Cite as 886 F.2d 1081 (9th Cir. 1989)
We conclude that Payday exceeded the scope of its license when it copied and prepared a modified version of the programs without S.O.S.’s permission.[1] Whether these acts, unshielded by any license, infringed S.O.S.’s copyright will be a matter for the district court to determine on remand.[2]
II. Trade Secrets
S.O.S. appeals the district court’s grant of summary judgment in favor of Payday on S.O.S.’s trade secrets count under the Uniform Trade Secrets Act, Cal.Civ.Code §§ 3426 et seq.[3] The facts S.O.S. alleges are essentially the same as in its
- ↑ Our analysis of these issues allows us succinctly to resolve two of the parties’ other claims. S.O.S. argues that contract language obligating S.O.S. to modify the program as necessary for $50.00 per hour also obligated Payday not to modify the program itself. The district court granted summary judgment in favor of Payday on this claim, relying on its interpretation of the software contract. Because we find that the contract did not give Payday the right to prepare derivative works based on S.O.S.’s programs, summary judgment was inappropriate an this basis. However, if it is determined on remand that Payday’s modifications resulted in the creation of a new work rather than a derivative work, the district court will need to consider whether such noninfringing modifications were also prohibited by the contract.
The district court dismissed as moot Payday’s declaratory judgment claim of copyright invalidity after determining that Payday had a license to use and modify the software. Because S.O.S.’s claims of copyright infringment are not disposed of by reference to the contract, the issue of copyright invalidity is not moot. Payday will have the opportunity to challenge the validity of S.O.S.’s copyright on remand, by producing evidence of intent to defraud and prejudice to substantiate its allegation of fraud on the copyright office, and by developing its theory that portions of Chu and Koyama’s work was not work for hire. Summary judgment in favor of S.O.S. will be appropriate on Payday’s challenge based on joint authorship.
- ↑ Because the district court construed the contract between S.O.S. and Payday to permit Payday’s uses, it did not need to consider the underlying question of whether Payday’s uses, unshielded by the contract, infringed S.O.S.’s copyright. We similarly do not need to reach that question here. It will remain for S.O.S. to prove that the modified programs prepared by Payday are substantially similar to S.O.S.’s, so as to make them derivative works rather than new works that would not infringe S.O.S.’s copyright. See Litchfield v. Spielberg, 736 F.2d 1352, 1357 (9th Cir.1984).
A second issue is whether Payday might have a defense to its copying of S.O.S.’s programs if it were found at trial that S.O.S. breached its contract by refusing to give Payday a copy of the software unless Payday paid for protective modifications. In that event, copying the software surreptitiously may have been the only means available to Payday to exercise its contractual right of use. We express no opinion as to whether a licensor’s breach of contract depriving a licensee of access to copyrighted material can excuse the licensee’s copying of that material in order to gain access.
- ↑ Section 3426.1(b) provides:
“Misappropriation” means:
(1) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
(2) Disclosure or use of a trade secret of another without express or implied consent by a person who:
(A) Used improper means to acquire knowledge of the trade secret; or
(B) At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was
(i) Derived from or through a person who had utilized improper means to acquire it;
(ii) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
(iii) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use …
Section 3426.1(a) provides:
“Improper means” includes … breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. Reverse engineering or independent derivation alone shall not be considered improper means.
Section 3426.1(d) provides:
“Trade secret” means information, including a … program … that:
(1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.The Legislative Committee Note to the statute elaborates on the requirements for maintaining a trade secret:
[R]easonable efforts to maintain secrecy have been held to include advising employees of the existence of the trade secret, limiting access to a trade secret an “need to know basis,” and controlling plant access…. [R]easonable use of a trade secret including controlled disclosure to employees and licensees is consistent with the requirement of relative secrecy.
Payday, on the other hand, may well have assumed that its purchase price for right of use would include the right to use the software on its own computer, if it ever purchased one. It could reasonably have assumed that S.O.S., not Payday, would bear the costs of protecting S.O.S.’s trade secret interests. This would not affect the extent of the license granted. Payday would be entitled to possess a copy of the software to enable it to exercise its limited right of use, but would not own that copy.
An owner of a copy of software has certain rights under the Copyright Act which a mere possessor does not. See, e.g., 17 U.S.C. § 117 (right to make copy or adaptation of program if essential to utilization of the program; right to make archival copy); 17 U.S.C. § 109(a) (right to sell or dispose of owned copy).
