The American Committee for Interoperable Systems ("ACIS") submits this brief as amicus curiae and respectfully requests that this Court affirm the decision below.
 

ACIS is an informal organization of companies that develop innovative software and hardware products that interoperate with computer systems developed by other companies. ACIS believes that computer programs deserve effective intellectual property protection to give developers sufficient incentive to create new programs. At the same time, ACIS is concerned that granting developers excessive protection will impede innovation and inhibit fair competition in the computer industry. ACIS urges the application of legal standards that will effectuate copyright law's fundamental aims by ensuring authors "the right to their original expression," while at the same time encouraging competitors "to build freely upon the ideas and information conveyed by a [copyrighted] work." Feist Publications, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 349-50 (1991).

Neither ACIS nor its members have a direct financial interest in the outcome of this litigation. However, reversal of the district court's decision in this case would have serious anti-competitive consequences for ACIS members and for consumers and the computer industry as a whole. In particular, reversal of the district court's holding on copyright preemption would permit software vendors unilaterally to outlaw reverse engineering and other privileges that the Copyright Act grants to the users of computer programs. This would stifle the ability of ACIS member companies to develop innovative and competitive products.
 
 

The United States Copyright Act embodies a compromise between two competing goals: encouraging the creation of new works, and encouraging the widespread dissemination and use of works. To reconcile these competing interests, Congress in passing the Act, and the courts in applying it, have struck a delicate balance between the rights of authors and the privileges of users in a wide range of contexts. Any departure from this balance may have devastating consequences for producer and consumer welfare.

In this brief, ACIS focuses on one particular example of the copyright balance at work - the well accepted privilege of users of computer programs to "reverse engineer" those programs in order to determine how to make interoperable programs. Although the privilege to reverse engineer computer programs for certain limited purposes is firmly established in modern copyright law, some software vendors have attempted to circumvent this legal mandate by enforcing license terms that purport to prohibit customers from reverse engineering their software.

To permit software vendors, pursuant to state contract law, to enforce contractual restrictions on reverse engineering would frustrate the important federal copyright policy - embodied in Section 107 of the Copyright Act - that gives a privileged place to reverse engineering. The Supremacy Clause of the U.S. Constitution prevents this result by preempting any enforcement of the offending contractual provisions. Further, the dire consequences forecast by appellant's amici if these provisions are not enforced are overstated and implausible. The computer software industry is robust and growing even without the additional protection appellant and its amici demand.
 

I. COPYRIGHT LAW REPRESENTS A "DELICATE BALANCE" BETWEEN THE RIGHTS OF AUTHORS AND USERS

A copyright is not an absolute property right. Rather, it is the result of "a scheme of carefully balanced property rights that give authors and their publishers sufficient inducements to produce and disseminate original creative works and, at the same time, allow others to draw on these works in their own creative and educational activities." 1 Paul Goldstein, Copyright: Principles, Law and Practice § 1.14, at 1:40 (1995). This regime of limited authorial rights was established for the express purpose of achieving two goals - encouraging the creation of new works of authorship by giving authors incentives to create, and encouraging the dissemination and use of these new works among the general public. Id. The Supreme Court has made clear that the first goal is but a means to the end of the second goal:

Creative work is to be encouraged and rewarded, but private motivation must ultimately serve the cause of promoting broad public availability of literature, music, and the other arts. The immediate effect of our copyright law is to secure a fair return for an author's creative labor. But the ultimate aim is, by this incentive, to stimulate . . . creativity for the public good. Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975).

Sometimes, these related goals are at odds with each other. For instance, one way to encourage the creation of new works of authorship is to give more and more powerful rights to the authors. The greater the benefit authors receive, arguably, the greater the incentive for authors to produce new works. But expanding copyright in this fashion comes at a price. Giving greater exclusive rights to authors would reduce the availability of existing works to both the ultimate consumer and to those who would alter, improve, or extend the works that had come before. Thus, expanding copyright will not necessarily encourage the dissemination of works to those who could make use of them, and may not even optimally encourage the creation of works in the long run.

Congress and the courts have responded to this complex incentive structure by creating a set of copyright rules that is essentially a compromise between the desires of authors and those of users. Stewart v. Abend, 495 U.S. 207, 225 (1990). The Copyright Act grants certain exclusive rights to authors, but it also reserves privileges (such as the fair use doctrine, 17 U.S.C. § 107, and the rights granted in Section 117 of the Act) to users. The Supreme Court has repeatedly underscored that the compromises in the Copyright Act reflect a delicate balance between these competing interests: "the Act creates a balance between the artist's right to control the work during the term of the copyright protection and the public's need for access to creative works." Stewart, 495 U.S. at 228; accord Fogerty v. Fantasy, Inc., 114 S. Ct. 1023, 1029-30 (1994); Feist, 499 U.S. at 349-50.

