1996年に作成したものです。

LEGAL PROTECTION OF SOFTWARE IN THE UNITED STATES

(Masafumi Kawamura)

            This paper gives an outline of legal protection of software in the United States, with referring protection against so-called reverse engineering. This paper examines four types of direct protections -- copyright protection, trade secret protection, patent protection and contractual protection. In addition to these direct projections, there are several indirect projections. For example, software can be protected indirectly as a result of protection of trademarks thereon. However, this paper does not refer to such protections which protect software indirectly.

I. COPYRIGHT PROTECTION

A. GENERAL

1. COPYRIGHTABILITY OF SOFTWARE

            1976 Copyright Act ("Copyright Act") expressly provides copyright protection on eight categories of works including "literary works" (17 U.S.C. 102). Copyright Act defines "Literary works" as "works, other than audiovisual works, expressed in words, numbers, or other verbal or numerical symbols or indicia, regardless of the nature or the material objects, such as books, periodicals, manuscripts, phonorecords, film, tapes, disks, or cards, in which they are embodied" (17 U.S.C. 101). Computer program has copyrightability as a "literary work".[FN1]

2. SUBJECT MATTER OF COPYRIGHT PROTECTION -- EXPRESSION/IDEA DICHOTOMY

            Copyright does not protect ideas but the expression of ideas. Copyright Act provides that "In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work" (17 U.S.C. 102(b)). However, it is not necessarily easy to distinguish expression and idea. If no violation occurs without line-for-line copying, distinction between expression and idea is easy. But, if copyright protection goes beyond line-for-line copying, it is a difficult issue how to draw a line between expression which is within copyright protection and idea which is beyond copyright protection.

a. WHELAN ASSOCIATES, INC. v. JASLOW DENTAL LABORATORY, INC.

            In Whelan Associates, Inc. v. Jaslow Dental Laboratory, Inc.[FN2], the courts addressed the issue "whether the structure (or sequence and organization) [FN3] of a computer program is protectible by copyright, or whether the protection of the copyright law extends only as far as the literal computer code." In Whelan, the Third Circuit stated: "the line between idea and expression may be drawn with reference to the end sought to be achieved by the work in question. In other words, the purpose or function of a utilitarian work would be the work's idea, and everything that is not necessary to that purpose or function would be part of the expression of the idea." [FN4] The court further held that "copyright protection of computer programs may extend beyond the programs' literal code to their structure, sequence, and organization".[FN5]

            Other cases reflect the court's reasoning in Whelan. A number of cases uphold structure, sequence and organization protection as a legal principle and find substantial similarity on at least some of the facts in each case.[FN6]

b. PLAINS COTTON COOPERATIVE ASS'N v. GOODPASTURE COMPUTER SERV., INC.

            In Plains Cotton Cooperative Ass'n v. Goodpasture Computer Serv., Inc.[FN7], the Fifth Circuit did not follow Whelan.

            The court found no copying when an allegedly infringing program was found very similar to the plaintiff's program on the functional specification, programming, and documentation levels. The court stated: "We decline to embrace Whelan for two reasons. . . . .Second, appellees presented evidence that many of the similarities between the GEMS and Telcot programs are dictated by the externalities of the cotton market. . . . .The record supports the inference that market factors play a significant role in determining the sequence and organization of cotton marketing software, and we decline to hold that those patterns cannot constitute 'ideas' in a computer context." [FN8]

            The decision in Plains Cotton indicates that if similarities in structure and organization are dictated by externalities, the structure, sequence, and organization of a computer program do not constitute copyrightable expression but constitute idea.

            I agree with the approach of Plains Cotton rather than that of Whelan. In Whelan the court treated computer program same as works of fiction or drama. (The concept of “structure, sequence, and organization” is equivalent to plot, subplot sequence of scenes, setting characterization and patterns of dialogue in works of fiction or drama.) However, computer program is different from works of fiction or dram in its characteristics. As for works of fiction or drama, there are unlimited numbers of ways to express. In contrast, the number of ways to program computer software is limited. Computer software directs toward certain function and efficiency, and accordingly, how to program it is limited by such function and efficiency. If there are only few ways to express an idea, protecting an expression among them has an effect to protect the idea. As indicated in Sega below, in order to enjoy a lawful monopoly over the idea the creator of the work must satisfy the stringent standards imposed by the patent laws. Therefore, I think the scope of copyright protection on computer software should be narrower than that on the works of fiction or drama. From this viewpoint, I think the approach of Plains Cotton is more appropriate than that of Whelan.

3. EXTENT OF COPYRIGHT PROTECTION

            Copyright Act grants the owner of copyright "the exclusive rights to do and to authorize any of the following:

(1) to reproduce the copyrighted work in copies or phonorecords;

(2) to prepare derivative works based upon the copyrighted work;

(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;

(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; and

(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly. "(17 U.S.C. 106)

            However there are certain limitations to the copyright owner's exclusive rights that are noninfringing uses of the copyrighted works. These limitations include the "fair use" of work (17 U.S.C. 107), certain kinds of reproduction by libraries and archives (17 U.S.C. 108), certain educational performances and display (17 U.S.C. 110), and making of archival copies and copies created as an essential step in the utilization of a computer program (17 U.S.C. 117). The exclusive rights are also limited by the so-called "first sale doctrine", which provides that the purchaser of a "particular copy" of a copyrighted work may sell or otherwise transfer that copy without permission of the copyright owner. First sale defense does not apply where computer software was purchased from a licensee of the copyright owner who did not actually have title to the software.[FN9]

4. REMEDY

            The copyright owner may institute an action for infringement (17 U.S.C. 501(b)) within three years after the claim accrued (17 U.S.C. 507(b)). However, in the case of works of United States authors, no lawsuit for copyright infringement may be brought until a work is registered (17 U.S.C. 411(a)).

