Court Opinion

ID: 1027292
Source: CourtListenerOpinion
Date Created: 2013-07-05 07:20:56.871975+00
Date Added: 2024-06-11T12:27:24.541995
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                              No. 07-1600

JUAN ALTMAYER-PIZZORNO,

                Plaintiff - Appellee,

          v.

L-SOFT INTERNATIONAL, INCORPORATED,

                Defendant – Appellant,

          and

L-SOFT SWEDEN AB; L-SOFT INVESTMENTS, S.A.; L-SOFT UK LTD;
ERIC THOMAS,

                Defendants,

          and

DELOITTE & TOUCHE, LLP,

                Interested Party.

                              No. 07-1613

JUAN ALTMAYER-PIZZORNO,

                Plaintiff – Appellee,

          v.

ERIC THOMAS,

                Defendant – Appellant,
           and

L-SOFT INTERNATIONAL, INCORPORATED; L-SOFT SWEDEN AB; L-SOFT
INVESTMENTS, S.A.; L-SOFT UK LTD,

                 Defendants,

           and

DELOITTE & TOUCHE, LLP,

                 Interested Party.

Appeals from the United States District Court for the District
of Maryland, at Greenbelt.  Peter J. Messitte, Senior District
Judge. (8:02-cv-01556-PJM)

Argued:   September 25, 2008             Decided:   December 3, 2008

Before WILLIAMS, Chief Judge, GREGORY, Circuit Judge, and James
C. CACHERIS, Senior United States District Judge for the Eastern
District of Virginia, sitting by designation.

Affirmed by unpublished opinion.      Judge Gregory wrote the
opinion, in which Chief Judge Williams and Senior Judge Cacheris
joined.

ARGUED: Mark Thomas Stancil, ROBBINS, RUSSELL, ENGLERT, ORSECK,
UNTEREINER & SAUBER, L.L.P., Washington, D.C., for Appellants.
Norman L. Smith, FISHER & WINNER, Baltimore, Maryland, for
Appellee. ON BRIEF: Craig M. Palik, MCNAMEE, HOSEA, JERNIGAN &
KIM, P.A., Greenbelt, Maryland, for Appellant Eric Thomas;
Roy T.    Englert,    Jr.,     Ariel    N.     Lavinbuk,    ROBBINS,
RUSSELL, ENGLERT,    ORSECK,    UNTEREINER    &    SAUBER,   L.L.P.,
Washington, D.C., for      Appellant      L-Soft      International,
Incorporated.    Jeffrey E. Nusinov, FISHER & WINNER, L.L.P.,
Baltimore, Maryland; Francis J. Gorman, Charles L. Simmons,
GORMAN & WILLIAMS, Baltimore, Maryland, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

                                     2
GREGORY, Circuit Judge:

     Juan Altmayer-Pizzorno (“Pizzorno”) brought suit against L-

Soft International, Inc. (“L-Soft”), and its CEO Eric Thomas

(“Thomas”),     alleging,    inter   alia,     that   L-Soft 1   breached    the

software distribution contract between the parties and engaged

in copyright infringement through its continued software sales

after    the   termination   of   the    contract.      A   jury   returned    a

verdict for Pizzorno on both of these claims.               On appeal, L-Soft

argues that the district court erred in denying its motion for

judgment as a matter of law on the copyright infringement claim.

For the reasons set forth below, we affirm the judgment of the

district court.

                                        I.

     L-Soft is a software company whose premier product is an e-

mail list management program known as LISTSERV.               LISTSERV offers

various functions related to e-mail list management, but the

program does not actually send e-mail messages.              In 1995, L-Soft

came into contact with Pizzorno, a developer who had designed

mailing software that was capable of quickly sending a large

number    of   e-mail   messages.        The   two    parties    discussed    an

     1
       Defendants L-Soft International, Inc., and Eric Thomas are
hereinafter collectively referred to as “L-Soft.”

                                        3
arrangement in which L-Soft would market and sell licenses of

Pizzorno’s       mailing     software     that    were     packaged        along    with

LISTSERV.        These     negotiations    culminated       in   an   October        1995

contract between the parties, known as the Intellectual Property

Distribution Agreement (“IPDA”).

    Under the terms of the IPDA, Pizzorno granted L-Soft the

exclusive    North       American     licensing      rights      to    the       mailing

software, which was to be sold under the brand name LSMTP; in

exchange, L-Soft was to pay Pizzorno twenty-five percent of the

net proceeds from its sales of LSMTP.                    L-Soft also agreed to

sell maintenance services for LSMTP, and Pizzorno was to provide

support under the maintenance service contracts in exchange for

eighty percent of the net proceeds from the service contracts.

