U.S. Auto Parts Network, Inc. v. Parts Geek, LLC , 692 F.3d 1009 ( 2012 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
U.S. AUTO PARTS NETWORK, INC., 
Plaintiff-Appellant,
v.
PARTS GEEK, LLC, a New Jersey No. 10-56129
limited liability company; RICHARD
E. PINE; BRIAN TINARI, an  D.C. No.
2:09-cv-04609-
individual; LOWELL E. MANN, an JFW-RZ
individual; DANNIE HENDERSHOT, an
individual; LUCAS THOMASON, an
individual,
Defendants-Appellees.

U.S. AUTO PARTS NETWORK, INC., 
Plaintiff-Appellee,
v.
No. 10-56194
PARTS GEEK, LLC, a New Jersey
D.C. No.
limited liability company; RICHARD
E. PINE; BRIAN TINARI, an  2:09-cv-04609-
individual; LOWELL E. MANN, an JFW-RZ
individual; DANNIE HENDERSHOT, an OPINION
individual; LUCAS THOMASON, an
individual,
Defendants-Appellants.

Appeal from the United States District Court
for the Central District of California
John F. Walter, District Judge, Presiding
Argued and Submitted
March 6, 2012—Pasadena, California
10395
10396 U.S. AUTO PARTS NETWORK v. PARTS GEEK
Filed August 31, 2012
Before: Jerome Farris, Richard R. Clifton, and
Sandra S. Ikuta, Circuit Judges.
Opinion by Judge Ikuta
U.S. AUTO PARTS NETWORK v. PARTS GEEK 10399
COUNSEL
Gerald E. Hawxhurst (argued), Crowe Hawxhurst LLP, Los
Angeles, California; Michael H. Simon, Christopher L. Gar-
rett, Nathan R. Christensen, Perkins Coie LLP, Portland, Ore-
gon, for appellant/cross-appellee U.S. Auto Parts Network,
Inc.
Steven E. Angstreich (argued), Weir and Partners LLP,
Cherry Hill, New Jersey; Daniel E. Sobelsohn, The Sobelsohn
Law Firm, Los Angeles, California, for appellee/cross-
appellant Parts Geek LLC.
Wendy S. Albers (argued), Reed Smith LLP, Los Angeles,
California, for appellee Lucas Thomason.
OPINION
IKUTA, Circuit Judge:
U.S. Auto Parts Network (USAP) brought suit against Parts
Geek, LLC and various individuals alleging, among other
things, copyright infringement in certain e-commerce soft-
10400 U.S. AUTO PARTS NETWORK v. PARTS GEEK
ware. The district court granted summary judgment against
USAP on its claim of copyright infringement because it con-
cluded that USAP did not own the allegedly infringed copy-
right. Because there are genuine issues of material fact as to
whether USAP owns a copyright in all or part of the software
at issue, we reverse in part, vacate in part, and remand.1
I
The story starts in 1996, when Richard Pine and Todd
Daugherty founded BenzBin, a website that sold Mercedes-
Benz car parts. By 2000, Pine and Daugherty met two more
internet entrepreneurs, Brian Tinari and Lowell Mann.
Together they began to work on what had by then become
Partsbin, a website selling replacement parts for cars of all
makes. Partsbin needed software to help it process customer
orders over the internet (e-commerce software) and so Tinari
entered into discussions with a computer programmer, Lucas
Thomason, to license an order processing program of Thoma-
son’s called Manager 2000.2 Thomason wrote the program in
“late 1999 or early 2000,” while he was “self-employed and
doing business as ‘Lucas Networks.’ ” Thomason gave Parts-
bin a “perpetual license to use” Manager 2000 and Partsbin
began using the software in its business.
Sometime around April 2001, after Thomason provided the
company with the Manager software, Partsbin hired him as its
“director of eServices.” As part of the position, Thomason
moved into one of Pine’s houses that doubled as a Partsbin
office. While at Partsbin, Thomason worked on, among other
things, “creating websites, catalogs and maintaining the net-
work.” He also continued to make “modifications and
1
In this opinion, we address only USAP’s claim of copyright infringe-
ment. In a memorandum disposition filed concurrently with this opinion,
we address the balance of the district court’s summary judgment order.
2
The parties use numerous names for this software, but this opinion will
use Manager 2000 to avoid confusion.
