Storage Technology Corp. (Doing Business as Storagetek) v. Custom Hardware Engineering & Consulting

United States Court of Appeals for the Federal Circuit
04-1462
STORAGE TECHNOLOGY CORPORATION
(doing business as Storagetek),
Plaintiff-Appellee,
v.
CUSTOM HARDWARE ENGINEERING & CONSULTING, INC.,
Defendant-Appellant,
and
DAVID YORK,
Defendant-Appellant.
Charles W. Steese, Steese & Evans, P.C., of Denver, Colorado, argued for
plaintiff-appellee. With him on the brief was Sandra L. Potter. Of counsel on the brief
were Michael D. Broaddus, Perkins Coie LLP, of Seattle, Washington, and Bobbee J.
Musgrave, Musgrave & Theis, LLP, of Denver, Colorado. Of counsel were Jerry A.
Riedinger, Perkins Coie LLP, of Seattle, Washington, and Mark T. Wasden, of
Washington, DC; and Teresa L. Ashmore, Musgrave & Theis LLP, of Denver, Colorado.
Dean L. Franklin, Thompson Coburn LLP, of St. Louis, Missouri, argued for
defendants-appellants Custom Hardware Engineering & Consulting, Inc. and David
York. Of counsel on the brief were Edwin G. Harvey and Nicholas B. Clifford, Jr., Simon
Passanante, PC, of St. Louis, Missouri, and Anthony G. Simon.
Joseph D. Steinfield, Prince, Lobel, Glovsky & Tye, LLP, of Boston,
Massachusetts, for defendant-appellant David York.
Appealed from: United States District Court for the District of Massachusetts
Judge Rya W. Zobel
United States Court of Appeals for the Federal Circuit
04-1462
STORAGE TECHNOLOGY CORPORATION
(doing business as StorageTek),
Plaintiff-Appellee,
v.
CUSTOM HARDWARE ENGINEERING & CONSULTING, INC.,
Defendant-Appellant,
and
DAVID YORK,
Defendant-Appellant.
___________________________
DECIDED: August 24, 2005
___________________________
Before RADER, SCHALL, and BRYSON, Circuit Judges.
Opinion for the court filed by Circuit Judge BRYSON. Dissenting opinion filed by Circuit
Judge RADER.
BRYSON, Circuit Judge.
Storage Technology Corporation (“StorageTek”) manufactures automated tape
cartridge libraries that can store massive amounts of computer data. The cartridge
libraries consist of Library Storage Modules, or “silos,” that contain numerous tape
cartridges, tape drives for reading the cartridges, and a robot arm for moving the
cartridges. Connected to each silo is a Library Control Unit that controls the robotic
mechanisms in the silo and monitors their progress. The individual silos and Control
Units are connected via a local area network to a Library Management Unit, which is a
computer that can direct and control several silos. To access data from the library, a
user sends a request for the data to the Management Unit. The Management Unit then
transmits commands to the appropriate Control Unit to find and read the tape cartridge
containing the requested data. The Control Unit then sends the data over the network
back to the Management Unit.
A central element of this case concerns what occurs when the entire tape library
is first turned on. Upon startup, the Management Unit loads executable code, called the
“9330 code,” from its hard drive into its random access memory (“RAM”). When the
Control Unit is powered up, the Management Unit sends other code, called the “9311
code,” across the network to the Control Unit, where it is loaded into the Control Unit’s
memory. Both processes happen automatically, without any action by the library user.
StorageTek’s claims in this case stem from the fact that the 9330 and 9311
computer code is copyrighted. StorageTek describes both the 9330 and 9311 code as
consisting of two intertwined, but distinct, groups: functional code and maintenance
code. While StorageTek never specifies which portions of its copyrighted code fall into
each group, it states that the functional code consists of the portions of the computer
program that cause the Management Unit and Control Unit to run, while the
maintenance code consists of the portions of the program that diagnose malfunctions
and maintain the performance of the Management Unit and Control Unit. When
StorageTek sells its tape libraries to customers, the company does not sell the software
that runs the library. Rather, it only licenses the programs to its customers. The license
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covers only the functional code portions of the software, and it specifically excludes the
maintenance code. However, StorageTek provides the entire code to the customer.
Both the functional and maintenance code are automatically loaded into the RAM of the
Control Unit and Management Unit upon startup, and copying the entire code is
necessary to activate and run the library.
Custom Hardware Engineering & Consulting, Inc., (“CHE”) is an independent
business that repairs data libraries manufactured by StorageTek. In order to diagnose
problems with the libraries, CHE intercepts and interprets error messages produced by
the maintenance code. The error messages are known as fault symptom codes. The
fault symptom codes are generated by the Control Unit and are transmitted to the
Management Unit over the network within a package of information, called an Event
Message. To ensure that the Control Unit is configured to send the fault symptom
codes, CHE needs to override a password protection scheme, called GetKey, which
was written by StorageTek to disallow certain unauthorized reconfigurations of the
maintenance code on the Control Unit. CHE has used two devices to circumvent
GetKey. The original device, called a Library Event Manager (“LEM”), was connected to
the network between the Control Unit and the Management Unit. The LEM worked by
trying different passwords to “crack” GetKey. The LEM then allowed CHE to force the
Control Unit to send fault symptom codes over the network after rebooting the
Management Unit and Control Unit. CHE has ceased using the LEM in favor of a
different device, the Enhanced Library Event Manager (“ELEM”). The ELEM also is
attached to the network between the Control Unit and Management Unit. Rather than
“cracking” the GetKey password, the ELEM mimics a signal from the Management Unit
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to the Control Unit upon rebooting the Control Unit, which causes the maintenance code
on the Control Unit to be configured to send the fault symptom codes. CHE then
intercepts the Event Messages and interprets the fault symptom codes. Based on the
information in those error codes, CHE is able to diagnose and repair the data libraries.
