Apple Computer, Inc. v. Microsoft Corp.

• Decision Date: 25 July 1989
• Docket Number: No. C-88-20149-WWS.,C-88-20149-WWS.
• Citation: 717 F. Supp. 1428
• Parties: APPLE COMPUTER, INC., Plaintiff, v. MICROSOFT CORPORATION and Hewlett-Packard Company, Defendants.
• Court: U.S. District Court — Northern District of California

717 F. Supp. 1428

APPLE COMPUTER, INC., Plaintiff, v. MICROSOFT CORPORATION and Hewlett-Packard Company, Defendants.

No. C-88-20149-WWS.

United States District Court, N.D. California.

July 25, 1989.

Jack E. Brown, Brown & Bain, P.A., Phoenix, Ariz., Lois W. Abraham, Chris R. Ottenweller, Martin L. Lagod, Brown & Bain, Palo Alto, Cal., for plaintiff Apple Computer, Inc.

David T. McDonald, Karl J. Quackenbush, Shidler McBroom Gates & Lucas, William O. Ferron, Jr., Seed & Berry, Seattle, Wash., John N. Hauser, Lynn H. Pasahow, McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for defendant Microsoft Corp.

S. Leslie Misrock, Jonathan A. Marshall, Jon R. Stark, Pennie & Edmonds, New York City, Neil Boorstyn, Townsend and Townsend, San Francisco, Cal., Stephen P. Fox, Roland I. Griffin, Hewlett-Packard Co., Palo Alto, Cal., for defendant Hewlett-Packard Co.

MEMORANDUM OF DECISION AND ORDER

SCHWARZER, District Judge.

Apple Computer, Inc. ("Apple") has brought this copyright infringement action against Microsoft Corporation ("Microsoft") and Hewlett-Packard Company ("HP"), alleging that the visual displays in Microsoft's software product Windows 2.03 and HP's product NewWave infringe Apple's copyrighted graphic user interface.

Microsoft and HP previously moved for summary judgment under the Agreement between Apple and Microsoft dated November 22, 1985 ("Agreement"). In its prior ruling, the Court held that the Agreement is not a complete defense to Apple's infringement claims with respect to Windows 2.03. It also held that the Agreement licenses Microsoft "to use the visual displays in Windows 1.0 and the named applications programs in current and future software products." Apple Computer, Inc. v. Microsoft Corp., 709 F.Supp. 925, 931-32 (N.D.Cal.1989).

In its motion Microsoft also sought an adjudication that the license covers a set of discrete visual displays and that the visual displays in Windows 2.03 are within this set. (Microsoft Memo. filed 2/13/89 at 3.) The Court rejected that claim insofar as it was based solely on the interpretation of the Agreement. Following issuance of the prior ruling, however, the parties submitted videotapes and other materials directed at a comparison of the visual displays in Windows 1.0 and those in Windows 2.03. HP also moved for partial summary judgment that the license covers discrete visual displays. After further briefing and argument, following distribution to counsel of a prior draft of this memorandum, the Court now makes its rulings on Microsoft's requested adjudication and HP's motion.¹

The question now before the Court is whether the Agreement, although not a complete defense, is a partial defense against the infringement claim and, if so, to what extent it licenses the visual displays in Windows 2.03 and NewWave.

I.

Apple contends that the 1985 agreement was only "a license of the interface of Windows Version 1.0 as a whole, not a license of broken out `elements' which Microsoft could use to create a different interface more similar to that of the Macintosh." (Apple Memo. 7.) Microsoft and HP contend that the license applies to discrete visual displays in Windows 1.0 individually and, therefore, that Windows 2.03 and NewWave are covered by the license to the extent that they include visual displays found in Windows 1.0.

The language of the 1985 Agreement does not support Apple's restrictive interpretation. The Agreement identifies its subject matter as "certain visual displays generated by ... `Microsoft Windows Version 1.0'" and five named applications programs. (Microsoft Memo., Ex. A, Agreement, Preamble (emphasis added).) Microsoft acknowledged that these "visual displays ... are derivative works of the visual displays generated by Apple's Lisa and Macintosh graphic user interface programs." (Id., ¶ 1 (emphasis added).)

Apple granted Microsoft a non-exclusive "license to use these derivative works in present and future software programs and to license them to ... third parties." (Id., ¶ 2 (emphasis added).) Microsoft, in turn, granted Apple a non-exclusive license "to use any new visual displays created by Microsoft ... as part of its Microsoft Windows retail software product." (Id., ¶ 5.)