U.S. AUTO PARTS NETWORK v. PARTS GEEK 10401
enhancements” to Manager 2000, some at the direction of his
supervisors, and some of his own accord because he thought
it “might be helpful or needed” given Partsbin’s changing
needs. For example, Partsbin began as both a retailer and
direct distributor of the parts it sold online; it carried stock,
sold, and delivered whatever parts customers ordered. But this
integrated business model meant that the size of its online cat-
alog was limited by the size of its warehouse. Partsbin’s busi-
ness entered a new phase after its primary supplier agreed to
ship parts directly to Partsbin customers without having Parts-
bin keep the parts in stock. Use of this drop shipping tech-
nique expanded Partsbin’s business to the extent that Tinari,
one of the Partsbin founders, called it a “material break-
through.”
Thomason tailored the Manager software to fit Partsbin’s
business changes. He added one of these modifications, called
Auto Vend, around “2003 to early 2004.” Auto Vend is a dis-
tributor selection system: if a customer orders a part that is
out of stock in Partsbin’s own warehouse, Auto Vend will
identify an appropriate distributor to fill the customer’s order.
As Partsbin evolved, so did Manager 2000. In his time
working at Partsbin, Thomason developed at least four more
versions of Manager—Manager 2001, Manager 2001 v2,
Manager 2003, and Manager 2005.3 There is no record of a
written agreement between Thomason and Partsbin regarding
the ownership rights to Thomason’s “modifications and
enhancements” to Manager 2000.
Partsbin became an internet success story. By 2006, its
annual sales had reached approximately $80 million. Parts-
bin’s success attracted suitors, one of which was USAP,
another online retailer of aftermarket auto parts. In May 2006,
3
Thomason was employed at Partsbin from April 2001 to May 2006
with a possible gap from “the end of 2001” to “possibly midsummer of
2002.”
10402 U.S. AUTO PARTS NETWORK v. PARTS GEEK
USAP and Partsbin entered into an acquisition agreement,
whereby USAP agreed to purchase Partsbin for some $50 mil-
lion. The acquisition agreement listed Partsbin’s assets as
including all its “Intellectual Property,” defined in relevant
part as “all rights to and interests in . . . all Software, copy-
rights . . . registrations and applications thereof . . . .” “Soft-
ware” was defined, in turn, to mean “title and interest in the
[Partsbin] software programs” identified in a schedule
attached to the agreement. The attached schedule of intellec-
tual property rights stated in relevant part:
e-commerce system — owned by Company [Partsbin]
manager — owned by Company [Partsbin]
After the acquisition, USAP hired many of Partsbin’s key
employees, including the four founders (Pine, Daugherty,
Tinari, and Mann), Thomason, and Pine’s son-in-law, Dannie
Hendershot, who was also an early-stage Partsbin employee.
According to Thomason, his “primary role” at USAP was to
“manage Manager” by again making “modifications and
enhancements” to the software in order to accommodate the
needs of his co-workers and supervisors. Eventually, these
updates led to the development of at least two more versions
of e-commerce software, Manager July 2008, and Versapart.
Thomason resigned from USAP in July 2008. Around that
same time, Pine, Tinari, Mann, and Hendershot also left
USAP to launch a new online aftermarket car parts retailer
named Parts Geek. Parts Geek needed e-commerce software,
so it contacted Thomason. Thomason began work on the Parts
Geek project about four weeks before he left USAP. He fin-
ished writing the new software, called Admin, by October
2008 and Parts Geek began accepting orders through Admin
shortly thereafter.
Parts Geek was another success, growing to over $12 mil-
lion in sales by the end of 2009. This rapid growth attracted
U.S. AUTO PARTS NETWORK v. PARTS GEEK 10403
USAP’s attention and suspicion, culminating in this suit by
USAP against Parts Geek and Thomason claiming, among
other things, that Admin infringes USAP’s copyrights in
Manager. USAP also brought three state law causes of action
(misappropriation of trade secrets, breach of contract, and
unfair competition), and Parts Geek responded with federal
antitrust and state tortious interference counterclaims.
