This whole week I'm going to be talking about a recent court decision that's come to my attention that is particularly customer-unfriendly. Before I get into the details, though, I think we need to lay a bit of groundwork about how copyright law works, and doesn't work, when it comes to software. And a good way is to examine an older court decision - a case that many observers and even Congress think is the worst beat that software customers ever took.

In MAI Systems v. Peak Computer (U.S. Court of Appeals 9th Circuit, 1993,) computer manufacturer MAI sued third-party service provider Peak for copyright infringement. MAI's basic argument was that, in booting up an MAI system to service it, Peak's service technicians were making an illegal copy of MAI's operating system software by loading it into RAM. You may laugh and think that anyone with even a rudimentary understanding of computers would reject that argument out of hand, but the court bought it hook, line, and sinker. What's worse, to rule in favor of MAI, the court had to find a way to ignore what would appear to be a clear manifestation of Congressional will on this subject.

In 1993, one of the few portions of the Copyright Act that pertained specifically to computer software was Section 117, "Limitations on exclusive rights: Computer programs." That's the section that gives customers the right to make a back-up copy of a program, and it also says that "the owner of a copy of a computer program" is allowed to make a copy that "is created as an essential step in the utilization of the computer program." And if loading the software into RAM isn't an "essential step" in utilizing a program, what is?

Nonetheless, the Ninth Circuit ruled that Section 117 did not apply in the MAI situation. For one thing, the MAI software came with license agreements that said the licensee - MAI's paying customers, in other words - could only allow "three (3) of its bona fide employees" to access the system software diagnostics. But, in the court's view, it wasn't just a matter of Peak's employees not being entitled to Section 117 protections - MAI's customers weren't either: "Since MAI licensed its software, the Peak customers do not qualify as "owners" of the software and are not eligible for protection under 117."

To say this decision was somewhat controversial is to put it mildly, since the anti-competitive consequences of the Ninth Circuit's ruling, particularly in regards to third party support, were manifestly obvious. Naturally, MAI continued to sue any third party that dared encroach on its court-granted monopoly on servicing its installed base, and it was clear that hardware and software manufacturers would be changing their license agreements so they could do likewise. For once, Congress was actually forced to act, in 1998 adding provision (c) and (d) to Section 117 to at least try to make it clear that third party service providers could touch their customers' computers without being copyright infringers. (Even in this limited goal, by the way, Congress was not completely successful, as we've seen with lawsuits from companies like StorageTek that closely parallel MAI's approach.)

Unfortunately, while legislatively overturning the MAI decision, Congress did not clarify the far more fundamental challenge to the Section 117 protections made by the Ninth Circuit's decision. Is the "owner of a copy" of a software program that Section 117 shields not an owner if the software is licensed? Of course, at least according to software company license agreements, virtually all software is "licensed, not sold." So if that means no software customers are owners of a copy, then why did Congress even bother amending 117, since software licenses render it completely meaningless?

Of course, other courts have had different takes on the owner of a copy issue than that in the MAI case, so at this point it's simply not clear what the law is. Unfortunately, as I'll discuss tomorrow, the Ninth Circuit is back on the case, so to speak. And that means be afraid, software customers, be very afraid.