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IP/Entertainment Case Law Updates

Altmayer-Pizzorno v. L-Soft International, Inc., et al. (unpublished)

The Fourth Circuit Court of Appeals held that a defendant cannot prevail on a copyright misuse defense when the copyright holder shows that its improper practice has been abandoned and that the consequences of the misuse of the copyright have dissipated.

Juan Altmayer-Pizzorno, a developer who designed mailing software (“LSMTP”) that quickly sends large numbers of emails, contracted with L-Soft International, Inc., a software company that makes the email list management program LISTSERV, to market and sell licenses of LSMPT that were packaged along with LISTSERV. The contract included a non-compete covenant. In the district court trial, a jury found that L-Soft breached the contract and was liable for copyright infringement for all LSMTP sales occurring thereafter. L-Soft appealed, asserting the misuse of copyright defense.

The misuse of copyright defense precludes a copyright holder from recovering for infringement where the holder attempted to suppress any attempt by the licensee to independently implement the idea that the copyrighted material expresses. However, the court of appeals held that the holder is free to bring a suit for infringement once it has purged itself of the misuse. To purge its copyright misuse, the holder must show that the improper practice has been abandoned and that the consequences of the misuse of the copyright have dissipated. However, the holder is not required to prove that the consequences of the misuse have dissipated unless the defendant first shows that the misuse had anti-competitive consequences. If the defendant fails to meet this burden, the termination of the contract containing the anti-competitive clause may be sufficient to purge the misuse.

Here, the court held that Pizzorno’s misuse of the copyright was purged when he terminated the contract. Additionally, L-Soft did not meet its initial burden of showing the existence of anti-competitive effects resulting from the inclusion of the non-competition covenant.