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Winter 1992-93, Volume 1, Number 1
__________________________________

By George, Donaldson & Ford
Attorneys at Law
A Registered Limited Liability Partnership
1000 Norwood Tower
114 West Seventh Street
Austin, Texas 78701
(512) 495-1400
(512) 499-0094 (FAX)
___________________________________

Copyright (c) 1993 George, Donaldson & Ford, L.L.P.
(Permission is granted freely to redistribute
this newsletter in its entirety electronically.)
___________________________________

David H. Donaldson, Jr., Editor <DHDONALD+aGD&F%[email protected]>

Peter D. Kennedy, Associate Editor <PDKENNED+aGD&F%[email protected]>
___________________________________

IN THIS ISSUE:

1. ARE ELECTRONIC BULLETIN BOARD SYSTEM OPERATORS LIABLE FOR THEIR
USER'S LIBELOUS STATEMENTS?

2. ELECTRONIC PUBLISHING, BULLETIN BOARD E-MAIL, AND THE STEVE JACKSON
GAMES CASE

3. WHEN IS A COMPUTER PROGRAM A "COPY"?

4. CAN YOU INFRINGE A COPYRIGHT WHILE ANALYZING A COMPUTER PROGRAM?

5. DOES ANTITRUST LAW HAVE A PLACE IN THE COMPUTER INDUSTRY?

6. WHAT DO YOU MEAN WE DON'T OWN THE SOFTWARE?

=========================================================================

1. ARE ELECTRONIC BULLETIN BOARD SYSTEM OPERATORS LIABLE FOR THEIR USER'S
LIBELOUS STATEMENTS?

Electronic bulletin boards are now very popular "places" for people
to "meet" and discuss issue of the day -- from politics to fantasy game-
playing to bird watching. The unique freedom bulletin boards offer is both
a great advantage and a potential source of new legal questions and
headaches. Many bulletin boards are free of charge, or charge only modest
fees, and the cost of a personal computer and modem has dropped
dramatically. Unlike other means of mass communication, electronic
bulletin boards present no significant barriers to entry; almost anyone can
become a fully active member in wide-ranging discussions and debates
involving hundreds or even thousands of participants and observers. Users
are free to post whatever messages suit their fancy, limited only by the
possibility of editing or deletion by the system operator.

The system operators of most bulletin boards commonly do not edit or
control the messages and files posted by users. For the large
communication services such as CompuServe and Prodigy, meaningful editorial
control or review of messages and uploads is impossible. The system
operators of smaller boards generally prefer to allow the discussions on
their boards to range freely, while simply defining the areas and topics
for discussion, and perhaps setting the tone or direction of discourse.
The technical work of maintaining a board is demanding enough, without the
added chore of reviewing the content of each posting and file. Many sysops
are rightly satisfied to provide a forum for discussion -- a democratic,
uninhibited common ground in cyberspace for the "robust and wide-open"
debate of public issues the First Amendment is meant to guarantee.

Where technology leads, law is sure to follow. A host of legal
questions have arisen around electronic bulletin boards, from the legal
protection for private electronic mail carried on boards, to the right of
BBSs to discount telephone rates. Many legal questions involve the sysop's
possible liability, both civil and criminal, from potential criminal
liability for knowingly providing a means for the distribution of
electronic "contraband" (such as purloined passwords, or stolen documents,
codes, and credit card numbers) to possible civil penalties for copyright
infringement.

A significant legal question is how the age-old civil lawsuit of
defamation of character should apply (if at all), to the brand-new medium
of the electronic bulletin board -- more specifically, when is the system
operator of a bulletin board liable for defamatory statements posted by a
user?

Despite a spate of articles about the legal protection,
constitutional and otherwise, enjoyed by sysops and BBS users, very few
actual court decisions have been issued defining the scope of protection
and potential liability. The most significant decision to reach the law
reports so far concerning sysop liability for defamation is CUBBY, INC. v.
COMPUSERVE, INC., (reported in 776 F. Supp. 135 (S.D.N.Y. 1991)).