The payment schedule in the IPDA obligated L-Soft to make all

royalty payments to Pizzorno on a quarterly basis.

     In addition to the IPDA’s licensing and royalty provisions,

the contract included a non-competition covenant that prohibited

L-Soft    from    developing    any     software    that    would     be    in     direct

competition with LSMTP and from contracting with a third party

to develop competing software. 2                 The IPDA also contained two

     2
         Section 6.2 provides:

     A software product shall be considered to qualify as
     Competing Software if, subject to the other limiting
     and defining provisions in this Article 6, the
(Continued)
                                          4
provisions allowing for termination of the contract, one in the

event of default and the other for voluntary termination.                                    Under

Section    5.2       of    the    IPDA,      either         party       could    terminate      the

contract if, after giving written notice to the other party that

it   had   breached         the   terms      of       the    IPDA,      the     breaching    party

“fail[ed]       to        correct,     or     commence            and     diligently        pursue

corrective      action,       within      thirty        days.”          (J.A.     100.)      Under

Section     5.4      of     the      IPDA,    either           party      could     voluntarily

terminate the IPDA without cause; however, L-Soft had to give

sixty days written notice, while Pizzorno was required to give

eighteen     months         written     notice.               Furthermore,         if     Pizzorno

elected    to     voluntarily         terminate             the   IPDA,       L-Soft    would   be

immediately released from the non-competition covenant at the

time that the notice of termination was given.

      From 1993 until 1998, both parties performed in accordance

with the IPDA.             However, Pizzorno did not receive his royalty

payment for the first quarter of 1999, which ended on April 30,

1999, and he sent Thomas correspondence by e-mail and registered

      software product performs tasks substantially similar
      to the Software, such that a typical customer and user
      of the Software could be reasonably expected to switch
      from the Software to the new software product with
      negligible   or    at   least   acceptable   loss   in
      functionality and performance.

(J.A. 101.)

                                                  5
mail on May 25, 1999.            In this correspondence, Pizzorno notified

Thomas that L-Soft had failed to send him a royalty check for

the first quarter of 1999 as required by the IPDA.                              Thomas

responded      to   Pizzorno     by     e-mail,   claiming     that    Pizzorno      was

himself in breach of the IPDA and disputing that L-Soft owed

Pizzorno any royalties for the first quarter.                         L-Soft claimed

that    it    had    overpaid      Pizzorno       in   prior    quarters       due    to

differences in accounting procedures.

       On July 13, 1999, Pizzorno sent Thomas a letter (“the July

13th letter”), in which he stated:

       [O]n May 25th I sent you a letter, both per e-mail and
       on paper per registered mail, inquiring on the status
       of the 2nd quarter royalty payment, which was due by
       the end of April.     You responded per e-mail saying
       that you were changing your accounting system and
       would pay once that had been done, but you never did.
       Certainly you realize that I have the right to be paid
       on time . . . I find it hard to believe that L-Soft
       owed me no money at all for that quarter. I wonder if
       you are still selling licenses of the program. As far
       as I can tell, by not paying me, you have breached the
       contract.

       I now consider the contract terminated, and unless you
       prove that L-Soft indeed owned [sic] me no money by
       the end of July, I will act accordingly. Thank you.

(J.A. 222 (ellipsis in original).)

       On August 5, 1999, L-Soft sent a letter to Pizzorno in

response to the July 13th letter.                 In this letter (“the August

5th letter”), L-Soft reiterated that it had not paid Pizzorno

because      of   changes   in    its    accounting     procedures,      and    L-Soft

                                            6
assured Pizzorno that he would be paid royalties in the future

as soon as he was entitled to them.           L-Soft further alleged that

Pizzorno was in breach of the IPDA because he had failed to

provide adequate technical support and failed to provide L-Soft

a copy of the source code for the mailing software.

       On August 25, 1999, Pizzorno sent a letter to L-Soft in

response to the August 5th letter.            In this letter (“the August

25th letter”), Pizzorno stated that he had initially sent notice

of default on May 25, 1999, and after he received no payment or

adequate    explanation    for    nonpayment,     he    sent   the   July   13th

letter    terminating     the    agreement.       The    August   25th    letter

continued:

       Given the history of payments from L-Soft to Mr.
       Pizzorno pursuant to the Agreement, Mr. Pizzorno finds
       it difficult to believe that no payments were due for
       the first quarter.    If indeed no payments were due,
       then this implies that L-Soft has defaulted on its
       obligations to use its best efforts to sell the
       Software . . . . In any event, empty statements that
       no royalties are due will not suffice.    Until L-Soft
       provides an accounting, Mr. Pizzorno will continue to
       treat the Agreement as terminated.

