Company Allowed to Copy Vendor’s Embedded Source Code

Rhett Pardon
TOPEKA, Kansas — A federal court has ruled that a company can copy its own source code to extract its data that is embedded in a licensor’s custom software.

The U.S. District Court for the District of Kansas, in a decision released this month, held that several “fair use" factors set out in the federal Copyright Act support the conclusion.

The case involved Shawnee Mission, Kansas-based Evolution Inc., which entered into a series of licensing agreements in 1998 with SunTrust Bank and affiliated entities to provide SunTrust with custom financial software.

But after three years of battling pervasive glitches, numerous patches and upgraded versions that spawned more problems, SunTrust fired Evolution and switched to another software company.

And that proved problematic during a switchover because SunTrust needed to extract its data embedded within Evolution's software and convert it into a format usable by its new software company.

Programmers for SunTrust wrote three programs to extract the data, but in so doing copied portions of Evolution's source code.

Evolution filed suit immediately in U.S. District Court for copyright infringement, breach of contract and misappropriation of trade secrets.

Atlanta, Ga.-based SunTrust moved for summary judgment, arguing that the copyright claim could not stand because SunTrust never exceeded the scope of the license, which permitted the licensee to use the software "for its own administrative, accounting, and management purposes."

The court held that the scope of the license was ambiguous and cannot be dismissed, but SunTrust attorneys also argued that the banking company could copy the source code under principles of fair use.

The court agreed, ruling that intermediate copying of source code to get at non-copyrightable elements of the program is permitted.

U.S. District Court Judge Carlos Murguia pointed to §107 of the Copyright Act that supported the court’s conclusion.

Specifically, the court held that SunTrust did not copy the source code with the aim of developing a competing commercial product; it did not copy the entire source code; and it is not a competitor of Evolution so its use will not affect Evolution's potential market for its source code.

The court also said that another program written by SunTrust that boosted the functionality of Evolution's software by incorporating the ability to generate a ledger print was permitted under §117(a) of the Copyright Act allowing the owner of a copy of a computer program to copy or adapt it where doing so is "an essential step in the utilization of the computer program ….”

The court granted SunTrust's motion for summary judgment, finding that the data extraction programs and feature enhancement program do not infringe Evolution's copyrights. Also, the court granted SunTrust summary judgment on Evolution's trade secrets claim, citing a lack of evidence.

“The court’s decision relied most heavily on Assessment Technology of Wisconsin vs. WIREdata Inc., 350 F.3d 640, 645 (7th Circuit, 2003), the facts of which did not involve reverse engineering,” Murguia wrote. “Therefore, while plaintiff’s arguments regarding this issue are not new, they nevertheless fail to clearly establish a manifest error of law.”

The case is Evolution Inc. vs. SunTrust Bank, et al., No. 01-2409.