minor value of the software. Thus, the Rifkin and related cases are not considered software piracy, as defined here, because they involved the use of the software for an unintended purpose, i.e. to divert funds. They manipulated the software with incorrect data entries. However, Rifkin could have become a software pirate, under the definition used here, if he had also made a copy of the bank’s software and used it elsewhere or sold it. However, in this case, to paraphrase Willie Sutton, that was not where the money was. I. 3. Software piracy is growing With the increasing creation, use, sale and value of packaged software programs, software piracy is also increasing, as is accompanying legal and media attention. In 1978, one source estimated that the total value of the existing software in the world was $100 Billion [3]. In Parker U. Flook, the U.S. Supreme Court cited the figure of $70 Billion [4]. The number of programs is growing at the rate of l,OOO,OOOa year by one estimate [S] and 3,650,OOO
M. Bump / Software Piraq
a year by another [6]. Of course, not all such but for a programs are marketed, nor “piratable,” commodity that virtually did not exist 30 years ago, the growing value of software is tempting prey. like a gold-carrying Spanish galleon. In the not too distant past, computer users would buy a computer, the operating system and one or more language compilers and then develop the rest of the software in-house. In such a world, there was less opportunity to make unauthorized copies which would be useful to another organization because those other organizations could not readily use the software. However, with the increased power and use of computers, and the shortage of in-house programmers, application developers began to market standard software packages - and software pirates took note. There are widely varying estimates of the amount of software piracy. One computer magazine editorial writer noted, “it is obvious that software is being ‘knocked off’ at an alarming rate” [7]. (Actually, the problem is that most piracy is not so “obvious.“). One software company executive observed that “43% of all statistics are made up on the spot.” [8] Nonetheless, he estimated, perhaps “on the spot,” that there are between four and ten (4410) unauthorized copies of the more popular software packages for every one which has been purchased [9]. It is believed that much of the amateur piracy has been by casual pirates in computer clubs who trade software [lo]. The size and composition of the group which is in a position to pirate software has changed radically during the brief history of computing. In 1980, there were approximately 534,000 programmers in the United States [II]. That was the group most likely to be able to use, copy and resell software. However, the explosion of the number of personal computer owners has sent the number of potential software pirates into the millions. One legitimate lead-in to such activity is that owners and creators of software and its accompanying documentation often encourage users to make backup copies to guard against unintended loss. The 1980 amendments to Section 117 of the 1976 Copyright law include a section which authorizes such archival use. Toward that end many computer manuals instruct users on how to make copies of software. The delicate task of computer and software manufacturers is to discourage illegal copying and to permit or facilitate
12s
legal copying - no mean task. They want to make software and hardware as user-friendly as possible, but most of the possible anti-piracy measures are user-‘ un’friendly. 1.4. Software tion
piracy
is attracting
increasing
atten-
Software and computer industry oriented publications are increasingly covering software piracy. Howevery, many such articles use hypotheticals such as: Company X, a software oendor, employs a skilled programmer to help develop a novel software product . The programmer notifies Company X that he is resigning to take a better position at Cornpam Z . . Thereafter, Company Z very rapidib develops software that is functionally identical to the product marketed by Company X. . Company A, a software vendor, provided Company B with a nontransferable license to use its software for internal use only. SubsequentJy, Company A discovers that Company C is marketing amazingly similar software at a lower price. Company C thought that it owned the software since it had ‘purchased’ it from Company B (121. Others describe format:
real situations,
but in disguised
Not long ago the Swiss subsidiary of a multinational U. S. -based chemical company ordered some packugedprograms from a software house in France. When the programs arrived, the Swjiss data-processing people discovered that they had bought programs which were exact copies of those developed by their parent company in the United States. The French software pirates had not even bothered to change the u&es to the metric system (131. Perhaps the feeling is that if real names and places are given, it will cast a poor light on the industry and show would-be criminals how easy it is to commit computer crime. However, that reluctance keeps other computer owners from knowing the seriousness of the computer crime problem. Many companies are reacting to the rise in software piracy by engineering technical obstacles to software piracy. Some have used enciphering methods to prevent unauthorized copying. Recently, Whitesmiths Ltd., a software development
and manufacturing company in Concord, Massachusetts. introduced a new method of protecting software - giving purchasers an emblem-seal to attach permanently to a terminal which is using the software. The company took this action in a perhaps desperate effort to more effectively control piracy. Bill Plauger, President of Whitesmiths. estimates that “software developers lose up to 50 percent of their revenues because of what he terms commercial piracy - and software sales are estimated at $22 billion annually” [14]. Another company, VisiCorp. has announced a product with an Apple-like mouse, Vision; but the mouse is encrypted with a code matching a code on the floppy Vision disk, thereby making pirated software inoperable [15]. If the floppy or mouse is pirated, the codes of each will not match and that will block functionality. Similarly, some small computers will initialize a new software disk by encoding it, making it operable only on that initializing hardware. However, this paper does not analyze the different types of legal, contractual and technical protection available to software owners and developers, nor does it describe the considerable Federal and state legislative activity to increase such protection [15]. A complete discussion of these topies would each require additional volumes. One ironic response to such efforts is the appearance of vendors who sell software which allows users to decipher the “anti-copying” code. Two examples are “Locksmith” and “Nibbles Away 2” [17]. By May 1982, over 15,000 copies of the deciphering programs of these two companies had been sold to allow microcomputer users to make copies of software. The two companies market the packages as legitimate ways to make archival copies, as is permitted by the U.S. Copyright Act, as amended in December 1980. Ironically, the deciphering software of each company is itself protected by ciphers so people cannot make copies of that software.
2. Introduction
to Court Cases
Involving
Software
Piracy 2.1. The court cuses are the tip of the iceberg
It is believed that most software piracy occurs undetected, and even if detected it is not often
publicized. If publicized or exposed, only a small percentage of cases are actually prosecuted in criminal or civil courts. and an even smaller percentage of those actually are reported in journals and casebooks. One estimate is that only 10% of computer crimes have been publicized and, again. software piracy is a small subset of that [18]. One FBI agent estimated that only 12% of detected computer crimes (including, but not limited to software piracy) were reported to law enforcement agencies. Of those, only 18% resulted in convictions. Further, he estimated only one of every 22.000 computer criminals goes to jail 1193. (This report records one case of a software pirate, Robert Hancock, going to jail.) Until now, software piracy has lacked the glamour and the sheer number of dollars of the usually publicized computer crimes. However, the increasing value and scope of applications software will soon erode the validity of this observation. 2.2. One prerequisite
to leg-d uction
is to estuhlish
a
leg-d wrong
It took the courts and legislatures many years to determine what property rights existed in software, in part because it was invisible. Without such rights there was no legal action which could be taken against a person who took the software without authorization. Basically, the legal system did not understand, and was not properly educated to understand, the real value of software. This was especially frustrating for various tax authorities which were not permitted to tax software, even though they knew that software had value. When packages began to be sold in large quantities in the marketplace, the actual value skyrocketed and the legal system was forced to take notice. Because of the large potential losses due to software piracy and the common assumption that it is widespread, it is not surprising that the legal profession began to take notice and produced a large volume of articles in computer-related and legal periodicals about the legal ways to protect software from pirates. Many of those articles focus on the patentability of software programs after a positive or negative court decision, while others explore the application of trade secret law and copyright law to software. Each tries to develop a certain formula for legal protection. There have
been so many such articles and conferences, perhaps crying “wolf,” that one senior computer atof Software: A torney asked. “Legal Protection Matter of Monumental Insignificance?” [20]. Before the Copyright Law was reformed in 1976 to give increased assurance of protection for software, few programs were actually registered with the U.S. Copyright Office. In early 1977. only 1.200 of the estimated then-existing millions of programs were registered. Of those. IBM and Burroughs accounted for 75% [21]. Now, with the adoption of the Copyright Act of 1976. registration is simpler and a copyright is born when the product is created [22]. However, the copyright designation must still be attached to the product and the product still must be registered with the Copyright Office. Trade secret law gives a property right to a company which actively seeks to keep its software codes accessible to only a few, (hence the “secret”). usually with a restrictive license. Few programs are protected by patent law, due to the extensive and expensive patenting process. Once piracy is detected, a software developer OJ owner can seek criminal prosecution for violations of the property rights under any of the above three theories but criminal prosecution is not often used. When the legal system is used, the most common action is a civil suit to enjoin the use of pirated software, or to seek monetary damages or both. Twenty-nine of the thirty-one cases presented below were such civil suits. Despite the availability of judicial recourse, it is believed that most allegations of software piracy are handled more quietly (when pursued at all) through negotiation and/or threats of legal action. This would be one explanation for the small number of such cases, compared to the allegedly widespread occurrence of software piracy. The thirty-one cases below. reported from various media, may be only the tip of the iceberg of actual cases; but with this paper, it’s a visible tip. 2.3. Description
und categorization
of the cuses
The thirty-one cases noted here are an unknown fraction of the total number of cases of software piracy, just as the reported cases of prosecutions of other crimes are but a fraction of those which actually occur. These cases made it to the civil or criminal courts using one or more of three legal
theories: copyright, trade secret, and patent law. Copyright and trade secret theory are used most frequently. In addition. the cases reported here involve the larger violations. usually between companies where substantial sums are at stake. It can be expected that. given the expense of prosecuting defendants in the courts, there will be few cases involving the small personal computer owner who makes a few copies for “friends.” None of the cases reported here involves an otherwise employed microcomputer user making copies for others to use or to sell. The listing of the cases reported and summarized here is not complete, as more research is needed. There is no central reporting resource for all of them, and the major legal reporters use index keys which are not coded for “software piracy.” nor even “software.” Not included here are the increasingly frequent international hardware/software piracy cases where the counterfeit computers, including chips and software, are produced abroad. This category presently involves alleged Apple Computer counterfeits produced in the Far East. Dan Wendin, the lawyer for Apple in charge of the counterfeit problem, estimates that there are over 100 companies making copies of Apples, and at least Apple operating systems, around the world [23]. Apple has filed complaints with the International Trade Commission alleging that 20 foreign and domestic companies have been counterfeiting Apples, and it alleges that foreign counterfeiters have been producing 335,000 Apple II’s monthly [24]. Apple believes that in Hong Kong, counterfeit copies outsell its own Apples by a ratio of 10 to 1 [25]. Apple has won a preliminary injunction against the U.S. distributor, Formula International, of the “Pineapple” computer to prohibit Formula’s distribution of Apple’s copyrighted software [26]. (One intriguing aspect of such counterfeiting has been the apparent focus on Apples rather than other computer models. As one Apple spokesperson said, “It’s kind of flattering, in a perverse sort of way.” [27]) Among the major software corporations, VisiCorp is also an international target [28]. Also not included are the cases brought by software developers who merely sought to restrain former employees from working elsewhere after resigning. Electronic Data Systems has brought many such cases (e.g. EDS u. Kinder, 497 F. 2d 222, and EDS V. Powell, 508 S.W.2d 137) to
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M. Bump / Software
restrain former employees, without actualy alleging or proving that the employees were engaging or planning to engage in software piracy. The cases in this paper are presented in summary form, categorized according to the following typology: A. Unauthorized personal or corporate use, for the use itself only and not consequent results, such as theft of money by: 1. an employee with current access rights; 2. a software developer contractor with current access rights; person or corporation with current 3. another access rights; 4. a former employee; 5. a former software developer contractor; who formerly 6. another person, or corporation, had access rights; who never had access 7. someone, or corporation, rights. B. Unauthorized re-creation (from memory or notes), or copying for use (without resale) by another person or organization by: 1. an employee with current access rights; 2. a software developer contractor with current access rights; 3. another person or corporation with current access rights; 4. a former employee; 5. a former software developer contractor; 6. another person, or corporation, who formerly had access rights; 7. someone, or corporation, who never had access rights. C. Unauthorized sale of a package to more than one person or organization by: 1. an employee with current access rights; 2. a software developer contractor with current access rights; person or corporation with current 3. another access rights; 4. a former employee; 5. a former software developer contractor; 6. another person, or corporation, who formerly had access rights; 7. someone, or corporation, who never had access rights.