Because of the delicate nature of this balance between competing interests, courts must exercise care in expanding (or contracting) the nature of the rights granted to the copyright owner, lest the unintended consequences of such a change bring the whole edifice tumbling down.

II. USERS HAVE A FIRMLY ESTABLISHED PRIVILEGE TO "REVERSE ENGINEER" COPYRIGHTED COMPUTER PROGRAMS

Unlike traditional literary works such as novels and plays that stand alone, computer programs never function by themselves. They function only by interacting with other programs, and with the computer environment in which their developers place them. This environment is absolutely unforgiving. Unless the computer program conforms to the precise rules for interacting with the other elements of the system, no interaction between the program and the system is possible. As a result, no matter how much better or cheaper the new program is, it will not be marketable unless it can work with (or "interoperate" with) existing computer systems. Such interoperability is achieved by conforming to the rules that the developer of one program establishes as a "socket" to enable another program to "plug into" it.

These rules are referred to in computer parlance as interface specifications. It is well established that copyright does not extend to interface specifications; thus, the interoperable developer is free to conform to the interface specifications established by the first comer. But because most programs are distributed in object code format, i.e., machine readable 0s and 1s, the precise interface specifications cannot be identified simply by looking at the program. Rather, to learn the interface specifications necessary for interoperability, the interoperable developer must reverse engineer the program with which it seeks to interoperate.

The nature of software technology requires the making of interim copies while performing some software reverse engineering techniques. Decompilation or disassembly, for example, involves "translating" the machine-readable object code into a higher level, human readable, format which a trained programmer can analyze. This translation entails the making of a derivative work, in apparent contravention of the author's exclusive rights. See 17 U.S.C. § 106(2). Courts in several circuits, however, have explicitly recognized that such interim copies are a fair use when the reverse engineering is performed for purposes of uncovering interface specifications necessary for interoperability. See Sega Enter. Ltd. v. Accolade, Inc., 977 F.2d 1510, 1527-28 (9th Cir. 1992); Atari Games Corp. v. Nintendo of Am., Inc., 975 F.2d 832, 843-44 (Fed. Cir. 1992); Bateman v. Mnemonics, Inc., No. 93-3234, 1996 U.S. App. LEXIS 5155 (11th Cir. Mar. 22, 1996); DSC Communications Corp. v. DGI Tech, Inc., 898 F. Supp. 1183 (N.D. Tex. 1995); see also Mitel, Inc. v. Iqtel, Inc., 896 F. Supp. 1050 (D.Colo. 1995) (dictum). Most commentators have also endorsed this position.

Sega is the leading decision on this issue. The Ninth Circuit recognized that "Accolade copied Sega's software solely to discover the functional requirements for compatibility with the [Sega] Genesis console - aspects of Sega's program that are not protected by copyright." Sega, 977 F.2d at 1522. The court noted that Accolade's reverse engineering was necessary for it "to become a legitimate competitor in the field of Genesis-compatible video games." Id. at 1523. The court then acknowledged the consumer welfare benefits of reverse engineering:

Accolade's identification of the functional requirements for Genesis compatibility has led to an increase in the number of independently designed video game programs offered for use with the Genesis console. It is precisely this growth in creative expression, based on the dissemination of other creative works and the unprotected ideas contained in those works, that the Copyright Act was intended to promote. Id.

The freedom to reverse engineer software in order to achieve interoperability is critical to maintaining competition not just in the video game sector, but in the entire software industry. Economists have demonstrated that the software market exhibits strong network externalities, which enable the first comer to establish its interface specification as a de facto standard. If the first comer can prevent interoperable developers from uncovering the interface specifications which are not the subject of any intellectual property rights, then the first comer can exercise monopoly control over important segments of the computer market.

Such a broad monopoly would have serious implications for consumer welfare. In the absence of competition during the effective lifespan of the product, the first developer would have little incentive to develop more innovative and less costly products. These negative consequences would be compounded by the fact that the personal computer revolution, and recent major improvements in communications technology, have produced an overwhelming need for interconnection between different elements of computer systems. Within a given large corporation, literally thousands of personal computers and workstations scattered across the globe need to interact with each other and with the company's mainframes. Moreover, with the advent of the Global Information Infrastructure, different firms will need to exchange vast quantities of data through their computers. Prohibiting competitors from accessing the de facto standard interface specifications would lock users into a particular operating system or network software environment, and would inhibit the transfer of data between users with different computing environments. See Lotus, 49 F.3d at 821 (J. Boudin, concurring).