            Three types of remedies are available for copyright infringement: i) injunctions, ii) recovery of damages and profits, and iii) recovery of costs and attorneys' fees.

i) Injunctions

A court may grant temporary and final injunctions to prevent or restrain infringement (17 U.S.C. 502).

ii) Damages and profits

The copyright owner is entitled to recover the actual damages and profits of the infringer (17 U.S.C. 504(b)). However, these damages and profits are often difficult to prove, and the law allows for statutory damages. The copyright owner may elect specified statutory damages within specified range instead of actual damages and profits (17 U.S.C. 504(c)), provided that copyright registration has been timely made (17 U.S.C. 412).

iii) Costs and attorney's fees

Subject to timely registration (17 U.S.C. 412), the court may, in its discretion, allow the recovery of costs of the litigation and reasonable attorney's fee (17 U.S.C. 505).

            In addition, criminal sanctions may also be imposed for copyright infringements in certain cases (17 U.S.C. 506).

B. COPYRIGHT PROTECTION AGAINST REVERSE ENGINEERING

            In Sega Enterprises Ltd. v. Accolade, Inc.[FN10], the Ninth Circuit held that interim copying for the purpose of disassembly of the object code of a copyrighted computer program does not constitute copyright infringement under certain circumstances.

            In Sega, the court was asked to determine "whether the Copyright Act permits persons who are neither copyright holders nor licensees to disassemble a copyrighted computer program in order to gain an understanding of the unprotected functional elements of the program." [FN11] Accolade, defendant-appellant, raised four arguments in support of its position that disassembly of the object code in a copyrighted computer program does not constitute copyright infringement. Among these arguments, Accolade contended that "disassembly of object code in order to gain an understanding of the ideas and functional concepts embodied in the code is a fair use that is privileged by section 107 of the Act."[FN12]

            In determining this argument, the court examined four statutory factors listed in section 107 of Copyright Act as follows.

i) Purpose and Character of the Use

            The first statutory factor is "the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes".

            The court found that "Accolade copied Sega's code for a legitimate, essentially non-exploitative purpose"[FN13] based on the following facts:

- "although Accolade's ultimate purpose was the release of Genesis-compatible games for sale, its direct purpose in copying Sega's code, and thus its direct use of the copyrighted material, was simply to study the functional requirements for Genesis compatibility so that it could modify existing games and make them usable with the Genesis console"; and

- "no other method of studying those requirements was available to Accolade".

            The court also pointed out: "Accolade's identification of the functional requirements for Genesis compatibility has led to an increase in the number of independently designed video game programs offered for use with the Genesis console. It is precisely this growth in creative expression, based on the dissemination of other creative works and the unprotected ideas contained in those works, that the Copyright Act was intended to promote." [FN14]

            Although Accolade's copying "for a commercial purpose weighs against a finding of fair use", the court held that the first statutory factor weighed in favor of Accolade, giving the commercial aspect of the use minimal significance. [FN15]

ii) Nature of the Copyrighted Work

            The second statutory factor is "the nature of the copyrighted work".

            The court held that this factor also weighed in favor of Accolade [FN16] based on the following facts:

- "[t]he interface procedures for the Genesis console are distributed for public use only in object code form, and are not visible to the user during operation of the video game program";

- "disassembly of the object code in Sega's video game cartridges was necessary in order to understand the functional requirements for Genesis compatibility"; and

- "[d]isassembly of object code necessarily entails copying".

            The court supported its conclusion by recognizing that "[i]f disassembly of copyrighted object code is per se an unfair use, the owner of the copyright gains a de facto monopoly over the functional aspects of his work - aspects that were expressly denied copyright protection by Congress. 17 U.S.C. 102(b). "[FN17] The court also pointed out that "[i]n order to enjoy a lawful monopoly over the idea or functional principle underlying a work, the creator of the work must satisfy the more stringent standards imposed by the patent laws", and that "because Sega's video game programs contain unprotected aspects that cannot be examined without copying, we afford them a lower degree of protection than more traditional literary works."[FN18]

iii) The Amount and Substantiality of the Portion Used in relation to the Copyrighted Work as a Whole

            The third statutory factor is "the amount and substantiality of the portion used in relation to the copyrighted work as a whole".

            The court decided that this factor was against Accolade. The facts show that Accolade had disassembled entire programs written by Sega. However, the court pointed out that "[i]n fact, where the ultimate (as opposed to direct) use is as limited as it was here, the factor is of very little weight." [FN19]

iv) Effect of the Use upon the Potential Market for or Value of the Copyrighted Work

            The final statutory factor is "the effect of the use upon the potential market for or value of the copyrighted work".

