Dun & Bradstreet Software Services, Inc. v. Grace Consulting, Inc., 307 F.3d 197

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307 F.3d 197 | 3rd Cir. | 2002

Before: SCIRICA, ROSENN, Circuit Judges,(cid:13) and KANE,* District Judge(cid:13) (Filed: September 24, 2002)(cid:13) Wayne C. Matus (Argued)(cid:13) LeBoeuf, Lamb, Greene & MacRae(cid:13) 125 West 55th Street(cid:13) New York, NY 10019(cid:13) Harvey C. Kaish(cid:13) McCarter & English(cid:13) 100 Mulberry Street(cid:13) Four Gateway Center(cid:13) Newark, NJ 07107-0652(cid:13) Peter J. Gallagher(cid:13) Salans, Hertzfeld, Heilbronn,(cid:13) Christy & Viener(cid:13) 620 Fifth Avenue(cid:13) New York, NY 10020(cid:13) Counsel for Appellant(cid:13) Geac Computer Systems(cid:13) Andrew J. Kyreakakis (Argued)(cid:13) Ambrosio, Kyreakakis, DiLorenzo,(cid:13) Moraff & McKenna(cid:13) 317 Belleville Avenue(cid:13) Bloomfield, NJ 07003(cid:13) Counsel for Appellees(cid:13) Grace Consulting, Inc. and Grace(cid:13) Maintenance(cid:13) Leonard T. Nuara (Argued)(cid:13) Thacher, Proffitt & Wood(cid:13) 1 Exchange Place, Suite 600(cid:13) Jersey City, NJ 07302(cid:13) Counsel for Appellee(cid:13) Anthony Ilutzi(cid:13) _________________________________________________________________(cid:13) * Honorable Yvette Kane, United States District Court for the Middle(cid:13) District of Pennsylvania, Sitting by Designation.(cid:13) 2(cid:13) Ronald S. Katz(cid:13) Coudert Brothers(cid:13) 600 Beach, 3rd Floor(cid:13) San Francisco, CA 94109(cid:13) Counsel for Amicus for(cid:13) Appellee Service Industry(cid:13) Association(cid:13) OPINION OF THE COURT(cid:13) ROSENN, Circuit Judge.(cid:13) This appeal presents serious problems of alleged(cid:13) copyright infringement in an evolving and highly(cid:13) competitive world of computer technology that challenges(cid:13) the effectiveness of our well-established copyright laws.(cid:13) Formerly known as Dun & Bradstreet Software Services,(cid:13) Inc. (DBS), Geac Computer Systems, Inc. (collectively Geac)(cid:13) is the undisputed owner of certain proprietary, copyrighted(cid:13) software, including a system known as Millennium. The(cid:13) system is designed to provide valuable services to the(cid:13) business community at large.(cid:13) Millennium contains highly confidential information and(cid:13) trade secrets that were designed and developed by Geac at(cid:13) great effort and expense. Geac complains that Grace(cid:13) Consulting, Inc., its founder, president, and chief executive(cid:13) officer Anthony Ilutzi, and a related enterprise, Grace(cid:13) Maintenance, Int. (collectively Grace) deliberately have(cid:13) infringed on Geac’s copyrighted software while in the(cid:13) course of providing consulting and maintenance services to(cid:13) companies licensed by Geac to use its software.(cid:13) Geac brought suit against Grace in March 1994 in the(cid:13) United States District Court for the District of New Jersey.1(cid:13) Grace filed an answer together with counterclaims for(cid:13) _________________________________________________________________(cid:13) 1. The District Court had subject matter jurisdiction pursuant to 28(cid:13) U.S.C. SS 1331, 1338 and 1367 because the plaintiffs’ complaint alleges(cid:13) claims under the federal Copyright Act and related state law claims. This(cid:13) court has appellate jurisdiction of the timely appeals from the final(cid:13) judgment of the District Court pursuant to 28 U.S.C.S 1291.(cid:13) 3(cid:13) breach of contract and tortious interference. The District(cid:13) Court struck Grace’s counterclaims and six of its defenses(cid:13) after the close of testimony. The court, however, entered(cid:13) summary judgment in favor of the defendants on Geac’s(cid:13) claim for misappropriation of trade secrets. On the(cid:13) remaining issues, the case was tried to a jury which(cid:13) returned a verdict in favor of the defendants. The Court(cid:13) denied Geac’s motions for a judgment as a matter of law(cid:13) after trial and for a new trial. Geac timely appealed. The(cid:13) Court also rejected Grace’s claim for attorneys’ fees. Grace(cid:13) timely cross-appealed. We affirm in part and reverse in(cid:13) part.(cid:13) I.(cid:13) BACKGROUND(cid:13) A. GEAC’S MILLENNIUM SOFTWARE(cid:13) Among the United States copyrighted products owned by(cid:13) Geac are twelve different software business applications,(cid:13) collectively known as Millennium. These applications keep(cid:13) track of a host of business information, such as accounts(cid:13) payable, taxes payable, accounts receivable, fixed assets,(cid:13) and others. Trade secrets and highly confidential(cid:13) information are found in a wide variety of materials relating(cid:13) to Millennium, including but not limited to: (a) source and(cid:13) object codes for applications and operating software; (b)(cid:13) software documentation; (c) software upgrades; (d) manuals(cid:13) and materials for training, installation, service and(cid:13) maintenance; and (e) customer lists and other information(cid:13) about the specific needs of its licensees. Geac faces(cid:13) substantial competition for all of its Millennium products,(cid:13) and its confidential information and trade secrets allow it to(cid:13) compete effectively and advantageously.(cid:13) Geac authorizes its customers to use its Millennium(cid:13) software under licensing agreements that contain protective(cid:13) provisions for its trade secrets and copyrighted properties.(cid:13) The licensing agreements provide, inter alia, that if a(cid:13) customer engages a third party consultant to install or(cid:13) configure the software to the customer’s needs or for(cid:13) 4(cid:13) maintenance, the consultant must execute a non-disclosure(cid:13) agreement acceptable to Geac. Geac also offers(cid:13) maintenance service to its customers for its Millennium(cid:13) software which includes, among other things, telephone(cid:13) support, repairs, fixing program errors ("bugs"), and(cid:13) updated versions of Millennium. Millennium runs on a(cid:13) large mainframe computer that is typically licensed to large(cid:13) corporations and institutions, with the customers electing(cid:13) which of Millennium’s twelve copyrighted software(cid:13) applications it wants to license.(cid:13) At issue here is the Human Resources application known(cid:13) as HR:M. This application enables licensees to perform(cid:13) various payroll, benefits, and other employee-related(cid:13) functions in any jurisdiction in the United States. HR:M(cid:13) consists of numerous individual programs, each of which(cid:13) are self-contained units of code. Each of the programs(cid:13) performs one or more of the many individual tasks(cid:13) comprising the application. One of such programs is Geac’s(cid:13) W-2 PAYTXABR. This W-2 program enables employers to(cid:13) prepare employee W-2s and related year-end reports(cid:13) required by federal and state taxing authorities.(cid:13) B. GRACE’S OPERATIONS(cid:13) Grace Consulting, Inc. is a New Jersey corporation with(cid:13) its principal place of business in Verona, New Jersey, and(cid:13) is engaged in the business of computers and software(cid:13) consulting. Anthony Ilutzi, a New Jersey resident, formed(cid:13) the company to provide consulting services to Geac(cid:13) licensees. This company also does business as Grace(cid:13) Maintenance, Int., which was formed in 1993 to provide a(cid:13) program of maintenance support services for Millennium.(cid:13) We refer to them collectively as Grace. Grace’s activities in(cid:13) implementing their services apparently triggered this suit(cid:13) by Geac.(cid:13) Commencing in 1993, Grace offered and performed(cid:13) services for Geac’s licensees, including customizing(cid:13) Millennium software for their specific needs, fixing"bugs"(cid:13) in Millennium software, providing tax and regulatory(cid:13) updates, and modifying Geac’s programming language code.2(cid:13) _________________________________________________________________(cid:13) 2. Instructions for a computer program may be written in any of three(cid:13) different levels of computer language.(cid:13) 5(cid:13) Grace began offering Millennium licensees Grace’s"Remain(cid:13) on Release" program, which provides Geac customers with(cid:13) Grace’s own version of Geac’s W-2 program. Grace(cid:13) represented that this software maintenance program(cid:13) "allows customers to stay on their present release without(cid:13) having to accept expensive upgrades from the vendor."(cid:13) Under this program, Grace purported to save Geac(cid:13) customers considerable money they presumably would pay(cid:13) Geac under its maintenance program.(cid:13) Grace’s W-2 software was initially developed by Cook &(cid:13) Reynolds Services, Inc. (CNR), a company formed by two(cid:13) former Geac employees, Stan Cook and Rick Reynolds. In(cid:13) 1996, Grace purchased the rights to CNR’s W-2 program,(cid:13) revised it, and renamed the individual programs to begin(cid:13) with a "GMI" prefix instead of "CNR." The CNR W-2 then(cid:13) became known as "GMITXABR."(cid:13) _________________________________________________________________(cid:13) Computers can "understand" (that is, execute) only programs in(cid:13) "machine language" -- the lowest level. A machine language is a(cid:13) cluster of "0" and "1" symbols called"bits," which are the only(cid:13) symbols recognized by digital computers. A program consisting of a(cid:13) sequence of machine language instructions is referred to as "object(cid:13) code."(cid:13) To make it easier for humans to read and write programs, two(cid:13) "higher" levels of languages exist. The first level is "assembly(cid:13) language." Assembly language instructions consist of alphanumeric(cid:13) labels rather than bits. To be executed by the computer, the(cid:13) alphanumeric instructions must be translated into their(cid:13) corresponding clusters of bits by another computer program known(cid:13) as an "assembler." At the next level are "high-level" computer(cid:13) languages, such as FORTRAN or COBOL, that employ English-like(cid:13) words and syntax and are therefore easier to use and understand(cid:13) than assembly or machine language. Each high-level instruction is(cid:13) the equivalent of several assembly or machine language(cid:13) instructions. A computer program known as a "compiler" translates(cid:13) high-level programs into the corresponding object code. Programs(cid:13) written in assembly or high-level languages are referred to as(cid:13) "source programs" or "source code."(cid:13) Copyright Protection of Computer Program Object Code , 96 HARV. L. REV.(cid:13) 1723, 1725 (footnotes omitted).(cid:13) 6(cid:13) C. GEAC’S LICENSING AGREEMENTS(cid:13) Geac has two standard Millennium licensing agreements(cid:13) that are at issue here: the DBS and the McCormack and(cid:13) Dodge (M&D) agreements (collectively, the License(cid:13) Agreements). The DBS License Agreement prohibits anyone(cid:13) from modifying Geac’s Millennium software without Geac’s(cid:13) authorization. The M&D License Agreements permit a third(cid:13) party consultant, in limited instances, to modify the Geac(cid:13) code, provided it satisfies the Agreement’s non-disclosure(cid:13) and work-for-hire prerequisites for accessing the code.