|News from August
Federal Circuit Rules on Preemption and Shrink Wrap Contracts
8/20. The U.S.
Court of Appeals (FedCir) issued its opinion in Bowers
v. Baystate Technologies, a patent, copyright and contract case
involving templates for CAD software. The Appeals Court affirmed in part and
reversed in part.
Background. Harold Bowers created a template to aid in the use of
computer aided design (CAD) software, such as the CADKEY tool of Cadkey, Inc. He
filed a patent application for his template in 1989, and U.S.
Patent No. 4,933,514 was issued in 1990.
CAD software works with menus, and menus nested within menus, which may be
difficult for some to use. Bowers' patent disclosed a template, or desktop
digitizing tablet, with various commands arranged in logical locations. The user
points to and clicks upon the desired command.
George Ford designed Geodraft, a DOS based add-on program to operate with CAD.
Geodraft allows an engineer to insert technical tolerances for features of the
computer generated design. He copyrighted Geodraft. Bowers then obtained an
exclusive license to Ford's Geodraft. Bowers then bundled and sold his template
and Geodraft software, with a shrink wrap agreement that prohibits reverse
Baystate then developed a competing template and software, which incorporated
features of Bowers' product. Under competition from Baystate, Bowers entered
into a distribution agreement with Cadkey whereby Cadkey bundled Bowers'
template and software for free. Bowers sought to make money off of selling
software upgrades. Baystate subsequently acquired Cadkey, and repudiated the
contract with Bowers.
District Court. Baystate filed a complaint in U.S. District Court (DMass) against
Bowers alleging that Baystate’s products do not infringe the ‘514 patent,
that the ‘514 patent is invalid, and that the ‘514 patent is unenforceable.
It sought declaratory relief. Bowers filed counterclaims for copyright
infringement, patent infringement, and breach of contract (including the
prohibition on reverse engineering).
The trial jury found for Bowers on all claims, and awarded him $1,948,869 for
copyright infringement, $3,831,025 for breach of contract, and $232,977 for
patent infringement. The District Court set aside the copyright damages as
duplicative of the contract damages and entered judgment for $5,270,142,
including pre-judgment interest. Baystate appealed. Bowers cross appealed the
District Court's denial of copyright damages.
Court of Appeals. The Court of Appeals affirmed in part, and reversed in
part. It affirmed the breach of contract award. It also affirmed the District
Court's modification of the damages award (by finding copyright damages
duplicative of contract damages). Finally, it reversed the judgment as to patent
infringement, as a matter of claim construction.
The Appeals Court held that the Copyright Act, and in particular, 17 U.S.C. § 301, does
not preempt or narrow Bowers' contract claims. The Court held this as a
matter of the law of the originating Court -- in this case, the First Circuit.
The Court further found that Bowers had presented ample evidence of reverse
engineering by Baystate of the subject matter covered by the shrink wrap
contract. The Court affirmed the judgment for breach of contract, and the dollar
amount of the award.
The Appeals Court then affirmed the District Court's decision to set aside the
jury's award of copyright damages. It wrote that "The shrink wrap license
agreement prohibited, inter alia, all reverse engineering of Mr. Bowers'
software, protection encompassing but more extensive than copyright protection,
which prohibits only certain copying. Mr. Bowers' copyright and contract claims
both rest on Baystate's copying of Mr. Bowers' software. ... In this case, the
breach of contract damages arose from the same copying and included the same
lost sales that form the basis for the copyright damages. The district court,
therefore, did not abuse its discretion by omitting from the final damage award
the duplicative copyright damages."
The Appeals Court also wrote that "Because this court affirms the district
court's omission of the copyright damages, this court need not reach the merits
of Mr. Bowers' copyright infringement claim."
On the patent infringement claim, the Appeals Court reversed. It wrote that
"this court perceives no basis upon which a reasonable jury could find that
Baystate's accused templates infringe claim 1 of the '514 patent." Hence,
there was no literal infringement. Bowers did not assert infringement under the
doctrine of equivalents.