StorageTek brought an action in the United States District Court for the District of
Massachusetts against CHE and its president, David York. StorageTek alleged that
CHE committed copyright infringement when CHE rebooted and reconfigured its
customers’ Control Units and Management Units. Storage Tech. Corp. v. Custom
Hardware Eng’g & Consulting, Inc., No. 02-12102-RWZ (D. Mass.). Additionally,
StorageTek alleged that CHE violated the anticircumvention provision of the Digital
Millennium Copyright Act (“DMCA”), 17 U.S.C. § 1201(a), when CHE circumvented the
GetKey protection system to force the customer’s Control Unit to transmit error codes.
StorageTek also claimed that CHE misappropriated its trade secrets by intercepting the
Event Messages, which StorageTek asserts is confidential information. Finally,
StorageTek asserted other claims, including an action for patent infringement, that are
not at issue in this appeal. In response, CHE counterclaimed, alleging that StorageTek
had committed various antitrust violations.
Upon bringing suit, StorageTek asked the district court to issue a preliminary
injunction against CHE. After a hearing on the motion, the district court agreed that
StorageTek had shown a substantial likelihood of success on the copyright, DMCA, and
trade secret claims. Additionally, the court found that the potential losses to
StorageTek’s business due to CHE’s activities were sufficiently great that the balance of
hardships favored issuing a preliminary injunction. Finally, the trial court held that
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CHE’s antitrust counterclaims would likely fail and in any event could not shield CHE
from an injunction. The court therefore enjoined CHE from circumventing the GetKey
system, intercepting and displaying Event Messages, or causing the copying of the
maintenance code on its customers’ systems. CHE appeals. Because the issues on
appeal are not within our exclusive jurisdiction, we follow the law of the circuit from
which this appeal is taken. Glaxo, Inc. v. Novopharm, Ltd., 110 F.3d 1562, 1572 (Fed.
Cir. 1997).
I
CHE does not deny that the copyrighted maintenance code is copied into the
Control Unit’s or Management Unit’s RAM when the company reboots its customers’
systems. See MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 518-19 (9th Cir.
1993). Nor does CHE dispute that the duplication of the maintenance code is outside
the explicit grant of StorageTek’s software license to its customers. Absent a defense,
CHE’s actions would constitute copyright infringement. Stenograph L.L.C. v. Bossard
Assocs., Inc., 144 F.3d 96, 99 (D.C. Cir. 1998). CHE maintains, however, that its
replication of the maintenance code is permissible based on a variety of defenses.
Specifically, CHE argues that the copying is protected by sections 117(a) and 117(c) of
the Copyright Act, 17 U.S.C. §§ 117(a), 117(c), and the doctrine of fair use. CHE also
claims that it is implicitly authorized to copy the maintenance code and that
StorageTek’s copyright on the code is invalid.
A
CHE first asserts that section 117(c) of the Copyright Act shields it from liability
for copyright infringement. Section 117(c) has not previously been construed by the
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First Circuit or any court of appeals, and we therefore treat the issue as one of first
impression. Section 117(c) provides that
it is not an infringement for the owner or lessee of a machine to make or
authorize the making of a copy of a computer program if such copy is
made solely by virtue of activation of a machine that lawfully contains an
authorized copy of the computer program, for purpose only of
maintenance or repair of that machine, if --
(1) such new copy is used in no other manner and is destroyed
immediately after the maintenance or repair is completed; and
(2) with respect to any computer program or part thereof that is not
necessary for the machine to be activated, such program or part
thereof is not accessed or used other than to make such new copy by
virtue of the activation of the machine.
CHE’s position is that its actions are protected by section 117(c) because the
owners of the tape libraries authorize CHE to turn on the Control Units and
Management Units to maintain and repair the tape libraries, and the duplication of the
software into RAM is necessary for the machine to function. CHE also argues that its
activities fall directly within Congress’s purpose in enacting section 117(c), which was to
“ensure that independent service organizations do not inadvertently become liable for
copyright infringement merely because they have turned on a machine in order to
service its hardware components.” H.R. Rep. No. 105-551, pt. 1, at 27 (1998).
StorageTek contends that CHE’s activities fail to meet the requirements of
sections 117(c)(1) and 117(c)(2). Specifically, StorageTek claims that CHE does not
destroy the copy of the computer code in RAM after the maintenance is completed, in
contravention of section 117(c)(1). StorageTek also claims that the maintenance code
is not “necessary for the machine to be activated,” and that CHE therefore violates
section 117(c)(2) when it accesses the maintenance code to diagnose errors in the
cartridge library. The dissent agrees.
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The requirement in section 117(c)(1) that the new copy of the computer program
be destroyed after maintenance or repair is completed can be achieved in most cases
by turning off the machine, which erases the copy from RAM. In this case, the evidence
showed that CHE reboots the storage libraries at the conclusion of its maintenance
contract with the owners of the storage libraries, thus destroying the copy of the
computer program in RAM. However, the district court determined that the destruction
of the copy at that point does not satisfy the requirements of section 117(c)(1) because
CHE “fails to destroy the copies they make immediately after completion of repairs.” In
other words, the district court looked to whether CHE rebooted the machines each time
it repaired a particular malfunction in the silo. The flaw in the court’s analysis is that it
focuses on the term “repair” in the statute, while ignoring the term “maintenance.”