(cid:13) Both of Geac’s License Agreements prohibit the removal(cid:13) of the Geac code from the licensee’s site. The M&D License(cid:13) Agreement authorizes and limits the licensee to use the(cid:13) system solely for its own internal operation on any central(cid:13) processor within Customer’s data center at the location(cid:13) designated on the "Customer and Product Information(cid:13) Schedule" or, with the prior approval of Geac, at a(cid:13) designated replacement site or service bureau. This(cid:13) Agreement defines use as "copying any portion of a(cid:13) Licensed Program . . . or transmitting [it] to a computer for(cid:13) processing of the instructions or statements contained in(cid:13) the Licensed Program." The Agreement expressly provides(cid:13) that "customer[s] shall not copy the System, in whole or in(cid:13) part, except as expressly provided in the [M&D] license(cid:13) agreement." The DBS License Agreement also restricts the(cid:13) use, including copying, of the Geac source code, solely for(cid:13) "purposes on the Hardware and Operating System Software(cid:13) at the Site." Both License Agreements bar the distribution(cid:13) of modified versions of the code. It is undisputed that(cid:13) approximately 35% of Grace customers are subject to the(cid:13) DBS license agreement and 65% are subject to the M&D(cid:13) license agreement.(cid:13) In relevant part, the M&D License Agreement specifically(cid:13) provides:(cid:13) - Customer may also disclose M&D confidential(cid:13) information to Customer’s consultants who have(cid:13) been retained to perform work for hire in connection(cid:13) with Customer’s use of the System. All Customer(cid:13) consultants having access to M&D confidential(cid:13) information will be required to execute a non-(cid:13) 7(cid:13) disclosure agreement acceptable to M&D prior to(cid:13) disclosure.(cid:13) - Customer shall not copy the System, in whole or in(cid:13) part, except as expressly provided in this section.(cid:13) The System may be copied, in whole or in part, in(cid:13) printed or machine readable form, for use by(cid:13) Customer at the designated site, for archive or(cid:13) emergency restart purposes, to replace a worn copy,(cid:13) to understand the contents of such machine-(cid:13) readable materials . . . ."(cid:13) At trial, Geac’s counsel conceded that "under the M&D(cid:13) license, we allowed customers and consultants that(cid:13) qualified, to modify the source code for that customer only."(cid:13) In relevant part, the DBS Software License Agreement(cid:13) specifically provides:(cid:13) - Customer may make a reasonable number of copies(cid:13) of the Program exclusively for testing, disaster(cid:13) recovery, inactive back-up or archival purposes.(cid:13) - Each party shall hold Confidential Information of(cid:13) the other in confidence . . . . All Confidential(cid:13) Information shall remain the sole property of the(cid:13) disclosing party.(cid:13) - Upon execution of a satisfactory nondisclosure(cid:13) agreement, third parties may have access to(cid:13) Confidential information.(cid:13) - All programs and Documentation, and any(cid:13) modification or copies thereof are proprietary and(cid:13) protected by copyright and/or trade secret law and(cid:13) no ownership rights are transferred by this(cid:13) Agreement.(cid:13) - Customer shall not modify, reverse engineer, reverse(cid:13) assemble or reverse compile any Program or part(cid:13) thereof . . . .(cid:13) In addition, all third party consultants engaged to work(cid:13) on software products licensed by Geac to its customers are(cid:13) required to execute a consultant’s non-disclosure (cid:13) agreement.3 It provides, in relevant part, for an(cid:13) _________________________________________________________________(cid:13) 3. The consultant non-disclosure agreement allows Consultant access to(cid:13) certain proprietary and confidential information about the Program,(cid:13) 8(cid:13) acknowledgment by the Consultant of the secret trade(cid:13) status of the source code, program and system design(cid:13) specifics and all related items or materials developed by or(cid:13) licensed to the licensee. It also requires an agreement to(cid:13) abide by all of the terms of these provisions, using items(cid:13) only in accordance with the license agreements and making(cid:13) no duplicates of any items except with the written consent(cid:13) of the vendor as necessary in the course of any(cid:13) employment.(cid:13) _________________________________________________________________(cid:13) modifications thereto and derivative works thereof, upon the following(cid:13) conditions:(cid:13) - Consultant may use the Confidential Information, including(cid:13) adapting, modifying and crating derivative works of the Program,(cid:13) solely for purposes of assisting Customer in evaluating the(cid:13) Program and/or implementing or modifying the Program at(cid:13) Customer’s facility to meet Customer’s particular requirements.(cid:13) Consultant may not use the Confidential Information to perform(cid:13) maintenance services for Customer or for any other purposes,(cid:13) and may not in any event distribute the Confidential Information(cid:13) to any third party including other DBS licensees.(cid:13) - All adaptations and modifications to the Confidential Information,(cid:13) and all derivative works thereof shall be deemed to be the sole(cid:13) property of [Geac], whether prepared by [Geac], Customer,(cid:13) Consultant or any other party. Consultant agrees that any such(cid:13) adaptations, modifications and derivative works prepared by(cid:13) Consultant for Customer shall be deemed to be work for hire as(cid:13) defined under the U.S. copyright law.(cid:13) - Consultant shall have no right to use, copy or disclose the(cid:13) Confidential Information, in whole or in part, except as(cid:13) authorized herein. Consultant may disclose the Confidential(cid:13) Information only to DBS’s or Customer’s employees in the scope(cid:13) of their employment who have a need to know and to obtain(cid:13) access thereto for the purposes described above and who are(cid:13) bound by a written agreement with Consultant to maintain the(cid:13) confidentiality of such Confidential Information in a manner(cid:13) consistent with this Agreement.(cid:13) - All tangible Confidential Information and any copies thereof, shall(cid:13) be promptly returned to DBS or destroyed at DBS’s option upon(cid:13) request of DBS or upon termination of this Agreement.(cid:13) 9(cid:13) D. INFRINGEMENT CLAIMS(cid:13) Geac claims that one of its most important software(cid:13) products is its Millennium package, including the twelve(cid:13) separate programs which compose it. It alleges that it has(cid:13) never authorized defendants to market or license(cid:13) Millennium software or upgrades, either to the general(cid:13) public or to specific business clients. The defendants,(cid:13) however, it asserts, have induced one or more of Geac’s(cid:13) customers to provide them with Millennium software,(cid:13) upgrade programs, documentation, and customer lists, all(cid:13) of which constitute confidential information of Geac. Geac(cid:13) further alleges that Ilutzi and Grace have illegally and(cid:13) without Geac’s permission copied these proprietary(cid:13) materials and used the confidential information to solicit(cid:13) directly in competition with Geac existing Geac licensees(cid:13) and provide them with software and maintenance service(cid:13) for Geac software. By improperly taking this confidential(cid:13) information and software programs, Geac alleges that Grace(cid:13) has avoided a substantial investment in time and money(cid:13) that Geac found necessary to develop the Millennium(cid:13) confidential package. Grace, therefore, has been able to(cid:13) offer their services at prices significantly lower than those(cid:13) charged by Geac. Further, Geac asserts that Grace has(cid:13) improperly used Geac’s confidential information and(cid:13) materials to upgrade and alter Millennium software.(cid:13) In a systematic attempt to lure away Geac’s software(cid:13) maintenance customers, it alleges that Grace has(cid:13) disseminated advertising and marketing materials 4 to(cid:13) existing Geac licensees using Geac customer lists to which(cid:13) Grace had no right to access, as well as confidential and(cid:13) proprietary information and materials which they had no(cid:13) right to possess or use.(cid:13) Geac claims of copyright infringement may be divided(cid:13) into three general categories. First, Geac claims that the(cid:13) _________________________________________________________________(cid:13) 4. An excerpt of the nature of the marketing materials states: "GMI has(cid:13) its own proprietary Year End processing software for HR:M. This(cid:13) software was developed by Rick Reynolds and Stan Cook, both former(cid:13) developers of the M&D HR:M package and is in use at our maintenance(cid:13) clients as well as clients who are continuing on DBS maintenance but(cid:13) have found our W-2 process to be superior to the vendor’s process."(cid:13) 10(cid:13) defendants have infringed upon the aforesaid copyrights(cid:13) not only by copying and obtaining unauthorized copies of(cid:13) Millennium programs and documentation but loading such(cid:13) copies into computer memory and delivering unlawful(cid:13) copies to Grace’s customers, and amending the Millennium(cid:13) software. These acts of infringement, it asserts, were(cid:13) committed for the purpose of marketing, maintaining, and(cid:13) upgrading Millennium software without Geac’s authority.(cid:13) Second, it claims that Grace’s W-2 program contains literal(cid:13) copying of Geac’s PAYTXABR package. Third, it also asserts(cid:13) that Grace’s use of the Copy and Call commands to access(cid:13) Geac’s software infringes.(cid:13) In its answer to Geac’s complaint, Grace states that it(cid:13) has entered into one or more Consultant’s Confidentiality(cid:13) Agreements with Geac, but denies generally all other(cid:13) allegations of infringement alleged in the complaint. It(cid:13) claims that the consulting services it performed did not(cid:13) infringe because: (1) no copying was performed; (2) no(cid:13) derivative works were created; (3) any copying, if performed,(cid:13) was inadvertent and de minimis; (4) the "call and copy"(cid:13) commands used in providing services were non-infringing;(cid:13) (5) Geac licensing agreements authorized its customers to(cid:13) use maintenance services like Grace; and (6) the services(cid:13) that Grace performed comported with "standard industry(cid:13) practice" and Geac’s licensing agreements.(cid:13) In addition, Grace pled counterclaims for breach of(cid:13) contract and tortious interference. At the close of(cid:13) testimony, the District Court struck the following defenses:(cid:13) (1) copyright misuse defense; (2) de minimis defense; (3)(cid:13) waiver defense; (4) estoppel defense; (5) 17 U.S.C.S 117(cid:13) defense; and (6) fair use defense. One of the struck(cid:13) defenses that Grace has cross-appealed only for is the(cid:13) copyright misuse defense. On appeal, Grace contends that(cid:13) as required by Section 15 of the License Agreement, it(cid:13) entered into non-disclosure agreements with each licensed(cid:13) customer it served in which each consultant agreed to(cid:13) protect the confidentiality of the software. It further argues(cid:13) that Geac’s course of conduct demonstrated that(cid:13) consultants like Grace "were expressly permitted" to provide(cid:13) "maintenance to licensees." If there was some copying, it(cid:13) was de minimis and, therefore, not infringing.