Computer Associates International sued American Fundware, Inc., claiming that American’s software product, PC-Fund, infringed CAI’s copyrights. It was American’s practice to keep only the current version of the source code of its programs and destroy earlier versions. After American was sued by CAI, it continued its practice of destroying non-current versions.
The court held that American knew, or should have known, that the earlier versions of the software would be evidence in the litigation, and therefore American had a duty to preserve the software once it had been served with American’s complaint. The court punished American Fundware by imposing the most extreme sanction: it ordered the entry of default against American.