                 FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

ALTERA CORPORATION,                   
                 Plaintiff-counter-
                                          Nos. 03-17323
              claimant-defendant-
                                               03-17334
                          Appellee,
               v.                          D.C. No.
                                          CV-99-21134-
CLEAR LOGIC, INCORPORATED,                  JW/PVT
               Defendant-counter-
                                            OPINION
                claimant-plaintiff-
                        Appellant.
                                      
       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
                   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
  1
   Altera 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.

   Clear Logic manufactures a different type of chip:
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
  2
   Altera 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
two-dimensional abstract drawing. After this, a layout
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-
  3
   There 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
  4
   Brooktree 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               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 rul-
ing rejecting preemption.

                               V.

                      Copyright Misuse

   Finding no clear authority for extending the doctrine of
copyright misuse beyond “its logical place as a defense to a
claim of copyright infringement,” the district court rejected
Clear Logic’s argument that Altera’s license agreements
should not be enforced because they operate as “illegal tying
arrangements because Altera is using its copyright in its pro-
gramming software to control competition in an area outside
the copyright, i.e. Altera’s chip hardware.” We review this
question of law de novo, and we affirm the district court’s rul-
ing. See Waits, 978 F.2d at 1099.

  In Practice Management Information Corp. v. American
Medical Association, we adopted the doctrine of copyright
misuse, specifically describing the doctrine as a “defense to
copyright infringement.” 121 F.3d 516, 520 (9th Cir. 2001)
(emphasis added); see also A&M Records v. Napster, Inc.,
239 F.3d 1004, 1026-27 (9th Cir. 2001) (discussing copyright
misuse as an affirmative defense). The Fifth Circuit has dis-
                    ALTERA v. CLEAR LOGIC                  13325
cussed copyright misuse as an “unclean hands defense” which
“forbids the use of the [copyright] to secure an exclusive right
or limited monopoly not granted by the [Copyright] Office
and which is contrary to public policy to grant.” Alcatel USA,
Inc. v. DGI Techs, Inc., 166 F.3d 772, 792 (5th Cir. 1999)
(alterations in original, internal citations omitted).

   [9] When copyright misuse applies, we do not allow
enforcement of the copyright for the period of misuse. Prac-
tice Mgmt Info Corp., 121 F.3d at 520 & n.3. Because the
remedy for copyright misuse is equitable, it makes little sense
to allow Clear Logic to proceed on an independent claim for
copyright misuse when there has been no allegation of copy-
right infringement. Cf. Sony Computer Entm’t, Inc. v. Con-
nectix Corp., 203 F.3d 596, 608 (9th Cir. 2000) (refusing to
consider copyright misuse where Sony had not established a
likelihood of success on the merits sufficient to merit injunc-
tive relief on a claim of copyright infringement). We have
already rejected Clear Logic’s copyright preemption argu-
ment. We cannot now void the license agreements under the
pretext of refusing to enforce a copyright that has not been
asserted. Copyright misuse is not a defense to the state law
claims asserted by Altera.

                              VI.

         The District Court’s Interpretation of the
              Software License Agreement

   In denying Clear Logic’s motion for summary judgment,
the district court found, as a matter of law, that “if [Altera’s]
software is used to create a bitstream, which is in turn used
to program a Clear Logic device, the software has necessarily
been used to program the Clear Logic device.” Such a use
would be contrary to the permitted use provision in Altera’s
software license agreement, which provides that users may
“use the Licensed Programs for the sole purpose of program-
ming logic devices manufactured by ALTERA and sold by
13326                    ALTERA v. CLEAR LOGIC
ALTERA or its authorized distributors.” Clear Logic urges
the court to take extrinsic evidence into consideration and
reach a more limited reading of the license provision. We
review the denial of a motion for summary judgment de novo,
and finding no error in the district court’s interpretation of the
contract, we affirm. Lee v. Gregory, 363 F.3d 931, 932 (9th
Cir. 2004).

