Apple Computer, Inc. v. Franklin computer Corp. - brief

CASE NAME	APPLE COMPUTER, INC., a California corporation, Appellant v. FRANKLIN COMPUTER CORPORATION, a Pennsylvania corporation
COURT	UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
CITATION, DATE	714 F.2d 1240; 1983 U.S. App. LEXIS 24388; 219 U.S.P.Q. (BNA) 113; Copy. L. Rep. (CCH) P25,565; 70 A.L.R. Fed. 153. August 30, 1983

PROCEDURAL HISTORY
TRIAL COURT:		APPEAL COURT (for appeal cases only):
PLAINTIFF	Apple Computer, Inc.	APPELLANT	Apple Computer, Inc.
DEFENDANT	Franklin Computer Corp.	RESPONDENT	Franklin Computer Corp.

DESCRIPTION OF EVENTS
"Apple Computer, Inc. appeals from the district court's denial of a motion to preliminarily enjoin Franklin Computer Corp. from infringing the copyrights Apple holds on fourteen computer programs." "Apple, one of the computer industry leaders, manufactures and markets personal computers (microcomputers), related peripheral equipment such as disk drives (peripherals), and computer programs (software). It presently manufactures Apple II computers and distributes over 150 programs. Apple has sold over 400,000 Apple II computers, employs approximately 3,000 people, and had annual sales of $335,000,000 for fiscal year 1981. One of the by-products of Apple's success is the independent development by third parties of numerous computer programs which are designed to run on the Apple II computer." "Franklin, the defendant below, manufactures and sells the ACE 100 personal computer and at the time of the hearing employed about 75 people and had sold fewer than 1,000 computers. The ACE 100 was designed to be "Apple compatible," so that peripheral equipment and software developed for use with the Apple II computer could be used in conjunction with the ACE 100. Franklin's copying of Apple's operating system computer programs in an effort to achieve such compatibility precipitated this suit." "Like all computers both the Apple II and ACE 100 have a central processing unit (CPU) which is the integrated circuit that executes programs. In lay terms, the CPU does the work it is instructed to do. Those instructions are contained on computer programs." "There are three levels of computer language in which computer programs may be written. High level language, such as the commonly used BASIC or FORTRAN, uses English words and symbols, and is relatively easy to learn and understand (e.g., "GO TO 40" tells the computer to skip intervening steps and go to the step at line 40). A somewhat lower level language is assembly language, which consists of alphanumeric labels (e.g., "ADC" means "add with carry"). Statements in high level language, and apparently also statements in assembly language, are referred to as written in "source code." The third, or lowest level computer language, is machine language, a binary language using two symbols, 0 and 1, to indicate an open or closed switch (e.g., "01101001" means, to the Apple, add two numbers and save the result). Statements in machine language are referred to as written in "object code."" "The CPU can only follow instructions written in object code. However, programs are usually written in source code which is more intelligible to humans. Programs written in source code can be converted or translated by a "compiler" program into object code for use by the computer. Programs are generally distributed only in their object code version stored on a memory device." "A computer program can be stored or fixed on a variety of memory devices, two of which are of particular relevance for this case. The ROM (Read Only Memory) is an internal permanent memory device consisting of a semi-conductor "chip" which is incorporated into the circuitry of the computer. A program in object code is embedded on a ROM before it is incorporated in the computer. Information stored on a ROM can only be read, not erased or rewritten. The ACE 100 apparently contains EPROMS (Erasable Programmable Read Only Memory) on which the stored information can be erased and the chip reprogrammed, but the district court found that for purposes of this proceeding, the difference between ROMs and EPROMs is inconsequential. 545 F. Supp. at 813. The other device used for storing the programs at issue is a diskette or "floppy disk", an auxiliary memory device consisting of a flexible magnetic disk resembling a phonograph record, which can be inserted into the computer and from which data or instructions can be read. "Computer programs can be categorized by function as either application programs or operating system programs. Application programs usually perform a specific task for the computer user, such as word processing, checkbook balancing, or playing a game. In contrast, operating system programs generally manage the internal functions of the computer or facilitate use of application programs. The parties agree that the fourteen computer programs at issue in this suit are operating system programs."

