StorageTek Troubles Me

The Federal Circuit decided Storage Technology Corp. v. Custom Hardware Engineering & Consulting yesterday (pdf link to the court’s opinion), reversing a preliminary injunction granted to the manufacturer of a digital storage library that is trying to use copyright law and the DMCA to keep aftermarket maintenance companies out of its machines. Shades of MAI and Triad! Egads, we’ve been here before.

The result is right, I think, but there is at least one piece of the majority’s analysis that I find troubling. ST argued that CHE committed copyright infringement when it booted the machines and caused copyrighted maintenance code to be loaded into RAM. CHE replied with section 117(c) of the Copyright Act, which Congress drafted to protect Independent Service Organizations maintaining computers under the authority of the machines’ owners. The court agreed with CHE’s interpretation of Section 117.

But ST persisted: It argued that the terms of its license with ST customers — in which customers were not given permission to use the maintenance code — meant that CHE could not be treated as an agent of ST customers. Here’s where the court’s reasoning gets dicey:

[T]he license grants the customer the use of the code for “the sole purpose of enabling the specific unit of Equipment for which the Internal Code was provided ····” The clear implication of those sections is that the license is tied to the piece of equipment on which the software resides. Thus, the authorized use is tied to a particular machine, rather than a particular person. In fact, one version of StorageTek’s license agreement expressly contemplates third-party use of the equipment, noting that “misuse of the Equipment or negligence by Customer or a third party” is not included within the maintenance provision of the license. Thus, the prohibition against assigning or permitting another to use the code is clearly a restriction on giving a third party a copy of the code that is divorced from the machine “on which its use is authorized.” In this case, CHE is merely turning on the machine on which the use of the code is authorized.

. . . . StorageTek, of course, could have drafted the license agreement to explicitly disallow copying by third parties through activation of the equipment owners’ machines. In the absence of such language, however, CHE’s copying appears to be protected as long as CHE is acting as an agent of the equipment owners.

Does this mean that Section 117(c) can be overridden by contract? So it appears. Worse — holy equitable servitude! Judge Bryson, who wrote the majority opinion here, joined Judge Newman’s majority opinion in Monsanto v. McFarling in 2002, which approved Monsanto’s “seedwrap” agreement and in effect created a servitude on soybean seeds. What mischief has the court unleashed by extending this theme into the copyright arena? We’ll see.

Patently-O has a good overview of the court’s reasoning.

UPDATE: Added this link to Jason Schultz’s analysis at Copyfight.