(J.A.    231.)   The    August    25th   letter   also    addressed      L-Soft’s

contention that Pizzorno had breached the IPDA by failing to

provide the source code for the mailing software, stating that

Pizzorno “has elected the escrow option” and “is prepared” to

transmit the source code directly to the licensees.                  (J.A. 231-

32.)     Pizzorno further charged L-Soft with several additional

                                         7
breaches of the IPDA, including:              (1) failing to make second

quarter royalty payments, (2) failing to use best efforts in

marketing LSMTP, and (3) using LSMTP in a manner not permitted

by the IPDA.       Pizzorno demanded that L-Soft cure these breaches

within thirty days.

     Pizzorno next communicated with L-Soft via two e-mails sent

on September 10, 1999.         In the first e-mail, Pizzorno contacted

Thomas regarding Pizzorno’s failure to provide support services

for the mailing software:

     [A]s I and my attorney have indicated, we consider the
     Agreement terminated.    Accordingly, I am no longer
     providing support services. If L-Soft 1) persuades me
     that no royalties were due the first quarter, and 2)
     cures the breaches described in my attorney’s most
     recent letter, I will resume support.    Until then, I
     will forward all “help” messages to you . . . .

     This of course ignores the problem that L-Soft
     continues to use LSMTP despite the termination of the
     Agreement. I will not ignore that for long.

(J.A. 237.)        Pizzorno wrote the second e-mail in response to a

support    request    from    an   L-Soft   employee.       In    that    e-mail,

Pizzorno   told     the   employee   that    L-Soft   and   he    were    “in   the

middle    of   a   contract   dispute,      and   unless    and   until    L-Soft

resolves this dispute I will not be supporting LSMTP further.”

(J.A. 253.)        Pizzorno did answer the question, however, “as a

courtesy, and without waiving any of my rights regarding the

contract dispute.”        (Id.)

                                       8
       On September 27, 1999, L-Soft responded to the August 25th

letter.        In this letter (the “September 27th letter”), L-Soft

acknowledged that Pizzorno had made allegations that L-Soft was

in default of the contract, but it denied those allegations.                        In

addition, the September 27th letter followed up on Pizzorno’s

failure to provide the source code for the mailing software.

Pizzorno       ultimately     placed    the     source   code    into   escrow      in

October 1999.          The parties had no communications with each other

from       September    27,   1999,    until    the   filing    of   this   lawsuit;

however,       L-Soft    continued     to   sublicense     LSMTP     and    made    no

royalty payments to Pizzorno.

       On April 29, 2002, Pizzorno brought suit against L-Soft in

the United States District Court for the District of Maryland

for breach of contract and copyright infringement. 3                  L-Soft filed

a counterclaim against Pizzorno for breach of contract.                            The

jury returned a verdict in favor of Pizzorno, specifying in the

verdict form that L-Soft had breached the IPDA on April 30,

1999, and that Pizzorno had not breached the IPDA.                          The jury

also determined that Pizzorno had terminated the agreement on

       3
       Because L-Soft continued to sell LSMTP licenses after the
lawsuit was filed, Pizzorno sent a notice of voluntary
termination to L-Soft on December 16, 2003, which was “given in
addition to my previous notices of termination” and “without
prejudice to my termination of the Agreement in 1999 for cause.”
(J.A. 743.)

                                            9
July     13,    1999,     and   that     L-Soft        was    liable      for   copyright

infringement for all LSMTP sales occurring thereafter.

       Following the verdict, L-Soft raised and renewed several

motions    for     judgment     as   a   matter    of        law,   two   of    which   are

relevant to this appeal:                 (1) that the July 13th letter was

insufficient to terminate the IPDA, and (2) that the misuse of

copyright       defense    precluded      Pizzorno       from       recovering    on    the

copyright infringement claim.                 The district court denied both

post-trial motions and entered judgment for Pizzorno.                              L-Soft

appeals.

                                           II.

        We review de novo the district court’s denial of a motion

for judgment as a matter of law.                 Int’l Ground Transp., Inc. v.

