High court won't hear programmer's appeal

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

William Krause of New York first charged in 1996 that Titleserv, a title insurance firm, had committed copyright infringement when it altered eight programs he had written for the company over a decade of work.

Krause left the programs, which were designed to manage client information, on Titleserv's servers when he quit working for the company. He placed locks on the code and stipulated that Titleserv could run--but not alter--the programs, prompting a lawsuit from the company, which claimed it needed to make code tweaks in order to fix bugs and to perform other "routine" functions. Company employees ultimately picked the locks and made the changes they said they needed.

A federal trial court ruled in favor of Titleserv, and an appeals court upheld that judgment last year (click for PDF of opinion).

In both cases, the judges found that Titleserv was not at fault, because under U.S. copyright law, it's legal for people to make changes to software, provided that they own a physical copy of the program, the changes constitute "an essential step in the utilization" of the program, and the software is used "in no other manner."

The Supreme Court on Monday denied Krause's appeal without comment. The high court did not, however, make an anticipated announcement as to whether it will hear a patent infringement appeal in the case of eBay v. MercExchange.

The auction giant has asked the court to consider whether companies held liable in patent infringement cases should be subject to injunctions while their cases are on appeal.

[arluthier]

EULA's Wrong?

So I guess as long as I own a legal copy of Windows XP Pro... then item 5 of their EULA does not apply to me. Well that is as long as I am just 'trying to make it work correctly'. ;)

5. LIMITATION ON REVERSE ENGINEERING,
DECOMPILATION, AND DISASSEMBLY. You may
not reverse engineer, decompile, or
disassemble the Product, except and only
to the extent that it is expressly
permitted by applicable law notwithstanding
this limitation.

[dogpoolcuestick]

probably not...

because you don't "own" the software... that seems to be the key word in the article... some where in that XP EULA BS you probably are only granted a license to use the software...

sounds like this company did own the software, since the programmer was in their employ...

yeah, i know... i paid for it, i own it... i feel the same way and personally will do whatever i want with something i paid for... including software and music...

[rhyssleary]

Interesting ruling

It does sound like we are now allowed to plunder software packages that we legally own.

Can I now legally use DLL (dynamic link libraries) that have features I could use to enhance my website? For example, MS Office has a wonderful spell check feature that would be handy to implement on-line for the price of just one MS Office copy? (I know, there are cheaper alternatives, but it's just an example)

Perhaps I should just do it and not alert Microsoft to this little loop hole.

Too late.

Rhyss Leary

[`WarpKat]

Therein lies the problem...

You don't own Windows XP. Microsoft has granted you a license to use it as-is, which is revokable at any time under their discretion.

You do not "own" software unless you've written it yourself. You do not "own" music, for that matter, either, unless you've written it. You're granted a license, which you pay for, to "listen" to it on the medium you've chosen to hear it from.

That goes without saying that just because you purchase a track from Sony Connect or iTunes: it doesn't mean you own the track. You've paid $0.99 to listen to it in the form you've decided to receive it on. It's a license.

Now, if copyright law allows you the luxury of modifying and reverse engineering licensed works, then by all means, go to town with it.

Sadly, this isn't the case here.

[David Webb]

Yes that makes them Null and Void

I don't think many people understand just yet what this ruling means. It means that ALL software can be freely modified in spite of an EULA. It takes the teeth out of EULAs and means that all software can potentially be modified however the user sees fit.

So now I'm going to use hexeditors and soforth and modify all the closed source proprietary software I can get my hands on. Thank god for america!

Titleserv owned the code in the first place

If William Krause was working for Titleserv at the time of the software development (which is what I gathered from the article), why are they even arguing the legality of the copyright? Titleserv, by paying Mr. Krause's salary, owned the work he produced... unless Mr. Krause had a contract with Titleserv before he developed the programs stipulating that he would retain copyright to the source.

[rhyssleary]

Copyright Ownership belongs to you by default

My understanding is that when you create something in a tangible form, you (by default) own the copyright to that creation.

By that logic, the company would have to stipulate that they own anything you create in their employment agreement which is the case where I work.

Failing that stipulation, it would then fall back to the copyright belonging to the creator.

If there was a verbal agreement that copyright was assigned to the company, then they should argue as such.

Just the opinion of a lowly programmer trying to earn a living.

[gswearingen]

TitleServe didn't own the code

If Krause was an employee TitleServe would have owned the code, but he was not--TitleServe paid him as an independent contractor and unless there's a written contract that says otherwise, an independent contractor (aka consultant) continues to own the code he writes and the company merely gets a license to use it.

[hsantos]

REED TEST

Good point. The article had many items of inconsistencies.