CompuServe Inc., which runs one of the larger on-line information
systems, included in its Journalism Forum a daily newsletter called
"Rumorville USA." A company called DFA wrote and published the newsletter,
and provided it to a company known as CCI. CCI had contracted with
CompuServe to manage, review, and edit the contents of the Journalism
Forum, and uploaded "Rumorville USA" to the service, without prior approval
or review by CompuServe. CompuServe had no contract with DFA, the
newsletter's author, but only with CCI.

Cubby, Inc., a company that was developing a journalism news database
hoping to compete with "Rumorville USA," was unhappy with a story in a
"Rumorville USA" issue that mentioned Cubby. Cubby sued DFA and
CompuServe, alleging that the article libelled Cubby and its owner. Judge
Leisure of the federal district court located in New York City held that
even if the "Rumorville USA" article defamed Cubby (which was in dispute)
*CompuServe* could not be held responsible. The judge saw CompuServe as
an "electronic, for-profit library," that had no opportunity to review the
content of its holdings before they are published. "Secondary publishers"
such as libraries and bookstores are not responsible for the content of the
books they offer unless they know, or have reason to know, of the books'
objectionable nature. The judge noted that the sheer volume of the
material posted on CompuServe kept it from ever knowing or having reason
to know that a certain posting was defamatory. Because the technology and
volume made it unreasonable and unfeasible for CompuServe to monitor every
statement made on its service, Judge Leisure dismissed the suit against
CompuServe.

While sysops breathed a sigh of relief after CUBBY v. COMPUSERVE was
decided, the case will not be the last word. For one, while other courts
will pay it some mind, the case is controlling precedent for only one
federal trial court in New York City. New York's status as an important
center of both libel *and* computer law does increase the persuasive
authority of CUBBY v. COMPUSERVE, however.

Second, the specific facts of the case keep CUBBY v. COMPUSERVE from
being a sweeping precedent. Because CompuServe is so big, it is reasonable
not to expect it to review the contents of every posting, but what about
smaller boards? If the system operator of a board is also an active user,
and could theoretically review all the latest postings, is he or she
protected by the decision in CUBBY v. COMPUSERVE? What if CompuServe had
been given notice of the defamatory nature of the article, but refused to
remove it from the system? Judge Leisure's logic would indicate that if
there was proof that CompuServe *knew* that "Rumorville USA" had defamed
Cubby, it would not escape liability on that ground alone; it would have
to defend the defamation action on more traditional grounds -- that the
statement was a constitutionally protected statement of opinion on an issue
of public concern, or a privileged comment about a public figure, for
example, or that the statement, although harmful, was substantially true.
(And, there is currently little reason to think that law of libel will
apply any differently to the person *who* actually makes the defamatory
statement on an electronic bulletin board, than it does to a person making
such a statement. Judge Leisure has not published any opinion discussing
the outcome of Cubby's suit against the *authors* of "Rumorville USA.")

Paradoxically, Judge Leisure's decision in CUBBY v. COMPUSERVE may
encourage sysops *not* to review the contents of their boards, in order to
claim ignorance of defamatory postings. Outside the courtroom, writers
have been trying to develop legal theories that give system operators
satisfactory protection. These range from the "secondary publisher"
analogy adopted by CUBBY v. COMPUSERVE, (see L. Becker, Jr., "The Liability
of Computer Bulletin Board Operators for Defamation Posted by Others", 22
Conn. L. Rev. 203 (1989)), to suggesting that electronic bulletin boards
might be treated like "common carriers" such as telephone companies, making
them immune from any liability for statements passing through their wires
(see R. Charles, "Computer Bulletin Boards and Defamation: Who Should be
Liable? Under What Standard?", 2 J. Law & Tech. 121 (1987) and E. Jensen,
"An Electronic Soapbox: Computer Bulletin Boards and the First Amendment,"
39 Fed. Comm. Law J. 217 (1987)). An upcoming article even argues that the
unique nature of electronic bulletin boards should *protect* the sysops,
not present additional legal risks: because bulletin boards, unlike other
mass media, offer persons who think they have been defamed by a message on
the board a free, immediate, and practically unlimited right to reply to
the message, the law should recognize a privilege for the sysop from suit
for defamation carried on his or her board who allows access for replies.
This would encourage rather than stifle free discussion, the purpose of the
First Amendment (see E. Cavazos, Note, "Computer Bulletin Board Systems and
the Right of Reply: Redefining Defamation Liability for a New Technology,"
Volume 12, The Review of Litigation (forthcoming)).