   Under California law, extrinsic evidence is admissible if
the language of the contract is “reasonably susceptible” of the
meaning urged by the parties. Pacific Gas and Electric Co. v.
G.W. Thomas Drayage & Rigging Co., 442 P.2d 641 (Cal.
1968). Thus, even if the language appears unambiguous on its
face, the court must first make a preliminary determination
whether the evidence is relevant to prove a meaning of which
the instrument is reasonably susceptible. Banco do Brasil,
S.A. v. Latian, Inc., 285 Cal. Rptr. 870 (Cal. Ct. App. 1991).
Thus, the parties may introduce evidence to explain the terms
of the contract, but they may not introduce evidence of terms
not specifically included in the contract or evidence that con-
tradicts the terms of the contract. Id. at 891; see also
Brinderson-Newberg Joint Venture v. Pacific Erectors, Inc.,
971 F.2d 272, 277 (9th Cir. 1992).

   As Clear Logic reads the contract, the permissible use pro-
vision covers only the use of the software, but not the “output
of the program, including the bitstream file.” The district
court initially rejected this argument, finding that “the unam-
biguous language of the software license provides that the
Altera software may be used to program an Altera device. If
the software is used to create a bitstream, which in turn is
used to program5 a Clear Logic device, the software has nec-
  5
    Clear Logic makes much of the district court’s use of the term “pro-
gram” with respect to the Clear Logic devices. But if “create” is substi-
tuted for “program” in the district court’s statement, the result is the same.
The importance is not whether a Clear Logic device can be programmed,
but that the end device is not an Altera product.
                    ALTERA v. CLEAR LOGIC                  13327
essarily been used to program the Clear Logic device.” In its
order denying Clear Logic’s motion to reconsider, however,
the district court stated that it had “thoroughly reviewed Clear
Logic’s extrinsic evidence for a second time” and found that
the evidence did not support Clear Logic’s interpretation of
the terms.

   [10] The intent of the parties is the governing notion of
contract law. Altera’s intent is clear from the language of its
license agreement: Altera sought to prevent competitors from
benefitting from its software. The district court correctly gave
effect to the terms of the contract and the intent of the parties
and we affirm the district court’s denial of Clear Logic’s
motion for summary judgment on that issue.

                              VII.

        Clear Logic’s Motion for Judgment as a
       Matter of Law on Altera’s State Law Claims:
         The Validity of the License Agreements

   Finally, Clear Logic argues that Altera should have been
forced to prove which customers were subject to which
licensing provision, and whether each of those contracts was
valid. We review the district court’s denial of Clear Logic’s
motion for judgment as a matter of law de novo, Bell v. Clack-
amas County, 341 F.3d 858, 865 (9th Cir. 2003), viewing the
evidence in the light most favorable to Altera. Reeves v.
Sanderson Plumbing Prod., Inc., 530 U.S. 133, 149-50
(2000).

   Altera argues that it did not have to prove that any specific
customers were parties to specific provisions, because tortious
interference “arises from interference with the contractual
relationship, not from interference with any specific contract.”
Altera cites Ramona Manor Convalescent Hospital v. Care
Enterprises, 225 Cal. Rptr. 120, 126 (Cal. Ct. App. 1986) to
support that claim. The language in that case, however, refers
13328               ALTERA v. CLEAR LOGIC
to the allegedly infringing party’s intent at the time of the
conduct in question. When the defendant performs the act that
causes the interference, the defendant need not know exactly
who is a party to the contract, so long as he knows he is inter-
fering with a contractual relationship. Id.; see also Sebastian
Int’l. v. Russolillo, 162 F. Supp. 2d 1198, 1203-04 (C.D. Cal.
2001) (taking note of this distinction); Rest. 2d Torts § 766
(Comment p) (noting that the person inducing a breach must
be aware that there is a contract, but need not know the spe-
cific parties to the contract). For purposes of alleging the two
state law torts Altera has alleged, interference with contrac-
tual relations and inducing breach of a contract, Altera must
prove not only that Clear Logic knew a contract existed, but
must prove, as an element of the breach of contract claim, that
a valid contract existed. The terms of a contract on paper,
with no evidence that any parties agreed to those terms, do not
prove the existence of a valid contract.

