Appeal from the United States District Courtfor the Central District of CaliforniaDickran M. Tevrizian, District Judge, PresidingArgued and Submitted August 7, 1995Submission Vacated June 18, 1996Resubmitted September 13, 1996Pasadena, CaliforniaFiled August 6, 1997Amended January 9, 1998Before: James R. Browning, William A. Norris, andStephen Reinhardt, Circuit Judges.Opinion by Judge Browning
_____________________________COUNSEL Joseph R. Re, Knobbe, Martens, Olson & Bear, NewportBeach, California, for the plaintiff-appellant.Jack Bierig, Sidley & Austin, Chicago, Illinois, for thedefendant-appellee.Maureen Brodoff, National Fire Protection Association,Quincy, Massachusetts, for the amici.
_____________________________ORDER The opinion filed on August 6, 1997 is amended as follows:(1) The second sentence in the last paragraph of Section IIIis stricken, and the third sentence is amended to read:"Because the AMA did not lobby HCFA to adopt the CPT,the AMA's First Amendment right to petition the governmentis not at stake." 121 F.3d 516, 521 (9th Cir. 1997).(2) The words "on its copyright misuse claim" are added tothe last sentence of the opinion. 121 F.3d at 521.
_____________________________OPINION BROWNING, Circuit Judge:Practice Management Information Corporation ("PracticeManagement") appeals from a partial summary judgment andpreliminary injunction forbidding it from publishing a medi-cal procedure code copyrighted by the American MedicalAssociation ("the AMA").1I.Over thirty years ago, the AMA began the development ofa coding system to enable physicians and others to identifyparticular medical procedures with precision. These effortsculminated in the publication of the Physician's Current Pro-cedural Terminology ("the CPT"), on which the AMA claimsa copyright.The current edition of the CPT identifies more than sixthousand medical procedures and provides a five-digit codeand brief description for each. The CPT is divided into sixsections -- evaluation, anesthesia, surgery, radiology, pathol-ogy, and medicine. Within each section, procedures arearranged to enable the user to locate the code number readily.In the anesthesia section, procedures are grouped according tothe body part receiving the anesthetic; in the surgical section,the procedures are grouped according to the body system,such as the digestive or urinary system, on which surgery isperformed. The AMA revises the CPT each year to reflectnew developments in medical procedures.In 1977, Congress instructed the Health Care FinancingAdministration ("HCFA") to establish a uniform code foridentifying physicians' services for use in completing Medi-care and Medicaid claim forms. See 42 U.S.C.S 1395w-4(c)(5). Rather than creating a new code, HCFA contracted withthe AMA to "adopt and use" the CPT. AgreementP 1. TheAMA gave HCFA a "non-exclusive, royalty free, and irrevo-cable license to use, copy, publish and distribute " the CPT. Id.P 3(a). In exchange, HCFA agreed "not to use any other sys-tem of procedure nomenclature . . . for reporting physicians'services" and to require use of the CPT in programs adminis-tered by HCFA, by its agents, and by other agencies wheneverpossible. Id. PP 1, 2.2 HCFA published notices in the Federal Register incorporat-ing the CPT in HCFA's Common Procedure Coding System,see 48 Fed. Reg. 16750, 16753 (1983); 50 Fed. Reg. 40895,40897 (1985), and adopted regulations requiring applicantsfor Medicaid reimbursement to use the CPT. See 42 C.F.R.S 433.112(b)(2) (requiring compliance with Part 11 of theState Medicaid Manual, which requires states receiving fed-eral funding for Medicaid to adopt the Administration's Com-mon Procedure Coding System as the exclusive medicalprocedure coding system).3Practice Management, a publisher and distributor of medi-cal books, purchases copies of the CPT from the AMA forresale. After failing to obtain the volume discount itrequested, Practice Management filed this lawsuit seeking adeclaratory judgment that the AMA's copyright in the CPTwas invalid for two reasons: (1) the CPT became uncopyright-able law when HCFA adopted the regulation mandating useof CPT code numbers in applications for Medicaid reimburse-ment, and (2) the AMA misused its copyright by entering intothe agreement that HCFA would require use of the CPT to theexclusion of any other code. The district court granted partialsummary judgment for the AMA and preliminarily enjoinedPractice Management from publishing the CPT. PracticeManagement appeals.II.[1] Practice Management's argument that the CPT becamelaw and entered the public domain when HCFA by regulationrequired its use rests ultimately upon Banks v. Manchester,
128 U.S. 244
