Opinion ID: 3011995
Heading Depth: 2
Heading Rank: 3

Heading: grace consulting and maintenance

Text: ACTIVITIES We turn to Geac’s second claim of infringement arising out of Grace’s consulting and maintenance activities. In support of its infringement claims, Geac contends that Grace’s witnesses admitted also copying Geac’s copyrighted source code while fixing bugs, creating tax updates, customizing Millennium, modifying the program language code, and compiling, link editing and testing Millennium. Ilutzi admitted to modifying many of Geac’s programs in all twelve Millennium applications. This modification was large scale, and included compilation, link editing,6 and _________________________________________________________________ 6. Dr. Dewar, Grace’s expert, explained thatcompiling is a program that converts source code, which can be read by humans, into object 17 testing of GMI W-2 software with the DBS code at customer sites, and modifying the Geac program language code. He further stated unequivocally that in fixing bugs and in adding features, Grace consultants have modified DBS’s source code. When asked whether he would admit that his consultants would find it easier to copy and modify Geac’s source code and cheaper for his customers rather than create a program from scratch, Ilutzi replied absolutely. He also responded affirmatively when asked whether his consultants would take Geac’s software if one of his customers wants software to perform a particular function. We address Grace’s contention that notwithstanding all of the foregoing evidence of infringement, none occurred. It asserts that both the terms of the License Agreements and Geac’s course of conduct confirm that Geac expressly permitted computer consultants to provide maintenance to its licensees. Grace’s position in general at trial and on appeal is that the License Agreements raise factual issues of interpretation. We examine the M&D License Agreement wherein Grace claims authorization to copy Geac’s programs. Grace refers to Paragraph 16 of the License Agreement that permits the consultant to copy a limited number of copies to be made or remain in existence at any one time for use by the customer. However, Grace omits reference to a significant portion of Paragraph 16 which provides: Customer shall not copy the System, in whole or in part, except as expressly provided in this section. The System may be copied . . . for use by Customer at the designated site, for archive or emergency restart purposes, to replace a worn copy, to understand the contents of such machine-readable materials, or to store at the off-premises location which Customer uses for security storage purposes, provided, however, that no more than 10 printed copies and 10 machine- _________________________________________________________________ code, which is binary, consisting of ones and zeroes that computers can read. Link editing further processes the object code into executable files, which can then be run on the computer. 18 readable copies will be in existence under this license at any one time without prior written consent from M&D. (Emphasis added). Grace, however, asserts that its consulting and maintenance activities complied with the custom and industry practice. Paragraph 15 of the License Agreement does permit licensees to provide access to consultants they have hired to Geac’s confidential information provided the consultants have executed a non-disclosure agreement acceptable to the licensor prior to disclosure. 7 Grace also contends that as required by Section 15 of the License Agreement, it entered into non-disclosure agreement with each licensed customer it served in which each consultant agreed to protect the confidentiality of the software. The License Agreement between Geac and its licensees was crucial in the trial of this case. The record supports plaintiffs’ arguments that many of the defendant’s witnesses admitted to conduct which, in the absence of authorization from Geac, amounted to infringement of Geac’s copyrights. These acts included copying its code, creating and distributing derivative works, and the extensive sale and marketing of Grace’s W-2 program. Unless authorized by Geac, its right to create derivative works has been usurped by Grace, whose product instructs the computer to incorporate Geac copyrighted material with its W-2 program. This derivative work exists in a concrete or permanent form and substantially incorporated protected material from the pre-existing work. See Micro Star v. Formgen, Inc., 154 F.3d 1107, 1110 (9th Cir. 1998).8 _________________________________________________________________ 7. Customer may also disclose M&D confidential information to Customer’s consultants who have been retained to perform work for hire in connection with Customer’s use of the System. All Customer consultants having access to M&D confidential information will be required to execute a non-disclosure agreement acceptable to M&D prior to disclosure. 