4dd Holdings, LLC v. United States
15-945
| Fed. Cl. | Apr 20, 2022Background
- DoD/VA selected 4DD’s commercial TETRA software for the DMIX data-federation project; government licensed 64 cores of TETRA and 50 seats of TETRA Enterprise Studio via reseller Immix.
- The contract incorporated 4DD’s EULA, which limited government copying to specified cores/seats and one backup copy and forbade redistribution; a "phone home" tracking feature was disabled and 4DD provided a license portal instead.
- Government systems ended up with numerous over-installations; DHA and 4DD negotiated a "true-up" and in March 2015 the government paid $1.7M for 168 extra cores and the modification included a release covering liabilities arising from the over-installations.
- 4DD sued for copyright infringement in 2015 alleging unauthorized copies beyond the EULA limits; earlier the court found government spoliation (deletion of relevant evidence) and awarded sanctions and limited adverse inferences.
- Cross-motions for summary judgment address (a) validity and scope of the copyright/license, (b) whether excess copying is infringement and how many infringing copies exist, (c) whether the March 2015 release bars claims, and (d) whether §117(a) permits the government’s copies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does 4DD have a valid copyright in TETRA? | 4DD: Yes; seeks declaration. | Gov: Concedes. | Yes — court finds 4DD has a valid copyright. |
| Did the EULA prohibit additional copying and are those limits conditions (allowing infringement suit) or mere covenants (breach-only)? | 4DD: EULA bars copying beyond licensed cores/seats/one backup; terms are conditions precedent so infringement claim lies. | Gov: Various defenses — order-of-precedence/FAR, PSA/DFARS, subcontract language, and an implied-in-fact license permitting backups/SDLC copies. | EULA prohibits excess copying; the prohibitions are conditions precedent — 4DD may bring infringement claims. Implied-in-fact license and order-of-precedence/PSA/subcontract defenses rejected. |
| Are the many asserted copies (RAM, SDLC artifacts, VM images, backups, Enterprise Studio seats) infringing and may court decide the numbers now? | 4DD: All copies beyond EULA (Mr. Myers’ counts: ~79,220 TETRA copies; ~74,115 Studio copies) are infringing. | Gov: Many are nonfunctional/not "copies" for copyright purposes; expert disputes counting and core/seat allocations. | Denied as to characterization and counts — unresolved factual and technical disputes about what constitutes a copy and how many infringing instances exist; these issues reserved for trial. |
| Does the March 2015 modification/release bar 4DD’s infringement claims and/or does §117(a) permit the government’s copies because it was an "owner of a copy"? | 4DD: Release covered contract claims only; Immix lacked authority to release 4DD’s copyright claims; release limited to 168 cores or invalid because gov’t misrepresented counting. | Gov: The release (accord and satisfaction) released all liability arising from the over-installations; Immix acted with authority; alternatively §117(a) authorizes essential-step and archival copies because government was an owner. | Gov’t motion denied. Whether the release is valid (meeting of minds/misrepresentation) is a factual question for trial. As a matter of law, government is not an "owner of a copy" under §117(a), so §117 defense fails. |
Key Cases Cited
- Bitmanagement Software GmBH v. United States, 989 F.3d 938 (Fed. Cir.) (explains when an express contract precludes an implied-in-fact license and distinguishes conditions vs. covenants in software licenses)
- DSC Communications Corp. v. Pulse Communications, Inc., 170 F.3d 1354 (Fed. Cir.) (analysis of what contractual restrictions defeat "owner of a copy" status under 17 U.S.C. § 117)
- MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir.) (discusses ownership status vs. licensing for software and limits of § 117)
- Krause v. Titleserv, Inc., 402 F.3d 119 (2d Cir.) (examples of courts finding purchasers to be owners of software copies where restrictions were minimal)
- Universal Instruments Corp. v. Micro Systems Eng’g, Inc., 924 F.3d 32 (2d Cir.) (addresses ownership for § 117 where license language and transfer rights were broad)
- Thoroughbred Software Int’l, Inc. v. Dice Corp., 488 F.3d 352 (6th Cir.) (holds defendant liable for unauthorized copies regardless of whether all copies were used)