If the experience of the more traditional mass media is any
indication, we can expect more defamation lawsuits brought against the
operators and owners of bulletin board systems, until the contours of the
law are better settled by concrete decisions or legislation.
_________________________________________________________________________

2. ELECTRONIC PUBLISHING, BULLETIN BOARD E-MAIL, AND THE STEVE JACKSON
GAMES CASE

Currently moving through federal court is a lawsuit that may help
define the legal protection for electronic publishers and electronic mail,
and set limits on government law enforcement officials searching for
evidence of illegal computer hacking.

On May 1, 1990, the United States Secret Service (charged with
investigating computer crime as well as protecting the President) searched
the offices of Steve Jackson Games, a fantasy role-playing game publisher
in Austin, Texas. The Secret Service confiscated and kept for months three
of the company's computers, including one computer that ran the company's
electronic bulletin board, and another that contained drafts of an upcoming
book. The Service claimed it was investigating suspected illegal activity
of a Steve Jackson Games employee.

In May, 1991, Steve Jackson, his company, and three active users of
the company's bulletin board sued the Secret Service and the responsible
officials to recover the damages caused by the raid, which included the
temporary loss of the bulletin board, as well as the loss of the book.
Prominent issues in the lawsuit include whether the Secret Service had
probable cause to search the offices in the first place, and whether the
government violated the Electronic Communications Privacy Act (which
prohibits the illegal interception, disclosure or use of electronic
communications) by seizing and reviewing the BBS computer.

In recent filings, the government asked the court to dismiss the
case, arguing, among other things, that the bulletin board's users had no
"reasonable expectation of privacy" in the contents of their e-mail, that
Steve Jackson's book-form, role-playing games and magazines are not worthy
of protection by the Privacy Protection Act, and that the Electronic
Communications Privacy Act does not prohibit the government from seizing
and reading the entire contents of a BBS, including the e-mail, so long as
there is a search warrant which authorizes the seizure of computers. Steve
Jackson and the three users of his board (represented by George, Donaldson
& Ford) have asked the judge to rule that even as the Secret Service tells
the story, the law was violated. The case was tried before Judge Sam
Sparks in an Austin, Texas federal court the week of January 26, 1993, and
awaits Judge Spark's ruling.
_________________________________________________________________________

3. WHEN IS A COMPUTER PROGRAM A "COPY"?

When the computer whizzes of today were growing up, one of the most
popular Saturday morning cartoon programs was "H.R. Pufnstuf." This
creation of Sid and Marty Krofft - a life-action adventure featuring human
caricatures and fanciful creatures - lead to one of the first modern cases
to grapple with an issue that now plagues the computer software industry:
What is the dividing line between an idea, concept, or process, which is
not protected by copyright law, and the expression of an idea, which is
protected? When McDonald's introduced its "McDonaldland" with
"Hamburglar," "Fry Guys," talking fries with human faces, and other
characters, Sid and Marty Krofft sued, alleging that although the
McDonaldland creatures were not exact imitations of the characters in "H.R.
Pufnstuf," they were substantially similar and therefore their use
constituted a copyright infringement. (SID & MARTY KROFFT TELEVISION v.
McDONALD'S CORP., 562 F.2d 1157 (9th Cir. 1977)). A jury, after reviewing
both creations, agreed with Sid and Marty, and the courts ultimately
affirmed the jury's verdict, holding that although "Hamburglar" and his
buddies were not exact duplicates, they "captured the 'total concept and
feel'" of "H.R. Pufnstuf," which justified a finding of substantial
similarity and, in turn, copyright infringement. McDonald's Corporation
was forced to seek a license from the Kroffts.

The same scenario, although now much more complex, is being played
out in the computer industry. Over the last seven years federal courts,
which consider cases involving the copyright infringement, have been
grappling with what constitutes copyright infringement in the software
industry.