(cid:13) 11(cid:13) II.(cid:13) THE MOTION FOR JUDGMENT AS A MATTER OF LAW(cid:13) Geac presented two motions for judgment as a matter of(cid:13) law during a complex and difficult trial and one after the(cid:13) jury returned its verdict for the defendants. The trial court(cid:13) denied each of them. A trial court’s denial of motions for(cid:13) judgment as a matter of law during the trial and after the(cid:13) verdict by the jury must be affirmed where the evidence(cid:13) viewed in a light most favorable to the non-moving party(cid:13) contains a "minimum quantum of evidence" reasonably to(cid:13) support the jury’s verdict. Kuth v. Truck Stops of Am., 909(cid:13) F.2d 743, 745 (3d Cir. 1990). Our review of a District(cid:13) Court’s action in each of these instances is plenary. Id. In(cid:13) denying plaintiff ’s motion for judgment as a matter of law,(cid:13) the trial judge stated that she believed there was ample(cid:13) evidence on which the jury could have decided that the(cid:13) defendants were not liable for copyright infringement. She(cid:13) offered no explanation on what evidence she relied for her(cid:13) conclusion.(cid:13) A motion for judgment as a matter of law should be(cid:13) granted only if, viewing the evidence in the light most(cid:13) favorable to the non-movant and giving it the benefit of(cid:13) every favorable and reasonable inference, there is(cid:13) insufficient evidence from which a jury reasonably could(cid:13) find liability. In assessing whether the evidence is sufficient(cid:13) to sustain liability, the court may not weigh the evidence,(cid:13) determine the credibility of the witnesses, or substitute its(cid:13) version of the facts for the jury’s version. Although(cid:13) judgment as a matter of law should be granted sparingly, a(cid:13) scintilla of evidence is insufficient to sustain a verdict of(cid:13) liability. Lightning Lube, Inc. v. Metro Corp. , 4 F.3d 1153,(cid:13) 1166 (3d Cir. 1993). Thus, although the court draws all(cid:13) reasonable and logical inferences in the non-movant’s favor,(cid:13) we must reverse an order denying judgment as a matter of(cid:13) law if, upon review of the record, it is apparent that the(cid:13) verdict is not supported by legally sufficient evidence.(cid:13) Although we do not set aside a jury verdict lightly or(cid:13) without careful review of the complete record, we must(cid:13) grant judgment here in this case as a matter of law because(cid:13) 12(cid:13) there is plain evidence of copyright infringement. When the(cid:13) record is distilled, filtered, and shaken down, 5 it becomes(cid:13) apparent that there is no legal basis for such infringement.(cid:13) A. COPYRIGHT LAW(cid:13) We commence our analysis with the relevant provisions(cid:13) of the copyright law. Beginning with the federal(cid:13) Constitution, copyright protection has enjoyed a revered(cid:13) place in our national legal system and in the development(cid:13) of the arts, sciences, the economy, and industrialization of(cid:13) our nation. Under Constitutional mandate, Congress is(cid:13) specifically empowered "To promote the Progress of Science(cid:13) and useful Arts, by securing for limited Time to Authors(cid:13) and Inventors the exclusive Right to their respective(cid:13) Writings and Discoveries." U.S. CONST. ART. I, S 8. Congress(cid:13) enacted the first copyright statute as early as 1790. The(cid:13) existing copyright laws are codified in the Copyright Act of(cid:13) 1976 (the Act). This Act contains a complete revision of(cid:13) copyright law in response to far reaching new developments(cid:13) made in technology and the sciences. Congress amended(cid:13) the Act in 1980 expressly to extend copyright protection to(cid:13) computer programs and derivatives. 17 U.S.C. SS 101 et(cid:13) seq.(cid:13) The Copyright Act as amended provides, in relevant part,(cid:13) that:(cid:13) (a) Copyright protection subsists, in accordance with(cid:13) this title, in original works of authorship fixed in any(cid:13) tangible medium of expression, now known or later(cid:13) developed, from which they can be perceived,(cid:13) reproduced, or otherwise communicated, either directly(cid:13) or with the aid of machine or device. Works of(cid:13) authorship include the following categories: (1) literary(cid:13) works:(cid:13) _________________________________________________________________(cid:13) 5. Counsel for the parties were not of much assistance to the court with(cid:13) respect to the contents of the record. The joint appendix consisted of(cid:13) many volumes and supplemental appendices but the index to them does(cid:13) not identify or refer to a single witness by name. Typical references to(cid:13) the testimony are: "Excerpts of transcript trial" and date. This is(cid:13) meaningless and frustrating to the court. Moreover, the transcript of(cid:13) testimony also fails to identify the witness under examination.(cid:13) 13(cid:13) 17 U.S.C. S 102(a). Computer programs are entitled to(cid:13) copyright protection as "literary works." Whelan Assoc. v.(cid:13) Jaslow Dental Lab., 797 F.2d 1222, 1234 (3d Cir. 1986).(cid:13) To establish a claim of copyright infringement, a plaintiff(cid:13) must establish: (1) ownership of a valid copyright; and (2)(cid:13) unauthorized copying of original elements of the plaintiff ’s(cid:13) work. Whelan, 797 F.2d at 1231; Gator Rubber Co. v. Bondo(cid:13) Chem. Indus., 9 F.3d 823, 831 (10th Cir. 1993). Copying is(cid:13) a "shorthand reference to the act of infringing any of the(cid:13) copyright owner’s five exclusive rights set forth at 17 U.S.C.(cid:13) S 106." Ford Motor Co. v. Summit Motor Products, Inc., 930(cid:13) F.2d 277, 291 (3d Cir. 1991). Of relevance here, 17 U.S.C.(cid:13) S 106 provides:(cid:13) Subject to sections 107 through 121, the owner of(cid:13) copyright . . . has the exclusive rights to do and to(cid:13) authorize any of the following:(cid:13) (1) to reproduce the copyrighted work in copies or(cid:13) phonorecords;(cid:13) (2) to prepare derivative works based upon the(cid:13) copyrighted work;(cid:13) (3) to distribute copies or phonorecords of the(cid:13) copyrighted work to the public by sale or other transfer(cid:13) of ownership, or by rental, lease, or lending;(cid:13) In the instant case, the ownership of the copyrighted(cid:13) property is undisputed, as is its validity. The United States(cid:13) Copyright Office issued to Geac certificates of registration(cid:13) for all programs contained in its Millennium software(cid:13) package. What remains at issue is the copying, and much(cid:13) of the evidence in support of the plaintiffs’ claim comes(cid:13) from the lips of Grace’s president and its other witnesses.(cid:13) As we previously noted, supra, we divide Geac’s claim into(cid:13) three parts. First, Geac claims that the defendants(cid:13) infringed upon their copyright by copying their software in(cid:13) the course of providing consultant and maintenance(cid:13) services to Geac’s licensees. Second, Geac claims that(cid:13) Grace’s W-2 programs contain literal copies of PAYTXABR.(cid:13) Third, Geac also asserts that Grace’s W-2 program contains(cid:13) Copy and Call commands to Geac’s source and object(cid:13) codes.(cid:13) 14(cid:13) B. PAYTXABR AND DE MINIMIS(cid:13) Initially, Grace performed maintenance work for Geac’s(cid:13) licensees as to which Geac made no complaint. However,(cid:13) commencing in 1993, Grace expanded its activities beyond(cid:13) maintenance service to provide Geac’s customers with(cid:13) software, particularly a program it called the "Remain on(cid:13) Release." Geac viewed the expanded activities beyond mere(cid:13) maintenance, and especially the sale of Grace software, as(cid:13) a violation of its exclusive rights under the Copyright Act to(cid:13) make and distribute derivative works of its Millennium(cid:13) programs.(cid:13) Grace offered and sold a program that it obtained by(cid:13) copying and modifying Geac’s copyrighted Millennium(cid:13) product known as PAYTXABR. Grace distributed and sold it(cid:13) as its CNRTXABR program. It acquired this program from(cid:13) Cook and Reynolds, and immediately renamed it the(cid:13) GMITXABR program.(cid:13) Reynolds testified categorically on direct examination that(cid:13) his W-2 program was in no way similar to HR:M’s (DBS(cid:13) Millennium) program. This unexplained statement,(cid:13) however, lacks substance and verity because it is wholly(cid:13) inconsistent with his testimony concerning the origin of his(cid:13) program. He testified that when he was installing programs(cid:13) presumably on behalf of Dun & Bradstreet’s licensee Super(cid:13) Foods in Ohio, their local school district "wasn’t showing up(cid:13) on the W-2." Reynolds, thereupon, asked for a copy of the(cid:13) PAYTXABR program. Then "I made a copy and renamed it(cid:13) CNRTXABR," and then made a fix for Super Foods to pick(cid:13) up the local school tax. He acknowledged that CNRTXABR(cid:13) "should have stayed at Super Foods and shouldn’t have(cid:13) been distributed with the other code - a bad idea." This is(cid:13) a plain statement of the root of his infringement.(cid:13) On cross-examination, he testified:(cid:13) Q: Could you have written the CNR W-2 program(cid:13) without making either copies or calls to Dun &(cid:13) Bradstreet copy members or source code?(cid:13) A: No.(cid:13) Reynolds’s denial of infringement is also inconsistent(cid:13) with earlier testimony given by Ilutzi under cross-(cid:13) 15(cid:13) examination wherein he admitted unequivocally that CNR(cid:13) W-2 "makes copies and calls to Geac codes" and that CNR’s(cid:13) W-2 contains CNRTXABR. Ilutzi also admitted that Grace(cid:13) initially distributed CNRTXABR as part of its W-2 software,(cid:13) later renamed and replaced it as part of its W-2 software(cid:13) with GMITXABR, and distributed it as part of its W-2(cid:13) software. Ilutzi testified:(cid:13) Q: Do you admit that CNR W-2 makes copies and(cid:13) calls to Geac codes?(cid:13) A: Yes.(cid:13) Q: Do you admit that CNR W-2 contains CNRTXABR?(cid:13) A: Yes.(cid:13) Q: Do you admit that GMI W-2 makes copies and(cid:13) calls to Geac code?(cid:13) A: Yes.(cid:13) Q: Do you admit that GMI W-2 contains GMITXABR?(cid:13) A: Yes.(cid:13) Ilutzi further admitted that CNRTXABR was created by(cid:13) copying and modifying Geac’s program PAYTXABR and that(cid:13) Grace’s "CNRTXABR was used in the making of(cid:13) GMITXABR," both of which supplied the same tax program.(cid:13) Grace’s counsel conceded at trial that Grace was not(cid:13) contesting its use of Geac’s PAYTXABR. "It is there and(cid:13) that’s literal copying." Ilutzi conceded under cross-(cid:13) examination that CNRTXABR should not have been in the(cid:13) CNR W-2 program because it was copied from PAYTXABR.