Section 117(d) defines “repair” as “the restoring of the machine to the state of
working in accordance with its original specifications . . . .” 17 U.S.C. § 117(d)(2). It
defines “maintenance” as “the servicing of the machine in order to make it work in
accordance with its original specifications . . . .” 17 U.S.C. § 117(d)(1). Those two
definitions make clear that Congress contemplated two distinct activities. The term
“repair” denotes fixing a broken machine that is no longer “working in accordance with
its original specifications.” That term would apply whenever there is a discrete problem
with the machine, e.g., when there are “worn or defective components such as memory
chips, circuit boards, and hard drives” that need to be replaced. S. Rep. No. 105-190,
at 58 (1998). Once the machine is “restored” to its original working condition, the new
copy of the program would have to be destroyed immediately in order for section 117(c)
to apply. In contrast, the term “maintenance” has a much broader temporal connotation.
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The Senate Report on section 117 characterized “maintenance” as including “checking
the proper functioning of [ ] components.” Id. Thus, maintenance, or “servicing,” was
meant to encompass monitoring systems for problems, not simply fixing a single,
isolated malfunction.
This interpretation of the term “maintenance” comports with the general policy
underlying the enactment of section 117(c). That policy was “to ensure that
independent service organizations do not inadvertently become liable for copyright
infringement merely because they have turned on a machine in order to service its
hardware components.” H.R. Rep. No. 105-551, pt. 1, at 27. Congress thus sought to
protect the class of companies that fix and maintain computer systems, as opposed to
those that would make other commercial use of copyrighted material. The point of
requiring that copies be “destroyed immediately after the maintenance or repair is
completed” was not to create artificial restraints on companies engaged in legitimate
repair and maintenance activities, but to prevent persons from invoking the protection of
section 117 and then later using the copied material for a prohibited purpose. It would
run counter to that objective to construe section 117(c) narrowly to apply only to
companies that performed repair in discrete, temporally isolated stages, rather than to
construe the statute to apply to repair and maintenance services generally, so long as
the companies’ only reason for copying the software at issue was to fix and maintain the
machines on which the software was running.
In its analysis of section 117(c), the district court gave considerable weight to the
testimony of StorageTek’s expert, Christian Hicks. The court noted that Mr. Hicks
testified that a copy of the copyrighted software program remains in the Management
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and Control Units’ RAM on an ongoing basis as the system operates with the LEM or
ELEM attached. Because that description did not comport with the notion of “repair,”
the court held section 117(c) inapplicable. In describing CHE’s process, however, Mr.
Hicks noted that “the LEM and ELEM stay in place at the facilities so that when
problems occur,” CHE can detect and fix the malfunction. That is the same as saying
that while the LEM and ELEM are attached, CHE “checks the proper functioning” of the
storage library and ensures that the machine “works in accordance with its original
specifications.” Accordingly, CHE’s actions fall within the definition of maintenance in
section 117. Moreover, when CHE’s maintenance contract is over, CHE stops its
maintenance and immediately reboots the storage library, thereby destroying the copy
of the copyrighted program. CHE’s actions therefore appear to comply with the
requirement of section 117(c)(1). While CHE may actively check to ensure that the silo
is free from errors over an extended period of time, the protection of section 117 does
not cease simply by virtue of the passage of time. Rather, it ceases only when that
maintenance ends.
In the alternative, StorageTek contends that CHE cannot avail itself of section
117(c) because the statute requires that “with respect to any computer program or part
thereof that is not necessary for the machine to be activated, such program or part
thereof is not accessed or used . . . .” According to StorageTek, the maintenance code
is “not necessary for the machine to be activated,” and CHE’s access to and use of the
maintenance code to generate the Event Message signal therefore makes CHE liable
for infringement. That assertion turns on the meaning of “maintenance code.”
StorageTek’s license agreement states that the maintenance code is software “which
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detects, records, displays and/or analyzes malfunctions in [the] Equipment.” Because
those processes are distinct from “activating the machine,” StorageTek argues that
duplication of the maintenance code is not covered by section 117(c).
Unfortunately, determining whether a particular piece of software is “necessary
for the machine to be activated” is not as simple as it might appear. On the one hand,
not all code that resides in a machine’s RAM after the completion of the startup routine
qualifies as “necessary for the machine to be activated,” even though that code is put
into RAM as part of the activation process. If that were so, the requirement of section
117(c)(2) would effectively be read out of the statute, since under that interpretation
there would be no program that was copied by virtue of activation but could not
otherwise be accessed or used. At the same time, the code “necessary for the machine
to be activated” cannot be the minimal amount of code that, when loaded into RAM,
causes the machine to produce any response. For instance, the programs and drivers
that allow the monitor on a personal computer to function do not fall outside the
protection of section 117(c) simply because the computer itself can be activated and
can function without a monitor attached. If section 117(c) were read that restrictively,
accessing copyrighted software that controlled the monitor would put parties at risk of
infringement, which would thwart Congress’s desire to ensure “that an independent
service provider may turn on a client’s computer machine in order to service its
hardware components.” S. Rep. No. 105-190, at 57.
In enacting section 117(c), Congress gave some indication of what it considered
to be “necessary for the machine to be activated.” Specifically, the House Report on
section 117(c) noted that software is necessary for the machine to be activated if it
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“need[s] to be so loaded in order for the machine to be turned on.” H.R. Rep. No. 105-
551, pt. 1, at 28. As examples of software that need not be loaded in order for the
machine to function, the Report listed programs marketed as separate products that
load into RAM along with the operating system or software that the owner of the
machine has independently configured the computer to load during initialization. Id.Therefore, separate “freestanding programs” that load into RAM upon startup clearly
may not be accessed under section 117(c)(2).
Congress’s clearest indication of what it considered to be “necessary for the
machine to be activated,” however, is found not in section 117(c), but in section 117(d).
