MEMORANDUM AND ORDER
Pending before the Court are the following Motions:
1)Plаintiff Engenium Solutions, Inc.’s (“Plaintiff’ or “Engenium”) Motion to Strike Defendants’ Expert Andrew Wright (“Motion to Strike Wright”) (Doc. No. 147);
2) Plaintiffs Motion to Strike Expert Dave Faiola (“Motion to Strike Faiola”) (Doc. No. 148);
3) Defendants Symphonic Technologies, Inc.’s (“Symphonic”) and Steve Carr’s (“Carr”) (collectively “Defendants”) Motion to Exclude Testimony and Expert Report of Krishna Muppavarapu (“Motion to Exclude Muppavarapu”) (Doc. No. 136);
4) Defendants’ Motion to Exclude the Opinions and Conclusions of Chris W. Johnson (“Motion to Exclude Johnson”) (Doc. No. 137);
5) Plaintiffs Partial Motion for Summary Judgment on Copyright Liability and Request for Permanent Injunction (“Partial Motion for Summary Judgment”) (Doc. No. 134); and
6) Defendants’ Motion for Summary Judgment. (Doc. No. 138.)
After considering the Motions, all responses thereto, and the applicable law, the Court finds that:
1) Plaintiffs Motion to Strike Wright (Doc. No. 147) must be GRANTED;
2) Plaintiffs Motion to Strike Faiola (Doc. No. 148) must be GRANTED;
3) Defendants’ Motion to Exclude Muppavarapu (Doc. No. 136) must be DENIED;
4) Defendants’ Motion to Exclude Johnson (Doc. No. 137) must be DENIED;
5) Plaintiffs Partial Motion for Summary Judgment (Doc. No. 134) must be GRANTED; and
6) Defendants’ Motion for Summary Judgment (Doc. No. 138) must be GRANTED IN PART AND DENIED IN PART.
In 2006, Kartik Shetty (“Shetty”) and Carr partnered to develop scheduling software that would work in conjunction with SAP, a family of scheduling and maintenance software programs used worldwide by many businesses. (Doc. No. 138-5, Carr Decl. ¶¶ 4-5; Doc. No. 123, Expert Report of Krishna Muppavarapu, at 6.) They envisioned that Carr would be responsible for the business and design aspects, and Shetty would develop the actual code for the software. (Doc. No. 138-5, Carr Decl. ¶ 4; Doc. No. 134, Ex. I, Shetty Dep. 83:19-21, 89:3-8.) In October 2006, they formed Engenium. (Doc. No. 138-5, Carr Decl. ¶ 5.) During the time that Carr worked for Engenium, Engenium Scheduling Workbench (“Scheduling Workbench”) was developed and sold. (Doc. No. 2, Am. Compl. ¶¶ 9-11; Doc. No. 48, Answer ¶¶ 9-II.)
Scheduling Workbench is a customized scheduling and maintenance tool that is compatible with SAP but also provides additional features that SAP software does not offer. (Muppavarapu Report, at 6-9; Doc. No. 134, Ex. F, Expert Report of Gary Grant, 6-8.) Because SAP is utilized by a wide range of industries, SAP software may not meet some of the needs of a particular company. (Muppavarapu Report, at 7; Grant Report, 4.) Third-party developers like Engenium identify industry- or customer-specific needs that SAP’s software does not address, and develop SAP-compatible software to meet those needs. (Muppavarapu Report, at 7.)
Scheduling Workbench enhances an organization’s ability to perform maintenance efficiently. (Muppavarapu Report, at 8-9; Grant Report, 7-8.) SAP has its own software, SAP Plant Maintenance (“SAP PM”), that also schedules personnel to perform maintenance in a streamlined and coordinated fashion. (Muppavarapu Report, at 8; Grant Report, 7.) However, Engenium’s software provides several features that SAP PM does not, including: (1) a single screen that presents all of the necessary data for planning and scheduling; (2) numerous Key Performance Indicator (“KPI”) reports, which allow for better measurement and management of plant processes; (3) importation of data out of Scheduling Workbench and into Microsoft Excel, which allows the schedule to be displayed in a Gantt chart, a useful visual tool for scheduling work; (4) importation of data out of Scheduling Workbench and into Microsoft Project, a more user-friendly program, where data can be manipulated and then imported back into Scheduling Workbench; and (5) a customized material availability check feature that includes additional options not present in SAP PM’s material availability check. (Muppavarapu Report, at 19, 23, 26; Grant Report, 6-8.)
In order to be able to develop this customized, SAP-compatible software, Engenium executed a Development License Agreement (“DLA”) with SAP AG, the manufacturer of the SAP family of products. (Doc. No. 163-1, DLA; Muppavarapu Report, at 6.) The DLA grants Engenium a license to use SAP’s software. (DLA, at 1.) The DLA recognizes that the licensee such as Engenium may develop several types of SAP-compatible programs, including add-ons, enhancements, and modifications. (Id. ¶¶ 1.1, 1.7, 1.12, 2.3.2, 2.3.3.) The DLA defines these licensee programs as follows:
1.1 ‘Add-on’ means any developments utilizing the SAP development environment, SAP published APIs and/or libraries to create a new object that adds new and independent functionality, and branches off from the published SAP APIs and/or user exits (e.g. new functional components for business processes not covered by the Software constitute Add-ons; however, standalone interface code from SAP software to non software is not considered an Add-on).
1.7 ‘Enhancement’ means a development utilizing the SAP development environment, SAP published APIs and/or libraries to create a new object supporting an existing business scenario that customizes, enhances or changes in any other way existing SAP functionality (e.g. the creation of new APIs, alternative user interfaces, additional business content within existing functionality, and/or the extension of data structures or metadata all constitute enhancements.) [sic ]
1.12 ‘Modification’ means an alteration to the Software (e.g. a change made to the source code, metadata, etc) [sic] in which original SAP content is replaced with the modified content.), [sic ]
(Id. ¶¶ 1.1, 1.7, 1.12.) The DLA provides that, “ownership of Modifications and Enhancements, and any Intellectual Property Rights embodied therein, shall vest with SAP.” (Id. ¶ 2.3.2.1.) It specifically states that Engenium “irrevocably assigns to SAP all Licensee’s rights, title and interest (‘Assigned Intellectual Property Rights’) in and to the Modifications and Enhancements, including the right to register or file proprietary rights based on the Modifications and Enhancements.” (Id.) In contrast, the DLA provides that, “[t]he ownership of Add-ons shall vest in Licensee, or the end customer if so provided in the agreement between Licensee and end customer.” (Id. ¶ 2.3.3.)
Defendants contend that numerous features of Scheduling Workbench are enhancements or modifications within the meaning of the DLA. (Doc. No. 163, Defs.’ Reply to PL’s Resp. to Defs.’ Mot. for Summ. J. (“Defs.’ Reply”), at 3-5.) Plaintiff contends that Scheduling Workbench is actually an Add-on, and provides documentation from SAP showing that SAP certified Scheduling Workbench as a SAP Add-on. (Doc. No. 173, Pl.’s Surreply to Defs.’ Reply to PL’s Resp. to Defs.’ Mot. for Summ. J. (“PL’s Surreply”), 3-5; Doc. No. 173-2, SAP Integration Certificate; Doc. No. 173-3, SAP Add-on Test Report for Interface Certification.)
Defendants also contend that several other aspects of Scheduling Workbench which may be Add-ons are actually owned by ConocoPhillips, a customer of Engenium’s. (Doc. No. 138, Defs.’ Mot. for Summ. J., at 8-10; Defs.’ Reply, at 5-7.) In 2008, ConocoPhillips and Engenium executed a Master Software License, Maintenance and Service Agreement (“MLA”) granting ConocoPhillips a license to use Scheduling Workbench. (Doc. No. 158, MLA; Doc. No. 138-5, Carr Decl. ¶¶ 10-11.) The MLA provides as follows:
18.2 Ml copyrights, patents, trade secrets, or other intellectual prоperty rights associated with any ideas, concepts, techniques, inventions, processes, or works of authorship developed or created by Licensor during the course of performing work for Licensee (collectively the ‘Work Product’) shall belong exclusively to Licensee and shall, to the extent possible, be considered a work made for hire for Licensee within the meaning of Title 17 of the United States Code. To the extent the Work Product may not be considered work made for hire for Licensee, Licensor agrees to assign, and hereby assigns at the time of creation of the Work Product, without any requirement of further consideration, any right, title, orinterest Licensor may have in such Work Product.
