`UNITED STATES COURT OF APPEALS
`FOR THE NINTH CIRCUIT
`
`
`
`ALTERA CORPORATION,
`Plaintiff-counter-
`claimant-defendant-
`Appellee,
`
`v.
`CLEAR LOGIC, INCORPORATED,
`Defendant-counter-
`claimant-plaintiff-
`Appellant.
`
`Nos. 03-17323
`03-17334
`D.C. No.
`CV-99-21134-
`JW/PVT
`OPINION
`
`Appeal from the United States District Court
`for the Northern District of California
`James Ware, District Judge, Presiding
`
`Argued and Submitted
`April 12, 2005—San Francisco, California
`
`Filed September 15, 2005
`
`Before: Procter Hug, Jr., Warren J. Ferguson, and
`Pamela Ann Rymer, Circuit Judges.
`
`Opinion by Judge Hug;
`Concurrence by Judge Rymer
`
`13303
`
`(cid:252)
`(cid:253)
`(cid:254)
`
`
`ALTERA v. CLEAR LOGIC
`
`13307
`
`COUNSEL
`
`David M. Heilbron and C. William Craycroft, Bingham
`McCutchen LLP, East Palo Alto, California, for the appellant.
`
`Karl J. Kramer, Morrison & Foerster LLP, Palo Alto, Califor-
`nia, for the appellee.
`
`Sandeep Jaggi, Milpitas, California, for amicus curiae LSI
`Logic Corporation.
`
`OPINION
`
`HUG, Circuit Judge:
`
`This case involves an infringement action by Altera Corpo-
`ration (“Altera”) against Clear Logic Incorporated (“Clear
`
`
`
`13308
`
`ALTERA v. CLEAR LOGIC
`
`Logic”) under the Semiconductor Chip Protection Act of
`1984, 17 U.S.C. §§ 901-14 (“SCPA”). Altera also brought
`state law claims against Clear Logic for intentionally inducing
`Altera’s customers to breach their software license agree-
`ments with Altera and also for intentional interference with
`those contractual relations. A jury found for Altera on all
`claims and a judgment was entered for $30.6 million in dam-
`ages, $5.4 million in prejudgment interest and $394,791.68 in
`costs. The district court judge also entered an injunction pre-
`venting Clear Logic from engaging in those activities against
`Altera. We affirm the judgment and the injunction.
`
`I.
`
`Overview
`
`Filling the gap between copyright law and patent law, the
`SCPA aims to protect the substantial investment of innovative
`firms in creating the semiconductor chips that are “at the vor-
`tex” of the modern information age. H.R. Rep. No. 98-781, at
`2 (1984); S. Rep. No. 98-425 at 7-9. These chips operate
`microwave ovens,
`televisions, computers, robots, Xray
`machines, and countless other now indispensable apparatuses.
`S. Rep. No. 98-425 at 7-9. Each chip carries its own blueprint.
`Pirate firms can strip the layers of a semiconductor chip and
`replicate the design at a cost substantially lower than the orig-
`inal firm’s investment. Id.
`
`Altera and Clear Logic are competitors in the semiconduc-
`tor industry. Altera manufactures programmable logic devices
`(“PLDs”), which are chips that can be programmed to per-
`form various logic functions. A customer uses Altera’s
`MAX+PLUS II software to program the PLD to perform the
`desired function.1 The software helps to route the functions
`
`1Altera sells chips to companies that use those chips to perform logic
`functions in devices they produce, not to individual consumers. For exam-
`ple, a company that manufactures printers might purchase PLDs from
`Altera to perform the functions necessary to operate the printer.
`
`
`
`ALTERA v. CLEAR LOGIC
`
`13309
`
`through the thousands of transistors that make up the PLD,
`ideally achieving the maximum functionality for the particular
`function desired. Because the PLD can be programmed and
`reprogrammed, the customer, working with Altera, can con-
`tinue to work with the PLD and the software until the PLD
`meets the customer’s exact needs. This process can take
`months.