As we have noted, section 117(d) defines repair and maintenance in terms of allowing
the system to work “in accordance with its original specifications and any changes to
those specifications authorized for that machine.” Thus, the service provider must be
able to cause the machine to boot up in order to determine if it “works in accordance
with its original specifications.” Accessing software programs, such as freestanding
diagnosis and utility programs, that are not needed to boot up the computer and make
that determination, goes too far because access to those programs is not strictly
necessary to verify that the computer is “working in accordance with its original
specifications.”
In some instances, it may be difficult to determine whether particular software is
necessary to make the computer function and to ascertain whether the computer is
working properly. In this case, however, both parties agree that the maintenance code
is so entangled with the functional code that the entire code must be loaded into RAM
for the machine to function at all. That is, loading the maintenance code into RAM is
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necessary for the Management or Control Unit “to be turned on.” Contrary to the
dissent’s position, the fact that the maintenance code has other functions, such as
diagnosing malfunctions in the equipment, is irrelevant. Moreover, the possibility that
StorageTek could have written the maintenance code as a separate, “freestanding”
program that would not have been needed to start the machine does not affect the
statutory analysis of the system that StorageTek in fact created. Finally, although the
maintenance code can be reconfigured to perform fewer functions, as the dissent points
out, what StorageTek can do with the maintenance code after the system boots up is
irrelevant. As the statutory text and legislative history make clear, the phrase
“necessary for the machine to be activated” refers to the portion of code that must be
copied in order for the machine “to be turned on.” In this case, copying the
maintenance code into RAM is indispensable for the machine to be turned on or
activated; its functionality (or lack thereof) after bootup is moot.
Finally, StorageTek contends that section 117(c) does not apply to CHE’s
conduct because CHE does not reboot the machine and make a copy of the
copyrighted code “for purpose only of maintenance or repair.” Specifically, StorageTek
maintains that CHE reboots the machine in order to circumvent GetKey and gain access
to the fault symptom codes. That argument is unconvincing because CHE’s entire
purpose in obtaining the fault symptom codes is to diagnose and repair the silos.
StorageTek’s argument that CHE’s activity is not “for purpose only of maintenance or
repair” is akin to suggesting that it would be impermissible to activate a keyboard on a
personal computer for the purpose of maintenance or repair because the real purpose
of activating the keyboard would be to allow the user to type. That line of reasoning, if
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accepted, would quickly destroy the protection that section 117(c) affords. If CHE had
rebooted the storage library and loaded its own proprietary code to detect and diagnose
errors in the silo, that activity would surely be considered “repair and maintenance.”
Merely because CHE uses StorageTek’s proprietary maintenance code to do the same
thing does not cause CHE’s activities to no longer be “for the purpose only of
maintenance or repair of that machine.” In sum, we conclude that CHE is likely to
prevail on the merits of its argument that section 117(c) protects its act of copying of
StorageTek’s maintenance code into RAM.
B
CHE argues in the alternative that even if the section 117(c) defense is
unavailable, CHE is not liable for copyright infringement because it enjoys the benefits
of its customers’ licenses to copy StorageTek’s 9330 and 9311 code in order to activate
their machines. StorageTek’s license agreement with its customers allows the
customers to copy StorageTek’s software into RAM “for the sole purpose of enabling
the specific unit of Equipment for which the Internal Code was provided to perform its
data storage and retrieval or other operating functions.” Therefore, the customers do
not commit infringement merely by activating their Management and Control Units and
consequently copying StorageTek’s software into RAM. As an agent of those storage
library owners, CHE also does not commit copyright infringement simply by turning on
the owners’ machines. See Hogan Sys., Inc. v. Cybersource Int’l, Inc., 1997 WL
311526, at *4 (N.D. Tex. June 2, 1997), aff’d, 158 F.3d 319 (5th Cir. 1998) (although the
license at issue did “not specifically authorize a third-party consultant to use, copy, or
modify Umbrella software,” the court found that while the defendants “are engaged in
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consulting services on behalf of Norwest, Defendants’ activities are ‘sheltered under’
Norwest’s license rights”).
StorageTek argues that CHE’s use of the maintenance code must constitute
infringement because the license agreement specifically excludes the use of the
maintenance code. Because CHE’s customers are not allowed to access the
maintenance code, StorageTek asserts that when CHE does so, it must be infringing
StorageTek’s copyright. There are two flaws in that line of reasoning. First, CHE’s
customers are given the right to copy the maintenance code into the RAM of their
machines. The license specifically authorizes the customers to use the code to
“enabl[e] the specific unit of Equipment.” The parties are in agreement that both the
maintenance code and functional code portions of the 9330 or 9331 code must be
loaded into RAM in order to activate the Control and Management Units. In order to
activate the Control and Maintenance Units, the maintenance code must be copied.
The license thus authorizes the copying of that code.
Second, StorageTek’s argument conflates a claim based on copyright
infringement and an action based on breach of contract. To succeed in a copyright
action, “the copying must be beyond the scope of a license possessed by the
defendant,” Stenograph, 144 F.3d at 99, and the source of the copyright owner’s
complaint must be grounded in a right protected by the Copyright Act, such as unlawful
reproduction or distribution. See 17 U.S.C. § 106. In contrast, the rights granted by
contract can be much broader. As an example, consider a license in which the
copyright owner grants a person the right to make one and only one copy of a book with
the caveat that the licensee may not read the last ten pages. Obviously, a licensee who
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made a hundred copies of the book would be liable for copyright infringement because
the copying would violate the Copyright Act’s prohibition on reproduction and would
exceed the scope of the license. Alternatively, if the licensee made a single copy of the
book, but read the last ten pages, the only cause of action would be for breach of
contract, because reading a work does not violate any right protected by copyright law.
Likewise, in this case, the copying of the maintenance code is permitted by the license.