REMEDY SOUGHT	preliminarily enjoin Franklin Computer Corp. from infringing the copyrights Apple holds on fourteen computer programs.

ARGUMENT FOR PLAINTIFF
"Apple filed suit in the United States District Court for the Eastern District of Pennsylvania pursuant to 28 U.S.C. § 1338 on May 12, 1982, alleging that Franklin was liable for copyright infringement of the fourteen computer programs, patent infringement, unfair competition, and misappropriation." "After expedited discovery, Apple moved for a preliminary injunction to restrain Franklin from using, copying, selling, or infringing Apple's copyrights. The district court held a three day evidentiary hearing limited to the copyright infringement claims. Apple produced evidence at the hearing in the form of affidavits and testimony that programs sold by Franklin in conjunction with its ACE 100 computer were virtually identical with those covered by the fourteen Apple copyrights. The variations that did exist were minor, consisting merely of such things as deletion of reference to Apple or its copyright notice." "James Huston, an Apple systems programmer, concluded that the Franklin programs were "unquestionably copied from Apple and could not have been independently created." He reached this conclusion not only because it is "almost impossible for so many lines of code" to be identically written, but also because his name, which he had embedded in one program (Master Create), and the word "Applesoft", which was embedded in another (DOS 3.3), appeared on the Franklin master disk."

ARGUMENT FOR DEFENDANT
"Franklin's answer in respect to the copyright counts included the affirmative defense that the programs contained no copyrightable subject matter. Franklin counterclaimed for declaratory judgment that the copyright registrations were invalid and unenforceable, and sought affirmative relief on the basis of Apple's alleged misuse. Franklin also moved to dismiss eleven of the fourteen copyright infringement counts on the ground that Apple failed to comply with the procedural requirements for suit under 17 U.S.C. §§ 410, 411." "Franklin did not dispute that it copied the Apple programs. Its witness admitted copying each of the works in suit from the Apple programs. Its factual defense was directed to its contention that it was not feasible for Franklin to write its own operating system programs. David McWherter, now Franklin's vice-president of engineering, testified he spent 30-40 hours in November 1981 making a study to determine if it was feasible for Franklin to write its own Autostart ROM program and concluded it was not because "there were just too many entry points in relationship to the number of instructions in the program." Entry points at specific locations in the program can be used by programmers to mesh their application programs with the operating system program. McWherter concluded that use of the identical signals was necessary in order to ensure 100% compatibility with application programs created to run on the Apple computer."

