Bateman v. Mnemonics, Inc.
| Decision Date | 22 March 1996 |
| Docket Number | No. 93-3234,93-3234 |
| Citation | 79 F.3d 1532 |
| Parties | Brian E. BATEMAN; Charles H. Fricker, Plaintiffs-Counter-Defendants, Appellees-Cross-Appellants, v. MNEMONICS, INC.; Harry Thompson, President; David Katz, Vice President; Parking Automation Corporation; Joe Guidage, President, et al., Defendants-Counter-Claimants, Third-party-Plaintiffs, Appellants-Cross-Appellees, City of Miami, an entity organized and existing under the laws of the State of Florida; Department of Off-Street Parking of the City of Miami, an agency and instrumentality of the City of Miami, Florida; Generex Corporation, a Florida Corporation, Third-party-Defendants. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Appeals from the United States District Court for the Middle District of Florida.
ON PETITION FOR REHEARING
Before BIRCH and DUBINA, Circuit Judges, and JOHNSON, Senior Circuit Judge.
Pursuant to Federal Rule of Appellate Procedure 40(a), the panel hereby grants the appellees' petition for rehearing, withdraws the previous panel opinion dated December 22, 1995, and substitutes the following opinion:
This appeal requires us to address two issues of first impression in this circuit: (1) what methodology is to be employed in analyzing claims of copyright infringement of computer software, and (2) whether interface specifications are entitled to copyright protection. For the reasons that follow, we VACATE the judgment of the district court on the two copyright infringement counts and REMAND for a new trial on these counts. In addition, we REVERSE the judgment of the district court on the trade secret misappropriation count and instruct the district court to enter judgment as a matter of law for the appellants on this count.
Appellees-cross-appellants Brian E. Bateman and Charles H. Fricker filed an action in federal court against appellants-cross-appellees Mnemonics, Inc., Harry Thompson, David Katz, Parking Automation Corp., BCS, Inc. ("BCS"), and Robert Brunet (collectively "PAC"). The second amended complaint alleged copyright infringement in Bateman's single board computer operating system ("SBCOS") software (Count I), copyright infringement in Bateman and Fricker's hardware logic diagrams for their computer circuit board (Count II), copyright infringement in the programmable array logic ("PAL") software (Count III), false designation of origin in violation of 15 U.S.C. § 1125(a) (Count IV), common law unfair competition (Count V), and theft of trade secrets (Count VI). 1 After a lengthy trial, the jury found for Bateman and Fricker on three counts, awarding them $105,000 on Count I, $120,000 on Count II, and $300,000 on Count VI. 2 PAC appeals these judgments, and Bateman and Fricker cross-appeal, asserting that the district court abused its discretion in refusing to award exemplary damages to them on the trade secret claim under Fla.Stat. § 688.004(2).
Before addressing the many issues involved in this appeal, it is important to set forth the factual and technical background to this complex case. Both Bateman and Fricker are engineers. Bateman created and developed SBCOS software, and the Register of Copyrights registered his claim of copyright in this software. 3 Bateman and Fricker together created and developed hardware logic diagrams for a single board computer ("SBC") used in automated parking systems, and the Register of Copyrights registered their claim of copyright in these hardware logic diagrams. 4
Initially, Bateman had a business relationship with BCS and its principal, Robert Brunet, 5 in the mid-1980s. BCS manufactured and sold computer boards to several companies, including Generex Corporation. 6 Generex was engaged in the parking system business and desired to purchase a computer board and operating system for use in its parking garage business. To satisfy this need, Bateman and Fricker helped Brunet design a SBC, which contained Bateman's SBCOS software as one of its components. 7 Once the SBC was fully developed, BCS sold a number of these boards to Generex. 8 After this purchase, Generex's programmers composed an application program designed to interoperate with the SBCOS. 9 To ensure compatibility, Generex's programmers relied on specifications delivered to them by BCS 10 that dictated the "system calls" necessary to communicate with the operating system, the SBCOS. 11
In 1987, Generex was acquired by PAC, a wholly owned subsidiary of Mnemonics, Inc. Pursuant to the BCS/Generex agreement, BCS began delivering SBCs to PAC. In the spring of 1988, Bateman terminated BCS's right to use his SBCOS software on the SBCs that it was selling. 12 Bateman contacted Joe Guidage, the president of PAC, to notify him that BCS was no longer authorized to sell the SBC boards containing his SBCOS. Guidage and Bateman decided to do business with one another and apparently bypassed BCS and Brunet. In May of 1988, Bateman negotiated a written agreement with Guidage whereby he and Fricker agreed to design a new SBC, the SBC2, which was to contain an updated version of Bateman's SBCOS software. 13 In addition, the SBC2 was to include programmable array logic ("PAL") technology, which was not included on the SBC1. 14
Days after the May agreement between Guidage and Bateman was signed, it was repudiated by Thompson, president of Mnemonics, PAC's parent company. A new contract was negotiated and signed in June of 1988, under which Bateman and Fricker agreed to design the SBC2, which would meet certain of PAC's technical requirements. Bateman and Fricker delivered the SBC2 to PAC in June of 1988. In addition, in November of 1988, pursuant to the June contract, Fricker delivered to PAC "engineering" for the board; these materials were needed in order for PAC to be able to build SBC2s. 15 The hardware logic diagrams at issue in this case were among the documents delivered to PAC by Fricker in November of 1988. Bateman and Fricker acknowledge that there was no copyright notice on the diagrams that were delivered to PAC.