            Notwithstanding the minor economic loss Sega may suffer, the court concluded that this factor weighed in favor of Accolade based [FN20] on the following facts:

- "Accolade did not attempt to "scoop" Sega's release of any particular game or games, but sought only to become a legitimate competitor in the field of Genesis-compatible video games";

- "there is nothing in the record that suggests that Accolade copied any of" "the characteristics of the game program""that determine the program's commercial success";

- while "Accolade's disassembly of Sega's software undoubtedly 'affected' the market for Genesis-compatible games", but only indirectly; and

- "[t]here is no basis for assuming that Accolade's 'Ishido' has significantly affected the market for Sega's 'Altered Beast', since a consumer might easily purchase both; nor does it seem unlikely that a consumer particularly interested in sports might purchase both Accolade's 'Mike Ditka Power Football' and Sega's 'Joe Montana Football', particularly if the games are, as Accolade contends, not substantially similar".

            The court further pointed out that "an attempt to monopolize the market by making it impossible for others to compete runs counter to the statutory purpose of promoting creative expression and cannot constitute a strong equitable basis for resisting the invocation of the fair use doctrine. "[FN21]

            As mentioned above, the court found three of the four statutory fair use factors weighed in favor of Accolade, while one weighed in favor of Sega, and even then only slightly, and held that the interim copies used by Accolade to reverse engineer Sega's program were within the fair use exception.[FN22] This case indicates that computer software creators cannot invoke with certainty copyright protection against reverse engineering.

            I agree with the decision in Sega. A persuasive reasoning of the court is that “[i]f disassembly of copyrighted object code is per se an unfair use, the owner of the copyright gains a de facto monopoly over the functional aspects of his work ? aspects that were expressly denied copyright protection by Congress. 17 U.S.C. 102(b).” It should not be permitted to avoid the stringent standards imposed by the patent laws by utilizing copyright protection.

II. TRADE SECRET PROTECTION

A. GENERAL

1. SUBJECT MATTER OF TRADE SECRET

            Trade secret law protects certain types of confidential technical or business information against unauthorized use or disclosure.[FN23] Unlike copyright protection which is governed by federal law, trade secret protection is governed by state laws. However, more than 35 states have adopted the Uniform Trade Secrets Act ("USTA").[FN24] In spite of state-to-state variation of trade secret law, one accepted definition of a "trade secret" is that of Restatement of Torts.

            The Restatement of Torts defines trade secret as: "A trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical preserving materials, a pattern for a machine or other device, or a list of customs" (Section 757, comment b (1939)).

            USTA sets out a simpler definition of trade secret than that of the Restatement. USTA defines trade secret as "information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and

(2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." (Section 1(4))

            A critical requirement for information to meet in order to be a trade secret is secrecy.

Secrecy

            The Restatement states: "The subject matter of a trade secret must be secret. Matters of public knowledge or of general knowledge in an industry cannot be appropriated by one as his secret. . . . . It is not requisite that only the proprietor of the business know it. He may, without losing his protection, communicate it to employees involved in its use. He may likewise communicate it to others pledged to secrecy."(Section 757, comment b (1939)) However,"[i]f an individual discloses his trade secret to others who are under no obligation to protect the confidentiality of the information,. . . . his property right is extinguished". [FN25] It is requisite that trade secret owner takes affirmative steps to safeguard the secrecy of information.

2. SOFTWARE AND TRADE SECRET

            "Trade secret law is one of the most widely used forms of legal protection for intellectual property interests in computer software. Numerous courts of a variety of U.S. jurisdictions have ruled that trade secret properly protects computer software."[FN26]

            One significant issue of trade secret protection of software is whether mass-marketed computer software can be protected under trade secret law. When software is distributed to relatively few customers, affirmative steps to safeguard the secrecy of the information can be taken through signed written agreements. However, if the software is mass marketed, it is difficult to use signed written agreement to maintain secrecy. Producers of mass-marketed software try to maintain secrecy with using so-called shrink-wrap license. "A shrink-wrap license agreement provides that the acquirer of the software accepts the terms of the license upon opening or breaking the software packaging or upon using the software."[FN27] "Acceptance may also include failing to return the software to its point of sale within a specified period of time."[FN28]

            The enforceability of shrink-wrap licenses remains in question, and has not been tested spcifically by any courts.[FN29] Arguments cited as grounds for unenforceability of shrink-wrap license are as follows:

- there is no proper acceptance of the computer software manufacturer's offer, and that there is no contractual meeting of the minds,

- there is no privity of contract (the licensee is the customer, the licensor is the software manufacturer, yet the customer buys the software from a middleman the distributor),

- the statute of frauds is not met,

- shrink-wrap license is an unenforceable contract of adhesion under state law, [FN30] and

- shrink-wrap license circumvent the provisions of the Copyright Act, particularly the restrictions of the first sale doctrine. [FN31]

            The issue has not been addressed from the standpoint of trade secret law, however, some believe that it is unlikely that a court would find that a shrink-wrap license constituted reasonable efforts to keep the information secret under the circumstances of mass marketing. [FN32]

3. EXTENT OF TRADE SECRET PROTECTION

            Different from Patent or Copyright, trade secret law does not grant the owner of trade secret any exclusive rights on trade secret. "Rather, trade secret laws protect only the veil of secrecy that the owner has erected to surround his discovery."[FN33]

            USTA protects the owner of trade secret from two major types of "misappropriation". Under USTA, "Misappropriation means:

(1) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(2) Disclosure or use of a trade secret of another without express or implied consent by a person who:

    (A) used improper means to acquire knowledge of the trade secret; or

    (B) at the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was:

        (i) derived from or through a person who had utilized improper means to acquire it;

        (ii) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

        (iii)derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or

    (C) before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake." (Section 1(2))

4. REMEDY

            The trade secret owner may institute an action for misappropriation within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered (USTA Section 6).

