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MAI Sys. Corp. v. Peak Comput., Inc. - 991 F.2d 511 (9th Cir. 1993

Rule:

To prevail on a claim of copyright infringement, a plaintiff must prove ownership of a copyright and a copying of protectable expression beyond the scope of a license.

Facts:

Plaintiff MAI Systems Corp. ("MAI") manufactured computers and designed software to run those computers. The company continues to service its computers and the software necessary to operate the computers. MAI software included operating system software, which was necessary to run any other program on the computer. Defendant Peak Computer, Inc.  maintained computer systems for its clients; it maintained MAI computers for more than one hundred clients in Southern California. In Aug. 1991, defendant Eric Francis left his job as customer service manager at MAI and joined Peak. Three other MAI employees joined Peak a short time later. Some businesses that had been using MAI to service their computers switched to Peak after learning of Francis' move. MAI filed a lawsuit in federal district court against Peak, Peak's president, defendant Vincent Chiechi, and Francis seeking to enjoin defendants from copyright infringement, misappropriation of trade secrets and breach of contract. On MAI's motions, the district court granted partial summary judgment for MAI and entered a permanent injunction on the issues of copyright infringement and misappropriation of trade secrets. Defendants appealed.

Issue:

Did the district court err in granting MAI summary judgment and injunctive relief?

Answer:

Yes, in part.

Conclusion:

The appellate court reversed in part the district court's order granting summary judgment and vacated the permanent injunction to the extent that it enjoined defendants from misappropriating MAI's software and bulletins since issues of fact existed regarding whether the software was a trade secret, whether bulletins were misappropriated, and whether defendants loaned MAI's software. The court further ruled that summary judgment was properly granted to MIA on its breach of contract claim. In addition, the court held that defendants copied MAI's software by transferring it to a computer's Random Access Memory and using it to diagnose computer problems. As to injunctive relief, the court noted that the the district court found that defendants' advertisements that "MAI Basic Four" computers were part of its product line implied that it as MAI's dealer for new computers and constituted trademark infringement. The district court also found that such acts were likely to cause confusion, mistake or deception in that potential purchasers of MAI products and services would be led to believe that defendants' activities were associated with or sanctioned or approved by MAI. The court held that the district court did not abuse its discretion and that portion of the preliminary injunction was upheld.

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