Appendix — Apple Computer, Inc. v. Microsoft Corp.

Supreme Court brief1995

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Text

FILED

941121 DEC 19 19%

No.

Orrice OF The Lenk

IN THE

Supreme Court of the Anited States

OCTOBER TERM, 1994

APPLE COMPUTER, INC.,

Petitioner,

- Vv.

MIcROSOFT CORPORATION AND

HEWLETT-PACKARD COMPANY,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

APPENDIX

TO ACCOMPANY PETITIONER APPLE’S PETITION

EDWARD B. STEAD JACK E. BROWN

APPLE COMPUTER, INC. Counsel of Record

20525 Mariani Avenue ANTONIO T. VIERA

Cupertino, CA 95014 JOEL W. NOMKIN

(408) 996-1010 CHRISTOPHER J. RABOIN

CHARLES A. BLANCHARD

BERNARD PETRIE BROWN & BAIN, P.A.

633 Battery Street Post Office Box 400

San Francisco, CA 94111 Phoenix, AZ 85001

(415) 982-4743 (602) 351-8000

KENNETH W. STARR Curis R. OTTENWELLER

FRED M. ROWE DAVID J. ANDERMAN

PAUL T. CAPPUCCIO Brown & Balin

KIRKLAND & ELLIS 600 Hansen Way

655 Fifteenth Street, N.W. Palo Alto, CA 94306

Washington, D.C. 20005 (415) 856-9411

(202) 879-5000

Counsel for Petitioner

Deceinber 19, 1994

APPENDIX*

TABLE OF CONTENTS

I. THE OPINIONS BELOW ......ccccccccccess 1A

ll. CONSTITUTIONAL AND STATUTORY

a Say ee Fs 46-9 2 8 194A

IU. OTHER MATERIALS—COLLATION OF

SELECTED RECORD EXCERPTS .......... 200A

Evidence re:

1. Originality... ccc ccc ccc cee eceees 200A

2. Substantial Similarity ..............---. 204A

3. Indispensible Expression (Design

Oe CTE TEETER CCE 225A

Identification of Witnesses Cited ............ 240A

* All of the selections in the Appendix, arranged and submitted for the

Court’s convenience, are evidence entered in the Clerk’s Record below and are

cited thereto.

APPLE COMPUTER, INC., a California corporation,

Plaintiff-Appellee,

Vv.

MICROSOFT CORPORATION, a Delaware corporation,

Defendant-Appellant.

APPLE COMPUTER, INC., a California corporation,

Plaintiff-Appellee,

MICROSOFT CORPORATION, a Delaware corporation,

Defendant, and HEWLETT-PACKARD CO.,

Defendant-Appellant.

APPLE COMPUTER, INC., Plaintiff-Appellant,

¥.

MICROSOFT CORPORATION, a Delaware corporation;

HEWLETT-PACKARD CO., a California corporation,

Defendants-Appellees.

Nos. 93-16867, 93-16869 and 93-16883

United States Court of Appeals,

Ninth Circuit

July 11, 1994, Argued, Submitted

September 19, 1994, Decided

RYMER, Circuit Judge:

Lisa and Macintosh are Apple computers. Each has a

graphical user interface ("GUI") which Apple Computer, Inc.

registered for copyright as an audiovisual work. Both GUIs

were developed as a user-friendly way for ordinary mortals

to communicate with the Apple computer; the Lisa Desktop

and the Macintosh Finder’ are based on a desktop metaphor

with windows, icons and pull-down menus which can be

manipulated on the screen with a hand-held device called a

mouse. When Microsoft Corporation released Windows 1.0,

having a similar GUI, Apple complained. As a result, the

two agreed to a license giving Microsoft the right to use and

sublicense derivative works generated by Windows 1.0 in

present and future products. Microsoft released Windows

2.03 and later, Windows 3.0; its licensee, Hewlett-Packard

Company (HP), introduced NewWave 1.0 and later,

NewWave 3.0, which run in conjunction with Windows to

make IBM-compatible computers easier to use. Apple

believed that these versions exceed the license, make

Windows more "Mac-like," and infringe its copyright. This

action followed.

In a series of published rulings,” the district court

construed the agreement to license visual displays in the

Windows 1.0 interface, not the interface itself; determined

that all visual displays in Windows 2.03 and 3.0 were in

' The Macintosh Finder is registered as a derivative work of the Lisa

Desktop. Although the district court dismissed the Finder as a work in

suit, the Macintosh interface has been referred to interchangeably with

the Lisa during the course of this litigation.

? Apple Computer, Inc. v. Microsoft Corp., 709 F. Supp. 925 (N.D. Cal.

1989) (Apple I); Apple Computer, Inc. v. Microsoft Corp.; 717 F. Supp. 1428

(N.D. Cal. 1989) (Apple II; Apple Computer, Inc. v. Microsoft Corp., 759

F. Supp. 1444 (N.D. Cal. 1991) (Apple III; Apple Computer, Inc. v.

Microsoft Corp., 779 F. Supp. 133 (N.D. Cal. 1991) (Apple IV); Apple

Computer, Inc. v. Microsoft Corp., 799 F. Supp. 1006 (N.D. Cal. 1992)

(Apple V); Apple Computer, Inc. v. Microsoft Corp., 821 F. Supp. 616 (N.D.

Cal. 1993) (Apple VI). The first two published opinions were rendered by

Hon. William S. Schwarzer; after his appointment as Director of the

Federal Judicial Center, this matter was reassigned to the calendar of

Hon. Vaughn R. Walker.

Our treatment of facts throughout is truncated because the district

court’s is so extensive.

Windows 1.0 except for the use of overlapping windows®

and some changes in the appearance and manipulation of

icons; dissected the Macintosh, Windows and NewWave

interfaces based on a list of similarities submitted by Apple

to decide which are protectable; and applied the limiting

doctrines of originality, functionality, standardization, scenes

a faire and merger to find no copying of protectable elements

in Windows 2.03 or 3.0, and to limit the scope of copyright

protection to a handful of individual elements in NewWave.!

The court then held that those elements in NewWave would

be compared with their equivalent Apple elements for

substantial similarity, and that the NewWave and Windows

2.03 and 3.0 works as a whole would be compared with

Apple’s works for virtual identity. When Apple declined to

oppose motions for summary judgment of noninfringement

for lack of virtual identity, however, judgments in favor of

Microsoft and HP were entered.

Apple asks us to reverse because of two fundamental

errors in the district court’s reasoning.’ First, Apple argues

that the court should not have allowed the license for

Windows 1.0 to serve as a partial defense. Second, Apple

contends that the court went astray by dissecting Apple’s

works so as to eliminate unprotectable and licensed elements

> Windows 1.0 had a tiled windowing system in which the windows

were connected together in a fixed pattern such that all open windows

were simultaneously visible. An overlapping system allows windows to be

stacked on top of one another and moved around the screen individually.

* These items relate to the "zooming rectangle" animation associated

with the opening or closing of an icon into a window, the “dimming” of a

folder icon that has been opened into a window, and the use of a trash

can icon to depict the discard function. Each appears in both versions 1.0

and 3.0 of NewWave, but none is in any version of Windows.

* Although it does not concede that limiting doctrines were correctly

applied to each alleged similarity, Apple does not ask us to review the

many discrete decisions reflected in the district court’s published opinions.

We have done so only to the extent of being satisfied that none makes a

difference to the outcome, because we agree that the appeal turns on

whether ‘he district court’s approach was correct.

from comparison with Windows 2.03, 3.0 and NewWave as

a whole, incorrectly leading it to adopt a standard of virtual

identity instead of substantial similarity. We disagree.

The district court’s approach was on target. In so

holding, we readily acknowledge how much more complex

and difficult its task was than ours. The district court had

to grapple with graphical user interfaces in the first

instance—and for the first time, with a claim of copying a

computer program’s artistic look as an audiovisual work

instead of program codes registered as a literary work. In

this case there is also the unusual, added complexity of a

license that arguably covers some or most of the allegedly

infringing works. The district court therefore had to cut

new paths as it went along; we have the luxury of looking

at the case at the end of the trip. From this vantage point,

it is clear that treatment of Apple’s GUIs, whose visual

displays are licensed to a great degree and which are a tool

for the user to access various functions of a computer in an

aesthetically and ergonomically pleasing way, follows

naturally from a long line of copyright decisions which

recognizes that works cannot be substantially similar where

analytic dissection demonstrates that similarities in

expression are either authorized, or arise from the use of

common ideas or their logical extensions.

We therefore hold:

(1) Because there was an agreement by which Apple

licensed the right to make certain derivative works, the

district court properly started with the license to determine

what Microsoft was permitted to copy. Infringement cannot

be founded on a licensed similarity. We read Microsoft’s

license as the district court did, to cover visual displays—not

the Windows 1.0 interface itself. That being so, the court

correctly decided first to identify which visual displays in

Windows 2.03, 3.0 and NewWave are licensed and which are

not.

(2) The district court then properly proceeded to

distinguish ideas from expression, and to "dissect" unlicensed

elements in order to determine whether the remaining

similarities lack originality, flow naturally from basic ideas,

or are one of the few ways in which a particular idea can be

expressed given the constraints of the computer

environment. Dissection is not inappropriate even though

GUIs are thought of as the "look and feel" of a computer,

because copyright protection extends only to protectable

elements of expression.

(3) Having found that the similarities in Windows 2.03

and 3.0 consist only of unprotectable or licensed elements,

and that the similarities between protectable elements in

Apple’s works and NewWave are de minimis,° the district

court did not err by concluding that, to the extent there is

creative expression left in how the works are put together,

as a whole they can receive only limited protection. When

the range of protectable and unauthorized expression is

narrow, the appropriate standard for illicit copying is virtual

identity. For these reasons, the GUIs in Windows 2.03, 3.0

and NewWave cannot be compared for substantial similarity

with the Macintosh interface as a whole. Instead, as the

district court held, the works must be compared for virtual

identity.’

Apple also challenges dismissal of the Macintosh Finder

as a work in suit. Although we agree that the Finder, which

is registered as a derivative work of the Lisa Desktop, should

* The court’s order that the four individual similarities in NewWave

were to be compared at trial with their "equivalents" in Apple’s works for

substantial similarity, Apple VI, 821 F. Supp. at 631, is not an issue on

appeal. Apple does not assert infringement as to any of these elements

individually, and we therefore assume that it did not oppose entry of

judgment on this basis. In any event, as the district court held, id. at

623-25, these similarities do not comprise a core of protectable and

unlicensed similarities substantial enough to warrant a finding of illicit

copying under a standard of substantial similarity. See, e.g., Data East

USA, Inc. v. Epyx, Inc., 862 F.2d 204, 209 (9th Cir. 1988) (one remaining

similar feature was "inconsequential"); See v. Durang, 711 F.2d 141, 143

(9th Cir. 1983) (per curiam) (five remaining similarities insufficient to

convince trier of fact that works were substantially similar).

” Since Apple contests only the legal standard of virtual identity, we

do not consider whether summary judgment was appropriately entered on

the merits under that standard.

not have been dismissed as a work in suit because the

underlying copyright on the Lisa has not expired, Apple’s

non-opposition to judgment as to the Lisa applies to the

Finder as well. The Macintosh Finder is not incrementally

different from the Lisa Desktop in any respect material to

Apple’s claims of infringement. There is accordingly no

basis in the record for reversal on account of the erroneous

dismissal of the Finder.

Finally, Microsoft and HP cross-appeal denial of their

requests for attorney’s fees. Since the district court’s

decision, the Supreme Court has conferred greater discretion

to award fees to prevailing defendants than our law

previously acknowledged. Fogerty v. Fantasy, Inc.,___ US.

__, 1145. Ct. 1023, 127 L. Ed. 2d 455 (1994). Therefore,

we remand so that the district court may reconsider this

issue in light of Fogerty.

Analysis of Apple’s infringement claims must start with

an agreement signed in 1985 by Apple and Microsoft, which

resolved a dispute about visual displays generated by

Microsoft software products. The 1985 Agreement licensed

the right to use the visual displays generated by Apple’s Lisa

and Macintosh graphic user interface programs which

appeared as derivative works in Windows 1.0.° As a result,

to the extent that later versions of Windows and NewWave

* In the Agreement, Microsoft acknowledged "that the visual displays

in [Windows 1.0] are derivative works of the visual displays generated by

Apple’s Lisa and Macintosh graphic user interface programs." Apple

granted Microsoft a nonexclusive, royalty-free, nontransferable license "to

use these derivative works in present and future software programs and

to license them" to third parties for use in new software programs.

Microsoft, in turn, granted Apple a similar license "to use any new visual

displays created by Microsoft" during the next five years as part of its

Windows retail software products; Apple waived any copyright, patent,

trade secret or other claim against Windows 1.0; Microsoft agreed to delay

the release of any versions of its Excel spreadsheet program that would

run on computers other than the Macintosh; and Microsoft agreed to

release an enhanced version of Microsoft Word (a word processing

program) for the Macintosh.

—

use the visual displays in Windows 1.0 (which came from

Apple), that use is authorized.

Apple’s appeal turns on whether the Agreement,

properly construed, gives Microsoft the right to transfer

individual elements or design features used in Windows 1.0.

Apple particularly objects to any interpretation that- would

permit later Windows products to look more like the

Macintosh than Windows 1.0 looked.

The plain language of the Agreement disposes of Apple’s

argument. It licenses Microsoft to use "these derivative

works." "These derivative works" can only refer to

Microsoft’s acknowledgment that the "visual displays"

generated by Windows 1.0 "are derivative works of the visual

displays generated by Apple’s Lisa and Macintosh graphic

user interface programs." As the district court explained:

Had it been the parties’ intent to limit the license

to the Windows 1.0 interface, they would have known

how to say so. Instead, the "derivative works" covered

by the license are identified as the "visual displays" in

the Windows 1.0 interface, not the interface itself. And

there is nothing in the 1985 Agreement that indicates

that it was intended as a product license restricting

Microsoft and its licensees to the use of the Windows

1.0 interface as a whole.

Apple II, 717 F. Supp. at 1430-31.

Apple contends that the term "visual displays" is

ambiguous and can reasonably be construed (against

Microsoft, as drafter) to distinguish audiovisual copyrights

protecting visual works from literary copyrights protecting

programs, and to cover use of so much of Apple’s visual

copyrights as were used in Windows 1.0 but no more. This

argument fails because Apple tried to limit Microsoft’s

license to Windows 1.0 as a whole—but did not succeed.

Apple’s first draft included language providing that "at no

time shall this grant extend to any appearance, look, feel,

visual feature or operation other than that incorporated in

Microsoft Windows." Microsoft, however, rejected this

‘limitation. Thus, the parties had already staked out their

positions by the time Microsoft produced the final draft.

Accordingly, there is no basis for construing the Agreement

to grant the narrow license Apple bargained for but gave up.

Apple relies on statements by various Microsoft

employees in support of its ambiguity argument. These are

unavailing because the Agreement has an integration clause

which precludes contradicting its terms by collateral

understandings. Hayter Trucking, Inc. v. Shell Western E &

P, Inc., 18 Cal. App. 4th 1, 14, 22 Cal. Rptr. 2d 229 (1993).

In any event, testimony by the two employees who opined

that the phrase "visual displays" is ambiguous lacks force

because both are engineers who took no part in negotiating

the 1985 Agreement. Likewise, an internal Microsoft

memorandum by Bill Gates, which states that Microsoft

must "be careful not to take additional things from apple

| screens when we make enhancements—everything we do

today is fine," raises no triable issue as it is consistent with

Gates’s understanding that the license was for individual

displays, not the interface as a whole, and with testimony by

Apple’s chief negotiator that Apple’s license from Microsoft

gave Apple the right to incorporate into the Macintosh

interface any "new visual feature" developed by Microsoft for

Windows.

Apple’s further contention that the district court’s

interpretation of the Agreement must be wrong because it

would be unreasonable to suppose that Apple knowingly

gave away its most valuable technological asset ignores the

fact that Apple itself received valuable consideration under

the Agreement: the right to use and license any new

displays created by Microsoft within five years, together with

Microsoft’s promises to delay release of an IBM-compatible

version of Excel and to release an improved version of

Microsoft Word for the Macintosh. Under these

circumstances, the district court properly concluded that the

Agreement is not reasonably susceptible to Apple’s

interpretation.®

» For the same reasons, the district court did not abuse its discretion

in denying Apple’s motion for leave to amend to add claims for breach of

contract, rescission and unfair competition. See Allen v. City of Beverly

Apple also appeals denial of its own motion for partial

summary judgment that the works, viewed overall as they

are viewed by users, are unlicensed derivative works

substantially similar to Apple’s works. Our resolution of its

argument for reversal of judgments in favor of Microsoft and

HP essentially disposes of this issue.

Apple raises one additional point, however, which we

address here because Apple treats it as connected to its

motion. The argument is that even if the 1985 Agreement

does confer a partial license to use visual displays, Microsoft

and HP exceeded its scope and therefore infringed Apple’s

copyrights. See, e.g., S.O.S., Inc. v. Payday, Inc., 886 F.2d

1081, 1087 (9th Cir. 1989) ("A licensee infringes the owner’s

cases on which Apple relies, however, merely establish that

the breach of a prohibition in the license agreement can lead

to a finding of infringement. See, e.g., id. at 1088-89 (license

granted only right to use copyrighted computer program;

licensee exceeded scope of license by preparing modified

version of program without licensor’s permission); Frank

Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505,

511-12 (9th Cir. 1985) (license explicitly excluded

performance of songs in manner performed by licensee).

