Spataro & Associates

Wall Data vs Sheriff's Dept

Copyright © 2010 Stephen A. Spataro

 Wall Data’s trial court judgment for copyright infringement, damages, and attorney’s fees against the Los Angeles Co. Sheriff’s Department was recently upheld by the United States Court of Appeals for the Ninth Circuit.

Wall Data develops, markets, and licenses computer terminal emulation software products that allow personal computers that use one operating system to access data stored on computers that use a different operating system.

The Sheriff’s Department purchased a total of 3,663 licenses to use the software.  Wall Data claimed that the Sheriff’s Department “over-installed” the software and violated the terms of Wall Data’s shrink-wrap license, click-through license, and volume license booklets.

The Sheriff’s Department contended that it had not violated the terms of Wall Data’s licenses and that the “fair use” and “essential step” defenses applied.  Using hard drive imaging, the Sheriff’s Department had installed the software onto 6,007 workstations, alleging that it had configured the software so that the software could only be accessed by 3,663 workstations at a time and that the number of “usable” copies of the software did not exceed the number of licenses held by the Sheriff’s Department.

At the heart of the decision is Wall Data’s license which clearly restricted the Sheriff’s Department’s use of each licensed software program to a “single designated computer” and prohibited the Sheriff’s Department from using “the Software in any other multiple computer or multiple user arrangement.”  The Sheriff’s Department’s fair use and essential step defenses were rejected.  Loading an entire suite of the software onto nearly all of the Department’s computers was neither “fair” nor “essential.”  The Department’s use of hard drive imaging saved man-hours, eliminated possible errors associated with separately installing the individual packages onto each computer, and gave each workstation the potential use of the software.  But this is not what the Department had bargained or paid for.  The Department’s installation by hard drive imaging may have saved installation time and preserved flexibility but it was not “essential” or necessary.  The software could have been installed manually, without the aid of hard drive imaging.

Why this case matters

Clear, concise, and enforceable license terms continue to be most critical for software developers.  Developers should always structure and refer to each transaction as a license grant and never as a sale of software. Marketing personal should be reminded that customers are licensees and are not purchasers or buyers of the software. Whenever a user puts copyrighted software to uses beyond the licensed uses it bargained and paid for, it affects the legitimate market for the product.  Installation by hard drive imaging and other short cuts might be more efficient and effective ways to install software.  However, the message is that unrestricted and widespread conduct of the sort engaged in by the Sheriff’s Department leads to unlawful over-use of the software and significant legal exposure.

Equally important, ghost copies of software that lay dormant and unuseable only until a user unilaterally decides to activate the software creates an unauthorized user “sub-licensing” system and, in essence, makes tracking infringement almost impossible because the developer/copyright owner cannot independently verify which computer is used to access the software.  Such a system makes copyright infringement easier, because no physical installation is necessary, and makes detection of over-use more difficult.

Users/licensees should consider negotiating less restrictive licenses and more flexibility with software developers/licensors.