SAS Institute Inc. v. World Programming Limited is a set of cases between SAS Institute, the developer of the SAS System of analytical software, and World Programming Limited (WPL), which wrote the World Programming System (WPS) to run application programs written in the SAS Language. SAS sued in England and in the United States. On a reference from the English High Court, the Court of Justice of the European Union (CJEU) held in 2012 that neither the functionality of a computer program nor its programming language and data file formats are protected as a computer program under the Software Directive, and that a licensee may observe, study and test a program to determine its underlying ideas and principles.[1] The Court of Appeal of England and Wales dismissed SAS’s appeal in 2013.[2] In the United States, a North Carolina jury found WPL liable for fraudulent inducement and unfair trade practices, while the Federal Circuit in 2023 affirmed the dismissal of SAS’s non-literal copyright claim brought in Texas.[3]
Background
The SAS System is an integrated set of programs for data processing and statistical analysis, developed over 35 years. Its core component, Base SAS, lets users write and run their own programs (“scripts”) in the SAS Language. SAS also sold a cheaper, cut-down Learning Edition intended to teach users the system.[1][2]
WPL saw demand for alternative software that could run SAS Language programs. It designed WPS to emulate the SAS components so that, with minor exceptions, the same inputs produced the same outputs. The High Court noted that it was not established that WPL had access to SAS’s source code or copied its text or structural design.[1] WPL bought copies of the Learning Edition between 2003 and 2009 and used them to study the SAS System and to check that WPS produced the same results.[2]
The Learning Edition licence, as quoted by the Court of Appeal, granted a nonexclusive licence to use the software “on one (1) workstation at a time, for Customer’s [own self-training] non-production purposes only”, barred use for third parties, and prohibited reverse assembly, reverse engineering and decompilation “except to the extent applicable laws specifically prohibit such restriction”.[2]
The dispute
England and the CJEU
SAS claimed in the High Court that WPL had copied the SAS manuals in creating WPS, thereby indirectly copying the SAS programs; that WPL’s own manuals infringed the copyright in the SAS manuals; and that WPL had used the Learning Edition outside the scope of its licence, in breach of contract and copyright.[1][2] Arnold J tried the action in June 2010 and, by decision of 2 August 2010, referred questions to the CJEU on Directive 91/250/EEC (the Software Directive) and Directive 2001/29/EC (the InfoSoc Directive).[1][2]
United States
According to the Federal Circuit, SAS also sued WPL in the Eastern District of North Carolina for copyright infringement, breach of the licence, fraudulent inducement, tortious interference and violation of the North Carolina Unfair and Deceptive Trade Practices Act. The district court granted summary judgment to WPL on copyright infringement and the tortious interference claims. At trial the jury found WPL liable for fraudulent inducement and unfair trade practices, and the total damages after trebling were USD 79,129,905. The Fourth Circuit affirmed in part in 2020 and vacated the copyrightability ruling as moot.[3]
On 18 July 2018 SAS brought a second US action in the Eastern District of Texas. By the time of the appeal, only a claim for non-literal copyright infringement of the SAS System remained. SAS did not contend that WPL copied any line of SAS code. It claimed that WPL copied its “Input Formats”, the vocabulary and syntax of the SAS Language, and its “Output Designs”.[3]
Decision or outcome
CJEU (2012)
The Grand Chamber ruled that:[1]
- Under Article 1(2) of the Software Directive, neither the functionality of a computer program nor the programming language and the format of data files used in it to exploit certain of its functions constitute a form of expression of that program, and they are not protected by copyright in computer programs.
- Under Article 5(3), a person who has obtained a copy of a program under a licence is entitled, without the rightholder’s authorisation, to observe, study or test its functioning to determine the ideas and principles underlying any element of it, when carrying out acts covered by the licence and the loading and running necessary to use it, provided the person does not infringe the rightholder’s exclusive rights.
- Under Article 2(a) of the InfoSoc Directive, reproducing in a program or its manual elements described in another program’s user manual can infringe the copyright in that manual if the reproduction expresses the intellectual creation of the manual’s author, which is for the national court to decide.