RIAA Seeks to Enforce Subpoena to Identify Anonymous Infringer
8/20. The Recording Industry Association of
America (RIAA) filed a motion and memorandum
[19 pages in PDF] in U.S. District Court
(DC) in a proceeding brought by the RIAA for the purpose of obtaining and
enforcing a subpoena of Verizon's Internet services subsidiary. The RIAA motion
states that it seeks the identity of the user of "a computer connected to
the Verizon network that is a hub for significant music piracy".
The RIAA motion states that it seeks to enforce a subpoena issued on July 24,
2002, pursuant to the Digital Millenium Copyright Act (DMCA). It states that
"Verizon has refused to comply."
17 U.S.C. § 512(h)
provides, in part, that "A copyright owner or a person authorized to act on
the owner's behalf may request the clerk of any United States district court to
issue a subpoena to a service provider for identification of an alleged
infringer in accordance with this subsection."
Subsection 512(h)(5) provides, in part, that "Upon receipt of the issued
subpoena, ... the service provider shall expeditiously disclose to the copyright
owner or person authorized by the copyright owner the information required by
the subpoena, notwithstanding any other provision of law and regardless of
whether the service provider responds to the notification."
The proceeding is titled "In Re Verizon Internet Services, Inc.; Recording
Industry Association of America v. Verizon Internet Services, Inc." It is
D.C. No. 1:02MS00323.
DOJ Official Addresses Online Copyright Infringement
8/20. John Malcolm, Deputy Assistant Attorney General in charge of the Computer Crimes and
Intellectual Property Section (CCIPS) at the Department of Justice (DOJ),
gave a speech at the Progress and Freedom
Foundation's Aspen Summit 2002 in which he addressed the role of law
enforcement in online copyright infringement. He wrote that "Effective law
enforcement is obviously going to be a critical part of that equation. The
Department of Justice stands ready to do its part." See, text of speech as
prepared for delivery.
He wrote that "The demise of Napster has done nothing to dampen the demand
for on-line content, and Napster has been replaced by even more sophisticated
peer to peer services such as Morpheus, Kazaa, and Grokster." He added that
"intellectual property piracy is increasing in the on-line
Malcolm elaborated that "unlike in the past, when law enforcement would
shut down the initial distribution source and in effect ended the piracy
operation, in the digital age, cutting off the initial source does not end the
threat, as each and every copy distributed prior to law enforcement intervention
continues to exist on the Internet and can be reproduced and distributed
indefinitely by others."
He added that "this poses significant challenges to law enforcement.
Moreover, many, if not most, of the major software pirates are highly skilled,
covering their tracks, operating in relative anonymity, moving from location to
location to conduct their activities, and many times hijacking the computers of
innocent users to perpetrate their crimes."
Malcolm also reviewed some pending legislation. He wrote that "There are
several proposals currently being debated by Congress to address this problem.
They range from a proposal offered by Senator
Fritz Hollings which would prohibit firms from making or selling digital
media devices that did not incorporate so-called ``standard security
technologies´´ to a proposal offered recently by Congressman Howard Berman which would
permit copyright holders to disrupt file sharing systems when they suspect that
copyrighted material is being distributed without authorization." See, HR 5001,
introduced by Rep. Berman on July 25, 2002, and S 2048,
introduced by Sen. Hollings on March 21, 2002.
He also discussing private litigation efforts and enforcement proceedings by the
He concluded that "Civil remedies are simply inadequate against those who
are judgment proof or who are adept at hiding their money or who may be engaging
in massive IP theft for non-economic reasons or who may simply move their
illegal operations to another venue and set up shop again. Moreover, the tools
available to civil litigators are usually not as effective as the tools
available to law enforcement authorities. Further, federal law enforcement
authorities have the ability to conduct multi jurisdictional and international
investigations, which is of particular importance since many of the criminal
organizations that engage in massive infringement operate overseas and since the
Internet knows no geographic boundaries."
CDT Reports on Access to State Court Records
8/20. The Center for Democracy and Technology
(CDT) published a report
titled "A Quiet Revolution in the Courts: Electronic Access to State Court
Records". It is subtitled "A CDT Survey of State Activity and Comments
on Privacy, Cost, Equity and Accountability".
The CDT reports that "this movement to post court information online
represents a quiet revolution in citizen access and government accountability,
part of the growing reality of e-government. Public access to electronic court
records provides a convenient way for the public to monitor the judicial system
and ensure the fairness and equality of its operations."
