Wall Data v. Los Angeles County Sheriff's Dept., 03-56559.

Citation447 F.3d 769
Decision Date17 May 2006
Docket NumberNo. 03-56559.,03-56559.
PartiesWALL DATA INCORPORATED, Plaintiff-Appellee, v. LOS ANGELES COUNTY SHERIFF'S DEPARTMENT, a division of the County of Los Angeles; County of Los Angeles, Defendants-Appellants.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Dennis G. Martin, Blakely, Sofoloff, Taylor & Zafman, Los Angeles, CA, for the defendants-appellants.

Tod L. Gamlen and Keith L. Wurster, Baker & McKenzie LLP, Palo Alto, CA, for the plaintiff-appellee.

Appeal from the United States District Court for the Central District of California, R. Gary Klausner, District Judge, Presiding; D.C. No. CV-02-00301-RGK.

Before MARY M. SCHROEDER, Chief Judge, HARRY PREGERSON, and STEPHEN S. TROTT, Circuit Judges.

PREGERSON, Circuit Judge.

The Los Angeles County Sheriff's Department purchased 3,663 licenses to Wall Data's computer software,1 but installed the software onto 6,007 computers. We are asked to determine whether the Sheriff's Department's conduct constituted copyright infringement. The wrinkle in this otherwise smooth question is that, although the software was installed onto 6,007 computers, the computers were configured such that the total number of workstations able to access the installed software did not exceed the total number of licenses the Sheriff's Department purchased. We have jurisdiction under 28 U.S.C. § 1291 and hold that such copying constitutes copyright infringement despite the Sheriff's Department's configuration. We therefore affirm the district court.

I. FACTS AND PROCEDURAL HISTORY

Plaintiff-Appellee Wall Data Incorporated develops, markets, and sells a line of copyrighted computer terminal emulation software products including RUMBA Office and RUMBA Mainframe. Both RUMBA products allow personal computers that use one operating system to access data stored on computers that use a different operating system. RUMBA Office is the more expensive and more powerful computer program.

Between December 1996 and February 1999, the Appellants-Defendants, the Los Angeles County Sheriff's Department and the County of Los Angeles (collectively, "Sheriff's Department"), purchased both of Wall Data's RUMBA software products through an approved vendor. In December 1996, the Sheriff's Department purchased eight "units" of Wall Data's RUMBA Office program. Each of the eight units contained a RUMBA Office CD-ROM (compact disc read-only-memory) and a volume license booklet. Each volume license booklet granted the Sheriff's Department 250 licenses to RUMBA Office. In total, the Sheriff's Department paid $175,220 for 2,000 RUMBA Office licenses, at a reduced price of $87.61 per license.2

Between November 1997 and February 1999, the Sheriff's Department purchased 1,628 licenses to the lower-cost RUMBA Mainframe program. In all, the Sheriff's Department purchased 2,035 licenses to RUMBA Office and 1,628 licenses to RUMBA Mainframe, for a total of 3,663 licenses.

At first, the Sheriff's Department installed RUMBA Office manually, one computer at a time, onto approximately 750 computers in the Sheriff's Department's new detention facility — the Twin Towers Correctional Facility ("Twin Towers"). The Sheriff's Department soon realized that this process was too time consuming and would delay opening the Twin Towers. In addition, it was not clear where those employees who would need to use RUMBA programs would be assigned to work. To speed up the process of installation and to ensure that employees would be able to use the RUMBA software regardless of where they were assigned, the Sheriff's Department decided to install a "baseline" of software applications onto the hard drives of the remaining computers in its new detention facility. This was done by simultaneously copying the entire contents of a single "master" hard drive containing the baseline of software applications onto the hard drives of other computers. This method is known as "hard disk imaging," and saved the Sheriff's Department from having to install the software manually onto each computer.

By the time the Sheriff's Department finished hard disk imaging in mid-2001, RUMBA Office was loaded onto 6,007 computers in the Twin Towers, far in excess of the 3,663 RUMBA licenses the Sheriff's Department had purchased. Although RUMBA Office was installed onto nearly all of the computers in the Twin Towers, the Sheriff's Department configured those computers using a password-based security system such that the number of users who could access RUMBA Office was limited. The Sheriff's Department claims that, at all times, the number of those who could access the software was limited to the number of licenses it had.3

Shortly thereafter, Wall Data discovered that the number of computers in the Twin Towers that had RUMBA Office installed exceeded the number of licenses held by the Sheriff's Department. As a result, Wall Data claimed that the Sheriff's Department violated the terms of its licenses because the Sheriff's Department was licensed, at most, to install RUMBA software onto only 3,663 computers.