`
`type of chip:
`Clear Logic manufactures a different
`Application-Specific Integrated Circuits (“ASICs”). These
`chips are designed to perform one specific function and can-
`not be programmed by the customer. They use less power, are
`smaller and, for a customer with a large order, are often
`cheaper. Customers will sometimes start with PLDs and
`switch to ASICs once they have determined exactly what they
`need the chips to do. Traditionally, a company that converts
`from PLDs to ASICs must again start from a high level of
`description and work toward the end product, the ASIC. This
`can take a few months and there is a substantial risk that even
`after the initial attempt, the first chip will not work and more
`time and money will have to be invested in perfecting the
`product.
`
`Clear Logic works from a different business model. When
`customers program Altera devices, using the Altera software,
`a file called a bitstream is generated. Clear Logic asks cus-
`tomers to send the bitstream to Clear Logic, and Clear Logic
`uses the bitstream to create an ASIC for the customer. Clear
`Logic only produces ASICs that are compatible with Altera
`chips. The laser process Clear Logic uses to create chips with
`the bitstream allows for a turnaround time of just a few
`weeks, and rarely produces an incompatible chip.
`
`Faced with the loss of millions of dollars in business,
`Altera has challenged Clear Logic’s business model. In the
`district court, Altera argued that Clear Logic infringed its
`rights under the SCPA by copying the layout design of its reg-
`istered mask works for three families of chip products. Clear
`
`
`
`13310
`
`ALTERA v. CLEAR LOGIC
`
`Logic denied the infringement and asserted an affirmative
`defense of reverse engineering. The jury returned a verdict in
`favor of Altera on the infringement claim.
`
`In addition, Altera alleged state law claims based on a per-
`mitted use provision in its software licensing agreement. Cus-
`tomers can access two versions of the Altera software: one is
`a free version available on the internet, the other requires a
`subscription fee but includes additional benefits. In either
`case, the user must agree to the terms of a license before using
`the software. The license agreement has taken several forms,
`but Altera’s Vice President of Software and Tools Marketing,
`Timothy Southgate, testified that it was unlikely any custom-
`ers were still using older versions of the software because it
`is not compatible with some of the newer products. Each time
`the software is updated, the customer must agree to the latest
`version of the licensing provision. A provision was added to
`the software license agreement in the early 1990’s to prevent
`competitors from taking advantage of the software. The cur-
`rent version of the use provision, added to the agreement in
`1999, provides that customers may “use the Licensed Pro-
`grams for the sole purpose of programming logic devices
`manufactured by ALTERA and sold by ALTERA or its
`authorized distributors (the “Permitted Use”).” The earlier
`version did not include the word “sole,” but was otherwise
`similar.
`
`Based on that provision, Altera asserted state law claims for
`inducing Altera’s customers to intentionally breach their
`license agreements with Altera and also for intentionally
`interfering with those contractual relations. Clear Logic
`argued that those claims were preempted by federal copyright
`law and additionally alleged that the licensing agreements
`constitute copyright misuse. The district court found as a mat-
`ter of law that the claims were not preempted and also denied
`as a matter of law the copyright misuse defense because there
`was no allegation of copyright infringement. The jury found
`for Altera on these claims as well.
`
`
`
`ALTERA v. CLEAR LOGIC
`
`13311
`
`After the jury trial, pursuant to a stipulation of the parties,
`the district court determined damages, awarding Altera $30.6
`million in damages, $5.4 million in prejudgment interest, and
`$394,791.68 in costs. In addition, the court issued a perma-
`nent injunction preventing Clear Logic’s activities that were
`found to violate Altera’s rights under the SCPA and to induce
`the breach of Altera’s software licenses with its customers.
`
`On appeal Clear Logic does not contest the amount of the
`damage award, only its liability for those damages. It also
`does not contest the specific terms of the injunction. It con-
`tends that the district judge misinterpreted the application of
`the SCPA, and improperly instructed the jury concerning the
`defense of reverse engineering. Clear Logic also contests lia-
`bility under the state law claims.