Where, as here, the accused works include both licensed and

unlicensed features, infringement will depend on whether

the unlicensed features are entitled to protection. Cf. Data

East USA, Inc. v. Epyx, Inc., 862 F.2d 204, 208 (9th Cir.

1988) (substantial similarity of unprotected expression does

not support finding of infringement). Finally, contrary to

Apple’s suggestion, by concluding that the 1985 Agreement

provides a partial defense, the district court did not preclude

Apple from prevailing on its infringement claims; the court

Hills, 911 F.2d 367, 373 (9th Cir. 1990). The proposed amendment would

have been futile because the claims that Apple sought to add are based on

its allegation that during the negotiation of the 1985 Agreement,

Microsoft promised it would not make future versions of Windows any

more similar in appearance to the Macintosh.

10A

merely required Apple to prove that Microsoft and HP

copied unlicensed, protected expression. See S.0.S., 886 F.2d

at 1089 & n.11 (remanding for district court to determine

whether licensee’s unauthorized uses infringed licensor’s

Apple makes a number of related arguments challenging

the district court’s copyright analysis. It contends that the

district court deprived its works of meaningful protection by

dissecting them into individual elements and viewing each

element in isolation. Because the Macintosh GUI is a

dynamic audiovisual work, Apple argues that the "total

concept and feel" of its works—that is, the selection and

arrangement of related images and their animation—must be

compared with that of the Windows and NewWave GUIs for

substantial similarity. Apple further asserts that in this

case, the court had no occasion to dissect its works into

discrete elements because Microsoft and HP virtually

mimicked the composition, organization, arrangement and

dynamics of the Macintosh interface, as shown by striking

similarities in the animation of overlapping windows and the

design, layout and animation of icons. Apple also argues

that even if dissection were appropriate, the district court

should not have eliminated from jury consideration those

elements that are either licensed or unprotected by

contentions boil down to the same thing: Apple wants an

overall comparison of its works to the accused works for

substantial similarity rather than virtual identity.'°

'° Apple also argues that the court erred by ruling that its audiovisual

works are functional rather than aesthetic; that creative works are not

copyrightable when they serve a functional purpose; and that Apple’s

works are "useful articles" or "compilations" under 17 U.S.C. § 101. We

do not address these arguments specifically, because we do not read the

district court’s opinions as so holding. Rather, in the process of

considering the scope of Apple’s copyright the court took into account the

functional aspects of graphical user interfaces and the analogous range of

protection available for compilations. As we shall explain, this was not

improper.

11A

The fact that Apple licensed the right to copy almost all

of its visual displays fundamentally affects the outcome of

its infringement claims. Authorized copying accounts for

more than 90% of the allegedly infringing features in

Windows 2.03 and 3.0, and two-thirds of the features in

NewWave. More than that, the 1985 Agreement and

negotiations leading up to Microsoft’s license left Apple no

right to complain that selection and arrangement of licensed

elements make the interface as a whole look more "Mac-like"

than Windows 1.0.

Thus, we do not start at ground zero in resolving

Apple’s claims of infringement. Rather, considering the

license and the limited number of ways that the basic ideas

of the Apple GUI can be expressed differently, we conclude

that only "thin" protection, against virtually identical

copying, is appropriate. Apple’s appeal, which depends on

comparing its interface as a whole for substantial similarity,

must therefore fail.

To prevail, Apple must show ownership of a valid

copied unlicensed, protected elements of its copyrighted

audiovisual works. Brown Bag Software v. Symantec Corp.,

960 F.2d 1465, 1472 (9th Cir.), cert. denied, US. _,

113 S. Ct. 198, 121 L. Ed. 2d 141 (1992). Copying may be

shown by circumstantial evidence of access and substantial

similarity of both the general ideas and expression between

the copyrighted work and the allegedly infringing work. Jd.

We have traditionally determined whether copying

sufficient to constitute infringement has taken place under

a two-part test having "extrinsic" and "intrinsic" components.

As originally adopted in Sid & Marty Krofft Television

Productions, Inc. v. McDonald’s Corp., 562 F.2d 1157, 1164

(9th Cir. 1977), the extrinsic prong was a test for similarity

of ideas based on external criteria; analytic dissection and

expert testimony could be used, if helpful. The intrinsic

prong was a test for similarity of expression from the

standpoint of the ordinary reasonable observer, with no

expert assistance. Id. As it has evolved, however, the

extrinsic test now objectively considers whether there are

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12A

substantial similarities in both ideas and expression, whereas

the intrinsic test continues to measure expression

subjectively. Brown Bag, 960 F.2d at 1475; Shaw uv.

Lindheim, 919 F.2d 1353, 1357 (9th Cir. 1990). Because

only those elements of a work that are protectable and used

without the author’s permission can be compared when it

comes to the ultimate question of illicit copying, we use

analytic dissection to determine the scope of copyright

protection before works are considered "as a whole." See,

e.g., Brown Bag, 960 F.2d at 1475-76 (explaining that

purpose of analytic dissection is to define scope of copyright

protection); Pasillas v. McDonald’s Corp., 927 F.2d 440, 443

(9th Cir. 1991) (copyright holder cannot rely on standard

elements to show substantial similarity of expression);

Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d 197,

207-08 (9th Cir. 1989) (trier of fact cannot base infringement

decision on unprotectable aspects of plaintiff’s work).

Although this litigation has raised difficult and

interesting issues about the scope of copyright protection for

a graphical user interface, resolving this appeal is a matter

of applying well-settled principles. In this, as in other cases,

the steps we find helpful to follow are these:

(1) The plaintiff must identify the source(s) of the

alleged similarity between his work and the defendant’s

work.

(2) Using analytic dissection, and, if necessary, expert

testimony, the court must determine whether any of the

allegedly similar features are protected by copyright. Where,

as in this case, a license agreement is involved, the court

must also determine which features the defendant was

authorized to copy. Once the scope of the license is

determined, unprotectable ideas must be separated from

potentially protectable expression; to that expression, the

court must then apply the relevant limiting doctrines in the

context of the particular medium involved, through the eyes

of the ordinary consumer of that product.

(3) Having dissected the alleged similarities and

considered the range of possible expression, the court must

define the scope of the plaintiff's copyright—that is, decide

A a all A oy nt he a

13A

whether the work is entitled to "broad" or "thin" protection.

Depending on the degree of protection, the court must set

the appropriate standard for a subjective comparison of the

works to determine whether, as a whole, they are

sufficiently similar to support a finding of illicit copying.

Like the plaintiff in Brown Bag, in this case, Apple

identified the sources of alleged similarity by submitting a

list of particular features in its works which are similar to

features found in Windows 2.03, 3.0 and NewWave. Apple’s

suggestion that its arm was twisted to provide this list of

similarities and that it was somehow inappropriate for the

district court to ask for a list and to rely on it, instead of

considering the works as a whole, is misplaced. The court

had the benefit of numerous videotapes and demonstrations

of the GUIs "as a whole." The district court was

nevertheless obliged to identify similarities, determine their

source, and decide which elements are protectable. It was

thus well within the court’s case management discretion to

ask for a list from Apple.

It is not easy to distinguish expression from ideas,

particularly in a new medium. However, it must be done, as

the district court did in this case. Baker v. Selden, 101 USS.

99, 25 L. Ed. 841 (1879).'' As we recognized long ago in

the case of competing jeweled bee pins, similarities derived

from the use of common ideas cannot be protected;

otherwise, the first to come up with an idea will corner the

market. Herbert Rosenthal Jewelry Corp. v. Kalpakian, 446

F.2d 738, 742 (9th Cir. 1971). Apple cannot get patent-like

protection for the idea of a graphical user interface, or the

idea of a desktop metaphor which concededly came from

Xerox. It can, and did, put those ideas together creatively

with animation, overlapping windows, and well-designed

icons; but it licensed the visual displays which resulted.

'! 17 U.S.C. § 102(b) codifies this principle, denying copyright

protection "to any idea, procedure, process, system, method of operation,

concept, principle, or discovery.”

144A

The district court found that there are five other basic

ideas embodied in the desktop metaphor: use of windows to

display multiple images on the computer screen and to

facilitate user interaction with the information contained in

the windows; iconic representation of familiar objects from

the office environment; manipulation of icons to convey

instructions and to control operation of the computer; use

of menus to store information or computer functions in a

place that is convenient to reach, but saves screen space for

other images; and opening and closing of objects as a means

of retrieving, transferring and storing information. Apple V,

799 F. Supp. at 1026. No copyright protection inheres in

these ideas. Therefore, substantial similarity of expression

in unlicensed elements cannot be based on the fact that the

Lisa, the Finder, Windows 2.03, 3.0 and NewWave all have

windows, icons representing familiar objects from the office

environment that describe functions being performed and

that can be moved around the screen to tell the computer

what to do, menus which give easy access to information or

functions without using space on the screen, or objects that

open and close.

Well-recognized precepts guide the process of analytic

dissection. First, when an idea and its expression are

indistinguishable, or "merged," the expression will only be

protected against nearly identical copying. Krofft, 562 F.2d

at 1167-68; Kalpakian, 446 F.2d at 742. For example, in this

case, the idea of an icon in a desktop metaphor representing

a document stored in a computer program can only be

expressed in so many ways. An iconic image shaped like a

page is an obvious choice.

The doctrine of scenes a faire is closely related. As we

explained in Frybarger v. International Business Machines

Corp., 812 F.2d 525 (9th Cir. 1987), when similar features in

a videogame are "'as a practical matter indispensable, or at

least standard, in the treatment of a given [idea],'" they are

treated like ideas and are therefore not protected by

Philips Consumer Elecs. Corp., 672 F.2d 607, 616 (7th Cir.),

cert. denied, 459 U.S. 880, 103 S. Ct. 176, 74 L. Ed. 2d 145

15A

(1982)). Furthermore, as Frybarger holds, "the mere

indispensable expression of these ideas, based on the

technical requirements of the videogame medium, may be

protected only against virtually identical copying." Id.; see

also Data East, 862 F.2d at 209 (visual displays of karate

match conducted by two combatants, one of whom wears red

shorts and the other white as in the sport, and who use the

same moves, are supervised by a referee and are scored alike

as in the sport, are inherent in the sport of karate itself and

as such are unprotectable). In this case, for example, use of

overlapping windows inheres in the idea of windows. A

programmer has only two options for displaying more than

one window at a time: either a tiled system, or an

overlapping system. As demonstrated by Microsoft’s scenes

a faire video, overlapping windows have been the clear

preference in graphic interfaces. Accordingly, protectable

substantial similarity cannot be based on the mere use of

overlapping windows, although, of course, Apple’s particular

expression may be protected.

Apple suggests that scenes a faire should not limit the

scope of its audiovisual copyright, or at least that the

interactive character of GUIs and their functional purpose

should not outweigh their artistry. While user participation

may not negate copyrightability of an audiovisual work, see,

e.g., Midway Mfg. Co. v. Artic Int'l, Inc., 704 F.2d 1009,

1011-12 (7th Cir.), cert. denied, 464 U.S. 823, 104 S. Ct. 90,

78 L. Ed. 2d 98 (1983); Stern Elecs., Inc. v. Kaufman, 669

F.2d 852, 856 (2d Cir. 1982), the district court did not deny

protection to any aspect of Apple’s works on this basis. In

any event, unlike purely artistic works such as novels and

plays, graphical user interfaces generated by computer

programs are partly artistic and partly functional. They are

a tool to facilitate communication between the user and the

computer; GUIs do graphically what a character-based

interface, which requires a user to type in alphanumeric

commands, does manually. Thus, the delete function is

engaged by moving an icon on top of a trash can instead of

hitting a "delete" key. In Apple’s GUI, the ability to move

icons to any part of the screen exemplifies an essentially

16A

functional process, indispensable to the idea of manipulating

icons by a mouse.

To the extent that GUIs are artistic, there is no dispute

that creativity in user interfaces is constrained by the power

and speed of the computer. See Manufacturers Technologies,

Inc. v. Cams, Inc., 706 F. Supp. 984, 994-95 (D. Conn. 1989)

(denying protection to formatting style of plaintiff's screen

displays because of constraints on viable options available to

programmers). For example, hardware constraints limit the

number of ways to depict visually the movement of a

window on the screen; because many computers do not have

enough power to show the entire contents of the window as

it is being moved, the illusion of movement must be shown

by using the outline of a window or some similar feature.

Design alternatives are further limited by the GUI’s purpose

of making interaction between the user and the computer

more "user-friendly." These, and similar environmental and

ergonomic factors which limit the range of possible

expression in GUIs, properly inform the scope of copyright

protection.

Originality is another doctrine which limits the scope of

protection. As the Supreme Court recently made clear,

protection extends only to those components of a work that

are original to the author, although original selection and

arrangement of otherwise uncopyrightable components may

be protectable. Feist Publications, Inc. v. Rural Tel. Serv.

Co., 499 U.S. 340, 348-51, 111 S. Ct. 1282, 1289-91, 113 L.

Ed. 2d 358 (1991). Apple’s argument that components

should not be tested for originality because its interface as

a whole meets the test, see Roth Greeting Cards v. United

Card Co., 429 F.2d 1106, 1109 (9th Cir. 1970) ("[T]Jhe

originality necessary to support a copyright merely calls for

independent creation, not novelty."), is therefore misplaced.

Beyond that, Apple admits that it borrowed heavily from the

iconic treatments in the Xerox Star and an IBM

Pictureworld research report but disputes several of the

district court’s individual determinations. For instance,

Apple claims that its file folder and page icon designs are

original. Even if they are, these particular icons add so little

17A

to the mix of protectable material that the outcome could

not reasonably be affected.

In sum, the district court’s analytic dissection was

appropriately conducted under the extrinsic portion of our

test for whether sufficient copying to constitute

infringement has taken place. We are not persuaded to the

contrary by Apple’s arguments that the district court

shouldn’t have dissected at all, or dissected too much; that

it "filtered out" unprotectable and licensed elements instead

of viewing the Macintosh interface as a whole; and that it

should have recognized protectability of arrangements and

the "total concept and feel" of the works under a substantial

similarity standard.

First, graphical user interface audiovisual works are

subject to the same process of analytical dissection as are

other works. We have dissected videogames, which are

audiovisual works and therefore closely analogous, see, e.g.,

Data East, 862 F.2d at 208-09 (performing analytic

dissection of similarities to determine whether similarities

resulted from unprotectable expression); Frybarger, 812 F.2d

at 529-30 (district court correctly concluded that similar

features in videogames were unprotectable ideas and that no

reasonable jury could find expressive elements substantially

similar), and we have dissected nonliteral elements of

computer programs, which are somewhat analogous, see, e.g.,

Brown Bag, 960 F.2d at 1475-77 (rejecting argument similar

to Apple’s about propriety of analytic dissection of computer

program components such as _ screens, menus and

keystrokes); Johnson Controls, Inc. v. Phoenix Control Sys.,

Inc., 886 F.2d 1173, 1176 (9th Cir. 1989) (noting special

master’s detailed analysis of similarities). Other courts

perform the same analysis, although articulated differently.

See, e.g., Computer Assocs. Int’l, Inc. v. Altai, Inc., 982 F.2d

693, 706-11 (2d Cir. 1992) (adopting "abstraction-filtration-

comparison" test for analyzing nonliteral structure of

computer program, relying in part on our own approach);

Gates Rubber Co. v. Bando Chem. Indus., 9 F.3d 823, 834,

841 (10th Cir. 1993) (adopting Altai test, but suggesting that

comparison of works as a whole may be appropriate as

18A

preliminary step before filtering out unprotected elements);

Engineering Dynamics, Inc. v. Structural Software, Inc., 26

F.3d 1335, 1342-43 (5th Cir. 1994) (adopting Gates

Rubber/Altai test to analyze scope of copyright protection for

user interface, input formats and output reports); Lotus Dev.

Corp. v. Borland Int’l, Inc., 788 F. Supp. 78, 90, 93 (D. Mass.

1992) (describing similar three-part test); cf. Whelan Assocs.

v. Jaslow Dental Lab., Inc., 797 F.2d 1222, 1236 (3d Cir.

1986) (defining idea of utilitarian work as its purpose or

function, and everything not necessary to that purpose as

expression), cert. denied, 479 U.S. 1031, 107 S. Ct. 877, 93 L.

Ed. 2d 831 (1987).

Nor did the district court’s dissection run afoul of the

enjoinder in such cases as Johnson Controls, 886 F.2d at

1176, Krofft, 562 F.2d at 1167, and Roth, 429 F.2d at 1110,

to consider the "total concept and feel" of a work. Here, the

court did not inappropriately dissect dissimilarities, and so

did nothing to distract from subjectively comparing the

works as a whole. See Aliotti v. R. Dakin & Co., 831 F.2d

898, 901 (9th Cir. 1987) (indicating that as the concern of

Krofft).

