Supreme Court Lets Utilization Rights Stand

Moof writes "The United States Supreme Court refused to hear a case between a programmer and his former employer. What makes this news is the fact that the court is letting stand the rulings of the lower courts: Essentially if someone owns a physical copy of software, then they are allowed to modify the code as part of their regular use, no matter what other agreements are in place."

Comments

How does he legally claim copyright?

[XorNand]

The U.S. Supreme Court declined to hear an appeal by a programmer who sued his former employer for changing his programs' source code.

I RTFA, but don't understand how the programmer could claim copyright on something he wrote while being employed by this company. All work produced by a person during the course of his/her employment is owned by the employer, not the employee. Unless this guy had a special employment contract, or coded in his free time?

Re:How does he legally claim copyright?

[Xentor]

Maybe it was more of a consultant gig, where he sold them a black-box custom solution. They'd own the program, but he'd keep the code. They'd get it a little cheaper, but they'd have to hire him again whenever changes were needed...

I've seen this tactic before... I wouldn't work that way.

Re:How does he legally claim copyright?

[aitikin]

I understand that's the way the laws and contracts are written. Thing is, a photographer is hired to take a picture for someone. The photographer takes said picture, gives the person the picture and is paid for it. Who owns the copyright? The photographer. Because of my understanding on that, I understand where the coder is coming from (to an extent. Lesson here, read you contract before signing!).

Re:How does he legally claim copyright?

[emag]

I don't understand it either. It sounds from TFA as though he wrote these programs in the normal course of his employment, clearly making the software the property of the company. That he "placed locks on the code and stipulated that Titleserv could run--but not alter--the programs" sounds as though he was attempting to hold the company hostage. Even with some additional information in one of the comments on TFA, it sounds like it was a co-ownership situation, where the company had every right in the world to make modifications as it needed them.

Re:How does he legally claim copyright?

[lantenon]

From the wiki on work for hire:

A "work for hire" (sometimes expressed as "work made for hire") is an exception to the general rule that the person who actually creates a work is the legally-recognized author of that work. According to copyright law in most countries, if a work is "made for hire", the employer - not the employee - is considered the legal author. The employer may be a corporation or an individual.

The employee doesn't own this; the corporation does.

Re:How does he legally claim copyright?

[bwt]

I read the opinion. He was an independent contractor. By default, independent contractors own the copyrights to stuff they create. The idea is that the terms of their contract should spell out explicitly the full extent of the transfer of ownership, and that which is not given up is retained. If you are a regular employee stuff you create for work is owned by your employer because you are a part of them legally. This is the same idea that protects true employees from being sued by third parties, but does not protect contractors. These principles define what happens in the absense of explicit contract agreements.

Contradiction

[Apreche]

Isn't this a direct contradiction of the DMCA? What if I buy a physical copy of a game that has copy protection and modify that copy protection? Did the lower court make a bad ruling? Or is it only ok if you are not circumventing a copy protection measure?

Re:Contradiction

[briancarnell]

The article is quite clear that owning is very different from simply possessing a copy. Just because I have a copy of CIV IV does not necessarily mean I own the it under the definition used by the court here.

Even the supreme court :(

[Fred_A]

Great, now the supreme court starts to utilize "utilize". What's the point of utilizing fancy new words when thare are some fine regular words we could be utilizing instead that do just as well ?

Ok so people can modify code as part of their regular utilizage, and we can uglify the language as part of our reguly utilization of it as well, blah.

Re:Even the supreme court :(

[Have Blue]

Remember that this is a legal document we're reading. Each word has an extremely specific meaning that may or may not be the same as the colloquial meaning, and using a different one would have changed the legal meaning of the text.

Re:Even the supreme court :(

[richardtallent]

The word "utilize" came from the statute, not the court decision (and certainly not from the SC).

"Utilize" is not the same thing as "use", which is why you see so many grammarians getting their collective panties in a wad over seeing it in print. To "use" something denotes action in conformance with the thing's designed purpose. To "utilize" something means to use in a way that differs from the as-designed purpose. I can't "utilize" a hammer to drive a nail, I can only "use" it. However, I can "utilize" a screwdriver handle to drive a nail.