(MLA ¶ 18.2.) Defendants present email communications and invoices indicating that at least some of the features of Scheduling Workbench were added per ConocoPhillips’ request. (Doc. No. 163-2, August 4, 2009 Email from Carr to Conoco-Phillips; Doc. No. 163-3, March 23, 2012 ConocoPhillips Service Order.)
Engenium points out that the MLA specifically provides that ConocoPhillips will possess only a license to use Scheduling Workbench and any subsequent updates, versions or releases of Scheduling Workbench. (Doc. No. 176, Pl.’s Second Surreply to Defs.’ Reply to Pl.’s Resp. to Defs.’ Mot. for Summ. J. (“Pl.’s Second Surreply”), at 3-5.) They rely on a provision of Schedule A of the MLA, which provides as follows:
Licensed Programs licensed to Licensee shall be listed herein and defined as a machine executable version of such Licensed Programs and shall be deemed to include (i) the information and data contained in the relevant media, (ii) the reference manual, the programming tutorial and the installation guide (to be included where applicable) and any subsequent Updates, Versions or Releases of such materials provided to Licensee by Licensor and (iii) any other platform specific proprietary and confidential materials that Licensor may provide to Licensee in connection herewith. The license granted shall not extend beyond or include any material or Licensed Programs other than the material and Licensed Programs expressly and specifically set forth herein.
(MLA, Ex. A, at 1 (emphasis added).) “Updates” are defined as “corrections or improvements to the Licensed Program which result from notifications submitted by Licensee or internally initiated by Li-censor.” (Id. ¶ 15.4.) “Versions” are defined as “significant functional and/or technical Improvements requiring redesign and redevelopment of a major component of the Licensed Program into a new technology environment.” (Id.) “Releases” are defined as “functional refinements and/or technical improvements to the Licensed Program within the technology environment in which the Licensed Program is functioning.” (Id.) Plaintiff contends that the changes made to Scheduling Workbench are updates, versions, or releases. (PL’s Second Surreply, at 3-5.)
Over time, Shetty and Carr’s relationship became strained, and on August 18, 2010, Carr resigned from Engenium. (Doc. No. 138-5, Carr Decl. ¶¶ 8, 14; Doc. No. 134, PL’s Partial Mot. for Summ. J. ¶ 19.) On July 26, 2010, just prior to resigning, Carr removed $64,687.50 from Engenium’s bank account. (Doc. No. 150-10, Engenium’s Checking Account History, at 1; Doc. No. 138-5, Carr Decl. ¶ 15.) The amount Carr removed was precisely half of a support fee paid by ConocoPhillips that same day. (Doc. No. 150, PL’s Br. In Support of Its Resp. and Opposition to Defs.’ Mot. for Summ. J. (“PL’s Resp.”), at 21; Engenium’s Checking Account History, at 1.) Carr contends that, for over a year, he provided support and training to ConocoPhillips without compensation, and this amount constituted his rightful share of the proceeds. (Doc. No. 138-5, Carr Decl. ¶ 15.) Engenium claims that the $129,375.00 payment made by ConocoPhillips on July 26, 2010 was actually support fees for the upcoming year. (PL’s Resp., at 21.) Engenium attaches two invoices, one dated July 19, 2009, for “annual support” for Scheduling Workbench from June 1, 2009 through May 31, 2010, and another dated May 10, 2010, for an “Annual Service agreement.” (Doc. No. 150-12, July 19, 2009 Invoice; Doc. No. 150-13, May 10, 2010 Invoice.)
Before his resignation, on August 10, 2010, Carr filed a Certificate of Formation
Carr and Iain Ross, a SAP consultant who Carr had previously hired to perform work on Scheduling Workbench, continued to service ConocoPhillips on Engenium’s behalf for at least a brief period of time after Carr’s resignation. (Doc. No. 138-3, Ross Decl. ¶43; Doc. No. 138-5, Carr Deck ¶ 16; Doc. No. 156-4, Carr Decl. ¶¶ 6-7.) This work was performed at Shetty’s request. (Doc. No. 156-4, Carr Decl. ¶ 7; Doc. No. 156-7, Sept. 10, 2010 Email from Shetty.) As part of his support work, both before and after Carr’s resignation from Engenium, Ross maintained a copy of Scheduling Workbench on his personal server, DM0. (Doc. No. 156-4, Carr Decl. ¶¶ 6-7; Doc. No. 156-9, Feb. 11, 2010 Email from Shetty.) Around August 24, 2010, Shetty instructed Ross to delete the copy of Scheduling Workbench from his personal server, and perform all future Engenium support from Engenium’s server, DR1. (Doc. No. 138-3, Ross Decl., Ex. 5.) Ross informed Shetty that removal was complete the following day. (Doc. No. 138-3, Ross Decl. ¶ 44.)
Like Scheduling Workbench, Harmonix (1) presents all relevant data for planning and scheduling on a single screen; (2) comes with standard KPI reports; (3) offers the capability to import of data out of Scheduling Workbench and into Microsoft Excel; (4) offers the capability to import of data out of Scheduling Workbench and into Microsoft Project; and (5) includes a customized material availability check. (Muppavarapu Report, at 19-28; Grant Report, 6-8.) Plaintiffs expert, Krishna Muppavarapu, identified a number of similarities in the source code of Harmonix and Scheduling Workbench, including: (1) code for a Scheduling Workbench program that schedules work orders and operations and a Harmonix program that performs the same functions is virtually identical; (2) there are numerous shared non-functional characteristics, such as identical line breaks, spacing, indentation, identical loading language and identical timing of loading message, and data beginning to populate into a Microsoft Excel spreadsheet at the sаme arbitrary line number; (3) some of Harmonix’& obsolete code
Defendants, relying on expert reports of Andrew Wright and Dave Faiola, point out that software programs like Harmonix and Scheduling Workbench will often have similar functionality and code because they are designed to be compatible with SAP and are, at least in part, derived from SAP-supplied code. (Defs.’ Mot. for Summ. J., at 12-13; Doc. No. 138-6, Expert Report of W. Andrew Wright ¶ 6; Doc. No. 138-7, Expert Report of Dave Faiola ¶¶ 15, 23, 26, 33, 35.) They also argue that the evidence presented by Plaintiff cannot show substantial similarity between Harmonix and Scheduling Workbench because Muppavarapu considers less than 5% of the code of Scheduling Workbench and 1% of the code of Harmonix. (Defs.’ Mot. for Summ. J., at 16-17; Doe. No. 138-3, Ross Decl. ¶¶ 3-4.) Defendants’ experts also point to several functional and code-level differences between the programs, including: (1) Harmonix can run certain reports that Scheduling Workbench cannot; (2) Harmonix has a feature that allows automatic “leveling” (efficient allocation) of work orders against available craftsmen, whereas Scheduling Workbench does not; and (3) Harmonix and Scheduling Workbench have different selection screens for entering data. (Doc. No. 138-6, Wright Report ¶¶ 9-14; Doc. No. 138-7, Faiola Report ¶¶ 24-32.)
Plaintiff now moves for partial summary judgment on its copyright infringement claims, arguing that Defendants infringed on, and continue to infringe on, Plaintiffs exclusive right to reproduce under 17 U.S.C. § 106(1), Plaintiffs exclusive right to prepare derivative works under 17 U.S.C. § 106(2), and Plaintiffs exclusive right to distribute copies under 17 U.S.C. § 106(3). (Pl.’s Partial Mot. for Summ. J., at 10-27.) Plaintiff seeks an injunction and actual damages arising from Defendants’ alleged infringement. (Id. at 27-30.) Defendants also move for summary judgment on Plaintiffs copyright infringement claims, arguing that Plaintiff does not own the allegedly infringed code and, in any event, Harmonix and Scheduling Workbench are not substantially similar. (Defs.’ Mot for Summ. J., at 8-18.) Addi
The Court turns to the Motions to Exclude and Motions to Strike first. The Court then considers both parties’ Motions for Summary Judgment on copyright infringement. Finally, the Court addresses Defendants’ Motion for Summary Judgment on state law claims.