Pirucy
Each category is divided according to two criteria: type of court (civil/criminal) and type of defendant (corporate/individual). For those few cases where the alleged pirate was found not liable to the plaintiff, an “A” is added after the code, i.e. C7A). Note that in an alleged case, there may have clearly been piracy as defined above. but the Court did not find that the defendant’s actions were legally wrong.
3. Software Piracy Cases 3.1. CIVIL-
Corporate Defendants
C7 Apple Computer v. Franklin Computer, 3rd Circuit Court of Appeals, 9/83 reversing 545 F. Supp. 8 (E.D. Pa. 1982) In a landmark case, three judges of the U.S. Court of Appeals in Philadelphia ruled that software imbedded in a chip was protected by Federal copyright law. The dispute centered on Franklin’s use of the Apple operating system software as its own, arguing that since the operating system was on a chip, it was not protected by copyright law. The District Court judge had turned down Apple’s suit to enjoin Franklin Computer from selling Apple-like operating system software embedded in a ROM (read only memory) chip because he said that the claimed copyright protecton could not extend to such a medium, i.e. a chip. He said that the operating system, such as Applesoft and DOS 3.3, was an integral part of the hardware and thus not something which could be copyrighted. As often happens in software piracy cases, which rarely reach so high as a Federal Circuit Court of Appeals, the parties settled out of court. Franklin agreed to pay Apple $2.5 million and promised to discontinue the use of Apple’s operating system in Instead Franklin’s ACE personal computer. Franklin will now use its own operating system which does not contain Apple’s copyrighted ROM instructions [31]. World, Inc., C7A Atari, Inc. v. Amusement U.S.D.C. Maryland, 11/27/81. The Court ruled that Amusement World did copy the idea of Atari’s “Asteroids” game into its “Meteors” game, but that there were enough differences between the games to deny Atari’s request to enjoin the sale of “Meteors.” (For a similar case
with different result, see Atari c‘. N.Am. Consumer Electronics Corp. below.)
Philips
C7 Atari v. North American Philips Consumer Electronics Corp. 672 F. 2d 607 (7th Cir. 1982) petition for certiorari denied, 10/4/82. The Federal Appeals Court here enjoined the sale of a PAC-MAN-like game, “K.C. Munchkin” because of the overwhelming number of similarities between the two video game programs. The lower court did not grant the injection. C3 Corn-Share, Inc. 1.1.Computer Complex, Inc. 338 F. Supp. 1229 (East. Dist. Michigan, S.D. 1971); a/firmed 458 F.2d 1341 (6th Circuit 1972). The plaintiff had a “Technical Exchange Agreement” which provided for the exchange of plaintiff’s proprietary software, and which contained prohibitions against divulging the ComShare trade secrets to any third parties. A year after the termination of the Technical Exchange Agreement, Computer Complex planned to sell nearly all its assets to a third party. Plaintiff successfully sued to prevent the defendant from disclosing that software to a third party. B4 Cyhertek Computer Products, Inc. v. Pinckney Whitfield, Tracer Computing Corp. 6 CLSR 999 (Superior Court for Los Angeles, October 31, 1977.) Defendant Whitfield was one of the founding officers of Plaintiff Cybertek. As an employee, he had signed an “Employee Non-Disclosure Agreement” which had specifically referred to a software program called “Auto/Issue System.” Then he began consulting at Tracer before becoming an employee. The Court ruled that Whitfield had taken ideas with him and had written them into a Tracer program, in violation of the non-disclosure agreement. Further, the court stated in dicta, that even without the agreement, Whitfield would have been liable for misappropriating Cybertek trade secrets. In addition, because Tracer was fully aware of Whitfield’s obligations to Cybertek, it was liable, too. By injunction, the Court limited Tracer’s ability to continue marketing its own product. C7A Datu Cash Systems Inc. v. JS & A Group, Inc. 480 F. Supp. 1063 (N.D. Ill. 1979), affirmed on appeal with finding that copyright notice was insufficient, 628 F.2d 1038 (7th Cir. 1980)
Data Cash had created software for a computerized chess game which was then assembled into machine language and reproduced in a ROM chip. There was no copyright notice on the chip, but there was such a notice on the source code. The defendant then marketed a game with the same ROM and Data Cash sued. The Court found no violation of copyright law because the defendant’s ROM chip was not a “copy” as defined in the 1976 U.S. Copyright Act. The Court reasoned that the defendant’s chip was an embodiment of the source code, but not a direct copy of the copyrighted code itself [31]. This loophole in the law. as interpreted by one court, was closed on appeal although the plaintiff still lost due to the insufficient copyright notice for the chip. C3 Farney Engineering Compony ~1.Cannon Computer Company, 553 SW. 2d 651 (Texas, 1977). Cannon had licensed Forney to use a “Material Control System” software package without a right to sublicense. An employee of Forney then made a copy of the software and sold it to a third party. Cannon successfully sued Forney for $28,612.88 in damages. The case which was here reported was actually a successful appeal by Forney to relieve it from payment of $63,000 in punitive damages which it was required by the trial court to pay to Cannon. B4A Jostens, Inc. u. National Computer Systems, Inc. et al. 214 U.S. Patent Quarterly 918, (Minn. Supreme Ct. 4/23/82) While Jostens employed John Titus, he developed a CAD/CAM system to design jewelry. After he went to work for the defendant National Computer Systems, Inc. (NCS), the defendant began to market a similar product. However, the Court ruled that NCS could continue to do so because Jostens had taken insufficient precautions to protect its trade secrets during and after Titus’ employment. B4
Lockwood Co. v. CWC Inc. et al. Enforcing the Kansas Trade Secrets Act of 1981, Judge Morris O’Keefe permanently enjoined the misappropriation of Lockwood’s software and gave a $19,000 judgment to Lockwood. A former employee of Lockwood was the carrier of the software to CWC [32]. Despite the rewriting of the
130
programs into another computer thought processes were sufficiently liability.
language, the similar to find
C4 Management Science America u. Cyborg Systems, Inc., 6 CLSR 921 (USDC, N.D. Ill. June 8, 1978) The two founders of Cyborg were both former employees of Management Science America (MSA). MSA sued to stop Cyborg from marketing a payroll system which was allegedly similar to MSA’s. This report of the case covered only the denial of Cyborg’s motion for Summary Judgment, thus clearing the way for a trial on the merits. The case was later settled out of court [33]. C7 Micropro & Digital Reseurch u. Dutu Equipment. Federal Judge William Schwarzer signed a settlement award of $250,000 to Micropro and Digital Research to be paid by Data Equipment for copyright infringement. In addition, the Chairman of Data Equipment was required to personally pay the plaintiffs $30,000. (Seymour Rubenstein, President of Micropro said that the verdict “should be taken as a sign that software manufacturers will act aggressively to protect their own products against all unauthorized products.“) [34] The case was believed to be the first settled under the provisions of the U.S. Computer Software Copyright Act of 1980. Prior to the settlement, Data Equipment had been enjoined from selling any more copies of the allegedly counterfeit software [35]. C3 Micropro u. United Computer Corporution, (1982, U.S. District Court, San Francisco) Micropro filed suit against United Computer, a club which rents software (at 25% of the purchase price) to its members for lo-day trial use purposes, because the copies which were distributed to members did not have Micropro licensing restrictions on them. The result allegedly was that members of the club would rent copies for a few days, make illegal copies, and then return them to the club. United Computer has denied the charges, saying that it discourages such piracy by its members [36]. The case was still awaiting trial in January, 1984. C7 NBZ u. Ribbons Et Cetera, U.S. District Court, Calif. 1983.
