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IP Newsletter | Winter 2018/19
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TRADEMARK, DESIGN, COPYRIGHT & UNFAIR COMPETITION
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Supreme Court Holds that "Temporary Reproduction" Exception to Copyright Infringement Does Not Protect Intentional Violation of Concurrent Use-Based Licenses
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In a recent case involving the use of a third-party software tool to exceed the restrictions of a "concurrent use-based" license on a different software CAD program, the Supreme Court held that the maker of the software tool at issue (Hanall Technology) was liable for copyright infringement, rejecting Hanall's defense that the software tool merely created "temporary reproductions" of software that were excepted from copyright infringement. Kim & Chang successfully represented the CAD software maker (Dassault Systèmes) in this case.
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A "concurrent use-based license" is a license that limits the number of users who are allowed to use the software at the same time (typically where the software is available on a network), by allowing only a certain number of copies of the software to be active on the system simultaneously. The CAD software in this case (Dassault's CATIA software) was sold to companies under a concurrent use-based license. The software tool at issue in this case enabled purchasers to exceed the concurrent-user limits of the CATIA software, and was commercially sold to users of the CATIA software. Dassault accused Hanall of committing copyright infringement, on the basis that use of the software tool created multiple copies of the CATIA software in excess of the licensed concurrent-user limits. In response, Hanall brought a declaratory judgment lawsuit, claiming that its software only created "temporary reproductions" of the CATIA software under Article 35-2 of the Copyright Act, and therefore could not be considered copyright infringement.
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Article 35-2 provides that where a person uses a copyrighted work on a computer, that person may temporarily reproduce the copyrighted work on that computer to the extent deemed necessary for the purpose of smooth and efficient information processing (e.g., in a computer memory cache). In a previous 2017 case, the Supreme Court had held that temporary reproductions created by simply using software in a manner exceeding the scope of the software license (i.e., using software for commercial purposes without separate authorization) did not constitute copyright infringement, and cited to Article 35-2 as the basis for its holding.
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The Supreme Court distinguished the instant case, however, by pointing out that the temporary reproductions in this case were not created as a natural consequence of using the CATIA software, but were only possible because of the accused software tool, and therefore Article 35-2 did not apply. The Court noted that the key value of concurrent use-based licenses is allow licensing of expensive commercial software at lower cost by limiting the number of simultaneous users who can use the software at one time, and therefore that the use of external software to exceed contractual license limits without authorization would unduly harm legitimate sales of software, and should not be allowed.
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Since corporate software is commonly supplied under concurrent use-based license agreements, this holding by the Court provides important protection to the rights holders of such software by clarifying that the "temporary reproduction" exception to copyright infringement does not protect the intentional circumvention of authorized user limits in a software license. Since copyright infringement can carry criminal penalties, this holding should substantially enhance the remedies available to software copyright holders. Further, companies using software under a concurrent use-based license may need to take greater care to ensure that user limits under the license are not exceeded, since temporary reproductions due to excess users can potentially amount to copyright infringement.
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If you have any questions regarding this article, please contact:
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For more information, please visit our website: www.ip.kimchang.com
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