Is turn about fair play? Copyright law and the fair use of computer software loaded into RAM.

• Author: Asarch, Chad G.
• Position: Random access memory

I am not an advocate for frequent changes in laws and constitutions. But

laws and institutions must go hand in hand with the progress of the

human mind. As that becomes more developed, more enlightened, as

new discoveries are made, new truths discovered and manners and opinions

change, with the change in circumstances, institutions must advance

also to keep pace with the times. We might as well require a man to wear

still the coat which fitted him when a boy ....

--Thomas Jefferson (first head of the U.S. Patent Office)(1)

INTRODUCTION

Computer systems, especially those in heavy-use commercial settings, often require routine maintenance to continue functioning properly. Many businesses turn to an independent service organization ("ISO")(2) to provide computer maintenance services because ISOs frequently charge less than the original equipment manufacturer ("OEM") for those services.(3) The tremendous growth in computer use(4) has spawned a multi-billion dollar computer maintenance industry in the United States,(5) and ISOs and OEMs have become engaged in fierce competition for this computer service business.(6)

The struggle between ISOs and OEMs to capture this expanding market has spilled over into the courts, spawning a number of recent decisions in the area of copyright law that have added significant legal consequences to the mechanics of computer operation and maintenance. In particular, the Ninth Circuit in MAI Systems Corp. v. Peak Computer, Inc.(7)ruled that, for purposes of the Copyright Act,(8) loading software into a computer's active memory -- known as Random Access Memory ("RAM")(9) -- from a permanent storage device such as a hard disk, diskette, or Read Only Memory ("ROM")(10) results in the making of a "copy" of the software.(11) A user engages in "copying" under the Act by making a "fixed" copy of a copyrighted work.(12) Concluding that software stored in RAM is "sufficiently permanent" to be perceived and used by the computer, the court in Peak held that software loaded into RAM constitutes a "fixed" copy of the original stored in permanent memory.(13)

The Peak decision has serious ramifications for an ISO's ability to compete in the computer service market because an ISO generally must load or copy software into RAM when servicing computers. The simple act of turning on a computer requires the activation of the computer's operating software, which is designed to make the computer perform its most basic functions.(14) Operating software includes both operating system software(15) and utility or diagnostic software.(16) A computer must store its software in some form of permanent memory.(17) However, in order to use items stored in permanent memory, the computer must load the software into RAM: software remains inert until copied into RAM where it can be processed by the computer hardware.(18) Because even the lowest-level computer maintenance involves turning on the computer and testing it to make sure that the computer functions properly,(19) effective computer maintenance requires loading the operating software into RAM.(20)

Under the Copyright Act, a copyright infringement claim must satisfy two elements: (1) ownership of a valid copyright; and (2) unauthorized "copying" of copyrighted material.(21) In Peak, the OEM had licensed copyrighted software(22) to the computer owner (the "customer") under a restrictive licensing agreement that allowed the customer to use and copy the software during the normal operation of the computer but prohibited the making of any copies of the software by nonlicensed parties.(23) As a result, the court held that any copying of the software by the ISO(24) without the permission of the OEM occurred "beyond the scope of the license"(25) and therefore constituted copyright infringement.(26)

A "Peak claim" arises when: (1) an OEM transfers computer operating software to a customer under a restrictive licensing agreement, and (2) an ISO copies the software into RAM without the OEM's permission or "beyond the scope of the license" while servicing the computer.(27) In other words, any third party makes an infringing "copy" of licensed operating software simply by turning on the customer's computer without the OEM's permission. The Peak decision has widespread significance given the growing trend among OEMs(28) to license rather than transfer ownership of software to customers.(29)