NBI successfully obtained an injunction in Federal Court to prevent Ribbons from making or selling copies of NBI’s System 3000 Level C Software. Ribbons was even using the NBI trademark. C7 Nintendo v. Buy Coin Distributors, Inc., U.S.D.C., Eastern District, NY, 5/28/82 The Court upheld Nintendo’s claim of copyright infringement of its “Donkey Kong” game against the defendant distributor of video games. Further use or distribution by Bay Coin was prohibited. C7 Software Dimensions v. Meguwure Corporution, (U.S. District Court, Los Angeles, 1983) Software Dimensions charged that Megaware’s product, Micromate III. violated Software Dicopyrights for its Accounting Plus mensions’ software. It won a preliminary injunction for impoundment of all copies of the allegedly illegal software [38]. C7 Stern Electronics, Inc., v. Kuufmun et al, 213 U.S. Patent Quarterly 443 (2d Cir., l/20/82) The Court of Appeals upheld the District Court injunction against Kaufmann and the corporate codefendants against their marketing of video games which violated Stern’s copyrights for the game “SCRAMBLE” and other games. B4A Structural Dynumics Res. Corp. v. Engineering Mechunics Res. Corp., 401 F. Supp. 1102 (E.D. Mich. 1977) In this case, the former employees of Structural Dynamics were enjoined from working for their new employer, Engineering Mechanics. However, the lawful reason for the restraint was not trade secrets violation or other version of software piracy, but because the employees had signed an “Employee Patent and Confidential Information Agreement” which prohibited their objectionable employment for six months after leaving Structural. In finding that the resigned employees of Structural did not “pirate” software, the judge distinguished between software which was previously developed by an employer and which an employee threatened to take to others (as in the BP1 case above), and software which the employee actually developed, and for which a corporate trade secret is claimed. Of the latter, the Court described:
Where the developments are the product of the application of the employee’s own skill without any appreciable assistance by way of information or great expense or supervision by the employer, outside of the normal expenses of his job.. As that description fit the resigned employee’s software work, his employment was not enjoined on that basis [39]. C6 Synercom Technologv, Inc. u. Universal Computing Co., 199 U.S.P.Q. 537. 7 CLSR 1. 462 F. Supp 1003 (N.D. Texas. 1978) Copyright infringement was found as the Court held that instruction manuals, input formats, and the software code were eligible for protection. The defendants, UCC and EDI had made copies of Synercom’s copyrighted materials in order to successfully market a competing product. The court enjoined further use of those materials. C7 Tundy Corp. u. Personal Micro Computers Inc.. 525 F. Supp. 171 (N.D. Calif. 1981) The Court held that a ROM chip was covered by the 1976 Copyright Act, saying that the look-alike chips were “copies” of a software program within the meaning of the Act. With that ruling, the motion of the defendant, Personal Micro Computers, to dismiss the case was denied. Subsequently, the case was settled out of court [40]. C5 Technicon Medical Information Systems Corporation, v. Green Bay Packaging, Inc. 211 U.S. Patent Quarterly 343, 9/9/80. Green Bay was marketing software which Technicon had provided to Green Bay’s codefendant hospital customers. In a ruling on Green Bay’s motion for summary judgment (judgment without futher evidentiary trials), the Court denied the motion, saying that Technicon was entitled to a trial in order to attempt to prove that it had complied with the necessary preconditions for statutory copyright protection. (In a later case another court decided that Green Bay was entitled to a trial to try to prove that Technicon was, by its lawsuit, acting in bad faith. 480 F. Supp. 124 (E.D. Wise. 1979), affirmed, 7th Circuit Ct. of Appeals, 1982.) The case was pending trial in January, 1984 ]4ll. C7 Telex u. IBM, 367 F. Supp. 25% (N.D. Okla. 1973), trade secret ruling affirmed, 510 F. 2d 894
(10th Cir. 1975) petition for certiorari dismissed, 423 U.S. 802 (U.S. Supreme Court, 1975) The Court found that Telex had deliberately hired away IBM employees and used the confidenincluding source code. they tial information, brought with them for competitive advantage. Telex was enjoined from further hiring or soliciting any IBM employees for two years. and was ordered to pay IBM $13,776 for copyright infringement. C6 University Computing Co. I). L_vkes- Youngstown Corp. 504 F. 2d 518 (5th Cir. 1974) As with the Corn-Share case above, University Computing and Lykes-Youngstown had a joint venture agreement to provide software services and programs to retail stores. University owned the proprietary software. Shortly thereafter, Lykes terminated the agreement and established a competing company. It also bribed a department store employee to deliver the software tapes and documentation to the new company for $2500. Then Lykes attempted to sell the software and services as its own, and removed the University Computing logo from the software. The Court found that Lykes had unlawfully appropriated a trade secret and awarded University $220,000 in damages. C7 Warrington Associate>, Inc., u. Reul-Time Engineering Systems, 522 F., Supp. 367 (N.D. III. 1981) Warrington claimed that Real-Time was marketing software obtained from one of Warrington’s customers. In the court’s ruling denying defendant Real-Time’s motion for summary judgment, the court said that Warrington was entitled to a trial to prove its case, and to prove that it had taken sufficient steps to protect its copyright and trade secret rights. The case was later settled out of court [42]. C7 Williums Electronics, Inc. u. Arctic Internutional, fnc., 685 F. 2d 870 (3rd Cir. 1982) The Circuit Court of Appeals here upheld a lower court injunction against Arctic for marketing a product nearly identical to Williams’ DEFENDER. The game’s code was stored in a ROM chip, but the Court held that the material was protected by Copyright law.
3.2. CIVIL
~ Individual
Defendant
C5 BPI Systems, Inc. v. Leith, 532 F. Suppl. 208 (W.D. Texas. 1981) Leith was a former contract programmer with BP1 and was enjoined from using, with subsequent clients, parts of his programs (BP1 I/O routine, stop/go/quit routine) which were clearly proprietary to BPI. However, because he was a consultant and not an employee of BPI, BP1 did not have a copyright on the programs Leith had developed for BP1 and therefore Leith was not enjoined from selling those programs elsewhere [43]. As the ownership of these latter programs was a function of the original consultant contract, their subsequent sale and use by Leith was therefore not software piracy; but the use of the BP1 routines was piracy. (This is roughly the same distinction as drawn in the Structural Dynamics case, above.)
ing an accounts receivable program. He was enjoined from using that program after he left J&K, and was ordered to pay damages of $7500. C7 Stern Electronics Inc. v. Kaufman. 523 F. Supp. 635 (E.D. NY 1981) A preliminary injunction was granted against the manufacture and sale by defendant of an infringing game. The plaintiff had registered, for copyright purposes, the graphic display of the videogame by registering a videotape. The court held that it was not required, in addition, to register or place on deposit the underlying source code. 3.3 CRIMINAL None
found.
3.4. CRIMINAL CI Computer Print Systems, Inc. v. Lewis et al, 212 U.S. Patent Quarterly 626, (Pa. Superior Court, 10,‘10/80) The Superior Court upheld a lower court ruling that the defendant had wrongfully made a copy of his employer’s software and transferred it to a codefendant just prior to his resignation from his employer and subsequent employment as a consultant for the codefendant. The award of $18,000 damages for Lewis to pay Computer Print Systems was upheld. C4 CC.4 Corp u. Chance, No. C-82-1063 (N.D. Cal. July 12, 1982) GCA successfully sued to enjoin three former employees of GCA from using programs which belonged to GCA in their new company which provided computer services to other companies. The Court ruled that programs in source and object code were protected by copyright even when the object code is contained within an E-PROM chip. Also, the defendants had signed non-disclosure agreements when employed with GCA, and therefore’ their use of the software was a misappropriation of trade secrets [44]. C4 J&K Computer Systems, Inc. v. Parrish, 642 P. 2d 732 (Utah 1982) Parrish was formerly an employee of J&K where he had developed several programs, includ-
- Corporate
~ Individual
Cl Hancock v. State, 402 S.W. 2d 905 (1966) (criminal) Robert Hancock, an employee of Texas Instruments Automation Computer (TI) was convicted of offerring the source code of 59 programs owned by TI for sale to another company for five million dollars. He was sentenced to five years in prison and he did go to prison. Later cases reported his appellate efforts to get out of prison, partly relying on the theory that software was not “property.” (Note: in 1968, when American Law Reports, 3rd Edition, published an article “Computer Programs as Property Subject to Theft”, the Hancock case was the only case located by the authors which found theft of software programs to be subject to criminal prosecution.) B7 Ward v. Superior Court of the State of California, County of Alameda, 3 CLSR 206 (1972) [45]. (criminal) Criminal defendant charged with grand theft and theft of trade secrets involving fraudulent access, copying, and use of protected software and transportation of the copy. He had electronically gained access to a competitor’s computer and had the source code printed on his own printer. However, he also inadvertently had it printed at the printer of the competitor, which led to his demise. He was convicted but the sentence was suspended.
