Wall Data, Inc. v. L.A. Cnty. Sheriff’s Dep’t, 447 F.3d 769 (9th Cir. 2006)

Wall Data, Inc. v. L.A. Cnty. Sheriff’s Dep’t,

447 F.3d 769 (9th Cir. 2006)

Year

2006

Court

United States Court of Appeals for the Ninth Circuit

Key

Facts

Defendant Los Angeles County Sheriff’s Department purchased 3,663

licenses for plaintiff Wall Data, Inc.’s computer software. Defendant

installed the software in 6,007 computers, but configured it so that only 3,663

computers could use it at the same time. Plaintiff alleged that its software

was “over-installed” in violation of the licensing agreement that restricted use

of each license to a “single designated computer” and prohibited use “in any

other multiple computer or multiple user arrangement.” Defendant appealed

the district court’s ruling that limiting the number of “useable” copies to the

number of licenses was not fair use.

Issue

Whether it was fair use to install software on more computers than permitted

under a license where the total number of computers that may access the

software at the same time never exceeds the total number of licenses

purchased.

Holding

The court held that defendant’s over-installation of software was not fair use,

finding all four fair use factors supported that conclusion. In determining that

the use was not transformative, the court noted that defendant’s argument was

weakened by the fact that it made exact copies of the software and used it for

the same purpose as the original. Moreover, although defendant did not

commercially compete with plaintiff, the use was still commercial because the

repeated and exploitative use saved defendant the expense of purchasing more

authorized copies or more flexible licenses. The court also determined that

the copying affected plaintiff’s potential market because defendant only

purchased a few licenses and found a way to install the program on all its

computers without paying the fee required for each installation. Defendant

could have bargained for such flexibility in its license agreements, but it did

not, leading to a negative effect on the potential market. The nature of the

work and amount and substantiality factors went against fair use because

computer programs are protected works, and the entire program was copied

verbatim.