   [11] Nonetheless, the district court properly denied judg-
ment as a matter of law. The permitted use restriction was
added to the Altera software licensing agreement in 1996, and
the word “sole” was added in 1999. The addition of the word
“sole” makes the intent clearer, but does not alter the legal
operation of the terms. Furthermore, the printed bitstreams
Altera submitted at trial identify the version of the software,
and therefore the version of the permitted use restriction at
issue. Renewing a software subscription includes renewal of
the licensing agreement, so that customers must agree to an
updated version of the licensing agreement periodically, and
few customers are likely to maintain an older version of the
software because the older version may not support newer
product lines. Altera customers cannot use the software, and
therefore create the bitstreams, without agreeing to the licens-
ing agreement, including the permitted use restriction. In
essence, a valid contract is a prerequisite to the creation of a
bitstream from Altera software, and the jury could logically
conclude that valid contracts were formed via the Altera
licensing agreements before customers sent bitstreams to
                    ALTERA v. CLEAR LOGIC                  13329
Clear Logic. We therefore affirm the district court’s denial of
judgment as a matter of law on the final claim.

                          Conclusion

   The judgment of the district court and the permanent
injunction are AFFIRMED.



RYMER, Circuit Judge, concurring:

   I agree that the district court’s instructions did not consti-
tute reversible error on the record presented to us for review.
As the district court held, the selection, combination and
arrangement of electrical components in the mask works
(which it called the “mask work layout design”), including the
placement, orientation, and interrelationship of groupings of
transistors and interconnection lines are protectible.

   However, I write separately for two reasons. First, to
emphasize that our decision today does not mean that the
SCPA protects chip functionality or provides protection to
chips in any way synonymous with the protections provided
through patent law. To the extent our opinion or the district
court’s rulings pertain to functionality, it is in the context of
a case where the experts differed with each other (and even
occasionally with themselves) about what the layout design
amounts to, and what the architecture of the semiconductor
chips at issue is in relation to the organization of components,
groupings of transistors, and interconnecting lines. Based on
the state of the evidence, I cannot say that the district court
erred in allowing the jury to consider the entirety of the mask
works for both chips including not only the design layout of
the transistors, but also how these transistors came together on
the chip to form components and how both chips placed inter-
connecting lines between those components and groups of
transistors. Each side capitalized on the instructions, Clear
13330               ALTERA v. CLEAR LOGIC
Logic arguing that the differences in how it laid out its tran-
sistors led to substantial and original design differences
between its family of chips and Altera’s chips, while Altera
argued that the way it grouped its transistors into different
components and placed interconnecting lines between those
components was original to Altera and substantially copied by
Clear Logic. In this way, on the facts adduced in this particu-
lar case, the jury could decide whether the expression of those
elements in Altera’s family of chips was original and substan-
tially similar to the expression of those same elements in
Clear Logic’s family of chips.

   Second, to suggest that this is the type of case in which it
might have been useful to have a court-appointed, indepen-
dent expert. Neutral definitions and a common understanding
of the underlying technology would have been extremely
helpful as background for determining whether the chips
should have been compared for substantial similarity only at
the transistor level, only at the component level, or at some
level in between.

    I salute the district court and the parties for having held a
tutorial on the technology. It was undoubtedly valuable to the
district judge. The only problem is, it was unreported (which
is understandable, as a principal benefit of a tutorial is the
opportunity for informal exchange) and thus, it was unavail-
able to assist us. In future cases where such formats are used
— and I encourage it, having benefitted from similar tutorials
when I served as a district judge — I urge district judges and
litigants to consider the possibility of videotaping the tutorial
for whatever assistance it may be to the court of appeals.