As we made clear in Aliotti, the party claiming

infringement may place "no reliance upon any similarity in

expression resulting from" unprotectable elements. Id.

(emphasis added) (similarities between competing stuffed

dinosaur toys on account of posture and body design, and

being cuddly, stem from the physiognomy of dinosaurs or

from the nature of stuffed animals and are thus

unprotectable). Otherwise, there would be no point to the

extrinsic test, or to distinguishing ideas from expression. In

this case, it would also effectively rescind the 1985

Agreement. This does not mean that at the end of the day,

when the works are considered under the intrinsic test, they

should not be compared as a whole. See McCulloch v. Albert

E. Price, Inc., 823 F.2d 316, 321 (9th Cir. 1987) (contrasting

artistic work at issue, where decorative plates were

substantially similar in more than the one unprotectable

element (text), with factual works which have many

unprotectable elements and very little protectable

19A

expression). Nor does it mean that infringement cannot be

based on original selection and arrangement of unprotected

elements. However, the unprotectable elements have to be

identified, or filtered, before the works can be considered as

a whole. See Harper House, 889 F.2d at 207-08 (reversing

because "total impact and effect” test of jury instruction did

not distinguish between protectable and unprotectable

material, thereby improperly making it possible for jury to

find copying based on unprotected material instead of

selection and arrangement); see also Pasillas, 927 F.2d at

443 (copyright holder could not rely on unprotectable

elements to show substantial similarity of expression);

Frybarger, 812 F.2d at 529 (to extent that similarities

between works were confined to ideas and general concepts,

they were noninfringing).

The district court’s conclusion that the works as a

whole are entitled only to limited protection and should be

compared for virtual identity follows from its analytic

dissection. By virtue of the licensing agreement, Microsoft

and HP were entitled to use the vast majority of features

that Apple claims were copied. Of those that remain, the

district court found no unauthorized, protectable similarities

of expression in Windows 2.03 and 3.0, and only a handful

in NewWave. Thus, any claim of infringement that Apple

may have against Microsoft must rest on the copying of

Apple’s unique selection and arrangement of all of these

features. Under Harper House and Frybarger, there can be

no infringement unless the works are virtually identical.

Apple, however, contends that its audiovisual work with

animation and icon design cannot be analogized to factual

works such as game strategy books, see Landsberg uv.

Scrabble Crossword Game Players, Inc., 736 F.2d 485, 488

(9th Cir.) ("(S]imilarity of expression may have to amount to

verbatim reproduction or very close paraphrasing before a

factual work will be deemed infringed."), cert. denied, 469

U.S. 1037, 105 S. Ct. 513, 83 L. Ed. 2d 403 (1984),

accounting systems, see Selden, 101 US. at 104, 25 L. Ed.

841 (copyright in book describing new accounting system not

20A

infringed when defendant copied ledger sheets used in

system), or organizers, see Harper House, 889 F.2d at 205 (as

compilations consisting largely of uncopyrightable elements,

plaintiff's organizers entitled only to protection against

"bodily appropriation of expression"), which are afforded only

"thin" protection because the range of possible expression is

narrow. See Feist, 499 U.S. at 349, 111 S. Ct. at 1289-90.

Rather, it submits that the broader protection accorded

artistic works is more appropriate. See, e.g., McCulloch, 823

F.2d at 321 (artistic work like a decorative plate receives

broader protection because of endless variations of

expression available to artist).

Which end of the continuum a particular work falls on

is a call that must be made case by case. We are satisfied

that this case is closer to Frybarger than to McCulloch. See

also Atari Games Corp. v. Oman, 979 F.2d 242, 245 (D.C.

Cir. 1992) (analogizing audiovisual work like a videogame to

compilation of facts). Accordingly, since Apple did not

contest summary judgment under the virtual identity

standard on the merits, judgment was properly entered.

Apple also argues that the district court improperly

confined the rule in Shaw, 919 F.2d at 1361, that if a work

passes the extrinsic test it should go to the jury, to literary

works. See Kouf v. Walt Disney Pictures & Television, 16

F.3d 1042, 1045-46 (9th Cir. 1994) (applying Shaw’s rule to

motion picture screenplay and holding that plaintiff failed to

satisfy extrinsic test); Brown Bag, 960 F.2d at 1476

(declining to limit Shaw as a matter of law to literary works

because at least some computer programs are similar to

literary works). But see Pasillas, 927 F.2d at 442-43

(limiting Shaw to literary works and affirming summary

judgment on competing "Man in the Moon" masks for lack of

substantial similarity of protectable expression). We don’t

have to resolve whether audiovisual works such as GUIs are

more similar to Man in the Moon masks than to scripts,

however. Apple could have gone to the jury under a virtual

identity standard, but elected not to.

We therefore hold that the district court properly

identified the sources of similarity in Windows and

21A

NewWave, determined which were licensed, distinguished

ideas from expression, and decided the scope of Apple’s

filtering out unprotectable elements. Having correctly found

that almost all the similarities spring either from the license

or from basic ideas and their obvious expression, it correctly

concluded that illicit copying could occur only if the works

as a whole are virtually identical.

Apple contends that the district court erred in

dismissing the Macintosh Finder as a work in suit. Based

on 17 U.S.C. § 103(b), which provides that "[t]he copyright

in a... derivative work extends only to the material

contributed by the author of such work, as distinguished

from the preexisting material employed in the work,” the

court concluded that Apple could not proceed on the Finder

because the Finder is a derivative work of the original Lisa

Desktop and all of the unlicensed similarities are covered by

the underlying Lisa copyrights.

We agree with Apple that the district court’s reading of

§ 103(b) is too restrictive. Although it relied on Silverman

uv. CBS Inc., 870 F.2d 40 (2d Cir.), cert. denied, 492 U.S. 907,

109 S. Ct. 3219, 106 L. Ed. 2d 569 (1989), we believe that

case is distinguishable. In Silverman, the underlying works

had fallen into the public domain; the court held that the

defendant could be liable for infringement only if he copied

some original expression that was added by the derivative

works. Id. at 49-50; see also Shaw v. Lindheim, 809 F.

Supp. 1393, 1402 (C.D. Cal. 1992) (where underlying work

was unregistered, owner of derivative work could not recover

for copying of expression contained in original).

In this case, however, Apple is the author and copyright

owner of the Lisa Desktop and the Macintosh Finder, both

of which are still protected. Apple argues that under these

circumstances, § 103(b) does not prevent it from claiming

infringement of the Finder, even for copied material that

was incorporated from the Lisa. See, e.g., E.F. Johnson Co.

vu. Uniden Corp. of Am., 623 F. Supp. 1485, 1488, 1492 (D.

SS a a ae

22A

Minn. 1985); Rand McNally & Co. v. Fleet Management Sys.,

Inc., 591 F. Supp. 726, 733 n.6 (N.D. Ill. 1983).

Because Apple owns the copyrights in both works, it is

similarly situated to an exclusive licensee. If the copyright

owner of a derivative work is the exclusive licensee of certain

rights in the underlying work, he is treated as the copyright

owner of the underlying work for the purpose of exercising

those rights. 1 Melville B. Nimmer & David Nimmer,

Nimmer on Copyright § 3.05, at 3-32.2 (1993). He can

therefore sue for copying of material that appears in both

the derivative work and the underlying work. Id.; see

Gamma Audio & Video, Inc., v. Ean-Chea, 11 F.3d 1106,

1111-12 (1st Cir. 1993) (allowing exclusive licensee to base

infringement suit on derivative works; because derivative

works were unregistered, licensee could recover statutory

damages only if defendant’s unauthorized rental of

derivative works also infringed licensee’s rights in

underlying works). Like an exclusive licensee, Apple owns

the rights in the underlying work on which the Finder is

based. It therefore may base its claims on both the Finder

and the Lisa.

Nevertheless, we need not reverse. Apple contends that

it was deprived of the opportunity fairly to present its case

because the Finder is what everyone is familiar with and

almost none of the available evidence relates to the Lisa. It

concedes, however, that throughout the summary judgment

proceedings the district court allowed it to present its case

using the Finder. Thus, dismissal of the Finder could only

have an effect if the case were to go to trial. By virtue of

Apple’s non-opposition to judgment on the works as a whole,

we take it that the Lisa is not virtually identical to Windows

2:03, 3.0 or NewWave. As the district court found no

material difference between the Lisa and the Finder, there

can be no virtual identity as between the accused works and

the Finder, either.

23A

Both Microsoft and HP challenge the denial of their

requests for attorney’s fees under 17 U.S.C. § 505." At the

time of the district court’s decision, controlling Ninth

Circuit authority held that attorney’s fees were not available

to a prevailing defendant under § 505 unless the plaintiff's

action was frivolous or in bad faith. Cooling Sys. &

Flexibles, Inc. v. Stuart Radiator, Inc., 777 F.2d 485, 493

(9th Cir. 1985). Since that time, however, the Supreme

Court has overruled Cooling Systems, holding that

"[p]revailing plaintiffs and prevailing defendants are to be

treated alike, but attorney’s fees are to be awarded to

prevailing parties only as a matter of the court’s discretion."

Fogerty v. Fantasy, Inc.,_ _ U.S.__, 1148. Ct. 1023, 1033,

127 L. Ed. 2d 455 (1994). Because the district court now has

greater discretion to award attorney’s fees to prevailing

defendants, we remand Microsoft’s and HP’s requests for

reconsideration in light of the standard announced in

Fogerty. See Jackson v. Axton, 25 F.3d 884, 890 (9th Cir.

1994) (remanding attorney’s fees issue to district court in

light of Fogerty).

Apple argues that despite this change in the law,

remand is unnecessary because the district court also made

findings that require the denial of attorney’s fees under the

criteria set forth in Lieb v. Topstone Industries, 788 F.2d

'2 Microsoft also argues that it is entitled to attorney’s fees because

Apple breached the 1985 Agreement by suing it for copyright

infringement. See Effects Assocs. v. Cohen, 908 F.2d 555, 559 (9th Cir.

1990) (in granting nonexclusive license, copyright holder gives up right to

sue licensee for infringement), cert. denied, 498 U.S. 1103, 1115S. Ct. 1003,

112 L. Ed. 2d 1086 (1991). The district court properly denied Microsoft’s

motion based on its earlier ruling dismissing Microsoft’s counterclaim for

breach of contract. As the district court noted, the plain language of the

release indicates that Apple agreed not to sue Microsoft only with respect

to any rights Apple might assert in Windows 1.0. Nothing in the

Agreement suggests that Apple waived its right to sue Microsoft based on

a claim to proprietary material in any other Microsoft programs. Because

Apple did not breach the Agreement, Microsoft cannot be awarded

attorney’s fees on this basis.

24A

151, 156 (3d Cir. 1986).'* The record does not support this

contention. The district court clearly indicated that it might

be inclined to award attorney’s fees if a finding of bad faith

or frivolousness were no longer required, and it invited HP

and Microsoft to renew their motions should the law in this

circuit change. Remand is therefore appropriate.

AFFIRMED IN PART; REVERSED AND REMANDED

IN PART.

"> In Fogerty, the Supreme Court cited the Lieb factors with approval.

___ US. at___, 1148S. Ct. at 1033 n.19. This court has already relied on

the Lied criteria in setting guidelines for the award of attorney’s fees to

prevailing plaintiffs. McCulloch, 823 F.2d at 323.

25A

APPLE COMPUTER, INC., Plaintiff,

MICROSOFT CORPORATION and

HEWLETT-PACKARD COMPANY, Defendants.

No. C-88-20149-WWS

United States District Court,

N.D. California

March 20, 1989

MEMORANDUM OF DECISION AND ORDER

SCHWARZER, District Judge:

Apple Computer, Incorporated ("Apple") brings this

action against the Microsoft Corporation ("Microsoft") and

the Hewlett-Packard Company ("H-P"), alleging that the

visual displays and images in Microsoft’s product Windows

2.03 infringe Apple’s copyrighted audiovisual works.

Microsoft denies the allegations and moves for summary

judgment on its affirmative defense that the visual displays

in Windows 2.03 are within the scope of a license granted by

Apple to Microsoft in a Settlement Agreement entered into

by the parties on November 22, 1985 ("1985 Agreement”).

Apple, in turn, moves for partial summary judgment

declaring that Windows 2.03 is an unauthorized derivative

work of Apple’s copyrighted visual displays and dismissing

Microsoft’s affirmative defense based on the 1985

Agreement.’

' In deciding the motions before it, the Court does not reach

defendants’ other affirmative defense that Apple’s copyrights are invalid.

It considers only whether the 1985 Agreement affords defendants a

complete defense to this action.

26A

Argument by counsel has been heard and counsel have

had an opportunity to examine and comment on a prior

draft of this ruling.

The question before the Court concerns. the

interpretation of the agreement between the parties, which

is a question of law. Beck Park Apts. v. United States Dept.

of Hous. & Urb. Dev., 695 F.2d 366, 369 (9th Cir. 1982).

The parties agree that there is no disputed material issue of

fact and that the question before the Court is ripe for

decision on these motions for summary judgment.

I. FACTUAL BACKGROUND

A. The 1985 Agreement

Apple achieved commercial success with its Macintosh

personal computer, largely because of its distinctive user

friendly graphic user interface operating environment.

Apple copyrighted the visual displays in the Macintosh

operating system.

Microsoft developed a competing graphic user interface,

called Windows, for IBM compatible personal computers. In

October 1985 Apple informed Microsoft that it thought

Windows infringed on its copyrighted visual displays. Apple

and Microsoft entered negotiations to resolve their dispute.

These negotiations resulted in the 1985 Agreement which is

the subject of the motions now before the Court.

The preamble to the 1985 Agreement states that "a

dispute has arisen concerning the ownership and possible

generated by . . . ‘Microsoft Windows Version 1.0"" and five

named applications programs created by Microsoft to run on

the Macintosh. (MS App., Ex. A.) Microsoft acknowledged

? Citations to source materials conform to the following conventions:

(1) Appendix to Apple’s Motion for Partial Summary Judgment—"Apple

App.”; (2) Supplemental Appendix to Apple’s Motion—"Apple Supp. App.";

(3) Apple’s Exhibits and Deposition Testimony Subject to Protective

Order—"Apple Conf. App.”; (4) Appendix to Apple’s Response—"Apple Resp.

App.", (5) Appendix to Apple’s Reply—"Apple Reply App.’; and (6)

Appendix to Microsoft’s Motion for Summary Judgment—"MS App.".

Citations to depositions are by name of deponent, page number, and

volume number where appropriate.

27A

that the visual displays in the named programs “are

derivative works of the visual displays generated by Apple’s

Lisa and Macintosh graphic user interface programs.” (Id.,

1 1.)

Apple granted Microsoft a non-exclusive "license to use

these derivative works in present and future software

programs" (id., {1 2), and Apple released Microsoft from any

Windows Version 1.0" (id., 1 4). Microsoft, in turn, granted

Apple a five-year, non-exclusive license "to use any visual

displays created by Microsoft . . . as part of its Microsoft

Windows retail software product." (Id., {1 5.) Microsoft also

agreed to develop software necessary to make the Macintosh

attractive to business users, and to defer release of its Excel

program for IBM compatible personal computers.

The 1985 Agreement also contains an integration clause

stating that it constitutes the entire agreement between the

parties. (/d., 1 7.G.)

B. Drafting of the 1985 Agreement

Apple prepared the initial draft of the settlement

agreement, providing for a narrow license. (MS App., Ex. 0.)

Apple’s draft would have granted Microsoft a nonexclusive

license under Apple’s visual copyrights covering Apple’s

Lisa and Macintosh user interfaces for Microsoft

Windows and other Microsoft software products which

are compatible with Apple’s Macintosh computer .. .

only for use in Microsoft Windows program (as set forth

in Exhibit A) in the form that shall exist after the

completion of the changes set forth in paragraph 5 and

such applications as are available as of the date of this

Agreement that operate under Windows. After

November 1, 1986, additional applications to operate

under Microsoft Windows shall be covered by the license

grant of this Agreement but at no time shall this grant

extend to any appearance, look, feel, visual feature or

operation other than that incorporated in Microsoft

Windows as it shall exist after completion of the

changes set forth in paragraph 5.

(Id., 1 1.)

28A

Microsoft rejected the narrow license in Apple’s draft

and after further negotiations prepared a new draft

agreement. (MS App., Ex. P.) Microsoft’s draft was

substantially different from the Apple draft and similar in

form to the final agreement. The only relevant changes

made to arrive at the final agreement were to specify more

precisely that the dispute and settlement were with respect

to visual displays in Windows 1.0. The description of

Windows in the preamble by reference to the object code and

the words "the current version of Windows" in the release

clause both were replaced with the words "Microsoft

Windows Version 1.0."

II. DISCUSSION

The issue before the Court is whether the license

granted by Apple in the 1985 Agreement provides Microsoft

with a complete defense against Apple’s claims that the

visual displays in Windows 2.03 infringe Apple’s copyrights.

Apple contends that the license is limited to visual displays

in Windows 1.0 or virtually identical to those in Windows

1.0. Microsoft, in turn, contends that the license is broad

enough to cover enhancements to the Windows program, and

that, even if Apple’s narrow construction is adopted, the

visual displays in Windows 2.03 are virtually identical to

those in Windows 1.0.

