In a recent decision, the Court of Appeals for the Federal Circuit upheld a “finders-keepers, losers-weepers” approach to copyright infringement. The court dismissed a copyright infringement case under the doctrine of claim preclusion because the original source code had been lost and not entered as evidence in a prior case even when, later, the original source code was found and produced for the case in suit. It’s a telling reminder to: i) archive all versions of your source code or risk losing the evidence you need to successfully assert your copyright and ii) ensure you have sufficient proof of infringement before initiating your suit.

In Aviation Software Inc. v. United States, 100 U.S.P.Q.2d (BNA) 1943 (Fed. Cir. 2011), the Federal Circuit granted the United States’ motion to dismiss a copyright infringement case relating to software used to maintain and service government-owned aircraft. According to the plaintiff Aviation Software, Inc. (“Aviation”), the allegedly infringing software included source code from Airframe Systems Inc.’s (“Airframe”) aircraft maintenance tracking software known as the Airline Resource Management System (ARMS). Id. Airframe was Aviation’s predecessor in interest.

Under a contract with the United States, L-3 Communications Corporation (“L-3”) developed new replacement software for tracking aircraft maintenance. In June of 2006, L-3 delivered its newly developed MMM (“M3”) program to the United States and granted the United States a non-exclusive, world-wide, royalty-free license for that program. According to Aviation however, the M3 program contained protected source code from the ARMS.

Before the suit against the United States, Airframe had made multiple attempts to assert its copyright against L-3. The district court dismissed Airframe’s first attempt for failure to state a claim (“Airframe I”). Id. It dismissed Airframe’s second attempt, in part, based on the doctrine of res judicata, i.e., claim preclusion (“Airframe II”). Id. After the Court of Appeals for the First Circuit affirmed, Airframe voluntarily dismissed its remaining infringement claims in that suit.

In early 2009, Airframe filed a third action alleging that L-3 directly and contributorily infringed its copyright by developing and using the M3 program and by allowing the United States to do the same (“Airframe III”). Id. In April 2010, Airframe filed yet another complaint alleging that L-3 directly and contributorily infringed its copyright through development and licensing of its M3 software (“Airframe IV”). Id. at 1945. After consolidating the counts of Airframe III and Airframe IV, the district court granted summary judgment in favor of L-3 because although Airframe relied on a declaration for evidence, it could not produce the original copyrighted source code for comparison to L-3’s source code. Absent the ability to compare the code, the court found that Airframe could not show the alleged infringing M3 program was substantially similar to its program, and therefore could not prove infringement. Id.

Having finally discovered Airframe’s lost source code, in June, 2010, Aviation accused the United States of copyright infringement for its use of the M3 program licensed from L-3. Aviation asserted that the M3 program contained unlicensed copies of the ARMS’ reports, report formats, and menu and column headings.

The United States argued, however, that the doctrine of claim preclusion barred Aviation’s action for failing to state a proper claim. Id.

Claim preclusion is an equitable principle that prevents a re-determination of the merits of a legal claim that have been already decided in a court of competent jurisdiction. This promotes judicial economy by precluding parties from relitigating issues that were or could have been raised in prior actions. According to the Federal Circuit, claim preclusion is “central to the purpose for which civil courts have been established, the conclusive resolution of disputes.” Id. at 1946 (Citations omitted). The court continued, this “public policy that there be an end of litigation, applies with particular force in the context of cases involving intellectual property where it serves to prevent duplicative litigation against a single infringer for a single act of infringement.” Id. at 1947 (Citations omitted).

Claim preclusion applies when there is: (i) a judgment on the merits in a prior suit, (ii) a second suit involving the same parties or their privies, (iii) the second suit is based on the same cause of action, and (iv) the litigant previously had a full and fair opportunity to litigate its case. Id. (Citations omitted).

Reviewing the record, the Federal Circuit found the first prong to be satisfied by the combined Airframe III and Airframe IV litigations, where Airframe asserted that L-3 contributorily infringed its copyrights when it developed the M3 software and licensed it to the United States. The second prong was satisfied because the United States and L-3 were in privity by virtue of their contractual relationship. The third prong was satisfied because several of the earlier suits and the suit against the United States involved the same transactional facts, and as such, involved the same “cause of action” for preclusion purposes. Id.

The fourth prong, however, was more controversial. Aviation claimed that it should not be bound by the claim preclusion doctrine because it had finally found the critical evidence that Airframe was unable to present in the earlier suits – the original source code. Id. at 1948. The court disagreed. According to the court, Airframe had a full and fair opportunity to litigate its case. Id. The court found that Airframe’s failure to find its original source code earlier did not amount to a showing that the original source code could not, with reasonable diligence, have been discovered in time to move for a new trial in the prior adjudicated cases. The court then iterated that “it is well-accepted that ‘the fact that … new evidence might change the outcome of the case does not affect the application of the claim preclusion doctrine.’” Id. (Citations omitted). Indeed, “[i]f submitting new evidence rendered a prior decision factually distinct, res judicata would cease to exist, and [litigation] would continue ad infinitum.” Id. (Citations omitted).

As the original plaintiff, Airframe had ample opportunity to locate its source code before any of its suits were initiated. Therefore, the court barred Aviation’s infringement claims based on claim preclusion, sending this aircraft maintenance software case to the bone yard.