`
`II.
`
`The Semiconductor Chip Design Process and the
`Semiconductor Chip Protection Act
`
`Clear Logic and Altera define the stages and terms relating
`to the chip design process differently.2 According to Altera,
`the layout is “the physical arrangement of the components on
`the chip.” The architecture is comprised of “the components
`and the structures that are physically arranged within the
`chip.” Clear Logic argues that the architecture is essentially
`a block diagram showing the basic arrangement of the chip.
`From this conceptual plan, the designer creates floor plans
`that show the arrangement of functional modules, focusing on
`how the designer will group major components. The floor
`plan and the architecture are both at high levels of abstraction.
`The designer next creates an electrical schematic, which is a
`
`2Altera filed a Motion to Strike, objecting to several portions of Clear
`Logic’s Reply Brief. We grant Altera’s motion to strike with respect to the
`discussion of the evidence at page 23 of Clear Logic’s reply brief, but
`deny the remainder of the motion.
`
`
`
`13312
`
`ALTERA v. CLEAR LOGIC
`
`layout
`this, a
`two-dimensional abstract drawing. After
`designer creates a three-dimensional layout design which
`includes the specific placement of all of the elements of the
`chip and is used to make the glass masks that are printed onto
`the chip.
`
`Despite their disagreement over the specific definitions of
`industry terms and the specific steps in the process of chip
`design, Altera and Clear Logic agree that chip design starts
`with a high level idea and moves toward the placement of
`individual transistors on a chip in several layers. Ultimately,
`the schematics and floor plans are used to develop the specific
`placement of every transistor that will eventually go on the
`chip. Glass disks are etched with the pattern for each layer of
`the chip, and these glass disks, called masks, are printed onto
`the semiconductor chip, one layer at a time, by photolithogra-
`phy.3 S. Rep. No. 98-425 at 2-3. Generally, there are eight to
`twelve layers to the chip, each of which requires a separate
`mask. Id. The series of all of the masks is the mask work.
`
`Reverse engineering has long been an accepted practice in
`the semiconductor chip industry. By photographing and
`chemically dissolving each layer of the chip, a second com-
`pany can recreate the entire mask work for any chip. The pro-
`cess allows legitimate analysis of chips to spur innovation and
`improvement on existing designs, but also makes direct copy-
`ing of chips feasible. S. Rep. No. 98-425 at 4. At the behest
`of the semiconductor industry, Congress sought to protect this
`important facet of the American economy, and indeed of
`modern American society, while preserving the validity of
`reverse engineering as an appropriate form of competition.
`
`[1] After extensive debates, Congress passed the Semicon-
`ductor Chip Protection Act in 1985, creating sui generis pro-
`
`3There are other ways of fixing the mask work on the chip, but the
`SCPA is intended to protect that pattern regardless of the technological
`process that takes it from idea to chip.
`
`
`
`ALTERA v. CLEAR LOGIC
`
`13313
`
`tection for mask works embodied in semiconductor chip
`products. The Act borrows heavily from copyright law, and
`was initially proposed as an extension of existing copyright
`protection. S. Rep. 98-425 at 9; S. Rep. No. 98-425 at 12-13
`(1984) (analogizing mask works to technical drawings or
`audiovisual works subject to copyright protection). In analo-
`gizing semiconductor chips to traditional areas of copyright
`law, the legislative history notes that, just as a plagiarist who
`copies only one chapter of a book may be held liable for
`infringement, a person may be liable for copying a part of a
`mask work if it is a qualitatively important portion that results
`in substantial similarity. S. Rep. No. 98-425 at 16-18. The
`realities of the business world, however, would purportedly
`make it impractical for a copyist to copy a part of a chip but
`create the rest of the chip independently. Id. Where chips
`appeared to be similar, Congress assumed that admitting
`expert testimony to assist in determining whether subtle
`changes in a mask work layout were significant would resolve
`the problem of distinguishing a copy from a legitimate reverse
`engineering attempt in most cases. Id.
