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Barry Irwin has again received the “Best Lawyers in America” designation by US News and World Report and Best Lawyer US News and World Report and Best Lawyer. Best Lawyers are selected after a rigorous evaluation and include the Top 5% of private practitioners. Irwin IP thanks all of those who were involved in the submission, evaluation, and review process.

The United States District Court for the District of Arizona recently denied a motion for a preliminary injunction seeking to avoid compliance with an Arizona law requiring software providers to implement an application programming interface.  The Court found the law was not preempted by the Copyright Act and did not violate neither the Contracts nor Takings clauses of the Constitution.

Plaintiffs develop, own, and operate proprietary computer systems known as dealer management systems (“DMSs”).  DMSs are licensed to automotive dealerships to help manage their operations, including handling confidential consumer and proprietary data, processing transactions, and managing communications.  Dealers were traditionally allowed to share their DMS login credentials with their chosen third-party integration providers—an integration is necessary to ensure that the DMS operates seamlessly with the dealerships’ other software, such as an accounting system.  In or around 2015, however, Plaintiffs began contractually prohibiting dealers from granting third parties DMS access without Plaintiffs’ permission.

In March 2019, the Arizona Legislature passed the Dealer Data Security Law (“the Dealer Law”), A.R.S. §§ 28-4651–28-4655.  The Dealer Law precluded DMS providers from (1) prohibiting third parties that had met certain security standards from integrating into a dealer’s data system or (2) placing unreasonable restrictions on integration.  The Dealer Law also requires that DMS providers “[a]dopt and make available a standardized framework for the exchange, integration and sharing of data from [a DMS]” and that they “[p]rovide access to open application programming interfaces to authorized integrators.”  An application programming interface, or “API,” is an abstraction that facilitates communication between multiple pieces of software.  In other words, an API might tell users what the DMS can do and how to do it (e.g., how to write and read data), which could make integration easier.

In seeking to enjoin compliance with the Dealer Law, Plaintiffs challenged the Dealer Law as preempted by the Copyright Act and as unconstitutional in violation of both the Contracts and Takings clauses.  Regarding the Copyright preemption argument, Plaintiffs argued copyright protection was afforded to “source and object code; distinctive screen layouts; graphical content; text; arrangement, organization, and display of information; and the dynamic user experience” found in the DMS software, API, and data.  Plaintiffs reasoned that compliance with the Dealer Law would result in unauthorized copying and access of Plaintiffs’ copyrighted works.  The Court rejected these arguments, finding that it was possible to construe the Dealer Law in a way that does not conflict with Plaintiffs’ rights under the Copyright Act.  Specifically, the Court relied on the testimony of Defendants’ expert that the API could be implemented in a way that does not result in reproduction, access, or divulgence of any proprietary, copyrighted material.  The Court similarly rejected the constitutional challenges, finding that the possibility of implementing the API in such a way, which would not require significant expense, meant it was possible for Plaintiffs to comply with the Dealer Law without interfering with their existing contractual obligations or being deprived of the economic benefit of their proprietary software system.

This case highlights the delicate balance between intellectual property and antitrust.  The DMS providers’ decision to limit who could perform integrations had a significant enough impact to warrant state-wide legislation.  In that way, the Dealer Law can be analogized to prohibitions on tying arrangements and rules regarding standard-essential patents, both of which seek to prevent anticompetitive effects that often accompany ubiquitous technology.  On the other hand, forcing a company to implement an API may result in a less than optimal implementation.  Given the integral nature of software to our lives, this is likely not the last time we will see regulation efforts like these.

Irwin IP is pleased to announce that on April 15, 2020, Honorable Judge Gettleman granted summary judgment in favor of firm client Oasis Legal Finance Operating Company, LLC (“Oasis”), and against Oasis’s former CEO Gary Chodes, his business associate, and his personally-held entities (collectively, “Chodes”), on multiple counts of trademark infringement and unfair competition. 

This victory is a follow up to the Court’s February 8, 2018 Order granting Irwin IP’s motion for partial summary judgment that Oasis, and not Mr. Chodes or his entities, owns the Oasis trademarks.   Despite that early, partial victory, Chodes argued his use of the Oasis marks was non-infringing and that Oasis’s claims were barred by numerous affirmative defenses.  In its recent order, however, the Court explained that no reasonable jury could say defendants had not infringed the Oasis trademarks by founding or helping to found companies called “Oasis Legal Finance Group” and “Oasis Disability Group.”  The Court also held that none of the defendants’ 20 affirmative defenses could stand.  The issue of appropriate remedy remains to be decided.  Oasis intends to seek statutory damages, a permanent injunction, and attorneys’ fees.

Oasis provides litigation funding, a form of specialty finance in which an entity, such as Oasis, provides money to plaintiffs involved in litigation in exchange for an interest in any future recovery received by the plaintiff.  Oasis arguably is the most well-known brand nationwide for legal funding, having invested millions of dollars every year to promote its Oasis brand. 

Lisa Holubar and Adam Reis were primarily responsible for drafting the summary judgment briefs.  The Court ruled on the papers without hearing.