Atc Distribution Group, Inc. v. Whatever It Takes Transmissions

• Citation: 402 F.3d 700
• Decision Date: 30 March 2005
• Docket Number: No. 03-6505.,03-6505.
• Parties: ATC DISTRIBUTION GROUP, INC., Plaintiff-Appellant, v. WHATEVER IT TAKES TRANSMISSIONS & PARTS, INC.; Kenneth Hester; Charles Bowman; Charles Litchfield; William Watts; John Leech; Kimberly Nicks Hall, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

402 F.3d 700

ATC DISTRIBUTION GROUP, INC., Plaintiff-Appellant, v. WHATEVER IT TAKES TRANSMISSIONS & PARTS, INC.; Kenneth Hester; Charles Bowman; Charles Litchfield; William Watts; John Leech; Kimberly Nicks Hall, Defendants-Appellees.

No. 03-6505.

United States Court of Appeals, Sixth Circuit.

Argued: November 30, 2004.

Decided and Filed: March 30, 2005.

COPYRIGHT MATERIAL OMITTED

ARGUED:

James Gibson, University of Richmond Law School, Richmond, Virginia, James B. Niehaus, Frantz Ward, LLP, Cleveland, Ohio, for Appellant. David A. Calhoun, Wyatt, Tarrant & Combs, Louisville, Kentucky, for Appellees.

ON BRIEF:

James B. Niehaus, Michael E. Smith, Larry W. Conner, Frantz Ward, LLP, Cleveland, Ohio, Colin H. Lindsay, Dinsmore & Shohl, LLP, Louisville, Kentucky, for Appellant. David A. Calhoun, K. Gregory Haynes, Christopher W. Brooker, Wyatt, Tarrant & Combs, Louisville, Kentucky, for Appellees.

Before: BOGGS, Chief Judge; CLAY, Circuit Judge; and WALTER, District Judge.^*

OPINION

BOGGS, Chief Judge.

Appellant, ATC Distribution Group, Inc. ("ATC"), appeals the district court's grant of summary judgment in favor of the Appellees. ATC sells transmission parts. One of ATC's employees, Kenny Hester left ATC to form his own transmission parts company, Whatever It Takes Transmissions ("WITT"). WITT hired away several of ATC's other employees and created a transmission parts catalog that was almost identical to the ATC catalog, on which Hester had worked while he was with ATC. ATC sued WITT and several of its former employees, including Hester, alleging twelve intellectual property and unfair business practices claims. The district court granted summary judgment in favor of WITT and the other defendants on almost all of ATC's claims. ATC timely appealed the district court's grant of summary judgment on seven of those claims. For the reasons set forth below, we affirm the judgment of the district court in its entirety.

I

There are three areas of dispute between ATC and the Appellees: (1) the relationship between ATC and Kenny Hester, a former employee of ATC who started a rival transmission parts distributor, WITT; (2) the relationship between ATC, Hester, and the so-called "North Carolina Defendants," Charles Bowman, Charles Litchfield, William Watts, John Leech, and Kimberly Nicks Hall; and (3) WITT's use of ATC's transmission parts catalog and other intellectual property.

Kenny Hester. This case began with the merger of two companies in 1994. ATC Technology Group, ATC's predecessor-in-interest, acquired Hester Transmission Parts ("HTP"), along with HTP's building and the right to use HTP's transmission parts catalog, which HTP had originally acquired from McCarty, a printing company. ATC also acquired the services of Kenny Hester and the North Carolina Defendants, who had worked at HTP for varying amounts of time. Hester signed an employment contract and an agreement not to compete with ATC or solicit its employees prior to August 2, 1999.

Hester eventually left ATC in October 1999, after giving ATC more than a year's notice of his intent to leave, and agreeing to stay on longer than he originally planned, at ATC's request. Hester started a new transmission parts distributor, WITT, in Louisville, Kentucky in November 1999. WITT ultimately hired many of ATC's employees. WITT also used advertising that incorporated ATC's part numbers, and produced a flyer indicating that WITT was "formerly HTP," although the extent of the distribution and impact of that flyer is unclear.

The North Carolina Defendants. In January 2000, Hester met with the North Carolina Defendants in Charlotte. According to Hester, they confirmed their interest in leaving ATC for a new branch of WITT that Hester was opening in Charlotte. In March 2000, the North Carolina defendants resigned from ATC en masse over the course of two days, and began working at WITT. One of the North Carolina Defendants, Bowman, had signed a non-compete and non-solicitation clause in 1992 upon his promotion to Vice President and Sales Manager of HTP, a position from which he subsequently had been demoted. The North Carolina Defendants took with them copies of customer lists, reports of accounts receivable, and reports detailing the pricing groups to which ATC assigned customers. Some of the North Carolina Defendants began calling their former customers to solicit business for WITT.