A. Scope of the License Under the 1985 Agreement

The Court must interpret the 1985 Agreement so as to

give effect to the mutual intentions of the parties at the

time that the Agreement was entered. Cal. Civ. Code

§ 1636. The parties have submitted voluminous excerpts

from depositions in which, for the most part, the

protagonists testified to their intentions in entering into the

1985 Agreement in a manner invariably consistent with

their respective positions in this law suit. Such self-serving

testimony is of little assistance in interpreting the

Agreement. Instead, the Court must rely principally on the

contemporary evidence. Cal. Civ. Code § 1647; see also

Anchor Casualty Co. v. Surety Bond Sav. & Loan Ass’n, 204

Cal. App. 2d 175, 183, 22 Cal. Rptr. 278, 282 (1962) (prior

negotiations relevant).

9 a tbh Nei hd: MR MBCA A

29A

That evidence shows that whether the license should be

limited to the existing visual displays in Windows 1.0 was a

critical point of contention. Apple’s initial draft contained

a narrow license to use Apple’s visual displays only in the

then current version of Windows and in current and future

applications programs. It also limited future applications

programs so that the graphic display that a user would see

on running a Windows applications program would never

have an appearance, look, or feel other than that which

already existed in Windows at the time of the 1985

Agreement. Microsoft rejected this narrow license and

proposed different language. Apple felt that Microsoft’s

proposed language was too broad. The written comments of

Apple’s associate general counsel Rappaport on Microsoft’s

proposed license stated that the "grant is broader than we

intend; we intend to license only their current version of

Windows." (MS App., Ex. Q.)

When the two principals primarily responsible for

drafting the agreement, Rappaport and Microsoft vice

president of legal and corporate affairs Neukom, met to go

over Microsoft’s draft, this point was discussed. Neukom

testified that he understood from Rappaport that "he

thought this was a product license, that is, that whatever

visuals would be covered by the license would only, could

only be used by Microsoft in current versions of its Windows

product." (Neukom Depo., 53-54.) Neukom continued: "We

felt quite to the contrary and had reflected in our draft how

differently we approached the question . . . because our

license was intended not to have a limitation to the current

version of Windows." (Id., 54.)

Thus, the issue was framed in the negotiations and the

choice of words in the 1985 Agreement as executed must

necessarily be considered to have been deliberate.

Had Apple’s narrow provision been dropped without a

substitute restriction, it would be reasonable to interpret the

agreement as giving Microsoft a blanket license to develop

future Windows programs.

However, the parties substituted language showing an

intent to limit the license and accompanying release of

30A

claims to the visual displays in the then current version of

Windows, Version 1.0, and in the named applications

programs. The preamble of the Agreement defines the

subject matter of the dispute as "certain visual displays

generated by several Microsoft software products," and then

goes on to specify those products as "Microsoft Windows

Version 1.0" and certain named applications programs. (MS

App., Ex. A (emphasis added).) Microsoft then acknowledges

that "the visual displays in the above-listed Microsoft

programs are derivative works of the visuai displays

generated by Apple’s Lisa and Macintosh graphic user

interface programs." (Id.) The license granted by Apple to

Microsoft is "to use these derivative works in present and

future software programs." (Jd. (emphasis added).) Finally,

Apple’s release of copyright and other claims against

Microsoft goes only to "Microsoft Windows Version 1.0." (Id.

(emphasis added).)

Microsoft stresses that the license is for use in "present

and future software programs," indicating that the parties

foresaw that Microsoft would continue to develop its

Windows program, and intended to include future versions

of Windows within the scope of the license. That language

is limited, however, by the specification of the subject matter

of the license, i.e., the "derivative works" as defined in the

preamble and first paragraph of the 1985 Agreement. Hence

these words do not expand the scope of the license to allow

Microsoft to develop future versions of Windows as it

pleases; instead they allow Microsoft only to use the licensed

visual displays in future versions of Windows and in

different applications programs, whether then in existence

or not. That conclusion is supported by comparison of the

specific language used in the license from Apple to Microsoft

with the more general language used in the license from

Microsoft to Apple, licensing Apple "to use any new visual

displays created by Microsoft." (Jd. (emphasis added).) See

Cal. Civ. Code § 1641 (one clause of contract may be used to

interpret another clause in contract).

Microsoft also contends that overlapping windows are

not a visual display but, rather, that each individual window

31A

is itself a visual display, and that the combination of

windows on the screen is a screen display and hence not a

derivative work subject to the restrictions of the license.

Thus, it maintains, the license allows it to put different

windows on the screen in any way that it chooses, whether

tiled or overlapping. Microsoft’s technical witnesses

concede, however, that the term "visual display" could mean

anything from a single visual element to the entire screen

display. (Trower Depo., II 23; Konzen Depo., 97-99.)

Moreover, in light of Microsoft’s promotion of Windows 2.0

as visually new and different, Microsoft’s unsupported

assertion of this distinction between "screen display" and

"visual display" is not persuasive.

Even if Microsoft’s interpretation of the words "visual

display" were as plausible as Apple’s, because Microsoft

drafted the language, Apple’s interpretation would control.

See Interpetrol Bermuda Ltd. v. Kaiser Aluminum Int'l

Corp., 719 F.2d 992, 998 (9th Cir. 1983) ("Where, after

examining all the evidence, including the course of relations

between parties and the circumstances under which they

executed the contract, a question of contract interpretation

remains, a court is entitled to resolve the question against

the party who prepared a writing.").

Microsoft also contends that the license covers any

visual display that can be generated by any of the five

named applications programs when run on the Macintosh.

The parties devote considerable space in their memoranda to

argument over the meaning of the words "generated by" in

the preambie to the 1985 Agreement. The dispute is over

whether the visual displays in issue are "generated by"

Microsoft’s applications software or by the Macintosh system

software. This argument, reminiscent of the disputes of

medieval savants over how many angels can dance on the

head of a pin, need not be resolved.

There is no evidence that the negotiators of the 1985

Agreement were concerned with the highly technical and

complex matter of the interplay of applications and system

software. To the contrary, it is clear that what they were

concerned with was the end product: the visual interface.

32A

Neukom’s testimony shows that when he drafted the

agreement, he attached no technical meaning to the words

he chose; he used "visual displays generated by" and "visual

displays in"—the latter being the words used to define

derivative works in paragraph 1—interchangeably. (Neukom

Depo., 98-99.) And to construe the 1985 Agreement, by

virtue of the addition of two innocuous words in one

sentence, as licensing all visual displays that can be called

up by running five applications programs on Macintosh

would defy common sense.

Microsoft is correct when it maintains that Apple

received valuable consideration for the license; but it is not

reasonable to construe the 1985 Agreement as giving

Microsoft in return an essentially open-ended license to use

whatever visual displays its named software could generate

on a Macintosh, then or in the future. What Microsoft

received was a license to use the visual displays in the

named software products as they appeared to the user in

November 1985.

Finally, Microsoft contends that, even if the license is

limited to Windows 1.0, it would cover any visual display

that an applications programmer could generate using

Windows 1.0. Microsoft submits the declaration of one of its

software engineers that he managed to write applications

programs using Windows 1.0 that generated each of the

visual displays offered by Apple as examples of infringing

displays generated using Windows 2.03. (Gunderson Decl.)

This argument proves too much. If it were accepted, the

logical conclusion would be that Apple licensed whatever

visual displays a skilled programmer might be able to

generate by writing new code that, incidentally, used calls to

Windows 1.0 subroutines. This would amount to a license

to all of the visual displays that make the Macintosh

operating environment unique. Considering the great value

to Apple of the graphic interface embodied in its Macintosh

operating environment, it is contrary to reason and common

sense to interpret the 1985 Agreement as creating a blanket

license the limits of which are defined only by the limits of

the ingenuity and skill of programmers. See, e.g., Howe uv.

AN eT an te KG a tn ae

33A

American Baptist Homes of the West, Inc., 112 Cal. App. 3d

622, 627, 169 Cal. Rptr. 418, 420 (1980) (reasonable

construction consistent with language of contract must

prevail over unreasonable construction).

Accordingly, the plain intent and meaning of the 1985

Agreement is to grant a license and release® limited to the

visual displays in Windows 1.0 and the named applications

programs as they then existed and appeared to the user.

B. Application of the License to Windows 2.03

Regardless of how one interprets the license in the 1985

Agreement, if the visual displays of Windows 2.03 are

virtually the same as those of Windows 1.0, then Windows

2.03 is covered by the license. However, the testimony of

Microsoft’s witnesses and the contemporary record compel

the conclusion that the visual displays of the two programs

are fundamentally different.

The main applications window in Windows 1.0 uses a

tiled format in which the different applications windows

appear next to each other and do not overlap. (Apple App.,

Ex. 82, Microsoft Windows Software Development Kit,

Application Style Guide, Version 1.03, p. 5.) Microsoft

promoted this feature as distinguishing Windows 1.0 from

other windowing programs. In the promotional brochure for

Windows 1.0, after stating that Windows 1.0 allows an IBM

compatible personal computer to "have the friendly kind of

features that make computers like the Apple Macintosh so

easy and efficient to run," the first distinguishing feature

that Microsoft listed was

No Overlapping. Unlike other windowing products,

Microsoft Windows doesn’t overlap its application

windows. With Windows, your views are "tiled,"

conveniently sitting next to each other, so you can see

all of them. ... [YJou never "lose" a window.

(Apple App., Ex. 79, Microsoft Windows At a Glance.)

* Microsoft contends that this interpretation of the license provision

renders the release clause redundant. However, the license covers future

use of Apple’s visual displays and the release covers past use.

34A

In contrast, the main applications window in Windows

2.03 is an overlapping window. (Apple App., Ex. 83,

Microsoft Windows Software Development Kit, Application

Style Guide, Version 2.0, p. 5.) Microsoft chairman Gates

testified that "the fundamental differences [between the two

versions of Windows] were in the code between these two

things. ... [W]e changed the Style Guide to encourage

people to use overlapping, and we took the tile code out... .

The top-level main windows were changed so that the

built-in applications worked in an overlapped fashion."

(Gates Depo., 55-57.) Microsoft director of user interface

design Trower testified that "the most obvious difference

between the products is the lack of tiled windows." (Trower

Depo., 210.) Microsoft’s lead programmer for the Windows

user interface group Konzen agreed that "there are some

fundamental differences between the visual displays of

Windows 2.03 and the visual displays of Windows 1.0,"

including the change from tiled to overlapping windows.

(Konzen Depo., 157-58.)

Microsoft featured this change from tiled to overlapping

windows as a major selling point for Windows 2.0. The

press release announcing the new version advertised a "new

visual interface with overlapping windows.” (Apple App., Ex.

85, Microsoft News Release.) And a Microsoft publication

touting the new Windows system stated that there are

substantial differences between Windows 1.0 and Windows

2.0, the first difference listed being the change from tiled to

overlapping windows. (Apple App., Ex. 70, Vellon, The OS/2

Windows Presentation Manager: Microsoft Windows on the

Future, Microsoft Systems J. 13, 15 (May 1987).)

Thus, it cannot be disputed that Windows 2.03 is

significantly different from Windows 1.0. And this difference

is significant to Apple. The Windows 1.’ operating

environment, as shipped by Microsoft, was a tiled window

system, different from the Macintosh operating environment;

Windows 2.03 was designed, when run over an applications

program, to generate overlapping windows, which is a major

feature of the Macintosh operating environment; and

Windows 2.03 is more similar in overall visual appearance to

35A

the Macintosh visual displays than Windows 1.0. (Konzen

Depo., 26, 78, 118; see also Trower Depo. 210, 219; Davis

Depo., 89.)

Without contesting that Windows 2.03 represents a

major change from Windows 1.0,‘ Microsoft contends that

Windows 2.03 is still within the scope of the license because

Windows 1.0 supported overlapping windows substantially

similar to those featured in Windows 2.03. However, as

discussed in the previous section, the mere fact that it is

possible to generate overlapping windows using Windows 1.0

is not sufficient to bring all overlapping windowing

programs within the scope of the license. That overlapping

windows were an insignificant aspect of Windows 1.0 is

confirmed by Microsoft’s promotional material

distinguishing Windows 1.0 from the Macintosh operating

environment by featuring non-overlapping windows. (See

Apple App., Ex. 79, Microsoft Windows At a Glance.) It is

not reasonable to conclude that Apple gave up this valuable

distinguishing feature in the absence of explicit language.

C. Estoppel of Microsoft to Deny Copyright

Infringement

Apple’s contention that Microsoft is estopped to deny

premature. Because the Court holds only that the

Agreement is not a complete defense to the infringement

claims against Windows 2.03, the issues of infringement and

of whatever other defenses may be available to Microsoft

must be deferred for resolution in the next phase of the

litigation. The Court has no record before it that would

enable it to determine whether there is a relevant and valid

decide whether Microsoft is estopped to deny infringement

of works for which it holds no license.

il. ORDER

* Microsoft would be hard pressed to make such a contention. The

change in numbering from a "1" to the left of the decimal place to a "2"

represented a major new version release. (Shirley Depo., 25.; Davis Depo.,

78.)

36A

For the reasons stated, Apple’s motion for partial

summary judgment is granted to the extent that the Court

determines and adjudicates that the November 22, 1985

Settlement Agreement is not a complete defense to Apple’s

infringement claims with respect to Windows 2.03. In all

other respects, Apple’s motion is denied without prejudice.

Microsoft’s motion for summary judgment is granted to the

extent that the Court determines and adjudicates that the

November 22, 1985 Settlement Agreement licenses Microsoft

to use the visual displays in Windows 1.0 and the named

applications programs in current and future software

products. In all other respects Microsoft’s motion is denied.

The parties are directed to meet and confer with respect

to further proceedings in this action and be prepared to

discuss them at a status conference to be held on April 14,

1989, at 10 a.m.

IT IS SO ORDERED.

| : i

ote

37A

APPLE COMPUTER, INC., Plaintiff,

Vv.

MICROSOFT CORPORATION and

HEWLETT-PACKARD COMPANY, Defendants.

No. C-88-20149-WWS

United States District Court,

N.D. California

July 25, 1989

MEMORANDUM OF DECISION AND ORDER

SCHWARZER, District Judge:

Apple Computer, Inc. ("Apple") has brought this

("Microsoft") and Hewlett-Packard Company ("HP"), alleging

that the visual displays in Microsoft’s software product

Windows 2.03 and HP’s product NewWave infringe Apple’s

copyrighted graphic user interface.

Microsoft and HP previously moved for summary

judgment under the Agreement between Apple and Microsoft

dated November 22, 1985 ("Agreement"). In its prior ruling,

the Court held that the Agreement is not a complete defense

to Apple’s infringement claims with respect to Windows

2.03. It also held that the Agreement licenses Microsoft "to

use the visual displays in Windows 1.0 and the named

applications programs in current and future software

products." Apple Computer, Inc. v. Microsoft Corp., 709 F.

Supp. 925, 931-32 (N.D. Cal. 1989).

In its motion Microsoft also sought an adjudication that

the license covers a set of discrete visual displays and that

the visual displays in Windows 2.03 are within this set.

(Microsoft Memo. filed 2/13/89 at 3.) The Court rejected

that claim insofar as it was based solely on the

interpretation of the Agreement. Following issuance of the

38A

prior ruling, however, the parties submitted videotapes and

other materials directed at a comparison of the visual

displays in Windows 1.0 and those in Windows 2.03. HP

also moved for partial summary judgment that the license

covers discrete visual displays. After further briefing and

argument, following distribution to counsel of a prior draft

of this memorandum, the Court now makes its rulings on

Microsoft’s requested adjudication and HP’s motion.’

The question now before the Court is whether the

Agreement, although not a complete defense, is a partial

defense against the infringement claim and, if so, to what

extent it licenses the visual displays in Windows 2.03 and

NewWave.

' At oral argument, counsel for Apple contended for the first time that

the 1985 Agreement was ambiguous and therefore raised a triable issue

of fact, citing this Court’s article, Summary Judgment Under the Federal

Rules: Defining Genuine Issues of Material Fact, 99 F.R.D. 465 (1984).

The full passage from which counsel selectively quoted disposes of this

argument:

The interpretation of a written instrument is likewise sometimes

an issue of fact and sometimes an issue of law for Rule 56 purposes.

While interpreting a writing which the court finds to be

unambiguous is clearly a question of law, an issue of fact may be

raised by a dispute over the intention of the parties to an

unambiguous writing.

99 F.R.D. at 474 (footnotes omitted). Here there is no dispute over

historical facts. The self-serving deposition testimony of Apple’s witnesses

over what they intended by entering the 1985 Agreement does not create

an issue of fact; if it did, any party to an agreement could force a trial

simply by testifying to a contrary intention. There is no contemporary

evidence of the intended meaning of the words "visual displays"; much less

is there such evidence of a dispute over their meaning. What the

contemporary evidence shows, as discussed in the Court’s prior ruling, is

that the text proposed by Apple during the negotiations, which would

have given it the protection that it now seeks, i.e. the "no more like the

Macintosh" limitation, was rejected by Microsoft and different language

was agreed on. See 709 F. Supp. at 927. The question whether Apple can

now impose that limitation on the Agreement is a legal question of

interpretation properly decided on summary judgment.

