Globeranger Corp. v. Software AG United States of America, Inc.
836 F.3d 477
| 5th Cir. | 2016Background
- GlobeRanger developed an RFID inventory-management platform (iMotion) and a Navy-specific implementation (the "Navy Solution").
- GlobeRanger subcontracted for the Navy; the Navy later selected Software AG to implement an enterprise-wide RFID system, after which Software AG accessed GlobeRanger materials and source code.
- GlobeRanger sued in federal court, voluntarily dismissed, refiled in state court asserting trade-secret misappropriation, conversion, unfair competition, conspiracy, and tortious interference; Software AG removed to federal court asserting complete preemption by the Copyright Act.
- After a pretrial narrowing, the jury tried only trade-secret misappropriation and derivative conspiracy; it found misappropriation and awarded $15 million in compensatory damages (no punitive damages, no conspiracy).
- On appeal, Software AG challenged (inter alia) copyright preemption/jurisdiction, sufficiency of evidence on trade secrets, improper acquisition/use given DoD contracting rules (FAR/DFARS), damages model, and jury instructions.
- The Fifth Circuit: held trade-secret claim not preempted by Copyright Act; concluded that removal-founding preempted conversion claim supported federal jurisdiction (despite its later dismissal); affirmed judgment on merits, damages, and jury charge.
Issues
| Issue | Plaintiff's Argument (GlobeRanger) | Defendant's Argument (Software AG) | Held |
|---|---|---|---|
| Copyright preemption of trade-secret claim | Trade-secret law requires proof of improper means or breach of confidential relationship — an extra element distinct from copyright | Alleged conduct was merely copying/use of copyrightable software, so state claim is equivalent and completely preempted | Trade-secret claim not preempted: extra-element (improper means/confidential relationship) distinguishes it from copyright |
| Federal jurisdiction after removal | Jurisdiction proper because at least one originally pled claim (conversion) was completely preempted at time of removal, supporting federal-question jurisdiction and supplemental jurisdiction over trade-secret claim | If trade-secret claim not preempted, then no federal claim remains and case should be remanded | Affirmed federal jurisdiction: GlobeRanger I had found conversion preempted at removal; that supported federal jurisdiction even though conversion was later dismissed |
| Existence, specificity of trade secrets | GlobeRanger: iMotion source code, filtering algorithms, license-keyed installations and related materials constituted protectable trade secrets and were guarded | Software AG: insufficiently specific; evidence did not identify concrete secrets and many components were commercial or not secret | Jury had sufficient evidence on trade-secret existence; Texas law does not demand hyper-specific listing at trial |
| Use/misappropriation & effect of DFARS/FAR | GlobeRanger: Software AG obtained materials through improper means/notice and used them to assist R&D of competing product; much of iMotion was "commercial computer software" so DFARS did not permit broad government disclosure | Software AG: Navy (and FAR/DFARS) gave rights to share technical data or government-funded development means Software AG’s use was lawful; if software, must show copying via access-plus-similarity | Jury evidence supported misappropriation and "use" (including reliance to accelerate development); jury reasonably found key components were commercial software not surrendered to the government; DFARS arguments rejected on the record |
Key Cases Cited
- GlobeRanger Corp. v. Software AG, 691 F.3d 702 (5th Cir. 2012) (prior panel decision resolving early preemption/removal issues and informing jurisdictional analysis)
- Spear Mktg., Inc. v. BancorpSouth Bank, 791 F.3d 586 (5th Cir. 2015) (conversion and theft-based claims involving intangible information can be preempted where the claimed injury equates to copying/transmission)
- Alcatel USA, Inc. v. DGI Techs., Inc., 166 F.3d 772 (5th Cir. 1999) (explains extra-element test for copyright preemption and found certain unfair-competition misuse claims preempted)
- Computer Mgmt. Assistance Co. v. Robert DeCastro, Inc., 220 F.3d 396 (5th Cir. 2000) (state unfair-practices claim survived preemption where statute required fraud/misrepresentation — treated as an extra element)
- Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867 (5th Cir. 2013) (trade-secret "use" includes relying on plaintiff’s secrets to assist or accelerate defendant’s development)
- Dun & Bradstreet Software Servs., Inc. v. Grace Consulting, Inc., 307 F.3d 197 (3d Cir. 2002) (trade-secret misappropriation claims generally not preempted by Copyright Act when improper acquisition or breach of confidentiality is alleged)