(1888), which held that judicial opinions areuncopyrightable. Banks in turn rests upon two grounds, nei-ther of which would justify invalidation of the AMA's copy-right.[2] The first ground for the Banks holding that judicialopinions are not subject to copyright is that the public ownsthe opinions because it pays the judges' salaries. Id. at 253.The second is that as a matter of public policy,"the wholework done by the judges constitutes the authentic expositionand interpretation of the law, which, binding every citizen, isfree for publication to all . . . ." Id. [3] The first ground is clearly not applicable to the CPT.The copyright system was not significant in Banks becausejudges had no proprietary interest in their opinions. The copy-right system is of central importance in this case because theAMA authored, owns, and maintains the CPT and claims acopyright in it.[4] The copyright system's goal of promoting the arts andsciences by granting temporary monopolies to copy-rightholders was not at stake in Banks because judges' sala-ries provided adequate incentive to write opinions. In contrast,copyrightability of the CPT provides the economic incentivefor the AMA to produce and maintain the CPT. "To vitiatecopyright, in such circumstances, could, without adequate jus-tification, prove destructive of the copyright interest, inencouraging creativity," a matter of particular significance inthis context because of "the increasing trend toward state andfederal adoptions of model codes." 1 Melville B. Nimmer &David Nimmer, Nimmer on Copyright S 5.06[C], at 5-92(1996).4 As the AMA points out, invalidating its copyright onthe ground that the CPT entered the public domain whenHCFA required its use would expose copyrights on a widerange of privately authored model codes, standards, and refer-ence works to invalidation.5 Non-profit organizations thatdevelop these model codes and standards warn they will beunable to continue to do so if the codes and standards enterthe public domain when adopted by a public agency. 6[5] The second consideration underlying Banks -- the dueprocess requirement of free access to the law -- may be rele-vant but does not justify termination of the AMA's copyright.There is no evidence that anyone wishing to use the CPT hasany difficulty obtaining access to it. See Texas v. West Publ'gCo., 882 F.2d 171, 177 (5th Cir. 1989). Practice Managementis not a potential user denied access to the CPT, but a putativecopier wishing to share in the AMA's statutory monopoly.Practice Management does not assert the AMA has restrictedaccess to users or intends to do so in the future.[6] The AMA's right under the Copyright Act to limit orforgo publication of the CPT poses no realistic threat to publicaccess. The AMA has no incentive to limit or forgo publica-tion. If the AMA were to do so, HCFA would no doubt exer-cise its right to terminate its agreement with the AMA.7 Otherremedies would also be available, including "fair use" anddue process defenses for infringers, see 1 Nimmer & Nimmer,supra, S 5.06[C], at 5-92, and, perhaps most relevant, manda-tory licensing at a reasonable royalty could be required inlight of the great public injury that would result if adequateaccess to the CPT were denied. See Abend v. MCA, Inc., 863F.2d 1465, 1479 (9th Cir. 1988); Universal City Studios, Inc.v. Sony Corp. of America, 659 F.2d 963, 976 (9th Cir. 1982),rev'd on other grounds,
464 U.S. 417
(1984).The Supreme Court has not considered a case in which theauthor asserted a proprietary interest in material adopted bythe government as law. However, the First and Second Cir-cuits have declined to enjoin enforcement of private copy-rights in these circumstances.In Building Officials & Code Admin. v. Code Technology,Inc., 628 F.2d 730 (1st Cir. 1980), the district court prelimi-narily enjoined Code Technology, Inc. from copying a build-ing code copyrighted by Building Officials & CodeAdministration ("BOCA"), a private, non-profit group, andadopted by the State. The First Circuit reversed. It recognizedthe problem posed by Banks, but nonetheless refrained fromholding BOCA's copyright invalid: Groups such as BOCA serve an important public function; arguably they do a better job than could the state alone in seeing that complex yet essential regu- lations are drafted, kept up to date and made avail- able. Since the rule denying copyright protection to judicial opinions and statutes grew out of a much different set of circumstances than do these technical regulatory codes, we think BOCA should at least be allowed to argue its position fully on the basis of an evidentiary record, into which testimony and materi- als shedding light on the policy issues discussed herein may be placed.Id. at 74. In CCC Info. Servs., Inc. v. Maclean Hunter