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Lotus Stunned By First Circuit Copyright Decision

April 1995

Copyright law has often been called metaphysical, but rarely has the reality of this observation been demonstrated as starkly as in the recent decision by the U. S. Court of Appeals for the First Circuit in Lotus Development Corp. v. Borland International, Inc. For almost five years Lotus held Borland in a stranglehold as Lotus’s claims proceeded before Judge Keeton in the Massachusetts Federal District Court. On its face, Lotus’s case seemed quite simple: Lotus claimed that Borland had infringed Lotus’s copyright when Borland copied its menu command hierarchy — the system of menus that are used to operate the Lotus 1-2-3 spreadsheet program. Borland admitted deliberate, literal copying of the words and arrangement of the commands, but argued that these commands are not protected by copyright law.

There was little doubt what the outcome of this case would be in the District Court from the day that Lotus’s suit was filed in Boston and assigned to Judge Keeton. Judge Keeton had already considered identical legal arguments, pro and con, in Lotus’s copyright infringement suit againstPaperback Software Int’l and Mosaic Software . Both of these companies had also copied the 1-2-3 command structure, claiming that it was perfectly legal for them to do so. They may have been proven correct, but lacking resources to appeal their cases both companies were forced out of business. Given this background, it was clear that Borland’s only hope lay beyond Judge Keeton, in an eventual appeal to the First Circuit. However, the road to the Court of Appeals was long and bitter; Lotus had filed suit against Borland in the Summer of 1990. Over the next three years Judge Keeton published four lengthy opinions — all adverse to Borland — on whether Lotus’s menu structure was protected by copyright law. Finally, in the Fall of 1993 the Judge permitted Borland to appeal his rulings on liability while the parties prepared for a damages trial in which Lotus reportedly sought $100 million in damages from Borland. The damages trial was scheduled to begin on March 14, 1995. The Court of Appeals decision, holding that there had been no infringement on which damages could be based, was issued on March 9, 1995, only 5 days before the damages trial was to begin.

The First Circuit’s opinion was a profound vindication of Borland’s legal position. Although Borland had put forth many arguments in its defense, Borland’s core defense — and indeed, the central defenses of long-forgotten Paperback and Mosaic — was that the menus were a “system” or “method of operation.” Federal copyright law expressly states that systems and methods of operation (as well as ideas, processes, concepts, principles and discoveries) are not protected by copyright law. Judge Keeton had recognized that the 1-2-3 commands enabled users to operate a computer spreadsheet, but he held that there were also “expressive” elements in the choice and arrangement of the terms, and that therefore the command structure was protected under the copyright laws.

The First Circuit Court of Appeals agreed with the argument which had been made by Paperback and Mosaic as far back as 1987, and had been pressed by Borland since 1990. Likening the 1-2-3 menu commands to the buttons on a video cassette recorder, the Court held that the menu commands were essentially a “method” for operating the computer, and therefore could not be copyrighted. One of the three judges on the panel, in a concurring opinion, analogized the 1-2-3 menus to a QWERTY keyboard, and wondered why customers of Lotus who had devised macros using 1-2-3 should remain “captives of Lotus because of an investment in learning made by the users and not by Lotus.”

TLB Comment : Lotus has announced that it will appeal this decision to the U.S. Supreme Court. Unless the Supreme Court reverses the First Circuit, the Lotus/Borland decision is likely to have profound implications for software copyright law. It is the first U.S. copyright case to hold that the organization of on-screen commands used to operate a computer are unprotectible. It represents — and may be the strongest example to date of — a powerful trend away from protecting computer software programs under U.S. copyright law. Earlier cases that are part of this trend, such as Apple v. Microsoft and Computer Assoc. Int’l v. Altai, Inc , have been discussed extensively in earlier issues of the TLB. Lotus v. Borland takes the judicial philosophy underlying these cases — antipathy toward the protection of computer software under copyright law — to new extremes.