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Netbula v. Storage Technology Corp.

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This article is about the 2008 district court order on whether a per-user limit and unpaid distribution fees in a software development licence were limits on the scope of the licence, so that exceeding them was copyright infringement. It is not legal advice.

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Netbula, LLC v. Storage Technology Corp. was a licence-scope dispute in the Northern District of California in which a software vendor, Netbula, accused StorageTek, later part of Sun Microsystems, of using and distributing its remote procedure call (RPC) software beyond the licences it had bought.[1] On 18 January 2008 the court granted the defendants summary judgment on the copyright claim. It held that the main limits Netbula relied on, the number of users and payment for distribution, were contractual covenants, not limits on the scope of the licence, so breaching them was not copyright infringement.[1] The order is a worked example of why the wording of user and fee clauses matters in licence audits and overuse claims.

Background

Netbula’s ONC RPC and PowerRPC products have two parts: a software development kit (SDK) used by programmers, and supporting programs that applications built with the SDK can redistribute. Netbula sold separate SDK licences and distribution (“runtime”) licences.[1]

Netbula and StorageTek signed agreements dated 1 March 2000 and 17 March 2004. StorageTek used the SDK to develop its REEL and LibAttach products and distributed Netbula’s supporting programs inside them. Sun acquired StorageTek on 31 August 2005, and IBM, EMC and Darden were customers that obtained LibAttach from StorageTek.[1]

The dispute

Netbula’s amended complaint alleged copyright infringement, fraud, breach of contract, unfair competition and an accounting. The defendants moved for summary judgment on the copyright claim, arguing that the licences’ existence and scope barred it.[1] Netbula said StorageTek had:

  • let more developers use the SDK than the number of licences allowed;
  • developed on a Windows platform that the 2000 licence did not cover; and
  • distributed more copies of the supporting programs than it paid for.[1]

Decision or outcome

The court applied the rule that a licensor can sue a licensee for copyright infringement only if the licensee acts outside the scope of a licence, while breach of an independent covenant gives only a contract claim. It treated the question as one of California contract law.[1]

  • Number of users. Both agreements granted a licence “for up to ONE user(s) for each of the licenses purchased”. The court held this defined what each purchase gave the buyer and did not limit how the software could be used, so it was a covenant and could not support a copyright claim.[1]
  • Operating systems. The 2000 agreement licensed use “under Windows NT and 95/98 platforms”. The court held this did limit the scope of the licence, but Netbula had not produced evidence that StorageTek used the SDK on an unlicensed platform.[1]
  • Distribution volume. StorageTek acknowledged distributing more copies than it had paid for. The court found that the fee schedule, a one-time fee for the right to distribute up to 1,000 units, did not require prepayment and did not make payment a condition of the licence, which was perpetual and irrevocable. Failure to pay was a contract matter. The court gave little weight to employees’ later e-mails about over-distribution, because they did not show what the contract meant when signed.[1]
  • Customers and assignment. The claims against IBM, EMC and Darden fell with the claim against StorageTek. The clause that the agreement could not be assigned without consent, raised in connection with the Sun acquisition, was also an independent covenant and not a scope limit.[1]

The title of the order shows it addressed only the copyright claim. In May 2008 the case had been reassigned to a different judge and was being managed with related actions brought by Netbula’s principal.[2] The public record reviewed does not show how the contract claims ended.

Significance for software licensing and SAM practice

  • Count limits and scope limits are different things. A clause tying a licence to a number of users may be read as a price term, while a clause limiting platform or manner of use is more likely a scope limit.[1]
  • Remedies follow the characterisation. If a term is a covenant, the vendor’s remedy is contractual, which affects damages and the availability of copyright remedies.[1]
  • Downstream customers. End customers of a licensee’s product were protected where the licensee’s distribution was licensed.[1]

Lessons learned

  • A limit of one user per licence purchased may define what each purchase buys, not limit use. Exceeding it was a contract issue here.[1]
  • Platform and manner-of-use restrictions are more likely to be scope limits. The Windows platform clause was treated that way, although the claim failed for lack of evidence.[1]
  • Unpaid fees did not end a perpetual licence. The agreement did not make payment an express condition of the grant.[1]
  • Read the clause, not the commercial intent. Later internal e-mails about over-distribution did not change the meaning of an integrated, unambiguous contract.[1]

References

  1. Netbula, LLC v. Storage Technology Corp., No. C 06-07391 MJJ, order granting motion for summary judgment as to copyright claim (N.D. Cal. Jan. 18, 2008), Doc. 138Official copy, GovInfo U.S. Court OpinionsEffective 2008-01-18. Retrieved 2026-10-08.
  2. Netbula, LLC v. Storage Technology Corp., No. C 06-7391 JW, order following case management conference (N.D. Cal. May 8, 2008), Doc. 165Official copy, GovInfo U.S. Court Opinions; shows reassignment and related casesEffective 2008-05-08. Retrieved 2026-10-08.

See also

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