COURT OPINION
"As the Second Circuit has stated recently, "Despite oft repeated statements that the issuance of a preliminary injunction rests in the discretion of the trial judge whose decisions will be reversed only for 'abuse', a court of appeals must reverse if the district court has proceeded on the basis of an erroneous view of the applicable law."" "Because we conclude that the district court proceeded under an erroneous view of the applicable law, we reverse the denial of the preliminary injunction and remand." "The [district] court held Apple had not made the requisite showing of likelihood of success on the merits because it "concluded that there is some doubt as to the copyrightability of the programs described in this litigation." It also stated that "Apple is better suited to withstand whatever injury it might sustain during litigation than is Franklin to withstand the effects of a preliminary injunction" because an injunction would have a "devastating effect" on Franklin's business, apparently concluding on that basis that Apple had failed to show irreparable harm." "Again, although we cannot point to a specific holding, running throughout the district court opinion is the suggestion that programs in object code and ROMs may not be copyrightable." "We read the district court opinion as presenting the following legal issues: (1) whether copyright can exist in a computer program expressed in object code, (2) whether copyright can exist in a computer program embedded on a ROM, (3) whether copyright can exist in an operating system program, and (4) whether independent irreparable harm must be shown for a preliminary injunction in copyright infringement actions." "Certain statements by the district court suggest that programs expressed in object code, as distinguished from source code, may not be the proper subject of copyright. We find no basis in the statute for any such concern." "In 1976, after considerable study, Congress enacted a new copyright law to replace that which had governed since 1909.... The statute provides: (a) Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." "Although section 102(a) does not expressly list computer programs as works of authorship, the legislative history suggests that programs were considered copyrightable as literary works. See H.R.Rep.No. 1476, 94th Cong., 2d Sess. 54, reprinted in 1976 U. S. Code Cong. & Ad. News 5659, 5667 ("'literary works' . . . includes . . . computer programs")." "The 1980 amendments added a definition of a computer program: A "computer program" is a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.... The amendments also substituted a new section 117 which provides that "it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program" when necessary to "the utilization of the computer program" or "for archival purposes only."" "We considered the issue of copyright protection for a computer program in Williams Electronics, Inc. v. Artic International, Inc., and concluded that "the copyrightability of computer programs is firmly established after the 1980 amendment to the Copyright Act."" "[I]t is clear from the language of the 1976 Act and its legislative history that it was intended to obliterate distinctions engendered by White-Smith." "Under the statute, copyright extends to works in any tangible means of expression "from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." 17 U.S.C. § 102(a) (emphasis added). Further, the definition of "computer program" adopted by Congress in the 1980 amendments is "sets 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 (emphasis added)." "Just as the district court's suggestion of a distinction between source code and object code was rejected by our opinion in Williams issued three days after the district court opinion, so also was its suggestion that embodiment of a computer program on a ROM, as distinguished from in a traditional writing, detracts from its copyrightability. In Williams we rejected the argument that "a computer program is not infringed when the program is loaded into electronic memory devices (ROMs) and used to control the activity of machines."" "In Baker v. Selden (1879), plaintiff's testator held a copyright on a book explaining a bookkeeping system which included blank forms with ruled lines and headings designed for use with that system. Plaintiff sued for copyright infringement on the basis of defendant's publication of a book containing a different arrangement of the columns and different headings, but which used a similar plan so far as results were concerned. The Court, in reversing the decree for the plaintiff, concluded that blank account-books were not the subject of copyright and that "the mere copyright of Selden's book did not confer upon him the exclusive right to make and use account-books, ruled and arranged as designated by him and described and illustrated in said book." Id. at 107. The Court stated that copyright of the books did not give the plaintiff the exclusive right to use the system explained in the books" "Franklin reads Baker v. Selden as "stand[ing] for several fundamental principles, each presenting . . . an insuperable obstacle to the copyrightability of Apple's operating systems." It states: First, Baker teaches that use of a system itself does not infringe a copyright on the description of the system. Second, Baker enunciates the rule that copyright does not extend to purely utilitarian works. Finally, Baker emphasizes that the copyright laws may not be used to obtain and hold a monopoly over an idea. In so doing, Baker highlights the principal difference between the copyright and patent laws -- a difference that is highly pertinent in this case." "Franklin argues that an operating system program is either a "process", "system", or "method of operation" and hence uncopyrightable.... Apple does not seek to copyright the method which instructs the computer to perform its operating functions but only the instructions themselves." "Although a literal construction of this language could support Franklin's reading that precludes copyrightability if the copyright work is put to a utilitarian use, that interpretation has been rejected by a later Supreme Court decision." "Perhaps the most convincing item leading us to reject Franklin's argument is that the statutory definition of a computer program, is a set of instructions to be used in a computer in order to bring about a certain result, 17 U.S.C. § 101, makes no distinction between application programs and operating programs. Franklin can point to no decision which adopts the distinction it seeks to make." "The expression/idea dichotomy is now expressly recognized in section 102(b) which precludes copyright for "any idea." This provision was not intended to enlarge or contract the scope of copyright protection but "to restate . . . that the basic dichotomy between expression and idea remains unchanged."" "If other programs can be written or created which perform the same function as an Apple's operating system program, then that program is an expression of the idea and hence copyrightable." "A copyright plaintiff who makes out a prima facie case of infringement is entitled to a preliminary injunction without a detailed showing of irreparable harm.... Nor can we accept the district court's explanation which stressed the "devastating effect" of a preliminary injunction on Franklin's business. If that were the correct standard, then a knowing infringer would be permitted to construct its business around its infringement, a result we cannot condone."

DISPOSITION OF CASE
"For the reasons set forth in this opinion, we will reverse the denial of the preliminary injunction and remand to the district court for further proceedings in accordance herewith."

ECONOMIC ANALYSIS

The issue here is functionality versus form, but the risk is that copyrighting operating systems limits applications software. The decision may promote open-source programming.