P i iy al Ce eee pars 98 iene es

CRE ea Neg AO TE eRe RE PE ep es Re a ee RES Se

39A

Apple contends that the 1985 agreement was only "a

license of the interface of Windows Version 1.0 as a whole,

not a license of broken out 'elements' which Microsoft could

use to create a different interface more similar to that of the

Macintosh." (Apple Memo. 7.) Microsoft and HP contend

that the license applies to discrete visual displays in

Windows 1.0 individually and, therefore, that Windows 2.03

and NewWave are covered by the license to the extent that

they include visual displays found in Windows 1.0.

The language of the 1985 Agreement does not support

Apple’s restrictive interpretation. The Agreement identifies

its subject matter as "certain visual displays generated by

. ‘Microsoft Windows Version 1.0' and five named

applications programs. (Microsoft Memo., Ex. A, Agreement,

Preamble (emphasis added).) Microsoft acknowledged that

these "visual displays . . . are derivative works of the visual

displays generated by Apple’s Lisa and Macintosh graphic

user interface programs.” (Jd., 1 (emphasis added).)

Apple granted Microsoft a non-exclusive "license to use

these derivative works in present and future software

programs and to license them to .. . third parties." (Id., 1 2

(emphasis added).) Microsoft, in turn, granted Apple a

non-exclusive license "to use any new visual displays created

by Microsoft . . . as part of its Microsoft Windows retail

software product." (Jd., 1 5.)

The Agreement makes clear that the parties did not

consider an interface and the visual displays generated by

that interface to be synonymous, and that they chose the

words of the license deliberately. The word "interface" is

used in paragraph one in the context of Microsoft’s

acknowledgment that the licensed "visual displays . . . are

derivative works of the visual displays generated by Apple’s

Lisa and Macintosh graphic user interface programs." The

juxtaposition in that sentence shows that the terms "visual

displays” and "interface, " as used in the Agreement, were

not regarded by the parties as interchangeable.

Had it been the parties’ intent to limit the license to the

Windows 1.0 interface, they would have known how to say

40A

so. Instead, the "derivative works" covered by the license are

identified as the "visual displays" in the Windows 1.0

interface, not the interface itself. And there is nothing in

the 1985 Agreement that indicates that it was intended as

a product license restricting Microsoft and its licensees to

the use of the Windows 1.0 interface as a whole.

Apple contends that, notwithstanding the absence of any

language in the Agreement to time effect, its negotiators

understood that the license did’ not allow Microsoft to

develop a new interface more similar to the Macintosh

interface. The history of the negotiations, however, shows

that Apple tried but did not succeed in obtaining Microsoft’s

agreement to a limitation of the license to Windows 1.0

taken as a whole, protecting against the development of

interfaces more like the Macintosh look and feel. 709 F.

Supp. at 927. Instead the parties executed a license to use

specified visual displays.

To avoid the plain meaning of the Agreement, Apple

seeks to impose a tortured interpretation on the words

"visual display, " namely that they serve only to "distinguish

the computer code of Windows Version 1.0 from the

audiovisual works which the code produced.” (Apple Memo.

9.) Apple bases this argument on the fact that the

Agreement does not anywhere refer to “individual visual

display elements." (Jd.) The failure of the Agreement to

refer to “individual visual display elements", however, does

not mean that, contrary to the plain meaning of the

language of the Agreement, the license is not to use discrete

visual displays.”

That the license of visual displays from Apple to

Microsoft must mean what it says is also confirmed by the

2 Apple also contends that the use of the words "visual displays" in the

license does "not . . . warrant conversion of the Agreement into a license

(whole or partial) for all future products created by Microsoft . . . that

arguably could trace some similarity to Windows Version 1.0." (Apple

Memo. 9.) Apple is correct: "visual displays" means what it says, no more

and no less; the use of those words in the license does not "allow Microsoft

to develop future versions of Windows as it pleases, " see 709 F. Supp. at

929, and neither does this ruling.

41A

use of the same language in the license from Microsoft to

Apple "to use any new visual displays created by Microsoft

... in [Apple’s] software programs." (Microsoft Memo., Ex.

A, Agreement 1 5.) This license clearly gives Apple the right

to use individual visual displays created by Microsoft; Apple

is not limited to incorporating the entire interface into its

software programs if it wishes to use any new visual display

created by Microsoft. This understanding of the effect of the

license from Microsoft was shared by Apple’s chief

negotiator, Eisenstat, who testified that the license allowed

Apple to incorporate into its Macintosh interface any "new

visual feature" developed by Microsoft for Windows.

(Microsoft Memo. 7.)

Furthermore, as pointed out by Microsoft and HP,

Apple’s current interpretation would render the parties’

sublicensing rights worthless. Both Apple and Microsoft rely

heavily on third-party programmers to develop applications

programs to run under their respective operating

environments, thus enhancing the value of the operating

environments. Applications programs incorporate a mixture

of visual features from the operating environment and new

features added by the applications programmers. This

necessarily changes the visual displays seen by the user.°

Under Apple’s contention that the licenses extend to the

interface as a whole and do not allow deviation from that

interface, such selective use of visual features from the

operating environment and creation of different visual

displays would violate the licenses. An interpretation that

leads to such a result is unreasonable.‘

> As HP points out, if the visual displays were not affected by an

applications program, the user could not tell that the program was

running, control the program, put information into it, or take information

out of it. (HP Memo. 5-6.)

* In its comments on the Court’s proposed memorandum Apple

retreats from this position, stating that deviations from the Windows 1.0

interface would be permissible so long as they did not make "the

appearance more similar to Apple’s audiovisual works than was Windows

Version 1.0." (Written Comments 6.) Of course, such language was

nits

SSRN eee neste a a A ire ht see

42A

Thus, as stated in the Court’s prior ruling, the language

of the license "allow[s] Microsoft . . . to use the licensed

visual displays in future versions of Windows and in

different applications programs, whether then in existence

or not." 709 F. Supp. at 92°.

Contrary to Apple’s suggestion, there is nothing in the

use visual displays and to incorporate them into a new work

that also includes new visual displays. A copyright license

is a contract like any other contract and the starting point

of the analysis must necessarily be the terms of the license.

See Cohen v. Paramount Pictures Corp., 845 F.2d 851, 853

(9th Cir. 1988); see also 3 M. Nimmer & D. Nimmer,

Nimmer on Copyright § 10.08 (1988). As stated above, the

terms of the 1985 license are clear and unambiguous.

Apple also cites the rule that a licensee infringes the

rule has no application here because Microsoft is not accused

of altering a licensed work; the use of visual displays was

licensed, not use of Windows 1.0 as a whole. Moreover, each

of the cases on which Apple relies for this proposition

involved action by a copyright licensee beyond the scope of

the license. See, e.g., Frank Music Corp. v. Metro-Goldwyn

Mayer, Inc., 772 F.2d 505, 511-12 (9th Cir. 1985)

(performance of musical composition accompanied by visual

representations of dramatic work from which music came

violated license expressly limited to performing music);

Gilliam v. American Broadcasting Co., 538 F.2d 14, 20-21

(2d Cir. 1976) (licensee’s unilateral editing of television

programs violated express provision of license requiring

author’s consent for changes). In this case, the license

specifically authorized the use of "visual displays generated

by [Windows 1.0]" "in present and future software products."

(Microsoft Memo., Ex. A, Agreement, Preamble & 7 2.) Thus

the use of selected visual displays in other programs must

expressly rejected by Microsoft and is not found in the Agreement.

Moreover, its effect would be to give Apple a virtual veto power over all

new software products exercisable according to wholly subjective criteria.

43A

necessarily have been intended—if it was not, Microsoft

would be exposed to a possible infringement claim whenever

it used anything less than the entire Windows 1.0 interface.

Such a result cannot be squared with the plain language of

the Agreement.

It is, of course, true, as Apple argues, that in

determining whether an audiovisual work infringes, the

work must be viewed as a whole. But where a work includes

licensed features as well as unlicensed features, infringement

depends on whether the unlicensed features are entitled to

protection; licensed features are treated as being in the

public domain. Cf. Data East USA, Inc. v. Epyx, Inc., 862

F.2d 204, 208 (9th Cir. 1988) (substantial similarity of

unprotected expression does not support finding of

infringement).

In its prior ruling the Court concluded that overlapping

windows, as featured in Windows 2.03, are a visual display

within the meaning of the 1985 Agreement and are not

within the scope of the license. 709 F. Supp. at 929. But

overlapping windows, obviously, are not the only visual

display in Windows 2.03. And equally obviously, because

Windows 1.0 did not have overlapping windows, it must

have had other visual displays or else the license would have

been an empty gesture. It must be concluded therefore that

the Agreement licenses the use of the visual displays in

Windows 1.0 and to that extent provides a partial defense to

infringement claims based on the use of such visual! displays.

The question before the Court, therefore, is which visual

displays in Windows 2.03 and NewWave are visual displays

licensed under the 1985 Agreement.°

The Agreement does not specifically define the term

"visual display" and, on the record of these motions, there is

no basis for attributing to it a specific, technical meaning.

The term should therefore be given a_ reasonable

* The Court does not address the questions of whether Apple’s

substantially similar to any of Apple’s copyrighted material.

44A

interpretation, consistent with its facial meaning and the

purpose of the license to protect Microsoft against

infringement claims for using visual displays covered by the

Agreement. A visual display necessarily is what the user

sees on the screen. In the context of the Agreement it

consists of or includes those features to which one would

look to assess similarity for purposes of determining whether

the copyright has been infringed. See Data East, 862 F.2d

at 208.

This interpretation is consistent with Apple’s prior

usage. In its previous summary judgment memorandum,

Apple referred to a photograph of a screen display from

Windows 2.03 containing three overlapping windows. (Apple

Memo. filed 1/27/89 at 17, referring to Apple Appendix filed

1/27/89, Ex. 47.) Apple referred to "all of the visual displays

that appear" in this photograph, and then proceeded to list

the following: "the window border, the window frame, the

menu box outline, the dialog box outline, the scroll bars,

check boxes and buttons." (Jd.) ~

Apple has submitted a list of 189 "similarities in

particular features" between its copyrighted audio visual

works and Windows 2.03 and NewWave.® (Apple Pretrial

Stmt., Ex. A.) Microsoft claims that 178 of the 189

identified features are also features of Windows 1.0 and has

submitted a video tape in support of its claim. (Trower Dec.

filed 6/9/89, Ex. B (videotape) and Ex. 2 (list of features).)

Apple has also submitted a list of 39 differences between the

features of Windows 1.0 and those of Windows 2.03, and a

videotape demonstrating some of these differences; it does

not contend, however, that all of these new features infringe

its copyrights.’ (Exs. A and B to Apple’s Memo.) Microsoft

contends that twenty-nine of these differences are not

° Apple has identified an additional fifty visual features found only in

NewWave that it contends are substantially similar to visual features in

the Macintosh user interface.

7 In fact, some of the items in this list are not found in the Macintosh

graphic user interface.

45A

included in Apple’s list of similarities between Windows 2.03

and the Macintosh user interface, six relate to the change

from tiled to overlapping main application windows, two

relate to the changes in the use of icons, and the other two

are trivial. (Microsoft Response Memo. 22.)

The Court has reviewed all of the papers and related

videotapes submitted by the parties, as well as the exhibits

submitted in this and the previous phase of these summary

judgment motions.

This review discloses that both Windows 1.0 and

Windows 2.03 have many visual displays that are also found

in the Macintosh user interface. It also discloses, however,

that most visual displays in Windows 2.03 are also in

Windows 1.0 and, therefore, are covered by the 1985 license.

The features identified by Apple as_ potentially

infringing fall into six categories: (1) design and appearance

of individual main application windows (Apple Pretrial

Stmt., Ex A, A-2 through A-7, A-9, C, E); (2) design and

appearance of dialog boxes (id., J-O); (3) menu design and

appearance (id., F); (4) design and appearance of individual

applications programs included with Windows 1.0 and 2.03

(id., P-W); (5) icon design, appearance, and manipulation

(id., G); and (6) arrangement and manipulation of multiple

main application windows (id., A-1, A-8, B, D). The features

in the first four and most of the fifth of these groups are,

except for insignificant differences, the same in the two

versions of Windows.®

1. Appearance of individual main application windows.

The design and appearance of individual main application

windows is essentially unchanged from Windows 1.0 to

Windows 2.03. Under both versions of Windows, individual

main application windows are bordered rectangles’? with

* All features in groups H and I and some features in groups F, G,

and J are found in NewWave only; HP does not contend that they are

covered by the license. They are therefore not affected by this ruling.

* Windows 2.03 added a filled border running completely around each

window. This feature is not found in Macintosh windows.

46A

title bars at the top, scroll bars on the bottom and right

edges, elevator boxes on the scroll bars, a close-box at the

left end of the title bar,’° and a sizing box at the bottom

right corner of the window. Scrolling is identical between

the two versions. Window sizing is essentially the same:

under both versions, a window may be resized by dragging

the mouse from the lower right corner of the window and a

grey outline of the window follows the mouse. Although the

default colors of the various components of the windows are

different between the two versions, this is not a significant

change. Where Windows 1.0 has a sizing box at the right

end of the title bar, Windows 2.03 has two zoom arrows;

however, the Macintosh has neither of these features.

2. Dialog boxes. Both versions of Windows use dialog

boxes that may overlap the main application windows and

that contain checkboxes, radio buttons, and rectangular

buttons. The appearance of these items is essentially the

same between the two versions. Microsoft changed the label

of a standard button that appears in all dialog boxes from

"Ok" to "OK"; although the Macintosh also uses "OK, " this

change is not significant. Minor changes were made in the

underlining of button labels, but this feature is not found in

the Macintosh graphic user interface.

3. Menus. Menu design and appearance is essentially

the same in both versions of Windows. A horizontal bar,

called the menu bar, extends across the top of each main

application window. This bar contains a left-justified list of

menu names. When a menu name is selected with the

mouse, a pull down menu appears below the menu name.

The pull down menu contains a vertical list of menu items

which can be selected with the mouse. Windows 2.03

indicates keyboard accelerators, which allow the user to

choose a menu item from the keyboard without using the

mouse, by underlining; Windows 1.0 does not have this

feature, but neither does the Macintosh.

4. Applications programs. Both versions of Windows

come with a package of applications programs including a

'0 The appearance of the close-box was changed slightly.

47A

text editor, paint program, file management program,

database management program, clipboard, clock, and

calculator. All of these programs are essentially the same in

both versions of Windows. The only feature of these

programs that Apple identifies as being different is that

Windows 1.0 allows the user to change the size of the

calculator window but Windows 2.03, like the Macintosh,

does not. This, however, does not involve different visual

displays.

5. Icons. In both versions of Windows, a main

application window may be collapsed into an icon which can

be moved around the screen with the mouse. Both versions

of Windows also allow the user to open an icon into its

associated window.

Microsoft made some changes in its use of icons between

Windows 1.0 and Windows 2.03. Windows 1.0 allows icons

to be stored only in a special field at the bottom of the

screen; Windows 2.03, like the Macintosh, allows icons to be

stored anywhere on the screen in front of or behind open

windows. In Windows 1.0 the name of an icon, when

displayed, is above the icon; in Windows 2.03 the name of an

icon, when displayed, is below the icon.'! These changes in

the appearance and use of icons are not covered by the 1985

license.

6. Representation of multiple main application

windows. As the Court noted in its prior Order, the main

change from Windows 1.0 to Windows 2.03 was the change

from a tiled display of multiple main application windows to

an overlapping display. This change had a direct effect on

the appearance and manipulation of windows and required

many changes in visual displays.

In the tiled windowing system used in Windows 1.0, all

open main application windows are visible to the user and

are arranged side by side, like tiles on a floor. The screen is

always entirely filled by whichever windows happen to be

open at any given time. When one window is opened, closed,

'! In Windows 2.03, when an icon is at the bottom of the screen, its

name, when displayed, overlaps the icon.

48A

moved, or resized, all other windows must be redrawn to

accommodate the change.

In an overlapping window system such as is used in

Windows 2.03 and in the Macintosh graphic user interface,

open main application windows are overlapped, appearing

like papers loosely stacked on a desk. The active window is

automatically moved to the top of the stack. Because the

open windows overlap, each window may be sized and moved

independently of all other windows. When one window is

opened, closed, moved, or resized, all other windows remain

the same except to the extent that previously visible

portions are covered and previously covered portions are

revealed.

The changes in visual displays from Windows 1.0 to

Windows 2.03 necessary to implement the overlapping

windows system are not covered by the 1985 license.

CONCLUSION

For the foregoing reasons, the Court holds

(1) that the use of visual displays in Windows 2.03 that

are in Windows 1.0 and the named applications programs is

licensed by the 1985 Agreement;

(2) that the visual displays used in Windows 2.03 are in

Windows 1.0 and the named applications programs except

for those relating to the use of overlapping main application

windows, as opposed to tiled main application windows, and

except for the specified changes in the appearance and

manipulation of icons; and

(3) that Microsoft and its licensee HP are therefore

entitled to partial summary judgment on Apple’s

infringement claim insofar as it is based on the use in

Windows 2.03 and in NewWave of visual displays in

Windows 1.0 and the named applications programs.

