United States v. Larry Charles Taylor

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 05-3309
No. 05-3520
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Action Tapes, Inc., a Texas corporation, *
doing business as Great Notions, *
*
Plaintiff - Appellant/ *
Cross Appellee, *
* Appeals from the United States
v. * District Court for the
* District of Minnesota.
Kelly Mattson, doing business as Kelly *
J's New Home Sewing Center, *
*
Defendant - Appellee/ *
Cross Appellant. *
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Submitted: May 19, 2006
Filed: August 30, 2006
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Before LOKEN, Chief Judge, JOHN R. GIBSON and BYE, Circuit Judges.
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LOKEN, Chief Judge.
A century ago, the Supreme Court held that a copyright owner’s exclusive right
to distribute a copyrighted product does not include the power to control a purchaser’s
subsequent disposition of the purchased copy. See Quality King Distribs., Inc. v.
L’anza Research Int’l, Inc., 523 U.S. 135, 140-42 (1998), citing Bobbs-Merrill Co. v.
Straus, 210 U.S. 339 (1908). This “first sale” principle is now codified at 17 U.S.C.
§ 109(a), and Congress has resisted efforts to alter the balance of competing interests

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1Pub. L. No. 101-650, §§ 801-805, 104 Stat. 5089, 5134.
2
The HONORABLE JOAN N. ERICKSEN, United States District Judge for the
District of Minnesota.
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it reflects. However, in enacting the Computer Software Rental Amendments Act of
1990, 1 Congress decided that short-term rentals of copyrighted computer software
were depriving copyright owners of an appropriate return on their creative
investments. See H.R. Rep. No. 735, 101st. Cong., 2d Sess. 7, reprinted in 1990
U.S.C.C.A.N. 6935, 6939 (1990). The response was a limited statutory exception to
the first sale principle that prohibits a person in possession of “a particular copy of a
computer program” from disposing of that copy for commercial gain by “rental, lease,
or lending,” unless authorized to do so by “the owner of copyright in [the] computer
program.” 17 U.S.C. § 109(b)(1)(A). In this case, we explore the boundaries of this
additional protection granted only to owners of copyrights in computer programs.
Action Tapes has assembled a portfolio of graphic embroidery designs which
it embeds on disk-like memory cards that enable computer-run sewing machines to
stitch the embedded design on fabric and apparel. Kelly Mattson is the owner of a
sewing machine supplies store in northern Minnesota. Action Tapes commenced this
action for willful copyright infringement, alleging that Mattson has repeatedly
violated the Rental Amendments Act by renting Action Tapes memory cards to her
customers without Action Tapes’ permission. Both sides moved for summary
judgment. The district court 2 granted summary judgment in favor of Mattson,
concluding that Action Tapes memory cards contain only data, not computer
programs. Action Tapes appeals. Without reaching the question decided by the
district court, we affirm on a different ground -- that Action Tapes failed to prove it
applied for registration of the computer program copyrights before commencing this
infringement suit. We also affirm the district court’s denial of Mattson’s motion for
attorneys’ fees under 17 U.S.C. § 505.

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I.
A copyright in a work “subsists from its creation.” 17 U.S.C. § 302(a).
However, the copyright owner may not sue for infringement under the federal
Copyright Act until the owner has delivered “the deposit, application, and fee required
for registration” to the United States Copyright Office, a branch of the Library of
Congress. 17 U.S.C § 411(a); see Olan Mills, Inc. v. Linn Photo Co., 23 F.3d 1345,
1349 (8th Cir. 1994). Copyright protection extends to all “original works of
authorship fixed in any tangible medium” of expression. 17 U.S.C. § 102(a). But the
Copyright Office has prescribed five categories for registration purposes --
nondramatic literary works, works of the performing arts, works of the visual arts,
sound recordings, and serials (periodicals). See 17 U.S.C. § 408(c)(1); 37 C.F.R.
§ 202.3(b)(1).
The Copyright Act defines a “computer program” as a “set of statements or
instructions to be used directly or indirectly in a computer in order to bring about a
certain result.” 17 U.S.C. § 101. A computer program’s “source code” is the program
as initially written in the programming language being used. The source code is then
changed into “object code” before the computer can execute its instructions. See
Syntek Semiconductor Co. v. Microchip Tech. Inc., 307 F.3d 775, 779 (9th Cir. 2002).
The Copyright Office classifies computer programs as nondramatic literary works
because they can be expressed in words and numbers. Therefore, the Office’s Circular
61, entitled Copyright Registration for Computer Programs, instructs those applying
to register a computer program to complete application Form TX, the form prescribed
for nondramatic literary works. See 37 C.F.R. § 202.3(b)(2). The applicant must also
deposit with the Copyright Office “one copy of identifying portions of the program
(first 25 and last 25 pages of source code) reproduced in a form visually perceptible
without the aid of a machine or device, either on paper or in microform.” Circular 61,
Deposit Requirements, Part I; see also 37 C.F.R. § 202.20(c)(vii)(A)(1).

