• Ninth Circuit Rebuffs Software Licensee's Attempt To Police Own Use Of Software
  • July 19, 2006 | Author: Melissa D. Goetz
  • Law Firm: Manatt, Phelps & Phillips, LLP - Los Angeles Office
  • Recently, the U.S. Court of Appeals for the Ninth Circuit held that a software licensee may not install the software onto a number of computers that exceeds the number of licenses it has purchased, even if the computers are configured such that the total number of workstations able to access the software does not exceed the total number of licenses purchased. Wall Data Inc. v. Los Angeles Cty. Sheriff’s Dep’t.

    The Los Angeles County Sheriff’s Department purchased 3,663 licenses to Wall Data’s software. At first, the Sheriff’s Department installed the software manually onto 750 computers. Then, in an effort to save time, the Sheriff’s Department performed “hard disk imaging” and copied the entire contents of a single “master” hard drive simultaneously onto the remaining several thousand computers. Although the software was loaded onto 6,007 computers, the Sheriff’s Department configured the computers using a password-based security system such that the number of users who could access the software was limited to 3,663 – the same as the number of licenses purchased.

    Wall Data sued the Sheriff’s Department in federal court in Los Angeles, CA for copyright infringement. Wall Data alleged that the Sheriff’s Department had “over-installed” the software.

    The jury returned a general verdict finding the Sheriff’s Department liable for copyright infringement and awarding Wall Data $210,000 in damages. The trial court also granted Wall Data $516,271 in attorneys’ fees and approximately $38,000 in costs.

    The Ninth Circuit affirmed, holding that software copying, in these circumstances, constitutes copyright infringement. The Ninth Circuit explained that “although hard drive imaging might be an efficient and effective way to install computer software,” the Sheriff’s Department’s conduct “would nonetheless lead to over-use of the software.” The Ninth Circuit also noted that the Sheriff’s Department’s system made copyright infringement easier because no physical installation was necessary, and made detection of over-use more difficult. The Ninth Circuit also reasoned that software is “extraordinarily vulnerable to illegal copying and piracy” and entitled to enhanced copyright protection for its inventors and developers.

    The Wall Data case teaches that software licensees should be very cautious about practices that essentially ask the licensors to trust that their licenses are not being exceeded. Such practices may result in hefty monetary penalties, as the Sheriff’s Department bore in this case.