8. The Copyright Act defines a derivative work as: a work based upon one or more preexisting works, such as a translation . . . condensation, or any other form in which a work 19 Grace also copied Geac’s copyrighted software code in creating bug fixes for Millennium, creating tax updates and customizing Millennium, making Millennium year 2000 compliant, modifying the program language code, and compiling, link editing and testing Millennium. Ilutzi acknowledged that he has written enhancements for his clients for Geac’s HR:M program and readily agreed that he used Call or Copy for their programs. John Rasnic, a Grace computer consultant, testified when deposed that he worked on Millennium software; that he made a copy of a portion of the Millennium source code disks; that clients (naming some) have sent Grace floppy disks with Millennium downloaded to Grace at offsite locations. Rasnic also admitted to physically downloading pieces of Millennium’s source code from customers’ mainframes at the customers’ premises and then taking with him the floppy disks containing downloaded Millennium source code when he left the premises. He also acknowledged transferring those disks loaded with Millennium source code onto a personal computer at his Illinois offices, which are not physically located on the customer premises. The computer, Rasnic testified, can then make, at his direction, copies on the hard drive of what was on the floppy disk. During his service with Grace, Rasnic performed this operation at this office once a quarter to twice a week. A copy of the Millennium source code has remained in his personal computer on its hard drive for four to five weeks. At the time he was deposed, he stated that he had copies of the Millennium source code on his hard drive for the purpose of doing a modification for Food Line[a customer] of that program. He also stated that he has modified the source code at his Illinois office for other Grace clients only. Generally, the kinds of work he performed for the _________________________________________________________________ may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modification which, as a whole, represent an original work of authorship, is a derivative work. Id. S 101. 20 customers were telephone support, problem resolution, upgrades and modifications, and interfaces. The License Agreements provide that third parties, including customer consultants, may have access to confidential information, including the Millennium program, upon execution of a non-disclosure agreement acceptable to [Geac] prior to disclosure. Although Grace asserts that every one of its consultants signed a non-disclosure agreement when they worked on DBS software, we can find none of record except the Hutto document. Grace fails to point to any evidence of non-disclosure agreements signed by it or its employees with any of its customers; it claims a blanket authorization under the Hutto-VA agreement permitting access to Millennium. Hutto, a vice-president of Dun and Bradstreet, executed a non-disclosure document in 1993. The document fails to state the name of any customer for whom the services were to be performed. It is silent as to the duration of the period of service. Geac claims that this Hutto agreement applied only to the University of Virginia for whom Grace proposed to do maintenance work and was not a general authorization. Grace argues that Hutto testified that the agreement was not limited to any one licensee and was satisfactory for any licensee. This argument, however, is a distortion of what Hutto stated. He testified that the agreement was satisfactory as it related to the[University of Virginia]. The trial court ruled against Grace’s claim of blanket authorization stating that there is not a sufficient quantum of proof to establish that we have a contract . . . understood by both sides, and the same way. The court, therefore, would not permit this document to go to the jury. Grace has appealed this ruling. Hutto testified the agreement was only intendedfor the particular customer with whom they were dealing at the time, the University of Virginia. He never intended it to be a blank non-disclosure agreement with third-party consultants. Moreover, there was no discussion by him with Grace’s representative that the agreement include others than the University of Virginia. In addition, it is unrefuted that he had no authority to enter into a blanket non-disclosure agreement. Although he further testified 21 that an agreement containing similar language would have been satisfactory with respect to other customers, he did not testify, as Grace would have this Court believe, that the agreement was not limited to any one licensee. The other evidence, particularly the use of the plural in the word licensees and the letter of Grace’s counsel to Hutto, is of very little probative value. Reference to the plural in licensees in the agreement is indeed a slender reed on which to cling. We see no error in the District Court’s conclusion that there’s not a requisite quantum of evidence that the contract entered into between the parties had