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The
United States Court of Appeals, Ninth Circuit
Argued
and Submitted Aug. 7, 1995
Submission
Vacated Jun. 18, 1996
Resubmitted
Sept. 13, 1996
Decided
Aug. 6, 1997
Appeal
from C.D. Cal.
Affirmed
in part, reversed in part, vacated, and remanded.
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Joseph R. Re, Knobbe, Martens, Olson & Bear, Newport Beach, CA,
for plaintiff-appellant.
Jack Bierig, Sidley & Austin, Chicago, IL, for defendant-appellee.
Maureen Brodoff, National Fire Protection Association, Quincy, MA,
for amici.
Appeal from the United States District Court for the Central
District of California; Dickran
M. Tevrizian, District Judge, Presiding.
D.C. No. CV-94- 03107-DT.
Before: BROWNING,
NORRIS, and REINHARDT, Circuit Judges
JAMES R. BROWNING, Circuit Judge.
Practice Management Information Corporation ("Practice
Management") appeals from a partial summary judgment and preliminary
injunction forbidding it from publishing a medical procedure code
copyrighted by the American Medical Association ("the AMA").
[FN1]
FN1.
We have jurisdiction under 28 U.S.C. § 1292(a)(1). See MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d
511, 516 (9th Cir.1993).
I.
Over thirty years ago, the AMA began the development of a coding
system to enable physicians and others to identify particular medical
procedures with precision. These
efforts culminated in the publication of the Physician's Current
Procedural Terminology ("the CPT"), on which the AMA claims a
copyright.
The current edition of the CPT identifies more than six thousand
medical procedures and provides a five-digit code and brief description
for each. The CPT is
divided into six sections--evaluation, anesthesia, surgery, radiology,
pathology, and medicine. Within
each section, procedures are arranged to enable the user to locate the
code number readily. In
the anesthesia section, procedures are grouped according to the body part
receiving the anesthetic; in
the surgical section, the procedures are grouped according to the body
system, such as the digestive or urinary system, on which surgery is
performed. The AMA revises the CPT each year to reflect new
developments in medical procedures.
In 1977, Congress instructed the Health Care Financing
Administration ("HCFA") to establish a uniform code for
identifying physicians' services for use in completing Medicare and
Medicaid claim forms. See
42 U.S.C. § 1395w- 4(c)(5). Rather
than creating a new code, HCFA contracted with the AMA to "adopt and
use" the CPT. Agreement § 1. The AMA gave HCFA a
"non-exclusive, royalty free, and irrevocable license to use, copy,
publish and distribute" the CPT. Id. § 3(a). In exchange, HCFA agreed "not to use any other
system of procedure nomenclature ... for reporting physicians'
services" and to require use of the CPT in programs administered by
HCFA, by its agents, and by other agencies whenever possible.
Id. §§ 1, 2. [FN2]
FN2.
HCFA had the right to cancel the agreement and use a competing coding
system at any time and without penalty on ninety days notice. Agreement §
10.
HCFA published notices in the Federal Register incorporating the
CPT in HCFA's Common Procedure Coding System, see 48 Fed.Reg. 16750, 16753
(1983); 50 Fed.Reg. 40895,
40897 (1985), and adopted regulations requiring applicants for Medicaid
reimbursement to use the CPT. See 42 C.F.R. § 433.112(b)(2) (requiring
compliance with Part 11 of the State Medicaid Manual, which requires
states receiving federal funding for Medicaid to adopt the
Administration's Common Procedure Coding System as the exclusive medical
procedure coding system). [FN3]
FN3.
Other federal agencies require physicians to use the CPT. See, e.g., 20
C.F.R. § 10.411(c) (stating that physicians seeking compensation under
the Federal Employees' Compensation Act must identify their services using
CPT codes). The state
of California has incorporated the CPT into its Code of Regulations.
See Cal.Code Regs. tit. 22, § 51050.
Practice Management, a publisher and distributor of medical books,
purchases copies of the CPT from the AMA for resale.
After failing to obtain the volume discount it requested, Practice
Management filed this lawsuit seeking a declaratory judgment that the
AMA's copyright in the CPT was invalid for two reasons:
(1) the CPT became uncopyrightable law when HCFA adopted the
regulation mandating use of CPT code numbers in applications for Medicaid
reimbursement, and (2) the AMA misused its copyright by entering into the
agreement that HCFA would require use of the CPT to the exclusion of any
other code. The district court granted partial summary judgment for
the AMA and preliminarily enjoined Practice Management from publishing the
CPT. Practice Management appeals.