`
`The SCPA defines a “mask work” as
`
`a series of related images, however fixed or encoded
`—
`
`(A) having or representing the predetermined, three-
`dimensional pattern of metallic, insulating, or semi-
`conductor material present or removed from the lay-
`ers of a semiconductor chip product; and
`
`(B) in which series the relation of the images to one
`another is that each image has the pattern of the sur-
`face of one form of the semiconductor chip product.
`
`17 U.S.C. § 901(a)(2). A semiconductor chip product, in turn,
`is
`
`
`
`13314
`
`ALTERA v. CLEAR LOGIC
`
`the final or intermediate form of any product—
`
`(A) having two or more layers of metallic, insulat-
`ing, or semiconductor material, deposited or other-
`wise placed on, or etched away or otherwise
`removed from, a piece of semiconductor material in
`accordance with a predetermined pattern; and
`
`(B) intended to perform electronic circuitry func-
`tions.
`
`17 U.S.C. § 901(a)(1).
`
`[2] The SCPA grants the owner of a mask work the exclu-
`sive rights to reproduce the mask work and to “import or dis-
`tribute a semiconductor chip product in which the mask work
`is embodied.” 17 U.S.C. § 905. The Act does not, however,
`extend protection “to any idea, procedure, process, system,
`method of operation, concept, principle, or discovery, regard-
`less of the form in which it is described, explained, illustrated,
`or embodied in such work.” 17 U.S.C. § 902(c).
`
`Before trial, the district court granted in part Altera’s sum-
`mary judgment motion regarding the scope of the SCPA. The
`court held that “Altera’s layout is fixed in the final chip prod-
`uct: the placement of the components and their interconnec-
`tion lines on the actual chip are created using masks which are
`the physical embodiment of the layout design chosen by
`Altera design engineers. Thus Altera’s layout design is more
`than a mere idea. It is the blueprint for the layout of the semi-
`conductor chip.” The court concluded that “the Act is broad
`enough to cover the type of claims made by Altera,” but left
`for the jury the factual question of whether Altera had proven
`infringement. Relying on Brooktree Corp. v. Advanced Micro
`Devices, Inc., 977 F.2d 1555 (Fed. Cir. 1992), the only case
`to date to examine the SCPA, the court explained that “copy-
`ing groupings of transistors and interconnection lines may
`
`
`
`ALTERA v. CLEAR LOGIC
`
`13315
`
`constitute a violation of the Act.”4 The ruling on Altera’s
`motion for summary judgment involved a purely legal issue
`which we review de novo.
`
`In Brooktree, the plaintiff alleged that the defendant com-
`pany had copied its ten-transistor SRAM cell. 977 F.2d at
`1563. The court stated that “If the copied portion [of the mask
`work] is qualitatively important, the finder of fact may prop-
`erly find substantial similarity under copyright law and under
`the Semiconductor Chip Protection Act,” even if other por-
`tions of the chip were not copied. Id. at 1564 (citations omit-
`ted). The district court had appropriately allowed the jury to
`determine whether the copying of the layout of a cell within
`the chip was an infringement of the act. Id. at 1565.
`
`Altera asserts that the placement of groupings of transistors
`on the chip was copied, and does not specifically address the
`layout of the transistors within those groupings. Clear Logic
`argues that the placement of the groupings is a system or an
`idea and is not entitled to protection under the SCPA. We
`reject this contention; the boundaries and organization of
`these groupings are more than conceptual. As both John Reed
`and John Turner testified, these groupings are physically pres-
`ent in the mask work.