See United States v. Reed, 773 F.2d 477 (2d Cir. 1985)

I believe courts now follow what is called the "Reed Test" to judge work for hire status. In short, even as a consultant, how dependent are you on the company to complete your work? Money wise, resouces wise? Do you have to call them every day to get work done? Do you have an office? Are you using their computer? (a biggy) Are you using their stationary? etc. I forget, but there is some percentage of dollars that comes into play. i.e, work compensation represents a small or large part of your life.

Prior this landmark decision, companies had full control and rights of IP of employees. It didn't matter if you were an engineer and from home, you wrote a gardening book. Legally, they owned it all proceeds from the book. The thinking is that the company can always for some use for your 'ideas' in other divisions or departments, or they could start a new business from it. So in general, it was always good to get permission (in writing) for any type of work, even if it didn't directly relate to your work. It happen to me when I worked for a Fortune 100 corp in the 80's.

As more work was pushed to non-employees, especially in the software market, legal issues followed over ownership and copyright. Unless there was a written contract (which almost always rules in most cases), the consultant had first rights of the any IP development by him.

In the REED case, an ex-employee, turned consultant was essentially still behaving as "employee" for many of the reasons I indicated above. He used the company's computer resources, had a office, if I recall the court case, was the turning point.

For this case, I would think the turning point would be that they had assets that was critical to the company and no one around to fix it. Also locking the code, well, that is just plain unethical in the eyes of many. :-) That was probably enough to convince the judges. The best solution would of been getting an escrow on the code in case there were problems and Mr. Chase didn't want to fix it.

Lesson: Always have a contract and never use company resources to develop the IP.

[SqlserverCode]

Another attempt to make money

Well people will try all kinds of things, for example sue McDonalds because they are fat. This guy got paid for the work he did and should be quiet. Next monday the gardener will sue me because I moved the flowers in my garden thus messed up his precious work

http://sqlservercode.blogspot.com/

[aabcdefghij987654321]

It's a complex situation

Titleserve contracted Krause to develop this code to meet their own needs but allowed Krause to own the code as well. I've worked contracts like this before and my understanding would be that the plan was Titleserv negotiated a lower development cost on the idea that Krause could resell this same software to other companies (which apparently never happened).

The description of the code makes it sound like pretty lousy code too. It's obvious that Krause made it so that adding customers and other normal business functions required recompiling the code (which explains why he never sold it to another company).

Based on my own experiences with contracts like this (from both ends of the contract) I would say the Judge made a good call and the Supreme Court recognized that good call and left it alone.

[m0u5y]

courts

sometimes I think that they invented courts to avoid having to practice common sense.

[judge_mental]

Two Bad Alternatives (human beings)

This decision and the decision it relies upon are clearly
erroneous, but at the same time it is easy to see how they
arrived at their decisions.

The basic problem happens when a bad actor makes a good
legal argument. The judge does not want to reward the bad
behavior, so they invent something that seems to make the
particular situation turn out appropriately. Unfortunately many
of these inventions created to right a particular wrong develop
into monsters.

In this case we see a programmer who the judges have clearly
decided was over-reaching and punishing his former customer
(although I do not believe the recompile claim -- that sounds
like the defense over-reaching). This may well have been a
correct conclusion and the plaintiff/programmer could be a
terrible person.

The problem is that their solution is incorrect and has
implications that they were unable to see. By accepting the
notion that software licensees have the right to decompile,
modify, and include works that they have licensed in new works
that they create, the 2nd Circuit has opened a Pandora's box.

The provision that they base this decision on was created with
the sole purpose of ensuring that the copies made during the
process of running software (eg, copies to ram, hard disk, etc.)
did not constitute infringement. This is a common sense
provision that was needed to make people comfortable at the
time. This context provides an appropriate basis for
understanding the terms 'machine' and 'essential'. Airplanes and
automobiles have nothing to do with it.

The CONTU report that the court cites in their opinion suggests
that users be granted the right to translate existing source code
into another language looks like wishful thinking on the part of
banks and other significant lobbyists that did not make it into
the law. In fact such an interpretation is in conflict with the every
principle of copyright law that comes to mind with the exception
of political expedience.

All of this aside the better solution would have been for the
court to find a way to reach the bad actor without claiming that
licensors have rights that are not in the license agreement. This
may be because the attorneys did not raise the appropriate
issues at trial. In some respects at least we have avoided a
supreme court opinion that is equally problematic.

Yuck! Politicians and jurists creating ad hoc property law is just a
slimey awful mess. The power in the concept of property is that
it is something clear that people understand (mine/not mine
starts pretty early). The power of contract is that it is as flexible
as human imagination.

Can't we create a requirement that government be restricted in
how it modifies these important concepts? Oh yeah... Something
about that in the constitution isn't there? No after the fact
modification of contracts sounds familiar. And isn't the
government supposed to provide compensation when it takes
property? Hmmm...