Accordingly, this ruling constitutes a summary

adjudication that defendants’ use in Windows 2.03 and in

NewWave of the visual displays in Windows 1.0 and the

named applications programs is protected against Apple’s

infringement claim by the license provision in the 1985

Agreement. In the case of Windows 2.03, this applies to all

visual displays except the use of overlapping main

49A

application windows and the specified changes in the

appearance and manipulation of icons.

The Court will therefore now proceed to determine

whether the use of those unlicensed visual displays in

combination with licensed visual displays infringes Apple’s

audiovisual copyrights.

Counsel shall meet and discuss how that determination

may be expeditiously and properly made. A status

conference will be held on September 8, 1989 at 10:00 a.m.

IT IS SO ORDERED.

50A

APPLE COMPUTER, INC., a California corporation,

Plaintiff,

MICROSOFT CORPORATION, a Delaware corporation,

and HEWLETT PACKARD COMPANY, a California

corporation, Defendants.

No. C 88-20149-VRW

United States District Court,

N.D. California

March 6, 1991

ORDER ON CROSS MOTIONS FOR SUMMARY

ADJUDICATION

WALKER, District Judge:

Apple Computer, Inc. ("Apple") filed this copyright

infringement action on March 17, 1988, against Microsoft

Corporation ("Microsoft") and Hewlett-Packard Company

("HP"), claiming that Microsoft’s Windows computer

operating system software and HP’s NewWave computer

application software infringed Apple’s copyrights. The

copyrights at issue protect the visual displays of Apple’s

Macintosh computer user interface.

I. THE VISUAL DISPLAYS OF THE MACINTOSH

INTERFACE.

In developing the Macintosh computer operating system

software, Apple made one of the major commercial

breakthroughs of the 1980’s. The graphic user interface

generated by the Macintosh system software consists of

windows, icons, pull-down menus, and other images or visual

displays projected on the computer screen. The Macintosh

51A

user interface’ proved so intuitive that users were able

fairly quickly to learn how to manipulate the screen displays

and mouse and thus accomplish what had theretofore been

the daunting task of learning to operate a computer. This

breakthrough vaulted Apple to the top of the personal

computer industry.

The visual displays in a computer user interface owe

their appearance to system software and application

programs. System software is a computer program that

controls the computer hardware and schedules the execution

of its functions. Such software is keyed to the computer

hardware which it runs and establishes the visual

framework or environment for the images on the computer

screen, as does a proscenium in a theatre. In order to put a

computer to a specific task, however, the user also needs an

application program—to further the stage analogy, the play.

Application programs must be keyed to a particular system

software and work within that system’s framework or

environment to carry out a specific application or task, e.g.,

word processing, accounting, and charting.

The obvious difference between a stage play and a

computer interface is that in the latter, the user directs the

action. The "user friendliness" of the Macintosh interface

gave Apple a competitive edge over other personal computer

manufacturers.

The commercial success of the Macintosh user interface

and competition produced by Microsoft’s analogous Windows

Version 1.0 system software for IBM and IBM-compatible

personal computers spawned a dispute between Apple and

Microsoft over the rightful ownership of visual displays in

this interface. The parties’ dispute extended to ownership

of visual displays in Microsoft Windows Version 1.0, and

certain application programs: Microsoft Multiplan and

' This case deals only with the graphic elements or visual displays of

the Macintosh user interface. The whole Macintosh user interface

includes both its graphic elements or visual displays and the mouse

technology which enables the user to point on these graphic elements and

command some computer operation.

52A

Microsoft Excel, both spread-sheet programs; Microsoft

Chart, a graphics program; Microsoft File, a database

program; and Microsoft Word, a word processing program.

On November 22, 1985, Apple and Microsoft entered into an

agreement ("1985 Agreement") to settle this dispute. The

effect of that agreement upon the parties’ rights was the

first matter which the Honorable William W Schwarzer, to

whom this case was previously assigned, sought to

determine.

The 1985 Agreement provided that: (1) Microsoft

acknowledged that the visual displays in the Microsoft

Windows Version 1.0 operating system and the disputed

application programs were derivative works of the visual

displays generated by Apple’s Macintosh operating system

and that of an earlier Apple effort, the Lisa; (2) Apple

granted to Microsoft a non-exclusive, royalty-free,

nontransferable license to use these derivative visual

displays in present and future software programs and to

license them to third parties for use in new software

programs; (3) Microsoft agreed not to offer a new application

program similar in function to Microsoft Excel prior to

October 1, 1986; (4) Apple waived any copyright, patent,

trade secret or other claim it may have as to Windows

Version 1.0; (5) Microsoft granted to Apple a non-exclusive,

royalty-free, nontransferable license to use any new visual

displays created by Microsoft during the next five years as

part of the Microsoft Windows retail software products; and

(6) Microsoft agreed to revise Microsoft Word, which

operates on the Macintosh operating system, by enhancing

and improving that program by July 31, 1986.

Relying on this agreement, Microsoft apparently granted

HP a license to use the Microsoft Windows system software

in the development of what came to be known as HP’s

NewWave application program. Sewell Declaration with

Appendix in Support of Apple’s Summary Judgment Motion,

Exh. 39. After learning of the HP NewWave application

? Microsoft developed Multiplan, Chart and File under an earlier

agreement with Apple.

53A

program and evidently fearing that Microsoft’s licensing

activities would soon diminish the Macintosh competitive

advantage, Apple filed this lawsuit.

Apple’s complaint alleged three claims: (1) copyright

infringement of Apple’s audiovisual works by HP’s

NewWave and Microsoft’s Windows Version 2.03;

(2) contributory infringement against Microsoft for licensing

Apple’s visual displays to HP; and (3) unfair competition.

Microsoft and HP asserted a variety of affirmative defenses,

including two addressed in this order: Apple’s allegedly

fraudulent procurement of its copyrights and the asserted

lack of originality of the Macintosh graphic user interface.

By orders dated March 20 and July 25, 1989,° Judge

Schwarzer summarily adjudicated that: (1) the 1985

Agreement was not a complete defense to Apple’s claim of

Microsoft a license to use in current and future software

products the visual displays in Windows Version 1.0 and the

five named Microsoft application programs; and (3) the

visual displays in Windows 2.03 are in Windows 1.0 and the

named application programs except for those relating to the

use of overlapping main application windows and to certain

changes in the appearance and manipulation of icons. Judge

Schwarzer granted Microsoft partial summary judgment on

Apple’s infringement claim to the extent that Windows 2.03

and NewWave used visual displays that had appeared in

Windows Version 1.0 and the five application programs

named in the 1985 Agreement. 717 F. Supp. at 1435. Such

visual displays were protected from Apple’s infringement

claims by virtue of the 1985 Agreement’s licensing

provisions. In reaching this conclusion, Judge Schwarzer

rejected Apple’s contention that the 1985 Agreement forbade

Microsoft from developing in later system software an

overall visual appearance more similar to that of the

Macintosh than Windows Version 1.0. 717 F. Supp. at 1431.

Judge Schwarzer determined that the 1985 Agreement

> Apple Computer, Inc. v. Microsoft Corp., 709 F. Supp. 925, 717 F.

Supp. 1428 (N.D. Cal. 1989).

504A

licensed only those visual displays in Windows Version 1.0

and the five application programs named therein. 717 F.

Supp. at 1435.

Judge Schwarzer’s approach entailed analysis of the

works’ discrete "visual displays. Pursuant to Judge

Schwarzer’s direction, Apple identified 189 Macintosh visual

displays which it claimed appear in Windows Version 2.03

and NewWave.° Judge Schwarzer reorganized these visual

displays into six categories and decided that with respect to

Windows Version 2.03, all visual displays except the use of

overlapping application windows and certain changes in the

appearance and manipulation of icons were protected from

Apple’s infringement claims by virtue of the 1985

Agreement.® 717 F. Supp. at 1433 - 35.

By an order to which the parties stipulated during

Judge Schwarzer’s supervision of the litigation, this court

limited the current phase of litigation to issues regarding

the validity and scope of Apple’s copyrights in the works in

suit and whether any of the ten remaining visual displays

are licensed under the 1985 Agreement between Apple and

Microsoft.

Presently before the court are: (1) Microsoft’s motion

for partial summary judgment, seeking a determination that

seven of the ten remaining visual displays from Apple’s List

are licensed by the 1985 Agreement, and that none of the

remaining ten features is protectible expression within the

scope of any of Apple’s copyrights; (2) HP’s motion seeking

partial summary adjudication that: (a) each of the 50

* The term "visual displays" comes from the 1985 Agreement. See

Appendix to Microsoft’s Memorandum in Support of Motion for Partial

Summary Judgement, Exh. K.

* Apple’s document entitled "Similarities between Apple’s Copyrighted

Audiovisual Works and Microsoft’s Windows 2.03 and Hewlett-Packard’s

NewWave" shall hereinafter be referred to as "Apple’s List.”

° This holding did not affect the visual displays which Apple claimed

are found only in NewWave. 717 F. Supp. at 1433 n. 8.

55A

remaining items’ on Apple’s list of similarities applicable to

NewWave is not original; (b) each of the remaining items

does not constitute protectible expression under copyright

law; or (c) the scope of protection for such items is so

narrow that only virtually identical copying can constitute

infringement; and (d) 11 of the remaining 50 items are

licensed visual displays under the 1985 Agreement and are

protected against Apple’s claim of copyright infringement;

and (3) Apple’s motion for partial summary adjudication

that Apple’s audiovisual copyrights are valid and the

Microsoft and HP affirmative defenses should be dismissed.

Implicit in Judge Schwarzer’s approach to the case is a

rejection of Apple’s fundamental contention that the "total

concept and feel" of the Macintosh graphic user interface is

protectible expression. Rather, Judge Schwarzer’s approach

appears to have been to exclude licensed visual displays prior

to applying the substantial similarity of idea and expression

tests. The undersigned has considered a different approach

to the litigation from that adopted by Judge Schwarzer, one

that would not begin by an attempt to parse the visual

displays of the Macintosh system software. However

appealing such an approach might seem in the abstract, the

1985 Agreement appears to license individual visual displays

rather than an overall "total concept and feel."® After

lengthy consideration, the undersigned has concluded that

Judge Schwarzer correctly began his analysis of the issues

in the litigation with the 1985 Agreement. The court thus

turns to the motions directed to the remaining issues

involving the 1985 Agreement.

” Although HP correctly states that there are fifty visual displays on

Apple’s List which pertain only to NewWave, there are additional visual

displays on Apple’s List which refer to both NewWave and Windows 2.03.

* An evaluation of whether the "total concept and feel” of the works

is substantially similar should occur after unprotectible elements of

expression have been identified and excluded from consideration. See

Data East USA, Inc. v. Epyx, Inc., 862 F.2d 204, 208 (9th Cir. 1988).

06A

Il. MICROSOFT’S MOTION FOR PARTIAL SUMMARY

JUDGMENT.

In his July 25, 1989 order,® Judge Schwarzer found that

particular changes in the appearance and use of icons,

namely, the storage of icons anywhere on the screen rather

than just at the bottom of the screen, the display of the

icon’s name below the icon, and changes in visual displays

necessary to implement the overlapping windows system,

were not licensed under the 1985 Agreement. 717 F.Supp.

at 1433-1435. The remaining visual displays are:

Al overlapping windows in front of a muted

background;

A8 windows appearing partly on and off screen;

Bl top overlapping window displayed as the active

window;

B2 window brought to top of stack when mouse

clicked;

D1 gray outline of window dragged along with cursor

when mouse pressed on window’s title bar;

D2 window dragged to a new position when the mouse

is released after dragging the window’s outline;

D3 newly exposed areas on screen are redisplayed after

the window is moved;

G4 icon may be moved to any part of screen by

dragging along with cursor when user presses

mouse on icon;

G5 display of icons on screen behind any open

windows;

G6 icon’s title displayed beneath icon; and

In support of its contention that seven of the remaining

visual displays (Al, A8, B1, B2, D1, D2, D3) are licensed,

Microsoft has submitted a videotape, Exhibit H, which

shows that each of the seven visual displays appeared in the

1985 version of Microsoft Excel. Microsoft argues that any

visual displays in Windows Version 1.0 and the five

application programs developed by Microsoft (Word, Chart,

* Apple Computer, Inc. v. Microsoft Corp., 717 F. Supp. 1428 (N.D. Cal.

1989).

57A

File, Excel, and Multiplan) are licensed under the 1985

Agreement and, hence, are protected from Apple’s claims of

Apple contends that each of the Microsoft application

programs developed for the Macintosh computer owes its

distinctive Macintosh-like appearance to the Macintosh

system software without which the application programs

could not run. The visual displays which appear on the

screen when an application program is running on a

Macintosh computer are generated by the interaction

between the Macintosh system software and the application

program. Therefore, contends Apple, the only visual

displays in the five named application programs which are

licensed under the 1985 Agreement are those which are

created by the code of the Microsoft application programs,

not those generated by application calls to the Macintosh

system software. The visual displays which are generated by

the Macintosh system software include the window frames,

moving animation, and the redisplay of those portions of the

screen exposed by a window which has been moved. The

visual displays which are generated by the Microsoft Excel

application program are the contents of the windows. Capps

Supp. Decl. 17 3, 4 and Exh. 1:

The issue of which visual displays are generated by the

Microsoft application programs and which by the Macintosh

system software was raised earlier before Judge Schwarzer,

in a slightly different context. In his March 20, 1989 Order,

Judge Schwarzer declined to consider whether the visual

displays in issue were generated by the Microsoft application

programs or by the Macintosh system software. The point

arose in connection with Microsoft’s argument that the 1985

Agreement licensed to Microsoft all visual displays that

could possibly be called up by running the five Microsoft

application programs on the Macintosh system software then

or in the future. 709 F. Supp. at 929. Judge Schwarzer

concluded that Microsoft’s contention would "defy common

sense.” Id.

Microsoft refers to the depositions of Albert Eisenstat,

Apple’s Senior Vice President, and John Sculley, Apple’s

58A

President and CEO, in which these negotiators of the 1985

Agreement did not remember discussing the distinction

between visual displays generated by the Microsoft

application software code and those generated by the

Macintosh system software code. Appendix to Microsoft’s

Reply to Apple’s Response to Microsoft’s Motion for Partial

Summary Judgment. Furthermore, Microsoft contends that

it would have been extremely difficult for the negotiators of

the 1985 Agreement to determine which visual displays were

attributable to which program codes because such

information would require a detailed analysis of the images

created by each software program.

Apple contends that: (1) the controversy which resulted

in the 1985 license related entirely to Microsoft Windows

Version 1.0; (2) Apple did not present any complaint

formally or informally regarding any of the Microsoft

application programs; and (3) Microsoft’s Chairman Gates

repeatedly explained that he sought confirmation of

Microsoft’s ownership of the visual displays in only those

application programs that Microsoft created and owned.

Apple’s Response to Defendants’ Motions for Partial

Summary Judgment at 10.

Under California law, ambiguities in a written

agreement are to be interpreted against the drafter, in this

case, Microsoft. See S.O.S., Inc. v. Payday, Inc., 886 F.2d

1081, 1088 (9th Cir. 1989) (citing Heston v. Farmers Ins.

Group, 160 Cal. App. 3d 402, 415, 206 Cal. Rptr. 585 (1984));

Interpetrol Bermuda Ltd. v. Kaiser Aluminum Int'l Corp.,

719 F.2d 992, 998 (9th Cir. 1983).

Moreover, the Ninth Circuit has directed district courts

to interpret copyright licenses narrowly, consistent with the

federal copyright policy of providing incentives in the form

of copyright protection to authors. See S.O.S. Payday, 886

F.2d at 1088 ("copyright licenses are assumed to prohibit any

use not authorized"); Cohen v. Paramount Pictures Corp.,

845 F.2d 851, 854 (9th Cir. 1988). In S.O.S. v. Payday, the

court concluded that a software developer’s grant of a "right

of use" of several software programs to a company which

provided financial services to clients did not confer the right

o9A

to copy and prepare a modified version of the software

programs without the licensor’s permission. The court

concluded that the licensee had only acquired the right to

possess copies of the software programs for purposes of

producing a product for its clients, and, therefore, had

exceeded the scope of its license. Similarly, the Cohen court

construed a license of a copyrighted work narrowly. Cohen

involved a license to record and copy a motion picture and

exhibit it "by means of television,” which was construed not

to include the distribution of videocassettes for home

viewing, VCRs for home use not having been invented at the

time the license was executed.

In light of these rules of construction and the 1985

Agreement’s purpose to resolve the dispute over ownership

of visual displays in Windows Version 1.0, the court

concludes that the 1985 Agreement did not license the visual

displays which are generated by calls from the Microsoft

application programs to the Macintosh operating system.

The mere fact that the Macintosh system software was

designed so that the Macintosh interface could be used in

conjunction with a variety of application programs written

for the Macintosh computer,’® should not open the door to

a construction at odds with usual principles of contract law

and the agreement’s evident purpose. “It would be

astonishing if Apple had licensed those visual displays which

had won for it great acclaim for aesthetic and intuitive

appeal.