4. Conclusion
The term, “software piracy” has a catchy ring to it. and we are prone to exaggerate its extent. just as we do with the legends of the pirates of the Caribbean. This article provides a base of solid information about software piracy. Of the 31 cases reported here, 15 involved pirates who had no previous rights to the software. Six others involved former employees who took software with them. Confirming Leslie Ball’s reporting of Dorm Parker’s finding that “most” computer criminals are male [46]. none of the reported cases appeared to involve a civil or criminal prosecution of a woman. In many of the cases, a preliminary injunction was granted before a trial on the merits. In others. a trial judge or jury found that piracy existed. Further research is needed to make the results more comprehensive. With a more encyclopedic array of cases, it will be easier to fix estimates of the actual amount of piracy in certain classifications, allowing better analysis of the common facts. With such information, security specialists can give better guidance to software developers and software users to guard against the frequently occurring types of software piracy. References
[II “Computer Raid is investigated
by FBI Agents”, Bos/on (;bhr. 8,‘12/83. p. 3. VI ‘I Computer Crime” by Leslie Ball, Technology Rewew, April. 1982. p, 21 Software with Copyrights, Patents and Trade (31 “Protecting Secrets” by Janet Kuhn and Leslie Ball, Journd o/~~s~ems Munugement. December 1978, p. 28. Secret Law to Protect Software” by Roger Mil[41 “Trade gram, Computer Law Association conference, “Computer Software Protection” Washington. D.C. 1981.. page 1. I51 Kuhn and Ball, op ut. by Roger Mil[61 .‘Trade Secret Law to Protect Software”, gram. presented at the Computer Law Association Conference. “Computer Software Protection”. Washington, D.C. 1981 A Matter of Integrity”, HARD COPY. [71 “EDITORIAL. 4/83, VOL. 12. No. 24, PAGE 6 introduces new form of software proPI “Whitesmiths tection”, by Joel Barlas, MUSS High Tech, 4/l l/83 computer software piracy”, by Ronald RosenI91 “Fighting berg, Boston Globe, Boston, 4/2/X3. Business Section, page 8 [IO1 Barlas, op cit. Licensing of Tec~hnologv, Prac1111 Domestic and Intermtionol
ticing Law Institute. Tom Arnold and J. Thomas McCarthy, Co-Chairmen. /YXO. p. 592. Software Piracy” by Harvey Gilbert and [I21 “In Depth: Jonathan Joseph. Computerworld. 10 May 1982. “The Curious Case of the Softwjare Thief”. So&ore Nens. April 1983 [I31 The Electronrc Crirmnuk. by Robert Farr. page 156. I141 Rosenberg. op c/t. page 79. [I51 “Soft Talk”. Computer Systems News, 4/25/83. ProtectIon Bills Filed”. Sofr~ure Newt. 9/h/82. [IhI “Software P. 2 the Software Patch”, NL’H York T1me.s. 5/98/83, Sect. 3. p. 17. 1181 Ball, op ut. Agent Says Crime Pays: DP Theft Averages u91 “FBI $500.000”. by Jake Kirchner. Computer World. 9/S/80 of Software: A Matter of Monumental PO1 “Legal Protection Insignificance?“. by Robert Bigelow, Compujer LUM. und Tuu Reporr.. February. 1978. Boston. PII Kuhn & Ball, op uf. P21 Kuhn & Ball. i/d. piracy” program on WGBH Radio. Boston. 1231 “Softwjare MA. 7,‘10/83. mfr.: Probe of Pirates could curb legitimate f241 “Taiwan imports.” Computer & Sofrwrre News. 5/2/83. page 7. in Orient”. by Pamela Hollie. [251 “Apple Fights Counterfeits New York Ttme.7, Sect. IV. page 1, 8/11/82. 1261 “Order to Halt Apple ‘Copies”‘, New Yorh, Times. April, 83. 1271 “Bad Apples” by Mark Roman. NeM, YorX Times, Sect. III. page 23. 4/4/82 Court Bars Software Piracy”. HARD COP).. WI “German April 1983. p. 15. Ruling”. TIME Magazine. September 12. 1983. ~291 “Novel page 53. Files Brief in Apple Software Case”, Conl1301 “ADAPSO puterwwld. 1 l/8/82 [311 Soking the Computer Contruct D~lemnw. New Jersey Institute for Continuing Legal Education, p 144. A Matter of Integrity”, HARDCOPY. [321 “EDITORIAL, I171 “Copycattmg
4/83.
Apple reach settlement”, [331 “Franklin, ware NL’~J. l/9/84, page 1. [341 “Microcomputer
p. 6. (351 “Micropro.
(371 (381 1391 [40] [41]
Digital
Fine” Nru
cmd So/r-
York Ttnw.
9/S/82.
Research Win Copyright Lawsuit”. 11/24/82 “Micropro Fdes $lOM Copyright Suit Against Calif. Software Rental Firm”, Computer .!fvstems NEWS. 7/4/83. page 44. “NBI Gets Order in Software Dispute”. WuN Street Journul. 4/S/83 “Court Restricts Megaware Sales”, Computer ~v.~tems NEWS. 7/8,‘83 Ptwhusing and Leusmg Computers and Softwore. Practicing Law Institute, page 327. Telephone conversation with Barry Goode, Esq.. atty for Tandy., l/l l/84 Telephone conversation with Greg Wille, Esq.. atty for Green Bay., l/12/84 Computer
[36]
Piracy
Computer
Svstenz
NEWS.
[42] Telephone conversation with Jack Rovner. Esq., atty for Warrington. l/12/84 [43] “Who Owns Software Written Under Contract?” by Roland K. Bowns. Compurer~~orld, 2/7/83. page 30. [44] Computer Law and Tux Report, by Robert Bigelow. Sept. 1982. [45] “The Criminal Law Aspects of Computer Abuse:“, by Susan Nycum, Journal of Computers and Law. Rutgers University, 1976 page 271. [46] Ball, op ctt. p, 23.
[7]
[X]
[9]
[lo]
Bibliography [I I] [l] Boston Globe, Boston “Fighting computer software piracy”. by Ronald Rosenberg. 4/2/83, Business Section. page 8. “Computer Raid is investigated by FBI Agents”. 8/12/X3, P. 3 (21 Cornpurer & Software Ness, Lebhar-Friedman Inc., New York “Taiwan mfr.: Probe of Pirates could curb legitimate imports.” 5/2/X3. page 7. “Franklin, Apple reach settlement”, l/9/84, page 1. [3] Computer Lure ond Tax Report by Robert Bigelow. Boston. MA, September 1982, August 1982 [4] Computer Law Association Conference, “Computer Software Protection”, Presentation by Roger Milgram, “Trade Secret Law to Protect Software”. Washington, D.C. 1981. [51 Computer S)srems NEWS. “Micropro, Ditigal Research Win Copyright Lawsuit”. 11/24/82 “Soft Talk”, 4/25/83, page 79 “Court Restricts Megaware Sales”, 7/4/X3. “Micropro Files $lOM Copyright Suit Against Cahf. Software Rental Firm”, 7/4/X3, p. 44. [6] Computenvorld, Framingham. MA, “In Depth: Software Piracy” by Harvey Gilbert and Jonathan Joseph, 10 May 1982. “ADAPSO Files Brief in Apple Software Case”. 1 l/8/82, p. 125. “Who Owns Software Written Under Contract”, by Roland K. Bowns. 2/7/83, p. 30
[12]
[13]
[14]
[15] [16]
[171 [18] [19] [20] [21]
“FBI Agent Says That Crime Pays: DP Theft Averages $SOO,OOO.,9/X/80 Dontestrc ond Internutrontrl Lmnstng of Tcchnologv. Practicing Law Institute. Tom Arnold and J. Thomas McCarthy, Co-Chairmen. 1980, HARDCOPY Brea. CA. “EDITORIAL A Matter of Integrity”. April 83 “German Court Bars Software Piracy”. April. X3, page 15 Journul o/ Compu~err and Low. Rutgers Umversity. NJ. “The Criminal Law Aspects of Computer Abuse;“. by Susam Nycum. 1976. page 271. Journal of S_vs~cms Munogemen!, “Protecting Software with Copyrights, Patents and Trade Secrets” by Janet Kuhn and Leslie Ball. Dec. 1978, p. 28 “Is Computer Crime Important”. May 19X2. Muss High Tech. “Whitesmiths introduces new form of software protection”. by Joel Barlas. 4/l l/X3 New Englund Computer Lu+c Conference. Boston “Protection of Computer Programs Under Patent. Copyright, and Trade Secret Laws”. By Martin O’Donnell. Esq. 19X2. New Yorlr Times, New York “Microcomputer Piracy Fine”, 9/X/82. p. 5 “Copycatting the Software Patch”, 5/9/82. Section 3. p. 17. “Order to Halt Apple ‘Copies”‘. April. 1983. “Bad Apples” By Mark Roman, Sect. III, page 23, 4/4/X2 “Apple Fights Counterfeits in Orient”, by Pamela Hollie, Sect. IV, page 1, E/11 /82. Purchusrng und Leasing Computers and So/t+vure. Practicing Law Institute, Dan Brooks, Chairman. 1976. New York. Sofmare Nem, Hudson. NH “Software Protection Bills filed”, 9/6/82. p. 2 Soloing the Computer Contmct D~lrmmu. New Jersey Institute for Continuing Legal Education. p. 144. Technology Review. “Computer Crime” by Leslie Ball, April, 1982. p. 22. The Electronrc Crimmak, Robert Farr, NY. 1975 TIME Magazine, “Novel Ruling”, September 12. 1983, page 53. Wall Street Journul. Chicopee. MA “NBI gets Order in Software Dispute”, 4/8/83 WCBH Radio, Boston, MA. 7/10/X3, short news program on software piracy.