In the meantime proximity to this decision and the process that
created it has made me feel unclean. I'm going to wash my
hands...

[Sentinel]

Flawed laws, flawed arguments.

I think we are lacking information here. Did this guy work for the company? That is: was he on their payroll? Did he get up every morning and go to work in his office at the company headquarters? Or was he casually contracted to make a program for a specific need? If he did work for the company (in the sense of going to his office at the Company HQ), then I don't think he has much to allege in a court of law, especially if it is a private company. What you produce for a company is the property of that company, no matter who wrote it. The company might have done good, if they had let him know about this before hiring him (and maybe they did).

There is an interesting paragraph in this story:"...it's legal for people to make changes to software, provided that they own a physical copy of the program, the changes constitute "an essential step in the utilization" of the program, and the software is used "in no other manner."

This must be a typo, an error the writer of the story made. It just can't be right. If I own a physical copy of Windows, the law lets me modify it? Why then, doesn't Microsoft open up Windows and let open source programmers fix all the bugs in Windows. That would be "an essential step in the utilization" of Windows. It also makes Microsoft unable to protest if their code is leaked on the Web if it is used to fix their OS. Heck, I should be able to modify all the programs installed on my computer, just because I have physical copies of them. It maked EULAs invalid and illegal.

But we all know that EULAs are defended by the courts... So, this paragraph HAS to be a typo.

[/dev/rand]

Well.

I agree we are lacking information. For example I think the company had a copy of the source code. And also I wonder if it was in an interpreted or compiled language.

I am not a lawyer. But with you example of windows, this is how I see it.

No it wouldn't nessacarily give you the right to modify the windows source code, which you do not own a copy of(directly anyway). But you could binary patch your binary copy of windows. Provided:

It's an essential step in utilization. Removing XP verification likely may not be an essential step unless MS disappears from the face of the planet. Removing a CD key check may not be, but there is a utilitarian reason(Backups to preserve original media). Fixing bugs would likely be. Though if you don't have the source in the first place... And I'm not sure if bypassing BattleNet in order to have local ladder games would meet the criteria.

It's used "in no other manner". This clause may very well guard against modifying crippleware. i.e. You cannot binary patch a program to turn a demo into a full fledge version, and use it as anything but a demo. Once you put the modified version into main stream usage that would probably be a considered a different manner.

Also this wouldn't give you distribution rights. If you do for example remove an CD check to enable backups, then you can't put a copy of the CD on the web.. Or even the executable. Or the source code(if you have it). Maybe the patch. But be prepared to argue fair use and for some heat.

Also this doesn't invalidate EULA's entirely, but
it would put restrictions on what they can contain .
This isn't so huge a deal. I think there are things that are invalid within normal contracts.

[alek_nedic]

casually contracted

http://www.analogstereo.com/vacuum/miele_hepa_filter.htm

[rhyssleary]

What about DCMA?

So far, after reading the article and the court ruling (PDF copy), this is my understanding of what happened:

Mr. Krause
* Consultant (dba Special-T software)
* Copyright owner
* Terms of license allowed normal usage, no modification of code allowed
* Initiated termination of consulting relationship

Titleserv
* License holder of copyrighted work
* Failed attempt to acquire copyright ownership
* Modified copyrighted code
* Successfully defends itself against copyright infringement via 17 USC SS 117(A)(1)

The Case
* Not about work for hire
* Not about copyright ownership
* Clarifies what copyright infringement is

Conclusions

It does appear that by this ruling, it would be permissible to license a program and create derivative works from it.

I wonder how this jives with copyright law?

Doesn't this ruling also fly in the face of the DCMA (which I think is unconstitutional BTW if anyone cares)?

Ooh, let the sparks fly!

I predict the big boys will tear this one down.

[newerawisp]

THE COMPANY OWNS THE PROGRAM

It's not the laws that are flawed. It's the courts and attorneys that are flawed. The programmer was paid for his time while he was in the employment of the Company. He did not own any programs, he developed while in the employment of the Company. The programs were owned by the Company.

If the programmer was diligent he should have loaded the programs so that the source code was not downloadable or atleast not with that much ease. The source code of Microsoft software is not availbe so esily although the hackers can download anything with comparative ease.

In any case if the infrastructure was server oriented as discussed at
http://www.newerawisp.blogspot.com/
the resale value would not be that much. People would have to be careful at what price they let the other party gain possession of the software.

Even with the present infrastructure the courts seem to be saying that if you have the code do what you like with it.

[chanms]

Company in this case *does not* own the code

The problem is that company in this case does not own the code, but rather a license holder of the software, according to court documents.