Parts Geek and Thomason moved for summary judgment
on USAP’s claims, and USAP did the same on Parts Geek’s
counterclaims. As part of its opposition to summary judg-
ment, USAP submitted the first report of its software expert,
which stated that Admin included a feature “substantially sim-
ilar” to Auto Vend in Manager. In addition, USAP requested
a continuance of the summary judgment proceedings until (1)
it could depose Thomason and, (2) its software expert could
prepare a second report comparing the first four versions of
Manager (2000, 2001, 2001 v2, and 2003) to the later ver-
sions of the software (Versapart and Admin). The district
court denied the continuance for USAP’s software expert’s
second report, but allowed the continuance as to Thomason’s
deposition. Both parties filed supplemental summary judg-
ment briefing following the deposition.
The district court granted summary judgment to Parts Geek
and Thomason on USAP’s copyright infringement claim for
Manager, concluding that USAP did not own the copyright to
any versions of Manager because “Thomason never agreed to
transfer his ownership of the Manager program (or any of its
subsequent versions) to either Partsbin or USAP.” Because
the district court concluded that USAP had no ownership
interest in Manager, it ruled that USAP had no standing to
bring suit for infringement. Following summary judgment,
Parts Geek and Thomason moved for attorneys’ fees for
USAP’s claims related to the Manager software. The district
court granted the motions and awarded fees. The parties
timely appealed.
10404 U.S. AUTO PARTS NETWORK v. PARTS GEEK
On appeal, USAP claims that the district court erred in
granting summary judgment in favor of Parts Geek and Tho-
mason because USAP does have an ownership interest in
those portions of Manager that Thomason prepared while he
was working at Partsbin. According to USAP, Thomason’s
work while employed at Partsbin was “work made for hire,”
17 U.S.C. § 101, and therefore Partsbin was the copyright
owner of (at a minimum) any copyrightable enhancements
Thomason added to Manager 2000 while working for Parts-
bin, id. at § 201(b). USAP asserts that it became the copyright
owner of these enhancements when it acquired Partsbin’s
intellectual property. By the same work for hire theory, USAP
also claims the copyright to the enhancements Thomason
added to Manager while he was employed at USAP. Finally,
USAP asserts that Parts Geek and Thomason infringed
USAP’s copyright to these enhancements by using substan-
tially similar features as part of Admin.
We have jurisdiction pursuant to 28 U.S.C. § 1291 and
review de novo a district court’s grant of summary judgment,
as well as its interpretation of the Copyright Act. Ellison v.
Robertson, 357 F.3d 1072, 1075-76 (9th Cir. 2004). As the
moving parties, Parts Geek and Thomason bear the burden of
proving the absence of a genuine issue of material fact. Id. A
genuine issue of material fact exists if there is evidence from
which a jury could reasonably render a verdict in favor of
USAP, the non-moving party. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 252 (1986). In determining whether a jury
could so find, we draw all reasonable inferences in favor of
USAP. Ellison, 357 F.3d at 1075.
II
We must first determine whether USAP’s theory of copy-
right ownership is based on a correct legal interpretation. The
key to USAP’s argument is the interaction of two provisions
in the Copyright Act: the provision making employers the
copyright owner of an employee’s “work made for hire,” 17
U.S. AUTO PARTS NETWORK v. PARTS GEEK 10405
U.S.C. § 201(b), and the provision governing copyright own-
ership of “derivative works,” id. at § 103. We consider each
in turn.
A
[1] We begin by considering the applicability of the “work
made for hire” doctrine to Thomason’s development of soft-
ware enhancements to Manager 2000 while employed at
Partsbin and USAP. Software source code is subject to copy-
right protection. JustMed, Inc. v. Byce, 600 F.3d 1118, 1125
n.3 (9th Cir. 2010). Under § 201(a)4 of the Copyright Act,
copyright ownership “vests initially in the author or authors
of the work,” which is generally the creator of the copyrighted
work. See Cmty. for Creative Non-Violence v. Reid, 490 U.S.
730, 737 (1989). “The Act carves out an important exception,
however, for ‘works made for hire.’ ” Id. at 737. If a work is
made for hire, “the employer or other person for whom the
work was prepared is considered the author” and owns the
copyright “unless the parties have expressly agreed otherwise
in a written instrument signed by them.” § 201(b)5; see also
Thomson v. Larson, 147 F.3d 195, 205 n.27 (2d Cir. 1998)
(“The work-for-hire provisions are an exception to the rule
that copyrights belong in the first instance only to creators.”).