II.
Practice Management's argument that the CPT became law and entered
the public domain when HCFA by regulation required its use rests
ultimately upon Banks v. Manchester, 128 U.S. 244, 9 S.Ct. 36, 32 L.Ed.
425 (1888), which held that judicial opinions are uncopyrightable.
Banks in turn rests upon two grounds, neither of which would
justify invalidation of the AMA's copyright.
The first ground for the Banks holding that judicial opinions are
not subject to copyright is that the public owns the opinions because it
pays the judges' salaries. Id.
at 253, 9 S.Ct. at 39. The
second is that as a matter of public policy, "the whole work done by
the judges constitutes the authentic exposition and interpretation of the
law, which, binding every citizen, is free for publication to
all...." Id.
The first ground is clearly not applicable to the CPT. The
copyright system was not significant in Banks because judges had no
proprietary interest in their opinions.
The copyright system is of central importance in this case because
the AMA authored, owns, and maintains the CPT and claims a copyright in
it.
The copyright system's goal of promoting the arts and sciences by
granting temporary monopolies to copyrightholders was not at stake in
Banks because judges' salaries provided adequate incentive to write
opinions. In contrast,
copyrightability of the CPT provides the economic incentive for the AMA to
produce and maintain the CPT. "To vitiate copyright, in such
circumstances, could, without adequate justification, prove destructive of
the copyright interest, in encouraging creativity," a matter of
particular significance in this context because of "the increasing
trend toward state and federal adoptions of model codes."
1 Melville B. Nimmer & David Nimmer, Nimmer on Copyright §
5.06[C], at 5-92 (1996). [FN4] As
the AMA points out, invalidating its copyright on the ground that the CPT
entered the public domain when HCFA required its use would expose
copyrights on a wide range of privately authored model codes, standards,
and reference works to invalidation. [FN5] Non-profit organizations that
develop these model codes and standards warn they will be unable to
continue to do so if the codes and standards enter the public domain when
adopted by a public agency. [FN6]
FN4.
See also Building Officials & Code Admin. v.Code Tech., Inc., 628 F.2d
730, 736 (1st Cir.1980) (recognizing "a possible trend towards state
and federal adoption, either by means of incorporation by reference or
otherwise, of model codes"); 58
Fed.Reg. 57643, 57644-45 (1993) (Office of Management and Budget directed
federalagencies to adopt private standards "whenever
practicable" in order to "eliminate[ ] the costs to the
Government of developing its own standards").
FN5.
See, e.g., 32 C.F.R. § 199.13(e)(2) (limiting payment of dental benefits
to procedures defined in the Current Dental Terminology); 32 C.F.R. §
199.2 (conditioning payment of civilian medical benefits for mental
disorders on showing the patient has a disorder listed in the Diagnostic
& Statistical Manual of Mental Disorders (DSM III) );
16 C.F.R. § 1505.5(e)(5) (requiring electrically operated toys to
have a type SP-2 electrical power cord, as defined in the National
Electrical Code authored by the National Fire Protection Association);
16 C.F.R. § 1201.7 (requiring architectural glazing materials to
conform to standards published by the American National Standards
Institute); 7 C.F.R. §
1755.870(a)(8) (incorporating by reference Underwriters Laboratories
Inc.'s Standard Test for Flame Propagation Height of Electrical and
Optical-Fiber Cables Installed Vertically in Shafts);
11th Cir. R. 28-2(j) (requiring attorneys to conform their
citations to The Bluebook: A
Uniform System of Citation ).
FN6.
Amicus briefs have been filed by the American Dental Association, American
National Standards Institute, American Society of Association Executives,
American Society of Heating, Refrigerating & Air- Conditioning
Engineers, American Society of Mechanical Engineers, American Society for
Testing and Materials, National Fire Protection Association, and
Underwriters Laboratories Inc.
The second consideration underlying Banks--the due process
requirement of free access to the law--may be relevant but does not
justify termination of the AMA's copyright.
There is no evidence that anyone wishing to use the CPT has any
difficulty obtaining access to it.
See Texas v. West Publ'g Co., 882 F.2d 171, 177 (5th Cir.1989).
Practice Management is not a potential user denied access to the
CPT, but a putative copier wishing to share in the AMA's statutory
monopoly. Practice
Management does not assert the AMA has restricted access to users or
intends to do so in the future.