(cid:13) He directed at the end of 1996 that Grace discontinue(cid:13) distributing CNRTXABR. Grace’s expert, Dewar,(cid:13) acknowledged that Grace’s distribution of CNRTXABR and(cid:13) GMITXABR was contrary to "standard industry practice."(cid:13) However, he did not consider the distribution a copyright(cid:13) infringement because, in his opinion, it was de minimis.(cid:13) In supporting its de minimis defense, Grace asserts that(cid:13) the quantitative infringement amounted to only twenty-(cid:13) seven lines out of 525,000 lines. This argument is(cid:13) irrelevant as a matter of law and we therefore will not tarry(cid:13) on the disputed factual element. The unrefuted trial(cid:13) 16(cid:13) testimony was that if one considers Grace’s use of Copy(cid:13) and Call commands to gain access to PAYTXABR and the(cid:13) Geac code, the CNR W-2 program actually consists of 62%(cid:13) Geac code, and the GMI W-2 program possesses(cid:13) approximately 43% of Geac’s code. Much more significant,(cid:13) however, than the quantity of copy is the quality of the(cid:13) material purloined.(cid:13) A de minimis defense does not apply where the(cid:13) qualitative value of the copying is material. Kremin, Geac’s(cid:13) technical expert, and Dr. Dewar, Grace’s expert, both agree(cid:13) that Geac’s software would not work if PAYTXABR were(cid:13) removed from it and that Grace’s infringing W-2 software(cid:13) would not work without its copies of PAYTXABR. Thus, the(cid:13) information Grace copied was highly critical. In Harper &(cid:13) Row Publishers, Inc. v. Nation Enterprises, 471 U.S. 539,(cid:13) 564-66, (1985), the Supreme Court rejected a claim that(cid:13) copying 300 to 400 words of a copyrighted book was(cid:13) insubstantial and constituted fair use of the material. The(cid:13) Court looked to the "qualitative value of the copied(cid:13) material, both to the originator and to the plagiarist." Id. at(cid:13) 565; see also Educational Testing Serv. v. Katzman, 793(cid:13) F.2d 533, 542 (3d Cir. 1986). The trial judge appropriately(cid:13) struck the de minimis defense with respect to PAYTXABR(cid:13) from her jury charge and Grace does not contest this(cid:13) ruling. For the foregoing reasons, Grace’s de minimis(cid:13) argument made on appeal also must be rejected.(cid:13) C. GRACE CONSULTING AND MAINTENANCE(cid:13) ACTIVITIES(cid:13) We turn to Geac’s second claim of infringement arising(cid:13) out of Grace’s consulting and maintenance activities. In(cid:13) support of its infringement claims, Geac contends that(cid:13) Grace’s witnesses admitted also copying Geac’s copyrighted(cid:13) source code while fixing bugs, creating tax updates,(cid:13) customizing Millennium, modifying the program language(cid:13) code, and compiling, link editing and testing Millennium.(cid:13) Ilutzi admitted to modifying many of Geac’s programs in all(cid:13) twelve Millennium applications. This modification was(cid:13) "large scale," and included compilation, link editing,6 and(cid:13) _________________________________________________________________(cid:13) 6. Dr. Dewar, Grace’s expert, explained that"compiling" is a program(cid:13) that converts source code, which can be read by humans, into object(cid:13) 17(cid:13) testing of GMI W-2 software with the DBS code at customer(cid:13) sites, and modifying the Geac program language code. He(cid:13) further stated unequivocally that in fixing bugs and in(cid:13) adding features, Grace consultants have modified DBS’s(cid:13) source code. When asked whether he would admit that his(cid:13) consultants would find it easier to copy and modify Geac’s(cid:13) source code and cheaper for his customers rather than(cid:13) create a program from scratch, Ilutzi replied "absolutely."(cid:13) He also responded affirmatively when asked whether his(cid:13) consultants would take Geac’s software if one of his(cid:13) customers "wants software to perform a particular(cid:13) function."(cid:13) We address Grace’s contention that notwithstanding all(cid:13) of the foregoing evidence of infringement, none occurred. It(cid:13) asserts that both the terms of the License Agreements and(cid:13) Geac’s course of conduct confirm that Geac expressly(cid:13) permitted computer consultants to provide maintenance to(cid:13) its licensees. Grace’s position in general at trial and on(cid:13) appeal is that the License Agreements raise factual issues(cid:13) of interpretation.(cid:13) We examine the M&D License Agreement wherein Grace(cid:13) claims authorization to copy Geac’s programs. Grace refers(cid:13) to Paragraph 16 of the License Agreement that permits the(cid:13) consultant to copy a limited number of copies to be made(cid:13) or remain in existence at any one time "for use by the(cid:13) customer." However, Grace omits reference to a significant(cid:13) portion of Paragraph 16 which provides:(cid:13) Customer shall not copy the System, in whole or in(cid:13) part, except as expressly provided in this section. The(cid:13) System may be copied . . . for use by Customer at the(cid:13) designated site, for archive or emergency restart(cid:13) purposes, to replace a worn copy, to understand the(cid:13) contents of such machine-readable materials, or to(cid:13) store at the off-premises location which Customer uses(cid:13) for security storage purposes, provided, however, that(cid:13) no more than 10 printed copies and 10 machine-(cid:13) _________________________________________________________________(cid:13) code, which is binary, consisting of ones and zeroes that computers can(cid:13) read. Link editing further processes the object code into "executable(cid:13) files," which can then be run on the computer.(cid:13) 18(cid:13) readable copies will be in existence under this license(cid:13) at any one time without prior written consent from(cid:13) M&D.(cid:13) (Emphasis added).(cid:13) Grace, however, asserts that its consulting and(cid:13) maintenance activities complied with the custom and(cid:13) industry practice. Paragraph 15 of the License Agreement(cid:13) does permit licensees to provide access to consultants they(cid:13) have hired to Geac’s confidential information provided the(cid:13) consultants have executed a non-disclosure agreement(cid:13) acceptable to the licensor prior to disclosure. 7 Grace also(cid:13) contends that as required by Section 15 of the License(cid:13) Agreement, it entered into non-disclosure agreement with(cid:13) each licensed customer it served in which each consultant(cid:13) agreed to protect the confidentiality of the software.(cid:13) The License Agreement between Geac and its licensees(cid:13) was crucial in the trial of this case. The record supports(cid:13) plaintiffs’ arguments that many of the defendant’s(cid:13) witnesses admitted to conduct which, in the absence of(cid:13) authorization from Geac, amounted to infringement of(cid:13) Geac’s copyrights. These acts included copying its code,(cid:13) creating and distributing derivative works, and the(cid:13) extensive sale and marketing of Grace’s W-2 program.(cid:13) Unless authorized by Geac, its right to create derivative(cid:13) works has been usurped by Grace, whose product instructs(cid:13) the computer to incorporate Geac copyrighted material with(cid:13) its W-2 program. This derivative work exists in a concrete(cid:13) or permanent form and substantially incorporated(cid:13) protected material from the pre-existing work. See Micro(cid:13) Star v. Formgen, Inc., 154 F.3d 1107, 1110 (9th Cir. 1998).8(cid:13) _________________________________________________________________(cid:13) 7. Customer may also disclose M&D confidential information to(cid:13) Customer’s consultants who have been retained to perform work for hire(cid:13) in connection with Customer’s use of the System. All Customer(cid:13) consultants having access to M&D confidential information will be(cid:13) required to execute a non-disclosure agreement acceptable to M&D prior(cid:13) to disclosure.(cid:13) 8. The Copyright Act defines a derivative work as:(cid:13) a work based upon one or more preexisting works, such as a(cid:13) translation . . . condensation, or any other form in which a work(cid:13) 19(cid:13) Grace also copied Geac’s copyrighted software code in(cid:13) creating bug fixes for Millennium, creating tax updates and(cid:13) customizing Millennium, making Millennium "year 2000(cid:13) compliant," modifying the program language code, and(cid:13) compiling, link editing and testing Millennium. Ilutzi(cid:13) acknowledged that he has written enhancements for his(cid:13) clients for Geac’s HR:M program and readily agreed that he(cid:13) used Call or Copy for their programs.(cid:13) John Rasnic, a Grace computer consultant, testified(cid:13) when deposed that he worked on Millennium software; that(cid:13) he made a copy of a portion of the Millennium source code(cid:13) disks; that clients (naming some) have sent Grace floppy(cid:13) disks with Millennium downloaded to Grace at offsite(cid:13) locations. Rasnic also admitted to physically downloading(cid:13) pieces of Millennium’s source code from customers’(cid:13) mainframes at the customers’ premises and then taking(cid:13) with him the floppy disks containing downloaded(cid:13) Millennium source code when he left the premises. He also(cid:13) acknowledged transferring those disks loaded with(cid:13) Millennium source code onto a personal computer at his(cid:13) Illinois offices, which are not physically located on the(cid:13) customer premises. The computer, Rasnic testified, can(cid:13) then make, at his direction, copies on the hard drive of(cid:13) what was on the floppy disk.(cid:13) During his service with Grace, Rasnic performed this(cid:13) operation at this office "once a quarter to twice a week." A(cid:13) copy of the Millennium source code has remained in his(cid:13) personal computer on its hard drive for four to five weeks.(cid:13) At the time he was deposed, he stated that he had copies(cid:13) of the Millennium source code on his hard drive for the(cid:13) purpose of "doing a modification for Food Line[a customer](cid:13) of that program." He also stated that he has modified the(cid:13) source code at his Illinois office for other "Grace clients(cid:13) only." Generally, the kinds of work he performed for the(cid:13) _________________________________________________________________(cid:13) may be recast, transformed, or adapted. A work consisting of(cid:13) editorial revisions, annotations, elaborations, or other modification(cid:13) which, as a whole, represent an original work of authorship, is a(cid:13) "derivative work."(cid:13) Id. S 101.(cid:13) 20(cid:13) customers were telephone support, problem resolution,(cid:13) upgrades and modifications, and interfaces.(cid:13) The License Agreements provide that third parties,(cid:13) including customer consultants, may have access to(cid:13) confidential information, including the Millennium program,(cid:13) upon execution of a non-disclosure agreement acceptable to(cid:13) [Geac] prior to disclosure. Although Grace asserts that(cid:13) every one of its consultants signed a non-disclosure(cid:13) agreement when they worked on DBS software, we can find(cid:13) none of record except the Hutto document. Grace fails to(cid:13) point to any evidence of non-disclosure agreements signed(cid:13) by it or its employees with any of its customers; it claims(cid:13) a blanket authorization under the "Hutto-VA" agreement(cid:13) permitting access to Millennium.