            Three types of remedies are available for trade secret infringement: i) injunctions, ii) recovery of damages and iii) recovery of attorney's fees.

i) Injunctions

Actual or threatened misappropriation may be enjoined (USTA Section 2(a)). If the court determines that it would be unreasonable to prohibit future use, an injunction may condition future use upon payment of a reasonable royalty (USTA Section 2(b). In appropriate circumstances, affirmative acts to protect a trade secret may be compelled by court order (USTA Section 2(c)).

ii) Damages

A complainant may recover damages for the actual loss and unjust enrichment which are caused by misappropriation (USTA Section 3(a)). If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award made under subsection (a) (USTA Section 3(b)).

iii) Attorney's fees

If (i) a claim of misappropriation is made in bad faith, (ii) a motion to terminate an injunction is made or resisted in bad faith, or (iii) willful and malicious misappropriation exists, the court may award reasonable attorney's fees to the prevailing party (USTA Section 4).

B. TRADE SECRET PROTECTION AGAINST REVERSE ENGINEERING

            Trade secret law does not protect the owner against reverse engineering. In Kewanee Oil Co. v. Bicron Corp., the Supreme Court stated that "[a] trade secret law, however, does not offer protection against discovery by fair and honest means, such as by independent invention, accidental disclosure, or by so-called reverse engineering, that is by starting with the known product and working backward to divine the process which aided in its development or manufacture." [FN34]

III. PATENT PROTECTION

A. GENERAL

            "Patents grant to inventors a limited property right to exclude others from practicing (making, using, or selling) the claimed invention"[FN35] for 20 years. "In this way, patents are intended to encourage inventiveness."[FN36] "Strict examination of an invention is required, making the patent the most difficult from of intellectual property protection to obtain. Once obtained, a patent is maintained by periodic payment of maintenance fees during the life of the patent."[FN37]

1. REQUIREMENT

            An invention must fulfill five major requirements to be deemed patentable. The invention must: 1) be patentable subject matter (35 U.S.C. 101); 2) be useful (35 U.S.C. 101); 3) be novel (35 U.S.C. 101, 102); 4) not have been obvious at the time it was made (35 U.S.C. 103); 5) be disclosed in sufficient detail to "enable persons of ordinary skill in the art" to practice the invention without "undue experimentation" (35 U.S.C. 112).[FN38] The patent must also disclose the "best mode" contemplated by the inventor of carrying out his invention (35 U.S.C. 112). "If it is determined that these requirements have been fulfilled, and if certain other formal requirements are met, a patent will be granted. The grant of a patent by the U.S. Government to an applicant gives a property right from the U.S. Government to the applicant or the applicant's assignee."[FN39]

Subject Matter

            Patent Act provides that "Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title."(Section 101) Therefore, patentable invention must be characterizable as a process, machine, manufacture, or composition of matter.

            "Although the subject matter of things that may be patentable is broad, it is not unlimited. Laws of nature, physical phenomena, scientific principles, and abstract ideas cannot be patented."[FN40] In Parker v. Flook, the Supreme Court stated that "[t]he rule that the discovery of a law of nature cannot be patented rests, not on the notion that natural phenomena are not processes, but rather on the more fundamental understanding that they are not the kind of "discoveries" that the statute was enacted to protect."[FN41]

Novelty

            Invention should not have previously existed through the work of others (35 U.S.C. 102). A patent can be denied under several conditions, including:

- "the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent" (35 U.S.C. 102(a));

- "the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States" (35 U.S.C. 102(b)); and

- "before the applicant's invention thereof the invention was made in this country by another who had not abandoned, suppressed, or concealed it" (35 U.S.C. 102(g)) [FN42].

Nonobviousness

            An invention should be found to be not obvious. A patent may not be obtained "if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains" (35 U.S.C. 103).

2. PATENTABILITY OF SOFTWARE

a. GOTTSCHALK v. BENSON

            The Supreme Court addressed the issue of patentability of computer software in Gottschalk v. Benson.