The use of the code may violate the license agreement, but it is not forbidden by
copyright law and cannot give rise to an action for copyright infringement. See United
States Naval Inst. v. Charter Communications, Inc., 936 F.2d 692, 695 (2d Cir. 1991)
(“[a] licensee of any of the rights comprised in the copyright, though it is capable of
breaching the contractual obligations imposed on it by the license, cannot be liable for
infringing the copyright rights conveyed to it”).
Although there is language in some cases that can be read to suggest that
copyright protection extends to all conduct that would violate the user’s license, the
decisions in those cases are not that broad. For example, in S.O.S., Inc. v. Payday,
Inc., the Ninth Circuit stated that a “licensee infringes the owner’s copyright if its use
exceeds the scope of its license.” 886 F.2d 1081, 1087 (9th Cir. 1989). In that case,
however, it was clear that the “use” the copyright owner was complaining about was the
defendant’s “copying and modification of the software.” Id. at 1085. Similarly in John G.
Danielson, Inc. v. Winchester-Conant Props., Inc., 322 F.3d 26, 41 (1st Cir. 2002), the
First Circuit noted that “[u]ses of the copyrighted work that stay within the scope of a
nonexclusive license are immunized from infringement suits.” Not only did the court not
state that “uses” that fall outside the scope of the license would necessarily constitute a
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copyright violation, but the allegedly unlawful “use” in that case was the copying of
architectural plans. Id. at 32; see Data Gen. Corp. v. Grumman Sys. Support Corp., 36
F.3d 1147, 1167 (1st Cir. 1994). In light of their facts, those cases thus stand for the
entirely unremarkable principle that “uses” that violate a license agreement constitute
copyright infringement only when those uses would infringe in the absence of any
license agreement at all.
StorageTek maintains that regardless of the scope of its licenses vis-à-vis the
equipment owners, the licenses do not extend rights to third parties. In particular,
StorageTek points to the language of its standard license agreement, which states that
the equipment owner may not “sublicense, assign, lease or permit another person to
use Internal Code (except as provided . . . below).” The company argues that this
provision forbids CHE from copying StorageTek’s code into RAM by starting up the
Control and Management Units. That argument, however, ignores the rest of the
license agreement. The prohibition on third-party use of the code is modified by a later
provision stating that equipment owners “may transfer possession of Internal Code only
with the transfer of the Equipment on which its use is authorized.” Additionally, the
license grants the customer the use of the code for “the sole purpose of enabling the
specific unit of Equipment for which the Internal Code was provided . . . .” The clear
implication of those sections is that the license is tied to the piece of equipment on
which the software resides. Thus, the authorized use is tied to a particular machine,
rather than a particular person. In fact, one version of StorageTek’s license agreement
expressly contemplates third-party use of the equipment, noting that “misuse of the
Equipment or negligence by Customer or a third party” is not included within the
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maintenance provision of the license. Thus, the prohibition against assigning or
permitting another to use the code is clearly a restriction on giving a third party a copy of
the code that is divorced from the machine “on which its use is authorized.” In this
case, CHE is merely turning on the machine on which the use of the code is authorized.
See Green Book Int’l Corp. v. Inunity Corp., 2 F. Supp. 2d 112, 116 n.1 (D. Mass. 1998)
(multiple individuals may use computer under a license, “which limits use to ‘only one
single-user computer,’ without any additional restriction on the identity of the person
who, from time to time, physically sat at and operated such computer”). Because the
whole purpose of the license is to allow the tape library owners to activate their
machines without being liable for copyright infringement, such activity by the licensee
and its agents is implicitly authorized by the license agreement unless the agreement
explicitly prohibits third parties from powering up the machines.
Other cases involving software license agreements support that reading of
StorageTek’s agreement, albeit indirectly. For example, in MAI Systems, the Ninth
Circuit held that a third party was not authorized to copy licensed software into RAM by
activating a computer. However, the court held that the license did not cover such
copying because the license prohibited third parties from copying the software. 991
F.2d at 517. The license in MAI Systems was so restrictive that only three employees
of the licensee were allowed to use and copy portions of the software. Id. at 517 n.3. It
was only because the license contained such severe, explicit restrictions that the court
held that third parties were prohibited from copying the software by activating the
machine. The court in MAI Systems would not have had to rest its decision on those
restrictive license terms if third parties were disallowed from copying the software even
04-1462 17
in the absence of such restrictive language in the license. See also SMC Promotions,
Inc. v. SMC Promotions, 355 F. Supp. 2d 1127, 1132 (C.D. Cal. 2005) (forbidding third-
party copying by relying on the explicit language of the license, which stated that
licensees “may not delegate or authorize any other person to do so, whether on [the
licensees’] behalf or otherwise”).
StorageTek, of course, could have drafted the license agreement to explicitly
disallow copying by third parties through activation of the equipment owners’ machines.
In the absence of such language, however, CHE’s copying appears to be protected as
long as CHE is acting as an agent of the equipment owners.
C
In conclusion, the district court erred in finding that CHE was unlikely to prevail
on its defense to copyright infringement. CHE’s conduct appears to fall within the safe
harbor of 17 U.S.C. § 117(c). Additionally, CHE is likely to prevail on its contention that
StorageTek’s license agreement with its customers allows CHE, as the customers’
agent, to copy StorageTek’s software into RAM during the activation of the customers’
tape libraries. Having concluded that CHE is likely to prevail on the issue of copyright
infringement based on section 117(c) and the customers’ licenses, we do not need to
address CHE’s defenses premised on section 117(a), fair use, and invalid registration.
II
The DMCA claim is based on CHE’s circumvention of the GetKey protocol.