Shortly after delivering the engineering to PAC, Bateman and Fricker realized that they had given PAC their only copy of these materials. Because these materials were needed to manufacture more boards, Bateman and Fricker needed to retrieve them. Fricker received back the engineering materials from PAC, signing a receipt to indicate that PAC had loaned the materials to him; Fricker later returned the materials to PAC. It is these engineering materials that are at issue in Bateman and Fricker's theft of trade secret count against PAC. 16
By January of 1989, the business relationship between Bateman/Fricker and PAC had deteriorated severely. PAC experienced problems with the SBC2s that were in the field, and the parties disputed the cause of the problems. On January 18, 1989, Bateman and Fricker met with Jack Blalock, the general manager of PAC. PAC's payments were in arrears, while Blalock complained to Bateman and Fricker that their product was not satisfactory. Blalock requested that Bateman and Fricker deliver to PAC the "source code" 17 for the SBCOS and the rights to the SBC2 circuit design in exchange for a release of claims based on the inoperability of the delivered SBC2s, for which PAC had paid Bateman and Fricker $35,000. Bateman and Fricker refused to accept PAC's offer, and, on January 26, 1989, Blalock dispatched a letter to Bateman terminating the contract between Bateman/Fricker and PAC.
After Bateman and Fricker denied PAC's request for the source code for the SBCOS and the rights to the SBC2 circuit design, PAC undertook to compose its own operating system that would interoperate with the application program that it (or its predecessor, Generex) had written to be compatible with Bateman's SBCOS. Tom Colvin, Mnemonic's senior engineer, was assigned this task. He disassembled and decompiled a portion of Bateman's SBCOS from a computer chip resident on one of the previously delivered SBC2s. 18 PAC claims that Colvin was compelled to do this because Bateman had never provided PAC with a copy of the source code for his SBCOS. PAC also claims that Colvin identified those elements of the program that were necessary for compatibility with the preexisting application program and incorporated them into PAC's new operating system, known as the Lane Control Computer Operating System ("LCCOS"). In addition to composing the LCCOS, PAC also designed a new circuit board, known as the Lane Control Computer ("LCC"), which was to replace Bateman and Fricker's SBC2.
Shortly after the January contract termination by PAC, Bateman and Fricker filed suit in Florida state court, alleging breach of the June 2, 1988 contract. 19 They subsequently learned that PAC was marketing a new computer circuit board that appeared to perform the same functions as their SBC2. In May of 1990, Bateman and Fricker initiated this case in federal court in Florida, alleging, inter alia, copyright infringement and theft of trade secrets.
On appeal, PAC raises eight issues, and Bateman and Fricker present one issue on cross-appeal. The issues on direct appeal are whether: (1) a jury instruction that limited the "successive filtration" test for copyright infringement to nonliteral similarity was confusing or misleading; (2) the district court should have instructed the jury to filter out the operating system/application program interface; (3) it was plain error to instruct the jury that a "qualitatively" small amount of copying could authorize a finding of copyright infringement; (4) the district court erred in directing a verdict...
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