(cid:13) Hutto, a vice-president of Dun and Bradstreet, executed(cid:13) a non-disclosure document in 1993. The document fails to(cid:13) state the name of any customer for whom the services were(cid:13) to be performed. It is silent as to the duration of the period(cid:13) of service. Geac claims that this "Hutto" agreement applied(cid:13) only to the University of Virginia for whom Grace proposed(cid:13) to do maintenance work and was not a general(cid:13) authorization. Grace argues that "Hutto testified that the(cid:13) agreement was not limited to any one licensee and was(cid:13) satisfactory for any licensee." This argument, however, is a(cid:13) distortion of what Hutto stated. He testified that the(cid:13) agreement was satisfactory "as it related to the[University(cid:13) of Virginia]." The trial court ruled against Grace’s claim of(cid:13) blanket authorization stating that "there is not a sufficient(cid:13) quantum of proof to establish that we have a contract . . .(cid:13) understood by both sides, and the same way." The court,(cid:13) therefore, would not permit this document to go to the jury.(cid:13) Grace has appealed this ruling.(cid:13) Hutto testified the agreement was only intended"for the(cid:13) particular customer" with whom they were dealing at the(cid:13) time, the University of Virginia. He never intended it to be(cid:13) a blank non-disclosure agreement with third-party(cid:13) consultants. Moreover, there was no discussion by him(cid:13) with Grace’s representative that the agreement include(cid:13) others than the University of Virginia. In addition, it is(cid:13) unrefuted that he had "no authority" to enter into a blanket(cid:13) non-disclosure agreement. Although he further testified(cid:13) 21(cid:13) that an agreement containing similar language would have(cid:13) been satisfactory with respect to other customers, he did(cid:13) not testify, as Grace would have this Court believe, that(cid:13) "the agreement was not limited to any one licensee." The(cid:13) other evidence, particularly the use of the plural in the(cid:13) word "licensees" and the letter of Grace’s counsel to Hutto,(cid:13) is of very little probative value. Reference to the plural in(cid:13) "licensees" in the agreement is indeed a slender reed on(cid:13) which to cling. We see no error in the District Court’s(cid:13) conclusion that "there’s not a requisite quantum of(cid:13) evidence that the contract entered into between the parties(cid:13) had a meeting of the mind."(cid:13) The defendants offer an additional pellet in defense of(cid:13) their consulting and maintenance operation. They claim(cid:13) that their offsite activities in copying the source code and(cid:13) other elements of the program were justified by industry(cid:13) custom and practice.(cid:13) Grace emphasizes that it was industry practice to allow(cid:13) programs off-site and that customers required such off-site(cid:13) work, especially in emergency situations. Furthermore, it(cid:13) asserts that Section 16 of the License Agreement allows off-(cid:13) site activities, and that the provisions of the License(cid:13) Agreement "demonstrate that it does not preclude off site(cid:13) work." It maintains that its off-site activities are limited to(cid:13) reviewing the program to understand it so that necessary(cid:13) fixes can be made to the software in the customer’s(cid:13) mainframe computer. It contends that this section"makes(cid:13) clear that such activities are allowed." A defense of industry(cid:13) custom and practice in the face of the protective provisions(cid:13) of the Copyright Act could undermine the purposes and(cid:13) objectives of the statute and reduce it to rubble.(cid:13) Grace may not stultify itself by seeking shelter within(cid:13) selected terms of the License Agreements at one time and(cid:13) then, when it serves its convenience, disregard the(cid:13) conditions and other pertinent terms of the Agreements.(cid:13) Custom and practice in the computer industry, and the(cid:13) evidence of it in this record is vague and conclusory, is no(cid:13) authority to disregard or trump the specific terms of a valid(cid:13) license agreement or the provisions of the Copyright Act.(cid:13) "Custom and usage may not be invoked to relieve defendant(cid:13) of the clear cut obligations imposed by the application of(cid:13) 22(cid:13) the statute." Famous Music Corp. v. Seeco Records, Inc., 201(cid:13) F. Supp. 560, 566 (S. D. N.Y. 1961) Extrinsic evidence may(cid:13) not be used to nullify or modify the terms of a valid,(cid:13) unambiguous license agreement. See Atlantic Northern(cid:13) Airlines v. Schwimmer, 96 A.2d 652, 656 (N.J. 1953).(cid:13) "Extrinsic evidence . . . may not be used to create an(cid:13) ambiguity where none exists." International Union v. Skinner(cid:13) Engine Co., 188 F.3d 130, 145 (3d Cir. 1999).(cid:13) As previously noted, the Copyright Act gives the copyright(cid:13) owner the exclusive right to prepare derivative works based(cid:13) on the copyrighted work. 17 U.S. S 106. The District Court(cid:13) correctly defined a derivative work to the jury as"a new(cid:13) created work based on the original copyright work."9(cid:13) Grace’s W-2 program using Copy and Call commands(cid:13) copies Geac’s computer copyrighted code. Thus, it is a(cid:13) derivative work; the inclusion of the Copy and Call(cid:13) commands makes Grace’s W-2 programs infringing,(cid:13) derivative works of Geac’s copyrighted software.(cid:13) Grace attempts to brace its argument of industry practice(cid:13) to use these commands to retrieve data for maintenance(cid:13) work by arguing that the copy command does not modify(cid:13) the code. It also argues that the Copy and Call commands(cid:13) are used to access customer’s data, which belongs to the(cid:13) customer and is not protected.(cid:13) Section 2 of the M&D License Agreement provides in(cid:13) relevant part that the customer is authorized to use"the(cid:13) system solely for its own internal operation . . . within(cid:13) Customer’s data center at the location designated on the(cid:13) Customer and Product Information Schedule, at any other(cid:13) site which may replace it as provided in this section, or(cid:13) through a service bureau upon written prior approval of(cid:13) M&D." Paragraph 3 of that section permits use of the(cid:13) system in a remote job entry mode for the benefit of the(cid:13) customer and its subsidiaries provided that all processing(cid:13) involving use of any Licensed Program takes place only at(cid:13) the designated site or its temporary replacement."(cid:13) _________________________________________________________________(cid:13) 9. Under the Copyright Code, 17 U.S.C. S 101, a derivative work is work(cid:13) "based upon one or more preexisting works" and includes any recasting,(cid:13) transforming or adopting of the original work. Whelan, 797 F.2d at 1239.(cid:13) 23(cid:13) The limitation of the license authorization to the(cid:13) customer’s site and for its own internal operation is plain;(cid:13) use elsewhere may be permissible but with written prior(cid:13) approval of the licensor. Neither License Agreement(cid:13) permitted customer off-site use of the Geac code except(cid:13) with its prior approval. The License Agreement also forbade(cid:13) the distribution of modified versions of the Geac code.(cid:13) Section 16 of the agreement relied on by Grace is not(cid:13) inconsistent. It allows system copying, in whole or in part(cid:13) "for use by Customer at the designated site" and then(cid:13) under specific conditions and purposes set forth in that(cid:13) section. Such copying as is permitted at the site is only for(cid:13) purposes of "understand[ing] the contents of such machine(cid:13) readable materials." The interpretation of a written(cid:13) unambiguous agreement traditionally is a matter of law,(cid:13) not a question of fact for a jury. Church v. General Motors(cid:13) Corp., 74 F.3d 795, 799 (7th Cir. 1996); see also Winter v.(cid:13) Minnesota Mut. Life Ins. Co., 199 F.3d 399, 406 (7th Cir.(cid:13) 1999). We therefore hold that the terms and conditions of(cid:13) the License Agreements may not be altered or modified by(cid:13) extrinsic incidence of purported industry custom and(cid:13) usage.(cid:13) D. GRACE’S W-2 PROGRAM(cid:13) We turn now to Geac’s third claim -- Grace’s use of Copy(cid:13) and Call commands to Geac’s W-2 program. Grace(cid:13) contends that the Call and Copy commands are used to(cid:13) access customer’s data, that such data belongs to the(cid:13) customer, and is not protectable. It asserts the Copy(cid:13) command does not modify the code and that industry(cid:13) practice uses the commands "to interoperate two systems;"10(cid:13) the Copy command does not insert text from one program(cid:13) into another; their program remains separate in memory.(cid:13) Grace admitted that the installation, testing, compiling and(cid:13) link editing of its W-2 programs required copying Geac’s(cid:13) software and link editing the Geac code. Geac therefore(cid:13) _________________________________________________________________(cid:13) 10. Defendant Grace asserts in Geac’s brief filed at trial dated April 19,(cid:13) 2000, it conceded "that whether the call and copy" commands infringe is(cid:13) an issue to be decided by the jury. We can find no such concession in(cid:13) the record to which it refers.(cid:13) 24(cid:13) argues that these trial admissions compel the conclusion(cid:13) that, "as a matter of Law," Grace’s W-2 programs are(cid:13) infringing because they contain copies of Geac’s copyright(cid:13) code and are derivative works of Millennium. We agree.(cid:13) Citing to Walker v. University Books, 602 F.2d 589, 564(cid:13) (9th Cir. 1979), Geac further asserts that the Copyright Act(cid:13) does not allow an infringer to avoid liability by distributing(cid:13) instructions which result in copying. The Act gives a(cid:13) copyright owner the exclusive right to "prepare derivative(cid:13) works based upon the copyrighted work." 17 U.S.C.S 106.(cid:13) The Act also defines a "derivative work" as"a work based(cid:13) upon one or more pre-existing works [including] any other(cid:13) form in which a work may be recast, transformed or(cid:13) adapted." 17 U.S.C. S 101. Furthermore, the DBS License(cid:13) Agreement prohibits anyone from modifying the Millennium(cid:13) software code without Geac’s authorization. The M&D(cid:13) License Agreement permits a third party consultant, in(cid:13) certain instances, to modify the Geac code, but only if it(cid:13) satisfies the agreement’s non-disclosure and work-for-hire(cid:13) requirements for accessing the Geac code. Grace did not(cid:13) meet the License Agreements and non-disclosure(cid:13) requirements. Thus, Geac posits that this results in literal(cid:13) copy and modification of Geac’s W-2 program that(cid:13) constitutes a derivative work of the copied and called(cid:13) programs and code.(cid:13) We turn to Grace’s defense that its CNR W-2 program(cid:13) and the DBS Millennium W-2 programs are not similar and(cid:13) Grace, therefore, does not infringe on Geac’s copyright.