`
`Commentators have suggested analyzing the levels of
`abstraction in the production of a computer program or a
`mask work to identify the distinction between ideas and
`expression, and the degree of similarity, in these formats. See
`4 Nimmer on Copyrights § 13.03 (2005) (comparing the anal-
`ysis of broad ideas, plots, structure, dialogue, or sequence of
`events in a novel or play to the levels of abstraction in creat-
`ing a computer program); Copyright Protection for Semicon-
`ductor Chips: Hearings on H.R. 1028 Before the House
`
`4Brooktree was a case that originated in a district court in the Ninth Cir-
`cuit, and thus, the Federal Circuit stated that it applied Ninth Circuit law
`in addressing the SCPA claim.
`
`
`
`13316
`
`ALTERA v. CLEAR LOGIC
`
`Subcomm. on Courts, Civil Liberties, and the Administration
`of Justice of the Comm. on the Judiciary, 98th Cong. 316-21
`(1983) (letter and article submitted by Eric W. Petraske,
`patent attorney) (identifying ideas from electrical information,
`geometric information about component placement, size,
`shape, circuit design within the mask level). Our own cases
`have suggested such an approach is appropriate. See Data
`East USA, Inc. v. Epyx, Inc., 862 F.2d 204, 207-09 (9th Cir.
`1988). Under this approach, we identify the broad idea behind
`the design and assess each successive step in the design pro-
`cess, identifying the point at which the idea becomes protect-
`able expression. See Computer Assocs. Int’l, Inc. v. Altai, Inc.,
`982 F.2d 693, 706-12 (2d Cir. 1992) (as amended) (explaining
`the abstraction-filtration-comparison test for computer pro-
`grams).
`
`[3] In considering the chip design process, we recognize, as
`do the parties, that with each step, the ideas become more
`concrete until they are finally expressed in the layout of the
`transistors in the mask work. The customer’s idea is at the
`highest level of abstraction, and the schematics and floor
`plans convey more concrete ideas, designating how the chip
`may be structured or organized. These drawings are prelimi-
`nary sketches that would not be protected under traditional
`copyright principles. Copyright Protection for Semiconductor
`Chips: Hearings on H.R. 1028 Before the House Subcomm. on
`Courts, Civil Liberties, and the Administration of Justice of
`the Comm. on the Judiciary, 98th Cong. 116-17 (1983) (state-
`ment of Dorothy Schrader, Copyright Office). It is not until
`the level of the mask work, the piece of the process that Con-
`gress chose to protect, that there is an expression of that idea.
`Those ideas that are physically expressed in the mask work
`are subject to protection under the SCPA.
`
`[4] The district court correctly determined that the organi-
`zation of the groupings is physically a part of the mask work.
`The mask work is structured according to the groupings that
`Altera highlighted and the district court correctly allowed the
`
`
`
`ALTERA v. CLEAR LOGIC
`
`13317
`
`jury to determine whether those similarities constituted an
`infringement of the act. Unlike the outline of an article or the
`chapters in a book, these groupings physically dictate where
`certain functions will occur on a chip and describe the interac-
`tion of parts of the chip. The placement of logic groupings in
`a mask work is not an abstract concept; it is embodied in the
`chip and affects the chip’s performance and efficiency as well
`as the chip’s timing. In accordance with the Federal Circuit’s
`holding in Brooktree, it is the province of the jury to deter-
`mine whether those aspects of the mask work are material,
`and whether the similarity between the mask works is sub-
`stantial. 977 F.2d at 1570. The district court did not err in
`finding that the organization of the groupings of logic func-
`tions on Altera’s mask works, and the interconnections
`between them, was protected under the SCPA. The arrange-
`ment of the transistors within those blocks is also entitled to
`protection under the SCPA, but, as in Brooktree, the jury
`determines whether the similarities are more important than
`the differences. Id.
`
`III.
