1201 claim to control device features survives

Philips North
America, LLC v. v. Summit Imaging Inc., 2020 WL 1515624, No. C19-1745JLR (W.D.
Wash. Mar. 30, 2020)
But I was told that
after Lexmark and Chamberlain, manufacturers weren’t using §1201
claims to control devices!
The parties compete
to sell ultrasound imaging devices for hospitals and medical centers; Philips
sells related ultrasound hardwre devices. Philips’ Ultrasound Systems are
driven by one of two software platforms that Philips developed and owns: (1)
Philips Voyager Platform and (2) Philips Common Platform. Each PUS has features/tools
that are only enabled by license, and Philips aleges it uses “multiple layers
of technological controls to protect” their copyrighted works from unauthorized
access, and that the software and access control systems are trade secrets and
that those systems contain other trade secret information.
Summit allegedly hacks
into Philips’ software and alters the Ultrasound Systems in order to enable
features or options for which Philips’ customers have not paid Philips, and
trains Summits customers on how to circumvent Philips’ access controls. Summit
allegedly advertises that its Adepto tool is a “legal solution” or a “legal
alternative” to working with Philips in order to enable additional features and
options.
Defendants moved to
dismiss DMCA §§1201 and 1202 claims, Defend Trade Secrets Act claims, Uniform
Trade Secrets Act claims, false advertising claims, Consumer Protection Act
claims, and contributory copyright infringement claims.
Philips adequately
pled that its Ultrasound Systems are protected by “a technological measure that
effectively controls access to a work” under §§ 1201(a)(1) and (a)(2): (1)
user-specific codes; (2) user-specific hardware keys; (3) machine-specific
codes and hardware keys; (4) software files with licensed features and optional
add-on controls; (5) machine-specific configuration files that control
compatibility between the systems and software and/or the systems and replacement
parts; and (6) software disabling if a user attempts to make use of an
unlicensed feature. And Philips sufficiently alleged circumvention of those
access controls: defendants allegedly remove the hard drive from the Ultrasound
Systems and run their Adepto program on the hard drive, which changes
configuration files and software files in order to enable unlicensed options on
the hard drive, and force compatibility with otherwise incompatible transducer
parts.
§1202, modifying
CMI: Not plausibly alleged. The only CMI identified with any specificity in the
complaint is “the terms and conditions of the use of the software,” which allegedly
resides on “machine readable configuration files.” But Philips didn’t plead
facts explaining how defendants falsify, remove, or alter Philips’ terms and
conditions. Motion to dismiss granted with leave to amend.
DTSA and UTSA causes
of action also survived.
False advertising
(including state Consumer Protection Act): To the extent that the claim was
based on statements about the legality of defendants’ services, these were
inactionable statements of opinion because the statements “purport to interpret
the meaning of a statute or regulation.” And, though there is a “well-established
exception” to the bar against false advertising claims based on opinion
statements for an opinion statement “by a speaker who lacks a good faith belief
in the truth of the statement,” Philips failed to adequately plead that
defendants lacked a good faith belief in the truth of their statements.  Again: leave to amend.
Contributory
copyright infringement: adequately alleged because the Adepto tool allegedly
created copies of Philips’ software and log files [are the log files
copyrightable? Are they copyrightable by Philips? Seems unlikely].

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