Argument Recap / Panel Activity

A Federal Circuit panel heard oral argument earlier this month in SAS Institute Inc. v. World Programming Ltd., a copyright case originally filed in the Eastern District of Texas. We have been following this case because it attracted ten amicus briefs, six in support of SAS and four in support of WPL. In this case, SAS appeals a decision by the district court dismissing its claim of copyright infringement by WPL. SAS contends the district court incorrectly analyzed the copyrightability of a computer program and improperly excluded relevant witness testimony. Judges Newman, Reyna, and Wallach heard the oral argument. This is our argument recap.

Dale M. Cendali argued for SAS. Judge Wallach quickly asked her if it is disputed whether WPL literally copied any text of the underlying source code or the structural design. Cendali agreed that none of this copying occurred, but she argued that this is a case of non-literal copying. Judge Wallach next asked about the accuracy of testimony where a witness admitted to not reviewing SAS’s code or comparing it to WPL’s code. Cendali agreed this testimony was correct. Judge Wallach continued, asking about particular evidence, a contention in SAS’s brief about objections to witness testimony, and whether certain illustrations were part of the relevant copyright.

Judge Reyna then asked if district court resolved the matter of copyrightability as matter of law after an evidentiary hearing. In response, Cendali argued the procedure used by the district court was improper procedurally because the jury, she argued, was entitled to decide if anything is copyrightable under controlling Firth Circuit precedent. Judge Reyna, in turn, inquired whether the district court decided any factual disputes. In response, Cendali highlighted that the district court never noted that parts of the SAS code were in the public domain and did not grapple with or present any reasons for why parts of the code may be uncopyrightable. She argued there were factual underpinnings to the question and the district court failed to provide any appropriate reasoning for its denial of copyrightability. Judge Reyna further asked if SAS’s excluded expert witness would have been used at the evidentiary hearing. Cendali argued that the witness “absolutely” would have testified.

Judge Reyna then asked if SAS believed that “once you have copyright,” then the entire matter is subject to protection. He asked why parts of the copyright would not be subject to further analysis. Cendali argued that precedent affords a presumption of validity if a copyright is registered for the whole work. Cendali continued by contending that the standard process is first to identify what the defendant copied (here, she explained, input format and output designs), and then the burden falls on the defendant to explain why the copied elements were not copyrightable. Cendali noted that the specific keywords and phrases that had been copied were identified in the appendix and provided to WPL.

Jeffery A. Lamken argued for WPL. Lamken first noted that the SAS witness was excluded from the trial due to the potential to confuse the jury, but, he argued, he was not excluded from the evidentiary hearing. Next, Lamken argued, the judgment here was proper no matter who bears the burden on the issue of copyrightability because, while the “jury must make a side by side comparison,” the court decides the protected elements that can be used for comparison. Here, he argued, the district court asked SAS to identify these protected elements, but SAS refused to do so four times.

Judge Reyna interjected to ask what Lamken had to say in response to Cendali’s argument that SAS did specify the copied elements subject to protection. Lamken contended the specifics provided were from WPL’s work, but not from SAS’s own work.

Judge Newman asked if the concept of filtration is appropriate to use in a copyright case to find protected elements. In response, Lamken argued that the Fifth Circuit requires filtration. He argued, moreover, that, even if the end result is similar, one must look at the computer program or code. Here, Lamken argued, the underlying code is completely and separately independent. Lamken argued there is no evidence and no assertion by SAS that WPL’s code looks or resembles SAS’s code. Due to the fact that both SAS’s code and WPL’s code create user outputs, Lamken argued, one must decide how much of the outputs’ similarity is due to the users’ inputs and how much is due to the underlying code through filtration.

Judge Reyna asked if copyrightability is a question of law. Lamken responded by noting there could be underlying factual questions, but he said it is universally accepted that the court must decide which elements are protected before the case goes to the jury. Judge Reyna then inquired why SAS’s witness was not allowed to testify in the evidentiary hearing and what Lamken would label that hearing. Lamken argued that SAS was not prejudiced by the exclusion, and, he said, while it is hard to label the hearing, he would call it a bench determination. Lamken further argued that SAS did not respond to material WPL noted was unprotectable, and so the court’s determination was warranted in this case. Lamken maintained that, following any proceeding, SAS should have lost because the court specifically asked for and SAS failed to provide any differentiation of the protected material from the unprotected material.

Judge Newman asked, if copyright principles protect SAS’s entire product, whether the filtration analysis conforms to copyright law. Lamken responded by arguing that copyright does not grant every element of a work protection because copyright issuance does not occur after a look at the entire work. Therefore, he argued, the court must determine what is and is not protectable within the copyrighted work. Lamken continued by arguing that, because SAS did not filter the material for unprotectable work, the court could not present this unfiltered work to a jury. As a result, he maintained, the court was correct to grant a judgment against SAS.

In rebuttal, Judge Reyna asked Cendali whether the district court’s hearing fit within the special court procedures allowed by Federal Rule of Civil Procedure 16(c)(2)(L). Cendali responded that this rule does not allow a court to go around the other relevant rules governing the process, such as the right of a jury to hear and decide disputed issues of fact.

Judge Reyna also asked whether copyrightability is a pure question of law or if it has factual underpinnings. Cendali responded by arguing it is “clear and uncontested” that Fifth Circuit precedent has determined this is a mixed question of fact and law with factual underpinnings. Cendali continued by arguing that in her whole career she has never heard of a court deciding a case in an evidentiary hearing that is devoid of findings and conclusions. Judges Wallach and Reyna then asked if SAS asked the court to determine which issues are law and fact as well as if SAS noted factual issues for the court that needed to be decided. Cendali maintained that SAS intended to counter these points with its witnesses, but noted how its witnesses were not allowed to testify.

We will continue to monitor the case and report on any developments.