XX XXXXXX XXXXX XXXXX XX XX XX XX XX XX XX XX XXXX XX XXX XXXXXXX XX XX XX XX X XX XX XX XXXXXX XXXXXX XXXXX XX XX XXXXXX XXXXX XX XX XXXXXX XXXXXX XXXXXX XX XX XX XX XX XX XX XXXXX XXXX XX XXXX XXX XX XX XX XX XX XX XXXXX XX XX XXXXXX XXXXXX __________________________________ Spring 1995, Volume 3, Number 1 __________________________________ By George, Donaldson & Ford, L.L.P. Attorneys at Law 114 West Seventh Street, Suite 1000 Austin, Texas 78701 (512) 495-1400 (512) 499-0094 (FAX) gdf@well.sf.ca.us ___________________________________ Copyright (c) 1995 George, Donaldson & Ford, L.L.P. (Permission is granted freely to redistribute this newsletter in its entirety electronically.) ___________________________________ David H. Donaldson, Jr., Publisher <6017080@mcimail.com> Peter D. Kennedy, Senior Editor Jim Hemphill, Contributing Editor Jeff Kirtner, Law Clerk ___________________________________ IN THIS ISSUE: 1. WILL THE SHRINK-WRAP LICENSE DILEMMA PLAGUE ON-LINE SALES? 2. SOME LEGAL RISKS POSED BY ON-LINE ADVERTISING 3. LOTUS LOSES FIGHT TO PROTECT ITS USER INTERFACE 4. COPYRIGHT LAW UPDATE: COPYING BY COMMERCIAL RESEARCHERS IS NOT NECESSARILY A FAIR USE ___________________________________________________________________ 1. WILL THE SHRINK-WRAP LICENSE DILEMMA PLAGUE ON-LINE SALES? Can software companies unilaterally decide what terms govern the sale of their software? What's the point of those long, complicated, one-sided licenses that come with most commercial software packages? Are they enforceable? The Purpose of Shrink-wrap Licenses. Everyone has seen these licenses -- they come with commercial software and state that opening the package or using the software means the buyer is agreeing to abide by their terms. While these documents may be slightly aggravating, software companies use them for two important reasons -- to protect their copyrights and to limit their exposure to lawsuits. Software is terribly easy to copy and distribute; software developers understandably want to protect themselves from losing revenue from unauthorized copying. Shrink wrap licenses include terms restricting the copying of the software in order to help insure that the sale of a single copy of the software does not give rise to any implied license to make, distribute or use additional copies. The licenses might also try add further restrictions, such as prohibiting resale or leasing of the software. Shrink-wrap licenses have a second goal: to limit the software company's legal liability. This need arises not from copyright law, but from the general laws governing contracts and the sale of goods -- which in all states (except Louisiana) is the Uniform Commercial Code, or UCC. Article 2 of the UCC sets "default" rules that automatically become part of just about every sale of goods, unless the buyer and seller agree to change the defaults to something else. Despite some theoretical questions, most legal authorities agree commercial software is a "good" under the UCC. The problem for a software vendor is that the UCC reads into every sale implied terms that favor the buyer. Rather than adopt the doctrine of "caveat emptor," the UCC assumes that the seller has made certain promises or warranties about the quality of the product. If the product does not live up to these implied warranties, the buyer can sue. Most importantly, the UCC assumes that the seller always promises that the product is "merchantable," that is, fit for the customary use that such products are put to. Further, the UCC also assumes that the seller has promised that the product was fit for the buyer's particular intended use, if the seller had reason to know of that use. The seller and buyer can agree to change these terms, such as when a used car is sold "as is." The buyer and seller can also agree to limit the scope of the seller's liability if the product does not live up to the promises that were made. However, when the seller tries to make these limitations himself, through terms on an invoice or other document, the limitations must be "conspicuous," they must mention "merchantability," and they cannot be "unreason- able." Moreover, the buyer has to agree to the limits. Are Shrink-wrap Contracts Enforceable? There is serious question about how effective a typical shrink-wrap license is. Various criticisms are made. First, and most obviously, is whether a purchaser has really "agreed" to the terms of the shrink wrap license. Typically, the buyer does not know what the license says when she buys the software; the purchase is made before the terms are revealed. How can the buyer "agree" to the terms without knowing what they are? After a sale is made, one party cannot add new terms. The federal court of appeals sitting in Philadelphia discussed these issues in STEP-SAVER DATA SYSTEMS, INC. v. WYSE TECHNOLOGY, 939 F.2d 91 (3rd Cir. 