Universal Instruments Corp. v. Micro Sys. Eng'g, Inc.
924 F.3d 32
| 2d Cir. | 2019Background
- MSEI contracted with Universal in 2007 (Equipment Purchase Agreement, "EPA") for a phased Test Handling System (THS); Universal delivered phase one in 2008 and provided station software and a copy of the server source code per a Final Customer Acceptance letter.
- EPA §8.2(d) granted MSEI and its subcontractors/suppliers a non-exclusive, royalty-free, worldwide, perpetual license to use, reproduce, and display Universal's "Pre-Existing Intellectual Property" for MSEI's "internal use only."
- MSEI awarded phases two and three (THS2) to MTA in 2010; MSEI downloaded the station source code and used the server source code it had received from Universal, then gave code to MTA, which modified the server code to support new stations.
- Universal sued (July 2013) for copyright infringement, breach of contract, trade-secret misappropriation, unfair competition, unjust enrichment, and promissory estoppel; some claims were dismissed earlier; trial proceeded on remaining claims.
- The district court granted defendants' renewed JMOL after trial, finding (inter alia) that EPA §8.2(d) licensed the conduct, MSEI owned a copy under 17 U.S.C. §117(a), trade-secret claims were time-barred, and contract claims re modification were preempted by the Copyright Act.
- The Second Circuit affirmed, holding the license unambiguous, §117(a) authorized the modifications, trade-secret claims were time-barred, and unfair competition failed for lack of bad faith.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether EPA §8.2(d) permitted MSEI/MTA to reproduce and transfer Universal's source code for THS2 | Universal: license did not authorize furnishing source code to MTA or off‑premises transfer; at minimum ambiguous | Defendants: §8.2(d) unambiguously licensed MSEI and its suppliers (including MTA) to use/reproduce the pre‑existing IP for MSEI's internal use | Held: §8.2(d) unambiguously authorized MSEI and its suppliers to reproduce/use the code for MSEI's internal THS phases; non‑infringing |
| Whether MSEI/MTA's modifications of the server source code infringed | Universal: modification exceeded license and infringed exclusive rights | Defendants: MSEI was an "owner of a copy" under 17 U.S.C. §117(a); adaptations were essential and used only to utilize the program with machines | Held: §117(a) applied—the adaptations were essential steps and used in no other manner; modifications non‑infringing |
| Whether the breach‑of‑contract claim (modification theory) survives independent of copyright law | Universal: breach claim distinct from copyright; contract remedy available | Defendants: claim seeks to vindicate rights equivalent to exclusive copyright rights and is thus preempted | Held: Contract claim premised on exceeding license is preempted by the Copyright Act and fails because §117(a) bars recovery |
| Whether trade‑secret and unfair competition claims survive | Universal: trade‑secret misappropriation and unfair competition based on defendants' use and disclosure of source code | Defendants: trade‑secret claim time‑barred; MTA acted without bad faith and relied on EPA terms | Held: Trade‑secret claim is time‑barred (three‑year limitations); unfair competition fails for lack of bad faith |
Key Cases Cited
- Davis v. Blige, 505 F.3d 90 (2d Cir. 2007) (valid license immunizes licensee from infringement if use is within license scope)
- Tasini v. N.Y. Times Co., 206 F.3d 161 (2d Cir. 2000) (copyright owner bears burden to prove defendant's use was unauthorized)
- Bourne v. Walt Disney Co., 68 F.3d 621 (2d Cir. 1995) (scope of copyright license is a contract‑interpretation question)
- Krause v. Titleserv, Inc., 402 F.3d 119 (2d Cir. 2005) ("owner of a copy" analysis under 17 U.S.C. §117)
- Aymes v. Bonelli, 47 F.3d 23 (2d Cir. 1995) (modifications essential to utilize software may be protected by §117)
- Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417 (U.S. 1984) (unlicensed use is infringement only if it conflicts with exclusive statutory rights)
- Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424 (2d Cir. 2012) (preemption analysis: state claim preempted if it seeks to vindicate rights equivalent to copyright)
- Great Minds v. FedEx Office & Print Servs., Inc., 886 F.3d 91 (2d Cir. 2018) (licensee may use third‑party assistance unless license says otherwise)