775 F.Supp. 544 (E.D.N.Y. 1991), CV 89-0811, Computer Associates Intern., Inc. v. Altai, Inc.

Docket Nº:CV 89-0811.
Citation:775 F.Supp. 544
Party Name:20 U.S.P.Q.2d 1641 COMPUTER ASSOCIATES INTERNATIONAL, INC., Plaintiff, v. ALTAI, INC., Defendant.
Case Date:August 09, 1991
Court:United States District Courts, 2nd Circuit, Eastern District of New York
 
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Page 544

775 F.Supp. 544 (E.D.N.Y. 1991)

20 U.S.P.Q.2d 1641

COMPUTER ASSOCIATES INTERNATIONAL, INC., Plaintiff,

v.

ALTAI, INC., Defendant.

No. CV 89-0811.

United States District Court, E.D. New York.

Aug. 9, 1991

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Weil, Gotshal & Manges by Stephen D. Kahn, New York City, for plaintiff.

Anderson Kill Olick & Oshinsky by Susan G. Braden, Washington, D.C., Susman & Godfrey by Steven D. Susman, Dallas, Tex., for defendant.

TABLE OF CONTENTS

I. INTRODUCTION ...................................................... 549

  1. FACTS AND BACKGROUND .............................................. 549

    A. Parties ..................................................... 549

    1. Computers, Computer Programs, and Operating Systems ......... 549

    2. Operating System Compatability Components (Interfaces)...... 551

    3. The Computer Programs ....................................... 552

      1. CA"SCHEDULER ......................................... 552

      2. ADAPTER .............................................. 552

      3. ZEKE ................................................. 552

      4. OSCAR ................................................ 552

    4. Dramatis Personae ........................................... 553

      1. James P. Williams .................................... 553

      2. Claude F. Arney, III ................................. 553

    5. Development of OSCAR 3.4 .................................... 553

    6. Rewrite of OSCAR 3.4 into OSCAR 3.5 ......................... 554

    7. Evaluation of Altai's rewrite of OSCAR ...................... 554

  2. DISCUSSION ........................................................ 555

    A. Copyright Infringement ...................................... 555

    1. Ownership of a Valid Copyright ....................... 555

    1. Copying of the Copyrighted Work ...................... 557

      a. Access .......................................... 558

      1. Substantial Similarity .......................... 558

      i. Similarities between ADAPTER and OSCAR 3.4 . 560

      ii. Similarities between ADAPTER and OSCAR 3.5 . 561

      1. Misappropriation of Trade Secrets ........................... 562

      1. Preemption ........................................... 563

      a. Law of the Case? ................................ 563

      b. Preemption Analysis As Applied to the Facts ..... 563

    2. Choice of Law ........................................ 566

      a. Which State's Principles? ....................... 566

      b. Which State's Substantive Law? .................. 566

      c. Is the Texas Statute of Limitations a Bar? ...... 566

      1. Damages ..................................................... 567

      1. CA's View of Damages ................................. 567

    3. Altai's View of Damages .............................. 568

    4. Defects in CA's View ................................. 568

      a. CA's Actual Damages ............................. 568

      b. Altai's Profits from OSCAR 3.4 .................. 570

      c. Altai's Enhanced Good Will ...................... 570

    5. Defects in Altai's View .............................. 570

      a. CA's Actual Damages ............................. 570

      b. Altai's Profits from OSCAR 3.4 .................. 571

      c. Altai's Enhanced Good Will ...................... 571

    6. Evaluation and Conclusion as to Damages .............. 571

    7. Interest ............................................. 572

      1. Housekeeping Matters ........................................ 572

      1. Punitive Damages ..................................... 572

    8. Attorney's Fees ...................................... 572

      a. OSCAR 3.4 ....................................... 572

      b. OSCAR 3.5 ....................................... 573

    9. Fees of Dr. Davis .................................... 573

    10. Costs ................................................ 573

    11. The French Motion .................................... 573

    12. Exhibits ............................................. 573

  3. CONCLUSION ........................................................ 573

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    MEMORANDUM AND ORDER

    GEORGE C. PRATT, Circuit Judge (sitting by designation):

    I. INTRODUCTION

    Plaintiff Computer Associates International, Inc. ("CA") brought this action in August 1988 alleging that defendant Altai, Inc. ("Altai") had copied substantial portions of CA's SCHEDULER program into Altai's own computer software programs known as ZEKE, ZACK, and ZEBB. CA claims that Altai infringed CA's copyright in CA-SCHEDULER; in addition, CA claims that Altai misappropriated CA's trade secrets by incorporating elements of the CA-SCHEDULER program into ZEKE, ZACK, and ZEBB. The focal point of CA's claims of both copyright infringement and trade secret misappropriation is a discrete portion of Altai's programs called OSCAR, which CA contends was copied from a portion of its CA-SCHEDULER program known as ADAPTER.