            Benson had tried to patent "a method of programming a general-purpose digital computer to convert signals from binary-coded decimal form into pure binary form."[FN43] The court stated basic rules of patentable subject matter, with citing the precedents: "The Court stated . . . that '(w)hile a scientific truth, or the mathematical expression of it, is not patentable invention, a novel and useful structure created with the aid of knowledge of scientific truth may be.' That statement followed the longstanding rule that '(a)n idea of itself is not patentable.' . . .'A principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.'. . . Phenomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable, as they are the basic tools of scientific and technological work. . . . 'He who discovers a hitherto unknown phenomenon of nature has no claim to a monopoly of it which the law recognizes. If there is to be invention from such a discovery, it must come from the application of the law of nature to a new and useful end.'"[FN44] The court pointed out the character of the claim as: "Here the 'process' claim is so abstract and sweeping as to cover both known and unknown uses of the BCD to pure binary conversion. The end use may (1) vary from the operation of a train to verification of drivers' licenses to researching the law books for precedents and (2) be performed through any existing machinery or future-devised machinery or without any apparatus." [FN45] Finally, the court denied patentability, stating: "It is conceded that one may not patent an idea. But in practical effect that would be the result if the formula for converting BCD numerals to pure binary numerals were patented in this case. The mathematical formula involved here has no substantial practical application except in connection with a digital computer, which means that if the judgment below is affirmed, the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." [FN46]

            This case does not mean that any invention which involves a mathematical formula is unpatentable. It indicates that to be patentable, a mathematical formula must be applied to a specific end use.

b. PARKER v. FLOOK

            The Supreme Court again addressed the issue of software patentability in Parker v. Flook.

            The Supreme Court characterized its holding in Benson as precluding the patenting of "the discovery of a novel and useful mathematical formula" [FN47] and addressed the issue of "whether the identification of a limited category of useful, though conventional, post-solution applications of such a formula makes respondent's method eligible for patent protection."[FN48] Flook "applied for a patent on a 'Method for Updating Alarm Limits.' The only novel feature of the method is a mathematical formula." [FN49] The court did not agree with the argument that insignificant "post-solution activity . . . can transform an unpatentable principle into a patentable process", [FN50] and held that "a claim for an improved method of calculation, even when tied to a specific end use, is unpatentable subject matter under Section 101" [FN51]

            The Supreme Court left open the possibility of patenting computer programs, and recognized that "a process is not unpatentable simply because it contains a law of nature or a mathematical algorithm." [FN52]

c. DIAMOND v. DIEHR

            In 1981 the Supreme Court decided the case of Diamond v. Diehr.

            The court in Diehr reaffirmed that purely mathematical formula alone is not a proper subject matter of patent protection, stating: "A mathematical formula as such is not accorded the protection of our patent laws, Gottschalk v. Benson, 409 U.S. 63, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972), and this principle cannot be circumvented by attempting to limit the use of the formula to a particular technological environment. Parker v. Flook, 437 U.S. 584, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978)." [FN53] On the other hand, the court stated:"when a claim containing a mathematical formula implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e. g., transforming or reducing an article to a different state or thing), then the claim satisfies the requirements of section 101." [FN54]

            Diehr case indicates that at least some subject matter involving computer programs may be patented and that algorisms may be included as part of patentable subject matter.

3. EXTENT OF PATENT PROTECTION

            The inventor is granted the right to exclude others from making, using, or selling the invention throughout the United States or importing the invention into the United States for 20 years (35 U.S.C. 154).

            The "doctrine of equivalents" extend the protection. "Doctrine of equivalents" is defined as "[t]he substantial equivalent of a thing, in the sense of the patent law, is the same as the thing itself; so that if two devices do the same work in substantially the same way, and accomplish substantially the same result, they are the same, even though they differ in name, form or shape." [FN55] "The doctrine of equivalents prevents a copyist from evading patent claims with insubstantial changes. In applying the doctrine, the Supreme Court refused to allow an 'unscrupulous copyist to make unimportant and insubstantial changes and substitutions in the patent which, though adding nothing, would be enough to take the copied matter outside the claim.' " [FN56]

4. REMEDY

            A patentee may institute a civil action for infringement of his patent(35 U.S.C. 281).

            Three types of remedies are available for patent infringement: i) injunction, ii) recovery of damages and iii) recovery of attorney's fees.

i) Injunction

The court may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable (35 U.S.C. 283).

ii) Damages

A successful patent owner is entitled to an award of damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court (35 U.S.C. 284). The court may increase the damages up to three times the amount found or assessed (Id.).

iii) Attorney's fees

The court in exceptional cases may award reasonable attorney fees to the prevailing party (35 U.S.C. 285).

            In principle, no recovery shall be had for any infringement committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action (35 U.S.C. 286).

B. PATENT PROTECTION AGAINST REVERSE ENGINEERING

            Patented invention is sufficiently disclosed (35 U.S.C. 112), therefore, anyone can know the content of invention without reverse engineering. However, a patent holder can exclude others from using the patented invention or making a software equivalent to the patented invention (35 U.S.C. 154).

IV. CONTRACTUAL PROTECTION

A. GENERAL

            As mentioned in section II.A.2 above, contract is used as an affirmative step to safeguard the secrecy of the information, which is a requisite for trade secret. In addition, a variety of contracts are used to protect software. In such contracts, parties can tailor contents, extent or method of software protection to the character of software.

            However, there are several issues regarding contractual protection of software. As mentioned in section II.A.2 above, enforceability of shrink-wrap licenses remains in question. Provisions against public policy are unenforceable. Certain provisions go beyond mere their unenforceability. The Fourth Circuit decision in Lasercomb America, Inc. v. Reynolds, [FN57] was the first circuit court case to find copyright misuse [FN58].

