Chapter 5: Copyright Protection of Software:
Noncode and Nonliteral Aspects of Computer
Programs梂hen Does One Computer Program
Infringe the Copyright in Another Even Though
the Codes Are Different? (Continued)

Languages and Other Weird and Wonderful Things

One way to look at the position of Lotus in the 1𣇽 cases, Lotus v. Paperback Software and Lotus v. Borland, mentioned earlier, is that Lotus is claiming copyright in a computer programming language. Lotus did not argue for its right to do that, and neither of the district court decisions in its favor expressly upheld Lotus’ claim as a proper one to a programming language. Others, however, have so analyzed the 揷ommand structure claim some with favor and others with disfavor.

For an analysis of the Paperback decision, opposing recognition of copyright protection for computer programming languages, see Richard H. Stern, Copyright in Computer Programming Languages, 17 Rutgers Comp. & Tech. L. Rev. 321 (1991). For a contrasting view, the position that Ashton朤ate took in its copyright infringement litigation against Fox Software over the dBase II language is illustrative.

The Ashton朤ate v. Fox litigation took several bizarre turns. At one point, the district court judge held the copyright invalid for fraud, because A朤 had failed to disclose to the Copyright Office that most of the dBase II language had been taken from JPL DIS, a public domain database program developed earlier at the Jet Propulsion Laboratory. See dBase Copyright Invalidated, A.B.A.J., Mar. 1991, at 30. The district court subsequently reversed its order, while the case was on appeal.

At this point, Borland acquired A朤; this occurred during the pendency of the Lotus suit against Borland. The Antitrust Division of the U.S. Justice Department challenged the acquisition under section 7 of the Clayton Act, and Borland settled with a consent order described in the following material. The settlement was, essentially, that Borland agreed not to assert against other database program sellers the copyright law position that Lotus was then asserting against Borland. That ended the curious A朤 v. Fox litigation.

During the litigation, counsel for A朤 argued, in a brief in support of a motion for summary judgment, that the Paperback decision was precedent for protecting the dBase programming language under copyright law. The Antitrust Division's comments on that position occur in the Competitive Impact Statement on the settlement, which follows.

Mention has already been made of the unsuccessful attempt to register a claim of copyright in the gesticulations of a mechanical parrot that operated under the direction of a computer program. There was some precedent for that, although the Copyright Office refused to follow it. An animated, mechanical bear toy, Teddy Ruxpin, which 搑eads audio cassette tapes loaded into it, had been registered on the basis of a videotape of one of his 損erformances. (The Copyright Office later claimed that it had meant only to register copyright in the videotape, as such, so that 揷ompeting videotapes could not be made and sold without authorization.)

The Teddy Ruxpin copyright owner then successfully sued other companies who marketed tape cassettes with additional stories in them for Teddy Ruxpin toy bears to read with animation. Worlds of Wonder, Inc. v. Veritel Learning Systems, Inc., 658 F. Supp. 351, 355 (N.D. Tex. 1986); Worlds of Wonder, Inc. v. Vector Intercontinental, Inc., 653 F. Supp. 135, 139 (N.D. Ohio 1986). Apparently, these courts were persuaded by Teddy Ruxpin's manufacturer that the competitors infringed the copyright, because their tapes, when inserted into Teddy Ruxpin bears, could produce results substantially similar to the results of the original product.

There is no reason to expect any end to the catalog of weird and wonderful things that copyright lawyers will try to protect under copyright law. The enormous growth in sales of products containing microprocessor chips and computer software will surely stimulate their ingenuity.



United States v. Borland International, Inc.
Proposed Final Judgment and Competitive Impact Statement
56 Fed. Reg. 56096 (Oct. 31, 1991)

Introduction

Notice is hereby given pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b) through (h), that a proposed Final Judgment, Stipulation and Competitive Impact Statement have been filed with the United States District Court for the Northern District of California in United States v. Borland International, Inc., et al., Civil Action No. C 91- 3666. The proposed Final Judgment is subject to approval by the Court after the expiration of the statutory 60-day comment period and compliance with the Antitrust Procedures and Penalties Act, 15 U.S.C. 16 (b)-(h).