It should be stressed that interoperable products are not mere "clones" that offer only the same functionality as the products of the first comer, but at a lower price. While interoperable products must offer at least the same functionality, they typically offer additional features not found in the first comer's products. Thus, they compete with the first comers' products not only in terms of price (indeed, sometimes the interoperable products may be more expensive), but also in terms of innovation. In this respect, interoperable developers' use of preexisting interface specifications is a transformative use of the sort accredited by the Supreme Court in Campbell v. Acuff-Rose Music, Inc., 114 S. Ct. 1164 (1994).

Some ACIS companies are small start-ups with a handful of employees. Others are Fortune 500 companies. All need to interoperate with the computer systems developed by other firms in order to reach the market for their new products, which push the technological envelope. Any legal impediment to reverse engineering would threaten this vital sector of the U.S. software industry that has helped maintain our leadership position in global markets.

III. APPELLANT'S PROPOSED CHANGE IN THE LAW WOULD UNDERMINE THE PRIVILEGES GRANTED TO USERS BY COPYRIGHT LAW, AND SHOULD THEREFORE BE PREEMPTED

In the face of the clear fair use mandate permitting reverse engineering, many developers seek a "back door" by which they can evade this rule - and indeed the broader rule that allows users access to the unprotectable ideas and facts in a copyrighted work. The back door in this case is the contractual restriction on reverse engineering imposed by the developers of de facto standard programs.

These contractual restrictions can be challenged from several different directions: under principles of contract formation including as contracts of adhesion; as agreements in restraint of trade; and as copyright misuse. In this brief we focus on one of the theories considered by the court below preemption by the Federal intellectual property system. Before proceeding any further, we must stress that we are not arguing for the preemption of a contractual restriction on reverse engineering in a trade secret context. When the developer distributes a limited number of copies subject to signed confidentiality agreements, trade secret law should apply. However, we contend that federal law preempts contractual restrictions on the reverse engineering of widely distributed object code.

Copyright preemption of state law can take one of two basic forms. First, Congress has to a limited extent "preempted the field" of copyright by passing the Copyright Act of 1976. This statutory preemption is governed by Section 301 of the Copyright Act, 17 U.S.C. § 301, which provides in part that "all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright . . . are governed exclusively by" federal copyright law. Courts applying this section have concluded that federal preemption of contract law under Section 301 must be examined on a case-by-case basis. Contract law is not wholly preempted by Section 301, see Fantastic Fakes, Inc. v. Pickwick Int'l, Inc., 661 F.2d 479, 483 (5th Cir. 1981), but neither is it immune from preemption. See, e.g., S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1088 (9th Cir. 1989); David Rice, Public Goods, Private Contract and Public Policy: Federal Preemption of Software Licenses Prohibitions Against Reverse Engineering, 53 U. Pitt. L. Rev. 543, 604 (1992).

While appellant's amici devote much of their attention to Section 301 preemption, that is not the critical issue in this case. Federal preemption of state law also occurs where there is a conflict between state law and the federal intellectual property system. This Constitutional preemption based on the U.S. Constitution's Supremacy Clause, Article VI, and its Intellectual Property Clause, Article I, Section 8, can occur either when the federal and state laws directly conflict, so that it is physically impossible for a party to comply with both, or when a state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." California Fed. Sav. & Loan Ass'n v. Guerra, 479 U.S. 272, 281 (1987).

The Constitution's Intellectual Property Clause provides for copyright and patent regimes; a contractual prohibition on reverse engineering conflicts with both. The leading case treating Constitutional preemption under the copyright laws is Goldstein v. California, 412 U.S. 546 (1973). In that case, the Supreme Court considered whether the Copyright Act of 1909, then in force, preempted state protection for subject matter not included within that Act. In deciding that such state copyright rules were not preempted, the Court distinguished three types of situations - areas in which federal law mandated protection, areas in which federal law mandated no protection, and areas in which federal law was silent:

Where the need for free and unrestricted distribution of a writing is thought to be required by the national interest, the Copyright Clause and the Commerce Clause would allow Congress to eschew all protection. In such cases, a conflict would develop if a State attempted to protect that which Congress intended to be free from restraint or to free that which Congress had protected. However, where Congress determines that neither federal protection nor freedom from restraint is required by the national interest, it is at liberty to stay its hand entirely.