These cases arise because as new types of programs are created or new
ways of doing or presenting the same type of function are adopted, persons
who believe that they can produce a product that offers the same
functionality with improvements want to get into the market as well. Not
surprisingly, because consumers are reluctant to re-learn programs, new
entrants into the market try to make their product familiar to those who
have become accustomed to the industry standard. New entrants may use some
of the key strokes, screen displays and other characteristics of the
industry standard, along with the innovations and advantages that the new
entrant offers. Normally the new entrant's software has different source
code and object code from the industry standard. So there is no *literal*
copying of the source code or object code of the competitor. However, when
a new entrant incorporates some of the screen displays, the methods in
which the program operates, or the key strokes of the competitor, some
courts have held that this *non-literal* copying can be copyright
infringement as well.

The court attempting to sort out the legal differences and
similarities between "H.R. Pufnstuf" and McDonaldland had it easy compared
with today's courts that are struggling with a way to express in legal
terms the standard that will apply in deciding whether a software program
is a "copy" of another program. Three schools of thought are currently
battling for supremacy in the courts throughout the country. The first two
approaches seem to be losing ground, to, naturally, the one most complex
and difficult to apply.

The first concept, prevalent primarily in the southwest in the United
States Court of Appeals for the Fifth Circuit (which includes Texas,
Louisiana, Mississippi) essentially says that absent literal copying of the
code or the screen displays, similarity in the structures of the program,
the sequence of key strokes, and other methods by which the program
operates are not copyright infringement. (PLAINS COTTON CO-OP v.
GOODPASTURE COMPUTER SERVICE, INC., 807 F.2d 1256 (5th Cir.), cert. denied,
484 U.S. 821 (1987)). This approach was announced early in the development
of this area of the law. While it affected the development of the law in
this area, it does not appear to have gathered very many adherents.

The second approach, used by the United States Court of Appeals for
the Third Circuit (Pennsylvania, Delaware, New Jersey, Virgin Islands)
provides expansive copyright protection to computer software.

In WHELAN ASSOCIATES, INC. v. JASLOW DENTAL LABORATORY, INC., 797
F.2d 1222 (3rd Cir. 1986), the Third Circuit analyzed whether a dental
program designed for the IBM Series I computer written in event-driven
language ("EDL") was infringed by the defendants' "Dentlab" program
designed for the IBM/PC computer and written in Basic. Obviously, the two
programs were not literally the same because they had different languages
in which they were written, so the question was whether the *non-literal*
elements of the program -- the structure of the program, the sequence of
key strokes used to operate the program and the organization of the program
-- were substantially similar.

The court's key conclusion was that copyright protection of computer
programs extends beyond the programs' literal code to their structure,
sequence, and organization. The court held that a computer program is a
literary work and, like a play or a book, it can be copied by copying its
plot or its plot devices even though the copy may not be written in exactly
the same words or use exactly the same names. In responding to the claim
that the copyright statute does not protect ideas, concepts or processes,
the court said that in a computer program the purpose to be accomplished
by the program is the "idea" and that everything else that is not necessary
to that purpose or function is part of the expression of the idea. Where
there are various means of achieving the desired purpose, then the
particular means chosen is not *necessary* to the purpose and therefore is
expression and not idea.

Accordingly, the court compared how the two computer programs
accomplished the purpose of the program. It found a virtual identity of
most of the file structures used in each program, the screen outputs of
both programs, and an almost identical performance of five particularly
important sub-routines in the programs. The court affirmed the district
court's finding that there was substantial similarity between the programs
and therefore a copyright infringement.

The WHELAN approach to determining what is protected and
copyrightable in evaluating substantial similarity has been under attack
by the United States Court of Appeals for the Second Circuit (New York),
which serves the important media center of New York. In COMPUTER
ASSOCIATES INTERNATIONAL, INC. v. ALTAI, INC., 61 U.S.L.W. 2434, 1992 WL
372273 (2d Cir. 1992) (opinion on rehearing), the court adopted a different
approach to analyzing substantial similarity: a three part test involving
abstraction, filtration and comparison.

The ALTAI court began by explaining how it understood a computer
program was created: first, the programmer must identify the program's
ultimate function or purpose; second, the programmer breaks down the
ultimate function into subtasks; third, the subroutines are organized into
flow charts outlining the interaction (the structure of the program);
fourth, to assure the subroutines' proper interaction, parameter lists are
prepared; and finally, once the modules have been identified, designed and
interrelationships laid out conceptually, the code must be written to
reflect the design. Source code is written in English language statements
and then compiled into object code. The court noted that the actual "text"
of a computer program -- the source and object code -- are firmly protected
by copyright law.