Specifically, StorageTek maintains that the use of the ELEM and LEM devices violates
section 1201(a)(1) of title 17 of the United States Code, which prohibits any person from
“circumvent[ing] a technological measure that effectively controls access to a work
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protected under this title.” While the First Circuit has not addressed the scope of the
DMCA’s prohibition under section 1201(a), this court has confronted the issue in
Chamberlain Group, Inc. v. Skylink Technologies, Inc., 381 F.3d 1178 (Fed. Cir. 2004).
In Chamberlain we held that when Congress enacted the DMCA, it “chose to
create new causes of action for circumvention and for trafficking in circumvention
devices. Congress did not choose to create new property rights.” 381 F.3d at 1203.
Accordingly, we held that section 1201 “prohibits only forms of access that bear a
reasonable relationship to the protections that the Copyright Act otherwise affords
copyright owners.” Id. at 1202. A copyright owner alleging a violation of section
1201(a) consequently must prove that the circumvention of the technological measure
either “infringes or facilitates infringing a right protected by the Copyright Act.” Id. at
1203.
In this case, the LEM and ELEM devices allow CHE to bypass GetKey and gain
access to the maintenance code. Furthermore, the manner in which the ELEM and
LEM function requires that the Control or Management Units be rebooted, causing the
protected software to be copied into RAM. Nonetheless, simply because the ELEM or
LEM allows access to the copyrighted work concurrently with the copying does not
mean that the ELEM or LEM “facilitates” copyright infringement. Consequently, the
district court erred by failing to consider whether or not such facilitation occurred.
We held above that it is unlikely StorageTek will succeed on the merits of its
copyright claim. To the extent that CHE’s activities do not constitute copyright
infringement or facilitate copyright infringement, StorageTek is foreclosed from
maintaining an action under the DMCA. See Chamberlain, 381 F.3d at 1202. That
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result follows because the DMCA must be read in the context of the Copyright Act,
which balances the rights of the copyright owner against the public’s interest in having
appropriate access to the work. See id. at 1199 (“the severance of access from
[copyright] protection . . . would also introduce a number of irreconcilable problems in
statutory construction”); 17 U.S.C. § 1201(c)(1) (“Nothing in this section shall affect
rights, remedies, limitations, or defense to copyright infringement . . . .”); see also Sony
Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 429 (1984). Therefore,
courts generally have found a violation of the DMCA only when the alleged access was
intertwined with a right protected by the Copyright Act. See, e.g., Lexmark Int’l, Inc. v.
Static Control Components, Inc., 253 F. Supp. 2d 943, 987 (E.D. Ky. 2003), vacated
and remanded on other grounds, 387 F.3d 522 (6th Cir. 2004); RealNetworks, Inc. v.
Streambox, Inc., 2000 WL 127311, at *7 (W.D. Wash. Jan. 18, 2000); accord Universal
City Studios v. Corley, 273 F.3d 429, 435 (2d Cir. 2001) (explaining that Congress
enacted the DMCA to help copyright owners protect their works from piracy). To the
extent that StorageTek’s rights under copyright law are not at risk, the DMCA does not
create a new source of liability.
Even if StorageTek were able to prove that the automatic copying of the software
into RAM constituted copyright infringement, however, it would still have to show that
the LEM or ELEM facilitated that infringement. See Chamberlain, 381 F.3d at 1202. If
such a nexus were not required, the careful balance that Congress sought to achieve
between the “interests of content creators and information users” would be upset. See
H.R. Rep. No. 105-551, pt. 1, at 26.
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The problem in this case is that the copying of the software into RAM when the
Control or Management Units are rebooted takes place regardless of whether the LEM
or ELEM is used. Hence, there is no nexus between any possible infringement and the
use of the circumvention devices. Rather, CHE’s circumvention of GetKey only allows
CHE to use portions of the copyrighted software that StorageTek wishes to restrict
technologically. The activation of the maintenance code may violate StorageTek’s
contractual rights vis-à-vis its customers, but those rights are not the rights protected by
copyright law. There is simply not a sufficient nexus between the rights protected by
copyright law and the circumvention of the GetKey system.
A court must look at the threat that the unauthorized circumvention potentially
poses in each case to determine if there is a connection between the circumvention and
a right protected by the Copyright Act. See Lexmark Int’l, Inc. v. Static Control
Components, Inc., 387 F.3d 522, 549-50 (6th Cir. 2004); Chamberlain, 381 F.3d at
1204. In this case, the threat from CHE’s circumvention of GetKey is distinct from the
dangers that StorageTek’s copyright protects against. See 17 U.S.C. § 106.
In sum, the district court failed to consider whether the circumvention of the
GetKey system either infringes or facilitates infringing a right protected by the Copyright
Act. We conclude that it is unlikely that StorageTek will prevail on its claim under
section 1201(a) in this case because the ELEM and LEM devices are not reasonably
related to any violation of the rights created by the Copyright Act.
III
StorageTek asserts that the information contained in the Event Messages
constitutes a trade secret. Accordingly, StorageTek contends that by breaking GetKey
04-1462 21
and reconfiguring the Control Units to send the Event Messages, CHE has
misappropriated the secret information contained in the Event Messages. StorageTek’s
argument is undermined, however, by the fact that the pertinent information in the Event
Messages used to be publicly available.
Trade secret protection is unavailable for information that is not actually secret.
See Jet Spray Cooler, Inc. v. Crampton, 282 N.E.2d 921, 925 (Mass. 1972). Therefore,
information that is in the public domain cannot be appropriated by a party as its
proprietary trade secret. CVD, Inc. v. Raytheon Co., 769 F.2d 842, 850 (1st Cir. 1985)
(“Once a trade secret enters the public domain, the possessor’s exclusive rights to the
secret are lost.”). While StorageTek took precautions to protect the information in the
Event Messages by implementing GetKey, those efforts are insufficient to create trade
secret rights if the public previously had access to the information contained in the
Event Messages.