Mayor of Ocean City, 475 F.3d 214, 218 (4th Cir. 2007).                                   A

district court should grant a motion for judgment as a matter of

law after the jury verdict “only if, viewing the evidence in a

light most favorable to the non-moving party . . . and drawing

every    legitimate       inference      in     that    party’s      favor,     the     only

conclusion a reasonable jury could have reached is one in favor

of the moving party.”           Id. at 218-19.

       In deciding upon the applicability of an equitable defense

such as misuse of copyright, a district court must accept the

factual        findings    of    the     jury     if     they       are   supported       by

                                           10
substantial evidence.          See Wang Labs., Inc. v. Mitsubishi Elecs.

Am.,   Inc.,   103     F.3d    1571,   1579     (Fed.    Cir.    1997).      If     the

district court makes its own factual findings in determining the

applicability     of    an    equitable    defense,       we    must   uphold      such

findings unless they are clearly erroneous.                      See id. at 1579

n.3; Newell Cos., Inc. v. Kenney Mfg. Co., 864 F.2d 757, 762

(Fed. Cir. 1988).

                                          A.

       In order to terminate a contract, one party must give the

other party a notice of termination that is “definite, specific,

positive, and unconditional.”              C.W. Blomquist & Co., Inc. v.

Capital   Area   Realty       Investors    Corp.,   311       A.2d   787,   791    (Md.

1973); accord City of Fairfax v. Washington Metro. Area Transit

Auth., 582 F.2d 1321, 1327 (4th Cir. 1978).                     Written notice of

termination      is    not     required;       rather,    a     contract     may     be

terminated through conduct that is clearly inconsistent with the

continued existence of the contract.                Buchholtz v. Bert Goodman

Signs, Inc., 199 A.2d 915, 917 (Md. 1964).                     Nevertheless, even

where a contract is terminated or abandoned through the conduct

of both parties, such termination must be shown by “positive and

unequivocal conduct inconsistent with an intent to be bound.”

Graham v. James, 144 F.3d 229, 238 (2d Cir. 1998); see also

                                          11
Buchholtz,        199    A.2d    at   917-18      (applying         the    “unequivocal”

standard where the conduct of both parties was at issue). 4

       First, L-Soft argues that the district court misconceived

the legal standard for determining whether a contract has been

terminated.         According to L-Soft, the district court should have

determined for itself whether the July 13th letter was ambiguous

on its face, rather than merely “conclude[] that the jury could

well conclude that the letter was not ambiguous.”                            (J.A. 1660.)

L-Soft bases this argument on the familiar proposition that “the

determination of ambiguity is one of law, not fact.”                              Calomiris

v. Woods, 727 A.2d 358, 362 (Md. 1999).                     However, Calomiris is a

case       regarding     the   interpretation         of   the    terms    of    a    written

contract, not a case about whether a written notice constituted

an effective termination of a contract.                          See id.     In deciding

whether a contract was terminated, it is unnecessary for the

court       to    initially     determine     whether         a    written       notice    of

termination        was    “ambiguous”    as      is    done       for   cases     involving

contract         interpretation.        The      legal      standard       for       contract

termination permits the trier of fact to consider any written

       4
       The district court suggested that there may be a lower
standard for determining whether there has been an effective
contract termination when both parties act as if the contract is
terminated.     (J.A. 1661.)    While the district court was
incorrect as a matter of law, it did not actually apply a lower
standard in making its decision, and thus this error does not
merit reversal.

                                            12
documents,       the     conduct      of     the        parties,        and     surrounding

circumstances to determine whether the notice of termination was

positive and unconditional.                See Buchholtz, 199 A.2d at 917.                  A

fair reading of the district court’s opinion reveals that the

district court acknowledged that the notice of termination had

to meet the positive and unconditional standard, and it held

that a reasonable jury could have concluded that the July 13th

letter    and    the    prior      conduct       of    the   parties         satisfied    that

standard.

        Nevertheless, L-Soft argues that even if the district court

applied the correct legal standard for contract termination, the

July     13th   letter       was   legally        insufficient          to    satisfy     this

standard.       Under some circumstances, courts have determined that

particular written documents did not satisfy the standard for

termination      as     a    matter    of    law.            See,   e.g.,       Stovall     v.

Publishers Paper Co., 584 P.2d 1375, 1381 (Or. 1978); Rosenbloom

v. Feiler, 431 A.2d 102, 111 (Md. 1981); Accu-Weather, Inc. v.