A Primer on Software Piracy Cases in the Courts Morrison
Bump,
1. Introduction
Jr. Esq.
to Software
Piracy
1. I. Definition As with much technological change, the law and judicial system have lagged behind in adapting to the changing world of computer and software development. Changes in software development have created new classes of criminals and contract violators, and new theories and techniques to catch them. This paper discusses the fate of one breed of computer criminal, the softunre pirate, before the courts. Software piracy is a relatively recent type of computer crime because software development or engineering is no longer a custom design operation for particular organizations on particular computers. Software is now being produced for mass consumption and the ‘generic’ software package is not far off. Software packages may be very valuable even though they may be stored in a compact place, (like Jewelry or money) such as on a microprocessor chip or a floppy disk. Software packages may vary in price from tens of dollars to millions of dollars. As with the related and booming practice of video disk piracy, it is often easy to make multiple copies of software for a miniscule fraction of the average original development cost. Despite the widely acknowledged existence of widespread software piracy. there have been very few cases reaching the civil courts and nearly none before the criminal courts. There are several explanations: few pirates are caught. few owners of software are willing or able to press a claim in court, most cases are settled out of court, and perhaps there is not so much software piracy after all; or a combination of all of them. This paper does not try to answer the question of why there are so few cases. Instead, it presents the bare facts from the existing cases and categorizes the source of the piracy. i.e. how did the pirate or alleged pirate come to possess the software in the first instance and what happened to him or her. The presentation of cases here is not complete, for the legal reporting systems are also not up-to-date. Indeed, the phrase, “software piracy” does not appear in legal reports’ indices, nor legal dictionaries. More research is needed, but the patterns found in the 31 cases here will probably continue as the sample increases. From such patterns, software owners and legal practttioners can better see what they are up against. Keywords; Computer crime, Software piracy. Copyright, terfeit software. Patent. Software, Trade secret.
North-Holland Computers & Security 0167-4048/84/$3.00
3 (1984) 123-134 B 1984. Elsevier Science Publishers
Coun-
This article concerns one subset of computer crime: software piracy. The focus is not, as is the case with most articles on software piracy, on how to prevent it technically or legally, but on the facts of actual cases as recorded in judicial proceedings. This article collects and organizes basic information about known or alleged software pirates who have been pursued in the criminal and civil courts. “Computer crime” fascinates us non-criminals who: obsession with technology 1. Share the American and are sure that there is a technological solution to all problems (except where the technological solutions become problems themselves); impressed by the amounts of 2. are justifiably money that can be acquired with the meager physical labor of a few short keystrokes; 3. are impressed with the cleanliness of computer crime, i.e. no blood, or bodies to dispose, 4. are captivated by the apparent ease of escaping unscathed by the law, unless conspicuous consumption occurs, and 4. don’t know how to commit computer crime. This fascination is illustrated by the recent popularity of the movie “War Games”, and the extensive media coverage given to instances of “comhave gained unputer trespass”, where individuals authorized entry into computer systems. The term piracy is borrowed from another world
Morrison Bump, Jr. is employed by Digital Equipment Corporation in Northboro, Massachusetts as a Commodity Manager. He was formerly a Software Commodity Manager for external software acquisition for Digital’s internal use. He came to his current position with a J.D. from Boston University Law School. and M.P.A. from Northeastern University and a B.A. from Yale University. He is currently studying for an M.B.A. at Babson College in Wellesley, Massachusetts, where he prepared the basis for this article for a computer course taught by Leslie Ball, a member of the editorial board of Computers and Security. The views expressed herein are solely those of the author, and not of his employer.
B.V. (North-Holland)
124
M. Bump / SoJtwure Ptrcrc:,
in another century. One wonders who first applied the term to software, with its connotated images of swashbuckling, eye-patched, wooden-legged sailors of the Caribbean and Mediterranean. However fascinating and romantic, computer crime and software piracy are serious matters in a country which leads the world in computerization. In the future, such piracy can be expected to grow exponentially (even from its uncertain current level) just as the use of computers is increasing exponentially. Piracy is defined here as: the unauthorized taking, appropriation, reproduction, or use of a softwure progrum for its intended function, where the progrum is recognized as un item of o&e. This paper focusses on cases where the software piracy is alleged or found to be a legal wrong. Not included are cases of software piracy where it was considered incidental due to the drama or magnitude of the other aspects of computer crime. The analogy to real pirates still holds, for it was considered piracy when a bucanneer “borrowed” a ship for a few days and returned, and it was also piracy when he stole the ship, forced the captain to walk the plank, kidnapped the crew, stole the cargo, drank the grog, and then went on to steal another ship (and buried some treasure along the way). Under both scenarios, the pirate was hanged if caught, but with the second scenario the mere use of the ship was lost in the legal fog surrounding murder, theft, and kidnapping. Regarding software piracy, this paper focusses on the ” unauthorized taking, appropriation, reproduction, or use” only, and not the other related actions or the products of that use. Recently, an informal computer club of about 12 people gained access to unclassified information in the computer at the U.S. Los Alamos, New Mexico, atomic research laboratory. They obtained access through the communications network, TELENET [l]. Although the FBI investigated the “raid,” it is unlikely that criminal prosecution will result. More likely, the authorities will ask the club how they did what they did in order to improve security on the relevant systems. However, if the club were brought to court, it would probably be for some definition of trespass or illegal access to the Los Alamos computers. If they had shut down the atomic energy laboratory, or otherwise interfered, then that would have been the major news, as in “WAR GAMES,” but it
would not have been piracy since the Los Alamos software would not have been used for an intended purpose. The only actual software piracy, as defined above, would have been for the unauthorized use of TELENET if they did not already have access rights. On the other hand, if. once inside the Los Alamos system, they had used the programs there to help solve nuclear physics problems for school homework, then that, too, would have been piracy as defined above. 1.2. Piracy crime
distinguished
from
“clussic” computer
The classic computer crime involves unauthorized access such as was committed by Mark Rifkin, who gained access to a bank’s computer system and made an unauthorized transfer of $10.2 million to another bank for his subsequent withdrawal [2]. The victims, of this and other notorious computer crimes, and the courts were primarily concerned with the resulting theft of money and not the unauthorized use of the software. In such cases, the software programs made relatively little difference as individual keystrokes were used to manipulate the subject of the software rather than appropriate the software itself, and because of the relatively minor value of the software. Thus, the Rifkin and related cases are not considered software piracy, as defined here, because they involved the use of the software for an unintended purpose, i.e. to divert funds. They manipulated the software with incorrect data entries. However, Rifkin could have become a software pirate, under the definition used here, if he had also made a copy of the bank’s software and used it elsewhere or sold it. However, in this case, to paraphrase Willie Sutton, that was not where the money was. I. 3. Software piracy is growing With the increasing creation, use, sale and value of packaged software programs, software piracy is also increasing, as is accompanying legal and media attention. In 1978, one source estimated that the total value of the existing software in the world was $100 Billion [3]. In Parker U. Flook, the U.S. Supreme Court cited the figure of $70 Billion [4]. The number of programs is growing at the rate of l,OOO,OOOa year by one estimate [S] and 3,650,OOO
M. Bump / Software Piraq
a year by another [6]. Of course, not all such but for a programs are marketed, nor “piratable,” commodity that virtually did not exist 30 years ago, the growing value of software is tempting prey. like a gold-carrying Spanish galleon. In the not too distant past, computer users would buy a computer, the operating system and one or more language compilers and then develop the rest of the software in-house. In such a world, there was less opportunity to make unauthorized copies which would be useful to another organization because those other organizations could not readily use the software. However, with the increased power and use of computers, and the shortage of in-house programmers, application developers began to market standard software packages - and software pirates took note. There are widely varying estimates of the amount of software piracy. One computer magazine editorial writer noted, “it is obvious that software is being ‘knocked off’ at an alarming rate” [7]. (Actually, the problem is that most piracy is not so “obvious.“). One software company executive observed that “43% of all statistics are made up on the spot.” [8] Nonetheless, he estimated, perhaps “on the spot,” that there are between four and ten (4410) unauthorized copies of the more popular software packages for every one which has been purchased [9]. It is believed that much of the amateur piracy has been by casual pirates in computer clubs who trade software [lo]. The size and composition of the group which is in a position to pirate software has changed radically during the brief history of computing. In 1980, there were approximately 534,000 programmers in the United States [II]. That was the group most likely to be able to use, copy and resell software. However, the explosion of the number of personal computer owners has sent the number of potential software pirates into the millions. One legitimate lead-in to such activity is that owners and creators of software and its accompanying documentation often encourage users to make backup copies to guard against unintended loss. The 1980 amendments to Section 117 of the 1976 Copyright law include a section which authorizes such archival use. Toward that end many computer manuals instruct users on how to make copies of software. The delicate task of computer and software manufacturers is to discourage illegal copying and to permit or facilitate
12s
legal copying - no mean task. They want to make software and hardware as user-friendly as possible, but most of the possible anti-piracy measures are user-‘ un’friendly. 1.4. Software tion
piracy
is attracting
increasing
atten-
Software and computer industry oriented publications are increasingly covering software piracy. Howevery, many such articles use hypotheticals such as: Company X, a software oendor, employs a skilled programmer to help develop a novel software product . The programmer notifies Company X that he is resigning to take a better position at Cornpam Z . . Thereafter, Company Z very rapidib develops software that is functionally identical to the product marketed by Company X. . Company A, a software vendor, provided Company B with a nontransferable license to use its software for internal use only. SubsequentJy, Company A discovers that Company C is marketing amazingly similar software at a lower price. Company C thought that it owned the software since it had ‘purchased’ it from Company B (121. Others describe format:
real situations,
but in disguised
Not long ago the Swiss subsidiary of a multinational U. S. -based chemical company ordered some packugedprograms from a software house in France. When the programs arrived, the Swjiss data-processing people discovered that they had bought programs which were exact copies of those developed by their parent company in the United States. The French software pirates had not even bothered to change the u&es to the metric system (131. Perhaps the feeling is that if real names and places are given, it will cast a poor light on the industry and show would-be criminals how easy it is to commit computer crime. However, that reluctance keeps other computer owners from knowing the seriousness of the computer crime problem. Many companies are reacting to the rise in software piracy by engineering technical obstacles to software piracy. Some have used enciphering methods to prevent unauthorized copying. Recently, Whitesmiths Ltd., a software development
and manufacturing company in Concord, Massachusetts. introduced a new method of protecting software - giving purchasers an emblem-seal to attach permanently to a terminal which is using the software. The company took this action in a perhaps desperate effort to more effectively control piracy. Bill Plauger, President of Whitesmiths. estimates that “software developers lose up to 50 percent of their revenues because of what he terms commercial piracy - and software sales are estimated at $22 billion annually” [14]. Another company, VisiCorp. has announced a product with an Apple-like mouse, Vision; but the mouse is encrypted with a code matching a code on the floppy Vision disk, thereby making pirated software inoperable [15]. If the floppy or mouse is pirated, the codes of each will not match and that will block functionality. Similarly, some small computers will initialize a new software disk by encoding it, making it operable only on that initializing hardware. However, this paper does not analyze the different types of legal, contractual and technical protection available to software owners and developers, nor does it describe the considerable Federal and state legislative activity to increase such protection [15]. A complete discussion of these topies would each require additional volumes. One ironic response to such efforts is the appearance of vendors who sell software which allows users to decipher the “anti-copying” code. Two examples are “Locksmith” and “Nibbles Away 2” [17]. By May 1982, over 15,000 copies of the deciphering programs of these two companies had been sold to allow microcomputer users to make copies of software. The two companies market the packages as legitimate ways to make archival copies, as is permitted by the U.S. Copyright Act, as amended in December 1980. Ironically, the deciphering software of each company is itself protected by ciphers so people cannot make copies of that software.