CHE maintains that the vital information in the Event Messages—the meaning of
the fault symptom codes—was public knowledge before StorageTek created GetKey.
There appears to be overwhelming evidence that the fault symptom codes were freely
transmitted by the library components, with no effort to keep their meaning secret.
StorageTek’s senior customer service engineer testified that the fault system codes
were not confidential. That fact was confirmed by CHE’s expert. There was even
evidence that early versions of StorageTek’s software would cause the error codes to
be shown on the Control Unit’s display panel whenever there was an error. In fact,
technicians first learned the meaning of the error messages by recording the error
message that was revealed on the display panel for each type of machine malfunction.
04-1462 22
There was also evidence that the entire Event Message was openly transmitted before
the GetKey system was put in place. Mr. Billington, StorageTek’s expert, testified that
from 1987 until 1992 the data packets were “freely available.”
StorageTek makes two arguments in support of its contention that the Event
Messages were never freely available. First, it maintains that in 1992, before GetKey
was implemented, StorageTek attempted to keep the error codes secret by disabling
the maintenance code, which sends the Event Messages, on customers’ machines.
Those actions are irrelevant, however, because the error messages had already been
freely transmitted between 1988 and 1992. See J.T. Healy & Son, Inc. v. James A.
Murphy & Son, Inc., 260 N.E.2d 723, 730 (Mass. 1970) (a trade secret is lost when the
owner “lie[s] back and do[es] nothing to preserve its essential secret quality”). Second,
StorageTek argues that it is immaterial that the general meaning of the fault symptom
codes was in the public domain. Instead, StorageTek contends that the pertinent
confidential information is the error message corresponding to a specific customer’s
equipment malfunction. Thus, according to StorageTek, the secret information is the
error message that would be sent by a particular customer’s machine if the machine
were configured to produce and transmit fault symptom codes. Given that the general
meanings of the fault symptom codes are in the public domain, however, that argument
seemingly implies that the actual error on the customer’s machine is secret. Yet the
machines are owned by the customer and are in the customer’s possession. The
reason that the machine is malfunctioning therefore cannot possibly be considered a
secret. As an analogy, consider a stock broker who devised a program that would notify
him when a stock price was at a point at which the stock was worth buying. Obviously
04-1462 23
that special “buy price” could be a trade secret if it had not been previously made public,
but in no event could the actual market price that triggered the notification be
considered a trade secret. Similarly, the meaning of the fault symptom codes might
have been a trade secret if they had not been previously made public, but the actual
reason for the machine malfunctioning would not be.
The dissent maintains that “the information detailing precisely which aspect of the
system is broken and how to fix it” is protected as a trade secret. However, as we have
noted, the meanings of the codes and the malfunction itself are public information.
Additionally, there is no indication that the Event Messages provide a prescription of
how to fix the machine rather than simply a diagnosis of what is wrong. The dissent
further claims that trade secrets “remain trade secrets unless and until a third party
discovers the information on its own.” That analysis fails for two reasons. First, the
owner of the trade secret bears the burden of taking reasonable steps to preserve the
secrecy of the trade secret. See USM Corp. v. Marson Fastener Corp., 393 N.E.2d
895, 899-900 (Mass. 1979). The dissent’s position apparently shifts the burden onto
others to discover the trade secret information independently. Second, to show
misappropriation of a trade secret under Massachusetts law, StorageTek must show
that CHE “used improper means, in breach of a confidential relationship, to acquire and
use the trade secret.” Data Gen., 36 F.3d at 1165. CHE uses publicly available
information about what the fault symptom codes mean, and it developed the LEM and
ELEM devices independently to diagnose problems in the silos. There has been no
showing that either of those activities breached a confidential relationship. Therefore,
the diagnostic information obtained through those methods, i.e. determining what is
04-1462 24
physically wrong with the silo, cannot be a misappropriation of a trade secret, any more
than if CHE had reverse engineered the silo in any other manner. Bonito Boats, Inc. v.
Thunder Craft Boats, Inc., 489 U.S. 141, 160 (1989).
For these reasons, we agree with the appellants that the district court erred in
failing to consider whether the information contained in the error messages is secret.
Because it appears that the information for which StorageTek asserts trade secret
protection was previously in the public domain, we conclude that StorageTek is unlikely
to prevail on the merits of its trade secret claim.
IV
Because the district court committed errors of law in its consideration of
StorageTek’s copyright claim and because the district court overlooked material factors
in its analysis of the DMCA and trade secret claims, we find the court abused its
discretion in granting the preliminary injunction. See Bl(a)ck Tea Soc’y v. City of
Boston, 378 F.3d 8, 11 (1st Cir. 2004). Therefore, we vacate the grant of the
preliminary injunction and remand for further proceedings.
VACATED and REMANDED.
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United States Court of Appeals for the Federal Circuit
04-1462
STORAGE TECHNOLOGY CORPORATION
(doing business as Storagetek),
Plaintiff-Appellee,
v.
CUSTOM HARDWARE ENGINEERING & CONSULTING, INC.,
Defendant-Appellant,
and
DAVID YORK,
Defendant-Appellant.
RADER, Circuit Judge, dissenting.
This court’s opinion today destroys copyright protection for software that
continually monitors computing machine behavior. The opinion also conflates methods
used to protect trade secret information with the actual information constituting the trade
secret. Because these holdings are contrary to the underlying law, I respectfully
dissent.
