Bowers v. Baystate Techs., Inc. - 320 F.3d 1317 (Fed. Cir. 2003)

Rule:

The Copyright Act, 17 U.S.C.S. § 301(a), does not preempt contractual constraints on copyrighted articles. 

Facts:

Harold L. Bowers (Bowers) created a template to improve computer aided design (CAD) software, such as the CADKEY [*1321]  tool of Cadkey, Inc. Mr. Bowers filed a patent application for his template on February 27, 1989. On June 12, 1990, United States Patent No. 4,933,514 ( '514 patent) issued from that application. Generally, a CAD software program has many commands that the software presents to the user in nested menus many layers deep. The layering often makes it difficult for a user to find quickly a desired command. To address this problem, the claimed template works with a CAD system as illustrated in Fig. 1 of the '514 patent. In that figure, the '514 patent template lies on top of the digitizing tablet 18 of a CAD computer. The user selects data from the template with a pointing device 20. The template places the many CAD commands in a claimed visual and logical order. Mr. Bowers commercialized the '514 patent template as Cadjet for use with CADKEY. On February 1, 1993, Mr. Bowers requested reexamination of the '514 patent in view of prior art, namely the Keymaster template. Like the '514 patent template, the Keymaster template provides a unified visual representation of many CAD commands. Like the preferred embodiment of the '514 patent, the Keymaster template operates with CADKEY software. Following examiner rejections, the Board of Patent Appeals and Interferences ultimately found some amended claims of the '514 patent patentable. The PTO issued a reexamination certificate on December 9, 1997. George W. Ford, III, a development engineer and supervisor of quality control at Heinemann Electric, envisioned a way to improve Mr. Bowers' template and CAD software. Specifically, Mr. Ford designed Geodraft, a DOS-based add-on program to operate with CAD. Geodraft allows an engineer to insert technical tolerances for features of the computer-generated design. Mr. Ford obtained a registered copyright, TX 2-939-672, covering Geodraft. In 1989, Mr. Ford offered Mr. Bowers an exclusive license to his Geodraft software. Mr. Bowers accepted that offer and bundled Geodraft and Cadjet together as the Designer's Toolkit. Mr. Bowers sold the Designer's Toolkit with a shrink-wrap license that, inter alia, prohibited any reverse engineering.

In 1989, Baystate also developed and marketed other tools for CADKEY. One of those tools, Draft-Pak version 1 and 2, featured a template and GD&T software. In 1988 and 1989, Mr. Bowers offered to establish a formal relationship with Baystate, including bundling his template with Draft-Pak. Baystate rejected that offer, however, telling Mr. Bowers that it believed it had "the in-house capability to develop the type of products you have proposed." In 1990, Mr. Bowers released Designer's Toolkit. By January 1991, Baystate had obtained copies of that product. Three months later, Baystate introduced the substantially revised Draft-Pak version 3, incorporating many of the features of Designer's Toolkit. Although Draft-Pak version 3 operated in the DOS environment, Baystate later upgraded it to operate with Microsoft Windows TM. Baystate's introduction of Draft-Pak version 3 induced intense price competition between Mr. Bowers and Baystate. To gain market share over Baystate, Mr. Bowers negotiated with Cadkey, Inc., to provide the Designer's Toolkit free with CADKEY. Eventually, Baystate purchased Cadkey, Inc., and eliminated Mr. Bowers from the CADKEY network--effectively preventing him from developing and marketing the Designer's Toolkit for that program. On May 16, 1991, Baystate sued Mr. Bowers for declaratory judgment that 1) Baystate's products do not infringe the '514 patent, 2) the '514 patent is invalid, and 3) the '514 patent is unenforceable. Mr. Bowers filed counterclaims for copyright infringement, patent infringement, and breach of contract. Following trial, the jury found for Mr. Bowers and awarded him compensation for copyright infringement, breach of contract, and patent infringement. 

Issue:

Does the Copyright Act preempt a prohibition of reverse engineering, such as the one in Mr. Bowers’ shrink-wrap license agreements?

Answer:

No.

Conclusion:

In this case, the contract unambiguously prohibited "reverse engineering." That term meant ordinarily "to study or analyze (a device, as a microchip for computers) in order to learn details of design, construction, and operation, perhaps to produce a copy or an improved version." Thus, the contract in this case broadly prohibited any "reverse engineering" of the subject matter covered by the shrink-wrap agreement. The record amply supported the jury's finding of a breach of that agreement. The district court erred in instructing the jury that copyright law limited the scope of Mr. Bowers' contract protection. Notwithstanding that error, this court may affirm the jury's breach of contract verdict if substantial record evidence would permit a reasonable jury to find in favor of Mr. Bowers based on a correct understanding of the law. The shrink-wrap agreements in this case were far broader than the protection afforded by copyright law. Even setting aside copyright violations, the record supported a finding of breach of the agreement between the parties. In view of the breadth of Mr. Bowers' contracts, this court perceived that substantial evidence supports the jury's breach of contract verdict relating to both the DOS and Windows versions of Draft-Pak. The shrink-wrap license agreement prohibited, inter alia, all reverse engineering of Mr. Bowers' software, protection encompassing but more extensive than copyright protection, which prohibits only certain copying. Mr. Bowers' copyright and contract claims both rested on Baystate's copying of Mr. Bowers' software. Following the district court's instructions, the jury considered and awarded damages on each separately. This was entirely appropriate.