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December 9, 2011

Copyright (and Patent) Misuse – It’s Narrower Than You Think

The copyright misuse doctrine does not prohibit a copyright owner from requiring that licensees use the copyrighted work only on it own products. It only prohibits the copyright owner from imposing conditions that prohibit the licensee from making competing products. That is one of the rulings in the recent Ninth Circuit case of Apple v. Pystar. Other discussions of interest in that case concern the validity of software developers issuing licenses rather than engaging in sales to avoid application of the first sale doctrine, and application of injunction standards in the absence of a presumption of irreparable harm. (See my post of July 13, 2011 for a discussion of the elimination of the presumption of irreparable injury in copyright cases.)

The doctrine of copyright misuse derives from the similar doctrine of patent misuse. Basically, it prohibits a copyright owner from using his copyright to inhibit competition in either products that compete with the copyrighted work or tied products. So, for example, in the patent context, once cannot require a licensee of a salt shaker patent to buy salt only from the licensor. One might think, then, that it could be copyright misuse to require that a user of copyrighted software use it only on the licensor’s hardware.

Not so, says the Ninth Circuit. In the Ninth Circuit, copyright misuse occurs only when the copyright owner seeks to prevent a licensee from using a competing product. In the Apple case, the court held that although Apple prohibited use of its software on non-Apple hardware, it did not commit copyright misuse because it did prevent the licensee from developing or using competing software or hardware.

With respect to the license/sale distinction, the court endorsed the principle that so long as the copyright owner restricts the uses that can be made of his product, he can call it a license and avoid the first sale doctrine (the principle that once there has been an authorized sale, the buyer can resell or use the product without restriction).

Notwithstanding the absence of a presumption of irreparable harm, the court found irreparable harm sufficient to impose an injunction, based on the facts that liability had been determined against the defendant, there was a history of infringement, and a significant (albeit unexplained in the court’s opinion) threat of future infringement remains. Hopefully that means that the demolition of the presumption of irreparable harm will not, as a practical matter, curtail the issuance of injunctions in many infringement cases, and infringers will not be able to successfully adopt the infringe now, pay later model.