The fact that the word "utilize" was, er, used, actually played an important part in the district court's ruling. Use of that word specifically means that the owner can "stretch" a computer program to other purposes without violating copyright, as long as the principle use is the same (e.g., same sort of transactions being processed).

That freaking guy

[Hobbes897]

He placed locks on the code and stipulated that Titleserv could run--but not alter--the programs.

So much progress from one man's prickishness.

Re:Precident

[fred fleenblat]

it would make a great precedent except that it happened afterward.

The big point - who owned the code

[MyNameIsFred]

See this for more details. This issue appears to have been whether the company actually owned the source. The courts said yes.

Re:Fair use has been reinforced...

[no_opinion]

Wrong, that cannot be concluded from the ruling. If you read the opinion you'll see it is limited to software programs, not music or movies.

Don't get too excited!

[bherman]

The difference between this software and say MS Office is that you don't "own" MS office, you have a license to use it but you do not have property rights on it.

AFAIK.

IANAL.

Re:Don't get too excited!

[Pofy]

> The Software is licensed, not sold. This EULA does not grant you any rights to trademarks or service
>marks of Microsoft.

Yet they DO sell it. Writing something else does not change the fact that many times such software are sold, for example in a shop. Doesn't matter if you like to call it something else or write something else. Even more, a third part can't change and revoke a purchase deal between me and the shop.

It is intresting to note also that "licensing" is bassically something non existant in laws regulating sales, leases, and such. Licensing is basically giving a permission to something that is forbidden. In this case, there is no such forbiden thing either. You may also try figuring out what happens if what you say is true if you do NOT agree to the EULA, or prior to even getting a chance to do so, perhaps on the way home from the shop. What is the "status" of the purchase you made then? Non existant? regulated by something you have not yet agreed to? Something else? The thing is, Microsoft DO sell it, they handle it like a sale and it is done like a sale, hence it is a sale. There are a whole bunch of laws regulating sales by the way.

DMCA Violation!

[Jtheletter]

So is there any reason why this programmer can't turn around and start another suit claiming that the company violated the DMCA when they "picked the lock" and circumvented his digital security measure without his permission?

How is this any different than when I remove the DRM from an iTunes song as "an essential step in the utilization" of that song in my other digital music player(s)? Afterall, I own a physical copy of the software - the encoded song.

Maybe that's not the best example but there are lots of others that I'm sure slashdotters can some up with.

How is it that copyright law allows a holder's utilization to trump the agreement they had in place to run but not alter the software, yet pretty much any shrinkwrap/click-thru EULA isn't overruled by this same copyright utilization clause? Article was very light on details. Stinks of corporate favoritism at first glance.

Own or license?

[metoc]

From the ruling:

Section 117(a)(1) provides an affirmative defense against copyright
infringement for anyone who
(i) owns a physical copy of a computer program,
(ii) makes an adaptation "as an essential step in the utilization of the computer program in conjunction with a machine," and
(iii) uses it "in no other manner."

So if you 'owned' a physical copy of a Windows word processing app, and you adapted it so that it would run under Linux (machine), and made no other changes, you would not be infringing on someones copyright. But does the law distingish between 'own' and 'license'?

Not likely a DCMA issue

[RingDev]

He most likely ran the binaries through an obfuscator to make sure that any hard coded strings were appropriatly mangled and the code was not easily recoverable. That way, the code is "protected" but not encrypted and this would not fall under the DCMA's jurisdiction.

-Rick

"Owning a copy" of a computer program

[MotownAvi]

This is pretty huge. From the PDF:

It is undisputed that Titleserv possessed executable copies of all the programs. The parties disagree whether Titleserv owned those copies within the meaning of 117(a). Krause claims that Titleserv never owned the program copies saved on its file server, but rather possessed the copies as a licensee pursuant to an oral agreement. Titleserv asserts that it owns copies of the programs because it paid Krause a substantial sum to develop them and has an undisputed right to possess and use them permanently.

(emphasis mine)

So suppose I go to CompUSA and buy Photoshop off the shelf. I paid a subtantial sum to Adobe, and I have an undisputed right to possess and use Photoshop permanently. Can I finally legally say that I own a copy of Photoshop?

Definition of the ruling

[acherrington]

I think that a lot of people are jumping on the "I can get rid of the copyright protection on my CD/DVD/GAME/Etc...." band wagon. This isn't exactly correct.

