Microsoft v. Harmony Computers

Citation: Microsoft Corp. v. Harmony Computers & Elecs., 846 F. Supp. 208 (E.D.N.Y. 1994).

Factual Background
Plaintiff, Microsoft Corporation (“Microsoft”) brought suit against Harmony Computers & Electronics (“Harmony”) for selling copyrighted Microsoft MS-DOS and Windows software programs and accompanying materials without license or authorization. Microsoft claimed that Harmony not only distributed “stand-alone” products, which was a direct violation of Microsoft’s licensing agreement, but also circulated counterfeit products, which was illustrated by twenty-one different examples of counterfeit Microsoft products purchased from the defendant by a private investigator.

Harmony asserted that they were immune from liability for copyright infringement because they purchased all products they sold from Microsoft licensees and are therefore protected under the first sale doctrine. Additionally, Harmony denied the allegation that any of the Microsoft products they sold were counterfeit and, in the alternative, even if any of the products were counterfeit, Harmony bought them from Microsoft licensees under the good faith belief that the products were genuine.

In an attempt to curb the defendant's behavior, Microsoft sent several cease and desist letters between April and September 1993, however the defendant continued to carry on selling the software in question. Subsequently, Microsoft filed suit against Harmony, contending that the company was involved in copyright and trademark infringement.

Trial Court Proceedings
At trial, the district court determined that Microsoft had a valid claim for copyright infringement. In arriving at this decision, the court looked to see if Microsoft was a valid copyright owner of the products and if Harmony had engaged in any unauthorized copying. The court concluded, and the defendants agreed, that Microsoft was the valid copyright owner of all products in question. Additionally, the district court found that the defendant’s actions amounted to [unauthorized distribution]] of Microsoft products. Harmony’s contention that they purchased Microsoft products from licensed dealers, and therefore, were not liable was found to be meritless.

The licensed dealers from whom the defendant purchased the software exceeded the scope of their licensing agreement with Microsoft by selling stand-alone products to the defendant. Therefore, any distribution of Microsoft products by Harmony, whether within the scope of the plaintiff’s licensing agreement or not, would constitute copyright infringement since Harmony was never authorized to distribute the product.

Additionally, Harmony’s argument that they were protected by the first sale doctrine and was met with similar results. The court pointed to the fact that Microsoft never sold its software; rather it licensed all of its products. This led to the inability of the defendant to prove a chain of title for the software, making the first sale doctrine inapplicable in the case.