Opinion ID: 794298
Heading Depth: 4
Heading Rank: 4

Heading: Fourth Fair Use Factor: Effect of the Use Upon the Potential Market

Text: 34 In addressing the final fair use factor, we focus on the normal market for the copyrighted work and whether the allegedly infringing use threatens the potential market for, or value of, a copyrighted work. See Harper & Row, 471 U.S. at 568, 105 S.Ct. 2218 (noting that the fourth fair use factor is concerned with use that supplants any part of the normal market for a copyrighted work) (quoting S.Rep. No. 473, 94th Cong., 1st Sess. 65 (1975)). We have said: 35 [t]his inquiry attempts to strike a balance between the benefit the public will derive if the use is permitted and the personal gain the copyright owner will receive if the use is denied. The less adverse effect that an alleged infringing use has on the copyright owner's expectation of gain, the less public benefit need be shown to justify the use. 36 Mattel, 353 F.3d at 804-05. 37 The Sheriff's Department contends that its copying was solely an attempt to use efficiently its licensed copies of the RUMBA software products, and accordingly, there was no negative impact on Wall Data's market. It points to its own statements that it would not have purchased additional copies of the license had it known that its configuration went beyond its license. We are not persuaded. The Sheriff's Department bought a few licenses and found a way to install the program onto all of its computers without paying the fee required for each installation. The Sheriff's Department could have bargained for the flexibility it desired, but it did not. Whenever a user puts copyrighted software to uses beyond the uses it bargained for, it affects the legitimate market for the product. Thus, although hard drive imaging might be an efficient and effective way to install computer software, we conclude that unrestricted and widespread conduct of the sort engaged in by the defendant would nonetheless lead to over-use of the software. Campbell, 510 U.S. at 590, 114 S.Ct. 1164 (quoting 3 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.05[A](4), at 13-102.61 (1993)). 38 Equally important, ghost copies of the software lay dormant and were unuseable only until a Sheriff's Department network administrator decided to activate RUMBA Office on that computer. The Sheriff's Department thus created its own sub-licensing system where it granted users permission to use the software and, in essence, asked Wall Data to trust that it was not using RUMBA in excess of its authorization under the license. We recognize that computer licensing is generally an honor system, in that there is little to stop a person with physical possession of software from installing it on multiple computers. But in this case, the Sheriff's Department's system made tracking infringement almost impossible, because Wall Data could not independently verify which of the computers had been used to access RUMBA and which ones had not — it had to trust the Sheriff's Department that its system was not allowing over-use. In fact, after Wall Data brought the over-use of RUMBA to the Sheriff's Department's attention, a Sheriff's Department employee admitted, in an email, that he was not sure how to tell which computers had accessed RUMBA. 7 This system therefore made copyright infringement easier (because no physical installation was necessary) and made detection of over-use more difficult. 39 In recognition of the ease with which software can be over-used, courts have been cautious to extend protection to methods that would make copyright infringement of software any easier: 40 Software fundamentally differs from more traditional forms of medium, such as print or phonographic materials, in that software can be both, more readily and easily copied on a mass scale in an extraordinarily short amount of time and relatively inexpensively. One of the primary advantages of software, its ability to record, concentrate and convey information with unprecedented ease and speed, makes it extraordinarily vulnerable to illegal copying and piracy. [Thus,] it is important to acknowledge these special characteristics of the software industry and provide enhanced copyright protection for its inventors and developers. 41 Adobe Sys., Inc. v. Stargate Software Inc., 216 F.Supp.2d 1051, 1059 (N.D.Cal.2002). We believe that widespread use of hard drive imaging in excess of one's licenses could seriously impact the market for Wall Data's product. See Campbell, 510 U.S. at 590, 114 S.Ct. 1164 (citations omitted). Therefore, we conclude that the fourth factor also weighs against a finding of fair use. 42