Newman Dissents from CAFC View that SAS Failed to Show Copyrightability of Nonliteral Elements of Software Programs

The U.S. Court of Appeals for the Federal Circuit (CAFC) on Thursday issued a precedential decision holding that SAS Institute , Inc. failed to establish copyrightability of its asserted software program elements. Judge Newman dissented, arguing the ruling “contravenes the Copyright Act and departs from the long-established precedent and practice of copyrightability of computer programs” and that it represents a “far-reaching change.”

SAS sued World Programming Limited (WPL) in the Eastern District of Texas, alleging nonliteral copyright infringement of its software in addition to a number of other claims that were not part of the appeal. SAS on appeal to the CAFC specifically challenged the district court’s copyrightability determination, and argued that the district court abused its discretion both in its use of a “special hearing” to determine copyrightability and in rejecting SAS’ expert report.

Nonliteral elements relate to the aspects of a computer program that are not reduced to written code. “These elements include the program architecture, structure, sequence and organization, operational modules, and user interface,” explained the CAFC. An analogous example would be a novel in which the written words are the literal elements, while the organization of chapters, characters and plot would be nonliteral.

Abstraction-Filtration-Comparison Test

SAS argued that it satisfied its evidentiary burden to prove copyrightability once it showed that the SAS System was covered by valid registered copyrights. But the CAFC said “SAS’s preliminary showing that it has valid, registered copyrights directed to aspects of the SAS System is not sufficient to establish that each nonliteral element of the SAS System is protectable.” Instead, once SAS met its burden to show the required threshold of protectability, it became WPL’s burden to establish which elements are not protected, using the so-called abstraction-filtration-comparison test for copyrightability. Under this test, “a court breaks down the allegedly infringed program into its constituent structural parts—abstraction…. [Then] the court sifts out all non-protectable material—filtration…. And, third, the trier of fact compares any remaining “core of protectable expression” with the allegedly infringing program to determine if there is in fact a substantial similarity—comparison.”

The CAFC said WPL met its burden, showing “that at least a substantial portion of the allegedly infringed elements of the SAS System are not protectable by copyright.” The CAFC noted in its recap of the district court ruling:

“For example, WPL established that an earlier version of the SAS System, “SAS 76,” was in the public domain…. WPL also demonstrated that many of the Input Formats and Output Designs in the current SAS System are identical, or nearly identical, to those in SAS 76, and, as such, should be filtered…. WPL demonstrated that the SAS Language should be filtered because it is open and free for public use…. WPL’s expert opined that the allegedly copied materials contained unprotectable open-source elements; factual and data elements; elements not original to SAS; mathematical and statistical elements; process, system, and method elements; well-known and conventional display elements, such as tables, graphs, plots, fonts, colors, and lines; material for which SAS is not the author; statistical analysis; scènes à faire elements; and short phrase elements.”

The CAFC further noted that SAS refused to rebut WPL’s assertions and “did not otherwise provide evidence in relation to the ‘filtration’ step under the three-part test.” Ultimately, the majority held:

“[W]here the court has received persuasive evidence that the asserted elements are copyright unprotectable, SAS, as the copyright holder, was obligated to identify with specificity the elements of the SAS program that it asserts as copied and to establish that those elements fall within the scope of protection extended to such elements under copyright law.”

As to SAS’ contention that the district court’s use of a “Copyrightability Hearing” to determine copyrightability was an abuse of discretion as being inconsistent with Federal Rules of Civil Procedure (FRCP) 52 and 56, the CAFC said the hearing took the form of a pretrial conference and that such procedures are fully supported by the FRCP.  The CAFC also ruled that the exclusion of SAS’ expert report was not an abuse of discretion because the report was unhelpful as the expert did not conduct the filtration analysis and included “clearly unprotectable elements” in its own analysis. The CAFC said SAS failed to identify its infringement theory with specificity and the expert report did not help the court to clarify this point. It added:

“It is not enough to simply point to asserted elements and declare them protectable because they are creative or because other choices exist. Such an interpretation turns the Copyright Act on its head because it renders superfluous the requirement to prove that material a defendant is alleged to have copied constitutes protected expression.”

Newman: That’s Not the Law

In a 14-page dissent, Judge Newman said the majority’s ruling “contravenes law and precedent.” Newman said the district court’s determination that the SAS computer programs are not copyrightable because they contain nonliteral elements “that were generally known and inadequately distinguished” is “not the law.” She pointed to Feist Publications, Inc. v. Rural Telephone Service Co., which held that the “selection and arrangement” of known elements is protectable by copyright.”

The majority addressed Newman’s argument in a footnote, explaining that “this point overlooks that, in a copyright infringement action, when contrary evidence shows that not all material asserted is entitled to copyright protection, the copyright holder bears the burden to establish via evidence that such challenged material is entitled to copyright protection…. The dissent cites, Feist, for the “selection, combination, and arrangement” test but the court also explained that “[n]ot every selection, coordination, or arrangement will pass muster.”… In addition, Feist did not involve computer code.”

But Newman said the district court and her colleagues conflated the infringement and copyrightability questions and that use of the abstraction-filtration-comparison test to determine copyrightability was incorrect. “[A]s the Second Circuit stated, the filtration analysis serves ‘to determine whether the non-literal elements of two or more computer programs are substantially similar,’” explained Newman. She also cited to the Federal Circuit’s decision in Oracle v. Google, where the court said “Because Oracle ‘exercised creativity in the selection and arrangement’ of the method declarations when it created the API packages and wrote the relevant declaring code, they contain protectable expression that is entitled to copyright protection.”

Newman also took issue with the court’s failure to resolve the issues raised as to the burden of proof and concluded that “[t]he legal and policy premises of copyrightability of computer programs have heretofore been settled; there is no cause for judicial initiative to disrupt this important area of commercial and societal interest.”

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