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One who violates the Rental Amendments Act “is an infringer.” 17 U.S.C.
§ 109(b)(4). Action Tapes’ complaint alleged that Mattson infringed copyrights
“associated with” six memory cards that Mattson rented to others without Action
Tapes’ permission. In discovery and its summary judgment motion papers, Action
Tapes identified six “visual arts” copyright registrations for the copyrights allegedly
infringed. Action Tapes submitted no evidence that it complied with Circular 61 in
applying for these registrations, and no evidence that it deposited the source codes “in
a form visually perceptible without the aid of a machine or device.” Indeed, the term
source code is nowhere to be found in Action Tapes’ pleadings and motion papers,
and at the summary judgment motion argument counsel did not know the meaning of
that term. Thus, on this record, the six allegedly infringed visual arts copyrights are
not, as a matter of law, copyrights “in a computer program” within the meaning of the
Rental Amendments Act, 17 U.S.C. § 109(b)(1)(A). Accord Xoom, Inc. v. Imageline,
Inc., 323 F.3d 279, 284 (4th Cir.), cert. denied, 540 U.S. 879 (2003).
Action Tapes argues that its visual arts registrations suffice to satisfy the
§ 411(a) requirement that a copyright be registered before an infringement suit is
commenced. We disagree. Action Tapes seeks the benefit of a statute that confers
extra protection on the owners of a limited category of copyrights. A computer
program copyright protects the instructions that cause a computer “to bring about a
certain result,” here, the stitching of a design by a computerized sewing machine. A
visual arts copyright protects the result, here, the original design embedded in the
memory card and then stitched on the fabric. The Rental Amendments Act protects
the owners of computer program copyrights from competition from customer leasing,
but not the owners of copyrights in the design results.
The Copyright Office has promulgated regulations instructing applicants what
material they must deposit to obtain a copyright “in a computer program.” The
Copyright Office examines the deposited material, and its certificate of registration
is prima facie evidence of the copyright’s validity. 17 U.S.C. § 410(c). Moreover,

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this registration requirement has evidentiary significance. Here, for example, the
parties vigorously dispute whether Action Tapes’ memory cards contain “computer
programs” as defined in 17 U.S.C. § 101. The record would provide a more reliable
basis for resolving this dispute had Action Tapes properly applied for computer
program copyrights and deposited the required source codes. Because Action Tapes
failed to do so, § 411(a) bars its claims for the additional protection that the Rental
Amendments Act provides.
On appeal, Action Tapes further argues that summary judgment was improperly
granted because the record includes a certificate of registration for a literary works
copyright in “NL-1 Northern Lights,” and this certificate describes the nature of
Action Tapes’ authorship as “text of computer programs.” This contention reflects
a complete change of position. In the district court, Action Tapes did not allege that
this literary works copyright was infringed. Indeed, when the district court asked
during the summary judgment hearing whether Action Tapes had registered a
computer program copyright, counsel replied, “The registration is the visual arts
copyright registration.” Thus, we find insufficient evidentiary support in the record
for Action Tapes’ assertion that this certificate relates to a memory card that Mattson
allegedly infringed. We do not reverse the grant of summary judgment on the basis
of an argument not presented below. See Cronquist v. City of Minneapolis, 237 F.3d
920, 924-25 (8th Cir. 2001).
II.
In her cross appeal, Mattson argues that the district court abused its discretion
when it denied her motion for an award of attorneys’ fees authorized by 17 U.S.C.
§ 505. The decision to award attorneys’ fees to a prevailing party under § 505 is a
matter for the district court’s “equitable discretion,” to be exercised in an evenhanded
manner by considering factors such as whether the lawsuit was frivolous or
unreasonable, the losing litigant’s motivations, the need in a particular case to

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compensate or deter, and the purposes of the Copyright Act. See Fogerty v. Fantasy,
Inc., 510 U.S. 517, 534 & n.19 (1994). We review the district court’s ruling for abuse
of discretion. See Hartman v. Hallmark Cards, Inc., 833 F.2d 117, 122 (8th Cir. 1987).
Here, Action Tapes raised important and novel issues under the seldom-litigated
Rental Amendments Act. The district court did not abuse its discretion in denying an
attorneys’ fee award.
The judgment of the district court is AFFIRMED.
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