The Complaint in this case alleged that the proposed acquisition of Ashton-Tate Corporation by Borland International, Inc. would violate section 7 of the Clayton Act, as amended, 15 U.S.C. 18, by lessening competition in the sale of relational database management system software for personal computers using the DOS operating system (揜DBMS software") in the United States. Borland and Ashton-Tate are the two leading sellers of RDBMS software in the United States.

The proposed Final Judgment enjoins Borland from initiating any claim that asserts claims of copyright infringement in the command names, menu items, menu command hierarchies, command languages, programming languages and file structures used in Ashton-Tate's dBASE family of products. The proposed Final Judgment further directs Borland, within a period of ninety days from the entry of the Final Judgment, to attempt to resolve the action of Ashton-Tate Corp. v. Fox Software, Inc., No. CV 88-6837, filed in the United States District Court for the Central District of California, under certain circumstances, and to dismiss its claims against Fox Software if Fox dismisses its counterclaims against Ashton-Tate.

Public comment is invited within the statutory 60-day comment period. Such comments, and responses thereto, will be published in the Federal Register and filed with the Court.

Proposed Final Judgment

United States of America, Plaintiff, v. Borland International,
Inc., and Ashton-Tate Corporation, Defendants.
Filed: 10/17/91. Civil Action No. C 91-3666

Whereas, Plaintiff, United States of America, having filed its Complaint herein on October 17, 1991, and Plaintiff and Defendants, by their respective attorneys, having consented to the entry of this Final Judgment without trial or adjudication of any issue of fact or law herein and without this Final Judgment constituting any evidence against or an admission by any party with respect to any such issue;
And Whereas, Defendants have agreed to be bound by the provisions of this final Judgment pending its approval by the Court;
And Whereas, the essence of this Final Judgment is prompt and certain remedial action to ensure that, after the acquisition referred to herein, Defendants' ability to exercise market power and restrain competition in the sale of relational database management system software is not enhanced by an attempt to enforce claims to certain alleged intellectual property rights;
Now, Therefore, before the taking of any testimony and without trial or adjudication of any issue of fact or law herein, and upon consent of the parties hereto, it is hereby Ordered, Adjudged and Decreed as follows:

I. Jurisdiction

This Court has jurisdiction over the subject matter of this action and over each of the parties hereto. The Complaint states a claim upon which relief may be granted against defendants under section 7 of the Clayton Act.

II. Definitions

As used in this Final Judgment:

A. Acquisition means the Merger Agreement signed by Borland, Object, Inc., a wholly-owned subsidiary of Borland, and Ashton-Tate on July 9, 1991, pursuant to which Borland will acquire 100 percent of the common stock of Ashton-Tate in exchange for Borland common stock. * * *

D. Ashton-Tate's dBASE family of products means the computer programs bearing the dBASE trademark for the management of computer databases of which Ashton- Tate is the rightful owner and publisher, the exclusive rights and privileges in and to the copyrights of which Ashton-Tate owns, including revisions or updates to such programs.

E. The Los Angeles action means Ashton朤ate Corp. v. Fox Software, Inc., et al., No. CV 88-6837 TJH (Tx), filed in the United States District Court for the Central District of California.

F. The Boston action means Lotus Development Corp. v. Borland International, Inc., Civil Action No. 90-11662-K, filed in the United States District Court for the District of Massachusetts.

III. Applicability

* * * B. Nothing herein shall suggest that any copyright or other intellectual property right is legally cognizable, valid, or enforceable by Defendants or any other person.