Mkt. Reports,Inc., 44 F.3d 61 (2d Cir. 1994), the Second Circuit declinedto invalidate the copyright on a privately prepared listing ofautomobile values that several states required insurance com-panies to use in calculating insurance awards: We are not prepared to hold that a state's reference to a copyrighted work as a legal standard for valua- tion results in loss of the copyright. While there are indeed policy considerations that support CCC's argument, they are opposed by countervailing con- siderations. For example, a rule that the adoption of such a reference by a state legislature or administra- tive body deprived the copyright owner of its prop- erty would raise very substantial problems under the Takings Clause of the Constitution. We note also that for generations, state education systems have assigned books under copyright to comply with a mandatory school curriculum. It scarcely extends CCC's argument to require that all such assigned books lose their copyright -- as one cannot comply with the legal requirements without using the copy- righted works. Yet we think it unlikely courts would reach this conclusion. Although there is scant author- ity of CCC's argument, Nimmer's treatise opposes such a suggestion as antithetical to the interests sought to be advanced by the Copyright Act.Id. at 736.For the reasons we have stated earlier, as well as thoserelied upon by the First and Second Circuits, we affirm thedistrict court's conclusion that the AMA's copyright in theCPT should be enforced.8III.Practice Management argues that the AMA misused itscopyright by negotiating a contract in which HCFA agreed touse the CPT exclusively. See Lasercomb America, Inc. v.Reynolds, 911 F.2d 970, 977-79 (4th Cir. 1990) (defense ofcopyright misuse "forbids the use of the copyright to securean exclusive right or limited monopoly not granted by theCopyright Office"); see also DSC Communications Corp. v.DGI Techs., Inc., 81 F.3d 597, 601 (5th Cir. 1996) (same).9We have implied in prior decisions that misuse is a defenseto copyright infringement. See Triad Sys. Corp. v. Southeast-ern Express Co., 64 F.3d 1330, 1337 (9th Cir. 1995);Supermarket of Homes, Inc. v. San Fernando Valley Bd. ofRealtors, 786 F.2d 1400, 1408 (9th Cir. 1986). We now adoptthat rule.[7] On the undisputed facts in the record before us, we con-clude the AMA misused its copyright by licensing the CPT toHCFA in exchange for HCFA's agreement not to use a com-peting coding system. The AMA argues it did not insistHCFA use only the CPT; rather, HCFA decided to use a sin-gle code to take advantage of natural efficiencies. However,the plain language of the AMA's licensing agreement requiresHCFA to use the AMA's copyrighted coding system and pro-hibits HCFA from using any other. The exclusivity require-ment is a part of the consideration in exchange for which theAMA agreed to grant HCFA a "non-exclusive, royalty free,and irrevocable license to use, copy, publish and distribute"the CPT. Although HCFA apparently had nothing to gainfrom inclusion of the exclusivity provision, which side urgedits inclusion is of no consequence. Cf. Anchor Serum Co. v.Federal Trade Comm., 217 F.2d 867, 870 (7th Cir. 1954)(rejecting argument that exclusive dealing contract did notviolate section 3 of the Clayton Act because buyer initiatednegotiations and seller did not impose the contract terms onbuyer). The controlling fact is that HCFA is prohibited fromusing any other coding system by virtue of the binding com-mitment it made to the AMA to use the AMA's copyrightedmaterial exclusively. The absence of the agreement would notpreclude HCFA from doing what the AMA suggests would beproper -- deciding on its own to use only the AMA's system.What offends the copyright misuse doctrine is not HCFA'sdecision to use the AMA's coding system exclusively, but thelimitation imposed by the AMA licensing agreement onHCFA's rights to decide whether or not to use other forms aswell. Conditioning the license on HCFA's promise not to usecompetitors' products constituted a misuse of the copyright bythe AMA.[8] The adverse effects of the licensing agreement areapparent. The terms under which the AMA agreed to licenseuse of the CPT to HCFA gave the AMA a substantial andunfair advantage over its competitors. By agreeing to licensethe CPT in this manner, the AMA used its copyright "in amanner violative of the public policy embodied in the grantof a copyright." Lasercomb, 911 F.2d at 977.[9] The AMA argues the copyright misuse defense failsbecause Practice Management did not establish an antitrustviolation. We agree with the Fourth Circuit that a defendantin a copyright infringement suit need not prove an antitrustviolation to prevail on a copyright misuse defense. See Laser-comb, 911 F.2d at 978.