1991), and decided that a particular shrink-wrap license was not enforceable. See also David Hayes, Shrinkwrap License Agreements: New Light on a Vexing Problem, 15 Hastings Comm. Ent. L.J. 653 (1993). A second, related objection is one raised to all take-it-or- leave it contracts, which are derisively named "contracts of adhesion." These tend to get rough treatment by courts, and shrink-wrap licenses are a special strain. Other concerns relate to the technical question of contract formation -- the sale is usually made between a retailer and the consumer, but the shrink-wrap license is between the consumer and the software company. Is that a contract at all? What did the software company give the consumer that the consumer did not already have when she bought the product? There are also some concerns about whether particular restrictive terms in these licenses (or more accurately, state laws that state that the terms are enforceable) violate the federal Copyright Act. See VAULT CORP. v. QUAID SOFTWARE, LTD. 847 F.2d 255 (5th Cir. 1988). Can These Problems be Fixed by On-line Transactions? Do these same objections to shrink-wrap licenses apply to on- line transactions? Maybe not. The unique nature of interactive on-line transactions offers vendors the ability to get and record the buyer's agreement to license terms before a purchase is made. Much of the software that is distributed on-line, shareware particularly, comes with a license.doc zipped up with the program files. These licenses will have the same troubles a shrink-wrap licenses, because they are an after-the-fact "surprise". However, most bulletin board systems, and now the World Wide Web, can easily be configured to require short interactive sessions before a transaction is consummated. The vendor can display the license terms, require the buyer's assent before the software is made available, and importantly, the buyer's assent can be recorded -- written to a log file. While an on-line seller cannot force the buyer to read the terms, it surely can record the fact that the terms were displayed, and that the buyer gave affirmative responses -- "Did you read the terms of the license?" "I did." "Do you agree to the terms?" "I do." This type of interaction before the sale makes the transaction appear far less one-sided. While take-it-or-leave-it terms might still be criticized as "adhesion contracts," the unique give-and- take that's possible on-line removes much of the inequitable sting that "surprise" shrink-wrap license terms leave on many observers. ___________________________________________________________________ 2. SOME LEGAL RISKS POSED BY ON-LINE ADVERTISING Advertising on the Internet is booming -- not with crass "spamming" on Usenet newsgroups, but with flashy, multi-media home pages on the World Wide Web that show off pictures, sound and even video. Most commercial World Wide Web sites combine a mix of advertising, information, and entertainment -- honoring the Internet tradition that tasteful, non-intrusive self-promotion is acceptable if it comes along with something neat or valuable. Are there legal risks involved in on-line advertising? There are, just like any other endeavor. Any business that extends its advertising to cyberspace must take the same care as it does with print or broadcast advertising. Electronic advertising also introduces new questions of jurisdiction -- whose laws apply? On- line service providers that accept advertising must consider their own potential liability, too. What is their duty concerning the content of other companies' ads? Advertisements are "publications." Companies that put their ads on the Internet are "publishers" and face the same potential risks of defamation, invasion of privacy, etc., from these ads as from print ads. Moreover, electronic service providers that accept paid advertisement may be "publishers" of those ads as well, and responsible to some degree for their content. Absent particular exceptions, advertisements carried by a publisher are viewed as that publisher's own speech. For example, the landmark 1964 Supreme Court libel case, New York Times v. Sullivan, concerned the liability of the New York Times for a paid advertisement written by others. The Supreme Court's ruling, although favorable to the Times, made no distinction between advertisements and other content of the newspaper. Compuserve, in the now-famous Cubby v. Compuserve case, successfully defended itself from a libel suit by proving its ignorance -- that it knew nothing of the content of a newsletter carried on its service, but provided by an outside contractor. This defense -- based on the traditional protection granted bookstores from libel suits -- is unlikely to be available when it comes to paid advertisements. Publishers, whether on-line or in print, generally review the content of advertisements