Practice Management Information Corp. v. American Medical Ass'n

• Decision Date: 06 August 1997
• Docket Number: No. 94-56774,94-56774
• Citation: 121 F.3d 516
• Parties: 235 Copr.L.Dec. P 27,684, 43 U.S.P.Q.2d 1611, 45 U.S.P.Q.2d 1780, Medicare & Medicaid Guide P 45,548, 97 Cal. Daily Op. Serv. 6252, 97 Daily Journal D.A.R. 10,221 PRACTICE MANAGEMENT INFORMATION CORPORATION, a California Corporation, Plaintiff-Appellant, v. The AMERICAN MEDICAL ASSOCIATION, an Illinois nonprofit corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 516

121 F.3d 516

235 Copr.L.Dec. P 27,684, 43 U.S.P.Q.2d 1611,

45 U.S.P.Q.2d 1780,

Medicare & Medicaid Guide P 45,548,

97 Cal. Daily Op. Serv. 6252,

97 Daily Journal D.A.R. 10,221

PRACTICE MANAGEMENT INFORMATION CORPORATION, a California Corporation, Plaintiff-Appellant, v. The AMERICAN MEDICAL ASSOCIATION, an Illinois nonprofit corporation, Defendant-Appellee.

No. 94-56774.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 7, 1995.

Submission Vacated June 18, 1996.

Resubmitted Sept. 13, 1996.

Decided Aug. 6, 1997.

Joseph R. Re, Knobbe, Martens, Olson & Bear, Newport Beach, CA, for plaintiff-appellant.

Jack Bierig, Sidley & Austin, Chicago, IL, for defendant-appellee.

Maureen Brodoff, National Fire Protection Association, Quincy, MA, for amici.

Appeal from the United States District Court for the Central District of California; Dickran M. Tevrizian, District Judge, Presiding. D.C. No. CV-94-03107-DT.

Before: BROWNING, NORRIS, and REINHARDT, Circuit Judges

JAMES R. BROWNING, Circuit Judge.

Practice Management Information Corporation ("Practice Management") appeals from a partial summary judgment and preliminary injunction forbidding it from publishing a medical procedure code copyrighted by the American Medical Association ("the AMA"). ¹

I.

Over thirty years ago, the AMA began the development of a coding system to enable physicians and others to identify particular medical procedures with precision. These efforts culminated in the publication of the Physician's Current Procedural Terminology ("the CPT"), on which the AMA claims a copyright.

The current edition of the CPT identifies more than six thousand medical procedures and provides a five-digit code and brief description for each. The CPT is divided into six sections--evaluation, anesthesia, surgery, radiology, pathology, and medicine. Within each section, procedures are arranged to enable the user to locate the code number readily. In the anesthesia section, procedures are grouped according to the body part receiving the anesthetic; in the surgical section, the procedures are grouped according to the body system, such as the digestive or urinary system, on which surgery is performed. The AMA revises the CPT each year to reflect new developments in medical procedures.

In 1977, Congress instructed the Health Care Financing Administration ("HCFA") to establish a uniform code for identifying physicians' services for use in completing Medicare and Medicaid claim forms. See 42 U.S.C. § 1395w-4(c)(5). Rather than creating a new code, HCFA contracted with the AMA to "adopt and use" the CPT. Agreement p 1. The AMA gave HCFA a "non-exclusive, royalty free, and irrevocable license to use, copy, publish and distribute" the CPT. Id. p 3(a). In exchange, HCFA agreed "not to use any other system of procedure nomenclature ... for reporting physicians' services" and to require use of the CPT in programs administered by HCFA, by its agents, and by other agencies whenever possible. Id. pp 1, 2. ²

HCFA published notices in the Federal Register incorporating the CPT in HCFA's Common Procedure Coding System, see 48 Fed.Reg. 16750, 16753 (1983); 50 Fed.Reg. 40895, 40897 (1985), and adopted regulations requiring applicants for Medicaid reimbursement to use the CPT. See 42 C.F.R. § 433.112(b)(2) (requiring compliance with Part 11 of the State Medicaid Manual, which requires states receiving federal funding for Medicaid to adopt the Administration's Common Procedure Coding System as the exclusive medical procedure coding system). ³

Practice Management, a publisher and distributor of medical books, purchases copies of the CPT from the AMA for resale. After failing to obtain the volume discount it requested, Practice Management filed this lawsuit seeking a declaratory judgment that the AMA's copyright in the CPT was invalid for two reasons: (1) the CPT became uncopyrightable law when HCFA adopted the regulation mandating use of CPT code numbers in applications for Medicaid reimbursement, and (2) the AMA misused its copyright by entering into the agreement that HCFA would require use of the CPT to the exclusion of any other code. The district court granted partial summary judgment for the AMA and preliminarily enjoined Practice Management from publishing the CPT. Practice Management appeals.