IV. Injunction

A. Defendants are hereby enjoined and restrained from initiating or making any claim or counterclaim that asserts claims of copyright infringement in the command names, menu items, menu command hierarchies, command languages, programming languages and file structures used in and recognized by Ashton-Tate's dBASE family of products, standing alone and apart from other aspects of those computer programs.

B. Nothing in paragraph IV.A. shall preclude defendants from asserting in any litigation the legal right to use the command names, menu items, menu command hierarchies, command languages, programming languages and file structures or from asserting copyright protection in and copyright infringement of the computer program code (including its structure, sequence and organization) and other aspects of the user interface of Ashton-Tate's dBASE family of products.

C. * * * Within a period of ninety (90) days from the entry of this Final Judgment, Borland shall use its best efforts to resolve the Los Angeles action in a manner consistent with paragraph IV.A, above; provided, however, that Borland shall dismiss with prejudice its claims in the Los Angeles action with fifteen (15) days following the dismissal with prejudice of Fox's counterclaims in the Los Angeles action.

Competitive Impact Statement

The United States, pursuant to Section 2(b) of the Antitrust Procedures and Penalties Act (揂PPA), 15 U.S.C. 16(b)-(h), files this Competitive Impact Statement relating to the proposed Final Judgment submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

On October 17, 1991, the United States filed a civil antitrust complaint under section 15 of the Clayton Act, as amended, 15 U.S.C. 25, alleging that the acquisition of Ashton-Tate Corporation (揂shton-Tate) by Borland International, Inc. (揃orland), would violate section 7 of the Clayton Act, as amended, 15 U.S.C. 18. The complaint alleges that the effect of the acquisition may be substantially to lessen competition in the sale of relational database management system (揜DBMS) software for IBM and IBM-compatible personal computers (揚Cs) running the MS-DOS/PC-DOS operating system (揇OS) in the United States.

Borland and Ashton-Tate, both major software vendors, are the two largest firms, in terms of market share, currently selling RDBMS software in the United States. Borland's RDBMS software is sold under the tradename 揚aradox, and Ashton-Tate's RDBMS software is sold under the tradename 揹BASE. After the acquisition, Borland will control approximately 60 percent, measured by dollar sales and units shipped, of the United States RDBMS software market. The acquisition thus results in a substantial increase in concentration in a market that is already concentrated and in which entry by new firms is difficult. The complaint seeks, among other relief, to have the acquisition adjudged in violation of Section 7 of the Clayton Act.

On October 17, 1991, the United States and Borland and Ashton-Tate filed a Stipulation by which they consented to the entry of a proposed Final Judgment. Under the proposed Final Judgment, as explained more fully below, Borland is enjoined from initiating any claim that asserts copyright infringement in the command names, menu items, menu command hierarchies, command languages, programming languages, and file structures used in Ashton- Tate's dBASE family of products. The proposed Final Judgment further directs Borland, at any time, to dismiss Ashton-Tate's pending copyright suit against Fox Software, Inc. (揊ox), with prejudice within fifteen days following the dismissal with prejudice of Fox's counterclaims against Ashton-Tate. Additional details regarding Borland's obligations with respect to the Fox suit are described more fully under Section III.

The United States and the defendants have stipulated that the proposed Final Judgment may be entered after compliance with the APPA, unless the government withdraws its consent. Entry of the proposed Final Judgment would terminate this action, except that the Court would retain jurisdiction to construe, modify, and enforce the proposed Final Judgment and to punish violations of the Judgment.

II. Events Giving Rise to the Alleged Violation

On July 9, 1991, Borland agreed to purchase Ashton-Tate by acquiring 100 percent of Ashton-Tate's stock in exchange for Borland stock valued at approximately $440 million. Under the Agreement and Plan of Merger, Ashton- Tate has become a wholly-owned subsidiary of Borland.