before they are accepted and published, if only to determine pricing. They usually retain the right to refuse an advertisement based on its content. (Recall the recent attempts by revisionist "historians" to place ads in college papers denying that the Holocaust took place). Because of this potential exposure to liability, electronic publishers should be guided by two general principles: (1) review all proposed advertisements for potential legal problems, and (2) obtain an agreement that the advertiser will indemnify the publisher for any legal liability that arises from the ad. This article reviews several areas of potential concern for electronic advertisers. Ads for illegal transactions. You can't legally advertise marijuana for sale. (Or, more accurately, the First Amendment does not protect ads for illegal transactions.) A publisher can't knowingly carry such ads, even if the publisher would not be a party to the illegal transaction. A publisher's liability for carrying ads for illegal transactions has been hashed out in an interesting series of lawsuits involving the magazine Soldier of Fortune, which unintentionally carried several classified advertisements submitted by real live hit men offering the services of a "gun for hire." The hit men were hired through the magazine ads, and the families of those people "hit" sued the magazine. Two federal appeals courts came to entirely opposite conclusions about very similar Soldier of Fortune ads. The Eleventh Circuit upheld a multi-million dollar damage award against the magazine; the Fifth Circuit reversed a finding of liability. The legal principles these courts announced were relatively consistent, though: if an advertisement poses a "clearly identifiable unreasonable risk that it was an offer to commit crimes for money" the publisher can be held liable if it was negligent in running the ad. BRAUN v. SOLDIER OF FORTUNE MAGAINZE, INC., 968 F.2d 1110, 1121 (11th Cir. 1992), cert. denied, 113 S. Ct. 1028 (1993). A publisher must make sure that the ad, on its face, does not present a "clearly identifiable unreasonable risk" that the advertisement is soliciting an illegal transaction. On the other hand, the courts are less likely to impose liability for ambiguous advertisements that could have an innocent meaning. See EIMANN v. SOLDIER OF FORTUNE MAGAZINE, INC., 880 F.2d 830 (5th Cir. 1989), cert. denied, 493 U.S. 1024 (1990). This recognizes courts' reluctance to impose a duty on publishers to investigate advertisements beyond what the advertisements say. There is no reason to believe that this standard is different for advertisements of so-called "victimless" crimes like prostitution, although the likelihood of a civil lawsuit might be less. Ads for regulated businesses. Many businesses are regulated, and so is the content of their advertisements. The First Amendment permits some government regulation of commercial speech; for example, lawyer advertising is regulated by state bar associations or courts (although lawyers are constantly fighting over how far the regulations can go). Businesses placing ads should know what rules regulate their advertising. Companies accepting ads have two choices: (1) know the regulations for all companies for which it accepts ads; or (2) require the advertiser to guarantee that its ads comply with applicable regulations, and indemnify the publisher for losses if they don't. An example of the difficult legal questions raised by local regulation in the new borderless world of cyberspace are lottery and gambling ads. Some states (and territories) regulate or ban advertising lotteries and gambling. Puerto Rico, for instance, allows casino gambling. It also allows advertisement of gambling aimed at tourists, but prohibits such ads aimed at Puerto Ricans. The U.S. Supreme Court says that this odd regulatory scheme is constitutional. POSADAS DE PUERTO RICO ASSOCIATES v. TOURISM CO. OF PUERTO RICO, 478 U.S. 328 (1986). More recently, the Supreme Court also upheld the constitutionality of a federal law that forbids radio or television stations from broadcasting lottery ads into states that don't have a lottery -- even if the broadcasts are primarily heard in a state that has a lottery. UNITED STATES v. EDGE BROADCASTING CO., 113 S. Ct. 2696 (1993). This federal law only regulates airwave broadcasts of lottery ads. However, some states have similar statutes banning lottery advertising in any medium. For example, North Carolina prohibits advertising a lottery "by writing or printing or by circular or letter or in any other way." N.C. Stat.  14-289. Could North Carolina enforce this law against electronic publishers who carry lottery ads? Answering that question raises a host of difficult, unanswered jurisdictional questions and is beyond the scope of this short article. As a practical matter, it seems unlikely