The AMA's right under the Copyright Act to limit or forgo
publication of the CPT poses no realistic threat to public access.
The AMA has no incentive to limit or forgo publication.
If the AMA were to do so, HCFA would no doubt exercise its right to
terminate its agreement with the AMA. [FN7] Other remedies would also be
available, including "fair use" and due process defenses for
infringers, see 1 Nimmer & Nimmer, supra, § 5.06[C], at 5-92, and,
perhaps most relevant, mandatory licensing at a reasonable royalty could
be required in light of the great public injury that would result if
adequate access to the CPT were denied.
See Abend v. MCA, Inc., 863 F.2d 1465, 1479 (9th Cir.1988);
Universal City Studios, Inc. v. Sony Corp. of America, 659 F.2d
963, 976 (9th Cir.1981), rev'd on other grounds, 464 U.S. 417, 104 S.Ct.
774, 78 L.Ed.2d 574 (1984).
FN7.
Alternatively, HCFA might by regulation or contract require the AMA to
provide greater access. See
H.R.Rep. No. 94-1476, at 59, reprinted in 1976 U.S.C.C.A.N. 5659, 5672;
Marvin J. Nodiff, Copyrightability of Works of the Federal and
State Governments Under the 1976 Act, 29 St. Louis L.J. 91, 104 (1984).
The Supreme Court has not considered a case in which the author
asserted a proprietary interest in material adopted by the government as
law. However, the First
and Second Circuits have declined to enjoin enforcement of private
copyrights in these circumstances.
In Building Officials & Code Admin. v.Code Technology, Inc.,
628 F.2d 730 (1st Cir.1980),
the district court preliminarily enjoined Code Technology, Inc. from
copying a building code copyrighted by Building Officials & Code
Administration ("BOCA"), a private, non-profit group, and
adopted by the State. The
First Circuit reversed. It
recognized the problem posed by Banks, but nonetheless refrained from
holding BOCA's copyright invalid:
Groups such as BOCA serve an important public function;
arguably they do a better job than could the state alone in seeing
that complex yet essential regulations are drafted, kept up to date and
made available. Since
the rule denying copyright protection to judicial opinions and statutes
grew out of a much different set of circumstances than do these technical
regulatory codes, we think BOCA should at least be allowed to argue its
position fully on the basis of an evidentiary record, into which testimony
and materials shedding light on the policy issues discussed herein may be
placed.
Id. at 736.
In CCC Info. Servs., Inc. v. Maclean Hunter Mkt. Reports, Inc., 44
F.3d 61 (2d Cir.1994), the Second Circuit declined to invalidate the
copyright on a privately prepared listing of automobile values that
several states required insurance companies to use in calculating
insurance awards:
We are not prepared to hold that a state's reference to a
copyrighted work as a legal standard for valuation results in loss of the
copyright. While there
are indeed policy considerations that support CCC's argument, they are
opposed by countervailing considerations. For example, a rule that the adoption of such a
reference by a state legislature or administrative body deprived the
copyright owner of its property would raise very substantial problems
under the Takings Clause of the Constitution.
We note also that for generations, state education systems have
assigned books under copyright to comply with a mandatory school
curriculum. It scarcely
extends CCC's argument to require that all such assigned books lose their
copyright--as one cannot comply with the legal requirements without using
the copyrighted works. Yet
we think it unlikely courts would reach this conclusion.
Although there is scant authority of CCC's argument, Nimmer's
treatise opposes such a suggestion as antithetical to the interests sought
to be advanced by the Copyright Act.
Id. at 736.
For the reasons we have stated earlier, as well as those relied
upon by the First and Second Circuits, we affirm the district court's
conclusion that the AMA's copyright in the CPT should be enforced. [FN8]
FN8.
Practice Management argues that the CPT is an uncopyrightable industry
standard or "idea" under section 102(b) of the Copyright Act,
the merger doctrine, and Sega Enters. Ltd. v. Accolade, Inc., 977 F.2d
1510, 1523-24 (9th Cir.1993) because HCFA mandates use of CPT codes in
Medicaid applications. This
court has not allowed the owners of copyrights in expressions mandated by
industry standards to use their copyrights to stifle independent creative
expression in the industry. Sega,
977 F.2d at 1523-24. However,
the AMA's copyright does not stifle independent creative expression in the
medical coding industry. It
does not prevent Practice Management or the AMA's competitors from
developing comparative or better coding systems and lobbying the federal
government and private actors to adopt them.
