IP Law Daily Software provider can pursue breach claims against U.S., but infringement could only be asserted by ‘copyright owner’
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Wednesday, December 21, 2016

Software provider can pursue breach claims against U.S., but infringement could only be asserted by ‘copyright owner’

By Robert Margolis, J.D.

Finding that Bruhn NewTech, Inc., is not the legal or beneficial owner of an "exclusive right" in the copyrights it alleges were infringed by the United States, the United States Court of Federal Claims in Washington, D.C., has dismissed Bruhn’s copyright infringement claim. The Court also dismissed Bruhn’s claim alleging that the United States violated the "Uniform Trade Secrets Act," but permitted Bruhn’s breach of contract claim to proceed (Bruhn NewTech, Inc. v. United States, December 19, 2016, Horn, M.B.).

Bruhn and Bruhn-Denmark. Bruhn, a wholly owned subsidiary of Bruhn NewTech A/S ("Bruhn-Denmark"), markets and sells commercial software created by Bruhn-Denmark. Its software is used in military systems that track and analyze chemical, biological, radiological, and nuclear agents in battlefield or civilian environments. In May 1998, the United States awarded Bruhn a contract where it licensed Bruhn’s analysis software. Bruhn alleged in its complaint that the software is the primary product of Bruhn-Denmark and that Bruhn-Denmark is the owner of registered copyrights for the software.

Alleged breach. Bruhn alleges that while the United States was using the software in "the Korean theater of military operations," it breached its software license agreement with Bruhn by transferring the software to the armed forces of the Republic of Korea ("South Korea") and the air force of the Kingdom of Jordan ("Jordan"). According to Bruhn, it learned in March 2013 that the United States authorized the transfer of the software onto computer hard drives designated for delivery to South Korea within laptops that would be operated by South Korean forces without United States oversight or monitoring. In May of 2013, Bruhn also became aware that the United States had provided copies to Jordan’s air force. Bruhn alleged that those transfers were without its consent and in violation of the software license, infringed Bruhn’s copyrights, and illegally disclosed its trade secrets. Bruhn submitted a certified claim to the contracting officer, which was denied. Bruhn then filed its complaint in the Court of Claims.

No jurisdiction. The court found that it lacks subject matter jurisdiction over Bruhn’s copyright infringement claim. The court began its analysis by agreeing with the United States that the court is granted jurisdiction over copyright infringement claims against the United States not by the Copyright Act itself, but under 28 U.S.C. §1498(b), which states that such an action may only be brought by "the copyright owner." There was no dispute that Bruhn-Denmark is the actual owner of the registered copyrights, but that Bruhn, a separate legal entity, is the plaintiff bringing the claim.

"The copyright owner" is not a term that is defined in the statute, and Bruhn argued that it includes both legal and beneficial owners, since Section 501(b) of the Copyright Act permits both legal and beneficial owners to sue for copyright infringement. The court acknowledged that whether legal and beneficial owners could sue the United States for copyright infringement is a question of first impression, but decided it need not address it. Even if a legal or beneficial owner could sue, the court concluded, under Section 501(b) the plaintiff must be the legal or beneficial owner of "an exclusive right under a copyright" to do so, and Bruhn has no such "exclusive right." The court examined Bruhn’s agreement with Bruhn-Denmark and found no provision giving Bruhn the requisite exclusivity. Because Bruhn did not establish that it is the copyright "owner," the court held that it lacks subject matter jurisdiction under 28 U.S.C. §1498(b), and dismissed the copyright infringement claim.

Trade secret claim. Bruhn also asserted a claim for violation of the "Uniform Trade Secrets Act," but as the court noted, that is not a binding law of any jurisdiction, but a model statute proposed for general consideration. An individual jurisdiction must enact it for it to become law. Because the "Uniform Trade Secrets Act" is not codified in the United States Code, the United States has not waived sovereign immunity over such a claim, requiring dismissal, the court held.

Contract breach. The court did find that Bruhn alleged sufficient facts to state a claim that the United States breached its license agreement by transferring the software to South Korea and Jordan, and allowed the breach of contract claim to go forward.

The case is No. 1:16-cv-00783-MBH.

Attorneys: Steven J. Lewicky (Davis, Agnor, Rapaport & Skalny, LLC) for Bruhn NewTech, Inc. Scott D. Bolden, Department of Justice, for United States.

Companies: Bruhn NewTech, Inc.

MainStory: TopStory Copyright TechnologyInternet TradeSecrets

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