that North Carolina officials would try to prosecute the State of Texas, for example, if Texas set up a Web site to advertise its lottery that of course could be accessed from North Carolina. On the other hand, a local North Carolina service provider that accepted and posted ads for the Texas lottery (or even the results of the Texas lottery) might have something to worry about: the language of the law prohibits it; the service provider is in easy reach of local prosecutors; and the U.S. Supreme Court has already looked kindly on a similar law. Misleading and deceptive ads. The First Amendment does not protect false advertisement; state statutes (and some federal laws) routinely prohibit false, misleading and deceptive ads. For example, the broad Texas Deceptive Trade Practices-Consumer Protection Act ("DTPA") prohibits all sorts of deceptive advertising, and gives deceived consumers very powerful remedies in court. Such statutes are primarily aimed at those who place advertisements, rather than the publishers. Where do electronic publishers fit in? As usual, it's not clear. Newspapers cannot be sued under the Texas DTPA because that law does not apply to "the owner or employees of a regularly published newspaper, magazine, or telephone directory, or broadcast station, or billboard." Tex. Bus. & Comm. Code  17.49(a). Is an internet service provider a "magazine" or "broadcast station?" Maybe. Is a BBS or a World Wide Web page a "billboard"? Maybe. The question has not come up yet. While it would be more logical and consistent with the purpose of the statute to exempt electronic publishers that perform the same function as a newspaper, courts are supposed to apply the DTPA "liberally" to provide consumers with as broad a remedy as possible from deceptive ads -- leaving the answer in doubt. Some things are clear. An entity distributing information regarding its own goods or services cannot claim the "media exemption" -- a newspaper or BBS that publishes false information about its goods or services can be sued by consumers under the DTPA. Also, an entity that has a financial stake in the sale of the goods advertised is also subject to DTPA liability. This means that internet service providers that accept a percentage of sales generated by on-line advertising will be subject to the restrictions of the DTPA, and should insure that the ads they place are not deceptive, and that the seller has agreed (and can) indemnify them for liability. Finally, no publisher -- whether earthbound or in cyberspace -- is exempt from DTPA liability if the outlet and/or its employees know an ad is false, misleading or deceptive. Remember: It's YOUR service. Unless an electronic publication accepts all advertisements, regardless of content, and does not review the content of that advertising in any way or reserve any right to reject advertisements (and can prove this in court), the presumption will be that the service "published" the ad and is responsible for its content. No one has a First Amendment right to place their advertisement with any given Internet service provider or on any commercial information service. Despite lots of on-line rhetoric, the First Amendment only restricts what the government can do, not what businesses (even big ones) can do. Remember that a publisher always has the right to reject an ad for any reason at all and can require changes before an ad is placed. For ads that are obviously illegal, slanderous or misleading, the safest bet is to refuse the ad. ___________________________________________________________________ 3. LOTUS LOSES FIGHT TO PROTECT ITS USER INTERFACE The literal "words" of a computer program - the source code and its derivative, the object code - are protected by copyright law just like the words in a book are protected. This rule is simple to apply, and literal copying of source code is easy to identify. What the law has been struggling to define for more than over a decade is what, if any, non-literal aspects of computer software - the way the software looks, feels, operates, and is operated - are also entitled to the strong protection of the Copyright Act. One of the most important non-literal aspects of a computer system is its user interface -- the commands, menus, and macros that are the operating "knobs" and "buttons" of a program. A Brief History of User Interface Protection. User interfaces account for a large percentage of the creative effort, development cost, and popularity of computer programs. Software developers have long sought legal protection for them in a variety of ways, but in particular through copyright laws. A new legal ruling issued by a federal appeals court in Boston, LOTUS DEV. CORP. v. BORLAND INT'L, INC., [fn1] restricts the copyright protection available to user interfaces, by holding that the Lotus 1-2-3 menu commands and menu command