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Datacarrier S.A. v. Woccu Services Group, Inc.

United States District Court, W.D. Wisconsin

November 22, 2016

DATACARRIER S.A., Plaintiff,
v.
WOCCU SERVICES GROUP, INC., Defendant.

          OPINION & ORDER

          JAMES D. PETERSON District Judge

         This is a copyright infringement case involving computer software used to run ATMs, which has been put to use primarily in South America. Before the court is a motion to dismiss that raises questions about the limits of protection afforded under the United States Copyright Act. The first limit is territorial: defendant WOCCU Services Group, Inc. (WSG) contends that it cannot be liable for authorizing, from the United States, infringement that itself occurred wholly outside the United States. The second limit concerns protectable subject matter: WSG contends that it does not infringe because its software copies no more than unprotectable ideas, processes, and functions from plaintiff Datacarrier S.A.'s software. Finally, WSG contends that the amended complaint fails to plausibly allege any direct infringement in the United States. The bottom line is that WSG contends that the amended complaint does not plausibly allege any copyright infringement that would be actionable under the Copyright Act.

         The court agrees with WSG on the territoriality issue. All agree that infringement occurring wholly outside the United States is not actionable under the Copyright Act. It is an open question in the Seventh Circuit whether merely authorizing such extraterritorial infringement is itself an actionable act of domestic infringement. The weight of better reasoned authority, including chiefly Subafilms, Ltd. v. MGM-Pathe Communications Co., 24 F.3d 1088 (9th Cir. 1994), holds that it is not. A minority of authorities leans the other way, but the Subafilms approach is more consistent with the fundamentally territorial approach to international copyright law. National independence is harmonized through treaties, but copyright enforcement is still, most fundamentally, a nation-by-nation affair. To decide otherwise would expand the purview of U.S. courts, and doing so would introduce thorny conflict-of-laws problems.

         The court agrees with Datacarrier on the subject matter issue, at least at the pleading stage. WSG is no doubt correct that many aspects of Datacarrier's software are ideas and functions, and in that sense Datacarrier is entitled only to thin copyright protection. But even a thin copyright protects against literal copying, and the amended complaint alleges at least some of that. WSG may ultimately have a successful defense on the merits, but at this point in the case the amended complaint adequately alleges copying of protected elements.

         The final issue is whether the amended complaint adequately alleges acts of direct infringement in the United States. Datacarrier alleges that WSG infringes by testing the allegedly infringing software in the United States and by maintaining an executable copy of the software in the United States to provide support to its users in South America. Datacarrier's theory is predicated on the notion that an infringing copy is made whenever the infringing software is run on a computer, a notion WSG does not challenge. The court concludes that Datacarrier has adequately alleged domestic acts of direct infringement.

         ALLEGATIONS OF FACT

         The court draws the following facts from the amended complaint, Dkt. 28, construing the allegations “in the light most favorable to [Datacarrier], accepting as true all well-pleaded facts alleged, and drawing all possible inferences in [its] favor.” Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008).

         Plaintiff Datacarrier S.A. is an Ecuadorian software company. The piece of software at issue in this case-the TID Program-processes financial transactions and manages ATM systems.

         Defendant WOCCU Services Group, Inc. (WSG) is a Wisconsin corporation that provides financial products and services to credit unions outside of the United States. WSG holds ownership interests in several Latin American and South American companies that provide services to banking and credit unions, which include support for ATM networks.

         Datacarrier licensed its software, including the TID Program, to Servicios Tecnologicos de Guatemala S.A. (ServiTech). ServiTech, in turn, licensed the software to WSG. WSG authorized its affiliates to use the Datacarrier software, including the TID Program, in connection with ATMs operated in South America and Latin America.

         At some point, WSG grew dissatisfied with the Datacarrier software. Programmers at WSG's Peruvian affiliate, which we shorten to “Kuskanet, ” began developing an alternative ATM software, called Entura. WSG operated and evaluated Entura in Wisconsin and ultimately decided to replace Datacarrier's TID Program with Entura. Kuskanet transferred Entura to WSG, and WSG licensed the software to its South American and Latin American affiliates.

         WSG's licensing agreement with ServiTech, and thus its rights to the Datacarrier TID Program, terminated on June 30, 2013. Datacarrier registered its copyright to the TID Program in the United States effective December 15, 2014.

         Apparently in response to a complaint from Datacarrier, the Ecuadorian government investigated similarities between the TID Program and Entura. The report of the government experts is attached to the amended complaint. Although the precise purpose and findings of the report are not entirely clear, the report concludes that there are similarities between the TID Program and Entura. The programs use some of the same standards and specifications, and Entura copied some of the variable names, code, and databases in the TID Program.

         The court has subject matter jurisdiction over this case pursuant to 28 ...


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