Goldstein, 412 U.S. at 559. In resolving the Constitutional preemption question regarding reverse engineering, therefore, a court must decide whether enforcing a contractual restriction on reverse engineering would have the effect of protecting that which the copyright laws intended to be free from restraint.

It clearly would. As discussed in section I above, the copyright laws are not unrestricted grants of property rights. Rather, copyright strikes a delicate balance between the rights of various parties with an interest in copyrighted material. While the Copyright Act provides a series of exclusive rights to copyright owners in 17 U.S.C. § 106, many other provisions of the Act (notably 17 U.S.C. § 102(b) and 17 U.S.C. §§ 107-120) expressly create certain user privileges in copyrighted material. Courts have interpreted these privileges as permitting the reverse engineering of software to learn the information necessary to achieve interoperability. Indeed, the Sega court explained that reverse engineering furthered the public policy of the Copyright Act. A legal prohibition on the reverse engineering of programs would

preclude[] public access to the ideas and functional concepts contained in those programs, and thus confer[] on the copyright owner a de facto monopoly over those ideas and functional concepts. That result defeats the fundamental purpose of the Copyright Act - to encourage the production of original works by protecting the expressive elements of those works while leaving the ideas, facts, and functional concepts in the public domain for others to build on.

Sega, 977 F.2d at 1527. In this passage, the Ninth Circuit echoes the Supreme Court's teachings in Feist, where the Court explained why a compilation of phone book information could not receive protection:

It may seem unfair that much of the fruit of the compiler's labor may be used by others without compensation. As Justice Brennan has correctly observed, however, this is not 'some unforeseen byproduct of a statutory scheme.' It is, rather, 'the essence of copyright,' and a constitutional requirement. The primary objective of copyright is not to reward the labor of authors, but 'to promote the Progress of Science and useful Arts.' To this end, copyright assures authors the right to their original expression, but encourages others to build freely upon the ideas and information conveyed by a work…. This result is neither unfair nor unfortunate. It is the means by which copyright advances the progress of science and art. Feist, 499 U.S. at 349-50 (emphasis added; citations omitted).

Allowing software vendors to impose terms that prohibit reverse engineering would frustrate the policy of encouraging the creation of new, interoperable software products. Not surprisingly, the one reported decision to consider the issue found that federal copyright law preempts state laws enforcing contractual restrictions on reverse engineering. Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988), examined the enforceability of a state statute which expressly validated shrinkwrap license terms precluding users from reverse engineering computer programs. Relying on the Constitutional preemption cases, the Fifth Circuit refused to enforce the term because it "conflicts with the rights of computer program owners under [17 U.S.C.] § 117 and clearly 'touches upon an area' of federal copyright law." Id. at 270.

Contractual restrictions on reverse engineering also interfere with the operation of the federal patent system. The most recent Supreme Court patent preemption case, Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989), concerned a Florida statute which prohibited the unauthorized use of a direct molding process to replicate manufactured boat hulls. The Supreme Court in a unanimous decision held that the statute conflicted with the federal patent law and thus was invalid under the Supremacy Clause. The Court stated that "the States may not offer patent-like protection to intellectual property creations which would otherwise remain unprotected as a matter of federal law." Id. at 156. The Court further stated that "[i]n essence, the Florida law prohibits the entire public from engaging in a form of reverse engineering of a product in the public domain." Id. at 160. The Court concluded that "the efficient operation of the federal patent system depends upon substantially free trade in publicly known, unpatented design and utilitarian conceptions." Id. at 156.

Like the Florida statute, a contractual restriction on software reverse engineering would "offer patent-like protection to intellectual property creations which otherwise would remain unprotected as a matter of federal law." Id. at 156. The utilitarian interface specifications could not be used by competitors even though the specifications had not endured the rigors of a patent examination and found to meet the statutory requirements of novelty and nonobviousness. Similarly, a contractual restriction would prohibit the licensee "from engaging in a form of reverse engineering of a product" distributed to the public. Id. at 160. Without question, such restrictions would interfere with the "free trade" in publicly distributed, "unpatented . . . utilitarian conceptions," and thereby impede the "efficient operation of the federal patent system." Id. at 156. Accordingly, "the Bonito Boats decision strongly suggests that federal patent law is an alternative to federal copyright law for preempting both state legislation and judicial cases that uphold the enforceability" of contractual restrictions on software reverse engineering. Charles R. McManis, Intellectual Property Protection and Reverse Engineering of Computer Programs in the United States and the European Community, 8 High Tech. L. 25, 94 (1993).