hierarchy were not copyrightable. This decision could have far-reaching effects on the software industry. By the late 1980s it was firmly established that user interfaces could be protected by copyright, and the legal battles since then have centered on what elements of interfaces can be copyrighted and on how broad the scope of copyright protection should be. Three influential cases in the late 1980s and early 1990s, WHELAN ASSOCIATES, INC. v. JASLOW DENTAL LAB., INC., [fn2] LOTUS DEVELOPMENT CORP. v. PAPERBACK SOFTWARE INTERNATIONAL, [fn3] and LOTUS DEVELOPMENT CORP. v. BORLAND INT'L, INC., [fn4] gave very broad protection to user interfaces. Those cases were heavily criticized, however, in part because they ignored certain traditional aspects of copyright doctrine, and perhaps more importantly, because they were seen as stifling innovation and competition. Many in the software industry claimed that by giving broad protection to the user interfaces, later developers were prevented from creating programs that improved on the earlier program but remained compatible with it. Innovation in software, these critics claimed, occurs in small steps by building on what has come before. Too much protection stifles this step-by-step process. They further argued that unless the later program could be compatible with the earlier one, users of the earlier program would not switch to the new, better product, because they had too much time invested in learning the earlier program. This argument has well-known analogues in other areas, most notably the QWERTY keyboard, which is known to be less efficient than other keyboard configurations but continues to monopolize keyboard design because everyone knows it. Recent cases have drastically reduced the copyright protection afforded to user interfaces. In particular, the federal appeals court in New York in a case called COMPUTER ASSOC. INT'L, INC. v. ALTAI, INC., [fn5] developed an abstraction-filtration-comparison test that eliminates from copyright protection many of the elements that developers most want to protect. The adoption of the ALTAI test in other courts, coupled with a growing conviction that copy- right and software do not mix well because of software's functional aspects, has generated a movement in the courts toward reduced copyright protection for software. Nowhere is this more evident than in BORLAND, in which the First Circuit held that Lotus 1-2-3's menu command hierarchy is not copyrightable because it is a "method of operation," and as such is specifically denied copyright pro- tection under 17 U.S.C.  102(b), which states: "In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, [or] method of operation . . . regardless of the form in which it is described, explained, illustrated, or embodied in such work." 1-2-3 v. Quattro Pro. Borland had copied Lotus 1-2-3's menu commands and menu command hierarchy when it developed what it believed to be improved spreadsheet programs, Quattro and Quattro Pro. The Quattro programs offered two alternative user interfaces: the Borland interface, which included Borland's improvements over Lotus 1-2-3, and the Lotus Emulation Interface. The Lotus Emulation Interface allowed Quattro users to enter Lotus 1-2-3 commands while using Quattro. By offering the compatible interface, Borland made it possible to attract Lotus 1-2-3 users, who could switch to Quattro without any initial loss of efficiency. Borland later developed a "Key Reader" that allowed Quattro to interpret Lotus 1-2-3 macros, which are composed of a series of Lotus 1-2-3 menu commands. Lotus sued Borland, claiming that both the Lotus Emulation Interface and the Key Reader contained virtually identical copies of the Lotus 1- 2-3 menu command hierarchy, and thus infringed its copyright in the Lotus 1-2-3 menu commands and menu command hierarchy. Judge Keeton presided over the trial, and in a series of four opinions known as BORLAND I - IV, he ruled that both the Lotus Emulation Interface and the Key Reader infringed Lotus's copyright in Lotus 1-2-3. In BORLAND II, Judge Keeton held that the Lotus 1- 2-3 menu commands and menu command hierarchy were copyrightable. Judge Keeton based his ruling on the well-known, if somewhat mystical, idea/expression dichotomy. Copyright law, of course, protects expression but not ideas; this distinction has proven to be a particularly vexing problem in software cases. In BORLAND II, Judge Keeton reasoned that the "idea" of Lotus 1-2-3's menu commands and menu command hierarchy was to control a spreadsheet using commands, and that, because millions of satisfactory menu commands and menu command hierarchies could be constructed, the particular commands and hierarchy selected for Lotus 1-2-3 was an "expression" of that "idea," and therefore copyrightable. On appeal, the First Circuit did not dispute Judge