a meeting of the mind. The defendants offer an additional pellet in defense of their consulting and maintenance operation. They claim that their offsite activities in copying the source code and other elements of the program were justified by industry custom and practice. Grace emphasizes that it was industry practice to allow programs off-site and that customers required such off-site work, especially in emergency situations. Furthermore, it asserts that Section 16 of the License Agreement allows offsite activities, and that the provisions of the License Agreement demonstrate that it does not preclude off site work. It maintains that its off-site activities are limited to reviewing the program to understand it so that necessary fixes can be made to the software in the customer’s mainframe computer. It contends that this sectionmakes clear that such activities are allowed. A defense of industry custom and practice in the face of the protective provisions of the Copyright Act could undermine the purposes and objectives of the statute and reduce it to rubble. Grace may not stultify itself by seeking shelter within selected terms of the License Agreements at one time and then, when it serves its convenience, disregard the conditions and other pertinent terms of the Agreements. Custom and practice in the computer industry, and the evidence of it in this record is vague and conclusory, is no authority to disregard or trump the specific terms of a valid license agreement or the provisions of the Copyright Act. Custom and usage may not be invoked to relieve defendant of the clear cut obligations imposed by the application of 22 the statute. Famous Music Corp. v. Seeco Records, Inc., 201 F. Supp. 560, 566 (S. D. N.Y. 1961) Extrinsic evidence may not be used to nullify or modify the terms of a valid, unambiguous license agreement. See Atlantic Northern Airlines v. Schwimmer, 96 A.2d 652, 656 (N.J. 1953). Extrinsic evidence . . . may not be used to create an ambiguity where none exists. International Union v. Skinner Engine Co., 188 F.3d 130, 145 (3d Cir. 1999). As previously noted, the Copyright Act gives the copyright owner the exclusive right to prepare derivative works based on the copyrighted work. 17 U.S. S 106. The District Court correctly defined a derivative work to the jury asa new created work based on the original copyright work.9 Grace’s W-2 program using Copy and Call commands copies Geac’s computer copyrighted code. Thus, it is a derivative work; the inclusion of the Copy and Call commands makes Grace’s W-2 programs infringing, derivative works of Geac’s copyrighted software. Grace attempts to brace its argument of industry practice to use these commands to retrieve data for maintenance work by arguing that the copy command does not modify the code. It also argues that the Copy and Call commands are used to access customer’s data, which belongs to the customer and is not protected. Section 2 of the M&D License Agreement provides in relevant part that the customer is authorized to usethe system solely for its own internal operation . . . within Customer’s data center at the location designated on the Customer and Product Information Schedule, at any other site which may replace it as provided in this section, or through a service bureau upon written prior approval of M&D. Paragraph 3 of that section permits use of the system in a remote job entry mode for the benefit of the customer and its subsidiaries provided that all processing involving use of any Licensed Program takes place only at the designated site or its temporary replacement. _________________________________________________________________ 9. Under the Copyright Code, 17 U.S.C. S 101, a derivative work is work based upon one or more preexisting works and includes any recasting, transforming or adopting of the original work. Whelan, 797 F.2d at 1239. 23 The limitation of the license authorization to the customer’s site and for its own internal operation is plain; use elsewhere may be permissible but with written prior approval of the licensor. Neither License Agreement permitted customer off-site use of the Geac code except with its prior approval. The License Agreement also forbade the distribution of modified versions of the Geac code. Section 16 of the agreement relied on by Grace is not inconsistent. It allows system copying, in whole or in part for use by Customer at the designated site and then under specific conditions and purposes set forth in that section. Such copying as is permitted at the site is only for purposes of understand[ing] the contents of such machine readable materials. The interpretation of a written unambiguous agreement traditionally is a matter of law, not a question of fact for a jury. Church v. General Motors Corp., 74 F.3d 795, 799 (7th Cir. 1996); see also Winter v. Minnesota Mut. Life Ins. Co., 199 F.3d 399, 406 (7th Cir. 1999). We therefore hold that the terms and conditions of the License Agreements may not be altered or modified by extrinsic incidence of purported industry custom and usage.