ATC's catalog and part numbers. In 1995, ATC first published a transmission parts catalog that Hester had worked on since his days at HTP, a catalog that ATC hoped would become the industry standard. This and subsequent catalogs were distributed throughout the industry. The ATC catalog and the parts numbering system used in the catalog were based on an original catalog and numbering system that McCarty, the printing company, had distributed to several parts wholesalers, each with the wholesaler's own name on it. The illustrations in the catalog were obtained by hiring an artist to create sketched copies of photographs found in another distributor's catalog, and then rearranging them in an order consistent with the assembly and disassembly of a transmission. After Hester left ATC in 1999, he obtained an electronic copy of the ATC catalog, on which he based a new catalog used by WITT salespeople. According to Hester, no copies of this catalog have ever been distributed outside WITT, but WITT does use many of ATC's part numbers in advertising and in its internal processes.

ATC brought suit against WITT, Hester, and the North Carolina Defendants in the United States District Court for the Western District of Kentucky in June 2000, alleging (1) copyright infringement (by WITT and Hester), in the form of copying without permission ATC's catalog and the part numbers and illustrations contained in the catalog; (2) trademark infringement (by WITT); (3) unfair competition (by WITT and Hester); (4) common law trademark infringement (by WITT); (5) common law unfair competition (by WITT); (6) aiding and abetting trademark infringement and unfair competition (by WITT); (7) breach of contract (by Hester and Bowman); (8) unjust enrichment and quantum meruit (by WITT, Hester, and the North Carolina Defendants); (9) misappropriation and conversion (by WITT, Hester, and several named North Carolina Defendants); (10) breach of fiduciary duty (by Hester and the North Carolina Defendants); (11) trade defamation (by WITT, Hester, and two of the North Carolina Defendants); and (12) intentional interference with business relations (by WITT, Hester, and the North Carolina Defendants). All parties moved for summary judgment.

The court granted summary judgment in favor of all named defendants on ATC's claims for copyright infringement, trademark infringement, common law trademark infringement, common law unfair competition, aiding and abetting trademark infringement and unfair competition, unjust enrichment and quantum meruit, misappropriation and conversion, trade defamation, and intentional interference with business relations. The court granted summary judgment in favor of all defendants on all aspects of ATC's unfair competition claim except the part of the claim arising from WITT's use of the phrase "formerly HTP," on which the court granted summary judgment in favor of ATC. The court granted summary judgment in favor of defendant Bowman on the breach of contract claim, but denied summary judgment on the part of the claim arising from Hester's alleged breach of contract. Finally, the court granted summary judgment in favor of the North Carolina Defendants on the breach of fiduciary duty claim, but denied Hester's motion for summary judgment on that claim. In total, ten of the twelve counts were resolved in their entirety on summary judgment, with only one part of the unfair competition claim decided in ATC's favor. The remaining claims, including ATC's claim for damages for unfair competition, were dismissed without prejudice by the district court on August 12, 2003, pending this court's resolution of this appeal.¹

ATC timely appealed the district court's order granting summary judgment in favor of defendants on ATC's claims for copyright infringement, unfair competition, unjust enrichment and quantum meruit, misappropriation and conversion, breach of fiduciary duty, trade defamation, and intentional interference with business relations.²

II

We review a district court's order granting summary judgment de novo, and its findings of fact for clear error. Howard v. City of Beavercreek, 276 F.3d 802, 805 (6th Cir.2002).

A. Copyright infringement.

The Constitution establishes Congress's power to create copyrights to "promote the Progress of Science and the useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." U.S. Const. art. I, § 8, cl. 8. The Copyright Act gives copyright owners exclusive rights to reproduce, prepare derivative works from, distribute, and publicly perform or display a copyrighted work, and allows "the legal or beneficial owner of an exclusive right under a copyright ... to institute an action for any infringement of that particular right." See 17 U.S.C. §§ 106, 501(b). A claim of copyright infringement requires proof of "(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original." Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991).

ATC claims that WITT and Hester infringed its copyrights in the parts catalog, the individual part numbers contained in the catalog, the illustrations contained in the catalog, and its self-described "Numbering System Manual." Appellees do not contest the allegation that they copied these works and items. Rather, they raise the affirmative defense that ATC abandoned any copyright interests it might have had by widely distributing the catalog, and argue in the alternative that...