A recent decision by the U.S. Court of Federal Claims in Bitmanagement Software GMBH vs. The United States determined the United States was not liable for copyright infringement because, based on the interactions between the parties, the Navy was authorized to copy Bitmanagement’s software on 350,000 computers. Bitmanagement is a German company that develops software for rendering three-dimensional graphics and one of their primary products is a three-dimensional renderer named BS Contact Geo.

Background: Floating Software Licenses Led to Copyright Infringement Allegations

In 2006, the Navy was developing a software application called SPIDERS 3D that provides a virtual reality environment for engineers and technicians to view and optimize configurations of Navy installations. During the development of this application, the Navy realized a need for the inclusion of a three-dimensional visualization software within SPIDERS 3D. To fill this need, the Navy procured BS Contact Geo on three separate occasions in 2006, 2008 and 2012 through a software reseller, Planet 9, who Bitmanagement used to market and sell Bitmanagement’s products in the United States.

Bitmanagement normally sells its software products on a PC license basis, which means the purchased software can be installed on one computer for each PC license. Following the Navy’s initial purchase of a BS Contact Geo license in 2006, the Navy contacted Planet 9 and informed them that Bitmanagement’s default PC license system was incompatible with the Navy’s computer environment. Bitmanagement responded, stating that “we [Bitmanagement] are open for any licensing scheme that suits the US Navy better and are willing to do our utmost to enable an other [sic] licensing functionality, if requested.” In response, the Navy explained they needed an “application with its own license key (not PC specific).” Bitmanagement then provided a custom-designed licensing file to the Navy that was not PC specific.

In 2008, the Navy submitted to Planet 9 a purchase order for an additional 100 BS Contact Geo licenses. In April 2011, the Navy began discussions with Planet 9 and Bitmanagement about procuring further licenses. At that time, the Navy was experiencing difficulty utilizing their BS Contact Geo licenses in various situations and approached Bitmanagement through Planet 9 about a different licensing scheme. Bitmanagement responded with three proposed licensing options that differed from their traditional PC license system. One of these options included using a server to limit the number of simultaneous users to the number of available licenses through the use of a counter. The Navy indicated that they wanted to use this server-based license approach and Bitmanagement agreed, stating “Let’s go for the floating license server approach.” In subsequent interactions between the parties, not only did the Navy repeatedly reiterate its intent to deploy BS Contact Geo across the entire Navy intranet, but also the use of the floating licensing system was reaffirmed multiple times by Bitmanagement.

In June 2012, Bitmanagement delivered modified BS Contact Geo software to the Navy that conformed to the floating licensing system. Following the delivery of the software, the Navy contacted Bitmanagement no less than five separate times, informing Bitmanagement of their timeline to deploy BS Contact Geo across the Navy’s intranet and thus be available on all 350,000+ Navy computers on the network. In response, Bitmanagement stated “thank you for your encouraging email,” and “thanks for the good news!” Additionally, Bitmanagement referenced the Navy’s planned use of their software in a July 2013 sales pitch to another customer by highlighting that the “US Navy: After five years of testing, approval for the use of the BS Contact Geo on 350,000 PCs of the US Navy took place in May 2013 and central distribution has begun.”

Awareness of Company’s Intentions Negated Prima Facie Case of Copyright Infringement

On June 21, 2016, legal counsel for Bitmanagement sent a letter to the Navy asserting copyright infringement of BS Contact Geo and on July 15, 2016, Bitmanagement filed a lawsuit against the United States. To establish a prima facie case of copyright infringement, a plaintiff must prove both of the following, according to Gaylord v. United States:

  1. Ownership of a valid copyright.
  2. Copying of constituent elements of the work that are original.

However, a copyright owner does have the right to authorize the use of its copyrighted material and such authorization provides an affirmative defense against a claim of copyright infringement.

In this case, the court held that, while “Bitmanagement has established a prima facie case of copyright infringement of its software BS Contact Geo,” the interactions between the parties unequivocally show that Bitmanagement was not only aware that the Navy planned to install BS Contact Geo across a broad spectrum of the Navy’s intranet but also that Bitmanagement authorized such installations. Therefore, because Bitmanagement authorized the copying of BS Contact Geo by the Navy as evidenced by the parties’ interactions, the United States was not liable for copyright infringement.

The case highlights the importance of contract management and IP protection discipline when interacting with the government.  For more information on this case, or how to protect intellectual property developed and/or delivered under government contracts, please contact Todd Overman.

Update: This content was republished in the January 2020 issue of The Licensing Journal, the leading source of in-depth, practice-oriented licensing guidance by top attorneys in intellectual property, computer technology, and entertainment law. More information about the publication can be found here.