Dodged a virus and copyright liability: Court rules unused copy isn’t infringing

Design Data Corp. v. Unigate Enterprise, Inc., 2014 WL 3868076, No. 12–cv–04131 (N.D. Cal. Aug. 6, 2014)

The court found that defendants couldn’t be liable for copyright infringement when the only copying they ever did consisted of downloading, but not installing, a copy of the relevant software onto an external hard drive.  The plaintiff was given extra time and extensive discovery to show that further copying occurred, but could not do so.  Given this, the copying was de minimis as a matter of law.

Design Data owns structural steel detailing software called SDS/2, which is CAD software that can produce 2D and 3D drawings and models of structural steel components.  These drawings and models can only be viewed with the SDS/2 software, the “SDS/2 Viewer” software, and electronic images (and printed versions) exported from SDS/2 (e.g., .pdf or .tiff files).  Using SDS/2 to design a component generates a directory of folders that contain all the information and files related to a project, including text files detailing errors and instructions to correct errors.

Defendants (grouped as Unigate) provides steel detailing CAD files to customers.  It doesn’t do the detailing itself, but acts as a middleman between Chinese contractors and clients in the United States.  Defendants admittedly told clients that they “could do” steel detailing using SDS/2 and represented that they had offices in China, but in reality they outsourced the work to others in China.  (This opinion does not resolve Design Data’s attempts to bring false advertising claims.)

Unigate didn’t dispute that SDS/2 appeared to have been used to create drawings and images for five of its projects, it contended that the work was actually done in China.  Unigate also admitted that it forwarded files containing 2D and 3D drawings and models created with SDS/2 to clients and prospective clients.  And it admitted that one principal, Helen Zhang, downloaded a copy of SDS/2 to an external hard drive—the parties disputed whether this was a “cracked” copy that Zhang was unable to make work, or instead a free demonstration copy she believed to be legitimate.  Design Data found a folder containing installation files for SDS/2 and three patch files which enable a user to circumvent SDS/2’s licensing requirement on Unigate’s computers.

Forensic imaging by Unigate found a single reference to SDS/2 on a computer and a copy of SDS/2 on an external hard drive; the reference was an antivirus log showing that the copy was on the external hard drive.  The forensic analysis found no evidence that the SDS/2 software ever existed or was installed on the computer.  Design Data’s expert also created forensic images and reviewed Unigate’s expert’s copies; he was unable to locate or recover a copy of the circumvention file initially found by Design Data, but did find a reference to that file as being located on Zhang’s external drive and “quarantined” by the antivirus software.  (I’d say, given the outcome, that the antivirus software did them a huge favor even if the supposed crack was actually legitimate, for relevant values of legitimate.)  Design Data’s expert suggested that the file had been purposefully and permanently removed from the G drive, though he located a file suggesting that a file called sds2.exe could be found on Zhang’s G drive. He was also unable to locate any evidence suggesting the SDS Viewer program was ever saved or located on any of Unigate’s devices.

On Design Data’s contributory infringement claim, case law established that a US company can’t be found liable for contributory copyright infringement for authorizing or collaborating with someone that infringes a copyrighted work in a foreign country.  Subafilms, Ltd. v. MGM–Pathe Communications Co., 24 F.3d 1088 (9th Cir.1994). Design Data provided no evidence that any drawings and images were created in the US, so Unigate won summary judgment.

Direct infringement: Design Data first contended that Unigate imported files and images generated by SDS/2 in China, in violation of 17 U.S.C. § 602.  It argued that “job files” and images created in China constituted a copy of SDS/2.  Unigate did possess images containing drawings and models generated with SDS/2; text files generated by the operation of SDS/2 that were error logs containing user error reports and Design Data instructions regarding those errors; and entire directories of folders generated by SDS/2 (“job files”) containing all information related to the design of two projects with SDS/2.  Design Data argued that there was a material issue of fact whether these outputs contained expression protected by the SDS/2 copyright registration.

The court found that the copyright registration on the software was not broad enough to protect these outputted files and drawings.  Other cases about audiovisual display and “look and feel” were inapposite.  A computer program is a set of statements or instructions to be used to bring about a certain result; that result is program data, and not covered by the copyright in the computer program.  Drawings produced from SDS/2 might be copyrightable, but aren’t automatically entitled to protection as the output of SDS/2.  (Indeed, I suspect that Direct Data’s clients would be very, very surprised to hear that Direct Data claimed a copyright interest in specific drawings, or even in error logs.  Would they be joint authors?  How would intentionality work there?)  Thus, Direct Data failed to raise a material issue of whether the files and images created by SDS/2 were protected by the program copyright.

Infringement by downloading: For use to be actionable, it must be significant enough to count as infringement.  Where no reasonable juror could find that downloading but not opening or using the program was significant, summary judgment was appropriate.  Direct Data argued that copying the entire code couldn’t be de minimis as a matter of law. But the cases focus on the substantial or insubstantial “use” of the copyrighted material.  Ringgold, for example, speaks of de minimis copying as precluding a “claim based on a photograph of [the copyright holder’s] product in an office copy of a display card of a competitor’s product where the display card was never used.”  Cases that ask whether an audience would “recognize” a protected work in another work were inapposite, because their focus was on whether the audience listening to the new work would recognize the original.  (Here, there’s not an audience.  If you make a copy in the forest, is it a copy?  Abraham Drassinower has some interesting work on this.)

Direct Data tried to create an issue of fact about whether Unigate did actually use SDS/2 by pointing to a number of statements to prospective clients that it “used” or could “produce” drawings in SDS/2. But given the undisputed facts about its actual business model, its marketing pitches weren’t evidence of actual use. “[D]ownloading of a copy of SDS/2—without any evidence that the copy was installed or used—amounts at most to a de minimis ‘technical’ violation that is not actionable as a matter of law.”  (P2P users who create huge libraries to satisfy some acquisitive urge may take some comfort, though I suspect they’d be liable for crushing statutory damages anyway.  Just maybe not billions.)

Direct Data argued that Unigate was untrustworthy, e.g., refusing to turn over relevant information, buying and downloading a cracked copy of SDS/2, and falsely advertising that they used SDS/2.  But this wasn’t enough to defeat Unigate’s motion for summary judgment, given Direct Data’s ample opportunities to find evidence of actual infringement.