The safe harbor created by § 117(c) is not a carte blanche license to use any
program loaded into a computer’s RAM when a machine is turned on. Section 117(c)(2)
specifically precludes a repairman from using copies of programs loaded into RAM upon
powering-up that are “not necessary for that machine to be activated.” Maintenance
code that continually monitors for faults, as does Storage Tek’s, is loaded into RAM
upon powering-up the system but, as CHE admits, the maintenance code can be
disabled with no affect on the operating aspects of the system. Of course, disabling the
maintenance code eliminates continuous monitoring for faults. Even though Storage
Tek has chosen to load the maintenance code upon activation, the maintenance code
as such is incidental, not indispensable, to activation. Consequently, CHE’s use of
copies of Storage Tek’s maintenance code falls outside the safe harbor created by §
117(c).
This court’s opinion holds that CHE’s copying and use of Storage Tek’s
diagnostic “maintenance code” software falls within the protection of § 117(c) because
“CHE ‘checks the proper functioning’ of the storage library and ensures that the
machine ‘works in accordance with its original specifications.’” However, § 117(c)
places restrictions upon the use of maintenance software. Therefore, while I agree that
“maintenance” includes checking the proper functioning of components, I do not agree
that CHE’s use of Storage Tek’s maintenance code falls within the protection of
§ 117(c).
When using Storage Tek’s maintenance code, which is not code “necessary for
the machine to be activated,” CHE does not reboot the storage silos of its clients for the
sole purpose of making a new copy “by virtue of the activation of the machine.” If it did,
CHE would be within the safe harbor of § 117(c). Although at the time CHE reboots it
repairs nothing, adjusts nothing, and checks nothing, CHE subsequently accesses and
uses the maintenance code to send data packets that indicate the operation of the
system. Therefore, CHE does not fall within the safe harbor of § 117(c)(2).
Alternatively, even if Storage Tek’s maintenance code were so written as to be
“necessary for the machine to be activated,” when CHE reboots the silos with that code,
it once again repairs nothing, adjusts nothing, and checks nothing. Because CHE does
04-1462 2
not perform any “maintenance” or “repair” when it reboots the system to manipulate the
maintenance code, this copying of the maintenance code does not fall within the
protection of § 117(c)(1).
Section 117(c) allows a repairman to turn on a machine and to use the programs
necessary to run the machine for the limited period of time the repairman is actually
working on the machine, whether the repairman is fixing something that is actually
broken, or servicing parts to prevent the machine from breaking in the future. Servicing
parts may certainly encompass “putting the machine through the paces” to ensure that
all the parts are properly functioning. In other words, the words “maintenance” and
“repair” in § 117(c) extend the protection of § 117(c) to cover both the monitoring of
function to assure that repair is not needed, and identification of malfunction to facilitate
repair. However, the “maintenance and repair” must be of limited duration. Section
117(c)(1) specifies that any copy of the maintenance software must be destroyed “after
the maintenance or repair is completed.” CHE, however, does not meet this condition.
CHE runs the maintenance software continually to monitor operation. Only when a
problem arises during monitoring, does CHE actually work on the silo. Thus, CHE uses
the copy of the maintenance code in RAM beyond actual servicing or repairing. This
continual use falls outside the scope of § 117(c).
As this court’s opinion states, the policy of § 117(c) is “to ensure that
independent service organizations do not inadvertently become liable for copyright
infringement merely because they have turned on a machine in order to service its
hardware components. . . . The point of requiring that copies be ‘destroyed immediately
after the maintenance or repair is completed’ was not to create artificial restraints on
04-1462 3
companies engaged in legitimate repair and maintenance activities, but to prevent
persons from invoking the protection of § 117 and then later using the copied material
for a prohibited purpose.” CHE, however, does not boot the machine in order to service
or repair it; it boots to manipulate the maintenance level of the maintenance code so
that it may read fault codes. As noted above, this is not “maintenance” or “repair” under
§ 117(c). CHE also does not “immediately destroy” the copy when the service or repair
is completed. CHE uses the maintenance code even while the machine is functioning
properly and is in full use by the client. How can CHE’s continual use of Storage Tek’s
software during a three-year (or more) contract not be “using the material for a
prohibited purpose”? Again, the “immediately destroy” requirement of § 117(c) protects
use only during the limited time the repairman is actually working on the computer.
This court also holds that the diagnostic information contained in the data
packets created and sent by the maintenance code cannot be a trade secret because
“the reason the machine is malfunctioning [ ] cannot possibly be considered a trade
secret.” But it is the data packets themselves, not the physical operation (or mis-
operation) that they describe, that is the trade secret. A malfunction may be
independently discoverable, but that does not preclude the information which describes
it from being a trade secret. In my eyes, this court’s analogy to a special “buy price” is
flawed. As I see it, the message that the arm of a storage silo is “broken” is analogous
to the “buy price” that this court states “cannot possibly be considered a trade secret.”
The diagnostic information contained in the data packets, i.e., the information detailing
precisely which aspect of the system is broken and how to fix it, is analogous to the
information detailing why the “buy price” makes a good buy. That a third party may
04-1462 4
perform its own diagnostics on the broken system and discover the cause of the
malfunction does not remove the proprietary nature of the information until the third
party actually performs the diagnostics and discovers the malfunction. Trade secrets
remain trade secrets unless and until another party discovers the information on its own,
at which point the information enters the public domain and is no longer protected. The
point is that the other party must perform the work to discover the information on its own
instead of stealing the information from its competitor.
Finally, this court’s suggestion that the meaning of the fault symptom codes
themselves may have been a trade secret if they had not been introduced into the
public domain misses the point. The proprietary fault symptom codes are the language
used to express the faults, so it is the correlation of fault and code that forms the lexicon
by which the trade secret can be deciphered.
For the foregoing reasons, I respectfully dissent.
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