The company involved owned the software... outright owned it. You must remember that when you purchase a copy of 99.99999999% of all works, you do not own it, rather you purchased a license for it. Bascially, they are saying you may mod your car or house, because you own it, but they haven't said anything about licensed software.

A little bit of his side

[Stanistani]

Krause argued that Titleserv never owned the program copies at issue, but rather possessed them as a licensee pursuant to an oral agreement. Titleserv countered that it owned the copies because it paid Krause a substantial sum to develop them and had an undisputed right to possess and use them permanently.

This quote is from:
HERE

Hoy! An oral agreement.
Legal, binding, but not provable in this case.

You can't generalize it like that

[billstewart]

First of all, this wasn't a Supreme Court decision - it was a Supreme Court refusal-to-decide, which leaves the appeals court for whatever district the case was filed in governing the case in that district only. If the appeals court or the district court below it wrote a really good opinion, it can be influential in other cases in other districts, but it doesn't have to be.

Second, there were obviously contractual issues going on here. The news article doesn't say when or where the programmer wrote the programs, or whether he was a consultant or regular employee, or whether they were "work for hire", or what other contracts they had. It doesn't sound like typical work for hire by an employee, because that would normally be owned by the employer and the case would have been a slam-dunk way earlier. So the results of this case are likely to only be useful if you've got a similar contractual agreement, and we don't know what that agreement is because the article doesn't go into that kind of detail.

GPL implication

[GigsVT]

Surprised no one has picked up on the implication for the GPL.

Right now you don't need to agree to the GPL to compile/use/run GPL software, since those things don't trigger copyright protections.

But previous to this, if you modified it at all, copyright law kicks in and you must abide by the GPL, by modifying it, you stepped outside allowed use under "all rights reserved" and are thus you can only operate under the terms of the GPL.

Under this precedent, you can modify it even if it were released under "All Rights Reserved" and thus do not need to comply with the GPL.

This may have serious implications regarding possible GPL V3 clauses on internally modified GPLed software that is used as a network service. If you can modify the software within your rights under "All Rights Reserved" then you may not have to comply with any GPL V3 provision that says you must distribute source for internally modified GPL programs running as network services.

Re:Wrong?

[Proteus]

IANAL, but I don't think that [assignment of copyright to an employer] happens by default. That's why companies have you sign something that makes it explicit.

I'm not an attorney, either, but I have been an employer. The error of the statement above, and a similar line of thought in this comment below, is that everything in a contract is stuff that isn't already in the law. That's simply not true.

When you create a contract, you do it for a few reasons. One is to address things that aren't already covered adequately elsewhere. Another is to have a single document where all terms are agreed upon, to establish that all parties knew their rights and responsibilities -- even if they are already coded in law. Another is that terms in contracts are often easier to enforce than the same terms coded as law (in terms of suing someone for violation).

When someone hires you to create a work, they own the copyright under the doctrine of "work for hire". The contracts do a couple of things: they spell this out explicitly, and often extend the provision to works you were not directly asked to create.

This is HUGE

[John Murdoch]

Don't just RTFA--read the decision. In particular, note this conclusion on page 11:

We conclude in the absence of other evidence that Titleserv's right, for which it paid substantial sums, to possess and use a copy indefinitely without material restriction, as well as to 5 discard or destroy it at will, gave it sufficient incidents of ownership to make it the owner of the 6 copy for purposes of applying 117(a).4 7

This is the conclusion the court reached after some extensive discussion of what it means to "own" a copy of a piece of software. Key point: the court is ruling on a specific law referring to ownership of a copy of a program, NOT ownership of (or even access to) the source code. The court discusses at length what ownership means--and concludes with the paragraph above. In other words, if you...

• paid substantial sums of money
• have the right to possess and use it indefinitely without material restriction
• may discard or destroy it at all

...then you--as a matter of law--own a copy of the software.

How huge is this?
The immediate impact of this is to legalize reverse-engineering projects of custom software where the original coder can't or won't produce the source. The more interesting question is whether this legalizes the reverse-engineering of commercially-"licensed" software. On the one hand, this ruling makes it clear that--Microsoft's EULA to the contrary--I own several copies of Microsoft Office. On the other hand, the letter of the law, and the text of this decision, would seem to only permit me to use a disassembler to examine the code and fix bugs. Nothing--repeat--nothing in this decision would permit me to re-distribute that code. That's still very much an issue of copyright infringement.

