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Actuate Corp. v. Fidelity National Information Services

District court dismisses claims for direct and indirect copyright infringement, finding that action against licensee for unpaid royalties lies in contract law rather than copyright where licensee did not exceed any of its licensing conditions.

Plaintiff Actuate Corporation sued defendant Fidelity National Information Services, alleging direct and indirect copyright infringement based on claimed discrepancies in Fidelity’s royalty payments to Actuate for use of its software under a licensing agreement. Fidelity moved to dismiss, arguing that a licensee is not liable for infringement solely on the basis of unpaid royalties. The court agreed, noting that courts in the Ninth Circuit have recognized claims for copyright infringement only where the licensee exceeded the scope of the licensing agreement to exercise any of the statutory rights under the Copyright Act (e.g., creating or distributing copies of a work in excess of explicit numeric conditions within the licensing agreement). Courts in the Ninth Circuit have routinely rejected copyright infringement claims stemming from the alleged breach of covenants in the licensing agreement (e.g., failing to remit sufficient royalties); those claims do not sound in copyright law but are instead actionable only under contract law. The license at issue granted limited rights to use, manufacture, and distribute certain software, but because the essence of Actuate’s direct infringement claim was for the unpaid use and distribution of software, those allegations were not cognizable as direct copyright infringement claims. The court also dismissed the indirect infringement claims, finding that allegations that Fidelity was aware of or permitted “over-deployment” of the software by end users, in violation of end-user licensing, could not support a claim for indirect infringement because the allegations sound in contract, not copyright. Accordingly, the court granted Fidelity’s motion to dismiss without prejudice.