In Wall Data, Inc. v. Los Angeles County Sheriff's Department, (2006 Daily Journal D.A.R.5965, C.A.9 (Cal.), May 17, 2006)), the United States Court of Appeals considered a case brought by a computer software company, which claimed that a county sheriff's department infringed upon its copyright by installing the software onto a greater number of computers than allowed in the purchase agreement.
The Court ruled that the department had no defense under federal copyright laws to breach its agreement, and found it liable to the company for copyright infringement.
The Los Angeles County Sheriff's Department ("Department"), purchased computer software from Wall Data, Inc. ("Company"). The licensing agreement between the Department and the Company allowed the Department to install the software onto 3,663 computers. The Department then installed it onto 6,007 computers, but configured it so that no more than 3,663 work stations could access the software at any one time.
The company filed suit for copyright infringement, claiming that the Department was entitled by its licensing agreement to install the software onto no more than 3,663 computers. The District Court found the Department liable and awarded damages and attorney's fees to the Company. The Department appealed.
The Court reviewed Title 17 of the United States Code to evaluate the Department's claim that it was entitled to a "fair use" defense, that it had done nothing more than apply technology to make the best and broadest authorized use of its licenses. The Court outlined four factors which determine whether a "fair use" applied: 1) the purpose of the use, including whether it was for nonprofit educational purposes; 2) the nature of the copyrighted work; 3) the portion used relative to the copyrighted work as a whole; and 4) the effect of the use on the market for the copyrighted work.
As to the first factor, the Court ruled the Department's use of the software was not "transformative" because it did not used the copyrighted work in a way that transformed it into a new creation. Nor did its use promote advancement of knowledge and the arts. Finally, the Department's use was commercial, the Court said, because it was "made to save the expense of purchasing authorized copies."
Moving to the second factor, the Court found that the software was the result of investments of many years and millions of dollars by the Company, which again weighed in favor of copyright protection.
As to the third factor, the Court determined that the Department had used entire verbatim copies of the software, not merely portions of it, again weighing in favor of protecting the Company's copyright.
Regarding the fourth factor, the Court found that the Department could have negotiated for the rights to additional installations, but did not. The Court ruled, "Whenever a user puts copyrighted software to uses beyond the uses it bargained for, it affects the legitimate market for the product."
The Court therefore concluded that none of the factors weighed in favor of finding for a "fair use" defense by the Department. The judgment against the Department was affirmed.
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