A “Far-Reaching Decision” for the Copyrightability of Computer Programs

GettyImages-1425611812-300x200On April 6, 2023, the U.S. Court of Appeals for the Federal Circuit affirmed Judge Gilstrap’s ruling in SAS Institute, Inc. v. World Programming Limited, which effectively denied copyright protection to SAS Institute’s data analysis software. The decision is likely to have lasting implications for developers that seek to protect software through copyright law.

The SAS System and WPL’s “Clone” World Programming System
SAS is the developer of SAS System, an “integrated range of software products” for data access, management, analysis and presentation. SAS System users can write commands in the SAS Language with pre-written, pre-designed procedures (PROCs) that generate outputs, such as tables and graphs. World Programming Limited (WPL) created its World Programming System (WPS) to “clone” the SAS System by parsing SAS language and producing outputs similar to those produced by the SAS System. The SAS System consists of input formats, output designs, and keywords that overlap with an earlier version of the SAS System in the public domain (SAS 76), but also contains various updates not found in SAS 76.

The EDTX Decision
SAS filed suit against WPL alleging that the WPS infringes SAS’s copyright in the SAS System. On the eve of trial, the District Court held a “Copyrightability Hearing.” Following the hearing, it dismissed SAS’s copyright claims with prejudice, applying the abstraction-filtration-comparison (AFC) test, i.e., “[t]he dominant test for determining substantial similarity between computer programs” (4 Nimmer on Copyright § 13.03). Adopting a burden shifting framework, the District Court found that while SAS had carried its initial burden on copyrightability, WPL had shifted the burden back to SAS by proffering evidence that some material within the copyrighted work was unprotectable, e.g., SAS 76, open-source software, etc. Because SAS failed to rebut this evidence, or “affirmatively show[] some elements of the work to be protectable,” the District Court reasoned, SAS’s claims could not proceed to trial and were dismissed. The District Court also excluded SAS’s expert report, finding that the expert’s “failure to filter out unprotectable elements resulted in an improper comparison of unprotectable elements to the accused products” and rendered his opinions “unreliable and unhelpful to the jury.”

The Federal Circuit’s Decision
On appeal, the Federal Circuit considered whether the District Court erred in its rulings on copyrightability, ordering a “Copyrightability Hearing” to reach that determination, and excluding SAS’s expert report.

As to the first issue, SAS argued that ownership of registered copyrights entitled SAS to a presumption of validity that satisfied its evidentiary burden, and that, in any case, the overall selection and arrangement of elements in the SAS System are protectable. The Court disagreed with both arguments, reasoning that “WPL showed that at least a substantial portion of the allegedly infringed elements of the SAS System are not protectable,” which shifts the burden of proof to SAS to show copyrightability, and SAS failed to rebut that evidence or “otherwise provide evidence in relation to the ‘filtration’ step under the three-part [AFC] test.”

The Court also rejected SAS’s second and third arguments, finding that the District Court had discretion to hold a Copyrightability Hearing (which it likened to Markman hearings in patent cases), and that the District Court “was correct to exercise its authority and require SAS to articulate a legally viable theory on which it expected to base its copyright infringement claims” because its expert had failed to filter out unprotectable expression from the asserted work.

The Dissent
The dissent characterized the majority’s decision as a “far-reaching change” that “departs from the long-established precedent and practice of copyrightability of computer programs” because the District Court improperly relied on burden of proof issues instead of analyzing the selection, coordination and arrangement of the various elements of the SAS. Citing Fifth Circuit precedent for the protectability of non-literal software elements, as well as the Federal Circuit and Supreme Court rulings in Oracle’s case against Google over the Java API, the dissent reasons that issues of copyrightability and infringement are different; rejects the use of the AFC test—an infringement test—to decide copyrightability; and notes that “the existence of possible infringement defenses based on the extent of copying does not negate copyrightability of the work.” The dissent also disagrees with WPL’s assertion that “copyright in a computer program reaches outputs” is an “open question,” characterizing that issue as a matter of settled law.

Impact on Copyright Protection for Non-Literal Software Elements
The Federal Circuit’s decision creates an uncertain legal landscape for the protection of non-literal software elements. The decision also raises many questions.

For example, does the burden-shifting framework adopted by the Court comport with the statutory presumption of validity that arises from a timely copyright registration? Can a defendant point to any element of uncopyrightable subject matter to shift the burden back to the plaintiff? As most software contains some uncopyrightable elements (e.g., open-source code), this framework may deprive software copyright registrants of the presumption to which they are entitled.

Further, did the Federal Circuit properly apply the AFC infringement test to decide issues of copyrightability? In Oracle America, Inc. v. Google Inc. (May 9, 2014) the Federal Circuit found the structure of the Java API was copyrightable, and admonished the district court for “fail[ing] to distinguish between the threshold question of what is copyrightable—which presents a low bar—and the scope of conduct that constitutes infringing activity”; the SAS Court’s reasoning arguably raises similar concerns.

Ultimately, the impact of the decision on copyright protection for software developers remains to be seen, and may even highlight an issue that warrants clarification by the Supreme Court.


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