`
`Reverse Engineering
`
`[5] The SCPA specifically protects the right of
`
`(1) a person to reproduce the mask work solely for
`the purpose of teaching, analyzing, or evaluating the
`concepts or techniques embodied in the mask work
`or the circuitry, logic flow, or organization of com-
`ponents used in the mask work; or
`
`(2) a person who performs the analysis or evaluation
`described in paragraph (1) to incorporate the results
`of such conduct in an original mask work which is
`made to be distributed.
`
`17 U.S.C. § 906. This reverse engineering provision explicitly
`protects industry practices and encourages innovation. The
`
`
`
`13318
`
`ALTERA v. CLEAR LOGIC
`
`second mask work must not be “substantially identical to the
`original,” and as long as there is evidence of “substantial toil
`and investment” in creating the second mask work, rather than
`“mere plagiarism,” the second chip will not “infringe the orig-
`inal chip, even if the layout of the two chips is, in substantial
`part, similar.” Brooktree, 977 F.2d at 1566 (quoting Mathias-
`Leahy Memorandum at S12,917). The legislative history, rely-
`ing on the testimony of industry representatives, indicated that
`most cases would probably present clear cut evidence of
`direct copying or of innovation and that in cases falling into
`the gray area between outright copying and complete original-
`ity, the courts should consider the presence or absence of a
`paper trail by the second firm. See id. (summarizing relevant
`statements from the legislative history discussing reverse
`engineering and paper trails). A firm that simply copied
`another firm’s mask work would have no evidence of its own
`investment and labor, whereas a legitimate reverse engineer-
`ing job would require a trail of paper work documenting the
`analysis of the original chip as well as the development of an
`independent design. Id. The district court in this case
`instructed the jury that this was a factor to be considered in
`determining whether Clear Logic had proven a valid reverse
`engineering defense.
`
`In Brooktree, the Federal Circuit analyzed the defendant’s
`paper trail, but held that “the sheer volume of paper” was not
`dispositive. Id. at 1569. The trail in that case was susceptible
`to the interpretation that the defendant copied the chip. The
`court held that the jury was entitled to weigh the evidence and
`consider the differences in the chips as well as the similarities,
`and could find the similarities sufficient to invalidate the
`reverse engineering defense. Id.
`
`In this case, Clear Logic challenges the district court’s for-
`mulation of one of the reverse engineering jury instructions.
`We look to the instructions as a whole to determine whether
`they fairly and accurately cover the substance of the law.
`Swinton v. Potomac Corp., 270 F.3d 794, 802 (9th Cir. 2001).
`
`
`
`ALTERA v. CLEAR LOGIC
`
`13319
`
`We do not reverse the judgment if the alleged error in the jury
`instructions is harmless. Tritchler v. County of Lake, 358 F.3d
`1150, 1154 (9th Cir. 2004).
`
`The district court instructed the jury that
`
`A defendant does not infringe the mask works of a
`plaintiff if the defendant can prove by a preponder-
`ance of the evidence that it has engaged in legitimate
`reverse engineering. A question on the verdict form
`asks you to indicate whether you find that the defen-
`dant has proved that it has — that it engaged in legit-
`imate reverse engineering. To establish a legitimate
`reverse engineering defense, Clear Logic must prove
`by a preponderance of the evidence, the following
`requirements:
`
` Number 1. That Clear Logic reproduced Altera’s
`mask works solely for the purpose of teaching, sub-
`stantially analyzing, or substantially evaluating non-
`protectable concepts or techniques embodied in
`Altera’s mask works; and,
`
`2. That Clear Logic did not use or copy any of
`Altera’s protectable expression in the Clear Logic
`chips, but rather used only the non-protectable con-
`cepts or techniques embodied in Altera’s mask
`works in developing clear logic’s own chips, which
`contain an original layout design.
`
`(Tr. 1478-79) (emphasis added). The judge continued to
`instruct the jury that
`
`the law actually permits a competitor to reproduce
`the mask work if that reproduction is done solely as
`a step in a process of creating its own original mask
`work. A mask work is original as long as it exhibits
`any minimal degree of creativity in any aspect of the
`
`
`
`13320
`
`ALTERA v. CLEAR LOGIC
`
`mask work layout. The requisite level of creativity
`for originality is extremely low; even a slight amount
`will suffice.
