DSC Communications Corp. v. DGI Technologies, Inc.
| Decision Date | 30 April 1996 |
| Docket Number | No. 95-10850,95-10850 |
| Citation | 81 F.3d 597 |
| Parties | , 1995 Copr.L.Dec. P 27,513, 38 U.S.P.Q.2d 1699 DSC COMMUNICATIONS CORPORATION, Plaintiff-Appellant, v. DGI TECHNOLOGIES, INC., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Robert W. Kantner, Eric N. Whitney, Thomas Andrew Gigliotti, Baker & Botts, Dallas, TX, for plaintiff-appellant.
Stephen Granberry Gleboff, Douglas Aaron Cawley, David Hugh Judson, Aubrey Dale Pittman, Hughes & Luce, L.L.P., Dallas, TX, for defendant-appellee.
Appeals from the United States District Court for the Northern District of Texas.
Before REYNALDO G. GARZA, WIENER and STEWART, Circuit Judges.
DSC Communications Corporation obtained a preliminary injunction enjoining DGI Technologies, Inc. from making removable copies of DSC Communication Corporation's copyrighted software. DSC Communications Corporation appeals from the granting of this preliminary injunction, arguing that it is too narrowly drawn. Because we hold that the district court did not abuse its discretion in crafting the injunction, we AFFIRM.
DSC Communications Corporation ("DSC") manufactures telephone switching systems ("phone switches"). DGI Technologies, Inc. ("DGI") manufactures various devices, including microprocessor cards, that are used in DSC phone switches. DSC sued DGI for unfair competition on various grounds, including copyright infringement. DSC obtained a preliminary injunction in that suit, which prohibits DGI from making copies of DSC's copyrighted operating system software that can be removed from DSC's customer's premises. The injunction, however, does not prohibit DGI from making copies of DSC's copyrighted software that cannot be removed from DSC's customer's premises. DSC's appeals from the preliminary injunction, arguing that DGI should also be enjoined from making copies that cannot be removed from DSC's customer's premises.
A phone switch routes long distance telephone calls to their destinations. It consists of three principal components: (1) the switch matrix, which actually routes the telephone calls; (2) the trunk/line interface system, which converts long distance telephone signals into a form and sequence that can be handled by the switch matrix; and (3) a mass storage frame, which contains the software that operates the entire switching system.
Long distance signals must be in digital form and properly sequenced before they can be routed through the switch matrix. The trunk/line interface system converts the data arriving from the long distance telephone line into proper digital form and sequence. The trunk/line interface system is controlled by DSC's copyrighted software when it converts these signals. Once these signals have been "switched"--i.e. routed to their destination--the trunk/line system converts them back into a form in which they can be transmitted through the phone lines to their destination.
The trunk/line interface system is housed in metal cabinets called frames. These frames contain a number of shelves. The front of the shelves is open, and at the back of the shelves is a backpane. Cables carrying incoming telephone signals from the telephone line and outgoing signals to the switch matrix and the telephone lines are attached to the backpane. Groups of printed circuit boards called cards are inserted into the shelves of the frames from the front and connect to the backpane. These cards contain the components that translate the data The principal cards in the frames are microprocessor cards. The microprocessor cards contain firmware, which is software embedded in a memory chip on the card. When a microprocessor card is inserted into the frame, it must boot up. That is, it must download DSC's copyrighted operating system software into its random access memory ("RAM"). The booting up process is similar to that used in personal computers, which also boot up by downloading operating system software from a floppy disk or hard disk when the computer is turned on or reset. A microprocessor card must download DSC's copyrighted operating system software when it is used in the phone switch.
from the telephone line into a format that can be used by the switch matrix and vice versa.
DSC manufactures the entire phone switch system, and has a copyright on the software used in the phone switch. DSC sells phone switches, but does not sell the software necessary to operate them. Instead, it licenses the software to its customers. One of the customers to whom DSC sold a phone switch and licensed its software is NTS Communications Corporation ("NTS"). The licensing agreement between DSC and NTS prohibits NTS from copying the software, and only allows NTS to use the software in conjunction with the phone switch purchased from DSC.
DGI is attempting to develop a microprocessor card that can be used in DSC phone switches. Customers would use this card instead of using a DSC-manufactured card. DSC contends that DGI engaged in several acts of copyright infringement in its attempt to develop a microprocessor card. The alleged infringement at issue in this appeal is DGI's copying of DSC's copyrighted operating system software.
Because DSC did not sell its operating system software on the open market, the only way to gain access to the software was to license it from DSC. DGI needed to gain access to DSC's operating system software in order to develop a microprocessor card, because the microprocessor card had to be able to download the software into RAM, and had to be compatible with the software. To obtain access to the operating system software, DGI obtained access to a DSC phone switch owned by NTS. NTS gave DGI permission to use its phone switch to test microprocessor cards. In return for this permission, DGI gave NTS a ten percent discount on purchases of DGI cards, shelves and frames. DGI did more than merely test its cards, however. Without NTS's knowledge, it made copies of DSC's copyrighted software, and removed these copies from NTS's premises.
DGI used two methods to copy DSC's copyrighted software. First, it downloaded DSC's operating system into the memory of a DSC microprocessor card, out through a port on that card, and into a lap top computer. Second, DGI modified a DSC microprocessor card by adding chips designed to capture the communications between the card and another microprocessor card from which the operating system software would be obtained and a chip designed to hold and retain information on the downloading function when the microprocessor card was removed. DGI copied DSC's copyrighted operating system software using this modified microprocessor card.
The decision to grant or deny a preliminary injunction lies within the discretion of the district court and will be reversed on appeal only upon a showing of abuse of discretion. Blue Bell Bio-Medical v. Cin-Bad, Inc., 864 F.2d 1253, 1256 (5th Cir.1989).
In order to obtain a preliminary injunction, DSC was required to demonstrate: (1) a substantial likelihood of success on the merits; (2) a substantial threat of irreparable injury if the injunction is not issued; (3)...
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