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Gomar Manufacturing Company, Inc. v. Novelli

96-4000 (U.S. Dist. Ct. D. N.J. 1998) (Unpublished)

COMPUTER SOFTWARE; DISABLING CODES—The Computer Fraud and Abuse Act, which imposes liability on those who put disabling codes in programs owned by another, has no exemption for the use of such codes by the programming supplier to prevent unauthorized use of the program.

A company was having problems with a computer-controlled laminating machine it purchased, so it did not make all the required payments. The supplier admitted that without the company’s knowledge it had placed a computer disabling code in the machine’s program and that the supplier could manipulate the code at any time to cause a malfunction in the of running the machine. The company sought criminal sanctions pursuant to the Computer Fraud and Abuse Act and moved for summary judgment. The supplier argued that the Act does not prohibit use of disabling codes by a program supplier to prevent unauthorized use of computer programs in commercial settings.

The District Court found no blanket exemption under the Act for a supplier that uses disabling codes to prevent unauthorized use in commercial situations. In fact, the Court found that the Act specifically imposes liability for putting disabling codes into computer programs without permission from the person who “owns or is responsible for the computer system.” However, the District Court held that summary judgment was inappropriate because there were material issues of fact to be resolved. Specifically, there was debate over whether the buyer was in fact the entity that owned or was responsible for the computer system or whether the system was still owned by the supplier due to the company’s non-payment. At one point in the proceedings, the company claimed that it refused to make final payment or to accept delivery of the machine, but the company later claimed that it never rejected the machine. Since ownership of the machine was at issue, the Court ordered a full hearing. Finally, the Court refused to grant a preliminary injunction against the supplier, finding that the buyer did not meet its burden of showing it would be irreparably injured absent such an injunction, or that the balance of hardships weighed in favor of the injunction.


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