Prospect Commc’ns, Inc., 644 A.2d 1251, 1255 (Pa. Super. Ct.

1994).     L-Soft argues that the July 13th letter is similar to

the purported written notice of termination at issue in Stovall,

which     the   Supreme       Court    of     Oregon         determined        was   legally

insufficient to constitute an effective notice of termination.

In   Stovall,     the       plaintiff’s      counsel         sent   a    letter      to    the

defendant’s      counsel      as   part     of    an    ongoing     dispute       about    the

                                             13
construction of a road that was part of a timber contract.                                See

584 P.2d at 1377.           In the first two paragraphs of the letter,

the    plaintiff’s     counsel         ostensibly        terminated    the     contract,

stating that:

       We are giving you notice herewith that pursuant to
       Paragraph 11 of the contract we are exercising Mr.
       Stovall’s option to terminate the Timber Cutting
       Agreement and all rights thereunder of your client and
       of their predecessor in interest. The cutting of any
       timber will be considered willful trespass and treble
       damages will be sought under ORS 105.810.

Id. at 1378.

       In   the    third    paragraph         of   the    letter,     the    plaintiff’s

counsel first stated that he “was prepared to file [an] action

several days ago,” and he even included a copy of the complaint

with    the    letter.           Id.      However,       the   plaintiff’s       counsel

indicated that he and the plaintiff had “reexamined” a prior

letter of the defendant and that “it would appear that in the

interest      of   compromise          [the    defendant]      is   offering        to     do

substantially more than it has previously acknowledged to be its

obligation . . . .”          Id.       The letter then suggested a compromise

to the ongoing dispute between the parties and indicated that if

the compromise was not accepted by written notice within a week,

the plaintiff would file a complaint thereafter.                            Id. at 1378-

79.    The plaintiff’s counsel concluded the letter with a related

proposal,      which       the     defendant       should      consider       “if        [the

                                              14
defendant] accepts the compromise offer and will be logging in

the area.”    Id.

     Ultimately, the Stovall court found that the letter was an

ineffective notice of termination as a matter of law.                  See id.

at 1379-80.      According to the court, when a letter “mix[es]

words of termination with words of compromise, negotiations, and

present    obligation,”     such   a    letter   fails       to   satisfy    the

requirements for an effective termination.              Id. at 1380.        Even

though the first two paragraphs of the letter seemed to contain

clear, unequivocal language of termination, the remainder of the

letter    contained   an   extensive    “offer   of   compromise,”     raising

doubts as to whether the plaintiff had terminated the contract.

Id. at 1379-80.       Throughout the second half of the letter, the

plaintiff’s counsel referred to present contractual obligations,

which would presumably continue if the defendant were to accept

the plaintiff’s compromise offer within a week.              See id.

     Although    L-Soft    contends     that   the    July   13th   letter    is

similar to the letter at issue in Stovall, the two letters are

in fact quite distinct with regard to the termination of the

respective contracts.       In the first paragraph of the July 13th

letter, Pizzorno stated that he had sent a letter to Thomas on

May 25, 1999, inquiring about the royalty payment, but that he

had not received any payment nor been provided with a sufficient

explanation for non-payment.           Pizzorno concluded the paragraph

                                       15
by stating, “As far as I can tell, by not paying me, you have

breached the contract.”           (J.A. 222.)         According to L-Soft, the

last    sentence    of   the     first    paragraph     was   equivocal        because

Pizzorno    admitted     that     he    lacked    complete    information          about

whether L-Soft had breached the IPDA.

       The last sentence of the first paragraph should not be read

in     isolation,   as   L-Soft        suggests,      but   rather     it    must     be

considered in the context of the circumstances of the parties.

Pizzorno had no way of knowing the precise amount of royalty

payments that were due since he was not involved in the sales of

the LSMTP software; all such information was held exclusively by

L-Soft.     The use of the phrase “[a]s far as I can tell” did not

imply any equivocation in Pizzorno’s termination of the IPDA,

but    merely   reflected      the     fact    that   Pizzorno   had    no     way    of

verifying the amount of royalty payments he was owed.

       In the second paragraph of the letter, Pizzorno wrote, “I

now consider the contract terminated, and unless you prove that

L-Soft indeed owned [sic] me no money by the end of July, I will

act accordingly.”        (J.A. 222 (emphasis added).)            L-Soft contends

that this language is similar to that of the letter in Stovall

because it ostensibly terminated the IPDA but also provided a

condition that L-Soft could satisfy to prevent the termination

of    the   contract.       In    response,      Pizzorno     claims        that    this

paragraph clearly terminates the IPDA, and that a reasonable

                                          16
jury could conclude that the second clause merely gave L-Soft a

deadline to provide proof that no money was owed or else a

lawsuit would be filed to collect monies owed.