Relevant here, a “work made for hire” is defined as “a work
prepared [1] by an employee [2] within the scope of his or her
employment.” § 101.
4
Section 201(a) provides:
Initial Ownership.— Copyright in a work protected under this
title vests initially in the author or authors of the work. The
authors of a joint work are coowners of copyright in the work.
5
Section 201(b) provides:
Works Made for Hire.— In the case of a work made for hire, the
employer or other person for whom the work was prepared is
considered the author for purposes of this title, and, unless the
parties have expressly agreed otherwise in a written instrument
signed by them, owns all of the rights comprised in the copyright.
10406 U.S. AUTO PARTS NETWORK v. PARTS GEEK
[2] Although the Copyright Act does not define either
“employee” or “scope of employment,” these terms must be
“understood in light of the general common law of agency.”
Reid, 490 U.S. at 739-41 (applying agency principles to con-
clude that an artist who had been commissioned by a non-
profit corporation to create a sculpture was not an “employee”
who had created the work within the “scope of his employ-
ment.”). Reid cited to section 228 of the Restatement (Sec-
ond) of Agency as a source of these common law principles,
id. at 740, and courts have accordingly adopted section 228’s
three-prong test for determining when a work is made by an
employee “within the scope” of employment: “(a) it is of the
kind [the employee] is employed to perform; (b) it occurs sub-
stantially within the authorized time and space limits; [and]
(c) it is actuated, at least in part, by a purpose to serve the
[employer].” Avtec Sys., Inc. v. Peiffer, 21 F.3d 568, 571 (4th
Cir. 1994) (quoting Restatement § 228); accord Shaul v.
Cherry Valley-Springfield Cent. Sch. Dist., 363 F.3d 177, 186
(2d Cir. 2004) (same); see also 4 Melville B. Nimmer &
David Nimmer, Nimmer on Copyright § 5.03[B][1][b][I]
(2011).
[3] We join our sister circuits in adopting this approach.
Provided that Partsbin and USAP had the right to create deriv-
ative work based on Manager 2000, any separately copyright-
able software source code developed by Thomason while at
Partsbin, and later USAP, is a “work made for hire” if (1)
Thomason was an employee of Partsbin and USAP, and (2)
the development of software code was the type of work he
was employed to perform, the work occurred substantially
within the authorized work hours and space limits, and the
work was actuated, at least in part, by a purpose to serve
Partsbin and USAP.
B
We next consider how and when enhancements to software
programs such as Manager 2000 can be separately copyright-
U.S. AUTO PARTS NETWORK v. PARTS GEEK 10407
able as derivative works. A “work based upon one or more
preexisting works” that “recast[s], transform[s], or adapt[s]”
the preexisting work is referred to as a “derivative work.” 17
U.S.C. § 101.6 A copyright owner has the exclusive right to
“prepare” and authorize the preparation of “derivative works
based upon the copyrighted work.” Id. at § 106(2). A nonex-
clusive license of this right “may be granted orally, or may
even be implied by conduct.” Effects Assocs. v. Cohen, 908
F.2d 555, 558 (9th Cir. 1990) (quoting Nimmer on Copyright
§ 10.03[A] (1989)).
[4] The resulting derivative work may be independently
copyrightable, but the scope of this copyright is limited. For
example, where the copyright owner has authorized a third
party to prepare a derivative work based on the owner’s pre-
existing work, copyright protection in the derivative work will
cover only “the material contributed by the author of such
work, as distinguished from the preexisting material
employed in the work.” § 103(b); see Stewart v. Abend, 495
U.S. 207, 223 (1990) (“The aspects of a derivative work
added by the derivative author are that author’s property, but
the element drawn from the pre-existing work remains on
grant from the owner of the pre-existing work.”); Russell v.
Price, 612 F.2d 1123, 1128 (9th Cir. 1979). Copyright in this
contributed material “is independent of, and does not affect or
enlarge the scope, duration, ownership, or subsistence of, any
copyright protection in the preexisting material.” § 103(b).
