Friday, April 17, 2020

1201 claim to control device features survives

Philips North America, LLC v. v. Summit Imaging Inc., 2020 WL 1515624, No. C19-1745JLR (W.D. Wash. Mar. 30, 2020)

But I was told that after Lexmark and Chamberlain, manufacturers weren’t using §1201 claims to control devices!

The parties compete to sell ultrasound imaging devices for hospitals and medical centers; Philips sells related ultrasound hardwre devices. Philips’ Ultrasound Systems are driven by one of two software platforms that Philips developed and owns: (1) Philips Voyager Platform and (2) Philips Common Platform. Each PUS has features/tools that are only enabled by license, and Philips aleges it uses “multiple layers of technological controls to protect” their copyrighted works from unauthorized access, and that the software and access control systems are trade secrets and that those systems contain other trade secret information.

Summit allegedly hacks into Philips’ software and alters the Ultrasound Systems in order to enable features or options for which Philips’ customers have not paid Philips, and trains Summits customers on how to circumvent Philips’ access controls. Summit allegedly advertises that its Adepto tool is a “legal solution” or a “legal alternative” to working with Philips in order to enable additional features and options.

Defendants moved to dismiss DMCA §§1201 and 1202 claims, Defend Trade Secrets Act claims, Uniform Trade Secrets Act claims, false advertising claims, Consumer Protection Act claims, and contributory copyright infringement claims.

Philips adequately pled that its Ultrasound Systems are protected by “a technological measure that effectively controls access to a work” under §§ 1201(a)(1) and (a)(2): (1) user-specific codes; (2) user-specific hardware keys; (3) machine-specific codes and hardware keys; (4) software files with licensed features and optional add-on controls; (5) machine-specific configuration files that control compatibility between the systems and software and/or the systems and replacement parts; and (6) software disabling if a user attempts to make use of an unlicensed feature. And Philips sufficiently alleged circumvention of those access controls: defendants allegedly remove the hard drive from the Ultrasound Systems and run their Adepto program on the hard drive, which changes configuration files and software files in order to enable unlicensed options on the hard drive, and force compatibility with otherwise incompatible transducer parts.

§1202, modifying CMI: Not plausibly alleged. The only CMI identified with any specificity in the complaint is “the terms and conditions of the use of the software,” which allegedly resides on “machine readable configuration files.” But Philips didn’t plead facts explaining how defendants falsify, remove, or alter Philips’ terms and conditions. Motion to dismiss granted with leave to amend.

DTSA and UTSA causes of action also survived.

False advertising (including state Consumer Protection Act): To the extent that the claim was based on statements about the legality of defendants’ services, these were inactionable statements of opinion because the statements “purport to interpret the meaning of a statute or regulation.” And, though there is a “well-established exception” to the bar against false advertising claims based on opinion statements for an opinion statement “by a speaker who lacks a good faith belief in the truth of the statement,” Philips failed to adequately plead that defendants lacked a good faith belief in the truth of their statements.  Again: leave to amend.

Contributory copyright infringement: adequately alleged because the Adepto tool allegedly created copies of Philips’ software and log files [are the log files copyrightable? Are they copyrightable by Philips? Seems unlikely].

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