Keeton's conclusion that the menu commands and menu command hierarchy were expressive. However, the court decided that a menu command hierarchy is a "method of operation," and is thus not copyrightable under the specific language of 17 U.S.C.  102(b). The court defined a "method of operation" as "the means by which a person operates something." The court reasoned that the menu command hierarchy does not merely explain and present Lotus 1-2-3's functional capabilities, but also serves as the method by which Lotus 1-2-3 is controlled and operated. The court limited its broad definition of "method of operation" by requiring program features to be "essential" to the operation of the program before they are considered part of the program's method of operation and therefore not copyrightable. The court emphasized that Lotus 1-2-3 was impossible to use without using the menu command hierarchy, unlike other aspects of Lotus 1-2-3, which could be used without them. For example, the court noted that Lotus 1-2-3's "long prompts," which implemented a help facility, were not essential to using Lotus 1-2-3 and hence were not part of its operation. Furthermore, the court held that the computer code underlying Lotus 1-2-3 was not essential to operating Lotus 1-2-3, because other coding could perform the same function. Copying the source code is not necessary. In contrast, it was essential that Borland copy the precise menu command hierarchy if it was to develop a program compatible with Lotus 1-2-3. The Killer Analogy. The court likened Lotus 1-2-3's menu commands and hierarchy to the buttons on a VCR. Just as the VCR is controlled by pressing buttons arranged in a certain order and labelled in a certain way, so is Lotus 1-2-3 controlled by typing or highlighting commands arranged in a particular hierarchy. The menu commands and menu command hierarchy are just like the VCR buttons themselves, because one could not operate a VCR without the buttons. Likewise, one cannot operate Lotus 1-2-3 without using the menu commands and menu command hierarchy. According to the court, the decision not to allow a copyright for a menu command hierarchy (or any method of operation) is correct from a societal and economic point of view. Copyright law is meant to encourage others to build upon the ideas and information conveyed in a work. In the computer context, the BORLAND court stated that "building" requires using the precise "method of operation," or user interface, of earlier programs. Why? Otherwise, users would have to learn several different user interfaces to perform the same operation on different spread-sheet programs. Furthermore, the work that users had put in to develop Lotus 1-2-3 macros would be lost and innovation stifled by locking users into older, inefficient programs. What About The ALTAI Test? When the BORLAND decision was appealed, many copyright commentators and members of the software industry filed amicus briefs, concentrating in part on the ALTAI test of copyrightability and infringement. The ALTAI decision established a three-part "abstraction-filtration-comparison" test to help courts separate out non-copyrightable ideas from copyrightable expression, so that the court can then compare the two subject programs and see whether the allegedly infringing program has copied protected elements of the original program. SEE "When is a Computer Program a Copy?" Legal Bytes, Vol. 1, No. 1. The First Circuit in BORLAND did not explicitly use the ALTAI test. Why not? The ALTAI test was developed to aid courts in determining whether elements of a program are "ideas" or "expression" of those ideas. In BORLAND, though, the First Circuit had to decide whether Lotus 1-2-3 and Quattro shared a common "method of operation." The court apparently concluded that the "abstraction-filtration-comparison" test was not especially useful in determining whether what the two programs shared could be properly called a method of operation, and therefore not protected -- particularly when the allegation concerns literal copying of a menu command hierarchy, rather than non-literal copying of computer code. This does not mean, of course, that in other cases of alleged infringement, particularly those involving the alleged infringement of expression, the ALTAI test would not be used. Is BORLAND Pro-Competition and Pro-Innovation? By declaring that the menu commands and menu command hierarchy of Lotus 1-2-3 are uncopyrightable despite their "expressiveness," the BORLAND court allows any software developer to copy the Lotus 1-2-3 commands and hierarchy for use in their own spreadsheet program. Because Borland had included the Lotus 1-2-3 hierarchy in an improved spreadsheet program, Borland was a sympathetic defendant. But what about a developer who simply "rips off" the Lotus 1-2-3 command hierarchy to "reimplement" Lotus 1-2-3 