So can I reverse-engineer my Sony rootkit CD?
Frankly, you shouldn't bother. You should take that rootkit CD back to Wal-Mart and tell them (in as loud a voice as you can muster) that you read "on the Internet that Sony's new CDs install a virus on your computer." But I digress....

Where this is interesting is that it appears to overrule the software industry's assertion that you and I are licenseholders, not owners. This may force a wholesale change in EULAs--where it may become extremely interesting is in the question of the U.S. legal doctrine of First Sale. This says that if you buy something, you own it. And if you own it, you can do anything you want with it--including sell it to somebody else. The licensee/owner distinction that software companies have asserted is intended to prevent the creation of a used software market. EULAs typically include language that prohibits you from selling the software "license" to anyone else without getting permission from the vendor first, or otherwise jumping through hoops. Various vendor "authentication" programs that tie serialized CDs to the MAC addresses of your computer essentially do the same thing--you have to get permission from Microsoft to subsequently "unlock" that software and install it on a different PC. Under the doctrine of First Sale, that's blatantly illegal--IF you own the software.

The bottom line:
You may reasonably conclude that software industry lawyers are going to be working overtime on this.

What the decision *really* means

[Anonymous Coward]

The article is misleading, and the comments appear to be based on many wrong impressions on what this case decided.

Firstly, they did not decide the the company had any copyright. The case does not explicitly say, however based on the decision it seems that Krause was a contractor, not an employee, otherwise the company would own the copyright. Either that, or the company had an incompetent lawyer who failed to plead that point, which would have seen the case summarily dismissed much more easily so that the more interesting stuff here would not have needed any discussion.

Based on the description of things from the court, William Krause is not just an arsehole without the slightest bit of integrity in his body, but is a seriously incompetent programmer who should never be allowed to work in the industry again. He wrote the software in such a way that the only way to add customers to it was to modify the software - no input form for this guy, just hard code customer details into the source code. There were other problems of this nature, but that one alone should tell you enough to know he is incompetent and you should avoid him. Then when he and the company parted ways, he told them they could continue to use the software but could not make any modifications to it. Since they could not add customers to it, this effectively meant they could not get any use out of it. That should be enough to make it clear this guy is a complete arsehole.

Now, under 17 USC 117(a)(2), the owner of a copy of the program (that is, not the owner of the copyright, but the owner of the physical copy) legitimately obtained, does not infringe by doing anything necessary as an essential step in using the software. The company made the modifications predominantly for the purpose of adding customers and related things that ought to be ordinary functionality of the program, but could only be done by modifying the code because of the way this incompetent had implemented the thing. They also fixed bugs, which the court found was an "essential" step in using the program.

The company also reformatted the code and gave variables meaningful names. Now that would appear to go beyond essential steps, but it could be argued that this was necessary in order to be able to make the other essential modifications. It does not strike me as going quite as far as "essential", but put yourself in the position of the judge who has before him (or her) such a lowlife plaintiff. You can't change the law, but whether the step is essential or not is a question of fact that the judge can decide - if it's close enough to the fuzzy areas, whose side are you going to go with? As it turned out it seems the plaintiff did not argue that directly, but if he had he would most likely have lost on that point too.

The company also made enhancements - to add stuff like cheque printing. The court found this essential by finding (as a matter of law) that making the program more useful to its owner is a part of utilisation, and modification is an essential step in doing that. This part does create some tension with DMCA provisions - is a game more useful if it does not require you to have its CD in the drive? There is certainly an argument to be made that "No-CD" modifications are legal under this rule. In Australia the tension of such an interpretation with its equivalent of the DMCA is resolved by Stevens v Sony, which would state that the CD checking code does not qualify as a technological protection measure since it does not prevent the copying, only makes the software useless if copied (in the wrong way).

The final point is the most interesting one from a geek point of view. TitleServ also made modifications to make the software work with their new computer system, and more importantly, their new Windows operating system. The court found that copying the software onto the new Windows operating system and modifying it to work with that is protected. How does that help geeks? Think of Wine! Using Microsoft components on Li