Copyright Misuse: An Evolving Legal Theory and Its Impact on Business

July 07, 2012

Not many people casually mention the term "antitrust law" as an ice breaker for business conversations, but maybe they should. Antitrust law is relevant at virtually every level of business, including manufacturing, transportation, distribution and even marketing.

The presence of antitrust laws in the American business market helps to promote competition in the marketplace. This niche of law prohibits a variety of practices that could lead to monopolies or otherwise restrain trade. It fosters the competition that benefits consumers by leading to lower prices and a greater choice of products.

Antitrust law also governs the legality of one form of permissible monopoly in the United States: copyright. Those holding copyright protections retain the exclusive right to reproduce, publish, sell or distribute the protected items. This can cover a broad collection of products, ranging from a piece of artistic work to computer software.

But what happens when a copyright holder attempts to extend these protections beyond their intended scope? At that time, the legal theory of copyright misuse would come into play. Unfortunately, as some legal experts note, the true legal definition and application of copyright misuse is developing at a "glacial pace."

Copyright Misuse Defined

Copyright misuse is a claim that can be used in lawsuits as both a defense and counterclaim. The claim "forbids the use of copyright to secure an exclusive right ... not granted by the [Copyright] Office and which is contrary to public policy to grant," as stated in Altera Corp. v. Clear Logic, Inc.

If the court finds copyright misuse exists, the company or person holding the copyright protection is not allowed to enforce it. The court will hold that these protections are not operable during the time the misuse occurred.

In other words, a copyright holder cannot extend its limited monopoly to control areas outside of the copyright. Copyright misuse is similar to patent misuse, which is a more developed area of law. In fact, the U.S. Court of Appeals for the 4th Circuit stated that the two are analogous in Lasercomb America v. Reynolds.

In that case, Reynolds argued that Lasercomb misused its copyright protections for a software application by holding those that used the product to an unfair anti-competition clause. The company attempted to prevent licensees from developing competing software for 99 years, well past the 75 years allowed by copyright law at that time. The court agreed with Reynolds and would not enforce Lasercomb's copyright protections until the illegal clause was removed.

This legal theory is best clarified with an example.

Copyright Misuse Claims in Action

In the case of In the Matter of Costco Wholesale Corporation v. Omega, S.A., the U.S. District Court for the Eastern District of California issued a ruling on the controversial copyright misuse issue. The court held that the luxury-watch manufacturer was misusing copyright protections.

In this case, the watch itself could not be copyrighted. However, a small design that was engraved on the back of the product could be protected. Omega was suing Costco for infringing on the design and extended its argument to state that the retail company was violating Omega's copyright protections by attempting to sell the watch the design was engraved upon.

The court did not agree. Instead it found the attempt to inflate the copyright protections issued on the design to protect the entire watch was a misuse of the law. As a result, Costco was not violating Omega's copyright protections by selling the watch.

In addition to the continued clarification on the definition of copyright misuse, the ability to apply the legal theory in the courtroom is also evolving. In Apple Inc. v. Psystar Corporation, the U.S. District Court for the Northern District of California allowed copyright misuse as a defense. Generally, the theory had been mainly used as a counterclaim.

In this case, Apple sued Psystar claiming that Psystar violated copyright law by installing Apple's exclusive operating system on non-Apple computers. Psystar countered that Apple was attempting to overextend its copyright protections. Ultimately, the court held for Apple, stating its copyright protections extended to cover whereever Apple's operating system could be used. However, the court also expanded the use of the legal theory of copyright misuse in its ruling by allowing the use of the theory as a valid legal defense.

Although court cases are still defining the scope of copyright misuse, the consequences are clear: individuals and companies holding copyright protections that attempt to extend them beyond their intended use are subject to unenforceability of the copyright protections until the misuse is removed.

Essentially, this punishment is the equivalent of losing the protections altogether.

Navigating the intricacies of a copyright infringement counterclaim or defense can be tricky. However, the victim of such abuses may be entitled to legal remedies and protections. As a result, if you, a loved one or your company is the victim of an unlawful extension of copyright protections it is wise to seek the counsel of an experienced intellectual property litigation attorney.

Article provided by The Simon Law Firm, P.C.
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