Lasercomb America v. Reynolds

Lasercomb America, Inc. (Lasercomb) (plaintiff) and Holiday Steel Rule Die Corporation (Holiday) were competitors in the field of manufacturing steel rule dies used to cut and score cardboard to be folded into boxes. Lasercomb developed a software program called Interact that could design templates of cardboard cutouts and produce corresponding steel rule dies. Before marketing the software more broadly, Lasercomb licensed four prerelease copies to Holiday at a cost of $35,000 for the first copy, $17,500 each for the second and third copies, and $2,000 for the fourth. Lasercomb advised Holiday that the cost of any additional copies would be $2,000 each. Lasercomb also sent its standard licensing agreement to Holiday, but Holiday never executed it. The standard agreement included language that barred a licensee and its directors, officers, and employees from writing, developing, or selling computer-assisted die-making software during the term of the agreement, which was set at 99 years. Holiday’s president directed Job Reynolds (defendant), who was a computer programmer for Holiday, to circumvent Lasercomb’s protective measures on the software, make three unauthorized copies of Interact, and use the copies on Holiday’s computers. Reynolds and Holiday then created a software program called PDS-1000 that almost entirely copied Interact and marketed the program as their own. Holiday and Reynolds engaged in several deceptive practices to disguise their unauthorized use of Interact. Lasercomb sued Reynolds and Holiday for infringing its copyright in the Interact program. Reynolds and Holiday argued that the anticompetitive terms in Lasercomb’s standard licensing agreement constituted copyright misuse and barred Lasercomb’s infringement claim, even though Holiday never executed the agreement. The district court entered judgment in favor of Lasercomb, and Reynolds and Holiday appealed.