The court held that computer programs are "literary works" under the
Copyright Act, and therefore some non-literal aspects are protected as
well, but only so far as they incorporate the programmer's *expression* of
ideas as opposed to the *ideas* themselves. The Second Circuit said the
first step in deciding whether a program which does not literally copy
source or object code is "substantially similar" to a copyrighted program
is "abstraction." In essence, the court reverse engineers the copyrighted
computer program theoretically by dissecting the allegedly copied program's
structure and isolating each level of abstraction contained within it. The
process begins at the most basic level with the code and ends with the
articulation of the program's ultimate function -- for example, a
spreadsheet or a database. The court retraces and maps the designer's
steps but in the opposite direction taken by the designer. Once the
program's abstraction levels are determined, then a process of "filtration"
occurs.

In the filtration process the structural program is "filtered"
through a legal analysis to take out all of the aspects of the program that
are not protectable. The "filters" include (1) whether a structural
component was an idea or dictated by considerations of efficiency so as to
be necessarily incidental to that idea (the "idea" of columns on a
spreadsheet would include the code necessary to create the columns); (2)
whether the structural component is required by factors external to the
program itself (all spreadsheets need columns); or (3) was taken from the
public domain and hence, is nonprotectable expression (the use of columns
in accounting).

To elaborate, if there is only one efficient way to accomplish the
idea, then the procedure or method used to accomplish the idea merges into
the idea itself and is not protectable. Elements dictated by external
factors involve certain standard or stock devices that must be used to make
the program work. Examples of such extrinsic considerations include (1)
the computer's mechanical specifications; (2) compatibility requirements
of other programs; (3) the computer manufacturer's design standards; (4)
demands of the industry being serviced; and (5) widely accepted programming
practices within the computer industry. Elements taken from the public
domain would include material that is available generally such as
shareware, standard programming techniques, or code generators.

The final step is "comparison." Once the court filters the program
that was allegedly copied to take out all of the non-protected elements,
it compares the remaining nugget of protected expression with the allegedly
infringing program to see if there is any substantial similarity between
the two. After the ALTAI court completed this process, although there were
some similarities between the programs, they were so small or
insignificant, or so simple and obvious that their use could not be
considered copyright infringement.

The ALTAI court recognized that its opinion would make it
substantially more difficult for the owners of computer software to assert
copyright infringement actions against infringers. The court seemed to
confess that it had not clarified matters much: "to be frank, the exact
contours of copyright for non-literal program structure are not completely
clear" and anticipated that future cases would define the parameters more
clearly.

ALTAI's approach differed from WHELAN because in ALTAI the court
examined *each* level of abstraction in the program as opposed to the
overall program in its entirety. The WHELAN court's approach was
considered to be too overbroad because it found that the program had only
one "idea" and everything else was considered "expression." The ALTAI
court considered its more sophisticated abstraction, filtration and
comparison tests superior.

Subsequent courts appear to have sided with ALTAI and against WHELAN.
In ATARI GAMES CORP. v. NINTENDO OF AMERICA, INC., 975 F.2d 632 (Fed. Cir.
1992), the United States Court of Appeals for the Federal Circuit, the
court that considers patent and related lawsuits, adopted the ALTAI
approach to analyzing substantial similarity. Similarly, the United States
Court of Appeals for the Ninth Circuit, which includes California, has also
endorsed the dissection of copyrighted work to determine the level of
protection that will be afforded. BROWN BAG SOFTWARE v. SYMANTEC, 960 F.2d
1465 (9th Cir. 1992). Federal district judges, on the trial level, have
also adopted the ALTAI approach to determining substantial similarity.

As the Second Circuit admitted, however, the scope of copyright
protection for non-literal elements of a computer program remains
unsettled. If an exact copy is made of another program then copyright
infringement will occur. If a program is a completely independent creation
there is no copyright infringement because no copying has occurred.
Between those two extremes the law remains muddy and will depend largely
on the facts of each case and how the facts are presented to the court.