(cid:13) Grace makes much of the government form that both(cid:13) generate for their customers and that this is a government(cid:13) form unprotected under copyright law. Of course, it is(cid:13) unprotected, and is not an issue. However, there is no(cid:13) claim that the other material in the PAYTXABR package is(cid:13) not copyrighted property.(cid:13) Grace also leans on Dr. Dewar’s testimony to support its(cid:13) argument that the two programs are dissimilar. Dr. Dewar(cid:13) found similarities in the two programs at the upper level(cid:13) but found them different at the lower levels.11 No further(cid:13) explanation is offered by Dr. Dewar as to what are the(cid:13) _________________________________________________________________(cid:13) 11. For descriptions of "upper" and "lower" levels, see p.6, n.2, supra.(cid:13) 25(cid:13) differences, except for a vague reference to Grace’s(cid:13) "extraction program."(cid:13) The source code which speaks in human language, and(cid:13) is critical, is at the upper level. This infringement may not(cid:13) be justified on the ground that not all elements of the(cid:13) system were copied or that there were some dissimilarities.(cid:13) Grace may have rearranged some of the words in the(cid:13) plagiarizing program or altered or replaced one or more(cid:13) components in its program, but these efforts to distinguish(cid:13) its program from Geac’s system does not erase the literal(cid:13) copying of Geac’s source code; it does not surmount(cid:13) Reynolds’ acknowledgment that "I could not have written(cid:13) the W-2 program without making either copies or calls to(cid:13) Dun & Bradstreet copy members or source code."(cid:13) We had occasion in one of our early cases dealing with(cid:13) substantial similarity wherein the defendant’s premise was(cid:13) that one cannot prove substantial similarity without(cid:13) comparing the entirety or a greater part of the work. We(cid:13) concluded that not in every area of copyright infringement(cid:13) is there a general requirement "that most of each of two(cid:13) works be compared before a court can conclude that they(cid:13) are substantially similar." Whelan, 797 F.2d at 1245. The(cid:13) source code and the object code are the literal elements of(cid:13) a computer program and are protected by copyright law.(cid:13) Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d(cid:13) 1240, 1249 (3d Cir. 1993); Cognotec Services v. Morgan(cid:13) Guar. of New York, 862 F. Supp. 45, (S.D. N.Y. 1994).(cid:13) Dr. Dewar conceded that Grace made copies of Geac’s(cid:13) code by its Call commands to Geac’s software when Grace(cid:13) compiled it W-2 program. He testified that so long as Geac’s(cid:13) licenses used Grace’s program, the coping through the(cid:13) Copy and Call commands is non-infringing because the(cid:13) licensee had authority to access. This is sophistry with(cid:13) which we do not agree. Authority to the licensee to access(cid:13) both programs does not give Grace the right to copy and(cid:13) call Geac’s copyrighted property for its own commercial and(cid:13) competitive purposes. As we have already explained, this(cid:13) infringement cannot be excused by purported industry(cid:13) practice. Having copied the critical source code, it is no(cid:13) defense to infringement that more of the system was not(cid:13) 26(cid:13) copied or that the plagiarist’s system may have some(cid:13) dissimilarities from the original system.(cid:13) Turning to its last defense, Grace relies on Computer(cid:13) Associates International, Inc. v. Altai, Inc., 982 F.2d 693 (2d(cid:13) Cir. 1992) and Mitel, Inc. v. Iqtel, Inc., 124 F.3d 1366 (10th(cid:13) Cir. 1997). This defense to the use of the Copy and Call(cid:13) command in Grace’s W-2 program is predicated on the(cid:13) doctrine of externalities, often referred to in a non-(cid:13) computer literary setting as scenes a faire.(cid:13) The Court of Appeals explained in Gates Rubber Co. that(cid:13) under this doctrine, copyright protection is denied"to those(cid:13) expressions that are standard, stock, or common to a(cid:13) particular topic or that necessarily follow from a common(cid:13) theme or setting." Bando Chemical Industries, Ltd., 9 F.3d(cid:13) at 838. As related to computer programs, the Court of(cid:13) Appeals for the Second Circuit in Altai recognized that "in(cid:13) many instances it is virtually impossible to write a program(cid:13) to perform particular functions in a specific computing(cid:13) environment without employing standard techniques." 982(cid:13) F.2d at 709 (quoting 3 Nimmer S 13.03[F][3], at 13-65).(cid:13) That is because "a programer’s freedom of design choice is(cid:13) often circumscribed by extrinsic considerations such as (1)(cid:13) the mechanical specifications of the computer on which a(cid:13) particular program is intended to run; (2) compatibility(cid:13) requirements of other programs with which a program is(cid:13) designed to operate in conjunction; (3) computer(cid:13) manufacturers’ design standards; (4) demands of the(cid:13) industry being serviced; and (5) widely accepted(cid:13) programming practices within the computer industry." Id.(cid:13) at 709-10; see also Mitel, 124 F.3d at 1375. Thus, for these(cid:13) reasons certain content of the allegedly infringed program(cid:13) that might have been dictated by external factors may not(cid:13) be subject to copyright protection. Altai, 982 F.2d at 710;(cid:13) Gates Rubber, 9 F.3d at 838.(cid:13) The Court in Mitel agreed, stating that the"traditional(cid:13) copyright doctrine [of scenes a faire has been extended] to(cid:13) exclude from protection against infringement those(cid:13) elements of a work that necessarily results from external(cid:13) factors inherent in the subject matter of the work." Mitel,(cid:13) 124 F.3d at 1375. The rationale is rather straightforward:(cid:13) Because those external factors dictated the creation of the(cid:13) 27(cid:13) allegedly infringed work, "it is lacking the originality that is(cid:13) the sine qua non for copyright protection. Gates Rubber, 9(cid:13) F.3d at 838 (citing Publ’n, Inc. v. Rural Tel. Serv. Co., 499(cid:13) U.S. 340, 348 (1991).(cid:13) Both Altai and Mitel clearly held that in determining(cid:13) aspects of the program not entitled to protection because of(cid:13) external factors, we examine the program from the(cid:13) viewpoint of the creator. Altai, 982 F.2d at 714; Mitel, 124(cid:13) F.3d at 1375. The Mitel court pointedly noted that the focus(cid:13) is on the factual circumstances and the external factors(cid:13) surrounding the author of the infringed program. Mitel, 124(cid:13) F.3d at 1375; see also Control Data Sys., Inc. v. Infoware,(cid:13) Inc., 903 F. Supp. 1316, 1323 (D. Minn. 1995) ("The(cid:13) question to be examined is whether external factors limited(cid:13) the choices available to the [allegedly infringed](cid:13) programmers, not whether external factors may somehow(cid:13) limit the choices of [the alleged infringing work’s](cid:13) programmers.").(cid:13) Dr. Dewar made it clear that he was advancing his own(cid:13) theory, explaining: "So my understanding of the process of(cid:13) determining for myself whether I consider something(cid:13) infringement, is that if something is dictated by the(cid:13) requirement of intraoperability, then that is an external(cid:13) factor that is not protectable." Explaining further, he(cid:13) testified:(cid:13) [I]n modern computing, the notion of intraoperability is(cid:13) fundamental. And the idea of writing programs which(cid:13) are designed to work with licensed copies of other(cid:13) programs, a fundamental part of computing, one of(cid:13) which everyone has a PC, . . . taking advantage of.(cid:13) And consequently it is exactly expected to, according to(cid:13) industry standard and practice relating to(cid:13) intraoperability, you will find two programs to design,(cid:13) to work and to interoperate, and in the same manner(cid:13) will have the same calls.(cid:13) Dewar’s testimony regarding external factors, including(cid:13) interoperability, is wholly misplaced. As Dewar admitted on(cid:13) cross-examination, he focused on externality from the(cid:13) viewpoint of Grace’s W-2 program, not Geac’s. He looked at(cid:13) externalities from the eyes of the plagiarist, not the eyes of(cid:13) 28(cid:13) the program’s creator. As explained, in determining whether(cid:13) certain aspects of an allegedly infringed software are not(cid:13) protected by copyright law, the focus is on external factors(cid:13) that influenced the choice of the creator of the infringed(cid:13) product. Altai, 982 F.2d at 714; Mitel , 124 F.3d at 1375.(cid:13) What is telling is that Grace makes no effort to explain this(cid:13) fundamental error on the part of Dewar except to urge that(cid:13) "external factors" and "interoperability" "are important(cid:13) concepts in proving that no infringement occurred."(cid:13) Furthermore, Dewar here simply offered no testimony(cid:13) regarding what parts of Geac’s program were dictated by(cid:13) external factors and therefore not protected.(cid:13) He therefore concluded: "My opinion, there’s no(cid:13) infringement." His explanation ignores completely that(cid:13) Geac’s Millennium program was designed and developed(cid:13) not for the purpose of working with personal computers but(cid:13) solely for business customers’ specific human resource(cid:13) problems. Under his theory, the Copyright Act is(cid:13) superfluous and the License Agreements become a bundle(cid:13) of straw.(cid:13) Dewar’s explanation of the need to interoperate two(cid:13) programs, and industry practice and custom, do not justify(cid:13) unauthorized accessing and copying Geac’s copyrighted(cid:13) code. The Court in Mitel specifically rejected the analysis of(cid:13) the district court in that case which focused on whether(cid:13) external factors such as market forces and efficiency(cid:13) considerations justified the copying. Mitel, 124 F.3d at(cid:13) 1375; see also Apple Computer, Inc. v. Franklin Computer(cid:13) Corp., 714 F.2d 1240, 1253 (3d Cir. 1983) (stating that(cid:13) achieving total computability with independently developed(cid:13) application program . . . is a commercial and competitive(cid:13) objective which does not enter into the somewhat(cid:13) metaphysical issue of whether particular ideas and(cid:13) expressions have merged). We also reject the doctrine of(cid:13) externalities, including interoperability, as justification for(cid:13) using the Copy and Call commands to access Geac’s(cid:13) copyrighted software in violation of the License Agreements(cid:13) and the Copyright Code.(cid:13) E. CONCLUSION(cid:13) In conclusion, the interpretation of the License(cid:13) Agreements was a question of law and not of fact. The(cid:13) 29(cid:13) defenses raised by the defendants were unacceptable as a(cid:13) matter of law. Drawing all reasonable and logical inferences(cid:13) in the non-movant’s favor, we nevertheless must reverse(cid:13) the Order of the District Court denying Geac judgment as(cid:13) a matter of law on its copyright infringement claims. Upon(cid:13) our review of the record, it is evident that the verdict is not(cid:13) supported by legally sufficient evidence. In light of our(cid:13) decision on the motion for judgment as a matter of law, we(cid:13) do not reach the alternative issues relating to the motion(cid:13) for a new trial.