without paying all of the costs to develop the user interface? According to the court's decision, such a developer would not be liable for copyright infringement as long as he did not copy any of Lotus 1-2- 3's underlying code, and as long as he did not copy any of Lotus 1- 2-3's protectable screen displays. Is it clear this decision is pro-competitive and pro- innovation? Now developers can more easily make products compatible with an industry leader, and that would seem to increase competition and spur the industry leader to improve its program. But large companies can also make products extremely similar to, but not quite compatible with, programs of smaller companies. The larger company will not be liable for infringement (even though its user interface nearly mimics the earlier program) because under BORLAND the earlier program's interface is not copyrightable. If the larger company's program becomes the industry standard, the smaller company's innovative product will have trouble establishing a niche in the market, which may end up hurting diversity, competition, and innovation. How Broad Is BORLAND? Many questions remain about the extent of the BORLAND decision. As the concurring opinion in BORLAND notes, nearly every computer program can be thought of as uncopyrightable under one of the terms listed in  102(b). Consider BORLAND's extremely broad definition of "method of operation." A computer's operating system software is "the means by which a person operates" a computer, and is essential for doing so. Under BORLAND, can a developer "copy" an operating system by reimplementing the calls that application programs make to it (its user interface) and thereby quickly create a compatible operating system with a much-reduced development cost? Nor is it clear how BORLAND will apply when more than the menu commands and menu command hierarchy are at issue. BORLAND itself noted that all previous user-interface cases involved more than the menu command hierarchy; for example, several involved menus along with screen displays. Under the most straightforward reading of BORLAND, a later developer could copy the menu commands and menu command hierarchy verbatim, change the screen displays, and not be liable for copyright infringement. How much would the screen displays need to be changed? There is no easy answer, but there is reason to believe the later program could create screens that accepted or displayed all essential information from the screens of the earlier program. The earlier program, after all, cannot copyright the idea of creating screens to accept or display information. Furthermore, the screen may be unprotectable as a "blank form." Finally, the whole rationale of the BORLAND decision is to allow compatibility, which cannot be achieved without allowing the later program to do what the initial program did, and that could include accepting and displaying critical information. Finally, will BORLAND's logic be extended to other user interfaces, particularly Graphical User Interfaces ("GUIs")? To some extent, GUIs appear to fit BORLAND's definition of a "method of operation" because they are the "means by which a person operates" an application program or operating system. Will the BORLAND analysis leave the essential features of each GUI uncopyrightable? The Ninth Circuit, in APPLE COMPUTER, INC. v. MICROSOFT CORP., [fn6] has already applied a "virtual identity" standard for determining whether Microsoft's Windows infringed the few copyrightable aspects of Apple's Macintosh GUI. But if the method is unprotected (under BORLAND) and the features are only minimally protected (under APPLE), then how is a company to protect its investment in its user interface? Companies may turn toward other theories of legal protection, such as trade dress or trade- mark, laws established to protect a product's distinctive appear- ance. Decisions like BORLAND may move the industry and law in that direction. Footnote 1: 1995 WL 94669, 63 USLW 2565, 34 U.S.P.Q.2d 1014 (1st Cir. 1995). Footnote 2: 797 F.2d 1222 (3d Cir. 1986). Footnote 3: 740 F. Supp. 37 (D. Mass. 1990). Footnote 4: 788 F. Supp. 78 (D. Mass 1990) ("BORLAND I"); 799 F. Supp. 203 (D. Mass 1992) ("BORLAND II"); 831 F. Supp. 202 (D. Mass 1993) ("BORLAND III"); 831 F. Supp. 223 (D. Mass 1993) ("BORLAND IV"). Footnote 5: 982 F.2d 693 (2d Cir. 1992). Footnote 6: 35 F.3d 1435 (9th Cir. 1994). (This article was written by Jeff Kirtner, GDF law clerk and 3d year law student at the University of Texas School of Law). ___________________________________________________________________ 4. COPYRIGHT LAW UPDATE: COPYING BY COMMERCIAL RESEARCHERS IS NOT NECESSARILY A FAIR USE Copyright infringement, like speeding, is a "strict liability" offense. Just as the traffic cop doesn't care about how fast you THOUGHT you were going, the Copyright Act does not