Syntek Semiconductor Co., Ltd. v. Microchip Technology Incorporated
Docket: 00-17352, 00-17353, 01-15641
Court: Court of Appeals for the Ninth Circuit; April 8, 2002; Federal Appellate Court
A legal dispute arose between Syntek Semiconductor Co. Ltd. (plaintiff-appellant) and Microchip Technology Inc. (defendant-appellee) concerning the validity of Microchip's U.S. copyright registration for its PIC 16C5x microcode, which Syntek alleged was invalid. The case originated after Microchip accused Syntek of producing unauthorized clones of its microcontrollers in Taiwan, leading to a prior settlement where Syntek agreed to pay $400,000 to Microchip and cease its infringing activities. Following further allegations of infringement, a Taiwanese court found Syntek's officers guilty of criminal copyright infringement.
In March 1999, as the Taiwanese criminal proceedings concluded, Syntek filed a suit in the U.S. challenging Microchip's copyright registration, claiming harm from Microchip's use of the registration in Taiwan and its threats to Syntek's customers regarding infringement. Syntek sought a declaratory judgment to declare the copyright registration invalid, asserting that Microchip failed to comply with registration regulations. The district court ruled in favor of Microchip, granting summary judgment on the grounds that it had complied with copyright regulations. Syntek subsequently appealed the decision. The Ninth Circuit Court of Appeals determined that the doctrine of primary jurisdiction necessitated the dismissal of Syntek's action, directing the parties to pursue available administrative remedies.
Microchip's PIC 16C5x microcode qualifies as a computer program and is protected under the Copyright Act as a work of authorship. The Act defines a computer program as a set of instructions utilized by a computer, which can exist in source code or object code formats. Source code is written in a high-level programming language and is understandable by humans, while object code is in machine language and executable by computers. Typically, source code must be compiled into object code but can also be decompiled back into source code, although the resulting source code may differ from the original.
To register a copyright, the Act mandates that two complete copies of a published work be deposited. However, specific regulations permit the deposit of "identifying portions" of a computer program, such as the first and last 25 pages of source code, or the full source code if the program is 50 pages or shorter. While object code is not explicitly mentioned for deposit, guidance from the Copyright Office allows for its submission, albeit with a rule of doubt regarding validity due to the inability to assess copyrightable content.
Microchip registered its program without the original source code, instead submitting decompiled source code generated from the object code on the PIC 16C5x chip, explaining to the Copyright Office that it could not locate the original source code after a reasonable search. Despite this disclosure, Syntek contends that the registration was improper, arguing that the decompiled source code does not meet the necessary regulatory standards as it is not a genuine copy of the original source code.
Under the doctrine of primary jurisdiction, the Register of Copyrights should initially address the issues in this case. This doctrine, distinct from subject matter jurisdiction, allows courts to defer to relevant agencies for decision-making in specific circumstances, particularly when a claim requires resolution of a novel or complex issue entrusted to an agency. It is not meant to compel agencies to resolve all claims within their scope or to seek expert advice from them for every related issue. Instead, it facilitates the allocation of decision-making authority between courts and agencies in instances of jurisdictional overlap.
The doctrine differs from the requirement of exhausting administrative remedies, which mandates that plaintiffs seek relief from an agency before pursuing court action. In contrast, primary jurisdiction is a discretionary tool for courts when protecting the integrity of a regulatory scheme necessitates initial agency engagement.
Courts typically consider four factors when applying this doctrine: (1) the necessity of resolving an issue, (2) Congressional intent to assign the issue to a regulatory body, (3) the presence of comprehensive regulatory authority over an industry or activity, and (4) the need for expertise or uniformity in administration. In this case, the clear Congressional intent for national uniformity in copyright laws, combined with the complex and novel question of whether decompiled object code qualifies for registration under the Copyright Act, supports the application of primary jurisdiction.
Syntek challenges the validity of Microchip's copyright registration, rather than the underlying copyright itself. Typically, in copyright disputes, the validity of the copyright is contested, with registration serving as prima facie evidence of its validity. In this case, the focus is on whether the agency followed its regulations when granting the registration. The remedy sought by Syntek, a declaration of registration invalidity, is akin to seeking cancellation of the registration, which is an action taken by the Copyright Office when a registration is deemed invalid under the law. The regulations stipulate that the Copyright Office will cancel a registration if the submitted material fails to meet legal requirements and cannot be corrected. However, the process for cancellation is not clearly defined, as the Copyright Office generally does not respond favorably to cancellation requests from parties other than the copyright owner. Despite the lack of a formal procedure, an administrative remedy exists for cancellation, warranting referral to the Register of Copyrights to clarify the availability of such remedies for third parties. The case involves issues within the expertise of an administrative body, making the application of the primary jurisdiction doctrine appropriate, leading to a referral to the Register of Copyrights. This referral does not strip the court of jurisdiction; the court retains discretion to either maintain jurisdiction or dismiss the case without prejudice if no unfair disadvantage to the parties occurs.
If a court determines that a dispute falls within an agency's primary jurisdiction, it typically dismisses the case without prejudice, allowing the parties to seek administrative remedies. However, if the primary jurisdiction applies only to a specific issue rather than the entire dispute, the court usually stays the proceedings until the agency has acted. The Supreme Court has noted the importance of assessing whether a party faces unfair disadvantage from dismissal. In this instance, dismissal without prejudice is warranted because the central dispute requires agency consideration. There is no significant advantage or disadvantage to either party in deciding between a stay or dismissal. The court vacates the district court's judgment and remands with instructions to dismiss the action without prejudice to enable the parties to pursue administrative remedies with the Copyright Office. Additionally, the court vacates the premature award of attorneys' fees. The court did not address the existence of a private right of action for canceling a copyright registration or other related issues, stating these can be revisited after the Copyright Office's action. While Syntek raised a claim regarding the invalidity of Microchip's copyright registration due to alleged fraud, this claim was not sufficiently presented earlier, leading the court to decline its consideration. The court can raise the issue of primary jurisdiction sua sponte, and in primary jurisdiction cases, "referral" means either staying proceedings or dismissing the case without prejudice for administrative remedy pursuit. There is no formal mechanism for transfer between courts and agencies; parties must initiate proceedings before the agency themselves.