However, copyright protection for a derivative work “does
not extend to any part of the work in which such [preexisting]
6
Section 101 defines a “derivative work” as:
a work based upon one or more preexisting works, such as a
translation, musical arrangement, dramatization, fictionalization,
motion picture version, sound recording, art reproduction, abridg-
ment, condensation, or any other form in which a work may be
recast, transformed, or adapted. A work consisting of editorial
revisions, annotations, elaborations, or other modifications
which, as a whole, represent an original work of authorship, is a
“derivative work.”
10408 U.S. AUTO PARTS NETWORK v. PARTS GEEK
material has been used unlawfully.” § 103(a). Thus, if a third
party uses preexisting work in violation of the Copyright Act,
see Ets-Hokin v. Skyy Spirits, Inc., 225 F.3d 1068, 1078 n.7
(9th Cir. 2000), the resulting derivative work is not entitled to
copyright protection. In short, § 103 provides that a derivative
author may own the copyright in material the author contrib-
uted to a preexisting work, but not in infringing material or
material the author did not create.
We have adopted the Second Circuit’s test for ascertaining
whether a derivative work meets copyright law’s fundamental
requirement of originality. In order to be copyrightable, (1)
“the original aspects of a derivative work must be more than
trivial” and (2) “the original aspects of a derivative work must
reflect the degree to which it relies on preexisting material
and must not in any way affect the scope of any copyright
protection in that preexisting material.” Entm’t Research Grp.
v. Genesis Creative Grp., 122 F.3d 1211, 1220 (9th Cir. 1997)
(quoting Durham Indus. v. Tomy Corp., 630 F.2d 905, 909
(2d Cir. 1980)). This Durham test establishes two ways of
asking the same underlying question: whether the derivative
work meets the “constitutional requirement” of originality
enunciated in Feist Publications, Inc. v. Rural Telephone Ser-
vice Co., 499 U.S. 340, 346 (1991). In Feist, the Supreme
Court held that “[t]o qualify for copyright protection, a work
must be original to the author,” meaning that “the work was
independently created by the author (as opposed to copied
from other works), and that it possesses at least some minimal
degree of creativity.” Id. at 345. Thus, the first prong of the
Durham test asks whether the derivative work is original to
the author and non-trivial, i.e., possesses the minimal degree
of independent creativity required by Feist. Durham, 630 F.2d
at 909; Entm’t Research Grp., 122 F.3d at 1220. The second
prong asks whether the author of the derivative work made so
few changes to the preexisting work that issuing a copyright
for the derivative work would prevent the owner of the preex-
isting work from exercising some of its rights under copyright
law. Entm’t Research Grp., 122 F.3d at 1220.
U.S. AUTO PARTS NETWORK v. PARTS GEEK 10409
Durham illustrates how this test should be applied. In that
case, a toy company that produced Mickey Mouse, Pluto, and
Donald Duck toys claimed that it owned a derivative copy-
right in these Disney characters. Durham, 630 F.2d at 908-11.
The court rejected this claim. First, the court held that the toys
contained “no independent creation” and lacked “even a mod-
est degree of originality.” Id. at 910-11. Second, the court
explained that if it recognized the toymaker’s derivative copy-
right in the toys, then other licensees of Disney would “as a
practical matter, have to make substantial changes in these
characters in order to avoid infringing [the toymaker’s deriva-
tive] rights.” Id. at 911. As a result, “Disney’s right to copy
(or to permit others to copy) its own creations would, in
effect, be circumscribed.” Id. Because any material the toy-
maker contributed to the Disney characters was trivial and
lacked the requisite originality, Durham concluded the toys
were not copyrightable. Id. at 910-11; see also Entm’t
Research Grp., 122 F.3d at 1220.
[5] Applying this test, we conclude that in order to be
copyrightable derivative works, Thomason’s contributions to
Manager 2000 would have to be lawfully based on Manager
2000 and contain non-trivial enhancements that do not affect
the scope of copyright protection in Manager 2000. See
Entm’t Research Grp., 122 F.3d at 1220.
C
[6] Having separately examined the work for hire and
derivative work provisions of the Copyright Act, we now
must read them together. Based on our review, we conclude
that absent a written agreement to the contrary, the employer
is the author of a work made for hire. § 201(b). If such a work
is lawfully derived from a preexisting copyrighted work, the
employer holds the copyright to the original, non-trivial mate-
rial contributed to the preexisting work. § 103. Therefore, we
agree with USAP’s interpretation of the law: if Thomason’s
contributions to Manager 2000 while he was an employee at
10410 U.S. AUTO PARTS NETWORK v. PARTS GEEK
Partsbin and USAP were works made for hire and were also
copyrightable derivative works, then Partsbin and USAP
would be the copyright owners of those works.