`
` Notice that I use the term “legitimate” reverse
`engineering. In the process of reverse engineering,
`the competitor is allowed to photograph and repro-
`duce a registered mask work. If the competitor uses
`this information to reproduce a substantially identi-
`cal mask work, as for example a virtual photocopy,
`the competitor has not engaged in legitimate reverse
`engineering.
`
` Legitimate reverse engineering would start with
`photographing and reproducing the mask work, but
`the photograph and reproduction is used for the pur-
`pose of study and analysis, and then the competitor
`must combine this study and analysis with its own
`engineers’ engineering efforts to yield its own origi-
`nal mask work.
`
` Because the new mask work is designed to be
`interchangeable with the registered mask, it may be
`substantially similar to the registered mask work.
`
`(Tr. 1481-82).
`
`The question on the verdict form pertinent to the defense of
`reverse engineering stated:
`
` Did Clear Logic prove that it reproduced Altera’s
`mask works solely for the purpose of analysis to
`develop its own original layout design, namely one
`which is not substantially identical to components or
`groupings of components or interconnections on the
`corresponding Altera mask work which are material
`and original?
`
`
`
`ALTERA v. CLEAR LOGIC
`
`13321
`
` Answer as to each mask works which is the sub-
`ject of this action. A “Yes.” answer is a finding that
`the defense of legitimate reverse engineering was
`proved. A “No.” answer is a finding that the defense
`of legitimate reverse engineering was not proved.
`
`The jury responded “No” with respect to each mask work,
`finding that Clear Logic had not established a reverse engi-
`neering defense for any of the chip families.
`
`[6] The SCPA’s reverse engineering provision allows copy-
`ing the entire mask work. It does not distinguish between the
`protectable and non-protectable elements of the chip as long
`as the copying is for the purpose of teaching, evaluating, or
`analyzing the chip. Although the product created from that
`analysis must be original, the process of studying the chip is
`not limited to copying ideas or concepts. The district court’s
`instructions initially define “legitimate reverse engineering”
`to allow copying and analyzing only “non-protectable con-
`cepts or techniques.” This is an incorrect statement of the law.
`
`[7] The district judge’s instructions in this case were
`extremely thorough; he made a real effort to make the instruc-
`tions on this complex subject understandable to the jury. The
`instructions on the reverse engineering defense extend for
`several pages of the transcript. The later instructions correctly
`state the law applicable to the defense of reverse engineering
`and remedy the initial incorrect statement. They explain that
`it is permissible to reproduce “a registered mask work” as a
`step in the process of creating an original chip, so long as the
`purpose of reproducing the chip is appropriate. The district
`judge correctly explained that only minimal ingenuity is nec-
`essary for a second chip to qualify as original, and he empha-
`sized
`the distinction between substantial
`identity and
`substantial similarity. As the court in Brooktree discussed, the
`similarities in a chip may outweigh the differences. 977 F.2d
`at 1570. In this case, there was sufficient testimony about both
`the similarities and the differences in the mask works to allow
`
`
`
`13322
`
`ALTERA v. CLEAR LOGIC
`
`a jury to determine whether the Clear Logic mask works were
`original as defined under the Act. The incorrect statement in
`the instructions was not prejudicial error.
`
`As our opinion in In Re Asbestos Cases stated:
`
`Prejudicial error results when looking to the instruc-
`tions as a whole, the substance of the applicable law
`was [not] fairly and correctly covered. The instruc-
`tions and interrogatories must fairly present the
`issues to the jury. If the issues are fairly presented,
`the district court has broad discretion regarding the
`precise wording.