II. MOTIONS TO STRIKE AND MOTIONS TO EXCLUDE
A. Legal Standard
Federal Rule of Evidence 702 provides for the admission of expert testimony that assists the trier of fact to understand the evidence or to determine a fact in issue. A court is charged with a “gatekeeping function” to ensure expert testimony is both reliable and relevant. Daubert v. Merrell Dow Pharm., Inc.,
Further, the expert witness must be qualified “by knowledge, skill, experience, training, or education .... ” Fed. R.Evid. 702. A court must exclude an expert witness “if it finds that the witness is not qualified to testify in a particular field or on a given subject.” Wilson v. Woods,
The party seeking to rely on expert testimony bears thе burden of establishing, by a preponderance of the evidence, that all requirements have been met. Daubert,
B. Motion to Strike Wright
Plaintiff argues that (1) Wright is not qualified, (2) his opinion is not reliable, and (3) his opinion is not relevant. Plaintiff also argues that Wright’s opinion should be excluded because it fails to comply with the requirements of Fed.R.Civ.P. 26(a)(2)(B). (See generally Doc. No. 147, Mot. to Strike Wright.)
1. Qualifications
Wright has worked as a SAP consultant, analyst and programmer since 1994, with a focus on plant maintenance
The mere fact that Wright does not have engineering training does not mandate his exclusion. See Fed.R.Evid. 702 advisory committee’s note (2000 Amendment) (“Nothing in this amendment is intended to suggest that experience alone- — or experience in conjunction with other knowledge, skill, training or education — may not provide sufficient foundation for expert testimony. To the contrary, the text of Rule 702 expressly contemplates that an expert may be qualified on the basis of experience.”); see also S. Cement Co., Div. of Martin-Marietta Corp. v. Sproul,
2. Reliability
Wright conducted his analysis by dividing Harmonix and Scheduling Workbench into their three main functions: scheduling and backlog management, scheduling and backlog report, and schedule compliance. (Wright Report ¶ 8.) He then compared the components within each of these primary functions. (Id.) He includes a chart that explains the functionality and appearance differences between the two programs. (Id., Ex. A.) Plaintiff argues that Wright’s opinion is not reliable because he does not explain what data he used to reach his conclusions, which makes his conclusions unverifiable. (Mot. to Strike Wright, at 3-6.) Defendants respond that Wright conducted his comparison of the functional aspects of Harmonix and Scheduling Workbench in the only reliable manner conceivable: a side-by-side comparison of the programs. (Doc. No. 166, Resp. to PL’s Mot. to Strike Wright, at 2-3.)
The Court must agree with Plaintiff that Defendants have not met their burden to show that Wright employed a reliable methodology. The Court acknowledges that the Daubert factors may be ill-suited to assessing the reliability of the methodology employed by an expert comparing the features of two pieces of software. See Kumho Tire,
For the reasons stated above, Plaintiffs Motion to Strike Wright is GRANTED. The Court need not reach the remainder of Plaintiffs challenges to Wright’s report.
C. Motion to Strike Faiola
Plaintiff argues that (1) Faiola is not qualified, (2) his opinion is not reliable, and (3) his opinion is not relevant. Plaintiff also argues that Faiola’s opinion should be excluded because it fails to comply with the requirements of Fed.R.Civ.P. 26(a)(2)(B). (See generally Doc. No. 148, Mot. to Strike Faiola.)
1. Qualifications
Dave Faiola has worked as a SAP consultant, analyst and programmer since 1995. (Faiola Report ¶ 2.) He primarily provides SAP consulting and programming services. (Id.) Based on his experience, he is familiar with the standards SAP supplies to licensees to use in custom solutions like the scheduling tools at issue here. (Id. ¶ 3.) He was hired to compare the source codes of Engenium’s Scheduling Workbench and Symphonic’s Harmonix. (Id. ¶ 1.)
Plaintiff argues, briefly, that Faiola is not qualified to render some of the opinions in his report because they are legal conclusions. (Mot. to Strike Faiola, at 3.) The Court disregards those portions of Faiola’s report that offer legal conclusions as to whether Scheduling Workbench and Harmonix are • “substantially similar.” (See, e.g., Faiola Report ¶ 35.) Plaintiff does not challenge Faiola’s qualifications to provide expert opinion about the source codes of Scheduling Workbench and Harmonix. Furthermore, the Court does not doubt that Faiola’s extensive experience as a SAP consultant, analyst and programmer qualifies him to testify about similarities and differences in the source code of SAP customization software.
2. Reliability
Faiola inspected Harmonix and Scheduling Workbench for approximately nine hours in connection with his duties as an expert. (Faiola Report ¶ 4.) The methodology he employed was to compare the current and earliest versions of Symphonic’s software, ascertain what he considered to be the “original code,”
For the same reasons the Court excludes Wright, the Court must also exclude Faiola. Defendants again do no more than merely assert that Faiola conducted a side-by-side comparison of Symphonic’s and Engenium’s software. Manually comparing code side-by-side is not an inherently unreliable methodology. See Computer Assocs. Int’l v. Quest Software, Inc.,
For the reasons stated above, Plaintiffs Motion to Strike Faiola is GRANTED. The Court need not reach the remainder of Plaintiffs challenges to Faiola’s report.
D. Motion to Exclude Muppavarapu
Krishna Muppavarapu has over 14 years of experience in SAP Advanced Business Applications Programming (“ABAP”). (Muppavarapu Report, at 3.) He attended ABAP training and took a certification exam and was certified in ABAP. (Id.) He has developed several hundred new programs and has also modified several hundred existing programs. (Id. at 4.)
Muppavarapu reviewed the user manuals of Harmonix and Scheduling Workbench, and received a demonstration of Scheduling Workbench from Shetty. (Id.) He then spent three days inspecting Harmonix’ s code. (Id. at 10-11.) Muppavarapu took screenshots throughout his inspection, and then spent several days comparing screenshots of original and current versions of Harmonix to the real code of Workbench Solutions. (Id.) Defendants argue that Muppavarapu’s report must be excluded for lack of basis. (Mot. to Exclude Muppavarapu, at 4-5.) Specifically, they argue that the Harmonix code analyzed in Muppavarapu’s report amounts to only 1% of the total Harmonix code and 5% of Scheduling Workbench’s code, an insufficient factual basis from which to extrapolate copying. (Id.)
In Viterbo v. Dow Chemical Co., the Fifth Circuit explained that:
As a general rule, questions relating to the bases and sources of an expert’s opinion affect the weight to be assigned that opinion rather than its admissibility and should be left for the jury’s consideration. In some cases, however, the source upon which an expert’s opinion relies is of such little weight that the jury should not be permitted to receive that opinion. Expert opinion testimony falls into this category when that testimony would not actually assist the jury in arriving at an intelligent and sound verdict. If an opinion is fundamentally unsupported, then it offers no expert assistance to the jury.
Defendants’ argument that Muppavarapu analyzes only 1% of Harmonix code goes to the weight of the report, not its admissibility. This is not a ease where the expert bases his opinions on facts that are of so little weight that his opinion should not be admitted at all. While 1% of Harmonix’s code is not a large amount, another district court has recognized that “[t]here does not appear to be any perfect way to compare millions of lines of source codes” and allowed focusing on those parts where copying is likely. Computer Assocs.,
E. Motion to Exclude Johnson
Chris W. Johnson is a Senior Manager at UHY Advisors FLVS, Inc. (“UHY”). (Doc. No. 121, Expert Report of Chris W. Johnson, at 2-3.) He holds a master of science in economics from Texas A & M, is an accredited valuation analyst and has prior experience valuing software. (Id) He was retained by Plaintiff to quantify damages in this case. (Id at 1.) In assessing damages, Johnson has assumed that Engenium owns a valid copyright on Scheduling Workbench, and Defendants infringed Engenium’s copyright. (Id) In reaching his conclusions, he interviewed Shetty and reviewed various documents that shed light the likelihood that Engenium would have developed a relationship with customers Symphonic ultimately sold products and services to. (Id at 1, 6-10, Ex. B.) His damages figures are based on income Symphonic earned from sales of Harmonix to several companies that he concludes would have otherwise purchased Scheduling Workbench, plus likely maintenance contracts Engenium would have received from those companies, minus the additional cost Engenium would have had to incur to provide maintenance. (Id at 6-10, Attachment A.)