care whether you knew you were violating someone's copyright when you copied that computer program or book. The Copyright Act exists to protect the value of original creations, and unauthorized copying, whether intentional or not, hurts that value. On the other hand, the strict liability aspect of copyright law can have severe consequences, such as holding bookstores responsible if any books they carry happen to infringe someone's copyright, and holding computer bulletin board system operators liable even when they deny doing any copying themselves. See "BBS System Operators' Liability for Copyright Infringement: Let the Sysop Beware," Legal Bytes, Vol. 2, No. 1. The Copyright Act's "fair use" doctrine softens this harsh rule to a degree. The Copyright Act gives breathing space for limited unauthorized copying for particular non-profit, public-good oriented reasons, including "scholarship or research." 17 U.S.C.  107. An earlier issue of LEGAL BYTES discussed how courts in three cases applied this fair use exception to "archival" copying for educational use. See "Copyright Law: `Fair Use' of Copyrighted Materials by Schools & Non-Profit Organizations," Legal Bytes Vol. 2, No. 1. One of those cases, AMERICAN GEOPHYSICAL UNION v. TEXACO, INC., has now been affirmed on appeal in a lengthy written opinion, and this ruling may force significant changes in the way many institutions operate. Texaco employs between 400 and 500 scientists and engineers who do basic research and development. Their research is ultimately aimed at developing or improving Texaco products for sale in the marketplace. Texaco has large research libraries that subscribe to numerous scientific journals. Like many institutions, Texaco's libraries circulate the journals to their scientists who make copies of articles of interest for later reference. Texaco was sued by a publisher of scientific journals, which claimed that the copying practices of Texaco's researchers violated the publishers' copyright in the journals. After a trial focussing on the copying practices of a single randomly-selected Texaco researcher, the judge found that the copying was not a fair use, essentially because although Texaco operated like a non-profit research institution, it wasn't: Texaco's research ultimately was aimed at producing profits for the company. Texaco appealed the decision, and lost again. The U.S. Court of Appeals for the First Circuit, sitting in Boston, held that Texaco's copying was not a fair use. Two factors were key: (1) the Texaco researcher copied entire articles for later reference and therefore his copying was "archival," not "transformative," and (2) the copying had the effect of reducing the need for subscriptions, and therefore hurt the market value of the journals. The Court noted that not only are back issues, reprints and additional subscriptions available, but the Copyright Clearance Center, Inc. ("CCC") offers services to license photocopying of publications. Through the CCC, institutions like Texaco can purchase general licensing authorizing the archival photocopying done by its researchers. The existence of the CCC surely was a big factor in the First Circuit's willingness to find copyright violations in photocopying practices that are undeniably very wide-spread and accepted. Further, while the First Circuit did consider the "commercial" nature of Texaco's copying as weighing against giving it fair use protection, the Court did not give this factor nearly the weight that the trial judge did. The First Circuit realized that the connection between Texaco's revenues and the research copying was tenuous and very indirect. However, by reducing the importance of this factor, the Court actually broadens the institutions that must consider whether their archival copying is a fair use; the Court certainly did not rule out later decisions concluding that non- profit organizations' archival copying would fail a fair use test. While libraries still enjoy a statutory exemption for careful use of photocopied materials, see 17 U.S.C.  108, the TEXACO decision opens the question of how non-profit organizations should deal with photocopying practices that have become ingrained in the way that so many professionals and academics do their work. ___________________________________________________________________ ABOUT THIS NEWSLETTER LEGAL BYTES is a service to our clients and friends. These articles are intended to be summaries and brief discussions of emerging legal issues in the field of computer law. They are not intended to be exhaustive discussions of the topics. Because of their nature, they should not be relied upon as legal advice or used as a basis for reaching a conclusion. If you have ideas or topics you would like to see discussed in LEGAL BYTES, drop us a line. 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