However, the CDT also wrote that "At the same time, a review of current
practices indicates that the state and local courts are engaged in a series of
difficult and novel balancing acts. One involves the balance between privacy and
accountability. What information should be available online? ... Another set of
issues concern cost: Is it appropriate to charge for online access?"
The bulk of the report is a state by state summary of the type of electronic
access provided, and contact information. The report was principally researched
by CDT Research Fellow Kathy Roche.
Record Companies Withdraw Lawsuit Against Internet Backbone
8/20. The Recording Industry Association of
America (RIAA) announced that the lawsuit brought by thirteen of its member
music companies against four Internet backbone companies has been
On August 15, the music companies filed a complaint in U.S. District Court (SDNY) against four
Internet backbone companies seeking an order requiring the defendants to block
access to the Internet protocol addresses assigned to the Listen4ever servers in the People's
Republic of China. The complaint alleged that Listen4ever operates a web site
that engages in infringement of the music companies' copyrighted sound recording
by making them available for download. Plaintiffs also filed a motion for
The RIAA stated in a release
that only that the complaint was "withdrawn" because the infringing
web site is "now offline".
The RIAA published in its web site one huge PDF file that
includes various documents, including the Complaint, Plaintiffs' Memorandum of
Law in Support of Their Motion for Preliminary Injunction, and declarations of
witnesses and experts.
The one count complaint sought only injunctive relief, pursuant to Section
512(j)(1)(B)(ii) of the Digital Millennium Copyright Act (DMCA), which section
is codified at 17 U.S.C.
§ 512. The complaint requested "That the Court order Defendants to
block Internet traffic to and from the website ... all the pages affiliated with
it, and any substantially similar successor website".
The defendants were AT&T Broadband, Cable and Wireless USA, Sprint
Corporation -- Advanced Network Systems, and UUNet Technologies, Inc. The
operator of the infringing web site was not named as a defendant.
Rep. Barr Loses Primary Election
8/20. Rep. John Linder (R-GA)
defeated Rep. Bob Barr (R-GA) in the
Republican primary election for the Georgia 7th Congressional District. The two
incumbents faced each other as a result of redistricting.
Rep. Barr has been active on a wide range of technology related issues,
particularly matters pertaining to electronic privacy and Internet taxation. As
a member of the House Judiciary
Committee, and Chairman of its Subcommittee on Commercial and Administrative
Law, he has been in a position to pursue his technology related agenda. See, full story.
Sen. Enzi Wins Primary Election
8/20. Sen. Mike Enzi (R-WY) easily won the
Republican primary in Wyoming. He is the sponsor and leading proponent of S 149,
Export Administration Act of 2001.
Sen. Enzi's bill would modernize export control laws. It would ease restraints
on most dual use products, such as computers and software, but increase
penalties for violations. The Bush Administration supports this version of the
bill. The Senate passed it by a vote of 85 to 14, five days before the terrorist
attacks of September 11, over the opposition of a small group of Senators who
assert that it would harm national security.
The bill would also repeal provisions of the 1998 National Defense Authorization
Act which require the President to use Million Theoretical Operations Per Second
(MTOPS) to set restrictions on the export of high performance computers.
DOJ Clears eBay Acquisition of PayPal
8/20. PayPal announced in a release
"that the waiting period under the Hart Scott Rodino Antitrust Improvements
Act of 1976 expired without a formal request from the Department of Justice for
additional information or documentary material, which is commonly referred to as
a second request. The waiting period pertained to notices filed in respect of
eBay's pending acquisition of PayPal."
On July 8 eBay and PayPal announced that eBay
will acquire PayPal. eBay operates an auction web site. PayPal facilitates
online payments. eBay stated in a release that
"eBay will acquire all of the outstanding shares of PayPal in a tax free,
stock for stock transaction using a fixed exchange ratio of 0.39 eBay shares for
each PayPal share. Based on eBay's stock price on July 5, 2002, the acquisition
is valued at $1.5 billion." Also, PayPal "will continue to operate as
an independent brand". eBay also stated that "In view of the uncertain
regulatory environment surrounding online gaming, eBay plans to phase out
PayPal's gaming business after the transaction closes."
eBay's acquisition of PayPal still remains subject to approval by stockholders
FTC Sets Deadline for Comments on MSC Software Consent
8/20. The Federal Trade Commission (FTC)
published a notice
in Federal Register setting a deadline of September 13 for public comments on
its proposed consent agreement with MSC
Software Corporation. See, Agreement Containing
Consent Order [22 pages PDF], and notice in the Federal Register, August 20,
2002, Vol. 67, No. 161, at Pages 53942 - 53945.