      While the second paragraph of the July 13th letter might

not   have    been    written    using     precise      legal   terminology,       the

language is unlike the attempt to negotiate a compromise in the

Stovall letter.          Although L-Soft contends that the phrase “act

accordingly” could have a variety of meanings, a reasonable jury

could have found that Pizzorno used the phrase “act accordingly”

to indicate that he would seek damages for breach of contract

through the filing of a lawsuit.               Even if the import of the “act

accordingly”       language      could     not    be    precisely       deduced,     a

reasonable     jury      could   have    concluded      that    “act   accordingly”

clearly      did   not   refer   to     the    termination      of   the    contract,

particularly since Pizzorno had already stated that the contract

was terminated in the first clause of the sentence and used the

conjunction “and” to connect the two clauses.

      Finally,     L-Soft    urges      this   court    to   consider      Pizzorno’s

conduct following the receipt of the July 13th letter, which it

claims is inconsistent with the termination of the IPDA on July

13,   1999,    including:        (1)    the    August   25th    letter,     in   which

Pizzorno provided a list of L-Soft’s breaches of the IPDA; (2)

the September 10th e-mail to Thomas, in which Pizzorno stated

that he would resume support if Thomas cured the breaches of the

                                          17
IPDA; (3) the placement of the LSMTP source code into escrow on

October 1999; and (4) the termination of the IPDA on December

16, 2003, pursuant to the voluntary termination provision.

        Even assuming that Pizzorno’s conduct following July 13,

1999, was inconsistent with the termination of the contract,

such     conduct      cannot     “revive”        a        contract    that       has   been

terminated.         Courts have noted that the “conduct between the

giving of notice and the actual date of termination[] may be

considered in determining whether there has been a clear and

unequivocal termination.”             Morris Silverman Mgmt. Corp. v. W.

Union Fin. Servs., 284 F. Supp. 2d 964, 974 (N.D. Ill. 2003);

accord Maloney v. Madrid Motor Corp., 122 A.2d 694, 696 (Pa.

1956); Accu-Weather, Inc., 644 A.2d at 1254-55.                              However, in

those cases in which courts have considered a party’s conduct

subsequent to a purported notice of termination, the contract

had    not   been    immediately      terminated           in   the   written      notice;

rather, notice had been given for the contract to be terminated

on some future date.           See, e.g., Accu-Weather, Inc., 644 A.2d at

1254-55; Morris Silverman Mgmt. Corp., 284 F. Supp. 2d at 975.

Here,    the   conduct     at    issue     followed         a   notice      of   immediate

termination,        and   thus   it   is    of       no    moment     for    purposes   of

determining whether Pizzorno terminated the IPDA on July 13,

1999.

                                           18
      Since a reasonable juror could have concluded that the IPDA

was terminated on July 13, 1999, based on the July 13th letter,

the   prior        conduct     of   the       parties,     and     the        surrounding

circumstances,       the     district    court     did    not   err     in    denying   L-

Soft’s motion for judgment as a matter of law as to this issue.

                                          B.

      L-Soft further contends that Pizzorno should not recover on

his copyright infringement claim because the inclusion of the

non-competition covenant in the IPDA constituted a misuse of

copyright.         The Fourth Circuit expressly recognizes misuse of

copyright     as    an     equitable     defense     to    a    suit    for     copyright

infringement, first applying the defense in Lasercomb America,

Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990).                          The misuse of

copyright defense is analogous to the misuse of patent defense,

as both forbid the holder from using the copyright or patent

“‘to secure an exclusive right or limited monopoly not granted

by the [Copyright or Patent] Office and which it is contrary to

public policy to grant.’”               Id. at 977 (quoting Morton Salt Co.

v. G.S. Suppiger Co., 314 U.S. 488, 492 (1942)).                         Specifically,

the misuse of copyright defense precludes a copyright holder

from recovering for copyright infringement where the holder has

“attempt[ed]        to   suppress       any    attempt     by     the        licensee   to

independently        implement      the       idea    which       [the        copyrighted

material] expresses.”          Id. at 978.

