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Damage award for ‘autoreporting’ software

A software customer has to pay damages for copyright infringement for the continued ghostly presence of the software it had promised to remove from all its computer hard-drives.

Quantum Systems Integrators Inc. licensed software to Sprint Nextel Inc. in 1997 for use in data-monitoring functions on several hundred Sprint computers. In 2004, Sprint switched providers and began replacing Quantum’s software with another vendor’s product. Quantum sued Sprint for continued unauthorized use of its software, and the parties settled the suit Aug. 6, 2006, with Sprint’s agreement to stop using Quantum’s software within 60 days.

But, like E.T. phoning home, the Quantum software kept “autoreporting” messages indicating the software continued to be loaded onto Sprint computers’ RAM when the computers were turned on or rebooted. There was no evidence any Sprint employee ever deliberately accessed the Quantum software for a business-related purpose after expiration of the 60-day period.

After a jury trial in Alexandria federal court, Sprint was ordered to pay $69,000 in damages, or almost eight times the software license fee of $8,700 for the eight Sprint computers that still held the infringing software.

IP lawyers, take note: In the 4th Circuit’s unpublished opinion, Judge Allyson K. Duncan said that court had not yet directly addressed whether RAM copies can infringe.

But Duncan cited a leading 9th Circuit case and district court cases that hold that “the loading of copyrighted software creates an infringing copy,” saying “in this case the RAM copies were sufficiently fixed for purposes of copyright infringement.”

Although the 4th Circuit found no fault with the damage award when it decided the case July 7, it remanded the district court’s award of $381,705 in attorney’s fees. Duncan said Quantum achieved only “minimal success” in the lawsuit and the fee award was almost five times its award of actual damages.

Deborah Elkins

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