            Misuse is "a court-made doctrine that originated in the patent context and was intended to prevent the patentee from extending the power of the patent beyond the grant defined by the patent statute." [FN59] " Misuse traditionally has been found where a patentee has sought to 'extend' or 'leverage' the patent by, for example, requiring royalty payments beyond the term of the patent or coercing the licensee to license unwanted patents or purchase unwanted products." [FN60] "While the patentee is allowed to extract the full value of his patent by charging whatever royalty amount the market will bear, misuse arises when the patent is used to coerce an advantage outside the scope or beyond the term of the patent." [FN61] " Misuse does not invalidate a patent but rather renders it unenforceable until the patentee 'purges' himself of the misuse." [FN62]

            The plaintiff, Lasercomb, licensed software for designing dies used for making product packaging. [FN63] The Lasercomb's standard license agreement had restrictive noncompetition clauses including the following:

"Licensee agrees during the term of this Agreement and for one (1) year after the termination of this Agreement, that it will not write, develop, produce or sell or assist others in the writing, developing, producing or selling computer assisted die making software, directly or indirectly without Lasercomb's prior written consent. Any such activity undertaken without Lasercomb's written consent shall nullify any warranties or agreements of Lasercomb set forth herein. The 'term of this Agreement' referred to in these clauses is ninety- nine years." [FN64]

The defendant, Reynolds, did not sign the standard license agreement. [FN65] The defendant then circumvented the protective devices Lasercomb had provided with the software and sold infringing copies of the software. [FN66] Lasercomb sued for copyright infringement and Reynolds pled copyright misuse as a defense. [FN67]

            The court stated "the similarity of the policies underlying patent and copyright is great and historically has been consistently recognized. Both patent law and copyright law seek to increase the store of human knowledge and arts by rewarding inventors and authors with the exclusive rights to their works for a limited time. At the same time, the granted monopoly power does not extend to property not covered by the patent or copyright."[FN68] The court pointed out that "[t]he misuse arises from Lasercomb's attempt to use its copyright in a particular expression, the Interact software, to control competition in an area outside the copyright".[FN69] Finally, the court held "that misuse of copyright is a valid defense, that Lasercomb's anticompetitive clauses in its standard licensing agreement constitute misuse of copyright, and that the defense is available to appellants even though they were not parties to the standard licensing agreement".[FN70] The court refused to enforce the plaintiff's claims of copyright infringement.

            The Lasercomb case indicates that certain provisions can trigger off copyright misuse, and therefore render copyright protection unenforceable.

B. CONTRACTUAL PROTECTION AGAINST REVERSE ENGINEERING

            As mentioned in section I.B. above, copyright cannot protect the copyright owner against reverse engineering under certain circumstances. So, software supplier may seek to prevent reverse engineering through contractual agreement. Can a contractual provision prohibit reverse engineering?

            If a provision merely prohibits the activities which are also not permitted under Copyright Act, such provision is valid and enforceable. However, if the provision prohibits the activities which is otherwise permitted, it is arguable that the provision may be unenforceable. One argument from the points of copyright law and antitrust law is as follows.[FN71]

Copyright Law

            The purpose of the copyright law is "to create the most efficient and productive balance between protection (incentive) and dissemination of information, to promote learning, culture and development."[FN72] It may be said that a clause prohibiting reverse engineering conflicts with the policy of dissemination of information. As in Lasercomb, the restraint on reverse engineering is used to "control competition in an area outside of the copyright. Therefore, it is arguable that such restriction on reverse engineering is unenforceable, or further trigger off copyright misuse. "The non-competition restrictions in Lasercomb, however, were broader than a clause that prohibits merely reverse engineering because the former attempted to suppress any effort by the licensee to independently implement the ideas expressed in the licensed software. The non-competition clause, therefore, attempted to create patent-like protection. In contrast, a clause prohibiting reverse engineering is an attempt to suppress one avenue of learning the ideas expressed, rather than an attempt to suppress all independent implementation. A clause prohibiting reverse engineering conflicts with copyright law's goal of dissemination of ideas, but does not create patent-like protection."[FN73]

Antitrust Law

            "In general, patents and copyrights are inherent restraints on trade, and are legislative exceptions to antitrust laws."[FN74] Most attempts to extend patents and copyrights could constitute a restraint of trade (Section 1 of the Sherman Act) or monopolistic conduct (Section 2 of the Sherman Act). "Although a prohibition against reverse engineering is less restrictive than a general non-competition clause, it still has an anti-competitive intent because it attempts to inhibit a potential competitor."[FN75]

            I do not agree with the argument from the point of copyright law above. Contractual protection is different from copyright protection in its characteristics, and one reasoning in Sega that “[i]f disassembly of copyrighted object code is per se an unfair use, the owner of the copyright gains a de facto monopoly over the functional aspects of his work ? aspects that were expressly denied copyright protection by Congress. 17 U.S.C. 102(b).” does not apply to contractual protection. As we can see in contractual agreement on know-how, contract can regulate idea itself while Copyright Act is intended to protect only expression. Also, contractual agreement does not provide exclusive rights against non-contracting third parties, while Copyright Act provide certain exclusive rights against third parties. Further, contractual agreement is a product of mutual negotiation, while copyright protection is unilaterally created without the participation of the party doing reverse engineering. The scope and characteristics of copyright protection are different from those of contractual protection.. Therefore, the fact that Copyright Act cannot be a protection against reverse engineering does not mean that contractual agreement also cannot be the protection.