                                          19
      In Lasercomb America, the plaintiff developed computer die-

making   software       for    which    it       obtained    a   copyright,     and     it

licensed the software to the defendant and others.                          Id. at 971-

72.      The    plaintiff       included         anti-competitive      terms    in    its

standard       licensing      agreement,         which     forbade    the    licensees’

“directors, officers and employees, directly or indirectly, to

write, develop, produce or sell computer assisted die making

software.”       Id. at 973.         Because of an oversight, the defendant

did not sign the licensing agreement and thus was not bound by

the anti-competitive terms.                 Id.         Despite the fact that the

defendant      was     not    subject       to    the    terms   of    the    licensing

agreement,      this    Court       found    that    the    defendant       could    avail

itself of the misuse of copyright defense.                    See id. at 979.

      Although Lasercomb America recognized the existence of the

misuse of copyright defense, the decision also acknowledged that

a copyright holder who had misused a copyright was not forever

barred   from     bringing      a    suit   for     infringement.       Instead,      the

copyright holder “is free to bring a suit for infringement once

it has purged itself of the misuse.”                       Id. at 979 n.22 (citing

U.S. Gypsum Co. v. Nat’l Gypsum Co., 352 U.S. 457, 465 (1957)).

Although the Lasercomb America decision did not elaborate on

what standards should be used to determine whether copyright

misuse has been purged, the misuse of patent defense has a well-

established body of law upon which to draw.                       See id. at 973-74

                                             20
(drawing upon the misuse of patent defense in recognizing the

misuse of copyright defense).                   Therefore, we hold that in order

for a court to find that there has been a purge of copyright

misuse,          the   copyright       holder      must    show   that   “the    improper

practice has been abandoned and that the consequences of the

misuse of the [copyright] have been dissipated.”                              Morton Salt

Co., 314 U.S. at 493; accord U.S. Gypsum Co., 352 U.S. at 474.

          Even    though       the    burden    is    on   the    copyright     holder    to

demonstrate that the misuse has been purged, cf. B.B. Chem. Co.

v. Ellis, 314 U.S. 495, 498 (1942), the copyright holder is not

required         to    prove    that    the    consequences       of   the   misuse     have

dissipated unless the defendant first shows that the misuse had

anti-competitive consequences.                  Cf. U.S. Gypsum Co., 352 U.S. at

465 (finding that the district court erred in holding that the

patent misuse had not been purged because the record contained

no facts about the consequences of the misuse); White Cap Co. v.

Owens-Ill. Glass Co., 203 F.2d 694, 698 (6th Cir. 1953) (stating

in    a    patent       misuse       case   that     “it   was    unnecessary    for     the

plaintiff to prove that the consequences of the misuse had been

dissipated because it was not shown that the misuse had illegal

consequences”).            If the defendant fails to show that the misuse

had       anti-competitive            consequences,        the    termination     of     the

contract          containing          the     anti-competitive         clause     may     be

sufficient to purge the misuse.                      Cf. White Cap Co., 203 F.2d at

                                                21
698;   Ansul      Co.     v.    Uniroyal,         Inc.,   306    F.    Supp.    541,    560

(S.D.N.Y. 1969), aff'd & modified, 448 F.2d 872 (2d Cir. 1971),

cert. denied, 404 U.S. 1018 (1972) (“What conduct constitutes a

‘purge’ depends upon the nature and extent of the misuse.                              Where

the    misuse     consists          of   the    insertion       of    an    objectionable

provision       in    a     contract,         the   patentee’s        cancellation       and

abandonment of the clause may be sufficient.”).

       On appeal, L-Soft argues that the district court erred in

refusing     to      apply      the      misuse     of    copyright        defense.       In

particular, L-Soft contends that the non-competition covenant of

the IPDA prohibited L-Soft from developing or contracting for

the development of mailing software having functions similar to

those of LSMTP and that these restrictions constituted a misuse

of copyright.         On the other hand, Pizzorno argues that the non-

competition covenant was different from the standard licensing

agreement at issue in Lasercomb America in that:                             (1) the non-

competition covenant was part of a single contract between the

parties instead of a standard restriction imposed on multiple

licensees; and (2) the non-competition covenant bound only L-

Soft and not its officers, directors, or affiliate companies,

and thus the non-competition covenant did not have any actual

anti-competitive          effects        on   L-Soft.      Alternatively,        Pizzorno

argues     that      even      if    the      inclusion    of    the       non-competition

                                               22
covenant was a misuse of copyright, any misuse was purged by the

termination of the IPDA. 5

        The district court found that L-Soft could not avail itself

of the misuse of copyright defense, both because the facts of

the present case did not “quite have the same flavor” as those

in   Lasercomb        America   and       because   any    misuse     was    purged   by

Pizzorno’s termination of the IPDA.                    (J.A. 1700.)          We do not

need        to   decide   whether    the    inclusion     of    the   non-competition

covenant was a misuse of copyright, for even assuming that it

was a misuse of copyright, the misuse was purged at the time

that Pizzorno terminated the IPDA.