[10] We also reject the AMA's argument that the Noerr-Pennington doctrine immunized its actions. Because theAMA did not lobby HCFA to adopt the CPT, the AMA'sFirst Amendment right to petition the government is not atstake.IV.We affirm the district court's ruling that the AMA did notlose its copyright when use of the CPT was required by gov-ernment regulations, but reverse the ruling with respect tocopyright misuse. We hold that Practice Management estab-lished its misuse defense as a matter of law, vacate the prelim-inary injunction, and remand for entry of judgment in favorof Practice Management on its copyright misuse claim.AFFIRMED IN PART, REVERSED IN PART,VACATED, AND REMANDED.Each party shall bear their own costs. the end
___________________________FOOTNOTES 1 We have jurisdiction under 28 U.S.C. S 1292(a)(1). See MAI Sys.Corp. v. Peak Computer, Inc., 991 F.2d 511, 516 (9th Cir. 1993).2 HCFA had the right to cancel the agreement and use a competing cod-ing system at any time and without penalty on ninety days notice. Agree-ment P 10.3 Other federal agencies require physicians to use the CPT. See, e.g., 20C.F.R. S 10.411(c) (stating that physicians seeking compensation underthe Federal Employees' Compensation Act must identify their servicesusing CPT codes). The state of California has incorporated the CPT intoits Code of Regulations. See Cal. Code Regs. tit. 22, S 51050.4 See also Building Officials & Code Admin. v. Code Tech., Inc., 628F.2d 730, 736 (1st Cir. 1980) (recognizing "a possible trend towards stateand federal adoption, either by means of incorporation by reference or oth-erwise, of model codes"); 58 Fed. Reg. 57643, 57644-45 (1993) (Officeof Management and Budget directed federal agencies to adopt privatestandards "whenever practicable" in order to "eliminate[ ] the costs to theGovernment of developing its own standards").5 See, e.g., 32 C.F.R. S 199.13(e)(2) (limiting payment of dental benefitsto procedures defined in the Current Dental Terminology); 32 C.F.R.S 199.2 (conditioning payment of civilian medical benefits for mental dis-orders on showing the patient has a disorder listed in the Diagnostic &Statistical Manual of Mental Disorders (DSM III) ); 16 C.F.R. S 1505.5(e)(5) (requiring electrically operated toys to have a type SP-2 electricalpower cord, as defined in the National Electrical Code authored bythe National Fire Protection Association); 16 C.F.R.S 1201.7 (requiringarchitectural glazing materials to conform to standards published by theAmerican National Standards Institute); 7 C.F.R.S 1755.870(a)(8) (incor-porating by reference Underwriters Laboratories Inc.'s Standard Test forFlame Propagation Height of Electrical and Optical-Fiber Cables InstalledVertically in Shafts); 11th Cir. R. 28-2(j) (requiring attorneys to conformtheir citations to The Bluebook: A Uniform System of Citation).6 Amicus briefs have been filed by the American Dental Association,American National Standards Institute, American Society of Associa-tion Executives, American Society of Heating, Refrigerating & Air-Conditioning Engineers, American Society of Mechanical Engineers,American Society for Testing and Materials, National Fire ProtectionAssociation, and Underwriters Laboratories Inc.7 Alternatively, HCFA might by regulation or contract require the AMAto provide greater access. See H.R. Rep. No. 94-1476, at 59, reprinted in1976 U.S.C.C.A.N. 5659, 5672; Marvin J. Nodiff, Copyrightability ofWorks of the Federal and State Governments Under the 1976 Act, 29 St.8 Practice Management argues that the CPT is an uncopyrightable indus-try standard or "idea" under section 102(b) of the Copyright Act, themerger doctrine, and Sega Enters. Ltd. v. Accolade, Inc., 977 F.2d 1510,1523-24 (9th Cir. 1993) because HCFA mandates use of CPT codes inMedicaid applications. This court has not allowed the owners of copy-rights in expressions mandated by industry standards to use their copy-rights to stifle independent creative expression in the industry. Sega, 977F.2d at 1523-24. However, the AMA's copyright does not stifle indepen-dent creative expression in the medical coding industry. It does not pre-vent Practice Management or the AMA's competitors from developingcomparative or better coding systems and lobbying the federal governmentand private actors to adopt them. It simply prevents wholesale copying ofan existing system.Practice Management did not appeal the district court's finding that theCPT was sufficiently original to qualify for copyright protection, and wedo not review that question.9 Copyright misuse does not invalidate a copyright, but precludes itsenforcement during the period of misuse. See Lasercomb, 911 F.2d at 979n.22.