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Companies Can't Use Copyright Law to Squelch Competition

(November 17, 2004) - The Digital Millennium Copyright Act, or "DMCA," makes it a crime to circumvent technologies such as encryption in order to gain unauthorized access to copyright-protected movies, music, software, and other creative products. The DMCA even criminalizes the creation and distribution of circumvention tools. But it doesn't go so far as to allow manufacturing companies to squelch competition in replacement parts, at least according to a recent ruling by the U.S. Court of Appeals for the Sixth Circuit.

In 2003, Lexmark International, a manufacturer of computer printers, persuaded a federal judge in Kentucky to grant it a preliminary injunction banning the Static Control company from distributing a microchip that mimicks the "authentication sequence" in Lexmark's toner cartridge. The microchip enables competitors to market remanufactured cartridges that work with Lexmark printers. Lexmark said the authentication sequence is a form of encryption that needs to be unlocked in order to access the copyrighted software in its computer printer. Under this convoluted reasoning, the competing microchip amounted to a circumvention tool banned by the DMCA.

On October 26, 2004, the Court of Appeals overturned the preliminary injunction, and sent the case back to the district court for further proceedings. The appeals court said that Lexmark had not shown a "likelihood of success" either on its claim that Static Control's product violated the DMCA, or that Lexmark's authentication sequence was copyright-protected in the first place. Copyright law doesn't protect ideas, only the form in which those ideas are expressed, and according to the appeals court, the ideas and the expression in Lexmark's computer sequence may have "merged." Even if the computer sequence was copyright-protected, the court went on, Static Control might have a legitimate defense of "fair use."

Likewise, the court expressed doubt that the DMCA could be used to squelch competition in replacement parts. The law, in fact, has a specific "interoperability" exemption that allows circumvention for purposes of "identifying and analyzing" those parts of a computer program that must be understood in order to assure that other independently developed software will be compatible with it.

Finally, said the court, it isn't Lexmark's authentication sequence that controls access to its computer printer, but the printer memory itself, which is not encrypted.

Moving beyond these complex technical issues, Judge Gilbert Merritt wrote a strong concurring opinion that rejected Lexmark's whole strategy. Under Lexmark's reading of the DMCA, Judge Merritt said, "manufacturers could potentially create monopolies for replacement parts" simply by including "lock-out" chips in their products. But Congress "did not intend to allow the DMCA to be used offensively in this manner." Moreover, squelching competition in replacement parts through a creative reading of the DMCA would "stifle rather than promote" the "progress of science and useful arts" which is the proclaimed purpose of the U.S. Constitution's Copyright Clause.

The Sixth Circuit decision, Lexmark International, Inc. v. Static Control COmponents, Inc., can be found at http://caselaw.lp.findlaw.com/data2/circs/6th/035400p.pdf. For more on the DMCA, see "The Progress of Science and Useful Arts": Why Copyright Today Threatens Intellectual Freedom.