        With respect to the district court’s determination that any

misuse of copyright had been purged, the district court first

found        that    Pizzorno       had    abandoned      the    improper     practice

constituting         misuse   when    he    terminated     the   IPDA   on    July    13,

1999.        In making this determination, the district court accepted

the jury’s finding that Pizzorno had terminated the IPDA on that

date.        The district court was bound to accept the jury’s finding

provided that the finding was supported by substantial evidence,

        5
       Pizzorno also argues that L-Soft should be precluded from
raising the misuse of copyright defense on the grounds of waiver
and unclean hands.     Because we affirm the decision of the
district court on other grounds, it is unnecessary to address
these alternate grounds.

                                            23
and the substance of the July 13th letter and the prior conduct

of the parties supported such a finding.

      L-Soft    next   contends         that        the    district       court    erred   in

finding that any anti-competitive consequences of the misuse had

dissipated     at    the    time       that    Pizzorno           terminated      the   IPDA.

Specifically, L-Soft argues that it met its initial burden of

providing      evidence      that       the         copyright        misuse       had    anti-

competitive     effects     and     that      Pizzorno          failed     to   produce    any

evidence     that    those     consequences               had     dissipated.           L-Soft

primarily    relies    on    Section          5.4    of     the    IPDA,    the    voluntary

termination     provision,        as    evidence          that      the    non-competition

covenant     had     anti-competitive               consequences          outlasting       the

existence of the IPDA.             According to L-Soft, since Section 5.4

required that Pizzorno give eighteen months notice if he wished

to voluntarily terminate the agreement and released L-Soft from

the   non-competition        covenant         if     such       notice    was   given,     the

provision demonstrates that L-Soft would need at least eighteen

months after the expiration of the non-competition covenant to

develop competing software.

      L-Soft’s reliance on the voluntary termination provision as

evidence of the anti-competitive effects of the non-competition

covenant is misplaced.             The jury found that Pizzorno did not

terminate      the   IPDA     pursuant          to     the        voluntary     termination

provision, but rather pursuant to the provision allowing for

                                              24
termination in the event of default, and the latter provision

provided no comparable eighteen-month window for L-Soft to begin

development of competing software.                 More importantly, this type

of contractual provision represents nothing more than a bargain

reached between the parties, and it is certainly not the type of

concrete     evidence       of    anti-competitive       effects        that    must   be

produced     by    L-Soft.       The    Supreme    Court’s   decision          in   United

States Gypsum Co. is instructive in this regard, as it found

that the district court erred in holding that an unpurged misuse

had been shown where “the record is barren of any facts with

respect to the situation existing in the gypsum industry since

1941.”     352 U.S. at 465.            Similarly, L-Soft did not provide any

evidence regarding the market for mailing software around the

time of the termination of the IPDA, so it did not meet its

initial    burden     of     showing      the    existence   of    anti-competitive

effects    resulting       from     the   inclusion     of   the    non-competition

covenant.

      Assuming arguendo that L-Soft provided evidence of anti-

competitive consequences stemming from the copyright misuse, the

district     court    did     not      clearly    err   in   finding         that   those

consequences dissipated upon the termination of the IPDA.                           Given

the circumstances of this case, the district court could have

found that at the time of the termination of the IPDA, L-Soft

was   free    to     immediately        begin     development      of    a     competing

                                            25
product.    Furthermore, the non-competition covenant of the IPDA

did not prohibit L-Soft from purchasing a competing software

product    from   another    company,      only    from     contracting       for    its

development.      Thus, L-Soft would have been able to immediately

license    competing       software    from       another     company      upon      the

termination of the IPDA.

     Because      L-Soft    failed    to    meet    its     burden    of   providing

evidence that the inclusion of the non-competition covenant had

anti-competitive     effects,    the       district   court     did     not    err    in

refusing to apply the misuse of copyright defense.

                                       III.

     For the foregoing reasons, we affirm the judgment of the

district court.

                                                                              AFFIRMED

                                        26