In a Peak situation, an OEM has two separate potential causes of action: (1) a breach of contract claim only against the customer, and (2) a copyright infringement claim against the ISO -- a Peak claim. Although this Note only addresses the copyright claim, a brief comparison of the two causes of action will help clarify the scope of the copyright claim. The breach of contract claim arises because the customer violates the terms of the license by allowing the ISO or any other unauthorized third party to use the software.(30) The OEM cannot bring a breach of contract claim against the ISO because the ISO is not a party to the restrictive licensing agreement. In contrast, the OEM can bring a copy-right claim only against the ISO and not against the customer because any copying performed by the customer does not occur "beyond the scope of the license."(31) The ISO only infringes on the copyright when the ISO performs the copying. Thus, no copyright cause of action accrues where the customer allows the ISO to use the software while servicing the computer as long as the customer activates the computer and loads the software into RAM.(32)

These problems would be avoided if the courts considered the ISO's use of a computer's operating software "copied" into RAM to be a "fair use" of the software.(33) Under section 107 of the Copyright Act, a user may create copies of a copyrighted work without violating the Copyright Act if the user's activities constitute a "fair use."(34) The statute directs courts to weigh four factors in determining whether a particular use is fair: (1) the purpose of the use, (2) the nature of the copyrighted work, (3) the amount of the work copied, and (4) the effect of the use upon the market for the copyrighted work.(35) However, a precise definition of what qualifies as a fair use so far has eluded courts and commentators.(36) Instead, courts have characterized the fair use defense as an equitable doctrine that turns on a determination of the specific facts involved in a given copyright infringement case.(37) Although the Ninth Circuit in Peak did not address the issue of fair use, courts in subsequent rulings have concluded that ISOs cannot rely successfully on the fair use defense against a Peak claim.(38)

This Note argues that the fair use defense should be applied to ISOs charged with copyright infringement under a Peak claim. Part I maintains that the four fair use factors identified by Congress in the Copyright Act support a finding of fair use in Peak claims, primarily because an ISO's computer maintenance activities do not impact adversely the market for sales of computer software. Part II contends that equity and policy considerations support application of the fair use defense to Peak claims. Specifically, Part II reasons that preventing an ISO from successfully raising the fair use defense against a Peak claim would grant OEMs the ability to exclude ISOs from the computer service market simply by licensing rather than selling operating software to their customers. While an OEM should be able to license software to its customers, an OEM should not be able to use copyright protection improperly to acquire a de facto monopoly in the computer maintenance market.

1. THE FOUR FAIR USE FACTORS

   This Part argues that the fair use defense should be available to ISOs against a Peak claim because the four statutory fair use factors,(39) particularly the market impact factor, on balance weigh in favor of fair use. Section I.A discusses market impact, the most important of the four factors,(40) and contends that an ISO's use of software does not negatively impact the market for software sales because the use is nonproliferative. Section I.B submits that despite the commercial nature of an ISO's use of the software, the purpose of the use does not weigh against fair use because it lacks any negative impact on the market for sales of the software and because copying only serves as an intermediate step to an otherwise fair use. section I.C postulates that the nature of the copyrighted work supports fair use because operating software is a functional work(41) subject to less protection under copyright law. Finally, section I.D maintains that while the software is completely copied into RAM, the reality of computer operations offers the ISO no alternative but to copy the entire work in order to use it. Therefore, the extent of the copying factor also should not weigh against fair use.

   1. Market Impact

      The Copyright Act directs courts to consider "the effect of the use upon the potential market for or value of the copyrighted work"(42) in deciding fair use claims. This section argues that market impact supports fair use because ISOs do not compete with OEMs for sales of the software and because an ISO's use of the software to service customers' computers is nonproliferative: the ISO does not create any permanent, additional copies of the software. Section I.A.1 contends that the relevant market should include only the sales of copies of the software and should exclude potential licensing fees. Section I.A.2 maintains that an ISO's use of licensed software while servicing computers does not negatively impact the relevant market.

      1. Defining the Relevant Market: Excluding Potential Licensing Fees

      The relevant market in a Peak claim should be the market for sales of the OEM's software. Potential licensing revenues from computer maintenance should not be included in the relevant market because doing so in effect would extend copyright protection to the process of...