On August 14, the FTC issued an administrative complaint against MSC Software
alleging violations of Section 5 of the Federal Trade Commission Act (FTCA) and
Section 7 of the Clayton Act in connection with its 1999 acquisitions of
Universal Analytics, Inc. (UAI) and Computerized Structural Analysis &
Research Corp. (CSAR).
MSC sells simulation software, and related services and systems. The FTC stated
that MSC was the dominant supplier of Nastran software, which is an engineering
simulation software program used in the aerospace and automotive industries,
with an estimated 90% of worldwide revenue; UAI and CSAR each had sales of about
5% of worldwide revenue. MSC then acquired UAI and CSAR.
Under the terms of the proposed agreement, MSC must divest at least one copy of
its current advanced Nastran software, including the source code. The
divestiture will be through royalty free, perpetual, non-exclusive licenses to
one or two acquirers who must be approved by the FTC.
This proceeding is titled "In the Matter of MSC.Software". It is FTC
Docket No. 9299.
People and Appointments
8/20. President Bush announced his intent to appoint Clay Davis, Gilbert
Gonzalez, James House, Luis Luna, Roberto Salazar, and Christine
Toretti to be Members of the Board of Directors of the Rural Telephone Bank.
The Rural Telephone Bank was established in 1971 by an amendment to the Rural
Electrification Administration Act as a source of financing for
telecommunications companies and cooperatives eligible to borrow under the Act's
telephone loan program. See, White House
8/20. The Federal Communications Commission
(FCC) published a notice
in the Federal Register describing its "broadcast flag" Notice
of Proposed Rulemaking (NPRM) [15 pages in PDF]. The FCC adopted this NPRM
at its meeting on August 8, 2002. It released the text of the NPRM on August 9,
2002. This notice confirms previously announced comment deadlines. Comments
due by October 30, 2002. Reply comments are due December 13, 2002. See,
Federal Register, August 20, 2002, Vol. 67, No. 161, Pages 53903 - 53909. This
is MB Docket No. 02-230.
8/20. The Securities and Exchange Commission
(SEC) announced in a release
that it "has completed processing the sworn statements filed as of Aug. 14
by the CEOs and CFOs of the largest U.S. based companies and found that the
overwhelming majority of CEOs and CFOs filed statements certifying the material
accuracy and completeness of their companies' prior disclosure reports."
See also, Statements by
Company CEOs and CFOs.
8/20. The U.S. Trade and Development Agency (TDA)
announced in a release
that the TDA and the nation of Jordan "entered into a grant agreement to
fund technical assistance in planning for the liberalization of Jordan's fixed
line telecommunications services". The amount of the grant is $417,252.
CDT Writes NTIA Regarding Reform of ICANN
8/19. The Center for Democracy and
Technology (CDT) sent a letter to the National Information and Technology
Administration (NTIA) regarding restructuring of the Internet Corporation for Assigned Names and Numbers
The letter urges the NTIA "to insert a limited set of new requirements into
any renewal of ICANN's Memorandum of Understanding with the Department of
Commerce calling for increased accountability and meaningful checks on ICANN's
The letter continues that "Although the reform package approved in
Bucharest improves on previous drafts, it lacks adequate provisions to protect
the public's interest in ICANN's activities and establish meaningful constraints
on the ICANN Board's future authority. With the Department's MOU with ICANN set
to expire on September 30, the present opportunity for leadership should not be
The CDT stated, among other things, that "This should include an explicit
enumeration of ICANN's powers and a strong prohibition of any activities that
would deny individuals and organizations basic due process."
The CDT also seeks an "Independent Review Panel, capable of scrutinizing
Board and staff actions for compliance with critical documents such as the ICANN
The CDT letter was signed by Alan
Davidson, Associate Director, and Rob Courtney, Policy Analyst.
