## Facts

- Vault Corporation sold “PROLOK” copy-protected floppy diskettes that used a physical disk “fingerprint” plus software instructions to ensure a program would run only if the original PROLOK disk was present.
- PROLOK allowed a purchaser to make a disk copy, but the copy would not operate unless the original fingerprinted disk was in the drive.
- Vault packaged PROLOK with license terms prohibiting copying, modification, translation, decompilation, or disassembly; later versions added a Louisiana choice-of-law clause.
- Quaid Software developed RAMKEY (distributed in its CopyWrite product), which caused PROLOK-protected programs to run from copies without requiring the original PROLOK disk by making the program believe the fingerprint was present.
- Vault sued Quaid for direct copyright infringement based on RAM copying, creation of an unlawful derivative work, contributory infringement for enabling end-user infringement, and violation/enforcement of Louisiana’s Software License Enforcement Act (LSLEA).
- The district court denied Vault’s request for a preliminary injunction for lack of likelihood of success; by stipulation, that ruling became final judgment for Quaid, and Vault appealed.

## Issues

1. Whether RAM copies made during RAMKEY’s operation infringed Vault’s copyright or were permitted under 17 U.S.C. § 117 as an “essential step” in using a computer program.
2. Whether RAMKEY/CopyWrite constituted an infringing derivative work of Vault’s PROLOK software based on limited code overlap.
3. Whether Quaid was contributorily liable for distributing RAMKEY given potential infringing uses, in light of the “substantial noninfringing uses” doctrine.
4. Whether LSLEA provisions allowing licensors to prohibit decompilation or disassembly were preempted by federal copyright law.

## Decision

- The Fifth Circuit affirmed judgment for Quaid.
- RAM copies associated with use of the program were noninfringing under § 117’s “essential step” provision.
- Quaid’s software was not a derivative work of PROLOK; the small amount of overlapping code was insufficient to show unlawful appropriation.
- Quaid was not liable for contributory infringement because the product had substantial noninfringing uses, including enabling lawful archival copying.
- The LSLEA provision authorizing licensors to bar decompilation or disassembly was unenforceable as preempted by the Copyright Act.

## Legal Principles

- Under 17 U.S.C. § 117, the owner of a copy of a computer program may make or authorize copying or adaptation that is an essential step in utilizing the program with a machine, so long as it is not used in another manner.
- “Essential step” protection for RAM copying does not depend on whether the use aligns with the copyright owner’s preferred business model.
- A derivative-work claim requires substantial incorporation of protectable expression; de minimis or functionally dictated similarities do not establish infringement.
- Distribution of a technology with substantial noninfringing uses bars contributory infringement liability even if the technology can also be used to facilitate infringement.
- State statutes or rules that grant rights equivalent to, or that conflict with, federal copyright’s allocation of exclusive rights and limitations are preempted.

## Conclusion

The Fifth Circuit held that RAM copying incidental to using software fell within § 117, rejected claims that RAMKEY was an infringing derivative work or supported contributory liability given substantial lawful uses, and ruled that Louisiana’s statutory authorization to forbid decompilation or disassembly could not be enforced because federal copyright law preempted it.


Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988)