What Microsoft received in the 1985 Agreement was the

right to continue to market its application programs written

for the Macintosh and to use the visual displays generated

by those application programs (not the visual displays

generated by calls by the application programs to the

Macintosh operating system) in present and future

programs.

'0 By permitting application programs to call upon the Macintosh

system software to generate visual displays, the Apple software developers

simplified the task of writing application programs for the Macintosh

computer.

i tine,

FST OOO SA Beet OO

60A

Although seven of the eleven remaining visual displays

from Apple’s List (Al, A8, Bl, B2, Dl, D2, and D3) do

appear on the screen when the Microsoft Excel application

program runs in conjunction with the Macintosh operating

system, each of those seven visual displays owes its

appearance to the Macintosh operating system. Capps Supp.

Declaration. Therefore, those seven visual displays are not

licensed under the 1985 Agreement. Microsoft’s motion for

summary adjudication that these displays are covered by

virtue of being in the 1985 version of Microsoft Excel is,

therefore, denied.

Il. HP’S MOTION FOR PARTIAL SUMMARY

JUDGMENT. |

As to the scope of the 1985 Agreement, HP contends

that eleven of the fifty visual displays in Apple’s List are

covered by the 1985 Agreement and, therefore, are protected

from Apple’s claims of copyright infringement. These visual

displays are: I3, 15, 110, I11, 112, F18, F19, G10, G19, G20,

and G22.

A determination of the legal significance of undisputed

historical facts, such as the visual displays in Windows

Version 1.0 and NewWave, involves a mixed question of fact

and law normally decided by the court and, therefore,

appropriate for summary judgment. See Cohen, 845 F.2d at

853, 855 (reversal of summary judgment in favor of licensee).

As a preliminary matter, HP’s motion for summary

adjudication rests on the assumptions that the 1985

Agreement granted Microsoft the right to use and license to

third parties visual displays in Windows Version 1.0 and

that HP is entitled to use those visual displays by virtue of

a license from Microsoft to HP. The first assumption is

plainly justified by Section 2A of the 1985 Agreement.

Strangely, the second assumption is questionable. HP has

not established the terms of the Microsoft-HP license.

Absent such an agreement, HP has no right to rely on the

1985 Agreement between Microsoft and Apple as a defense

to copyright infringement. Because the parties proceeded

with two summary judgment motions without clarifying this

issue and there are letters referring to a license between

61A

Microsoft and HP,!! the court can only assume that

Microsoft did license the use of visual displays in Windows

Version 1.0 to HP. The court is confident that the lawyers

for these parties will be heard from if this is not the case

and shall thus address the merits of HP’S motion.

After reviewing the videotape exhibits submitted on this

issue and comparing the appearance of these eleven visual

displays in Apple’s programs and in Microsoft Windows

Version 1.0, the court drew the following conclusions.

Items 13, I5, 112, F18, F19, and G22 on Apple’s List are

all present in Windows Version 1.0 and hence are covered by

the 1985 License.

Item 110 is licensed insofar as Windows Version 1.0

contains a "Select All" item in the Edit pull-down menu

which allows the user to select all text in the window and

display that text in reverse video. To the extent that the

Windows Version 1.0 "Select All" item does not permit

selection by reverse video of any icons, the "Select All" item

is not licensed.

Item I11, a menu called "View" which presents the user

with a number of menu items allowing the user to choose

the folder’s window display as icons or as a tabular list by

name, type, or modification date, is licensed except insofar

as Windows Version 1.0’s "View" pull-down menu does not

offer the user the option to display a folder’s contents as

icons in the window.

Item G19, selection of an icon by changing both the icon

and its name into reverse video, is not licensed because in

Windows Version 1.0 only disk drive icons and their names,

which are not aligned directly below, can be selected by

reverse video. The appearance of selecting only disk drive

icons by reverse video in Windows Version 1.0 is

significantly different from the selection of the variety of

icons in the Macintosh and NewWave programs.

Items G10 and G20 do not appear to be licensed, but the

association of different icon images with different types of

objects and the use of a mouse to move icons around on a

'! Sewell Declaration with Special Appendix, Exh. 39 and 40.

62A

screen appear to be ideas. For purposes of the current

motion, the court finds only that items G10 and G20 are not

covered by the 1985 Agreement. The idea/expression

distinction is properly raised in connection with the issue of

substantial similarity, which is not presently before the

court.

Therefore, the court concludes that items I3, 15, 112,

F18, F19, and G22 on Apple’s List are licensed to Microsoft

pursuant to the 1985 Agreement and, assuming that

Microsoft licensed the use of these visual displays to HP, are

protected from Apple’s claim of copyright infringement.

The following items on Apple’s List are unlicensed and

pertain to NewWave: Al, A8, B1, B2, D1-3, G1, G2, G4, G5,

G6, G10-33, H1-6, I1, I2, 14, 16-11, J8-11 (55 items total).

IV. APPLE’S MOTION FOR PARTIAL SUMMARY

JUDGMENT CONCERNING VALIDITY OF ITS

COPYRIGHTS AND DEFENDANTS’ AFFIRMATIVE

DEFENSES.

Apple’s motion seeks summary adjudication declaring

Apple’s audiovisual copyrights valid and dismissing

defendants’ affirmative defenses. Following lengthy

consideration, the court has concluded that the present

record is insufficient to conclude that there are no triable

issues of fact as to these matters, with two exceptions:

(1) HP’s claim of Apple’s fraud on the Copyright Office, and

(2) the originality of Apple’s visual displays.

To prevail on a claim of copyright infringement, a

plaintiff must establish both ownership of a valid copyright

and copying by the defendant. Data East USA, Inc. v. Epyx,

Inc., 862 F.2d 204, 206 (9th Cir. 1988); Sid & Marty Krofft

Television Prod., Inc. v. McDonald’s Corp., 562 F.2d 1157,

1162 (9th Cir. 1977); Atari, Inc. v. North American Philips

Consumer Elec. Corp., 672 F.2d 607; 614 (7th Cir. 1982); see

Because direct evidence of copying is rare, copying may be

established by circumstantial evidence of access and

substantial similarity of ideas and the expression between

the copyrighted work and the alleged infringing work. Data

East, 862 F.2d at 206.

63A

Apple seeks partial summary judgment on the first

issue—the validity of its copyrights on the Lisa and

Macintosh programs and also asks the court to strike the

defendants’ affirmative defenses.'* In support of its

motion, Apple refers to the transcript of the April 14, 1989

Status Conference, at 13-14, in which counsel for Microsoft

and HP stipulated to the presumptively valid copyright

registration of Apple’s works in issue. Apple’s complaint

listed the allegedly infringed works and the copyright

registration numbers. In Microsoft’s answer, Microsoft

admitted that Apple received the certificates of registration

for the works in suit. Microsoft's Answer, % 10.

A certificate of registration from the Copyright Office

constitutes "prima facie evidence of the validity of the

U.S.C. § 410(c).'% This presumption of validity is

'? Microsoft’s affirmative defenses are: (1) Apple granted Microsoft

a royalty-free license to use the visual displays in issue pursuant to the -

1985 Agreement; (2) Apple is precluded by waiver or estoppel from any

claims of ownership or infringement against Microsoft products; (3) Apple

has failed to state a claim for contributory infringement; (4) Apple’s visual

displays are functional and hence barred from copyright protection under

17 U.S.C. § 102(b); (5) Apple’s visual displays are not original to Apple and

are not entitled to copyright protection under 17 U.S.C. § 102(a);

(6) Apple’s visual displays are common and ordinary expressions of

unprotectible ideas and are not susceptible to copyright protection under

the scenes a faire doctrine of copyright law; (7) no substantial similarity

exists between Apple’s visual displays and Microsoft’s Windows 2.03

software product; and (8) Apple’s claim of unfair competition is preempted

by 17 U.S.C. § 301.

HP’s affirmative defenses are: (1) Apple’s visual displays are

unprotectible ideas, indispensable expression, and/or non-original

expression; (2) fraud on the Copyright Office; (3) Apple’s visual displays

are functional; and (4) Apple’s works are entitled to a limited scope of

'> Section 410(c) provides:

In any judicial proceedings the certificate of a registration made

before or within five years after first publication of the work shall

constitute prima facie evidence of the validity of the copyright and

of the facts stated in the certificate. The evidentiary weight to be

64A

rebuttable. Durham Indus., Inc. v. Tomy Corp., 630 F.2d

905, 908 (2d Cir. 1980) (evidence in the record casting doubt

on validity rebuts presumption); Past Pluto Prod. Corp. uv.

Dana, 627 F. Supp. 1435 (S.D.N.Y. 1986). The presumptive

validity of a certificate of registration may be resolved on

summary judgment. S.O.S. v. Payday, 886 F.2d at 1086

(citing Seiler v. Lucasfilm, Ltd., 808 F.2d 1316, 1322 (9th

validity may not be overcome on the basis of fraud without

proof that omissions in copyright application were

intentional. Eckes v. Card Prices Update, 736 F.2d 859 (2d

Cir. 1984). HP opposes Apple’s motion seeking a

determination of validity of Apple’s certificates on two

grounds: fraud on the Copyright Office and lack of

originality.’

A. Fraud on the Copyright Office.

HP contends that Apple’s failure to disclose to the

works should overcome the presumption of validity of

Apple’s copyright registrations. HP has provided the court

with depositions and computer magazine articles showing

that the Apple Lisa/Macintosh graphic user interface was

strongly influenced by the Xerox programs, Smalltalk and

Star. While it is undisputed that the Lisa and Macintosh

designers were influenced by Xerox’s Smalltalk program,

which used a mouse and overlapping windows, and by

Xerox’s Star workstation, which extensively used icons, such

borrowing of ideas does not deprive Apple’s works of their

presumption of copyright validity. To require a designer of

a computer graphic user interface to acknowledge sources of

artistic influence would be similar to expecting Roy

Lichtenstein to declare in a copyright registration that a

particular work is derivative of a named comic strip. HP’s

contention that Apple’s failure to disclose the borrowed

accorded the certificate of a registration made thereafter shall be

within the discretion of the court.

'* Microsoft also contests the originality of Apple’s works.

65A

Xerox material is in itself adequate to overcome the

presumption of validity is unsupported by any binding

precedent. Furthermore, "[aJbsent intent to defraud and

prejudice, inaccuracies in copyright registration do not bar

actions for infringement." Harris v. Emus Records Corp.,

734 F.2d 1329, 1335 (9th Cir. 1984). HP has not provided

the court with any evidence of Apple’s intent to deceive the

of fact as to Apple’s intent remains, and summary judgment

cannot be granted to Apple on the record now before the

Court." HP’s Opposition to Apple’s Motion for Partial

Summary Judgment at 15-16.

The parties have recently sent letter briefs to the court

regarding the December 11, 1990 decision and order in

Ashton-Tate Corp. v. Fox Software, Inc., No. CV 88-6837

TJH, _ F. Supp. ___ (C.D. Cal. filed Dec. 12, 1990). HP

relied on the legal conclusion that Ashton-Tate’s failure to

disclose that its programs were derived from a computer

software program in the public domain invalidated

Ashton-Tate’s copyrights on its dBase line of computer

software programs.'° This court finds the two-page

Ashton-Tate decision unhelpful to the resolution of the

pending motions.

HP’s contention that Apple’s copyrighted works are

derivative works is meritless. A derivative work is one

which is substantially copied from a prior work. Litchfield

v. Spielberg, 736 F.2d 1352, 1357 (9th Cir. 1984), cert. denied

470 U.S. 1052, 105 S. Ct. 1753, 84 L. Ed. 2d 817 (1985). The

Ninth Circuit has stated that a work will be deemed a

derivative work "only if it would be considered an infringing

work if the material which it has derived from a prior work

had been taken without the consent of a copyright

'S HP’s assertion in its letter brief that it has not yet taken any

discovery on the subject of Apple’s inequitable intent does not preclude

summary adjudication of that issue. HP has had ample time to conduct

discovery on the issues of the originality and validity of Apple’s copyrights

on the works in suit, including intent to deceive the Copyright Office.

Judge Schwarzer afforded HP that opportunity.

66A

proprietor of such prior work." Jd. at 1357 (quoting from

United States v. Taxe, 540 F.2d 961, 965 n. 2 (9th Cir.

1976)). All works are derived to a certain degree from

preexisting works. A derivative work within the meaning of

the copyright law, however, is one which substantially

borrows the expression of ideas from an existing work. M.

has provided no evidence demonstrating that Apple’s works

in suit could be considered to have infringed Xerox’s

copyrights or that Apple’s works substantially borrowed

expressions of ideas from Xerox’s Smalltalk or Star

programs.

.The purpose of summary judgment is to pierce the

pleadings and assess the proof to determine whether a

genuine need for trial exists. Advisory Committee Note to

1963 Amendment of Fed. R. Civ. P. 56(e). "There is no issue

for trial unless there is sufficient evidence favoring the

nonmoving party for a jury to return a verdict for that

party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249,

106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986). Although

inferences are to be drawn in favor of the nonmoving party,

where the moving party has carried its burden under Fed. R.

Civ. P. 56(c), the nonmoving party "must do more than

simply show that there is some metaphysical doubt as to the

material facts." Matsushita Elec. Industrial Co. v. Zenith

Radio, 475 U.S. 574, 586, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d

538 (1986). Having reviewed the exhibits offered in

connection with this issue, the court concludes there can be

no triable issue that the Apple works in suit substantially

borrowed expressions of ideas from Xerox’s Smalltalk or Star

programs.

Finding no evidentiary basis for HP’s claim that Apple

intended to commit a fraud on the Copyright Office and

finding that the Apple visual displays are not derivative of

the Xerox Star or Smalltalk programs, the court concludes

that HP has failed to establish that Apple perpetrated a

fraud on the Copyright Office.

B. Originality of Apple’s visual displays.

67A

HP disputes that Apple’s copyrighted works were wholly

original to Apple because those works are "at best derivative

of the works of Xerox and others and more likely merely

compilations of preexisting uncopyrightable material." HP’s

Opposition to Apple’s Summary Judgment Motion, at 3.

The attacks of Microsoft and HP on the validity of

Apple’s copyrights on the basis of lack of originality

misconstrue the copyright requirement of originality. The

standard of originality required for copyrightability is

minimal. See Atari Games Corp. v. Oman, 888 F.2d 878

(D.C. Cir. 1989) (minimal degree of creativity required to

support a copyright). To fulfill the originality requireinent,

a work need only be independently created by the author

and embody a very modest amount of intellectual labor;

novelty or uniqueness is not essential. Baltimore Orioles,

Inc. v. Major League Baseball Players Ass’n., 805 F.2d 663,

668 (7th Cir. 1986), cert. denied 480 U.S. 941, 107 S. Ct.

1593, 94 L. Ed. 2d 782 (1987); West Pub. Co. v. Mead Data

Cent., Inc., 799 F.2d 1219, 1223 (8th Cir. 1986), cert. denied

479 U.S. 1070, 107 S. Ct. 962, 93 L. Ed. 2d 1010 (1987). It

has been said that the originality requirement is simply a

prohibition of actual copying by the copyright holder. Atari

Games Corp., 888 F.2d at 882; M. Kramer Mfg. v. Andrews,

783 F.2d 421, 437 (4th Cir. 1986).

In Johnson Controls, Inc. v. Phoenix Control Systems,

886 F.2d 1173 (9th Cir. 1989), the court concluded that the

existence of computer programs similar to plaintiff's

program was insufficient to rebut the presumption of

validity absent any evidence that plaintiff copied from the

other programs. Similarly, although there is evidence that

Apple’s designers borrowed ideas from Xerox’s Smalltalk and

Star programs, there is no substantiation for the allegation

that Apple copied protectible elements of expression from

those programs. Indeed, photocopies of visual displays from

the Smalltalk and Star programs within the parties’ exhibits

reveal scant similarity of expression between Xerox’s and

Apple’s visual displays. HP’s Documentary and Testimonial

Evidence in Support of Motion for Summary Judgment, Exh.

222, 227, 237, 264, 361.

68A

There being no triable issue of fact regarding fraud on

the Copyright Office or lack of originality of Apple’s works

in suit, Apple’s motion for partial summary judgment that:

(1) Apple did not perpetrate a fraud on the Copyright Office;

and (2) Apple’s works in suit fulfill the copyright

requirement of originality, is granted. Apple’s motion for

summary adjudication that its copyrights are valid is denied

without prejudice to renewal. Accordingly, HP’s affirmative

defense regarding fraud on the Copyright Office and both

HP and Microsoft’s affirmative defenses of lack of originality

are dismissed from the case. HP and Microsoft’s defenses to

infringement, such as functionality, scope of protection,

merger and scenes a faire doctrines remain in issue and

would be appropriately discussed in connection with an

adjudication regarding substantial similarity.

V. REMAINING ISSUES.

Microsoft and HP have asked the court for a

determination that each of the remaining visual displays on

Apple’s List is not entitled to copyright protection because

they are unprotectible ideas, scenes a faire, or expressions

which are merged with or indispensable to the ideas they

represent. Under Ninth Circuit precedent, it appears that

the issue of merger of idea and expression can preclude a

finding of substantial similarity, but has not been applied to

the issue of the copyrightability of a work. NEC Corp. v.