People and Appointments
8/19. Richard Notebaert was named Chairman of the Federal Communications Commission's (FCC) Network Reliability and Interoperability Council
(NRIC). Notebaert is the Ch/CEO of Qwest
Communications. Joseph Nacchio, a former Ch/CEO of Qwest, previously held
the position. The purpose of the NRIC is to develop recommendations for the FCC
and the telecommunications industry regarding reliability, security,
interoperability and interconnectivity of, and accessibility to, public
telecommunications networks and the Internet. See, FCC
8/19. U.S. Trade Representative (USTR) Robert Zoellick
named Harry Clark Counselor to the Office of the USTR. See, USTR release.
8/19. Robert Jordan was named Assistant Director of the Federal Bureau of Investigation's (FBI) Office of
Professional Responsibility. He has worked for the FBI since 1980. He replaces Michael
DeFeo, who is leaving the country. See, FBI release.
8/19. Federal Communications Commission (FCC)
Commissioner Michael Copps
released a statement
[PDF] regarding an obscene radio broadcast in New York City. He wrote that
"Congress passed laws limiting the broadcast of ``obscene, indecent or
profane´´ language and charged the FCC with the enforcement of these laws. The
FCC has a responsibility to ensure that the indecency laws of the United States
are being vigorously enforced. I take this responsibility with the utmost
seriousness. If these complaints and press accounts prove true, this Commission
should consider the strongest enforcement action possible against this station,
up to and including revocation of the station's license."
8/19. The Federal Election Commission (FEC)
announced that it has fined several committees for civil violations of federal
election laws. It fined VenturePAC $750 for filing a report late in 2001.
VenturePAC is the political action committee sponsored by the National Venture Capital Association (NVCA).
According to Political Money Online,
VenturePAC has $644,581 in total receipts so far for the 2002 election cycle.
The FEC also fined the AT&T Political Action Committee $1,200 for filing a
report late in 2001. The AT&T PAC has $728,494 in total receipts so far in
this election cycle. See, FEC
Bush Extends Export Administration Act Again
8/16. President Bush signed a document
titled "Notice: Continuation of Emergency Regarding Export Control
Regulations", which extends the Export Administration Act (EAA) for one
more year. The EAA was scheduled to expire on August 20, 2001. On August 17,
2001, President Bush issued Executive
Order 13222 extending the EAA for one year. The current action extends the
EAA for another year.
Bush wrote that "Because the Export Administration Act has not been renewed
by the Congress, the national emergency declared on August 17, 2001, must
continue in effect beyond August 17, 2002. Therefore, in accordance with section
202(d) of the National Emergencies Act (50 U.S.C. 1622(d)), I am continuing for
1 year the national emergency declared in Executive Order 13222."
Sen. Mike Enzi (R-WY), and others, have
attempted to pass legislation in the 107th Congress extending and reforming
export control laws. The Senate bill, S 149,
titled the "Export Administration Act of 2001", sponsored by Sen. Enzi,
is a major overhaul of export control laws. It passed the Senate Banking Committee on March 22,
2001 by a vote of 19-1. It passed the full Senate on September 6, 2001, by a
vote of 85-14.
S 149 would ease restraints on the export of most dual use products, such as
computers and software. However, it would raise penalties for violation of
remaining prohibitions. It would also repeal provisions of the 1998 National
Defense Authorization Act which require the President to use Million Theoretical
Operations Per Second (MTOPS) to set restrictions on the export of high
On August 1, 2001, the House
International Relations Committee approved HR 2581,
which is also titled the "Export Administration Act of 2001",
sponsored by Rep. Benjamin Gilman
(R-NY), by a vote of 26-7. However, it is a much different bill. The Bush
administration supports S 149.
While S 149 passed the Senate overwhelmingly, it passed before the terrorists
attacks of September 11, 2001. It now faces new opposition. No action has been
taken in either the House or Senate on this bill since September 11, 2001. On
the other hand, Sen. Fred Thompson
(R-TN), one of the leading opponents of S 149 in the Senate, is retiring.
Rep. Gilman has also announced his retirement.
4th Circuit Rules in Lanham Act Case
8/16. The U.S.
Court of Appeals (4thCir) issued its opinion [PDF]
Search LLC v. US Search.com, Inc., a trademark case.