Borland is engaged in the business of designing and marketing personal computer software for businesses and software developers. Borland distributes its products domestically and internationally primarily through distributors, dealers, and original equipment manufacturers and also sells directly to corporate, governmental, educational, and individual customers. Borland products are available in 13 languages for distribution in 41 different countries. The company's three principal products are RDBMS software, spreadsheet software and programming languages.

Ashton-Tate was also engaged in the business of the design and marketing of personal computer software for businesses and software developers. Ashton-Tate also distributed its products domestically and internationally, with products available in 20 languages in more than 50 countries. The company's major products included RDBMS, word processing, integrated decision support, spreadsheet, graphics, and utility software. The company offered a comprehensive line of consulting, training and support services for individuals, corporations and government. Ashton-Tate's current RDBMS software, dBASE III Plus and dBASE IV, were enhancements of its first product, dBASE II.

As explained more fully below, the United States filed its complaint because the acquisition would likely reduce competition in the development and sale of RDBMS software in the United States. The market for RDBMS software is concentrated, and entry is difficult. Prior to the acquisition, Borland and Ashton-Tate were the two leading firms offering RDBMS software. Some of the other competitors offer products (搙BASE clones) that are based on the dBASE programming language, which has become an industry standard, and that are alternatives to dBASE and Paradox. Paradox, on one hand, and dBASE and the xBASE clones, on the other hand, were in significant competition with one another. Prior to the acquisition, an increase in the price of either Paradox or dBASE would cause so many customers to switch to other RDBMS products that the price increase would be unprofitable. After the acquisition, however, the price increase would be profitable because Borland could capture a significant portion of that diversion梩hose customers who would switch to other RDBMS products that are close substitutes now owned by Borland. Finally, other firms in the industry could not reposition their product lines so as to prevent the acquisition from having this effect.

RDBMS software has multi-table, relational, and programming capabilities, in addition to other functional differences, that distinguish it from other types of software. Products such as flat-file, spreadsheet, and word processing software and even general programming languages and tools contain some of the same functions and can, in some instances, be used to perform certain applications accomplished with RDBMS software. The United States found, however, that given the functional differences and limitations of these other software products, customers would find it more difficult or costly to use those products to perform the same applications. Accordingly, the United States concluded that customers would not likely substitute other software products for RDBMS software in the face of a 搒mall but significant and non-transitory increase in price."

The United States further concluded that, for the development and sale of RDBMS software, the relevant geographic market is the United States. The United States market for RDBMS software is concentrated. In 1990, total United States sales of RDBMS software were approximately $200 million. In 1990, Ashton-Tate and Borland were the two largest sellers of RDBMS software, together accounting for nearly 60 percent of dollar sales and over 60 percent of units shipped. Concentration as measured by the Herfindahl-Hirschman Index (揌HI) for the United States RDBMS software market will increase significantly as a result of the acquisition. Based on 1990 dollar sales, the HHI for RDBMS software in the United States was 1726. The acquisition would increase the HHI by 1403 points to 3129 and the relevant market would become significantly more concentrated. Approximately twelve other firms account for the remainder of RDBMS market share, with no one firm holding a significant portion of market share as compared to the combined Borland/Ashton朤ate. Such an increase in concentration in an already concentrated market raises significant concerns, in combination with other factors, that the transaction may result in the exercise of market power.

In addition, the United States determined that entry into the RDBMS software market is difficult and time-consuming. It generally takes over two years to conceptualize, design, develop, test, and bring to market a full RDBMS software product. Moreover, new entrants also face difficulty in achieving market acceptance due to the preference of many customers for companies with well-established reputations and proven products and the comparatively high cost of effectively marketing a new high-end software product. Finally, existing RDBMS software customers find it difficult to switch to another RDBMS software product because there are considerable costs associated with switching, including (1) rewriting end-user applications written for the particular RDBMS software; (2) retraining both end users and (3) reconfiguring data-file structures (where necessary).