II.

Practice Management's argument that the CPT became law and entered the public domain when HCFA by regulation required its use rests ultimately upon Banks v. Manchester, 128 U.S. 244, 9 S.Ct. 36, 32 L.Ed. 425 (1888), which held that judicial opinions are uncopyrightable. Banks in turn rests upon two grounds, neither of which would justify invalidation of the AMA's copyright.

The first ground for the Banks holding that judicial opinions are not subject to copyright is that the public owns the opinions because it pays the judges' salaries. Id. at 253, 9 S.Ct. at 39. The second is that as a matter of public policy, "the whole work done by the judges constitutes the authentic exposition and interpretation of the law, which, binding every citizen, is free for publication to all...." Id.

The first ground is clearly not applicable to the CPT. The copyright system was not significant in Banks because judges had no proprietary interest in their opinions. The copyright system is of central importance in this case because the AMA authored, owns, and maintains the CPT and claims a copyright in it.

The copyright system's goal of promoting the arts and sciences by granting temporary monopolies to copyrightholders was not at stake in Banks because judges' salaries provided adequate incentive to write opinions. In contrast, copyrightability of the CPT provides the economic incentive for the AMA to produce and maintain the CPT. "To vitiate copyright, in such circumstances, could, without adequate justification, prove destructive of the copyright interest, in encouraging creativity," a matter of particular significance in this context because of "the increasing trend toward state and federal adoptions of model codes." 1 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 5.06[C], at 5-92 (1996). ⁴ As the AMA points out, invalidating its copyright on the ground that the CPT entered the public domain when HCFA required its use would expose copyrights on a wide range of privately authored model codes, standards, and reference works to invalidation. ⁵ Non-profit organizations that develop these model codes and standards warn they will be unable to continue to do so if the codes and standards enter the public domain when adopted by a public agency. ⁶

The second consideration underlying Banks--the due process requirement of free access to the law--may be relevant but does not justify termination of the AMA's copyright. There is no evidence that anyone wishing to use the CPT has any difficulty obtaining access to it. See Texas v. West Publ'g Co., 882 F.2d 171, 177 (5th Cir.1989). Practice Management is not a potential user denied access to the CPT, but a putative copier wishing to share in the AMA's statutory monopoly. Practice Management does not assert the AMA has restricted access to users or intends to do so in the future.

The AMA's right under the Copyright Act to limit or forgo publication of the CPT poses no realistic threat to public access. The AMA has no incentive to limit or forgo publication. If the AMA were to do so, HCFA would no doubt exercise its right to terminate its agreement with the AMA. ⁷ Other remedies would also be available, including "fair use" and due process defenses for infringers, see 1 Nimmer & Nimmer, supra, § 5.06[C], at 5-92, and, perhaps most relevant, mandatory licensing at a reasonable royalty could be required in light of the great public injury that would result if adequate access to the CPT were denied. See Abend v. MCA, Inc., 863 F.2d 1465, 1479 (9th Cir.1988); Universal City Studios, Inc. v. Sony Corp. of America, 659 F.2d 963, 976 (9th Cir.1981), rev'd on other grounds, 464 U.S. 417, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984).

The Supreme Court has not considered a case in which the author asserted a proprietary interest in material adopted by the government as law. However, the First and Second Circuits have declined to enjoin enforcement of private copyrights in these circumstances.

In Building Officials & Code Admin. v.Code Technology, Inc., 628 F.2d 730 (1st Cir.1980), the district court preliminarily enjoined Code Technology, Inc. from copying a building code copyrighted by Building Officials & Code Administration ("BOCA"), a private, non-profit group, and adopted by the State. The First Circuit reversed. It recognized the problem posed by Banks, but nonetheless refrained from holding BOCA's copyright invalid:

Groups such as BOCA serve an important public function; arguably they do a better job than could the state alone in seeing that complex yet essential regulations are drafted, kept up to date and made available. Since the rule denying copyright protection to judicial opinions and statutes grew out of a much different set of circumstances than do these technical regulatory codes, we think BOCA should at least be allowed to argue its position fully on the basis of an evidentiary record, into which testimony and materials shedding light on the policy issues discussed herein may be placed.

Id. at 736.

In CCC Info. Servs., Inc. v. Maclean Hunter Mkt. Reports, Inc., 44 F.3d 61 (2d Cir.1994), the Second Circuit declined to invalidate the copyright on a privately prepared listing of automobile values that several states required insurance companies to use in calculating insurance awards:

We are not prepared to hold that a state's reference to a copyrighted work as a legal standard for valuation results in loss of the copyright. While there are indeed policy considerations that support CCC's argument, they are opposed by countervailing considerations. For example, a rule that the adoption of such a reference by a...