U.S. Auto Parts Network, Inc. v. Parts Geek, LLC
2012 WL 3764704, 692 F.3d 1009 (2012)
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Rule of Law:
Under the work-made-for-hire doctrine, an employer owns the copyright to an employee's original, non-trivial modifications to a pre-existing work if the modifications were created within the scope of employment and the employer had a lawful right, such as an implied license, to create such derivative works.
Facts:
- In late 1999 or early 2000, computer programmer Lucas Thomason created an e-commerce software program called Manager 2000 while self-employed.
- Thomason granted Partsbin, an online auto parts retailer, a perpetual license to use Manager 2000 in its business.
- Around April 2001, Partsbin hired Thomason as its 'director of eServices.'
- While employed at Partsbin, Thomason made numerous modifications and enhancements to Manager 2000 to meet the company's changing business needs, creating several new versions and adding a key feature called 'Auto Vend'.
- In May 2006, U.S. Auto Parts Network (USAP) acquired Partsbin and all its intellectual property assets.
- Thomason became an employee of USAP after the acquisition and continued to develop and modify the software.
- In July 2008, Thomason and other key employees resigned from USAP and launched a competing online retailer, Parts Geek.
- Thomason then created new e-commerce software called Admin for Parts Geek, which USAP alleged contained features from the versions of Manager developed during Thomason's employment.
Procedural Posture:
- U.S. Auto Parts Network (USAP) sued Parts Geek, LLC, and Lucas Thomason in federal district court for copyright infringement.
- Parts Geek and Thomason moved for summary judgment on the copyright infringement claim.
- The district court granted the motion for summary judgment, concluding that USAP did not own the copyright to any version of the software and therefore lacked standing to sue.
- The district court subsequently awarded attorneys' fees to Parts Geek and Thomason.
- USAP, as appellant, appealed the grant of summary judgment and the attorneys' fees award to the U.S. Court of Appeals for the Ninth Circuit.
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Issue:
Does an employer own the copyright to enhancements an employee makes to a pre-existing software program, where the employee owns the copyright to the original program, if the enhancements were created within the scope of employment and qualify as copyrightable derivative works?
Opinions:
Majority - Ikuta, Circuit Judge
Yes. An employer owns the copyright to an employee's contributions to a pre-existing work if those contributions constitute a work made for hire and are also a copyrightable derivative work. The court reasoned that the 'work made for hire' and 'derivative works' provisions of the Copyright Act must be read together. A jury could reasonably find that Thomason's modifications to Manager 2000 were works made for hire because he was an employee and the modifications were created within the scope of his employment, as defined by the common law of agency. A jury could also find that the enhancements were copyrightable derivative works because Partsbin had an implied license to create them and at least one feature, Auto Vend, was an original and non-trivial contribution. Because genuine issues of material fact exist as to whether Partsbin, and subsequently USAP, owned the copyright to these enhancements, summary judgment was improper.
Analysis:
This case clarifies the intersection of the work-made-for-hire and derivative works doctrines, particularly within the software development context. It establishes that an employer can own copyright in an employee's modifications even when the employee owns the copyright in the underlying, pre-existing code. The decision underscores the importance for technology companies and their employees to have explicit written agreements detailing the ownership of both pre-existing intellectual property and any subsequent modifications made during employment. By formally adopting the Restatement (Second) of Agency's test for scope of employment, the Ninth Circuit provided a clear framework for future work-for-hire disputes in the circuit.