The United States also took into account the fact that the personal-computer software industry continues to be affected by a number of technological changes. In particular, a new operating environment developed by Microsoft, called 揥indows, offers opportunities for the introduction of new application software, including RDBMS software. Indeed, Microsoft, which heretofore has not offered a RDBMS product, recently announced that it is developing a new RDBMS product for Windows that it expects to introduce next year. These facts suggest that the current market shares of Ashton朤ate and Borland may not fully describe their competitive significance for the future. On the other hand, the United States determined that market changes resulting from these technological advances are likely to be evolutionary rather than revolutionary and are not sufficient in themselves to dispel the competitive concerns raised by this combination of the two leading sellers in the market.

In evaluating the competitive effects likely to result from the acquisition, it was particularly relevant that several of the smaller competitors in the RDBMS software market offer compatibility with the dBASE standard by using some of the command names, menu command hierarchies, command languages and other features of the dBASE programming language. As a result, dBASE customers can switch to those products (known as 搙BASE clones) at lower cost than to other products. Ashton朤ate has, however, asserted copyright claims to dBASE language which have impaired the ability of the xBASE firms to sell to certain customers, and which could limit the ability of the xBASE clones to inhibit possible anticompetitive effects of Borland's acquisition of Ashton-Tate. The largest of the xBASE firms, Fox, is a defendant in a suit (揕os Angeles action) seeking to enjoin its use of the dBASE programming language in Fox's RDBMS products. Ashton-Tate has enjoyed competitive advantages as a result of its adoption as a 搒tandard by corporate customers.56 The continued assertion of copyright claims to the dBASE language thus would enable the merged firm unilaterally to raise the price of its RDBMS products.

  5-6.     On November 18, 1988, Ashton-Tate filed a complaint against Fox and SCO alleging copyright infringement of its dBASE programs. Ashton-Tate Corporation v. Fox Software, Inc. and The Santa Cruz Operation, Civ. No. CV 88-6837 (C.D. Cal., filed Nov. 18, 1988). The complaint alleges that 搕he organization, structure, and sequence of the dBASE programs embody and reflect forms of expression original to Ashton-Tate, including the novel application development and data management environments they present to the computer program user.

Ashton-Tate seeks an injunction restraining Fox 揻rom copying, selling, marketing or distributing its products; other equitable relief; and unspecified damages and attorneys' fees. On December 8, 1988, Fox filed a counterclaim alleging that, among other things, Ashton-Tate 揾as monopolized and is attempting to monopolize the U.S. market for microcomputer database management systems. The lawsuit is still pending.

Widespread use of a RDBMS software product results in a large pool of trained users, applications developers and compatible tools that in turn promotes the further use of that product. 揅lone or compatible products also benefit from and promote such standardization.

In sum, for all the above reasons, the United States found that Borland's acquisition of Ashton-Tate, without the relief provided for in the proposed Final Judgment, posed a substantial likelihood that Borland could profitably exercise its market power by raising prices to the detriment of RDBMS software customers.

III. Explanation of the Proposed Final Judgment

The proposed Final Judgment, which requires Borland to refrain from exercising certain copyright claims related to the dBASE RDBMS software products, provides relief that will assure the continuation of a competitive marketplace. As discussed above in Section II, the acquisition raised the likelihood that Borland could raise the price of Paradox or dBASE without fear of losing a significant amount of sales to other products that are close substitutes. Borland's ability to exercise market power in that way could be constrained to an extent by the ability of customers to switch to the xBASE clones. The pendency or future threat of copyright claims relating to the dBASE language, however, has inhibited competition and would likely diminish the effectiveness constraint on Borland's market power. As a result, the United States sought to assure the continued availability of competitive alternatives by requiring Borland to relinquish certain copyright claims acquired through its acquisition of Ashton-Tate. In requiring this relief, the United States expresses no view on the validity or invalidity of any claims to copyright protection by any party to this Final Judgment or any third party or on the appropriateness of asserting any such claims.