(cid:13) III.(cid:13) MISAPPROPRIATION OF TRADE SECRETS(cid:13) Geac also pled a state claim for misappropriation of trade(cid:13) secrets claim with respect to Grace’s use of Millennium(cid:13) software. Geac argued that Grace breached multiple duties(cid:13) of confidentiality in creating and distributing its W-2(cid:13) program and other derivative works. The District Court(cid:13) granted Grace’s motion for summary judgment because it(cid:13) held that Geac’s claim was preempted by S 301 of the(cid:13) Copyright Act, 17 U.S.C. S 301.(cid:13) Our review of the District Court’s grant of summary(cid:13) judgment is plenary; we apply the same test as the District(cid:13) Court should have applied initially. Olson v. General Elec.(cid:13) Astrospace, 101 F.3d 947, 951 (3d Cir. 1996). Our review is(cid:13) de novo as to the question of law whether S 301 preempts(cid:13) a state cause of action for misappropriation of trade(cid:13) secrets. Trandes Corp. v. Guy F. Atkinson Co. , 996 F.2d(cid:13) 655, 658 (4th Cir. 1993).(cid:13) Section 301(a) of the Copyright Act provides that:(cid:13) all legal or equitable rights that are equivalent to any(cid:13) of the exclusive rights within the general scope of(cid:13) copyright as specified by section 106 in works of(cid:13) authorship that are fixed in a tangible medium of(cid:13) expression and come within the subject matter of(cid:13) copyright as specified by sections 102 and 103 . . . are(cid:13) governed exclusively by this title. Thereafter, no person(cid:13) is entitled to any such right or equivalent right in any(cid:13) 30(cid:13) such work under the common law or statutes of any(cid:13) State.(cid:13) 17 U.S.C. S 301(a). However, subsection b(1) makes explicit(cid:13) what is implicit in subsection (a) that the preemption(cid:13) provision does not apply if the "subject matter[ ] does not(cid:13) come within the subject matter of copyright as specified by(cid:13) sections 102 and 103." 17 U.S.C. S 301(b)(1).(cid:13) Subsection 301(b)(3) imposes another limitation that is(cid:13) principally at issue here. It provides that "[n]othing in this(cid:13) title annuls or limits any rights or remedies under the(cid:13) common law or statutes of any State with respect to(cid:13) activities violating legal or equitable rights that are not(cid:13) equivalent to any of the exclusive rights within the general(cid:13) scope of copyright as specified by section 106." 17 U.S.C.(cid:13) S 301(b)(3). As already noted previously, section 106 gives,(cid:13) subject to certain limitations, the owner of a copyright the(cid:13) exclusive rights to do and to authorize among other things(cid:13) the reproduction of the copyrighted material, the(cid:13) preparation of derivative works, and the distribution of(cid:13) copies. 17 U.S.C. S 106.(cid:13) As the District Court acknowledged, this Circuit has not(cid:13) yet addressed the effect of S 301 on the preemption of state(cid:13) misappropriation of trade secrets claims. Although we have(cid:13) not addressed the issue, we are not without guidance or a(cid:13) framework. The Congressional House Judiciary Committee(cid:13) Note accompanying S 301 clearly states that the intent of(cid:13) S 301 "is to preempt and abolish any rights under the(cid:13) common law or statutes of a State that are equivalent to(cid:13) copyright." House Report No. 94-1476. The note stated,(cid:13) however, that certain common law rights "would remain(cid:13) unaffected as long as the causes of action contain elements,(cid:13) such as invasion of personal rights or a breach of trust or(cid:13) confidentiality, that are different in kind from copyright(cid:13) infringement." Id. More specifically and most relevant to our(cid:13) issue, the Committee noted that misappropriation type(cid:13) claims are not necessarily synonymous with copyright(cid:13) infringements. Id. Therefore, misappropriation causes of(cid:13) action are not preempted if they are based on claims not(cid:13) equivalent to the exclusive rights within the general scope(cid:13) of the Copyright Act. Id.(cid:13) 31(cid:13) Less clear is what types of misappropriation claims are(cid:13) not preempted and are not within the general scope of the(cid:13) Act. The House version of S 301, which Congress adopted,(cid:13) deleted the Senate version of S 301(b)(3) that had(cid:13) enumerated certain types of misappropriation claims that(cid:13) would not be preempted. Conference Comm. Notes , House(cid:13) Conference Report No. 94-1733. However, as the District(cid:13) Court acknowledged, because any direct reference was(cid:13) deleted to acts of misappropriation, federal courts have(cid:13) grappled with whether a particular cause of action and,(cid:13) more specifically, a particular type of misappropriation is(cid:13) preempted under "any of the exclusive rights within the(cid:13) general scope of copyright as specified by S 106."(cid:13) Courts, as the Court of Appeals for the First Circuit(cid:13) acknowledged, have developed a "functional test" to(cid:13) determine the question of equivalence. Data General Corp.(cid:13) v. Grumman Systems Support Corp., 36 F.3d 1147, 1164(cid:13) (1st Cir. 1994). There, the court held that "if a state cause(cid:13) of action requires an extra element, beyond mere copying,(cid:13) preparation of derivative works, performance, distribution(cid:13) or display, then the state cause of action is qualitatively(cid:13) different from, and not subsumed within, a copyright(cid:13) infringement claim and federal law will not preempt the(cid:13) state action." Data Gen. Corp., 36 F.3d at 1164 (quoting(cid:13) Gates Rubber, 9 F.3d at 846-47); see also Trandes Corp.,(cid:13) 996 F.2d at 659 ("To avoid preemption, a cause of action(cid:13) defined by state law must incorporate elements beyond(cid:13) those necessary to prove copyright infringement, and must(cid:13) regulate conduct qualitatively different from the conduct(cid:13) governed by copyright law."); Altai, 982 F.2d at 716 ("[i]f an(cid:13) ‘extra element’ is ‘required instead of or in addition to the(cid:13) acts of reproduction, performance, distribution or display,(cid:13) in order to constitute a state-created cause of action, then(cid:13) the right does not lie ‘within the general scope of copyright,’(cid:13) and there is no preemption.") (citation omitted). This test(cid:13) has been labeled the "extra element" test. Trandes Corp.,(cid:13) 996 F.2d at 659.(cid:13) Not every extra element is sufficient to establish a(cid:13) qualitative variance between rights protected by federal(cid:13) copyright law and that by state law. Data Gen. Corp., 36(cid:13) F.3d at 1164-65; Altai, 982 F.2d at 717. A state law(cid:13) 32(cid:13) misappropriation of trade secrets claim that requires a(cid:13) proof of breach of duty of trust or confidence to the plaintiff(cid:13) through the improper disclosure of confidential materials is(cid:13) qualitatively different because it is not an element of(cid:13) copyright infringement. The breach of duty or trust(cid:13) represents unfair competitive conduct "qualitatively(cid:13) different from mere unauthorized copying." Data Gen. Corp.,(cid:13) 36 F.3d at 1165. Thus, it has been held that trade secrets(cid:13) claim based upon a breach of duty provides the extra(cid:13) element avoiding preemption. Altai, 982 F.2d at 717 ("[t]he(cid:13) defendant’s breach of duty is the graveman of such trade(cid:13) secret claims, and supplies the ‘extra element’ that(cid:13) qualitatively distinguishes such trade secret causes of(cid:13) action from claims for copyright infringement that are(cid:13) based solely upon copying."); Trandes Corp. , 996 F.2d at(cid:13) 660 (agreeing "that the breach of a duty of trust or(cid:13) confidentiality comprises the core of action for trade secret(cid:13) misappropriation" qualitatively distinguishing it from(cid:13) copyright infringement); see also Gates Rubber , 9 F.3d at(cid:13) 847-48 (same).(cid:13) Geac argues that "the district court erroneously(cid:13) concluded that Geac’s software . . . claims were based(cid:13) simply on the use and copying of the software, rather than(cid:13) Grace’s breach of its duties to keep Geac’s software and(cid:13) client list confidential." The extra element, it argues,(cid:13) precludes preemption. We agree with Geac that if their(cid:13) misappropriation of trade secrets claim was based on such(cid:13) breach of duty of trust and confidentiality, it would survive(cid:13) preemption in this case. Thus, if an employee of Geac who,(cid:13) by virtue of a confidential position, had access to the(cid:13) source code, misappropriated it, and used it to promote his(cid:13) own interests, such breach of confidentiality would be the(cid:13) extra element to a copyright infringement claim. The claim,(cid:13) therefore, would not be preempted by the Act. See Gates(cid:13) Rubber Co. v. Bando Chem. Indus., 9 F.3d. 823, 847-48(cid:13) (10th Cir. 1993) (copyright claim for wrongful use of a(cid:13) computer program does not preempt trade secret claim for(cid:13) misappropriation where defendant gained access to the(cid:13) program through plaintiff ’s employee who breached his(cid:13) duty to maintain secrecy).(cid:13) Geac also argues that the District Court did not address(cid:13) Geac’s misappropriation of trade secrets claim with respect(cid:13) 33(cid:13) to its customer lists. Because customer lists are not subject(cid:13) to copyright, it argues, it cannot pursuant to S 301(b)(1) be(cid:13) preempted. Grace does not dispute that the customer lists(cid:13) are not subject to copyright and presumably escape(cid:13) preemption for that reason pursuant to S 301(b)(1). Further,(cid:13) it does not contest that customer lists could constitute(cid:13) valid trade secrets. See Lamorte Burns & Co. v. Walters,(cid:13) 770 A.2d 1158, 1166 (N.J. 2001) ("In New Jersey, customer(cid:13) lists of service business have been afforded protection as(cid:13) trade secrets.").(cid:13) Under Rule 56(c) of the Federal Rules of Civil Procedure,(cid:13) summary judgment on an issue is appropriate only if the(cid:13) affidavits, depositions, and other evidence submitted in(cid:13) connection with the motion for summary judgment(cid:13) demonstrate that "there is no genuine issue as to any(cid:13) material fact and that the moving party is entitled to a(cid:13) judgment as a matter of law." See Seibert v. Nusbaum,(cid:13) Stein, Goldstein, Bronstein & Compeau, P.A., 167 F.3d 166,(cid:13) 170 (3d Cir. 1999). The court must "construe the facts in(cid:13) the light most favorable to the non-moving party."(cid:13) Seitzinger v. Reading Hosp. and Med. Ctr., 165 F.3d 236,(cid:13) 238 (3d Cir. 1999).(cid:13) In entering summary judgment, the District Court failed(cid:13) to consider evidence that Geac’s customer lists were not(cid:13) copyrightable material and, therefore, that claims alleging a(cid:13) violation of state laws were not preempted. See First(cid:13) Publications, Inc. v. Rural Tel. Service Co., 499 U.S. 340,(cid:13) 347 (1991) (data or facts "do not trigger copyright" because(cid:13) they are not original in the constitutional sense). Therefore,(cid:13) the claims that Grace misappropriated Geac’s client lists(cid:13) were not preempted and the District Court as a matter of(cid:13) law should not have dismissed them.