Intel Corp., 10 U.S.P.Q.2d 1177, 1179 (N.D. Cal. 1989); see

Data East, 862 F.2d at 208; Frybarger v. Int’l Business

Mach. Corp., 812 F.2d 525, 530 (9th Cir. 1987); Sid & Marty

Krofft, 562 F.2d at 1167-69; Herbert Rosenthal Jewelry Corp.

uv. Kalpakian, 446 F.2d 738, 742 (9th Cir. 1971); see also M.

In Aliotti v. R. Dakin & Co., 831 F.2d 898 (9th Cir.

1987), the Ninth Circuit incorporated the line of cases

involving the merger and scenes a faire doctrines into the

“analytical framework of the intrinsic test [the substantial

similarity of expression test]." Id. at 901. Accordingly, such

of expression, are appropriately addressed in connection with

69A

the second half of the Krofft bifurcated test of substantial

similarity of ideas and expressions.

Although the court did invite motions addressing the

issue of "scope of protection" of Apple’s copyrights and the

merger doctrine has been applied in other circuits to

preclude copyrightability of a particular work, the court

must follow the law of the Ninth Circuit. Since the court

did not invite motions regarding the issue of substantial

similarity, a resolution whether the works in suit are not

substantially similar because of the merger of idea and

expression in Apple’s visual displays is premature at this

time. Unfortunately, a substantial portion of HP and

Microsoft’s moving papers are irrelevant to the disposition

of the current motions.

VI. DISCOVERY SCHEDULE.

Counsel are directed to contact the deputy clerk to

schedule a status conference not less than 45 days from the

date of this order. The court hereby imposes a full

disclosure obligation on the parties. In advance of the status

conference, therefore, the parties should meet and confer

and, with respect to each claim and defense which the party

asserts, disclose the following: (1) the location of all

documents and other tangible evidence which the party has

reason to believe pertain to each claim or defense without

regard to the party’s access to or control over the location;

(2) the identity of each person believed to have knowledge of

each claim or defense without regard to whether the person

is aligned with the party and a brief narrative statement

describing the party’s belief as to the person’s knowledge;

and (3) an outline of the law applicable to each claim or

defense. Based upon this exchange, the parties shall prepare

a plan of discovery which shall be contained in a single joint

status conference statement which must be filed not less

than five days in advance of the status conference.

IT IS SO ORDERED.

70A

APPLE COMPUTER, INC., Plaintiff,

Vv.

MICROSOFT CORPORATION and

HEWLETT-PACKARD COMPANY, Defendants.

No. C-88-20149-VRW

United States District Court,

N.D. California

June 15, 1991

ORDER DENYING MOTION FOR RECONSIDERATION,

PARTIALLY GRANTING MOTION TO SUPPLEMENT,

AND DENYING MOTION TO AMEND

WALKER, District Judge:

Counsel for the parties appeared before the court on

June 13, 1991, to discuss: (1) Hewlett-Packard’s ("HP")

motion for reconsideration of the court’s March 6, 1991

order granting Apple’s motion for partial summary judgment

on HP’s affirmative defense of fraud on the Copyright

Office; and (2) Apple’s motion for leave to file a

supplemental and amended complaint.

I. HP’S MOTION FOR RECONSIDERATION.

HP’s motion for reconsideration asserts that HP has not

been permitted to conduct discovery with respect to its fraud

defense because prior to this court’s February 8, 1990 order,

Judge Schwarzer, during an unrecorded telephone

conference on January 19, 1990, limited discovery to issues

relating to the remaining items on Apple’s list. Therefore,

contends HP, this court’s March 6, 1991 order granting

partial summary judgment to Apple on HP’s fraud defense

was premature. At the June 13, 1991 hearing, this court

denied HP’s motion for limited reconsideration.

7T1A

A brief review of the relevant facts will clarify the

court’s reasons. This court’s February 8, 1990 status

conference order provided:

The next phase of this litigation will be limited to:

(a) determination of the validity and scope of protection

of Apple’s claimed copyrights in the works in suit,

including but not limited to, the issues of protectability

and originality, * * * discovery on all other issues,

including infringement, contributory infringement and

defendants’ counterclaims is stayed pending further

order of this Court.

February 8, 1990 Status Conference Order at 2. Apple filed

and served its motion for partial summary judgment on HP’s

affirmative defense of fraud on the Copyright Office on

April 16, 1990. HP never filed an affidavit pursuant to Fed.

R. Civ. P. 56(f) asserting the need for additional discovery.

It was not until HP’s January 7, 1991 letter to the court

that HP first asserted that further discovery was necessary.

See Stark Declaration filed May 17, 1991, Exh. 14.

Furthermore, the first time that HP informed the court of

the particular facts which would be uncovered by additional,

limited discovery, their source and relevance, was in its reply

to Apple’s opposition to HP’s motion for reconsideration.

HP’s Reply filed June 7, 1991, at 9.

Thus, HP was given the opportunity to conduct

discovery on the fraud defense notwithstanding its apparent

misunderstanding that the February 8, 1990 order limited

discovery to the validity of Apple’s copyrights with respect

to the remaining items on Apple’s list, not the validity of

each copyright as a whole. In fact, HP did conduct discovery

on its allegations of inequitable conduct with respect to the

remaining items on Apple’s list. Moreover, HP had two

months of unrestricted discovery from the time this

complaint was filed on March 17, 1988 through May 20,

1988 when Judge Aguilar ordered bifurcation of the

licensing and infringement issues. See May 20, 1988 Order.

District courts have broad discretion in handling

discovery matters. See Foster v. Arcata Associates, Inc., 772

F.2d 1453, 1467 (9th Cir. 1985). Under the circumstances,

isi AG ra se SE ear a eS ars a

72A

where a party unreasonably misconstrues the plain meaning

of a discovery order, fails to avail itself of several months in

which to conduct full discovery with respect to an issue, and

fails to file a Rule 56(f) affidavit or the equivalent thereof,

a district court may properly proceed to rule on motions for

summary judgment. See Bryant v. Ford Motor Co., 886 F.2d

1526 (9th Cir. 1989) (where plaintiff failed to file Rule 56(f)

affidavit, district court’s entry of summary judgment against

plaintiff five months after complaint filed was not an abuse

of discretion); Brae Transp., Inc. v. Coopers & Lybrand, 790

F.2d 1439 (9th Cir. 1986) (references in memoranda and

declarations concerning need for discovery do not qualify as

motions under Rule 56(f); because plaintiff failed to pursue

discovery diligently before summary judgment motions were

filed, it could not complain that the court should have

allowed further discovery before ruling); Foster, 772 F.2d

1453, 1467 (9th Cir. 1985) (ruling on summary judgment

before discovery completed was not an abuse of discretion

because plaintiff "failed to follow the proper procedures

under the Federal Rules of Civil procedure for obtaining a

continuance or other appropriate discovery order when

opposing a motion for summary judgment"); THI-Hawaii

Inc. v. First Commerce Fin. Corp., 627 F.2d 991, 993-34 (9th

Cir. 1980) (affirming district court’s grant of summary

judgment two months after action filed and prior to any

discovery because plaintiff failed to move for continuance

under Rule 56(f)).

Although HP cites Program Eng’g, Inc. v, Triangle

Publications, Inc., 634 F.2d 1188 (9th Cir. 1980), for the

proposition that the technical requirement of a Rule 56(f)

affidavit is not necessary to postpone determination of a

summary judgment motion where additional discovery is

needed, the Program Eng’g court concluded that in light of

the appellant’s failure to point to any evidence creating an

inference of conspiracy, failure to state what depositions it

needed, other specific evidence it hoped to discover, and the

relevance of such evidence to its claims, the appellant was

not entitled to additional discovery before the lower court

ruled on the summary judgment motion. Id., 634 F.2d at

tr come

73A

1194. Thus, HP’s complete failure to provide the court with

the equivalent of a Rule 56(f) affidavit and any evidence

creating an inference of specific intent to mislead or defraud

the Copyright Office constitutes a waiver of any claim to

additional discovery.

Il. APPLE’S MOTION FOR LEAVE TO FILE A

SUPPLEMENTAL AND AMENDED COMPLAINT.

Pursuant to Fed. R. Civ. P. 15(d), Apple moves to file a

supplemental complaint to update the versions of the

products referred to in the original complaint: Windows 3.0,

NewWave 3.0, Macintosh Finder 5.4, and Macintosh II ROM.

Apple’s original complaint, read liberally, appears to embrace

updated versions of Windows and, thus, it appears that

defendants should probably have been on notice that

subsequent versions of Windows and NewWave are reached

by Apple’s litigation claims.

The complaint did not, however, allege that updated

versions of the Macintosh Finder 5.4 and Macintosh II ROM

were infringed. Furthermore, these programs were

published on January 12, 1987, and March 15, 1987,

respectively, well before Apple filed its complaint on

March 17, 1988. Although Apple contends that it did not

include these two programs in its original complaint because

that time, and registration is a prerequisite to filing a

§ 411(a), HP notes that Apple could have availed itself of the

procedures for expedited issuance of registration certificates,

pursuant to 50 Fed. Reg. 46,206 (Nov. 6, 1985). HP also

argues that supplementation of the complaint with these

two derivative programs would entail substantial discovery

to determine the scope of the copyrights on the derivative

works.

Because the court cannot discern any reason for Apple’s

failure to include the Macintosh Finder 5.4 and Macintosh

II ROM earlier in this litigation and it appears that the

inclusion of these two programs at this late date would

cause delay in these proceedings and substantial prejudice to

the defendants, the court DENIES Apple’s motion to file a

74A

supplemental complaint including the Macintosh Finder 5.4

and Macintosh I] ROM programs.

Finally, Apple seeks to add claims for breach of contract,

rescission, and unfair competition against Microsoft in

Count III of its proposed amended supplemental complaint.

See Apple’s Notice of Motion and Motion for Permission to

Serve its Supplemental Complaint filed May 21, 1991, Tab

B. The essence of proposed Count III is that Microsoft

falsely represented that the 1985 Agreement would not

permit Microsoft to create future versions of Windows to

appear more similar to the Macintosh graphical user

interface than Windows 1.0. Id. at 10 125. In light of Judge

Schwarzer’s prior adjudication that during negotiations of

the 1985 Agreement, Microsoft’s counsel rejected Apple’s

proposed license limiting future Microsoft application

programs from having an appearance, look and feel more

like the Macintosh than that which already existed in

Windows at the time of the 1985 Agreement (Apple

Computer, Inc. v. Microsoft Corp., 709 F. Supp. 925, 928

(N.D. Cal. 1989)), it appears that Apple’s amendment to

include claims for breach of contract, rescission and unfair

competition would be futile.

Il. CONCLUSIONS.

For the reasons stated above, the court concludes that:

1. HP’s motion for limited reconsideration of the

March 6, 1991 order is DENIED.

2. Apple’s motion to file a supplemental complaint is

GRANTED with respect to the addition of Windows 3.0 and

NewWave 3.0, but DENIED with respect to Macintosh

Finder 5.4 and Macintosh II ROM. However, the evidentiary

issues concerning the use of the Macintosh Finder 5.4 as a

replacement for the Macintosh Finder as evidence at trial

are left open.

3. Apple’s motion to file an amended complaint is

DENIED in its entirety.

4. Apple shall file and serve a supplemental complaint

in compliance with this order no later than June 28, 1991.

5. Apple shall file and serve a new list of allegedly

infringing similarities between its copyrighted works in suit

7T5A

and windows 3.0 and NewWave 3.0 no later than July 5,

1991.

4. In order to expedite the resolution of this case, the

parties shall be permitted to conduct full discovery, and all

prior orders staying discovery are vacated. At the presently

scheduled July 8, 1991 hearing, counsel shall be prepared to

discuss an appropriate cut-off date for all remaining

discovery; the court urges counsel to establish a workable

schedule but one that will conclude discovery, including that

of opinion witnesses, as soon as practicable.

SO ORDERED.

Pe te

eee

76A

APPLE COMPUTER, INC., Plaintiff,

MICROSOFT CORPORATION and

HEWLETT-PACKARD COMPANY, Defendants.

No. C-88-20149-VRW

United States District Court,

N.D. California

July 25, 1991

ORDER ON DEFENDANTS’ REQUEST FOR

CLARIFICATION, APPLE’S MOTION FOR SUMMARY

JUDGMENT ON COUNTERCLAIMS, & MICROSOFT’S

MOTION TO DISMISS CERTAIN AFFIRMATIVE

DEFENSES

WALKER, District Judge:

Counsel for the parties appeared before the court on

July 8, 1991, to discuss: (1) defendants’ request for

clarification of the March 6, 1991 and May 24, 1991 orders;

(2) Apple’s motion for summary judgment on Microsoft’s

first and sixth counterclaims’ (breach of the 1985

Agreement’s covenant not to sue, and declaratory judgment

regarding the scope and interpretation of the 1985

Agreement, respectively) and on HP’s first and second

counterclaims (declaration of noninfringement and copyright

invalidity and unenforceability, and violation of § 2 of the

Sherman Act, respectively); (3) Microsoft’s motion to dismiss

Apple’s sixth, seventh, and eighth affirmative defenses to

' In an attempt to narrow the issues in this case, Microsoft

voluntarily dismissed its second, third, fourth, and fifth counterclaims

pursuant to Fed. R. Civ. P. 41(a)(1)(ii). Similarly, HP dismissed its third

and fourth counterclaims, and Apple dismissed its unfair competition

claim. See Stipulation and Order filed July 9, 1991.

TTA

Microsoft’s first counterclaim; and (4) further scheduling of

discovery deadlines and filing of motions. The court shall

address these matters seriatim.

I. DEFENDANT’S REQUEST FOR CLARIFICA-

TION.

Defendants ask the court to clarify its March 6, 1991

and May 24, 1991 orders. In particular, defendants seek

clarification whether the court’s dismissal of HP’s

affirmative defense challenging the validity of Apple’s

copyrights on lack of originality grounds also dismisses any

scope of protection defenses based on lack of originality.

Defendants ask the court for an explicit ruling that all scope

of protection issues remain for future determination:

functionality, merger, scenes a faire, unprotectible ideas,

indispensable or limited means of expression, and unoriginal

expression.”

The essence of defendants’ argument is that component

elements of a copyrighted work which are unoriginal, i.e.,

borrowed from a previously existing work, are not within

the scope of copyright protection and such unoriginal

elements must be eliminated prior to the determination of

whether the allegedly infringing and infringed works are

substantially similar. Defendants contend that Apple should

not be permitted to proceed with an infringement claim

based partially on visual displays which have been borrowed

from other software programs because such elements are

unoriginal and unprotectible. In support, defendants quote

language from Feist Publications, Inc. v. Rural Tel. Service

Co., 111 S.Ct. 1282, 1289 (1991) and Harper & Row

Publishers, Inc. v. Nation Enterprises, 471 U.S. 539, 547-48

components of the work which are original to the author

? The reason the May 24, °1991 order referred to unprotectible

expression under only the functionality, merger, and scenes a faire

doctrines is that "unprotectible ideas" are encompassed within the merger

of idea and expression theory and "indispensable or limited means of

expression” is simply another term for the scenes a faire doctrine (see

Data East U.SA., Inc. v. Epyx, Inc., 862 F.2d 204, 208 (9th Cir. 1988)).

heel nih met Oe

78A

and copying of unoriginal constituent elements does not

constitute infringement. However, defendants have not

cited a single Supreme Court or Ninth Circuit case in which

the lack of originality of an element of a copyrighted work

rendered that element unprotectible and excludable from the

substantial similarity analysis.

While the term "originality" is subject to semantic

variations, in the context of traditional copyright law,

originality is a doctrine which relates to the copyrightable

nature of a work as a whole rather than to whether

of a work. In both Feist and Harper & Row, the Supreme

Court refused to afford copyright protection to facts—

scientific, historical, biographical and newsworthy, because

they are not "original." In Feist, the facts were names,

telephone numbers, and towns of subscribers compiled in a

telephone directory. The facts in Harper & Row were

quotations borrowed under the fair use doctrine and

historical facts. The component elements of Apple’s works

which defendants contend are not original do not appear to

be unprotectible and unoriginal facts of the type described

in Feist and Harper & Row. An additional test of originality

for constituent elements of a copyrighted work, as proposed

by defendants, would, in effect, preclude copyright protection

for all pictorial works, which, if dissected, would be

composed of a limited number of geometric shapes. The

existing doctrines limiting the scope of protection prior to

the intrinsic test of substantial similarity, i.e., functionality,

merger, and scenes a faire, are sufficient means of sifting out

unprotectible elements. Accordingly, the originality of each

of the remaining features in Apple’s works in suit is not

relevant to the scope of protection inquiry.

Il. APPLE’S MOTION FOR SUMMARY JUDGMENT.

A. Microsoft’s First Counterclaim.

Microsoft’s first counterclaim alleges that Apple’s

filing of this lawsuit constituted a breach of the covenant

7T9A

not to sue in t

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