Section IV.A. of the proposed Final Judgment enjoins Borland, after the acquisition of Ashton-Tate, from initiating or making any claim or counterclaim that asserts claims of copyright infringement in the command names, menu items, menu command hierarchies, command languages, programming languages and file structures used in and recognized by Ashton-Tate's dBASE family of products, standing alone and apart from other aspects of those computer programs. In addition, Section IV.C. of the proposed Final Judgment requires that Borland shall, at any time, dismiss with prejudice its claims in the Los Angeles action within fifteen days following the dismissal with prejudice of Fox's counterclaims in the Los Angeles action.

Section IV.C. also requires that within a period of ninety days from the entry of the proposed Final Judgment, Borland shall use its best efforts to resolve the Los Angeles action in a manner consistent with the intent of Section IV.A. Finally, section IV.C. requires that should the district court presiding over an unrelated copyright infringement action filed against Borland by Lotus Development Corporation (the 揃oston action)7 dismiss Lotus' claims for copyright protection in its menu command hierarchy, Borland shall seek prompt resolution of the Los Angeles action in a manner consistent with the court's disposition and Section IV.A.

  7.     Lotus Development Corp. v. Borland International, Inc., Civ. No. 90-11662-K, filed in the United States District Court for the District of Massachusetts.

Section IV.B. permits Borland, after the acquisition, to assert in any litigation its legal right to use the command names, menu items, menu command hierarchies, command languages, programming languages and file structures as well as the copyright protection in and copyright infringement of the computer program code (including its structure, sequence and organization) and other aspects of the user interface of Ashton-Tate's dBASE family of products. This paragraph makes clear that the proprietary dBASE software itself and its underlying code are not being placed in the public domain.

In sum, the proposed Final Judgment effectively prohibits Borland from using its control of the dBASE standard as a means of inhibiting competition from other vendors of dBASE products on the basis of use of the dBASE language.

IV. Remedies Available to Potential Private Litigants

Section 4 of the Clayton Act, 15 U.S.C. 15 provides that any person who has been injured as a result of conduct prohibited by the antitrust laws may bring suit in federal court to recover three times the damages the person has suffered, as well as costs and reasonable attorneys fees. Entry of the proposed Final Judgment will neither impair nor assist the bringing of any private antitrust actions under the Clayton Act.

... VI. Alternative to the Proposed Final Judgment

The United States considered, as an alternative to the proposed Final Judgment filed with this Court, litigation to seek an injunction to block Borland's acquisition of Ashton-Tate. The United States rejected that alternative because the relief in the proposed Final Judgment should prevent the acquisition from having significant anticompetitive effects in the RDBMS software market, while allowing any procompetitive effects the acquisition may produce.

Note

The significant provision of this consent decree is that requiring the defendant, as a condition of allowance of the merger (i.e., as a means of preventing adverse competitive effects from occurring as a result of the merger), to agree not to assert a questionable copyright claim. This appears to be the first decree of its kind. It set a precedent for the consent decree in United States v. Thomson Corp., mentioned in connection with the West suit against Mead for its use of West jump cites in LEXIS.

In the present case, the Department of Justice had a significant tactical advantage that made Borland its ally rather than adversary on the copyright point. Borland was at the same time a defendant in Lotus’ suit against it in Boston as it was plaintiff (via Ashton朤ate) in the dBase language suit against Fox in Los Angeles. However, Borland was in the position of being on opposite sides of the copyright issue in the two cases. Of the two cases, the Boston case was far more important economically to Borland, since it was a 揵et the company suit. Lotus CEO Manzi had told the software industry trade press that he was going to perform a 揷ashectomy on Borland and its CEO (Philippe Kahn).

Those familiar with the story of Bre’r Rabbit begging Bre’r Fox not to throw him into the briar patch will appreciate the vigor of Borland’s struggle with the Department of Justice not to be forced to forswear claiming a copyright in the high-level application program language of the dBase application.




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