`
`847 F.2d 523, 524-25 (9th Cir. 1988) (internal citations and
`quotation marks omitted, alteration in original). In the case at
`hand, the interrogatory (or question) presented to the jury was
`clear and concise and correctly stated the law. It is significant
`that this was the statement of the law to which the jury partic-
`ularly responded. We hold that, viewing the instructions and
`the interrogatory as a whole, the legal issue was fairly pre-
`sented to the jury.
`
`IV.
`
`Copyright Preemption and the State Law Claims
`
`In addition to Altera’s claims under the SCPA alleging
`infringement of Altera’s mask works, Altera alleged that
`Clear Logic caused Altera customers to use Altera software in
`violation of its software licensing agreement. Clear Logic
`argues that the state law claims related to the software licens-
`ing agreement are preempted by federal copyright law. The
`Copyright Act specifically preempts “all legal or equitable
`rights that are equivalent to any of the exclusive rights within
`the general scope of copyright.” 17 U.S.C. § 301(a). The
`rights protected under the Copyright Act include the rights of
`reproduction, preparation of derivative works, distribution,
`
`
`
`ALTERA v. CLEAR LOGIC
`
`13323
`
`and display. 17 U.S.C. § 106. Whether copyright preemption
`applies is a question of law reviewed de novo. Waits v. Frito-
`Lay, Inc., 978 F.2d 1093, 1099 (9th Cir. 1992).
`
`The district court found that the Copyright Act did not pre-
`empt Altera’s state law intentional interference claims based
`on the “sole use” provision because the claims included an
`“extra element” not included within the Copyright Act’s pro-
`tections. We agree with the district court.
`
`If a state law claim includes an “extra element” that makes
`the right asserted qualitatively different from those protected
`under the Copyright Act, the state law claim is not preempted
`by the Copyright Act. Summit Mach. Tool Mfg. v. Victor CNC
`Sys., 7 F.3d 1434, 1439-40 (9th Cir. 1993); Bowers v. Bay-
`state Techs Inc., 320 F.3d 1317, 1323-24 (Fed. Cir. 2003).
`Most courts have held that the Copyright Act does not pre-
`empt the enforcement of contractual rights. See Bowers, 320
`F.3d at 1324-25 (noting that “most courts to examine this
`issue have found that the Copyright Act does not preempt
`contractual constraints on copyrighted articles”); Nat’l Car
`Rental Sys., Inc. v. Computer Assocs. Int’l, 991 F.2d 426, 431
`(8th Cir. 1993) (“National’s use of the licensed programs con-
`stitutes an extra element in addition to the copyright rights
`making this cause of action qualitatively different from an
`action for copyright.”); ProCD, Inc. v. Zeidenberg, 86 F.3d
`1447 (7th Cir. 1996) (noting that “courts usually read preemp-
`tion clauses to leave private contracts unaffected”). We find
`the logic of these cases persuasive here.
`
`In ProCD, the Seventh Circuit considered a situation simi-
`lar to the circumstances of this case. A consumer purchased
`ProCD’s software and used it in a manner contrary to the
`terms of the shrinkwrap license; he put the information on a
`website and made it available to companies at a fee lower
`than ProCD’s rate, although the terms of the license allowed
`only for private use. 86 F.3d at 1454-55. Likewise, Altera’s
`customers use software to create a bitstream (which is essen-
`
`
`
`13324
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`ALTERA v. CLEAR LOGIC
`
`tially information) and provide that information to Clear
`Logic, despite the terms of the agreement that restrict the cus-
`tomers to using that information for programming Altera
`products. The right at issue is not the reproduction of the soft-
`ware as Clear Logic argues, but is more appropriately charac-
`terized as the use of the bitstream. Similarly, the Eighth
`Circuit distinguished between use and reproduction
`in
`National Car Rental Systems, 991 F.2d at 432, specifically
`holding that use is a qualitatively different right. Id.
`
`[8] We find these cases compelling. A state law tort claim
`concerning the unauthorized use of the software’s end-
`product is not within the rights protected by the federal Copy-
`right Act, and accordingly, we affirm the district court’s