Preliminary Injunction for Software Copyright Infringement

When can a plaintiff obtain a preliminary injunction relating to a customer’s use and distribution of copyrighted software beyond the scope of the customer’s license?  The court in Accusoft Corp. v. Quest Diagnostics, Inc., No. 12-40007 (D. Mass. April 18, 2012), granted a preliminary injunction, but limited the preliminary relief so as to properly balance the hardships between the parties.

The plaintiff’s software program, ImageGear, “operates as a component in other software applications to provide discrete imaging functions.”  The plaintiff sold both “development licenses, which allow the licensee to incorporate ImageGear into those other software applications,” as well as “distribution licenses, which authorize distribution of those applications once ImageGear has been incorporated into them.”  The defendants had both development and distribution licenses for two products, and a development license, but no express distribution license, for a third product, OptiMaxx.  The plaintiff filed suit alleging that it had discovered numerous unauthorized distributions of OptiMaxx, and subsequently moved for “preliminary injunctive relief prohibiting [the defendants] from further use or distribution of OptiMaxx and requiring . . . recall [of] all existing licenses,” or alternatively for “a prospective injunction that would prohibit further distribution of OptiMaxx.”

Although the plaintiff did not grant an express distribution license for OptiMaxx, e-mail exchanges appeared to show that the plaintiff was aware, by 2006, that OptiMaxx, including ImageGear, was being distributed.  In 2008, defendant MedPlus “transferred its rights in [OptiMaxx] to Quest.”  E-mails showed that the plaintiff was aware of this transfer.  Subsequently, the parties disputed how to measure the license fees owed for distributed versions of OptiMaxx that included ImageGear.  On the same day it cashed a check tendered by Quest for an amount Quest said it owed, the plaintiff brought suit.

The court considered the familiar factors for obtaining a preliminary injunction, which are worth reproducing here:

“a plaintiff ‘must establish (1) that he is likely to succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in his favor, and (4) that the injunction is in the public interest.'” Peoples Fed. Sav. Bank v. People’s United Bank, 2012 WL 414251, at *6 (1st Cir. Feb. 10, 2012) (quoting Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). Although each of these factors must be considered independently, the movant’s likelihood of success on the merits “weighs heaviest in the decisional scales.” Coquico, Inc. v. Rodriguez-Miranda, 562 F.3d 62, 66 (1st Cir. 2009) (citations omitted). This focus on the likelihood of success is particularly appropriate in actions for copyright infringement because “the resolution of the other three factors often turns on the plaintiff’s likelihood of success.” Id.  A plaintiff seeking a preliminary injunction does not bear the burden of disproving each affirmative defense asserted by the defendant.

Analyzing the factors for a preliminary injunction, the court agreed with the plaintiff that it had established “a likelihood that it will succeed on its copyright claims.”  There was no license agreement governing the use of ImageGear in OptiMaxx, “but defendants nonetheless apparently did copy, use, and distribute that software.”  The validity of the copyright was uncontested.  OptiMaxx had “been copied and distributed to both Quest facilities and a third-party customers.”  The defendants had not shown that they could meet their burden of establishing, as an affirmative defense, that settlement negotiations had “led to an accord and satisfaction of any licensing fees owed to plaintiff.”

Although eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 393 (2006), means that the court could not simply presume irreparable harm, and although plaintiff’s risks to “preserving the value of its intellectual property and controlling the pricing model for distribution of ImageGear” were probably “less severe than plaintiff fear[ed],” the court found “that continued (and possibly expanding) infringement of plaintiff’s software presents a risk of irreparable harm that is sufficient to support a limited, prospective injunction.”  Plaintiff’s delay in bringing the suit did not evidence a lack of irreparable harm; the plaintiff apparently had not been aware of the degree of infringement for several years, and then spent time trying to settle the matter.

Balancing the hardships, the court noted that forcing defendants to conduct a recall of their software on the scale requested by the plaintiff “would impose heavy and unnecessary costs on it and its customers.”  Balanced against the delay that the plaintiff “may experience in collecting licensing fees,” the “relative risks weigh[ed] against issuance of” the broader injunction sought by the plaintiff.  “However,” the court went on to say, “the balance shifts if the potential relief is limited to measures necessary to maintain the status quo.”  Therefore, the court adopted the plaintiff’s second proposed order, which “would command defendants to halt further distributions of the allegedly infringing applications but would not require them to recall existing licenses or to return to software itself to [the plaintiff].”  This order would both “cause relatively minimal harm to defendants,” but also would relieve the plaintiff of “a risk of an unknown degree of ongoing and potentially increasing infringement.”

Finally, the court noted that the public interest was served by enforcing the copyright laws.  Potential harm to the public from withdrawing a medical product from use would be negated by limiting “court-ordered relief . . . to a prospective injunction against distributions of OptiMaxx to new customers.”

The court also granted the defendants’ request for a protective order preventing the plaintiff from enforcing subpoenas against defendants’ customers.  The court granted the motion, and quashed the subpoenas, but did so without prejudice to the plaintiff to renew the subpoenas “after defendants have produced an accounting as required by the rule accompanying preliminary injunction order.”

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