The parties tried unsuccessfully to settle the dispute. After settlement efforts failed, the Sheriff's Department removed RUMBA Office from the computers in the Twin Towers for which it did not have a license. The Sheriff's Department installed the less expensive RUMBA Mainframe program onto many computers to replace the copies of RUMBA Office that were removed.

On January 11, 2002, Wall Data filed suit against the Sheriff's Department. Although Wall Data raised several claims in its complaint, the only claim that went to trial (and the only claim at issue here) was copyright infringement. Wall Data alleged that the Sheriff's Department "over-installed" RUMBA Office onto computers in the Twin Towers and violated the terms of Wall Data's shrink-wrap license,4 click-through license,5 and volume license booklets.

In response, the Sheriff's Department contended that it had not violated the terms of Wall Data's licenses and that it was entitled to the following affirmative defenses: (1) a "fair use" defense under 17 U.S.C. § 107; and (2) an "essential step" defense under 17 U.S.C. § 117(a)(1). As described above, the Sheriff's Department argued that, even though it had installed RUMBA Office onto 6,007 workstations, it had configured the software so that the software could only be accessed by 3,663 workstations at a time. The Sheriff's Department argued that this constituted a fair use under 17 U.S.C. § 107 because the number of "useable" copies of the software did not exceed the number of licenses held by the Sheriff's Department. The Sheriff's Department also argued that the copying was an "essential step" under 17 U.S.C. § 117(a)(l), because the hard drive imaging process was a necessary step of installation. Based on these arguments and affirmative defenses, both parties moved for summary judgment.

The district court made its initial ruling on the parties' summary judgment motions on May 2, 2003, and concluded that neither party was entitled to summary judgment. On May 15, 2003, both sides filed numerous motions in limine. The district court ruled on these motions on June 17, 2003; it excluded evidence offered by the Sheriff's Department on its fair use defense, and other evidence that the district court ruled irrelevant, time consuming, or confusing to the jury. On the same day, the district court reconsidered its earlier ruling on summary judgment, and granted Wall Data's motion for summary judgment on the basis that the Sheriff's Department was not entitled to a fair use defense.

Following these rulings on the parties' motions in limine, a four-day jury trial took place. The only issues remaining for trial were whether the Sheriff's Department had infringed on Wall Data's copyright and whether any defense barred Wall Data's copyright infringement claim. At the end of trial, the jury returned a general verdict finding the Sheriff's Department liable for copyright infringement and awarding Wall Data $210,000 in damages. Subsequently, Wall Data filed a motion under 17 U.S.C. § 505 requesting over $1.5 million in attorneys' fees and nearly $150,000 in costs. The district court granted Wall Data $516,271 in attorneys' fees and approximately $38,000 in costs. After the district court entered final judgment against the Sheriff's Department, the Sheriff's Department timely appealed.

The Sheriff's Department now challenges (1) the district court's order granting summary judgment against its § 107 fair use defense; (2) the district court's evidentiary rulings on motions in limine including those affecting its § 107 fair use defense and § 117 essential step defense; (3) the district court's jury instructions regarding, inter alia, the Sheriff's Department's § 117 essential step defense; and (4) the district court's order granting Wall Data costs and attorneys' fees.

II. ANALYSIS

The 1976 Copyright Act defines a "computer program" as "a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result." 17 U.S.C. § 101. We have long held that a computer program is copyrightable as a "tangible medium of expression." Apple Computer Inc. v. Formula Int'l, Inc., 725 F.2d 521, 524-25 (9th Cir.1984).

As the owner of a copyright, Wall Data has exclusive rights in its copyrighted work. See 17 U.S.C. § 106. Exemptions, compulsory licenses, and defenses found in the Copyright Act narrow Wall Data's rights as a copyright owner. See id. at §§ 107-122. Here, the Sheriff's Department claims that two defenses found in the Copyright Act apply: the § 107 fair use defense and the § 117 essential step defense. As discussed below, we hold that neither of these defenses save the Sheriff's Department from liability to Wall Data for copyright infringement, and we affirm the district court in...

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