(cid:13) With respect to Geac’s software claims and the evidence(cid:13) in their support, the District Court concluded that they(cid:13) were based only on the use and copying of software and the(cid:13) codes. The court failed to consider evidence of the alleged(cid:13) breach of Grace’s duties to maintain the confidentiality of(cid:13) Geac’s software and customer lists. These trade secret(cid:13) claims were qualitatively different from the rights protected(cid:13) by the Copyright Act because Grace’s evidence of breach of(cid:13) 34(cid:13) confidentiality constituted the extra element necessary to(cid:13) avoid preemption.(cid:13) Geac introduced evidence to the District Court that Grace(cid:13) was bound by express promises of confidentiality with(cid:13) respect to the software and customer list because, as a(cid:13) third party consultant, it had assumed an obligation of(cid:13) confidentiality under its own standard agreement with its(cid:13) customers. Furthermore, there is evidence that Grace(cid:13) employed former employees, and contracted with Reynolds,(cid:13) who owed obligations of confidentiality to Geac, to develop(cid:13) W-2 programs and provide maintenance service in behalf of(cid:13) Grace. Geac also produced evidence that Grace used(cid:13) improper means to acquire Geac’s trade secrets by inducing(cid:13) Geac’s licensees to divulge trade secrets under the false(cid:13) representation to them that the Hutto-VA agreement(cid:13) authorized Grace to act generally as a third party(cid:13) consultant; that on the basis of this false representation,(cid:13) Geac’s licensees allowed Grace to service their copies of the(cid:13) Millennium program without Geac’s knowledge or consent.(cid:13) Grace disputes that Geac produces any evidence to(cid:13) support "a true trade secret claim." Grace argues that Geac(cid:13) did not make reasonable efforts to retain the trade secrecy(cid:13) of their customer lists and that there was no evidence of(cid:13) misappropriation. Geac admits that its customer lists were(cid:13) distributed to participants at its user conferences but(cid:13) contends that parties had to sign a confidentiality(cid:13) agreement. Because of the error of law and disputed issues(cid:13) of material facts, the entry of partial summary judgment(cid:13) was improper and will be vacated. The issue of(cid:13) misappropriation of trade secrets, therefore, will be(cid:13) remanded to the District Court for further proceedings(cid:13) consistent with this opinion.(cid:13) IV.(cid:13) GRACE’S CROSS-APPEAL(cid:13) Grace and Ilutzi have cross-appealed raising numerous(cid:13) issues. We conclude that each issue has no merit and(cid:13) therefore we discuss each item only briefly.(cid:13) 35(cid:13) First, Grace claims that the District Court erred in(cid:13) dismissing the breach of contract counterclaim "without(cid:13) articulating any factual basis for its decision." We could not(cid:13) disagree more with Grace’s characterization of the District(cid:13) Court’s decision. The court was quite clear when it stated(cid:13) that there is not "sufficient quantum of proof to establish(cid:13) that we have a contract." The contract claim was based on(cid:13) the "Hutto-VA" Agreement. As we have discussed above, the(cid:13) District Court found this agreement invalid and that it(cid:13) contained no blanket authority for Grace to serve all of(cid:13) Geac’s customers without appropriate, individual, non-(cid:13) disclosure agreement. We see no error.(cid:13) Even if there was a meeting of the minds, we conclude(cid:13) that the "Hutto-VA" Agreement is still not an enforceable(cid:13) contract because of lack of adequate consideration.(cid:13) Although Grace agreed not to disclose "proprietary or(cid:13) confidential information," there is no indication of what(cid:13) Geac promised in return or what Grace bargained for in(cid:13) return of its promise. Without any reference to the record(cid:13) for evidentiary support, Grace argues that Geac promised(cid:13) "that it would have no infringement claim against Grace if(cid:13) it complied with this agreement." However, the plain(cid:13) language of the agreement is silent as to any such promise.(cid:13) For similar reasons, we reject Grace’s promissory(cid:13) estoppel claim because it has failed to identify any clear or(cid:13) definite promise to which it reasonably relied upon. We do(cid:13) not reach the merits, however, because we conclude that(cid:13) Grace waived it by not asserting it before the District Court.(cid:13) United Parcel Serv., Inc. v. International Bhd. of Teamsters,(cid:13) Chauffeurs, Warehousemen and Helpers of Am., Local Union(cid:13) No. 430, 55 F.3d 138, 140 n.5 (3d Cir. 1995) ("It is the(cid:13) general rule that issues raised for the first time at the(cid:13) appellate level will not be reviewed.").(cid:13) Second, Grace had pled a tortious interference(cid:13) counterclaim alleging that Geac’s conduct damaged it(cid:13) economically with third parties. More specifically, as the(cid:13) Magistrate Judge also noted, the essence of the claim here(cid:13) is the alleged tortious conduct of Geac’s General Counsel(cid:13) James Alberg and certain letters he sent to the licensees.(cid:13) Grace assigned two errors to the District Court in(cid:13) dismissing this claim. The District Court dismissed the(cid:13) 36(cid:13) claim because Grace failed to produce sufficient evidence to(cid:13) prove that any third parties acted on a letter sent by(cid:13) Alberg. This was not erroneous. FDIC v. Bathgate , 27 F.3d(cid:13) 850, 871-72 (3d Cir. 1994) ("Under New Jersey law[one of](cid:13) the five elements of a claim of tortious interference with a(cid:13) prospective or existing economic relationship [is] the(cid:13) reasonable probability that plaintiff would have received the(cid:13) anticipated economic benefit in the absence of(cid:13) interference.") (citations omitted). The basis of the District(cid:13) Court’s dismissal was therefore the failure by Grace to(cid:13) produce sufficient evidence as to causation. Thus, Grace’s(cid:13) complaint on not having been provided an opportunity to(cid:13) prove damages because the case was bifurcated is(cid:13) irrelevant. There is no need to address whether the tortious(cid:13) interference claim fails to satisfy the other elements of the(cid:13) cause of action.(cid:13) Grace’s other claim of error on the tortious interference(cid:13) claim is equally unconvincing. It complains that the(cid:13) Magistrate Judge erroneously limited discovery, prejudicing(cid:13) its ability to present this claim. Were we to reach the(cid:13) merits, we would not agree. Grace was provided access to(cid:13) Geac’s documents of seventy of its licensees to whom Grace(cid:13) provided maintenance services. If Grace needed to contact(cid:13) other licensees to determine what effect letters sent by(cid:13) Alberg had on their decision making process, they could(cid:13) have turned to their own customer list. We see no error or(cid:13) prejudice warranting reversal. Moreover, we conclude that(cid:13) Grace waived the right to complain of the Magistrate(cid:13) Judge’s alleged limited discovery order by failing to appeal(cid:13) it to the District Court. United Steelworkers of Am., AFL-CIO(cid:13) v. New Jersey Zinc Co., 828 F.2d 1001, 1006 (3d Cir. 1987)(cid:13) ("Congress intended that review of a magistrate’s decision(cid:13) on a nondispositive pretrial matter must, initially, be had in(cid:13) the district court.") (quoting Siers v. Morrash, 700 F.2d 113,(cid:13) 114-15 (3d Cir. 1983); id. at 1008 ("[T]his court has(cid:13) consistently held that it will not, absent extraordinary(cid:13) circumstances, address on appeal issues not originally(cid:13) presented to the district court.").(cid:13) Third, Ilutzi argues that the District Court’s refusal to(cid:13) allow the jury to consider evidence of copyright misuse as(cid:13) a defense to any possible infringing activity was erroneous.(cid:13) 37(cid:13) Ilutzi contends that Geac "sought to use its copyright to(cid:13) take and retain control over an entirely different market(cid:13) than that covered by copyright (in seeking) to control(cid:13) services and maintenance with respect to its software."(cid:13) Because the District Court found that this defense suffered(cid:13) from the same infirmity as the contract and tortious(cid:13) interference counterclaim, it struck the defense. This Court(cid:13) has not yet addressed the legal viability of the copyright(cid:13) misuse as a defense. We reserve consideration of this issue(cid:13) for another case. Even if we were to adopt copyright misuse(cid:13) as a defense as laid out in Lasercomb America, Inc. v.(cid:13) Reynolds, 911 F.2d 970, 972-77 (4th Cir. 1990), we agree(cid:13) with the District Court that the record is simply devoid of(cid:13) any evidence of misuse by Geac. As we have discussed at(cid:13) length in our discussion of the motion denying judgment as(cid:13) a matter of law, Geac’s Licensing Agreements with its(cid:13) clients specifically allow for third party maintenance(cid:13) provided the third party signs non-disclosure agreements(cid:13) acceptable to Geac and complies with other conditions(cid:13) contained therein.(cid:13) Finally, both Grace and Ilutzi vehemently contend that(cid:13) the District Court abused its discretion in denying them, as(cid:13) the prevailing party in the copyright infringement action,(cid:13) attorney’s fees pursuant to 17 U.S.C. S 505. In light of our(cid:13) disposition of this appeal and cross-appeal, we conclude(cid:13) that the issue is moot and do not address it.(cid:13) Lastly, Ilutzi submits that Geac has abandoned claims(cid:13) against him because he is not named or listed in Geac’s(cid:13) opening brief. We find this argument to border on the(cid:13) frivolous. In no uncertain terms, Geac noted in its opening(cid:13) brief that references to Grace include all the defendants,(cid:13) appellees, and cross-appellants. Furthermore, Geac’s notice(cid:13) of appeal was from the June 6, 2000, judgment of no action(cid:13) entered in favor of both Grace and Ilutzi. Thus, both parties(cid:13) are properly before this Court as appellees.(cid:13) V.(cid:13) CONCLUSION(cid:13) In summary, we hold that the District Court erred in(cid:13) denying Geac’s motion for judgment as a matter of law. The(cid:13) 38(cid:13) District Court’s judgment rejecting Geac’s claim for(cid:13) misappropriation of trade secrets will be vacated. The(cid:13) District Court’s order dismissing defendant’s counterclaims(cid:13) will be affirmed. In light of our decision on the motion for(cid:13) judgment as a matter of law, there is no need to reach(cid:13) Geac’s motion for new trial and the alleged evidentiary and(cid:13) jury instruction errors. Grace’s motion for attorney’s fees(cid:13) will be denied as moot. The case will be remanded to the(cid:13) District Court with direction to enter an order vacating the(cid:13) judgments entered in favor of the defendants and for such(cid:13) further proceedings as are consistent with this opinion.(cid:13) Costs taxed against the defendants-appellees.(cid:13) A True Copy:(cid:13) Teste:(cid:13) Clerk of the United States Court of Appeals(cid:13) for the Third Circuit(cid:13) 39