Defendants seek to exclude Johnson’s testimony bеcause he assesses damages flowing from state law causes of action, over which Defendants argue this Court lacks jurisdiction. (Mot. to Exclude Johnson, at 2-4.) They also argue that Johnson’s opinions should be excluded because they lack adequate factual basis. (Id. at 6-9.) Specifically, they argue that Johnson improperly assumes certain facts about ownership and infringement, the length and relevance of potential maintenance agreements, and the likelihood that Symphonic’s customers would have purchased Scheduling Workbench but for purchasing the allegedly infringing Harmonix. (Id.)
To the extent that the Court lacks jurisdiction over any of Plaintiffs claims, Johnson’s report clearly sets out those damages that flow from alleged violations of state law rather than from copyright infringement. (See id. at 2.) With regard to Defendants’ argument that Johnson improperly assumes certain facts, as discussed supra Part II.D, challenges to the basis of an expert’s opinions generally go to the weight of the evidence. See Viterbo,
The Court declines to exclude Johnson’s opinions on the grounds raised by Defendants. Accordingly, Defendants’ Motion to Exclude Johnson is DENIED.
III. SUMMARY JUDGMENT MOTIONS
A. Legal Standard
To grant summary judgment, a court must find that the pleadings and evidence show that no genuine issue of material fact exists, and that the movant is therefore entitled to judgment as a matter of law. Fed.R.Civ.P. 56. The party moving for summary judgment must demonstrate the absence of any genuine issue of material fact; however, the party need not negate the elements of the nonmovant’s case. Little v. Liquid Air Corp.,
“Facts and inferences reasonably drawn from those facts should be taken in the light most favorable to the non-moving party.” Nichols v. Enterasys Networks, Inc.,
B. Copyright Infringement
Plaintiff has moved for summary judgment on its copyright infringement claims, arguing that Engenium possesses a valid copyright on Scheduling Workbench and that Defendants’ Harmonix infringed on, and continues to infringe on, that copyright. (Pl.’s Partial Mot. for Summ. J., at 10-27.) Defendants have also moved for summary judgment on Plaintiffs copyright infringement claims, arguing that Plaintiff does not own the allegedly infringed code and, in any event, Harmonix and Scheduling Workbench are not substantially similar. (Defs.’ Mot for Summ. J., at 8-18.) To prevail on a copyright infringement claim, a plaintiff must prove (1) ownership of a valid copyright and (2) copying by the defendant. Computer Mgmt. Assistance Co. v. Robert F. DeCastro, Inc.,
Copyright ownership is shown by: (1) proof of originality and copyright-ability, and (2) compliance with the applicable statutory requirements. Compaq Computer Corp. v. Ergonome Inc.,
1. Ownership of copyright
Defendants argue first that Plaintiff does not actually own the Scheduling Workbench code that Defendants allegedly copied. (Defs.’ Mot. for Summ. J., at 8-10; Defs.’ Reply, at 2-7.) Defendants argue that the DLA vests ownership of most of the allegedly infringed aspects of Scheduling Workbench in SAP, and the MLA transfers ownership of any remaining allegedly infringed aspects of Scheduling Workbench to ConocoPhillips. (Id.) Specifically, they contend that the DLA’s definitions of “enhancement” and “modification” apply to a number of the features of Scheduling Workbench, making those features the property of SAP. (Defs.’ Reply, at 2-5.) Accordingly, they contend, Engenium transferred its copyright ownership, as contemplated by 17 U.S.C. § 204.
The Court concedes that, when read in a vacuum, the definition of “enhancement” in the DLA could potentially apply to some of the features of Scheduling Workbench,
Defendants also contend that the capacity availability feature of Scheduling Workbench is an enhancement. (Defs.’ Reply, at 4.) The parties have not submitted sufficient information on this feature for the Court to determine whether it satisfies the definition of an enhancement under the DLA. The parties have told the Court only that the Scheduling Workbench capacity availability feature incorporates a SAP function module, but includes a custom variable and three custom lines of code. (Id.; Muppavarapu Report, Ex. J., at 13.) Because the parties have not presented evidence as to whether these customizations create new and independent functionality or whether they only enhance existing SAP functionality, the Court lacks a basis on which to determine if the feature is an enhancement or add-on.
However, this question of fact ultimately does not preclude the Court from resolving the parties’ infringement dispute. Plaintiff correctly points out that numerous courts, including this one, have held that alleged infringers may not avoid liability by arguing that a plaintiff does not own the copyright at issue due to defects in a copyright transfer agreement between the plaintiff and a non-party transferor. Billy-Bob Teeth, Inc. v. Novelty, Inc.,
In this case, unlike the above precedents, Defendants argue that the DLA and the MLA are valid transfer agreements, and Engenium has successfully transferred ownership to SAP and ConocoPhillips under 17 U.S.C. § 204. However, the precedents cited by Plaintiff are equally applicable; where there is no dispute between contracting parties as to the ownership of the copyright, a defendant accused of infringement may not avoid liability by arguing that the contract actually worked a transfer of ownership. See Billy-Bob,
Defendants’ argument that Engenium transferred ownership of certain aspects of Scheduling Workbench to ConocoPhillips under the MLA fails for the same reasons. While it is not entirely clear from the MLA whether the changes made to Scheduling Workbench at ConocoPhillips’ request constitute “work product” owned by ConocoPhillips, or are merely “updates,” “versions,” or “releases” owned by Engenium (compare Doc. No. 158, MLA, Ex. A, at 1 with Doc. No. 158, MLA ¶ 15.4), the Court need not resolve the matter. Defendants may not rely on an agreement transferring copyright ownership to avoid liability in an infringement suit.
2. Validity of copyright
a. Originality
Defendants also challenge Engenium’s ownership by arguing that Scheduling Workbench is not original. (Defs.’ Mot. for Summ. J., at 10-13.) Specifically, Defendants argue that portions of Engenium’s source code are derived from SAP and are SAP-owned, and other portions of the code had been independently developed by Ross before he had been hired to do work for Engenium. (Id. at 12; Defs.’ Resp., at 13-14.)
Plaintiff claims copyright infringement of Scheduling Workbench’s source code. (Pl.’s Partial Mot. for Summ. J., at 2, 19-26 (noting that the source code is at issue in this case, and analyzing similarities in source code between Scheduling Workbench and Harmonix-).) Because Plaintiffs claims involve infringement of the source code, and not other non-literal elements, the Court need only determine whether the source code of Scheduling Workbench is original and copyrightable.
The Court begins from the “well settled” proposition that “literal elements of computer programs, i.e., their source and object codes, are the subject of copyright protection.” Computer Assoc. Int’l v. Altai Inc.,
Defendants’ assertions that “the vast majority” of Scheduling Workbench is “SAP-derived and SAP-owned” cannot defeat the presumption of originality created by the certificate of registration. First, the only evidence Defendants cite in support of this argument are the expert reports of Wright and Faiola, which the Court has already ruled are not admissi
Nor do Defendants provide any evidence that the code for Scheduling Workbench’s Microsoft Project and Microsoft Excel punchout features is merely a copy of code Ross had previously developed. In support of this argument, Defendants cite to Ross’ declaration and emails between Shetty and Ross. (See Defs.’ Resp., at 14.) However, the portion of Ross’ declaration that is cited provides that Ross had a “basic solution in code” to the job posting Carr has posted, but goes on to state that he and Carr “set about developing the most efficient MSP and Excel enhancements we could to meet COP’s needs.” (Doc. No. 156-1, Ross Decl. ¶ 5.) This does not support the contention that Scheduling Workbench contains a mere copy of preexisting code; indeed, it suggests that while Ross possessed code which would be. a useful starting point for building certain features of Scheduling Workbench, Ross and Carr ultimately has to develop code to meet ConocoPhillips’ needs. The email string cited by Defendants provides only what appears to be a brief conceptual outline of a program Ross was developing for Engenium and indicates that Ross would “hunt around and look at my old documentation to see if I have anything useful.” (Doc. No. 156-10, Nov. 19, 2009 Emails between Shetty and Ross.) The Court fails to see the relevance of these emails.
The Court finds that Defendants have offered no evidence that Scheduling Workbench lacks the minimal degree of creativity necessary to qualify as an original work. See Feist,
b. Copyrightability
Defendants also contend that the source code Engenium claims is copyrighted is actually uncopyrightable scenes a faire. (Defs.’ Mot. for Summ. J., at 11-13; Defs.’ Resp., at 11-15.) Speсifically, they argue that fine breaks, indentation, formatting, the commented out code, the material availability check feature, and the Microsoft Excel and Microsoft Project punchout features are all scenes a faire. (Defs.’ Resp., at 11-15.)