It simply prevents wholesale copying of an existing system.
Practice Management did not appeal the district court's finding
that the CPT was sufficiently original to qualify for copyright
protection, and we do not review that question.
III.
Practice Management argues that the AMA misused its copyright by
negotiating a contract in which HCFA agreed to use the CPT exclusively. See Lasercomb America, Inc. v. Reynolds, 911 F.2d 970,
977- 79 (4th Cir.1990) (defense of copyright misuse "forbids the use
of the copyright to secure an exclusive right or limited monopoly not
granted by the Copyright Office");
see also DSC Communications Corp. v. DGI Techs., Inc., 81 F.3d 597,
601 (5th Cir.1996) (same). [FN9] We
have implied in prior decisions that misuse is a defense to copyright
infringement. See Triad
Sys. Corp. v. Southeastern Express Co., 64 F.3d 1330, 1337 (9th Cir.1995);
Supermarket of Homes, Inc. v. San Fernando Valley Bd. of Realtors, 786
F.2d 1400, 1408 (9th Cir.1986).
We now adopt that rule.
FN9.
Copyright misuse does not invalidate a copyright, but precludes its
enforcement during the period of misuse.
See Lasercomb, 911 F.2d at 979 n. 22.
On the undisputed facts in the record before us, we conclude the
AMA misused its copyright by licensing the CPT to HCFA in exchange for
HCFA's agreement not to use a competing coding system.
The AMA argues it did not insist HCFA use only the CPT; rather, HCFA decided to use a single code to take advantage
of natural efficiencies. However,
the plain language of the AMA's licensing agreement requires HCFA to use
the AMA's copyrighted coding system and prohibits HCFA from using any
other. The exclusivity
requirement is a part of the consideration in exchange for which the AMA
agreed to grant HCFA a "non-exclusive, royalty free, and irrevocable
license to use, copy, publish and distribute" the CPT. Although HCFA
apparently had nothing to gain from inclusion of the exclusivity
provision, which side urged its inclusion is of no consequence.
Cf. Anchor Serum Co. v. Federal Trade Comm., 217 F.2d 867, 870 (7th
Cir.1954) (rejecting argument that exclusive dealing contract did not
violate section 3 of the Clayton Act because buyer initiated negotiations
and seller did not impose the contract terms on buyer).
The controlling fact is that HCFA is prohibited from using any
other coding system by virtue of the binding commitment it made to the AMA
to use the AMA's copyrighted material exclusively.
The absence of the agreement would not preclude HCFA from doing
what the AMA suggests would be proper--deciding on its own to use only the
AMA's system. What
offends the copyright misuse doctrine is not HCFA's decision to use the
AMA's coding system exclusively, but the limitation imposed by the AMA
licensing agreement on HCFA's rights to decide whether or not to use other
forms as well. Conditioning
the license on HCFA's promise not to use competitors' products constituted
a misuse of the copyright by the AMA.
The adverse effects of the licensing agreement are apparent.
The terms under which the AMA agreed to license use of the CPT to
HCFA gave the AMA a substantial and unfair advantage over its competitors.
By agreeing to license the CPT in this manner, the AMA used its
copyright "in a manner violative of the public policy embodied in the
grant of a copyright." Lasercomb,
911 F.2d at 977.
The AMA argues the copyright misuse defense fails because Practice
Management did not establish an antitrust violation.
We agree with the Fourth Circuit that a defendant in a copyright
infringement suit need not prove an antitrust violation to prevail on a
copyright misuse defense. See
Lasercomb, 911 F.2d at 978.
We also reject the AMA's argument that the Noerr-Pennington
doctrine immunized its actions.
Because Practice Management need not establish an antitrust
violation, we need not consider the AMA's antitrust defenses. Moreover,
because the AMA did not lobby HCFA to adopt the CPT, the AMA's First
Amendment right to petition the government is not at stake.
IV.
We affirm the district court's ruling that the AMA did not lose its
copyright when use of the CPT was required by government regulations, but
reverse the ruling with respect to copyright misuse.
We hold that Practice Management established its misuse defense as
a matter of law, vacate the preliminary injunction, and remand for entry
of judgment in favor of Practice Management.
AFFIRMED IN PART, REVERSED IN PART, VACATED, AND REMANDED.
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