2. Introduction
to Court Cases
Involving
Software
Piracy 2.1. The court cuses are the tip of the iceberg
It is believed that most software piracy occurs undetected, and even if detected it is not often
publicized. If publicized or exposed, only a small percentage of cases are actually prosecuted in criminal or civil courts. and an even smaller percentage of those actually are reported in journals and casebooks. One estimate is that only 10% of computer crimes have been publicized and, again. software piracy is a small subset of that [18]. One FBI agent estimated that only 12% of detected computer crimes (including, but not limited to software piracy) were reported to law enforcement agencies. Of those, only 18% resulted in convictions. Further, he estimated only one of every 22.000 computer criminals goes to jail 1193. (This report records one case of a software pirate, Robert Hancock, going to jail.) Until now, software piracy has lacked the glamour and the sheer number of dollars of the usually publicized computer crimes. However, the increasing value and scope of applications software will soon erode the validity of this observation. 2.2. One prerequisite
to leg-d uction
is to estuhlish
a
leg-d wrong
It took the courts and legislatures many years to determine what property rights existed in software, in part because it was invisible. Without such rights there was no legal action which could be taken against a person who took the software without authorization. Basically, the legal system did not understand, and was not properly educated to understand, the real value of software. This was especially frustrating for various tax authorities which were not permitted to tax software, even though they knew that software had value. When packages began to be sold in large quantities in the marketplace, the actual value skyrocketed and the legal system was forced to take notice. Because of the large potential losses due to software piracy and the common assumption that it is widespread, it is not surprising that the legal profession began to take notice and produced a large volume of articles in computer-related and legal periodicals about the legal ways to protect software from pirates. Many of those articles focus on the patentability of software programs after a positive or negative court decision, while others explore the application of trade secret law and copyright law to software. Each tries to develop a certain formula for legal protection. There have
been so many such articles and conferences, perhaps crying “wolf,” that one senior computer atof Software: A torney asked. “Legal Protection Matter of Monumental Insignificance?” [20]. Before the Copyright Law was reformed in 1976 to give increased assurance of protection for software, few programs were actually registered with the U.S. Copyright Office. In early 1977. only 1.200 of the estimated then-existing millions of programs were registered. Of those. IBM and Burroughs accounted for 75% [21]. Now, with the adoption of the Copyright Act of 1976. registration is simpler and a copyright is born when the product is created [22]. However, the copyright designation must still be attached to the product and the product still must be registered with the Copyright Office. Trade secret law gives a property right to a company which actively seeks to keep its software codes accessible to only a few, (hence the “secret”). usually with a restrictive license. Few programs are protected by patent law, due to the extensive and expensive patenting process. Once piracy is detected, a software developer OJ owner can seek criminal prosecution for violations of the property rights under any of the above three theories but criminal prosecution is not often used. When the legal system is used, the most common action is a civil suit to enjoin the use of pirated software, or to seek monetary damages or both. Twenty-nine of the thirty-one cases presented below were such civil suits. Despite the availability of judicial recourse, it is believed that most allegations of software piracy are handled more quietly (when pursued at all) through negotiation and/or threats of legal action. This would be one explanation for the small number of such cases, compared to the allegedly widespread occurrence of software piracy. The thirty-one cases below. reported from various media, may be only the tip of the iceberg of actual cases; but with this paper, it’s a visible tip. 2.3. Description
und categorization
of the cuses
The thirty-one cases noted here are an unknown fraction of the total number of cases of software piracy, just as the reported cases of prosecutions of other crimes are but a fraction of those which actually occur. These cases made it to the civil or criminal courts using one or more of three legal
theories: copyright, trade secret, and patent law. Copyright and trade secret theory are used most frequently. In addition. the cases reported here involve the larger violations. usually between companies where substantial sums are at stake. It can be expected that. given the expense of prosecuting defendants in the courts, there will be few cases involving the small personal computer owner who makes a few copies for “friends.” None of the cases reported here involves an otherwise employed microcomputer user making copies for others to use or to sell. The listing of the cases reported and summarized here is not complete, as more research is needed. There is no central reporting resource for all of them, and the major legal reporters use index keys which are not coded for “software piracy.” nor even “software.” Not included here are the increasingly frequent international hardware/software piracy cases where the counterfeit computers, including chips and software, are produced abroad. This category presently involves alleged Apple Computer counterfeits produced in the Far East. Dan Wendin, the lawyer for Apple in charge of the counterfeit problem, estimates that there are over 100 companies making copies of Apples, and at least Apple operating systems, around the world [23]. Apple has filed complaints with the International Trade Commission alleging that 20 foreign and domestic companies have been counterfeiting Apples, and it alleges that foreign counterfeiters have been producing 335,000 Apple II’s monthly [24]. Apple believes that in Hong Kong, counterfeit copies outsell its own Apples by a ratio of 10 to 1 [25]. Apple has won a preliminary injunction against the U.S. distributor, Formula International, of the “Pineapple” computer to prohibit Formula’s distribution of Apple’s copyrighted software [26]. (One intriguing aspect of such counterfeiting has been the apparent focus on Apples rather than other computer models. As one Apple spokesperson said, “It’s kind of flattering, in a perverse sort of way.” [27]) Among the major software corporations, VisiCorp is also an international target [28]. Also not included are the cases brought by software developers who merely sought to restrain former employees from working elsewhere after resigning. Electronic Data Systems has brought many such cases (e.g. EDS u. Kinder, 497 F. 2d 222, and EDS V. Powell, 508 S.W.2d 137) to
128
M. Bump / Software
restrain former employees, without actualy alleging or proving that the employees were engaging or planning to engage in software piracy. The cases in this paper are presented in summary form, categorized according to the following typology: A. Unauthorized personal or corporate use, for the use itself only and not consequent results, such as theft of money by: 1. an employee with current access rights; 2. a software developer contractor with current access rights; person or corporation with current 3. another access rights; 4. a former employee; 5. a former software developer contractor; who formerly 6. another person, or corporation, had access rights; who never had access 7. someone, or corporation, rights. B. Unauthorized re-creation (from memory or notes), or copying for use (without resale) by another person or organization by: 1. an employee with current access rights; 2. a software developer contractor with current access rights; 3. another person or corporation with current access rights; 4. a former employee; 5. a former software developer contractor; 6. another person, or corporation, who formerly had access rights; 7. someone, or corporation, who never had access rights. C. Unauthorized sale of a package to more than one person or organization by: 1. an employee with current access rights; 2. a software developer contractor with current access rights; person or corporation with current 3. another access rights; 4. a former employee; 5. a former software developer contractor; 6. another person, or corporation, who formerly had access rights; 7. someone, or corporation, who never had access rights.
Pirucy
Each category is divided according to two criteria: type of court (civil/criminal) and type of defendant (corporate/individual). For those few cases where the alleged pirate was found not liable to the plaintiff, an “A” is added after the code, i.e. C7A). Note that in an alleged case, there may have clearly been piracy as defined above. but the Court did not find that the defendant’s actions were legally wrong.