Defendants first argue that the line breaks, indentation, and formatting of Scheduling Workbench are dictated by external factors, specifically the use of a SAP formatting program. (Defs.’ Resp., at 12-13.) Plaintiffs expert, Muppavarapu, points out numerous places where spacing and indentation in Scheduling Workbench and Harmonix are identical. (Muppavarapu Report, at 17-20; Muppavarapu Report, Ex. G, at 4.) He states that “in my experience as a software programmer, no two developers can independently format their code as identically] as seen in Harmonix [and Scheduling Workbench.]” (Muppavarapu Report, at 18.) Ross explains that formatting in SAP programs is automatically performed by a SAP program called Pretty Printer. (Doc. No. 156-1, Ross Deck ¶ 12.)
Defendants next argue that the commented out code is scenes a faire because it is common practice for programmers to use code they previously personally developed. (Defs.’ Resp., at 13.) Defendants raise the same argument regarding the Microsoft Excel and Microsoft Project punchout features. (Id. at 14.) Defendants misunderstand the scenes a faire doctrine. The doctrine provides that expressions that are common to a particular subject or dictated by external factors are uncopyrightable. Eng’g Dynamics,
Defendants also contend that the commented out code is based on SAP and Microsoft standards available to all programmers. (Defs.’ Resp., at 13.) The citation to Ross’ declaration in support of this statement says no such thing. (See id.; Doc. No. 156-1, Ross Deck ¶¶ 24-25.) Furthermore, even if the commented code is based on SAP and Microsoft standards, this fact alone would not make the commented out code uncopyrightable scenes a faire; only those portions of the source code that actually are SAP and Microsoft standard code would be scenes a faire. Defendants do not identify any such code in Harmonix or Scheduling Workbench.
Defendants raise a similar argument with regard to how data is populated into Microsoft Excel from Scheduling Work
Defendants also contend that both the Microsoft Excel punchout feature of Scheduling Workbench and the Material Availability feature are scenes a faire because they are based on industry standards. (Defs.’ Resp., at 14-15.) Defendants cite no evidence to support their claim with regard to the Microsoft Excel punchout feature, and cite only two paragraphs of Carr’s declaration with regard to the material availability punchout feature. (See id.; Doc. No. 156-4, Carr Decl. ¶¶ 8, 10.) Paragraph eight of Carr’s declaration contains no information that can conceivably support this assertion. (Doc. No. 156-4, Carr Decl. ¶ 8.) Paragraph ten of Carr’s declaration states only that it is common for material availability program to use operational features present in SAP because customers expect SAP-standard information in a material check program. (Id. ¶ 10.) This statement does not support the contention that the customized features of Scheduling Workbench’s material availability check feature are scenes a faire. Plaintiff seeks copyright protection for the customized features of Scheduling Workbench’s material availability check feature; indeed, Plaintiff readily concedes that its material availability program includes SAP-standard features in addition to the customized features. (See Muppavarapu Report, at 26; PL’s Resp., at 7.) Defendants have produced no evidence that Engenium’s customized material availability check feature is either merely a copy of SAP, or is otherwise a function of industry standards.
Plaintiff has produced a certificate of registration, creating a rebuttable presumption that the copyright on Scheduling Workbench is valid. Defendants have not offered any proof that Engenium copied Scheduling Workbench from another work. Nor have they shown that Scheduling Workbench is comprised entirely of uncopyrightable elements. Accordingly, Defendants have not rebutted Plaintiffs prima facie showing of a valid copyright. CMM Cable Rep,
ii. Copying
The second element of a copyright infringement claim is copying. Positive Black Talk Inc. v. Cash Money Records, Inc.,
1. Factual copying
The first prong of actionable copying concerns “whether the alleged infringer copied, or ‘actually used the copyrighted material in his own work.’ ” Bridgmon v. Array Sys. Corp.,
a. Access
“Access has been defined to include an opportunity to view the copyrighted work.” Ferguson v. National Broadcasting Co., Inc.,
Plaintiff has clearly met its burden on the first element of actual copying. During his time at Engenium, Carr had access to Scheduling Workbench’s code. (Doc. No. 134, Ex. D, Carr’s Responses to Defs.’ Reqs. for Admission, No. 6.) Carr did not resign from Engenium until August 18, 2010. (Doc. No. 138-5, Carr Deck ¶¶ 8, 14; Doc. No. 134, Pk’s Partial Mot. for Summ. J. ¶ 19.) However, by August 10, 2010, Carr had already filed a Certificate of Formation for Symphonic. (Doc. No. 11, Ex. B, Certificate of Formation.) Thus, for at least eight days after forming his new corporation, Carr indisputably had access to Scheduling Workbench’s code.
Furthermore, as part of the work he performed for Engenium, Ross maintained a copy of Scheduling Workbench on his personal server, DM0. (Doc. No. 156-4, Carr Deck ¶¶6-7; Doc. No. 156-9, Feb. 11, 2010 Email from Shetty.) Although parties disagree as to when or whether Scheduling Workbench was deleted from DM0, Ross continued to have access to Scheduling Workbench in late August of 2010, around the same time that he was hired by Symphonic. (Doc. No. 156-4, Carr Deck ¶¶ 6-7; Doc. No. 156-9, Feb. 11, 2010 Email from Shetty; Doc. No. 138— 3, Ross Deck ¶¶44, 50.) This timeline suggests that Symphonic had a “reasonable possibility of access” to Scheduling Workbench through Ross as well. Peel,
b. Probative Similarity
“In evaluating probative similarity, a court should compare the works in their entirety, including both protectible and unprotectible elements.” Straus v. DVC Worldwide, Inc.,
[t]his is appropriate because although the plaintiff must ultimately establish infringement by showing that the defendant copied a substantial amount of protectable elements, (i.e., meet the “sub-
stantial similarity” standard), the fact that non-protectable elements were copied, although not a basis for liability, can be probative of whether protected elements were copied (i.e., help establish probative similarity).
Positive Black Talk,
The Court finds that, on the evidence presented, Plaintiff meets its burden of showing probative similarity between a number of features in Scheduling Workbench and Harmonix. The following evidence amply supports this conclusion:
• A comparison of the source code between an early version of a Harmonix feature that schedules work orders and operations and a feature that performs a similar function in Scheduling Workbench reveals approximately twenty lines of different code out of twenty-two and a half pages of code. (Muppavarapu Report, at 17-18; Muppavarapu Report, Ex. M.)
• The features that enable data to be transferred to Microsoft Project contain numerous identical lines of source code, including identical comments and variable names. (Muppavarapu Report, at 23-26; Muppavarapu Report, Ex. H.)
• Harmonix and Scheduling Workbench contain several identical nonfunctional characteristics, such as identical line breaks, spacing, and indentation, identical loading language and timing of loading message, and population of data into a Microsoft Excel spreadsheet beginning at the same arbitrary line number. (Muppavarapu Report, at 18-21, 25; Muppavarapu Report, Ex. G; Muppavarapu Report, Ex. I.)
• The macros16 found in the Microsoft Excel punchout features of Scheduling Workbench and Harmonix have identical names and contain similar code. (Muppavarapu Report, at 19; Muppavarapu Report, Ex. G, at 10-11.)
• Harmonix’s customized material availability check feature is comprised entirely of basic SAP material availability functionality and four of the five customized icons found in Scheduling Workbench’s material availability check. (Muppavarapu Report, at 26.)
• Harmonix’s customized material availability check feature contains obsolete code for functionality it does not offer, but which can be found in Scheduling Workbench. (Muppavarapu Report, at 29.)
• Harmonix and Scheduling Workbench use identical variables, and Harmonix defines variables which are never referenced in its code, but which are referenced in Scheduling Workbench’s code. (Muppavarapu Report, at 32-36; Muppavarapu Report, Ex. G.)
Defendants do little more than suggest that the allegedly copied items make up a small percentage of the source code of both Scheduling Workbench and Harmonix. (Defs.’ Mot. for Summ. J., at 14.) Even if this is true, and even if Defendants had admissible evidence to support this contention,
The question in each case is whether the similarity relates to matter that constitutes a substantial portion of plaintiffs work — not whether such material constitutes a substantial portion of defendant’s work.... The quantitative relation of the similar material to the total material contained in plaintiffs work is certainly of importance. However, even if the similar material is quantitatively small, if it is qualitatively important, the trier of fact may properly find substantial similarity.