The Business Software Alliance ("BSA") and the Software Publishers Association ("SPA") suggest that Constitutional preemption applies only to state statutes, and not contracts, because contracts between private parties are "substantially less 'offensive' to the federal intellectual property scheme than a state statute . . . ." BSA Brief at 14; see also SPA Brief at 16. In fact, whether a contract is more or less inconsistent with the goals and objectives of the federal intellectual property system than a state statute turns on the nature of the contract and the statute. A state trade secret statute modeled on the Uniform Trade Secrets Act does not offend the federal intellectual property system, while a contractual restriction on a biographer's use of a manuscript found in a library would offend the fair use provision of the Copyright Act. Thus, the Second Circuit, in Wright v. Warner Books, Inc., 953 F.2d 731, 741 (2d Cir. 1991), found that "[t]o read [the restriction] as absolutely forbidding any quotation, no matter how limited or appropriate, would severely inhibit proper, lawful scholarly use and place an arbitrary power in the hands of the copyright owner going far beyond the protection provided by law." Likewise, enforcement of contractual restrictions on reverse engineering would place an arbitrary power in the hands of the software developer going far beyond the protection provided by law.

IV. REFUSING TO ENFORCE LICENSE RESTRICTIONS ON REVERSE ENGINEERING WILL NOT UNDERMINE INCENTIVES FOR THE DEVELOPMENT OF COMPUTER PROGRAMS

Appellant's amici in the software industry predict imminent disaster if the district court is not reversed. The SPA warns that the district court's reasoning, "if widely adopted, would hinder severely the ability of computer software companies to transact business in a rapidly changing, global economy." SPA Brief at 6. The BSA goes further, asserting that a "multi-billion dollar industry rests, in substantial part, on the confidence that transactions involving terms such as these rest on binding licenses." BSA Brief at 16. Reading these briefs, one is left with the impression that innovation in this computer industry will come to a screeching halt if the district court's interpretation of the law is left standing.

This is not the first time we have heard such predictions in the computer industry. Indeed, there seems to be a pattern of predicting dire consequences whenever courts place any limit on intellectual property protection in this industry. When in 1992 the Second Circuit in Altai adopted a less expansive interpretation of copyright protection for computer programs than prior courts had done, two IBM lawyers called the decision "a legal Chernobyl" and warned that it would surely destroy the software industry. Anthony L. Clapes & Jennifer M. Daniels, Revenge of the Luddites: A Closer Look at Computer Associates v. Altai, 9 Computer Law., Nov. 1992, at 11. Despite unanimous adoption of the Second Circuit's approach since 1992, the collapse of the computer software industry has yet to occur. To the contrary, the software industry remains extremely robust. Professor Miller similarly called the Ninth Circuit's recognition in Sega of a privilege to reverse engineer computer programs "singularly ill-suited to vindicating the public interest." Arthur R. Miller, Copyright Protection for Computer Programs, Databases, and Computer-Generated Works: Is Anything New Since CONTU?, 106 Harv. L. Rev. 977 (1993). Again, despite widespread adoption in the courts of such a reverse engineering privilege, the public interest seems alive and well. The district court's decision does not change the law; it merely applies rules that are already well-established. There is no reason to believe that this case will do any serious damage to the thriving computer industry. To the contrary, we believe that the district court decision will maintain competitive conditions in the industry and thereby prevent "monopolistic stagnation." Altai, 982 F.2d at 696.

The SPA's most specific concern with the district court's preemption ruling is that it threatens SPA members' ability to protect their trade secrets. SPA Brief at 15. The SPA completely misconstrues the district court's holding. The district court nowhere suggested that the Copyright Act preempted all contracts relating to copyrightable works. Rather, the court found that the Copyright Act preempted contract provisions which sought to circumvent the limits the Copyright Act placed on the author's rights. A provision which sought to maintain the confidentiality of a real trade secret would not circumvent a limitation of the Copyright Act, and thus would not be preempted.

By contrast, a confidentiality provision that sought to restrict use of the unprotected elements of a widely disseminated work would not pass preemption scrutiny. In Feist, for example, Rural Telephone could not have enforced an agreement with its thousands of subscribers to keep the information contained in its white pages secret. Neither can ProCD.

For the foregoing reasons, ACIS respectfully requests that this Court affirm the judgment below.