            I, however, think that a contractual provision prohibiting reverse engineering which is otherwise within the scope of fair use exception under Copyright Act can be a violation of antitrust law, and therefore unenforceable. Restraint on reverse engineering is used to control competition. As a result of such restraint, licensee has difficulty to develop new software by utilizing ideas contained in the licensed software. In 1991, the European Economic Community’s Council of Ministers gave final approval for a directive (“EC Directive”) requiring European copyright protection of computer software. [FN76] EC Directive permits reverse engineering under certain circumstances, and provides that such reverse engineering may not be prohibited by contract. [FN77] Considering these factors, I think the restraint on reverse engineering can be unenforceable. It might be argued that based on the fact that licensor has liberty of contract, licensor should be free to license with certain condition. However, antitrust law regulates such kind of contracts.

            Availability of contract to prohibit reverse engineering beyond the prohibition under Copyright Act is still an open issue. There is uncertainty whether a clause prohibiting reverse engineering is enforceable or unenforceable, or further trigger off copyright misuse protection.

V. RELATION AMONG PROTECTIONS.

A. RELATION BETWEEN PATENT AND TRADE SECRET [FN76]

            The patented invention must be disclosed in sufficient detail to "enable persons of ordinary skill in the art" to practice the invention without "undue experimentation" (35 U.S.C. 112). And "the file wrapper, consisting of supporting materials on file (specifically, the prosecution history of the application), becomes available for public inspection." [FN77] As a result, the status of trade secret is destroyed by failing to satisfy requirement of secrecy.

            On the other hand, "[b]ecause of the 'secret' nature of the protected subject matter, inventions maintained as trade secret are not made of public record and necessarily do not function as prior art for purposes of the patent system". [FN78] "As a result, inventions maintained as a trade secret cannot, for the most part, preclude issuance of a patent". [FN79]

B. RELATION BETWEEN COPYRIGHT AND TRADE SECRET

[FN80]

            In contrast to the mutually exclusive effect of the patent and trade secret law, copyright and trade secret protection are simultaneously available for computer software. Therefore, Copyright Act provides a safety net in the event trade secret protection is lost by accidental or public disclosure. If the extensive marketing of the software by shrink-rap license destroys the secrecy requisite for trade secret protection, copyright protection becomes important.

VI. CONCLUSION

            As mentioned above, there are a variety types of software protection. Howevers, no one provide a perfect protection of software. Each protection has advantage and disadvantage, including the followings:

Copyright Protection

Advantage:

- easy to obtain.

- can be used in combination with trade secret protection.

Disadvantage:

- protecting only expression.

- cannot be an effective protection against reverse engineering.

Trade Secret Protection

Advantage:

- easy to obtain.

- can protect idea itself.

Disadvantage:

- uncertainty whether it can be a protection for mass-marketed software.

- cannot be a protection against reverse engineering.

Patent Protection

Advantage:

- strong right to monopolize the idea.

Disadvantage:

- difficult to obtain.

- term of protection is limited to 20 years.

- sufficient disclosure is necessary and, consequently, cannot be used in combination with trade secret protection.

- physically easy to use or copy the disclosed patented software.

- difficult to find unauthorized use or copy of patented software from the object code of the program.

Contractual Protection

Advantage:

- easy to obtain.

- can provide flexible protection meeting character of software.

Disadvantage:

- possible limitations in enforceability. (e.g. shrink-wrap license. provision prohibiting reverse engineering.)

- powerless against third parties other than contracting parties.

            It is important to determine the best mix of legal protection, with considering each protection's advantage and disadvantage, and characteristic of concerned software.

 

FOOT NOTES

FN1. The court in Apple Computer, Inc v Franklin Computer Corp, 714 F.2d 1240, at 1249 (3d Cir.1983), found that "a computer program, whether in object code or source code, is a 'literary work' and is protected from unauthorized copying, whether from its object code or source code version."

FN2. Whelan Associates, Inc. v. Jaslow Dental Laboratory, Inc., 609 F.Supp. 1307 (E.D.Pa. 1985), aff'd, 797 F.2d 1222(3d Cir. 1986), cert. denied, 479 U.S. 1031 (1987).

FN3. "The concept of 'structure, sequence, and organization' is found outside the area of computer software in elements such as the plot, subplot, sequence of scenes, setting characterization and patterns of dialogue in works of fiction or drama; or in the detailed outline and organization and selection, coordination and arrangement of information of textbooks or other nonfiction works. In computer software, structure, sequence, and organization include the arrangement of computer program modules in relation to each other, as opposed to the literal text of the program." Office of Technology Assessment, Congress of the U.S., Computer Software: Copyrights, Patents, and the Challenge of Technological Change (hereinafter "OTA"), at 69 (1993).

FN4. Whelan, supra FN2 797 F.2d 1222, at 1236.