4 Nimmer on Copyright § 13.03[A][2][a]. Although the preceding guidance is offered in reference to substantial similarity, the Court sees no reason why it would not be equally applicable to probative similarity.
Even if Defendants are correct that the allegedly infringing Harmonix source code infringes on only four percent of Scheduling Workbench’s source code, the record contains evidence of the significance of the code that is infringed upon. Grant’s report indicates that the Microsoft Excel and Microsoft Project punchout features are “very unique.” (Grant Report, at 18.) Indeed, Grant states that he has “never seen this functionality except within Engenium and Symphonic.” (Id.) Similarly, four of the five icons in Scheduling Workbench’s material availability program, and the obsolete code for the fifth icon, are the only features in Harmonix’s material availability program not present in SAP’s material availability program. (Muppavarapu Re
On the evidence presented, no jury could reasonably conclude that probative similarity is lacking between Scheduling Workbench and Harmonix. Because Plaintiff has shown access and probative similarity, Plaintiff has proven factual copying,
c. Independent creation
Defendants may rebut a showing of factual copying by showing that Harmonix was independently created. Positive Black Talk,
2. Substantial similarity
In addition to showing factual copying, a plaintiff must also show that the copyrighted work and the allegedly infringing work are substantially similar. Positive Black Talk,
Several circuits have held that the abstraction-filtration-comparison analysis developed by the Altai court to analyze copyright infringement claims regarding nonliteral elements of computer software should be used to analyze claims of literal infringement as well. Altai,
In fact, we think that the Altai test in this context may actually be misleading because, in instructing courts to abstract the various levels, it seems to encourage them to find a base level that includes copyrightable subject matter that, if literally copied, would make the copier liable for copyright infringement. While that base (or literal) level would not be at issue in a nonliteral-copying case like Altai, it is precisely what is at issue in this appeal.
Lotus Dev. Corp. v. Borland Int’l, Inc.,
This Court agrees with the First Circuit that conducting the abstraction analysis contemplated by Altai makes little sense in a case where the infringement alleged is at the very base level of a software program. However, as the eScholar court reсognized, even if the abstraction-filtration-comparison analytical scheme is not strictly applied, “[fjunctionally, ... we must apply the same ‘well developed doctrines of copyright law5 at Altai’s filtration stage to determine if each component contains copyrightable material that the defendant may have infringed.” eScholar,
Although the standard for probative similarity mandates that courts compare plaintiffs and defendant’s works in their entirety, including those elements that are not copyrightable, see Straus,
There exists a high degree of similarity between the source code for each program’s scheduling features, Microsoft Excel and Microsoft Project punchout features, and material availability check features, even absent the formatting similarities found throughout Scheduling Workbench and Harmonix. (See Muppavarapu Report, at 17-19, 23-26, 29, 32-36; Muppavarapu Report, Ex. G; Muppavarapu Report, Ex. H; Muppavarapu Report, Ex. M.) Significant portions of the source code for these programs are identical in the parties’ respective products. (Muppavarapu Report, at 17-19, 23-26; Muppavarapu Report, Ex. G; Muppavarapu Report, Ex. H; Muppavarapu Report, Ex. M.) Harmonix contains the exact same innovations for its material availability check as Scheduling Workbench. (Muppavarapu Report, at 26, 29.) Harmonix and Scheduling Workbench use identical variable names, and Harmonix defines variables which it never uses in its code, but which are found in Scheduling Workbench’s code. (Muppavarapu Report, at 32-36; Muppavarapu Report, Ex. G.)
The Court concludes that, on this evidence, no reasonable jury could find for Defendants on the issue of substаntial similarity. All of the features within Harmonix highlighted by Plaintiff contain substantial similarities to the source code of corresponding Scheduling Workbench features. Furthermore, evidence supports the conclusion that these portions of Scheduling Workbench are qualitatively significant. (See Grant Report, at 18; Muppavarapu Report, at 26.) Defendants have not offered any admissible evidence that would persuade a reasonable juror that the protectable elements of Scheduling Workbench and Harmonix are not substantially similar.
The Court recognizes that summary judgment for Plaintiff on these issues is unusual. See Segrets, Inc. v. Gillman Knitwear Co., Inc.,
3. Exclusive rights under 17 U.S.C. § 106
Having established that Harmonix is a copy of Scheduling Workbench, Plaintiff must show that Defendants violated at least one of its exclusive rights under 17 U.S.C. § 106. Webbworld,
17 U.S.C. § 501 defines infringement as a violation of “any of the exclusive rights of the copyright owner as provided by sections 106 through 122.” The statutory language makes clear that a plaintiff need not prove multiple violations of its exclusive rights to state a claim for infringement. 17 U.S.C. § 501(a); see also Webbworld,
“A party infringes on the owner’s exclusive right to reproduce the copyrighted work when the party copies computer code without the owner’s authorization.” Quantlab Techs. Ltd. (BVI) v. Godlevsky,
For the reasons explained above, the Court finds that Plaintiff is entitled to summary judgment on its claim that the source code of Harmonix infringes on Engenium’s copyright. Plaintiffs Partial Motion for Summary Judgment is GRANTED. Defendants’ Motion for Summary Judgment is DENIED with respect to copyright infringement.
iii. Remedies
1. Damages
17 U.S.C. § 504 allows a plaintiff to elect either actual or statutory damages as a remedy for copyright infringement. However, 17 U.S.C. § 412 makes statutory damages unavailable for “any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work.” Here, the effective date of Plaintiffs Certificate of Registration for Scheduling Workbench is October 25, 2010 (Certificate of Registration.) This is well after the first publication of Scheduling Workbench. (See, e.g., July 19, 2009 Invoice to ConocoPhillips.) Defendants’ infringement of Engenium’s copyright began prior to the registration of Scheduling Workbench. (See, e.g., Muppavarapu Report, at 17 (noting that Symphonic’s scheduling program had a creation date of September 3, 2010).) Indeed, Plaintiff admits that 17 U.S.C. § 412 applies to this case. (Pl.’s Resp., at 23 (admitting that Plaintiff cannot recover attorney’s fees because of § 412).) Accordingly, Plaintiff is not entitled to statutory damages in this case. See Mason v. Montgomery Data, Inc.,
Plaintiff appears to move for summary judgment seeking a finding that Defendants infringed on Plaintiff’s copyright
Although Plaintiff is not eligible for statutory damages, Plaintiff is entitled to actual damages. 17 U.S.C. § 504. It is well-settled that a party has the right to have a jury determine actual damages. Feltner,
2. Permanent Injunction
Plaintiff also seeks a permanent injunction. (Pl.’s Partial Mot. for Summ. J., at 28-30.) This Court has the authority to grant permanent injunctions to prevailing plaintiffs in a copyright infringement suit. 17 U.S.C. § 502. The Court will address Plaintiffs request for a permanent injunction at a subsequent date.
3. Attorney’s Fees
Defendants request attorney’s fees as prevailing parties in a copyright infringement suit. (Defs.’ Mot. for Summ. J., at 30-31.) Because Defendants are not prevailing parties, this argument is moot. Plaintiff admits that 17 U.S.C. § 412 bars recovery of attorney’s fees in this case. (Pl.’s Resp., at 23.) Accordingly, no attorney’s fees will be awarded in this case.
C. Unfair Competition/ Breach of Fiduciary Duty
Defendants seek summary judgment on Plaintiffs claims of unfair competition and breach of fiduciary duty. (Defs.’ Mot. for Summ. J., at 18-24.)
i. Unfair Competition
“Even where there is no response to a motion for summary judgment the moving party must establish the absence of a genuine issue of material fact before it can prevail.” United States v. Eubanks, No. Civ. 3-02-CV-2541-H,
Section 301(a) of the Copyright Act “accomplishes the general federal policy of creating a uniform method for protecting and enforcing certain rights in intellectual property by preempting other claims.” Daboub v. Gibbons,
[A]ll legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103, whether created before or after that date and whether published or unpublished, are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.