    After most of the pretrial proceedings had been completed, this case was assigned to the undersigned for trial without a jury. Because of the extensive technical evidence and expert testimony anticipated from both sides, the court appointed Dr. Randall Davis of the Massachusetts Institute of Technology as its own expert, pursuant to Fed.R.Evid. 706.

    Trial commenced on March 28, 1990, and concluded on April 6, 1990, following which counsel submitted additional memoranda for the court's consideration.

    This memorandum and order disposing of this action includes the court's findings of fact and conclusions of law as required by Fed.R.Civ.P. 52(a).

    II. FACTS AND BACKGROUND

    A. The Parties

    Plaintiff CA is incorporated under the laws of the State of Delaware, and has its principal place of business at 711 Stewart Avenue, Garden City, New York 11530. Defendant Altai is incorporated under the laws of the State of Texas and has its principal place of business at 624 Six Flags Drive, Arlington, Texas 76011. Both CA and Altai design, develop, market, and support various computer software programs.

    B. Computers, Computer Programs, and Operating Systems

    To understand what ADAPTER and OSCAR do, it is necessary to focus upon how computers work and consider some basic computer terminology. Computers are machines which can do certain things based upon instructions. A computer is traditionally viewed as composed of three fundamental components: a CPU (central processing unit), some memory, and some means of getting input and displaying output. The CPU is where all the actual computing is done. Memory is used to hold the program that is being run, as well as to provide a place for the program to store the intermediate results of a calculation.

    A computer program, as defined in 17 U.S.C. § 101, "is a set of statements or instructions to be used directly or indirectly in a computer to bring about a certain result." Computer programs can be classified as systems programs and applications programs. Systems programs are concerned with the operation or use of the computer. Applications programs perform a task or set of tasks for the computer user, such as payroll accounting, data base operation, or word processing.

    Programs that run on the same computer and operating system can be divided into three types. The first, resident programs, reside in the computer's memory where they run continuously. CA-SCHEDULER and Altai's ZEKE are resident programs. A second type, batch programs, are scheduled, started, and run to completion of a particular job. The third group, server programs, are resident programs used by other programs to perform a service. ADAPTER and OSCAR are both classified as server programs.

    One particular type of system software is called operating system software. Operating systems are the programs that

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    manage the resources of the computer and allocate those resources to other programs that need them. For example, operating system software might perform, among others, these functions:

    --channeling information entered at a keyboard to the proper application program;

    --sending information from an application program to a display screen;

    --providing blocks of memory to an application program that requires them; and

    --allocating processing time among several application programs running on the computer at the same time.

    Operating system software interacts with whatever other programs are being used or "executed" by the computer, providing computer resources such as processors, memory, disk space, printers, tape drives, etc. for the other programs that need them through what are often referred to as "system calls". For this interaction to occur properly, the other programs must be compatible with the operating system software in use on the computer, i.e., they must be able to exchange information precisely and accurately with the operating system to interact with those computer resources.

    The computers involved in this case are IBM's System 370 family of computers. These are mainframe computers which come in varying sizes. IBM designed and developed three different operating systems for use with its System 370 computers: DOS/VSE for use with the small-to-medium-size computers; MVS for larger computers; and CMS for interactive computers.

    DOS/VSE and MVS are especially popular operating systems with businesses that run mostly batch jobs (which are sequences of application programs requiring no active user input during job execution), although both systems can support interactive applications in which users continuously interact with the computer. Businesses that run interactive applications or do a large amount of application development, which is also highly interactive, often choose the CMS operating system, which is the most efficient system for a highly interactive environment.

    Although the mix of batch and interactive jobs is a major influence in a data center's choice of operating system, all data centers run a large number of batch...

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