III
We next apply these legal principles to the facts of this case
in order to determine whether there is a genuine issue of
material fact that USAP owned copyrightable portions of the
post-2000 versions of Manager.7 Our analysis of the Copy-
right Act demonstrates that this question consists of two inter-
twined threshold issues: whether a jury could reasonably infer
(1) that Thomason’s enhancements to Manager 2000 consti-
tuted “work made for hire” as defined in the Copyright Act
(and thus potentially owned by Partsbin and USAP), and (2)
that such enhancements are copyrightable, meaning that Parts-
bin and USAP held non-exclusive licenses to modify Manager
2000 and these modifications are sufficiently original.
A
We begin with the question whether a jury could reason-
ably infer that Thomason’s work on the Manager software for
Partsbin and USAP constituted “work made for hire.” More
specifically, we must determine whether a jury could reason-
ably conclude that (1) Thomason was an employee of Partsbin
and then USAP when he created the later versions of Manager
(2001, 2001 v2, 2003, 2005, July 2008, and Versapart) and
(2) these works were made “within the scope of his employ-
ment.” § 101.
As a threshold matter, it is undisputed that Thomason was
a Partsbin employee from April 2001 to sometime in 2006,
and after that, a USAP employee until July 2008.
7
The parties do not dispute that Thomason is the author and copyright
owner of Manager 2000.
U.S. AUTO PARTS NETWORK v. PARTS GEEK 10411
We therefore turn to the question whether Thomason’s
updates to Manager were made within the scope of his
employment, that is, whether such coding was the kind of
work Partsbin and USAP employed Thomason to perform,
occurred within authorized work hours and space limits, and
was actuated, at least in part, by a purpose to serve Partsbin
and USAP. See Avtec, 21 F.3d at 571. There is evidence in the
record to support such an inference.
[7] First, a jury could reasonably find that Thomason’s
modifications to Manager 2000 were the kind of work Tho-
mason was “employed to perform.” See id. According to testi-
mony in the record, Thomason was hired as an employee by
Partsbin shortly after “he provided the company with the
Manager software for it to use as its e-commerce system.” At
Partsbin, Thomason worked as the “director of eServices,”
where his job included “creating websites, catalogs and main-
taining the network,” and making “changes or modifications”
to Manager. Thomason acknowledged that many of these
modifications were made in response to requests by his Parts-
bin supervisors. Similarly, Thomason testified that his “pri-
mary role” at USAP was to “manage Manager” by making
“modifications and enhancements” to the software that were,
at least in part, requested by the company.
[8] As to the second prong, whether Thomason wrote the
source code for these later versions of Manager 2000 “sub-
stantially within authorized time and space limits,” id., there
is little evidence in the record either way. But this lack of evi-
dence is not dispositive. Rather, as Avtec noted, when there is
evidence that the employee’s creation was the “kind of work”
the employee was employed to perform, courts have tended
to put little weight on evidence that “the work was done at
home on off-hours.” Id. at 571-72 (citing cases); cf. JustMed,
600 F.3d at 1128 (recognizing that for the purposes of a work
for hire situation, courts must be sensitive to the fact that a
“small start-up company” might “conduct[ ] its business more
informally than an established enterprise might”). In any
10412 U.S. AUTO PARTS NETWORK v. PARTS GEEK
event, here, the small amount of record evidence on this issue
supports USAP’s position. Because Thomason testified that
he lived rent-free in a house that doubled as a Partsbin office
while working on Partsbin’s software, a jury could reasonably
infer that neither Thomason nor Partsbin strictly differentiated
between work and home, or between work hours and off
hours, and thus all of Thomason’s work on Manager was
within authorized work hours and space limits. See Shaul, 363
F.3d at 186.
[9] Finally, a reasonable jury could infer from the record
that Thomason’s creation of these updated Manager programs
was “actuated, at least in part, by a purpose to serve” Partsbin
and USAP by making the software better suited to their busi-
nesses. See id. For example, Thomason explained that some
of the “modifications or enhancements” he made to Manager
while at Partsbin were ones that he determined to be “helpful
or needed” to the company as determined by his own
research. He testified similarly regarding his work at USAP.
