You Might Think City Buses Don’t Have a System, But They Totally Do! (it just might be copyright infringing)

Entities and people come together, do business, have disagreements, go their separate ways. It happens all the time. But nowadays, since so many things have embedded software, these break-ups of business relationships have copyright implications. If you don’t have a license to continue using the embedded software, when you break up with another business, that means you have to stop using whatever contains the software, too. Theoretically. 

A recent case out of the Middle District of Tennessee, ACS Transport Solutions, Inc. v. Nashville Metropolitan Transit Authority, 3:13-CV-01137, dealt with this issue. The Nashville Metropolitan Transit Authority (“MTA”) had contracted with ACS to develop a system for MTA to manage its buses. The system ACS created contained copyrighted software that ACS expressly licensed to MTA. A few years after the development of the system, MTA discontinued its relationship with ACS, but it continued to use the system that contained the embedded software. ACS contacted MTA and told it that it was using the software without a license and infringing ACS’s copyright. Nevertheless, MTA continued to use the system with the embedded software, and so ACS eventually brought this lawsuit. 

MTA argued that, when it terminated its relationship with ACS, it did not terminate the license to use the software, and so it was still properly licensed. However, MTA’s relationship with ACS was governed by a contract, within which was the software license. Terminating the relationship set forth by that contract, the court found, necessarily terminated the software license also found in that contract. 

MTA additionally argued that it had paid for the system and that therefore it should be entitled to use the software within the system indefinitely. ACS did agree that MTA had paid for the system and would not have owed ACS any further payments…if ACS and MTA had fulfilled the rest of their contractual obligations. Instead, ACS argued, MTA breached its obligations. Therefore, ACS rescinded MTA’s license to use the software. 

There was some slim hope for MTA. MTA argued that it had an implied license to use the software for a “reasonable” period of time while it transitioned to the new software of the company it hired to replace ACS. The court seemed skeptical that the length of time MTA had used ACS’s software after terminating ACS (it ended up using the software for more than two years after terminating ACS) was reasonable; the court implied that, even if MTA had had an implied license to use the software while it transitioned, MTA’s use had exceeded that implied license’s scope. However, the court found this to be a material fact in dispute and so inappropriate to resolve at the summary judgment stage. 

Under the terms of its contract with ACS, MTA received only a non-exclusive, revocable license for the software. If MTA had wanted more protection, MTA should have negotiated better license terms. ACS, of course, might never have been amenable to granting better license terms. But let this case be a lesson: Many things are going to come with embedded software these days, and that software is copyrighted. You’re going to need to dot your copyright i’s and cross your copyright t’s regarding this software; don’t lose sight of that by focusing instead on the larger product you’re buying. MTA may have thought of itself as buying a system, but it really needed to think of itself as buying the software within the system.