The court reasoned that the rightholder may not rely on the licence to prevent a licensee from determining the ideas and principles underlying the program in those circumstances, and that copyright is not infringed where a licensee without access to the source code merely studied, observed and tested the program to reproduce its functionality in a second program.[1] On the manuals, it said that keywords, syntax, commands, options, defaults and iterations, considered in isolation, are not the author’s intellectual creation; only their choice, sequence and combination may be.[1]
Court of Appeal (2013)
After the CJEU ruling Arnold J dismissed SAS’s claims, except that he found limited infringement of the SAS manuals by WPL’s manual, which WPL did not challenge. SAS appealed on the manual claims and the Learning Edition claim; there was no appeal on the program-to-program claim.[2] Lord Justice Lewison, with whom Vos and Tomlinson LJJ agreed, dismissed the appeal:[2]
- Manuals. Using the SAS manuals to reproduce the functionality of the SAS System did not infringe. Where WPL’s manual described WPS, created from observation of SAS’s functionality, the court likened it to a second chef writing down his own recipe for a pudding he had learned to make, an example from Navitaire v easyJet. Literal copying of manual text was a different matter, and the limited infringement stood.
- Learning Edition. The court read the CJEU as distinguishing between acts the licence permits and the purpose of those acts: once a licensee may perform acts for a purpose specified in the licence, Article 5(3) lets it perform the same acts to observe, study and test the program. So if the “non-production” restriction had the meaning Arnold J gave it, it was invalid to that extent. On who the “Customer” was, the court held, disagreeing with the judge, that it was WPL as the company that bought the software, so WPL had the right to use the Learning Edition and could authorise multiple employees to observe, study and test it, one at a time on a single workstation. It reached the same conclusion as the judge, that WPL was not in breach in that respect, for a different reason.
Federal Circuit (2023)
In the Texas action, the district court held a “copyrightability hearing” and applied the abstraction-filtration-comparison test. It found that SAS had valid copyright registrations, that WPL had produced evidence that the asserted elements were not protectable, and that SAS then failed to show which protectable elements remained. It rejected SAS’s expert report and dismissed the suit with prejudice.[3] The Federal Circuit (Judges Newman, Reyna and Wallach; opinion by Judge Reyna) affirmed. It held that the district court correctly determined as a matter of law that SAS failed to establish that the asserted elements were copyrightable expression, and that it acted within its discretion in holding the hearing and rejecting the expert report. Judge Newman dissented, describing the ruling as “a far-reaching change”.[3]
Significance for software licensing and SAM practice
The CJEU ruling is a leading EU authority on the boundary between a program’s protected code and its unprotected functionality, language and data formats. It also confirms that the lawful user’s right to observe, study and test under Article 5(3) cannot be removed by contract, but only covers acts the licence permits plus the loading and running needed to use the program.[1] English courts have since applied these limits strictly to other facts; see IBM v. LzLabs. The German court in Hellwig v. VMware also cited the ruling on functionality.
The US outcome was mixed. On copyright, SAS’s claim over the language and outputs failed on the abstraction-filtration-comparison approach first set out in Computer Associates v. Altai.[3] On contract and unfair trade practices, however, the North Carolina jury found WPL liable, which shows that licence terms and state law can matter where copyright does not reach.[3]
Lessons learned
- Know what Article 5(3) allows. A licensee may observe, study and test a program to determine its ideas and principles while doing what the licence permits and loading and running the program, and the rightholder cannot rely on the licence to prevent that.[1] The Court of Appeal held that a “non-production” restriction was invalid to the extent that it prohibited such observation, study and testing.[2]
- Separate function from text. Functionality, programming languages and file formats were not protected as computer programs, but WPL was still found to have infringed by copying parts of the SAS manuals’ text.[1][2] Teams building compatible products should write their own documentation.
- Forum and governing law change the result. The Court of Appeal found no breach of the Learning Edition licence, while a North Carolina jury found WPL liable for fraudulent inducement and unfair trade practices, with trebled damages of about USD 79 million.[2][3] Record which law and courts govern each licence you rely on, especially evaluation, trial and learning editions.