U.S. Search LLC (LLC) is an executive recruiting and placement firm based in
Falls Church, Virginia, that specializes in recruiting for the plastics
industry. The company's President is its sole recruiter. US Search.com, Inc. (Dotcom)
is a publicly traded Delaware corporation based in Los Angeles, California, that
provides access to online public record information over the Internet and
through the use of its toll free telephone number, 1-800- USSEARCH. Its services
are used to locate people, and to verify prospective employees' credentials and
background after an employer had identified the candidate. Dotcom registered the
mark "1-800- U.S. SEARCH" in 1998. After initiation of litigation, LLC
sought to register the mark "U.S. Search". The U.S. Patent and
Trademark Office rejected the application.
LLC filed a complaint in U.S. District
Court (EDVa) against Dotcom alleging false designation of origin under the
Lanham Act, 15 U.S.C.
§ 1125(a), and unfair competition under Virginia common law. Dotcom
counterclaimed against LLC alleging infringement of its federally registered
mark, pursuant to 15 U.S.C. §§ 1114, 1116-18, false designation of origin,
pursuant to 15 U.S.C. § 1125(a), and common law unfair competition.
The District Court found that "U.S. Search" was not entitled to
service mark protection when used in connection with LLC's executive recruiting
services and granted summary judgment to Dotcom. The Appeals Court affirmed.
9th Circuit Issues Amended Opinion in Syntek Semiconductor v.
8/16. The U.S. Court of Appeals (9thCir)
issued its amended
opinion [11 pages in PDF] in Syntek
Semiconductor v. Microchip Technology, a case in which an alleged
infringer sought a declaratory judgment from the U.S. District Court that a
copyright registration of computer source code is invalid. The District Court
granted summary judgment to the copyright holder. The Appeals Court, in its original
opinion [13 pages in PDF], issued on April 8, 2002, vacated. It held that,
pursuant to the doctrine of primary jurisdiction, the case should be dismissed
without prejudice, so that the infringer may seek an administrative remedy at
the Copyright Office. The amended
opinion provides that the judicial proceeding is stayed (not dismissed) pending
outcome of the administrative proceeding. The Appeals Court also denied Syntek's
petition for rehearing.
The Appeals Court reasoned in its amended opinion that dismissal might
"unfairly disadvantage" Syntek. It wrote that "Because the
statute of limitations may prevent Syntek from refiling its claim if necessary
at the conclusion of its administrative challenge to the Copyright Office’s
decision, we stay the proceedings pending the outcome of the administrative
The amended opinion does not alter the original opinion's analysis with respect
to application of the primary jurisdiction doctrine. The following description
of the case revises TLJ coverage of the original opinion. See, article titled
"Challenges to Source Code Copyright Registration & the Doctrine of
Primary Jurisdiction", in TLJ Daily E-Mail Alert
No. 406, April 9, 2002.
Background. Microchip Technology
is a Delaware corporation based in Chandler, Arizona. It designs, manufactures,
and sells micro controllers. Micro controllers are integrated circuits used to
control a particular system or process in an electronic product. The operation
of micro controllers is dictated by low level programming micro instructions
called micro code, which are fixed in storage. Microchip manufactures and sells
the PIC 16C5x micro controllers, which contain the PIC 16C5x micro code.
Microchip registered its PIC 16C5x micro code with the U.S. Copyright Office.
However, the Appeals Court explained that "Microchip did not have in its
possession the original PIC 16C5x source code when it registered its program
with the Copyright Office; so Microchip deposited source code that it had
decompiled from the object code embedded in the PIC 16C5x computer chip.
Microchip informed the Copyright Office of the nature of its deposit". The
Copyright Office then registered the copyright.
Syntek Semiconductor is a Taiwan corporation that also designs, manufactures,
and sell micro controllers. Microchip asserts that Syntek products have
infringed its copyright.
Taiwanese Actions. Microchip has twice presented its findings to the
public prosecutor in Taiwan that Syntek has produced and sold products that
infringe its copyright. In a 1993 proceeding, Syntek was indicted, but later
settled with Microchip. More recently, the Taiwan prosecutor again indicted
Syntek and two of its senior officers for criminal copyright infringement. The
Taiwan criminal court found Syntek's officers guilty of criminal copyright
infringement in April of 1999. Syntek appealed that decision.