17 U.S.C. § 301(a). The Fifth Circuit has established a two-part test to determine whether a state law claim is preempted. “First, the work in which the right is asserted must come within the subject matter of copyright as defined in sections 102.” Alcatel USA Inc. v. DGI Techs.,
Unfair competition is not an independent tort. Rimkus Consulting Group, Inc. v. Cammarata,
Courts have held that unfair competition claims premised on misappropriation of copyrighted material are preempted by federal copyright law. See Alcatel,
Although Plaintiffs complaint does not specifically explain that breach of fiduciary duty is the underlying cause of action that supports its allegations of unfair competition, this is the clear implication to be gleaned from the grouping of unfair competition with a breach of fiduciary duty claim. This Court could not find Texas cases that discuss breach of fiduciary duty as falling under the general definition of unfair competition. However, breach of fiduciary duty does fall under the general umbrella of “business conduct that is contrary to honest practice in industrial or commercial matters.” See Am. Heritage,
Plaintiffs allegations of unfair competition through breach of fiduciary duty are. not preempted by federal copyright law. A number of the allegations that form the basis of Plaintiffs unfair competition claim have little to do with copyright law. (See Doc. No. 2, Am. Compl. ¶ 40 (indicating that claim is based on alleged usurpation of corporate opportunities, removal of funds from Plaintiffs bank account, inducing Ross to breach his contract with Engenium).) See Kane,
Defendants next argue that no facts in the record support a claim of unfair competition. (Defs.’ Mot. for Summ. J., at 20.) However, Defendants’ argument is premised on its misunderstanding of the difference between the general area of law referred to as unfair competition, and the specific causes of action subsumed within it. See U.S. Sporting Prods.,
ii. Breach of Fiduciary Duty
The elements of a breach of fiduciary duty claim are: (1) a fiduciary relationship between the plaintiff and defendant; (2) the defendant must have breached his fiduciary duty to the plaintiff; and (3) the defendant’s breach must result in injury to the plaintiff or benefit to the defendant. Navigant Consulting, Inc. v. Wilkinson,
“The duty of loyalty dictates that a director must act in good faith and must not allow his personal interests to prevail over the interests of the corporation.” Gearhart,
“To establish a breach of fiduciary duty by usurping a corporate opportunity, the corporation must prove that an officer or director misappropriated a business opportunity that properly belongs to the corporation.” Landon v. S & H Mktg. Group, Inc.,
Summary judgment is inappropriate on Plaintiffs claim of breach of fiduciary duty. Plaintiff presents evidence that, while Carr was still a director of Engenium, he negotiated with a prospective client, Kraton Ploymers. (See Aug. 10, 2010-Aug. 17, 2010 Emails between Carr and representative of Kraton Polymers.) At this time, Carr has already formed Symphonic. (Doc. No. 150-11 Certificate of Formation.) Shortly after his resignation from Engenium, Carr offered Kraton Ploymers a contract with Symphonic. (See Aug. 20, 2010 Emails between Carr and representative of Kraton Polymers.)
Defendants may be correct that a director’s duty of loyalty terminates upon resignation. See Xerox Corp. v. Genmoora Corp.,
The cases Defendants cite in support of their motion for summary judgment are unavailing. (Defs.’ Mot. for Summ. J., at 21-23.) In Rankin v. Naftalis,
Defendants’ Motion for Summary Judgment is DENIED with respect to Plaintiffs claim of breach of fiduciary duty.
D. Misappropriation of Trade Secrets
Defendants move for summary judgment on Plaintiffs misappropriation of trade secrets claim. (Defs.’ Mot. for Summ. J., at 24-26.) Under Texas law, the elements of misappropriation of trade secrets are: (1) a trade secret existed; (2) the trade secret was acquired through a breach of a confidential relationship or discovered by improper means; (3) the defendant used the trade secret without authorization from the plaintiff; and (4) resulting damages. Calce v. Dorado Exploration, Inc.,
A trade secret is “any formula, pattern, device or compilation of information which is used in one’s business, and which gives one an opportunity to obtain an advantage over competitors who do not know or use it.” T-N-T Motorsports, Inc. v. Hennessey Motorsports, Inc.,
It is not entirely clear whether Plaintiff contends that Scheduling Workbench’s code or the information Engenium possessed about Kraton Ploymers’ specific client needs is the trade secret at issue. (See Pl.’s Resp., at 19-20.) Cf. Trilogy Software, Inc. v. Callidus Software, Inc.,
“Use of the trade secret means commercial use by which the offending party seeks to profit from the use of the secret.” Global Water Group, Inc. v. Atchley,
The case cited by Defendants in support of their motion is easily distinguishable. (See Defs.’ Mot. for Summ. J., at 26 (citing Propulsion Techs., Inc. v. Attwood Corp.,
Defendants’ Motion for Summary Judgment is DENIED with respect to Plaintiffs claim of misappropriation of trade secrets.
E. Conversion
Defendants seek summary judgment on Plaintiffs conversion claim. (Defs.’ Mot. for Summ. J., at 27-29.) Specifically, they argue that (1) the money at issue is not specific chattel, and (2) in any event, Carr had a superior right to possess thе money because he had never been compensated for the work he performed for Engenium. (Id. at 28-29.) Plaintiff contends that the sum removed was half of ConocoPhillips’ support payment fees for the upcoming year, and Carr had no right unilaterally to remove any portion of the payment. (Pl.’s Resp., at 20-21.)
“Conversion is the unauthorized and wrongful assumption and exercise of dominion and control over the personal property of another to the exclusion of, or inconsistent with, the owner’s rights.” Smith v. Maximum Racing, Inc.,
Here, Plaintiff alleges that Carr is liable for conversion of funds he removed from Engenium’s account. (PL’s Resp., at 20-21.) Engenium contends the funds removed were half of the support payment from ConocoPhillips for the upcoming year. (Id. at 21; Engenium’s Checking Account History; compare July 19, 2009 Invoice with May 10, 2010 Invoice.) Carr admits removing $64,687.50 from Engenium’s bank account, but contends he removed the funds as “payment for services rеndered.” (Defs.’ Mot. for Summ. J., at 28 (citing Doc. No. 138-5, Carr Decl. ¶ 15).)
This factual disagreement does not create a genuine issue of material preventing summary judgment because the funds at issue are not the proper subject of a conversion claim. This case does not involve specific funds that are delivered for safekeeping, nor is there any obligation to deliver or otherwise treat the money in a particular way. See Hernandez,
F. Tortious Interference with a Contract
Defendants also argue they are entitled to summary judgment on Plaintiffs claim of tortuous interference with contract. (Defs.’ Mot. for Summ. J., at 29-30.) Specifically, they argue that Plaintiff presents no evidence that (1) Carr interfered with the contract Ross had with Engenium, and (2) such alleged interference proximately caused the breach. (Id.) Plaintiff responds that (1) whether Carr’s interference was willful is a question of fact reserved for the jury, and (2) Defendants have not presented any evidence that establishes their defense.
A plaintiff must establish the following elements to succeed on a tortious interference with contract claim: (1) the existence of a contract subject to interference, (2) willful and intentional interference, (3) that proximately causes damage, and (4) actual damage or loss. Specialties of Mex. Inc. v. Masterfoods USA, No. L-09-88,
The Court agrees with Defendants that Plaintiff has produced no evidence to support a claim of tortuous interference with Ross’ contract with Engenium. Although Plaintiff has produced a contract between Ross and Engenium which provides that Ross agreed to, among other things, abstain from infringing on Engenium’s intellectual property rights, Plaintiff does not point to any evidence suggesting that Carr encouraged Ross to violate this, or any other, provision of the contract. (See Pl.’s Resp., at 22; Doc. No. 150-14, Master Contractor Agreement (“MCA”), at 4.) Plaintiff does no more than baldly assert that Carr “induced Ross to breach the MCA and work for Symphonic.” (Id.) However, Plaintiff does not point out any statements or steps taken by Carr that might constitute interference that proximately causes breach. The only potential act of interference that Plaintiffs identify is Carr’s offer to work at Symphonic. (Id.) It is well-established that merely entering into a contract with a party with the
Plaintiffs argument that intent is generally a question for the jury is irrelevant. (See Pl.’s Resp., at 22.) Contrary to Plaintiffs characterization, Defendants do not argue only that Plaintiff cannot prove intent. (Id.) Rather, as explained above, Defendants argue that Plaintiff has produced no evidence of any interference, intentional or otherwise, and that Plaintiff has produced no evidence that such alleged interference proximately caused the breach. The Court agrees that the only evidence of “interference” produced by Plaintiff is Carr’s offer of a position with Symphonic, which, as a matter of law, is insufficient to meet the proximate cause requirement of tortuous interference with a contract. Plaintiffs argument that Defendants have not offered facts that would prove Carr’s defense is similarly unavailing. Defendants are not obliged to “prove that the summary judgment facts establish defense” to prevail on a motion for summary judgment. (Id.) Defendants may meet their burden by showing that Plaintiff “fail[ed] to make a showing sufficient to establish the existence of an element essential to that [its] case” since “since a complete failure of proof concerning an essential element of the nonmoving party’s case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett,
Defendants’ Motion for Summary Judgment as to Plaintiffs tortious interference with contract claim is GRANTED.
