Vault Corp. v. Quaid Software Ltd.
847 F.2d 255
United States Court of Appeals for the Fifth Circuit
Decided: June 20, 1988

Vault Corporation was a manufacturer of floppy disks that contained a system called PROLOK. PROLOK was designed to prevent the unauthorized copying of software programs. Vault sold these disks to computer-software producers, who installed their own programs onto the disks. Each disk contained a “fingerprint” on the magnetic surface of the disk. After a user installed a program off a disk with PROLOK, the software would only function if the disk containing the fingerprint was inserted into a computer’s disk drive. As a result, the fingerprint on the disk combined with the software disk prevented the owner of a disk from making a functional copy of a program. Quaid Software Ltd. sold a disk containing a feature called RAMKEY. This program was designed to allow a user to by-pass Vault’s system. RAMKEY allowed copies of PROLOK disks to fool the PROLOK software into believing the copies contained the fingerprint of the original disks. A user could therefore make full copies of programs originally stored on PROLOK disks. Vault brought a copyright-infringement suit and sought an injunction against the use and sale of Quaid’s disks. The district found for Quaid, holding that the RAMKEY program was authorized under § 117 of the Copyright Act. Vault appealed.

The 5th Circuit affirmed the judgment of the district court. The Court held that under 17 U.S.C. § 117(1), the owner of a disk could make unauthorized copies of the program on the disk if the copies were necessary to use the program. This was determined to be a necessary exception because a computer program usually had to be copied into a computer’s memory before the program could be used. § 117(2) permits the owner of a software program to make unauthorized copies to protect against damage or destruction of the program by electrical or mechanical failure.

Vault argued that Quaid’s initial copying of PROLOK was not permitted under § 117(1), because Quaid copied the program for the sole purpose of bypassing PROLOK. However, the Computer Software Copyright Act does not require that a copy made by the owner of a disk be used for the copyright owner’s intended purpose. Copying the program to Quaid’s computer was necessary to use the PROLOK program and fell within the exception. Also, Quaid’s program allowed users to make archival copies of software. This is a use granted by § 117(2). Vault argued § 117(2) was aimed only to prevent loss due to mechanical or electrical failure and a program erased from a PROLOK disk can be restored without using RAMKEY. However, § 117(2) does not limit the making of archival copies to specific situations, and RAMKEY allowed a software owner to create archival copies on separate disks as well as protecting against loss or destruction of the original copy. Accordingly, no contributory infringement occurred. Similarly, RAMKEY did not constitute a derivative work of Vault’s program under § 106(2).

Over the years, as more advanced techniques have been developed to prevent consumers from making copies of software, programs to circumvent such copy protection have been developed at a similar rate. Programs designed for copyright protection have decreased in popularity over time. This is in part due to the fact that such programs inhibit the use of the program for legitimate purposes, such as sharing files from one device to another owned by the same company or family. The making of archival copies also becomes more difficult. While there are important reasons to develop protection software, such as guarding trade secrets, ultimately more creative solutions are needed in an industry where there are constantly new programs being developed to dismantle protection programs.

Additional Research by: Rachel Johns