Opinion ID: 761260
Heading Depth: 4
Heading Rank: 2

Heading: Copyright Misuse

Text: 66 DGI nevertheless insists that, even assuming that it committed acts of copyright infringement, the copyright misuse doctrine precludes injunctive relief based on that infringement. This doctrine--which has its historical roots in the unclean hands defense 80 --bars a culpable plaintiff from prevailing on an action for the infringement of the misused copyright. 81 It forbids the use of the [copyright] to secure an exclusive right or limited monopoly not granted by the [Copyright] Office and which it is contrary to public policy to grant. 82 The copyright misuse defense is analogous to the patent misuse defense, which was originally recognized by the Supreme Court in Morton Salt Co. v. G.S. Suppiger. 83 The Fourth Circuit was the first to extend the rationale behind patent misuse to copyrights. In Lasercomb America, Inc. v. Reynolds, the Fourth Circuit explained that, whereas copyright law [seeks] to increase the store of human knowledge and arts by rewarding ... authors with the exclusive rights to their works for a limited time ..., the granted monopoly power does not extend to property not covered by the ... copyright. 84 67 We recognized the copyright misuse defense in DSC I. 85 We noted that DSC seems to be attempting to use its copyright to obtain a patent-like monopoly over unpatented microprocessor cards. 86 Speculating that DGI might prevail on a copyright misuse defense, we refused to expand the preliminary injunction issued by the district court. 68 Not surprisingly, DGI argues, based on DSC I, that on remand the district court abused its discretion when it ignored the jury's finding that DSC misused its operating system copyright and entered the permanent injunction. DGI reasons that, as DSC's software is licensed to customers to be used only in conjunction with DSC-manufactured hardware, DSC indirectly seeks to obtain patent-like protection of its hardware--its microprocessor card--through the enforcement of its software copyright. DSC responds that its actions do not constitute misuse, inasmuch as its licensing agreement does not prohibit the independent development of compatible operating system software. As DSC points out, it was this attempt[ ] to suppress any attempt by the licensee to independently implement competing software that the court condemned in Lasercomb. 87 69 We agree with the DSC I panel's conjecture and the jury's finding that DSC's licensing agreement for its operating system constitutes misuse. The district court instructed the jury, in pertinent part: 70 [I]f DSC has used its copyrights to indirectly gain commercial control over products DSC does not have copyrighted, then copyright misuse may be present. The grant to the author of the special privilege of a copyright carries out a public policy adopted by the Constitution and laws of the United States, to promote the Progress of Science and useful arts, by securing for limited Times to [Authors] ... the exclusive Right ... to their original works. United States Constitution, Art. I, § 8, cl. 8, 17 U.S.C. § 102. But the public policy which includes original works within the granted monopoly excludes from it all that is not embraced in the original expression. It equally forbids the use of the copyright to secure an exclusive right or limited monopoly not granted by the Copyright Office and which is contrary to public policy to grant. 71 A reasonable juror could conclude, based on the licensing agreement, that DSC has used its copyrights to indirectly gain commercial control over products DSC does not have copyrighted, namely, its microprocessor cards. The facts on which we based our misuse prediction in DSC I have not changed substantially. As we reasoned then: 72 Any competing microprocessor card developed for use on DSC phone switches must be compatible with DSC's copyrighted operating system software. In order to ensure that its card is compatible, a competitor such as DGI must test the card on a DSC phone switch. Such a test necessarily involves making a copy of DSC's copyrighted operating system, which copy is downloaded into the card's memory when the card is booted up. If DSC is allowed to prevent such copying, then it can prevent anyone from developing a competing microprocessor card, even though it has not patented the card. 73 Under these facts, DSC's assertion that its licensing agreement does not prohibit the independent development of compatible software is simply irrelevant. Despite the presence of some evidence--the testimony of a DSC executive--that DGI could have developed its own software, there was also evidence that it was not technically feasible to use a non-DSC operating system because the switch has a common control scheme in which each microprocessor card in a network of such cards runs the same operating system. Hence, without the freedom to test its cards in conjunction with DSC's software, DGI was effectively prevented from developing its product, thereby securing for DSC a limited monopoly over its uncopyrighted microprocessor cards. Furthermore, the jury instructions never mentioned that misuse could only be present if DSC's agreement prohibited the independent development of software. Consequently, we conclude that the district court abused its discretion in awarding injunctive relief based on DGI's infringing acts. 74 We reach this conclusion despite the jury's finding that DGI acted with unclean hands in its acquisition and use of DSC's copyrighted software, firmware, and manuals. DSC insists that, based on this finding, DGI is barred from invoking an equitable defense, and DSC is entitled to injunctive relief notwithstanding its alleged copyright misuse. We reject this contention. 75 It is old hat that a court called upon to do equity should always consider whether the petitioning party has acted ... with unclean hands. 88 In Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 89 the Supreme Court proclaimed that one tainted with inequitableness or bad faith relative to the matter in which he seeks relief is barred from a court of equity, however improper may have been the behavior of the defendant.  90 In the instant case, it is DSC which seeks equitable relief in the form of an injunction, and thus it is DSC's hands alone that must pass the hygenic test. By misusing its software copyright, DSC sullied its hands, 91 barring itself from obtaining the equitable reward of injunction on grounds of copyright infringement. This does not mean that we repudiate the jury's finding of unclean hands on the part of DGI. Indeed, the deceptive practices used by DGI to obtain a copy of DSC's software left it with very dirty mitts. Nevertheless, this finding is irrelevant given the particular posture of this case. 92 76 In support of its contrary position, DSC relies on the Federal Circuit's decision in Atari Games Corp. v. Nintendo of America, Inc.. 93 In that case, the court held that the misuse defense is an equitable doctrine, and that Atari was ineligible to assert that defense because of its unclean hands. 94 The Atari court cited Supermarket of Homes, Inc. v. San Fernando Valley Board of Realtors 95 in support of this conclusion. As DGI points out, however, Supermarket does not stand for the proposition that unclean hands preclude the copyright misuse defense. 96 Although a smattering of other courts have proposed this type of bar to the use of an equitable defense, 97 we find these decisions unpersuasive. Consequently, we conclude that the district court abused its discretion in failing to allow DGI to invoke the equitable defense of copyright misuse.