District Court. Syntek filed a complaint in March of 1999 in U.S. District Court
(DAriz) against Microchip seeking a declaratory judgment that Microchip's
U.S. copyright registration of the PIC 16C5x micro code is invalid. Syntek
alleges that Microchip, by depositing source code that it had decompiled from
object code, did not comply with the applicable regulations when registering its
program. The District Court granted summary judgment to Microchip.
Appeals Court. The Court of Appeals raised the question of primary
jurisdiction, sua sponte. It vacated the judgment of the District Court and
stayed the action pursuant to the primary jurisdiction doctrine in order that
the parties may pursue appropriate administrative remedies before the Copyright
The Appeals Court wrote that "Primary jurisdiction is not a doctrine that
implicates the subject matter jurisdiction of the federal courts. Rather, it is
a prudential doctrine under which courts may, under appropriate circumstances,
determine that the initial decisionmaking responsibility should be performed by
the relevant agency rather than the courts." It added that "The
doctrine of primary jurisdiction is not equivalent to the requirement of
exhaustion of administrative remedies."
The Appeals Court followed a four part test announced by the Ninth Circuit in U.S.
v. General Dynamics Corp., 828 F.2d 1356 (9th Cir 1987). The Appeals Court
wrote in the present appeal that "Although the question is a matter for the
court's discretion, courts in considering the issue have traditionally employed
such factors as (1) the need to resolve an issue that (2) has been placed by
Congress within the jurisdiction of an administrative body having regulatory
authority (3) pursuant to a statute that subjects an industry or activity to a
comprehensive regulatory authority that (4) requires expertise or uniformity in
The Court analyzed each of these four factors. On the first factor, it wrote
that "Congressional intent to have national uniformity in copyright laws is
clear." On the second factor, it wrote that "the question of whether
decompiled object code qualifies for registration as source code under the
Copyright Act and regulations is an issue of first impression. It also involves
a complicated issue that Congress has committed to the Register of
On the third prong, the Appeals Court noted that Syntek seeks, not a declaratory
judgment that the copyright in invalid, but rather a declaration that the
registration is invalid. The Appeals Court wrote, "Thus, resolution of the
question at hand requires an analysis of whether the agency acted in conformance
with its own regulations when it granted the registration. Accordingly, referral
to the agency for consideration of these issues in the first instance is
Fourth, and finally, the Court reasoned that while Syntek plead that it seeks a
declaration of registration invalidity, this is indistinguishable from the
administrative remedy of copyright registration cancellation. Hence, it already
has an administrative remedy.
The Court concluded that all four factors are met, and hence, that a stay
pursuant to the doctrine of primary jurisdiction is appropriate.
The Court's ruling addresses only the doctrine of primary jurisdiction. The
Appeals Court did not address the question of whether decompiled object code
qualifies for registration as source code under the Copyright Act and
regulations. Nor did it address whether a private right of action exists for
cancellation of a copyright registration.
Finally, the Appeals Court added that "we need not decide ... whether
remedies are available under 17 U.S.C. § 701(e)".
This section pertains to the general responsibilities of the Copyright Office.
See also, 17
CFR § 201.7, regarding cancellation of completed registrations by the
The original opinion is also published at 285 F.3d 857.
People and Appointments
8/16. Supachai Panitchpakdi will become the new Director General of the World Trade Organization (WTO), effective
September 1, 2002. He will replace Mike Moore. Roderick Abbott, Kipkorir
Aly Azad Rana, Francisco Thompson Flôres, and Rufus Yerxa
will be the Deputy Directors General, effective October 1, 2002. They will
replace Ablassé Ouedraogo, Paul Henri Ravier, Miguel Rodriguez Mendoza, and
Andrew Stoler. See, WTO release.
8/16. The U.S.
Court of Appeals (6thCir) issued its opinion
Smith v. Bureau of Prisons, a case in which a federal prisoner
complained regarding the quality and pricing of telephone service afforded to
federal inmates. The District Court dismissed the complaint for failure to
exhaust administrative remedies. The Appeals Court affirmed.
Go to News from August 11-15, 2002.