The
case dates back to 1996, when consultant programmer William Krause
parted company with title insurance firm Titleserv after 10 years
of service. During that period he had written over 35 programs for
the firm, eight of which became the subject of a lawsuit.
Unfortunately for Titleserv, the question of ownership and
copyright in the programs had never been fully agreed, and on his
departure, according to court papers, Krause took with him the only
copies of the source code for two of the disputed programs, leaving
copies of the other six.
Working versions of all eight programs were installed on the
Titleserv’s servers, but had been locked, so that the source code
behind them was inaccessible. Krause told Titleserv that they could
continue to use the programs, but had no right to modify the source
code.
Titleserv sued in July 1996, alleging misappropriation of its
property.
In the meantime, Titleserv staff managed to access the source
code, and modified it slightly, in order to keep things running
smoothly until the firm could develop a newer system.
Krause then filed his own suit, alleging copyright
infringement.
The District Court ruled against him, finding that Titleserv’s
use and modification was protected under the US Copyright Act. This
Act gives a defence to anyone who owns a physical copy of a
computer program, adapts it as “an essential step in the
utilisation of the computer program in conjunction with a machine,”
and does not use it in any other manner.
Krause appealed, but lost his case in March this year when the
US Appeal Court for the Second Circuit upheld the lower court
ruling.
In effect, the case hinged on the question of ownership – the
ownership of copies of the disputed program.
According to the Appeal Court, “formal title in a program copy
is not an absolute prerequisite to qualifying for [the Act’s]
affirmative defense.” In its opinion, the question was:
“whether the party exercises sufficient
incidents of ownership over a copy of the program to be sensibly
considered the owner of the copy for purposes of [the Act]. The
presence or absence of formal title may of course be a factor in
this inquiry, but the absence of formal title may be outweighed by
evidence that the possessor of the copy enjoys sufficiently broad
rights over it to be sensibly considered its owner.”
On this occasion, said the Court, Teleserv had paid a
considerable price for the programs, which had been customised for
its needs. Krause had not reserved any rights to take the programs
back, said the Court.
According to CNET News.com, the Supreme Court has now refused to
take the case further.