3. Software Piracy Cases 3.1. CIVIL-
Corporate Defendants
C7 Apple Computer v. Franklin Computer, 3rd Circuit Court of Appeals, 9/83 reversing 545 F. Supp. 8 (E.D. Pa. 1982) In a landmark case, three judges of the U.S. Court of Appeals in Philadelphia ruled that software imbedded in a chip was protected by Federal copyright law. The dispute centered on Franklin’s use of the Apple operating system software as its own, arguing that since the operating system was on a chip, it was not protected by copyright law. The District Court judge had turned down Apple’s suit to enjoin Franklin Computer from selling Apple-like operating system software embedded in a ROM (read only memory) chip because he said that the claimed copyright protecton could not extend to such a medium, i.e. a chip. He said that the operating system, such as Applesoft and DOS 3.3, was an integral part of the hardware and thus not something which could be copyrighted. As often happens in software piracy cases, which rarely reach so high as a Federal Circuit Court of Appeals, the parties settled out of court. Franklin agreed to pay Apple $2.5 million and promised to discontinue the use of Apple’s operating system in Instead Franklin’s ACE personal computer. Franklin will now use its own operating system which does not contain Apple’s copyrighted ROM instructions [31]. World, Inc., C7A Atari, Inc. v. Amusement U.S.D.C. Maryland, 11/27/81. The Court ruled that Amusement World did copy the idea of Atari’s “Asteroids” game into its “Meteors” game, but that there were enough differences between the games to deny Atari’s request to enjoin the sale of “Meteors.” (For a similar case
with different result, see Atari c‘. N.Am. Consumer Electronics Corp. below.)
Philips
C7 Atari v. North American Philips Consumer Electronics Corp. 672 F. 2d 607 (7th Cir. 1982) petition for certiorari denied, 10/4/82. The Federal Appeals Court here enjoined the sale of a PAC-MAN-like game, “K.C. Munchkin” because of the overwhelming number of similarities between the two video game programs. The lower court did not grant the injection. C3 Corn-Share, Inc. 1.1.Computer Complex, Inc. 338 F. Supp. 1229 (East. Dist. Michigan, S.D. 1971); a/firmed 458 F.2d 1341 (6th Circuit 1972). The plaintiff had a “Technical Exchange Agreement” which provided for the exchange of plaintiff’s proprietary software, and which contained prohibitions against divulging the ComShare trade secrets to any third parties. A year after the termination of the Technical Exchange Agreement, Computer Complex planned to sell nearly all its assets to a third party. Plaintiff successfully sued to prevent the defendant from disclosing that software to a third party. B4 Cyhertek Computer Products, Inc. v. Pinckney Whitfield, Tracer Computing Corp. 6 CLSR 999 (Superior Court for Los Angeles, October 31, 1977.) Defendant Whitfield was one of the founding officers of Plaintiff Cybertek. As an employee, he had signed an “Employee Non-Disclosure Agreement” which had specifically referred to a software program called “Auto/Issue System.” Then he began consulting at Tracer before becoming an employee. The Court ruled that Whitfield had taken ideas with him and had written them into a Tracer program, in violation of the non-disclosure agreement. Further, the court stated in dicta, that even without the agreement, Whitfield would have been liable for misappropriating Cybertek trade secrets. In addition, because Tracer was fully aware of Whitfield’s obligations to Cybertek, it was liable, too. By injunction, the Court limited Tracer’s ability to continue marketing its own product. C7A Datu Cash Systems Inc. v. JS & A Group, Inc. 480 F. Supp. 1063 (N.D. Ill. 1979), affirmed on appeal with finding that copyright notice was insufficient, 628 F.2d 1038 (7th Cir. 1980)
Data Cash had created software for a computerized chess game which was then assembled into machine language and reproduced in a ROM chip. There was no copyright notice on the chip, but there was such a notice on the source code. The defendant then marketed a game with the same ROM and Data Cash sued. The Court found no violation of copyright law because the defendant’s ROM chip was not a “copy” as defined in the 1976 U.S. Copyright Act. The Court reasoned that the defendant’s chip was an embodiment of the source code, but not a direct copy of the copyrighted code itself [31]. This loophole in the law. as interpreted by one court, was closed on appeal although the plaintiff still lost due to the insufficient copyright notice for the chip. C3 Farney Engineering Compony ~1.Cannon Computer Company, 553 SW. 2d 651 (Texas, 1977). Cannon had licensed Forney to use a “Material Control System” software package without a right to sublicense. An employee of Forney then made a copy of the software and sold it to a third party. Cannon successfully sued Forney for $28,612.88 in damages. The case which was here reported was actually a successful appeal by Forney to relieve it from payment of $63,000 in punitive damages which it was required by the trial court to pay to Cannon. B4A Jostens, Inc. u. National Computer Systems, Inc. et al. 214 U.S. Patent Quarterly 918, (Minn. Supreme Ct. 4/23/82) While Jostens employed John Titus, he developed a CAD/CAM system to design jewelry. After he went to work for the defendant National Computer Systems, Inc. (NCS), the defendant began to market a similar product. However, the Court ruled that NCS could continue to do so because Jostens had taken insufficient precautions to protect its trade secrets during and after Titus’ employment. B4
Lockwood Co. v. CWC Inc. et al. Enforcing the Kansas Trade Secrets Act of 1981, Judge Morris O’Keefe permanently enjoined the misappropriation of Lockwood’s software and gave a $19,000 judgment to Lockwood. A former employee of Lockwood was the carrier of the software to CWC [32]. Despite the rewriting of the
130
programs into another computer thought processes were sufficiently liability.
language, the similar to find
C4 Management Science America u. Cyborg Systems, Inc., 6 CLSR 921 (USDC, N.D. Ill. June 8, 1978) The two founders of Cyborg were both former employees of Management Science America (MSA). MSA sued to stop Cyborg from marketing a payroll system which was allegedly similar to MSA’s. This report of the case covered only the denial of Cyborg’s motion for Summary Judgment, thus clearing the way for a trial on the merits. The case was later settled out of court [33]. C7 Micropro & Digital Reseurch u. Dutu Equipment. Federal Judge William Schwarzer signed a settlement award of $250,000 to Micropro and Digital Research to be paid by Data Equipment for copyright infringement. In addition, the Chairman of Data Equipment was required to personally pay the plaintiffs $30,000. (Seymour Rubenstein, President of Micropro said that the verdict “should be taken as a sign that software manufacturers will act aggressively to protect their own products against all unauthorized products.“) [34] The case was believed to be the first settled under the provisions of the U.S. Computer Software Copyright Act of 1980. Prior to the settlement, Data Equipment had been enjoined from selling any more copies of the allegedly counterfeit software [35]. C3 Micropro u. United Computer Corporution, (1982, U.S. District Court, San Francisco) Micropro filed suit against United Computer, a club which rents software (at 25% of the purchase price) to its members for lo-day trial use purposes, because the copies which were distributed to members did not have Micropro licensing restrictions on them. The result allegedly was that members of the club would rent copies for a few days, make illegal copies, and then return them to the club. United Computer has denied the charges, saying that it discourages such piracy by its members [36]. The case was still awaiting trial in January, 1984. C7 NBZ u. Ribbons Et Cetera, U.S. District Court, Calif. 1983.
