In drafting license agreements, licensors sometimes seek to prevent their licensees from engaging in certain competitive behavior such as creating works which compete with the copyrighted work, or from using other competitors’ works.
Courts have held that such restrictive licensing terms can constitute “copyright misuse.” The doctrine of misuse “prevents copyright holders from leveraging their limited monopoly to allow them control of areas outside the monopoly.” Assessment Technologies of WI, LLC v. Wiredata, 350 F.3d 640, 647 (7th Cir. 2003). While this doctrine has been applied to practices seen as violating the antitrust laws, such as certain tying arrangements, “[t]he question is not whether the copyright is being used in a manner violative of antitrust law (such as whether the licensing agreement is “reasonable”), but whether the copyright is being used in a manner violative of the public policy embodied in the grant of a copyright.” Lasercomb America, Inc. v. Reynolds, 911 F.2d 970, 978 (4th Cir. 1990). In other words, copyright misuse “forbids the use of the copyright to secure an exclusive right or limited monopoly not granted by the Copyright Office.” Id. at 977-79; accord Practice Management Info. v. Am. Med. Ass’n, 133 F.3d 1140 (9th Cir. 1997).
As such, licensees should be wary whenever their license agreements (i) attempt to control competition outside the scope of their copyright, and (ii) uses copyright to achieve that result. Copyright misuse does not invalidate the copyright, but merely precludes its enforcement during the period of the misuse. This defense is normally raised as a defense to a copyright infringement claim and can be asserted by any defendant, even if the defendant was not a party to the original “overreaching” contract.
Examples of copyright misuse:
• Requiring licensees and their employees to agree not to create their own works which compete with the copyrighted work. Lasercomb America, Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990).
• Requiring licensees to use the copyrighted work to the exclusion of other competitors’ works. Practice Management Info. v. Am. Med. Ass’n, 133 F.3d 1140 (9th Cir. 1997).
• Prohibiting the use of copyrighted software on any other equipment but the licensor’s, when that restriction effectively prevents the development of new works. DSC Communications Corp. v. DGI Technologies, Inc., 81 F.3d 597 (5th Cir. 1996).
• Threatening litigation in an effort to extract a licensing fee or other profit when there is no reasonable basis for determining that the copyright proprietor’s copyright has been infringed.
• Requiring licensees to purchase the copyrighted work in conjunction with other products.
Allen M. Lee Mr. Lee’s practice focuses on business, corporate and intellectual property matters, including the creation, protection and exploitation of intellectual property assets. For more information contact: Allen M. Lee, a Professional Law Corporation, Tel: (408) 249-2735, Email: info@allenmlee.com, Internet: www.allenmlee.com.
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