[10] In light of this analysis, we conclude that there is a
genuine issue of material fact as to whether Thomason’s work
on Manager while at Partsbin and USAP constitutes work
made for hire. Because there is no evidence that Thomason
and his employers “expressly agreed” in a “written instrument
signed by them” that Thomason would be the author of any
work he contributed to Manager during his employment,8
§ 201(b), a jury could reasonably infer that Partsbin and
USAP became the owners of any such work made for hire,
and that when USAP acquired Partsbin, it also acquired the
work Thomason did on Manager while employed at Partsbin.
Parts Geek and Thomason argue that USAP waived its
argument that it owned Thomason’s modifications to Man-
8
The current dispute is largely the result of the parties’ failures to
express or document clearly the precise terms of their relevant understand-
ings.
U.S. AUTO PARTS NETWORK v. PARTS GEEK 10413
ager by failing to raise it to the district court. But USAP suffi-
ciently raised this argument in its supplemental brief in
opposition to summary judgment following Thomason’s
deposition, which the district court permitted the parties to
file. In that brief, USAP argued that Thomason “made
changes, modifications, and enhancements to the Manager
software” while employed by Partsbin, and later, by USAP,
and as a result, “all of the work that Thomason did on the
Manager software as an employee belongs to his employers.”
This argument was “raised sufficiently for the trial court to
rule on it” and was therefore not waived. O’Rourke v. Sea-
board Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957
(9th Cir. 1989).
B
This conclusion leads to the next question, whether any of
Thomason’s work on Manager while employed by Partsbin
and USAP was copyrightable under the rules applicable to
derivative works.9 To answer this question, a fact finder must
determine (1) whether Partsbin and USAP lawfully derived
the enhancements to Manager 2000 that led to the subsequent
versions of the software, and (2) whether any of these
enhancements were “more than trivial” such that they did not
affect the scope of the copyright in Manager. Entm’t Research
Grp., 122 F.3d at 1220; Durham, 630 F.2d at 909; § 103(b).
[11] First, Thomason and Parts Geek argue that Thoma-
son’s enhancements to Manager 2000 are not copyrightable
derivative works because they were made through an unlaw-
ful use of Manager 2000, the preexisting work. Specifically,
9
USAP argues that the later versions of Manager produced by Thoma-
son while at Partsbin and USAP are not derivative works, but are in fact
entirely new works owned by Partsbin, and now USAP. Because the dis-
trict court denied USAP’s request to introduce evidence on this point, the
record is undeveloped on the issue. Therefore, for purposes of this appeal,
we assume without deciding that Thomason created derivative works
based on Manager 2000 while he was at Partsbin and USAP.
10414 U.S. AUTO PARTS NETWORK v. PARTS GEEK
Parts Geek asserts that Partsbin infringed Thomason’s exclu-
sive right to create and authorize the creation of derivative
works based on Manager 2000. § 106(2). We disagree. A rea-
sonable jury could infer that Thomason provided Partsbin and
USAP with an implied non-exclusive license to prepare deriv-
ative works from his software. See Effects Assocs., 908 F.2d
at 558; see also Asset Mktg. Servs. v. Gagnon, 542 F.3d 748,
755-57 (9th Cir. 2008). While employed by both Partsbin and
USAP, Thomason willingly modified and enhanced Manager
2000 and later versions of the software in response to his
employer’s requests. Thus, a genuine issue of material fact
exists as to whether Thomason’s conduct created an implied
license to Partsbin, USAP, or both, to use Manager 2000 (or
other versions of Manager for which Thomason potentially
retained copyright ownership) in developing the subsequent
versions of Manager.
[12] Second, although the record is relatively undeveloped
on this issue, a reasonable jury could infer that Thomason
added at least one original and non-trivial feature to Manager
2000 while working at Partsbin: Auto Vend, Manager’s dis-
tributor selection system that Thomason created in “2003 to
early 2004.” The record shows that Auto Vend was integral
to how Manager facilitated drop shipping because it allowed
Partsbin to satisfy its customers’ orders from the appropriate
parts suppliers. Given that a Partsbin founder described the
company’s switch to using drop shipping as a “material
breakthrough,” it is reasonable to infer that Thomason needed
to develop entirely new source code for the software feature
facilitating this “breakthrough.” See Entm’t Research Grp.,
122 F.3d at 1220; see also Feist, 499 U.S. at 345 (“To be
sure, the requisite level of creativity is extremely low; even a
slight amount will suffice.”).
