Arbitration was traditionally used to resolve different sorts of disputes having to do with labor, construction and insurance issues, among others. So, for a long time, it was not taken into account concerning software copyright cases. But that situation changed forever in the mid 1980’s when International Business Machines (IBM) and Fujitsu announced that they would have an arbitrated settlement to resolve a bitter, and rather long, dispute over software rights.

1. AN AMAZING STORY OF
ARBITRATION IN
COPYRIGHT DISPUTES
By Shahram Shirkhani
Image courtesy of
digital_trash at
Flickr.com

2. An amazing story of arbitration
in copyright disputes
Arbitration was traditionally used to resolve different sorts of
disputes having to do with labor, construction and insurance
issues, among others. So, for a long time, it was not taken into
account concerning software copyright cases. But that
situation changed forever in the mid 1980’s when
International Business Machines (IBM) and Fujitsu
announced that they would have an arbitrated settlement to
resolve a bitter, and rather long, dispute over software
rights. For that reason, it is not an exaggeration to claim that
proponents of arbitration were completely excited at that time.
They saw this case as an early example of future cases in which
copyright disputes over computer software would be resolved by
means of arbitration. And they were right. After all, the IBM v.
Fujitsu case was not only a very important arbitration case
at that time, but also had a crucial influence on the

3. An amazing story of arbitration
in copyright disputes
The dispute had to do with an allegation made by IBM. This
company claimed that Fujitsu had copied its operating
system software, but instead of litigating this complex
issue, they decided to arbitrate it. The operating system in
question was the then revolutionary System / 360, which IBM
introduced in the early 1960’s. This operating system was
compatible with the whole line of IBM computers, including
small processors and larger mainframes. And this meant that for
the first time, customers could use the same applications
program in different processing units, which implied that they
could invest in one kind of software without needing to change it
in the future if they decided to move up to larger computers. It is
argued for that reason that this family of computers and the
architecture that accompanied them changed how data
processing took place, and this led some people to see them as
the most successful computer in history.

4. An amazing story of arbitration
in copyright disputes
Both the System / 360 and its successor, the System / 370, were very
successful in the marketplace, because their users could expand and
modify their computers without having to think about changing their
applications software. In turn, customers started investing more money on
applications software for IBM operating system software, and this was
reflected in the growth of the market for IBM compatible hardware.
The problem was that these
operating systems remained
in the public domain for a
long period of time. The
reason was that IBM only
registered copyright protection
on its operating system
software in 1978, since that
year the National Commission
on New Technological Uses of
Copyrighted Works (CONTU)
gave the recommendation to
extend copyright protection toImage courtesy of kris_kolak at Flickr.com

5. An amazing story of arbitration
in copyright disputes
At that moment, different plug-compatible manufacturers
had been relying on the IBM-compatible market. They
were developing machines with equivalent or superior
performance at lower prices. And that was the case of a
company like Fujitsu. This company started the
development of its first M Series operating system in the
early and the mid 1970’s, and marketed with no
problems at all until October, 1982, when IBM argued
that Fujitsu had appropriated the mainframe operating
system programs that it was using for its M Series
illegally. But Fujitsu replied that they had designed
their own operating system, and that the IBM
technology that they could have used was already in
the public domain. They further argued that the main
motivation behind IBM’s allegation was in fact the
elimination of competitors.

6. An amazing story of arbitration
in copyright disputes
So, the two parts decided to negotiate, instead of
litigating the dispute. The negotiations took months to
come to an agreement, but finally in July, 1983, both
parts signed a settlement. Fujitsu agreed to pay
certain sum, which has been calculated to be as high as
$60 millions a year, due to previous distribution and use
of certain programs, and even agreed to pay a license
fee regarding future sales of other programs. But Fujitsu
did not admit that it was guilty of any form of copyright
infringement. On the other hand, IBM agreed to waive
the infringement claims that it had made, and even
decided to exchange the interface information that both
companies had given to customers that were employing
licensed programming material.

7. An amazing story of arbitration
in copyright disputes
The arbitration clause in the 1983 Settlement Agreement
was invoked by IBM in 1985 in order to file a demand for
arbitration. IBM did it with the American Arbitration
Association (AAA), and charged Fujitsu with the
violation of IBM's intellectual property rights in
operating systems software. After a long process of
arbitration, which took more than 26 months of
negotiations, the arbitrators reached three major results
on September 15, 1987. First, Fujitsu would have
access to IBM's programming material, but only for a
limited time and through a secured facility arrangement.
Second, Fujitsu guaranteed that it would pay IBM for
past and future use of its technology. And third, the
arbitrators retained the authority to resolve software
disputes between the two parties even when the
secured facility regime came to an end.