CHICAGO (CN) – Home Depot did not violate the copyright of a product-classification system when it built its own database after buying a perpetual license to another company’s system, the 7th Circuit ruled.
In 2004, Home Depot contracted with Edgenet to create a “taxonomy” that classified the more than 250,000 products in its inventory. The two companies set up a database that sorted products into categories and described each product’s specific attributes.
Edgenet retained intellectual property rights to the taxonomy, which it licensed to Home Depot at no cost provided that Edgenet remained Home Depot’s data-pool vendor. The contract also gave Home Depot the option to buy a perpetual license for $100,000.
In 2008, Home Depot began developing an in-house database, prompting Edgenet to register a copyright on the taxonomy called the “Big Hammer Master Collection Taxonomy and Attributes 2008.”
On Feb. 26, 2009, Home Depot announced its plans to terminate the agreement and sent Edgenet a check for $100,000 to purchase the perpetual license. Edgenet returned the check and filed suit, claiming copyright infringement.
The suit said Home Depot violated the terms of the agreement by copying the taxonomy before offering payment and by allowing its Canadian subsidiary to terminate its agreement with Edgenet, invalidating the perpetual license option.
A federal judge rejected this argument, and the 7th Circuit affirmed Friday.
“Home Depot didn’t do anything wrong by copying the taxonomy before paying $100,000,” Chief Judge Frank Easterbrook wrote for a three-judge panel. “Both the 2004 contract and the 2006 contract give Home Depot permission to employ the taxonomy as long as Edgenet remained its database-service provider.”
The judges also found that the contract was valid because Edgenet declined to revoke Home Depot’s license when the Canadian subsidiary contracted elsewhere.
“Termination of the contract lay a few months in the future; it required advance notice, which Home Depot gave,” Easterbrook wrote. “When Home Depot exercised its option, the copyright license for the taxonomy was in force. Thus Home Depot has not been in violation of the copyright laws for even one day.”
Home Depot is the largest home improvement retailer in the United States and operates more than 2,000 stores worldwide.