The Agreement makes clear that the parties did not consider an interface and the visual displays generated by that interface to be synonymous, and that they chose the words of the license deliberately. The word "interface" is used in paragraph one in the context of Microsoft's acknowledgment that the licensed "visual displays ... are derivative works of the visual displays generated by Apple's Lisa and Macintosh graphic user interface programs." The juxtaposition in that sentence shows that the terms "visual displays" and "interface," as used in the Agreement, were not regarded by the parties as interchangeable.

Had it been the parties' intent to limit the license to the Windows 1.0 interface, they would have known how to say so. Instead, the "derivative works" covered by the license are identified as the "visual displays" in the Windows 1.0 interface, not the interface itself. And there is nothing in the 1985 Agreement that indicates that it was intended as a product license restricting Microsoft and its licensees to the use of the Windows 1.0 interface as a whole.

Apple contends that, notwithstanding the absence of any language in the Agreement to this effect, its negotiators understood that the license did not allow Microsoft to develop a new interface more similar to the Macintosh interface. The history of the negotiations, however, shows that Apple tried but did not succeed in obtaining Microsoft's agreement to a limitation of the license to Windows 1.0 taken as a whole, protecting against the development of interfaces more like the Macintosh look and feel. 709 F.Supp. at 927. Instead the parties executed a license to use specified visual displays.

To avoid the plain meaning of the Agreement, Apple seeks to impose a tortured interpretation on the words "visual display," namely that they serve only to "distinguish the computer code of Windows Version 1.0 from the audiovisual works which the code produced." (Apple Memo. 9.) Apple bases this argument on the fact that the Agreement does not anywhere refer to "individual visual display elements." (Id.) The failure of the Agreement to refer to "individual visual display elements", however, does not mean that, contrary to the plain meaning of the language of the Agreement, the license is not to use discrete visual displays.²

That the license of visual displays from Apple to Microsoft must mean what it says is also confirmed by the use of the same language in the license from Microsoft to Apple "to use any new visual displays created by Microsoft ... in Apple's software programs." (Microsoft Memo., Ex. A, Agreement ¶ 5.) This license clearly gives Apple the right to use individual visual displays created by Microsoft; Apple is not limited to incorporating the entire interface into its software programs if it wishes to use any new visual display created by Microsoft. This understanding of the effect of the license from Microsoft was shared by Apple's chief negotiator, Eisenstat, who testified that the license allowed Apple to incorporate into its Macintosh interface any "new visual feature" developed by Microsoft for Windows. (Microsoft Memo. 7.)

Furthermore, as pointed out by Microsoft and HP, Apple's current interpretation would render the parties' sublicensing rights worthless. Both Apple and Microsoft rely heavily on third-party programmers to develop applications programs to run under their respective operating environments, thus enhancing the value of the operating environments. Applications programs incorporate a mixture of visual features from the operating environment and new features added by the applications programmers. This necessarily changes the visual displays seen by the user.³ Under Apple's contention that the licenses extend to the interface as a whole and do not allow deviation from that interface, such selective use of visual features from the operating environment and creation of different visual displays would violate the licenses. An interpretation that leads to such a result is unreasonable.⁴

Thus, as stated in the Court's prior ruling, the language of the license "allows Microsoft ... to use the licensed visual displays in future versions of Windows and in different applications programs, whether then in existence or not." 709 F.Supp. at 929.

Contrary to Apple's suggestion, there is nothing in the copyright law that precludes the grant of such a license to use visual displays and to incorporate them into a new work that also includes new visual displays. A copyright license is a contract like any other contract and the starting point of the analysis must necessarily be the terms of the license. See Cohen v. Paramount Pictures Corp., 845 F.2d 851, 853 (9th Cir. 1988); see also 3 M. Nimmer & D. Nimmer, Nimmer on Copyright § 10.08 (1988). As stated above, the terms of the 1985 license are clear and unambiguous.

Apple also cites the rule that a licensee infringes the copyright if he significantly alters the licensed work. This rule has no application here because Microsoft is not accused of altering a licensed work; the use of visual displays was licensed, not use of Windows 1.0 as a whole. Moreover, each of the cases on which Apple relies for this proposition involved action by a copyright licensee beyond the scope of the license. See, e.g., Frank Music Corp. v. Metro-Goldwyn Mayer, Inc., 772 F.2d 505, 511-12 (9th Cir.1985) (performance of musical composition accompanied by visual representations of dramatic work from which music came violated license expressly limited to performing music); Gilliam v. American Broadcasting Co., 538 F.2d 14, 20-21 (2d Cir.1976) (licensee's unilateral editing of television programs violated express provision of license requiring author's...