Two technology companies enter a joint development agreement, or one company licenses software to the other. Things start out well, but down the road, one party claims that its proprietary software was reverse-engineered by the other through a process known as decompilation—i.e., converting machine-readable object code into human-readable source code. This common, often innocent process in software development is a frequent source of costly, contentious litigation. The plaintiff in such a case may allege a variety of state law claims, including tortious interference with contract, unfair competition, unjust enrichment, and breach of contract, to name a few. Those state law causes of action may be asserted in state court, where, often, the judges are less familiar with intellectual property law than some of their federal counterparts are. And even when such claims are removed to federal court based on diversity, that removal does nothing to avoid the additional remedies which may be available under state law, including exemplary damages and/or mandatory attorney’s fees. Fortunately for defendants, federal preemption under the Copyright Act presents a potential shelter from state law claims and state court jurisdiction. Also, the Fifth Circuit has recognized one provision of the Act as defeating certain decompilation-based claims outright.
The Two Prongs of Copyright Act Preemption
In the Fifth Circuit, state law claims face a two-pronged test for preemption, with the first prong satisfied if the claim falls within the subject matter of copyright as defined by the Act. At the core of most claims relating to decompilation is the duplication and use of copyrightable (not always copyrighted) software or software architecture. Thus, the first prong of copyright preemption is easily met.
However, the second prong of the analysis is where most Copyright Act preemption battles are fought. Under that prong, the cause of action must be shown to protect rights that are equivalent to the exclusive rights of a federal copyright. More commonly, this is described as the “extra element” test, whereby preemption does not occur if the cause of action contains an element which falls outside of copyright law. In some cases, breach of contract claims have been held not preempted because the contractual right sued on dealt with something other than copyright protection, such as payment or confidentiality. Likewise, trade secret misappropriation claims have been held by a number of courts to have an extra element in their requirement of a confidential relationship. Thus, it is easy to see how certain causes of action related to decompilation might not be preempted.
Section 117 of the Act defeats certain decompilation-based claims outright
Though copyright preemption may not dispose of every decompilation-related claim, especially in the face of artful pleading by claimants’ attorneys, it is still an important weapon in the decompilation defendant’s arsenal. Importantly, in Vault v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988), the Fifth Circuit held that the following language from section 117 of the Act recognizes certain types of decompilation as legal, non-infringing activity.
[I]t 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 provided: (1) that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner…
Specifically, the Court of Appeals held that it was permissible under section 117 for a party to decompile anticopying software for the purpose of developing software that would defeat it, despite license language prohibiting copying or decompiling and a state law permitting such prohibitions. The state law claims to the contrary were held to be preempted. Thus, decompilation for the purpose of understanding software and developing another program that would work together with it (or, in this case, against it) is afforded special protection under the Act. And, notably, other circuits have applied section 117 even more broadly, construing the “essential step in the utilization” language to allow decompilation for the purpose of adding functionality for a particular customer’s needs.
Though Copyright Act preemption does not always defeat state court claims and jurisdiction, it is a useful weapon in intellectual property litigation, particularly with respect to causes of action based on decompilation. Therefore, when facing any such suit, whether in state court or federal, defendants and their counsel are well served to consider carefully whether any of the asserted claims pass the Fifth Circuit’s two-pronged test. There may be a substantial opportunity to narrow the claims and relief in play, or even to seek summary dismissal.