Allen-Myland v. IBM

Citation: Allen-Myland, Inc. v. IBM Corp., 746 F. Supp. 520 (E.D. Pa. 1990).

Factual Background
International Business Machines (IBM) manufactures and sells high performance computer systems. In 1985, IBM’s highest performance computer system was the 3090 line. IBM published the original version of the 3090 microcode in August of 1985 and registered it with the United States Copyright Office in November 1986 for use on all then existing models of the 3090 line.

Since 1973, Allen-Myland, Inc. (AMI) has been engaged in the business of providing engineering services to owners of IBM large scale mainframe computers. AMI has performed splits and reconfigurations on the mainframe computer lines which IBM sold prior to the 3090. On the copies of the 3090 microcode that AMI created and sent to its customers with reconfigured or split 3090 systems, AMI affixed labels virtually identical to those attached by IBM to the 3090 microcode tapes, cassettes, or disks. The labels contain the IBM copyright notice, notice that the tape is IBM property and that unauthorized use is prohibited, and the serial number of the 3090 systems with which AMI shopped the 3090 microcode. IBM contends that AMI intentionally attempted to duplicate that label as IBM would have produced it.

Trial Court Proceedings
In October 1985, Plaintiff AMI initially brought this action challenging various business practices of Defendant under the Sherman Antitrust Act and state commerce law. Following the trial on a Sherman Act claim, AMI filed additional claims and IBM filed additional counterclaims. In December 1986, IBM filed counterclaims for copyright infringement, breach of contract, and tortious interference with a contract. More specifically, IBM alleges that the 3090 microcode is copyrightable and has been copyrighted by IBM, and that AMI has infringed IBM’s copyright by its unauthorized copying and distribution of the 3090 microcode. Under 17 U.S.C. Section 106, the copyright owner has exclusive rights, among other things, to reproduce and distribute copies of the copyrighted work and to prepare derivative works based upon the copyrighted work. To establish its claim of copyright infringement, IBM must show two things: that it owned a valid copyright on the 3090 microcode and that AMI copied the 3090 microcode.

AMI was engaged in the business of providing engineering services to owners of mainframe computers made by IBM. IBM manufactured and sold high performance computer systems. IBM’s 3090 product line was at issue in this case. The court held that AMI infringed IBM’s copyright to the extent that it copied the 3090 microcode to support reconfigurations. However, the court determined that IBM was estopped from asserting its counterclaim regarding the copying of splits because IBM had violated a consent decree in its pricing of the microcode used to perform such splits.

AMI was found liable for copyright infringement, breach of contract, and unfair competition under the Lanham Act regarding counterfeit labels. The court also entered judgment in favor of IBM regarding AMI’s claims for tortious interference with a contract and breach of contract.