NBI successfully obtained an injunction in Federal Court to prevent Ribbons from making or selling copies of NBI’s System 3000 Level C Software. Ribbons was even using the NBI trademark. C7 Nintendo v. Buy Coin Distributors, Inc., U.S.D.C., Eastern District, NY, 5/28/82 The Court upheld Nintendo’s claim of copyright infringement of its “Donkey Kong” game against the defendant distributor of video games. Further use or distribution by Bay Coin was prohibited. C7 Software Dimensions v. Meguwure Corporution, (U.S. District Court, Los Angeles, 1983) Software Dimensions charged that Megaware’s product, Micromate III. violated Software Dicopyrights for its Accounting Plus mensions’ software. It won a preliminary injunction for impoundment of all copies of the allegedly illegal software [38]. C7 Stern Electronics, Inc., v. Kuufmun et al, 213 U.S. Patent Quarterly 443 (2d Cir., l/20/82) The Court of Appeals upheld the District Court injunction against Kaufmann and the corporate codefendants against their marketing of video games which violated Stern’s copyrights for the game “SCRAMBLE” and other games. B4A Structural Dynumics Res. Corp. v. Engineering Mechunics Res. Corp., 401 F. Supp. 1102 (E.D. Mich. 1977) In this case, the former employees of Structural Dynamics were enjoined from working for their new employer, Engineering Mechanics. However, the lawful reason for the restraint was not trade secrets violation or other version of software piracy, but because the employees had signed an “Employee Patent and Confidential Information Agreement” which prohibited their objectionable employment for six months after leaving Structural. In finding that the resigned employees of Structural did not “pirate” software, the judge distinguished between software which was previously developed by an employer and which an employee threatened to take to others (as in the BP1 case above), and software which the employee actually developed, and for which a corporate trade secret is claimed. Of the latter, the Court described:
Where the developments are the product of the application of the employee’s own skill without any appreciable assistance by way of information or great expense or supervision by the employer, outside of the normal expenses of his job.. As that description fit the resigned employee’s software work, his employment was not enjoined on that basis [39]. C6 Synercom Technologv, Inc. u. Universal Computing Co., 199 U.S.P.Q. 537. 7 CLSR 1. 462 F. Supp 1003 (N.D. Texas. 1978) Copyright infringement was found as the Court held that instruction manuals, input formats, and the software code were eligible for protection. The defendants, UCC and EDI had made copies of Synercom’s copyrighted materials in order to successfully market a competing product. The court enjoined further use of those materials. C7 Tundy Corp. u. Personal Micro Computers Inc.. 525 F. Supp. 171 (N.D. Calif. 1981) The Court held that a ROM chip was covered by the 1976 Copyright Act, saying that the look-alike chips were “copies” of a software program within the meaning of the Act. With that ruling, the motion of the defendant, Personal Micro Computers, to dismiss the case was denied. Subsequently, the case was settled out of court [40]. C5 Technicon Medical Information Systems Corporation, v. Green Bay Packaging, Inc. 211 U.S. Patent Quarterly 343, 9/9/80. Green Bay was marketing software which Technicon had provided to Green Bay’s codefendant hospital customers. In a ruling on Green Bay’s motion for summary judgment (judgment without futher evidentiary trials), the Court denied the motion, saying that Technicon was entitled to a trial in order to attempt to prove that it had complied with the necessary preconditions for statutory copyright protection. (In a later case another court decided that Green Bay was entitled to a trial to try to prove that Technicon was, by its lawsuit, acting in bad faith. 480 F. Supp. 124 (E.D. Wise. 1979), affirmed, 7th Circuit Ct. of Appeals, 1982.) The case was pending trial in January, 1984 ]4ll. C7 Telex u. IBM, 367 F. Supp. 25% (N.D. Okla. 1973), trade secret ruling affirmed, 510 F. 2d 894
(10th Cir. 1975) petition for certiorari dismissed, 423 U.S. 802 (U.S. Supreme Court, 1975) The Court found that Telex had deliberately hired away IBM employees and used the confidenincluding source code. they tial information, brought with them for competitive advantage. Telex was enjoined from further hiring or soliciting any IBM employees for two years. and was ordered to pay IBM $13,776 for copyright infringement. C6 University Computing Co. I). L_vkes- Youngstown Corp. 504 F. 2d 518 (5th Cir. 1974) As with the Corn-Share case above, University Computing and Lykes-Youngstown had a joint venture agreement to provide software services and programs to retail stores. University owned the proprietary software. Shortly thereafter, Lykes terminated the agreement and established a competing company. It also bribed a department store employee to deliver the software tapes and documentation to the new company for $2500. Then Lykes attempted to sell the software and services as its own, and removed the University Computing logo from the software. The Court found that Lykes had unlawfully appropriated a trade secret and awarded University $220,000 in damages. C7 Warrington Associate>, Inc., u. Reul-Time Engineering Systems, 522 F., Supp. 367 (N.D. III. 1981) Warrington claimed that Real-Time was marketing software obtained from one of Warrington’s customers. In the court’s ruling denying defendant Real-Time’s motion for summary judgment, the court said that Warrington was entitled to a trial to prove its case, and to prove that it had taken sufficient steps to protect its copyright and trade secret rights. The case was later settled out of court [42]. C7 Williums Electronics, Inc. u. Arctic Internutional, fnc., 685 F. 2d 870 (3rd Cir. 1982) The Circuit Court of Appeals here upheld a lower court injunction against Arctic for marketing a product nearly identical to Williams’ DEFENDER. The game’s code was stored in a ROM chip, but the Court held that the material was protected by Copyright law.
3.2. CIVIL
~ Individual
Defendant
C5 BPI Systems, Inc. v. Leith, 532 F. Suppl. 208 (W.D. Texas. 1981) Leith was a former contract programmer with BP1 and was enjoined from using, with subsequent clients, parts of his programs (BP1 I/O routine, stop/go/quit routine) which were clearly proprietary to BPI. However, because he was a consultant and not an employee of BPI, BP1 did not have a copyright on the programs Leith had developed for BP1 and therefore Leith was not enjoined from selling those programs elsewhere [43]. As the ownership of these latter programs was a function of the original consultant contract, their subsequent sale and use by Leith was therefore not software piracy; but the use of the BP1 routines was piracy. (This is roughly the same distinction as drawn in the Structural Dynamics case, above.)
ing an accounts receivable program. He was enjoined from using that program after he left J&K, and was ordered to pay damages of $7500. C7 Stern Electronics Inc. v. Kaufman. 523 F. Supp. 635 (E.D. NY 1981) A preliminary injunction was granted against the manufacture and sale by defendant of an infringing game. The plaintiff had registered, for copyright purposes, the graphic display of the videogame by registering a videotape. The court held that it was not required, in addition, to register or place on deposit the underlying source code. 3.3 CRIMINAL None
found.
3.4. CRIMINAL CI Computer Print Systems, Inc. v. Lewis et al, 212 U.S. Patent Quarterly 626, (Pa. Superior Court, 10,‘10/80) The Superior Court upheld a lower court ruling that the defendant had wrongfully made a copy of his employer’s software and transferred it to a codefendant just prior to his resignation from his employer and subsequent employment as a consultant for the codefendant. The award of $18,000 damages for Lewis to pay Computer Print Systems was upheld. C4 CC.4 Corp u. Chance, No. C-82-1063 (N.D. Cal. July 12, 1982) GCA successfully sued to enjoin three former employees of GCA from using programs which belonged to GCA in their new company which provided computer services to other companies. The Court ruled that programs in source and object code were protected by copyright even when the object code is contained within an E-PROM chip. Also, the defendants had signed non-disclosure agreements when employed with GCA, and therefore’ their use of the software was a misappropriation of trade secrets [44]. C4 J&K Computer Systems, Inc. v. Parrish, 642 P. 2d 732 (Utah 1982) Parrish was formerly an employee of J&K where he had developed several programs, includ-
- Corporate
~ Individual
Cl Hancock v. State, 402 S.W. 2d 905 (1966) (criminal) Robert Hancock, an employee of Texas Instruments Automation Computer (TI) was convicted of offerring the source code of 59 programs owned by TI for sale to another company for five million dollars. He was sentenced to five years in prison and he did go to prison. Later cases reported his appellate efforts to get out of prison, partly relying on the theory that software was not “property.” (Note: in 1968, when American Law Reports, 3rd Edition, published an article “Computer Programs as Property Subject to Theft”, the Hancock case was the only case located by the authors which found theft of software programs to be subject to criminal prosecution.) B7 Ward v. Superior Court of the State of California, County of Alameda, 3 CLSR 206 (1972) [45]. (criminal) Criminal defendant charged with grand theft and theft of trade secrets involving fraudulent access, copying, and use of protected software and transportation of the copy. He had electronically gained access to a competitor’s computer and had the source code printed on his own printer. However, he also inadvertently had it printed at the printer of the competitor, which led to his demise. He was convicted but the sentence was suspended.
4. Conclusion
The term, “software piracy” has a catchy ring to it. and we are prone to exaggerate its extent. just as we do with the legends of the pirates of the Caribbean. This article provides a base of solid information about software piracy. Of the 31 cases reported here, 15 involved pirates who had no previous rights to the software. Six others involved former employees who took software with them. Confirming Leslie Ball’s reporting of Dorm Parker’s finding that “most” computer criminals are male [46]. none of the reported cases appeared to involve a civil or criminal prosecution of a woman. In many of the cases, a preliminary injunction was granted before a trial on the merits. In others. a trial judge or jury found that piracy existed. Further research is needed to make the results more comprehensive. With a more encyclopedic array of cases, it will be easier to fix estimates of the actual amount of piracy in certain classifications, allowing better analysis of the common facts. With such information, security specialists can give better guidance to software developers and software users to guard against the frequently occurring types of software piracy. References
[II “Computer Raid is investigated
by FBI Agents”, Bos/on (;bhr. 8,‘12/83. p. 3. VI ‘I Computer Crime” by Leslie Ball, Technology Rewew, April. 1982. p, 21 Software with Copyrights, Patents and Trade (31 “Protecting Secrets” by Janet Kuhn and Leslie Ball, Journd o/~~s~ems Munugement. December 1978, p. 28. Secret Law to Protect Software” by Roger Mil[41 “Trade gram, Computer Law Association conference, “Computer Software Protection” Washington. D.C. 1981.. page 1. I51 Kuhn and Ball, op ut. by Roger Mil[61 .‘Trade Secret Law to Protect Software”, gram. presented at the Computer Law Association Conference. “Computer Software Protection”. Washington, D.C. 1981 A Matter of Integrity”, HARD COPY. [71 “EDITORIAL. 4/83, VOL. 12. No. 24, PAGE 6 introduces new form of software proPI “Whitesmiths tection”, by Joel Barlas, MUSS High Tech, 4/l l/83 computer software piracy”, by Ronald RosenI91 “Fighting berg, Boston Globe, Boston, 4/2/X3. Business Section, page 8 [IO1 Barlas, op cit. Licensing of Tec~hnologv, Prac1111 Domestic and Intermtionol
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4/83.
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p. 6. (351 “Micropro.
(371 (381 1391 [40] [41]
Digital
Fine” Nru
cmd So/r-
York Ttnw.
9/S/82.
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[36]
Piracy
Computer
Svstenz
NEWS.
[42] Telephone conversation with Jack Rovner. Esq., atty for Warrington. l/12/84 [43] “Who Owns Software Written Under Contract?” by Roland K. Bowns. Compurer~~orld, 2/7/83. page 30. [44] Computer Law and Tux Report, by Robert Bigelow. Sept. 1982. [45] “The Criminal Law Aspects of Computer Abuse:“, by Susan Nycum, Journal of Computers and Law. Rutgers University, 1976 page 271. [46] Ball, op ctt. p, 23.
[7]
[X]
[9]
[lo]
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