IY. CONCLUSION
For the reasons discussed above, the Court finds that
• Plaintiffs Motion to Strike Wright (Doc. No. 147) must be GRANTED;
• Plaintiffs Motion to Strike Faiola (Doc. No. 148) must be GRANTED;
• Defendants’ Motion to Exclude Muppavarapu (Doc. No. 136) must be DENIED;
• Defendants’ Motion to Exclude Johnson (Doc. No. 137) must be DENIED;
• Plaintiffs Partial Motion for Summary Judgment (Doc. No. 134) must be GRANTED; and
• Defendants’ Motion for Summary Judgment (Doc. No. 138) must be GRANTED IN PART AND DENIED IN PART. Specifically, Defendants’ Motion for Summary Judgment must be DENIED as to Plaintiffs claims of copyright infringement, unfair competition/breach of fiduciary duty, and misappropriation of trade secrets, and GRANTED as to Plaintiffs claims of conversion and tortious interference with contract.
A hearing is set for March 6, 2013 at 1:30 p.m. Parties should confer before the hearing and determine whether they wish to proceed to a jury trial on the remaining issues. Parties should also be prepared to address the permanent injunction at the hearing.
IT IS SO ORDERED.
Notes
. However, Carr’s declaration provides that Ross deleted Scheduling Workbench from his server on August 30, 2010. (Doc. No. 156-4, Carr Decl. ¶ 7.)
. Obsolete code, sometimes referred to as commented out code, is code that does not affect the function of a program, but has not been deleted from the source code. (Muppavarapu Report, at 21.) Code is "commented out” by adding an asterisk at the first position
. A variable is a way to reference defined, stored values. (Muppavarapu Report, at 32.)
. Muppavarapu also identifies 1,585 references to Engenium's unique, SAP-issued namespace on Harmonix’s system. (Muppavarapu Report, at 12-14.) Defendants argue vigorously that these references, and the evidence of transfer requests sent from DM0 to Engenium’s server, are not evidence of impermissible copying because Ross was permitted to make such a copy as part of his support obligations to ConocoPhillips. (Defs.’ Mot. for Summ. J., at 3-10.) The Court’s opinion does not rely on the presence of Engenium’s namespace on DM0.
. Unfortunately, Faiola's report does not explain how the "original code” is different from the earliest version of Symphonic’s software, or how exactly Faiola derived this so-called "original code.” (See Faiola Report ¶ 8.)
. Defendants obtain these numbers from a declaration by Ross. (Doc. No. 136-1, Ross Decl. ¶¶4-5.) Plaintiff seeks to strike this declaration, and numerous others by Ross, as undisclosed and impermissible expert testimony. (See, e.g., Doc. No. 142, Pl.’s Objections to and Mot. to Strike Iain Ross' Decl.; Doc. No. 146, Pl.'s Objections to Defs.’ Evidence in Support of Defs.’ Mot. for Summ. J., at 2-6.) The Court addresses the admissibility of Ross’ declarations infra Part II.D n. 8.
. Defendants also argue the report is inadmissible because it has not been signed by Muppavarapu. (Mot. to Exclude Muppavarapu, at 2.) Although the Court itself received an unsigned courtesy copy, Plaintiff electronically filed a signed copy of Muppavarapu’s report on December 18, 2012. (See Doc. No. 123.) Thus, Defendants’ argument is moot.
. Furthermore, Plaintiff is correct that if Defendants wished to use declarations from Ross to impeach Plaintiff’s expert's analysis and conclusions, Ross should have been disclosed as an expert. See Musser v. Gentiva Health Servs.,
. 17 U.S.C. § 204 provides in relevant part that "[a] transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.”
. On the other hand, the Court is aware of no features of Scheduling Workbench that could be classified as a "modification.” Defendants allege that Total Network Scheduling ("TNS”) feature is a modification. (Defs.’ Reply, at 4.) However, Defendants provide no evidenсe for the contention that TNS is alteration to the SAP software ... "in which original SAP content is replaced with the modified content.” (DLA ¶ 1. 12.) Defendants cite to
. Defendants also argue that, even if the copyrighted features of Scheduling Workbench are add-ons, Plaintiff has agreed, under the DLA, not to enforce its rights in those add-ons against any commercial partners or customers of SAP. (See DLA ¶ 2.3.4.5.) Even so, "a third party may only enforce a contract when the contracting parties themselves intend to secure some benefit for the third party and entered into the contract directly for the third party’s benefit.” S. Tex. Water Auth. v. Lomas,
. Defendants include the latter argument as evidence that Scheduling Workbench is not copyrightable. (Defs.’ Resp., at 13-14.) The
. The only argument in Plaintiffs Motion for Partial Summary Judgment that arguably concerns non-literal elements is Plaintiffs argument about how data is populated into Microsoft Excel. (Pl.'s Partial Mot. for Summ. J., at 25.) However, this argument is ultimately about the source code as well; data populates begins on line 18 of a Microsoft Excel spreadsheet in both Scheduling Workbench and Harmonix because the "code functions identically to populate data beginning on Row 18.” (Muppavarapu Report, Ex. G, at 9.)
In response to Plaintiff's Motion for Partial Summary Judgment, Defendants raise arguments about non-literal elements of Scheduling Workbench, such as its overall appearance. (Defs.' Resp., at 15.) They also raise arguments about Engenium’s user manual. (Id. at 15-16.) Given that Plaintiff only moves for summary judgment as to infringement of its source code, the Court finds these arguments nonresponsive and irrelevant.
. Defendants make substantially similar arguments in their own Motion for Summary Judgment, but do not delineate them as clearly. (See Defs.' Mot. for Summ. J., at 11-13.) Hence, the Court addresses their arguments as posed in their Response to Plaintiff's Motion for Partial Summary Judgment.
. As explained supra in Part II.D n. 8, to the extent that Ross is testifying as an expert, his testimony is inadmissible. However, Ross, as the developer of portions of Scheduling Workbench and Harmonix, may speak as a fact witness as to how each program was formatted. The Court understands Ross' statement to indicate that he knows Pretty Printer was used to format Scheduling Workbench and Harmonix.
. A macro is "a collection of commands that can be applied with a single click." (Muppavarapu Report, at 23 n. 3.)
. Neither Plaintiff nor Defendants recognize that the access analysis requires a showing of probative similarity, rather than substantial similarity. Positive Black Talk,
. See infra Part II.D n. 8 for an explanation of why Ross’ testimony on this point is not admissible.
. Defendants also argue that the structure and display similarities between the programs are just as likely to be a result of independent creation. (Defs.' Mot. for Summ. J., at 12.) As the Court has explained supra Part III. B.i.2 n. 12, Plaintiff’s copyright infringement claims are based on copying of source code, a literal element, not nonliteral elements. Accordingly, these arguments are irrelevant.
. Plaintiff concedes that Scheduling Workbench incorporates SAP elements, and does not assert that those aspects of Scheduling Workbench that are merely copying SAP standard code should be considered as part of the substantial similarity analysis. (Pl.’s Resp., at 7-9.)
. Plaintiff does not appear specifically to seek damages in its present motion. (PL’s Partial Mot. for Summ. J., at 30.) The Court briefly addresses damages, however, because Plaintiff does seek a determination of willfulness, which is relevant only to damages. (Id. at 27.)
. The Court takes these claims up together because it understands them to be related. See infra IILC.i.
. Defendants also argue, throughout their Motion for Summary Judgment, that Plaintiff has failed to adequately plead certain state law claims in its complaint. (See, e.g., Defs.’ Mot. for Summ. J., at 20.) However, these arguments are properly brought in a Rule 12(b)(6) motion, not a summary judgment motion.