Dun & Bradstreet Software Services, Inc. v. Grace Consulting, Inc. was a copyright case about who may maintain and modify licensed enterprise software. Geac Computer Systems, Inc., formerly Dun & Bradstreet Software Services, owned the Millennium mainframe business applications. Grace Consulting and a related firm, Grace Maintenance, serviced Geac’s licensees and sold them a rival year-end tax program. Geac sued in the District of New Jersey in March 1994. A jury found for Grace, but in 2002 the Third Circuit reversed, holding that the verdict was unsupported by legally sufficient evidence of authorisation and that Geac was entitled to judgment on copyright infringement.[1]
Background
Geac licensed twelve Millennium applications, including the HR:M human resources application with its W-2 program, PAYTXABR. Two standard licence forms were at issue: the DBS agreement and the McCormack and Dodge (M & D) agreement. Both barred removing code from the licensee’s site and restricted copying, and the DBS form prohibited modification without authorisation. Licensees could give consultants access to confidential information only if the consultant signed a non-disclosure agreement acceptable to the vendor beforehand. About 35% of Grace’s customers were on the DBS form and 65% on the M & D form.[1]
From 1993 Grace customised Millennium, fixed bugs and offered a “Remain on Release” programme that let customers stay on their current release rather than accept vendor upgrades. It also sold its own W-2 software, derived from a program written by two former Geac employees.[1]
The dispute
Geac alleged that Grace copied Millennium code and documentation, created and distributed derivative works, that its W-2 program contained literal copies of PAYTXABR, and that its use of Copy and Call commands to reach Geac’s source and object code infringed. Grace argued that the licences and Geac’s course of conduct allowed consultants to maintain licensees’ systems, that any copying was de minimis, and that the Copy and Call commands were justified by interoperability and industry practice. It also counterclaimed for breach of contract and tortious interference.[1]
Decision or outcome
The Third Circuit said that interpreting the licence agreements was a question of law, not of fact, and that the defences raised were unacceptable as a matter of law. It rejected the de minimis defence because the copied program was qualitatively critical, noting that Geac’s software would not work without PAYTXABR and Grace’s W-2 software would not work without its copy. It held that the licences allowed consultants access only under a non-disclosure agreement acceptable to the vendor and that Grace had not shown such agreements, relying instead on a single document signed by a Dun and Bradstreet vice-president in 1993 which the trial court had refused to treat as blanket authority to serve all licensees. It rejected the interoperability and industry-practice arguments as justification for the Copy and Call commands. The court therefore reversed the denial of judgment as a matter of law on the copyright claims.[1]
On the state-law claim, the court held that the district court had wrongly found misappropriation of trade secrets pre-empted by the Copyright Act, because the alleged breach of confidentiality was an extra element, and vacated and remanded that claim. It rejected each issue in Grace’s cross-appeal, including the contract counterclaim, for which the 1993 agreement lacked consideration and was not an enforceable contract.[1]
Significance for software licensing and SAM practice
The opinion is an early appellate treatment of third-party maintenance of licensed enterprise software. It turned on the specific licence wording: the licences allowed customers to use consultants, but only on conditions, and the maintainer’s wide-scale copying and modification fell outside them. For a later, differently reasoned dispute over a maintenance provider’s access to licensed software, see Avaya v. Telecom Labs; for third-party support of another vendor’s software, see Oracle v. Rimini Street.[1]
Lessons learned
- A licence that lets a customer give consultants access only under a vendor-approved non-disclosure agreement does not authorise a maintainer to copy and modify the code for many customers. The court read the access clause as conditional and limited.[1]
- Industry practice and interoperability arguments did not excuse copying where the licence terms did not permit it. The court rejected the doctrine of externalities as a justification for Copy and Call commands.[1]
- Check whether a third party you hire has signed the specific non-disclosure agreement your licence requires, for your company, before it touches vendor code. The court found no signed agreements for each customer other than one document.[1]
- A general agreement not tied to a named customer is unlikely to be read as blanket permission to serve all licensees. The 1993 document was held not to authorise Grace to serve all of Geac’s customers.[1]