Krause v. Titleserv, Inc.

Over a period of 10 years, William Krause (plaintiff) wrote custom computer programs for Titleserv, Inc. (defendant) for which Krause was paid substantial amounts. Eight of the programs were specifically designed to enable Titleserv to track and report on the status of its client’s requests, like a bank’s request for title reports. The programs were installed on Titleserv’s servers and accessible to Titleserv, its employees, and its subsidiaries. Krause terminated his relationship with Titleserv without assigning his copyright to the company. Krause left executable copies of the programs on Titleserv’s servers and allowed the company to use those copies, but he installed a locking command on the executable programs to prevent employees from obtaining the source code. Nevertheless, Titleserv’s employees were eventually able to circumvent the lock and decompile the executable code back into source code. Employees modified the source code in four categorical respects: they (1) fixed bugs in the code so the programs would continue functioning, (2) changed the code to add new clients or to keep the programs updated, (3) incorporated the programs into a new Windows-based system designed by Titleserv, and (4) added certain features, such as allowing two bank clients to directly access their records. Krause sued Titleserv, alleging copyright infringement. Titleserv moved for summary judgment, asserting statutory fair use under 17 U.S.C. § 117(a)(1) (§ 117(a)(1)). The district court granted summary judgment in favor of Titleserv, and Krause appealed.