[13] Moreover, a jury could reasonably conclude that the
copyright to the Auto Vend feature is “independent of, and
does not affect or enlarge the scope” of Thomason’s preexist-
ing copyright in Manager 2000. § 103(b). The record shows
U.S. AUTO PARTS NETWORK v. PARTS GEEK 10415
that Partsbin used Manager 2000 for two or three years before
Auto Vend was added, which provides evidence that Auto
Vend added an independent functionality to the preexisting
Manager 2000. Thus, it is reasonable to infer that Thomason
would be free to copy and license Manager 2000 (without
Auto Vend) to others, and that such licensees would not have
to be concerned about vulnerability to suit from Partsbin for
infringement of the Auto Vend feature. Cf. Entm’t Research
Grp., 122 F.3d at 1220; Durham, 630 F.2d at 909. Because
Partsbin’s ownership of the copyright to Auto Vend would
not circumscribe Thomason’s right to copy or license Man-
ager 2000, a jury could reasonably conclude that Auto Vend
was a copyrightable element of Thomason’s work made for
hire. See Entm’t Research Grp., 122 F.3d at 1220.
[14] Accordingly, a jury could reasonably conclude that
Partsbin owned the copyright to Auto Vend because it was a
non-trivial, original feature contributed to a lawfully used pre-
existing work, Manager 2000, as a work made for hire. A jury
could also conclude that USAP acquired this copyright when
it acquired Partsbin’s “Intellectual Property,” including “title
and interest in [Partsbin’s] software programs,” in 2006.
IV
[15] Although our analysis of USAP’s claims required a
long trip through a previously unexplored intersection of the
Copyright Act’s work for hire and derivative work provisions,
our conclusion is straightforward: there is a genuine issue of
material fact as to whether USAP owns the copyright to all or
any part of Manager. Based on our review of the law and the
record, and drawing all inferences in favor of USAP, a jury
could reasonably determine that even though Thomason
owned the copyright to Manager 2000, (1) Thomason granted
Partsbin and USAP implied, non-exclusive licenses to create
derivative work from that software, (2) Thomason’s modifica-
tions to that software while employed by Partsbin and USAP
were made within the scope of his employment, (3) at least
10416 U.S. AUTO PARTS NETWORK v. PARTS GEEK
one of those modifications made while employed by Partsbin,
Auto Vend, was independently copyrightable as a work made
for hire, and (4) such copyright was transferred to USAP in
2006 as part of its acquisition of Partsbin. Therefore, the dis-
trict court erred in granting summary judgment on the ground
that USAP could not show any such ownership interest as a
matter of law. We reverse the district court’s grant of sum-
mary judgment to Parts Geek on USAP’s copyright infringe-
ment claim on this basis.
Because the district court granted summary judgment on
this misunderstanding of USAP’s ability to own a copyright
to features of Manager, it did not reach the question whether
Thomason’s creation and Parts Geek’s use of Admin
infringed USAP’s copyright in the portions of Manager to
which USAP holds the copyright. On remand, the parties may
develop the record regarding this issue of infringement as
well as the threshold issues of copyright ownership, such as
the scope of Thomason’s work for hire while employed at
Partsbin (including any agreements he may have had with
Partsbin regarding his modifications to Manager 2000), the
scope of Thomason’s work for hire while employed at USAP,
and the relationship between Manager 2000 and the post-2000
versions of Manager.10 The district court should examine
these issues in the first instance in light of this decision.
REVERSED in part, VACATED in part, AND
REMANDED.
10
USAP’s appeal of the district court’s denial of its motion for continu-
ance of summary judgment pending further discovery is dismissed as
moot. See Noyes v. Kelly Servs., 488 F.3d 1163, 1174 (9th Cir. 2007). We
also vacate the district court’s entry of attorneys’ fees as to USAP’s copy-
right infringement claim. See United States v. 4,432 Mastercases of Ciga-
rettes, More or Less, 448 F.3d 1168, 1194 (9th Cir. 2006).