FN5. Id. 797 F.2d 1222, at 1248.

FN6. OTA, supra FN3 at 171.

FN7. Plains Cotton Cooperative Ass'n v. Goodpasture Computer Serv.,Inc.,807 F.2d 1256 (5th Cir.) cert. denied, 484 U.S. 821 (1987).

FN8. Id. 807 F.2d 1256 at 1262.

FN9. Microsoft Corp. v. Harmony Computers & Electronics, Inc., 846 F.Supp. 208 at 213 (E.D.N.Y. 1994).

FN10. Sega Enterprises Ltd. v. Accolade Inc, 977 F.2d 1510 (9th Cir.1992).

FN11. Id. at 1514.

FN12. Id. at 1518.

FN13. Id. at 1523.

FN14. Id.

FN15. Id.

FN16. Id. at 1526.

FN17. Id.

FN18. Id.

FN19. Id. at 1526-1527.

FN20. Id. at 1524.

FN21. Id. at 1523-1524.

FN22. Id. at 1527.

FN23. OTA, supra FN3 at 78.

FN24. Paul Goldstein, Edmund W. Kitch & and Harvey S. Perlman, Selected Statutes and International Agreements on Unfair Competition, Trademark, Copyright and Patent at 33 (1995 ed.)(Table of Jurisdictions Wherein Act Has Been Adopted).

FN25. Ruckelshaus v. Monsanto Co., 467 U.S. 986, at 1002 (1984).

FN26. OTA, supra FN3 at 82.

FN27. Michael A. Epstein, Modern Intellectual Property, Chapter 10. Protecting Computer Software, II. Trade Secret Law, B. Mass Market Implications (2nd ed.).

FN28. Id.

FN29. OTA, supra FN3 at 86.

FN30. In the case of Vault Corp. v. Quaid Software Ltd., the district court held that Vault's shrink-wrap license agreement was "a contract of adhesion which could only be enforceable if the Louisiana Software License Act . . . is a valid and enforceable statute." Vault Corp. v. Quaid Software Ltd., 655 F.Supp. 750 at 761.

FN31. Modern Intellectual Property, supra FN27, and OTA, supra FN3 at 86.

FN32. OTA, supra FN3 at 86.

FN33. Steven N. Dupont, The Copyright and Trade Secret Protection of Communication Software: Placing a Lock on Interoperability, John Marshall Journal of Computer & Information Law, at 34 (1994).

FN34. Kewanee Oil Company v Bicron Corporation, 416 U.S. 470, at 476 (1974).

FN35. OTA, supra FN3 at 39.

FN36. Id.

FN37. Id.

FN38. "To satisfy Section 112, the specification disclosure must be sufficiently complete to enable one of ordinary skill in the art to make the invention without undue experimentation" Martin v. Johnson, 454 F.2d 746, at 751, 172 USPQ 391, at 395 (CCPA 1972).

FN39. OTA, supra FN3 at 41.

FN40. Id. at 43.

FN41. Parker v. Flook, 437 U.S.A. 584, at 593 (1978).

FN42. Section 102(g) embodies first-to-invent rule.

FN43. Gottshalk v. Benson, 409 U.S. 63, at 65 (1972).

FN44. Id. at 67.

FN45. Id. at 68.

FN46. Id. at 71-72.

FN47. Parker v. Flook, supra FN40 at 585.

FN48. Id.

FN49. Id.

FN50. Id. at 590.

FN51. Id. at 595.

FN52. Id. at 590.

FN53. Diamond v. Diehr, 450 U.S. 175, at 191 (1981).

FN54. Id. at 192.

FN55. Fife Mfg. Co. v. Stanford Engineering Co.,193 F.Supp 226 at 232 (D.C.Ill. 1961).

FN56. Valmont Industries Inc v Reinke Manufacturing Co Inc, 25 U.S.P.Q.2d 1451, at 1454 (1993).

FN57. Lasercomb America, Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990).

FN58. David Bender & M. Elaine Johnston, Patents, Copyrights, Trademarks, and Literary Property Course Handbook Series, PLI Order No. G4-3903, Antitrust Aspects of Reverse Engineering, Section VI.B. (1993).

FN59. Wynne S. Carvill, Patents, Copyrights, Trademarks, and Literary Property Course Handbook Series, PLI Order No. G4-3942, Antitrust Issues in Management of Intellectual Property, Section III.C.(1995).

FN60. Id.

FN61. Id.

FN62. Id.

FN63. Lasercomb, supra FN56 at 971.

FN64. Id. at 973.

FN65. Id. at 971.

FN66. Id.

FN67. Id.

FN68. Id. at 976.

FN69. Id. at 979.

FN70. Id.

FN71. See John T. Soma, Gus Winfield & Letty Friesen, Symposium: Current Issues of SOFTWARE Copyrightability, Software Interoperability and Reverse Engineering, Rutgers Computer and Technology Law Journal, Section E.2. (1994).

FN72. Whelan, supra FN2 797 F.2d 1222, at 1235.

FN73. Symposium, supra FN70 Section E.2.

FN74. Id.

FN75. Id.

FN76. See OTA, supra FN3 at 86.

FN77. Id.

FN78. Id.

FN79. Id.

FN80. See id.