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Independent Service Organizations and Antitrust – The MAI Systems Corp. Case

September 1994

Last year we noted that the Ninth U.S. Circuit Court of Appeals in California had ruled that an independent service organization (“ISO”) had infringed the copyright in a computer manufacturer’s operating system by the mere act of turning on the computer in order to service it. The gist of the case was that an illegal copy was created when the program was copied into random access memory (RAM). The Court had further held that the licensees of the software did not have the legal authority to authorize a third-party ISO to make a copy in this manner, where the license agreement prohibited it.

We reported that in response to this decision six ISOs filed suit in federal court in Virginia, charging MAI with impermissibly using its copyrights to preclude competition in MAI computer maintenance and repair.

If the ISOs hoped that Virginia would be a friendlier forum than California, they have been sorely disappointed. The Virginia federal court has rejected the ISO’s claims of antitrust violations by MAI. Moreover, the Virginia court agreed with the California court, holding that the ISOs had infringed MAI’s software copyrights by loading the MAI licensees’ software into RAM. By suing MAI in Virginia, and thereby precipitating this outcome, the ISOs have strengthened the principle that manufacturers can use their copyrights to exclude independent maintenance and repair organizations from the marketplace. What previously might have been a single circuit decision now appears to represent current federal copyright law on these issues.