797 F.2d 1222 (3rd Cir. 1986), 85-1358, Whelan Associates, Inc. v. Jaslow Dental Laboratory, Inc.

Docket Nº:85-1358.
Citation:797 F.2d 1222
Party Name:WHELAN ASSOCIATES, INC. v. JASLOW DENTAL LABORATORY, INC., Dentcom, Inc., Edward Jaslow, Rand Jaslow, and Joseph M. Cerra. Appeal of JASLOW DENTAL LABORATORY, INC., Edward Jaslow, Rand Jaslow, and Dentcom, Inc.
Case Date:August 04, 1986
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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797 F.2d 1222 (3rd Cir. 1986)

WHELAN ASSOCIATES, INC.

v.

JASLOW DENTAL LABORATORY, INC., Dentcom, Inc., Edward

Jaslow, Rand Jaslow, and Joseph M. Cerra.

Appeal of JASLOW DENTAL LABORATORY, INC., Edward Jaslow,

Rand Jaslow, and Dentcom, Inc.

No. 85-1358.

United States Court of Appeals, Third Circuit

August 4, 1986

Argued March 3, 1986.

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[Copyrighted Material Omitted]

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Joel S. Goldhammer (argued), Seidel, Gonda, Goldhammer & Abbott, Philadelphia, Pa., Irwin S. Rubin, Rubin, Glickman & Steinberg, Souderton, Pa., for appellee Whelan Associates, Inc.

Michael J. Mangan (argued), Robert S. Bramson, Ronald E. Karam, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for appellants Jaslow Dental Laboratory, Inc. and Dentcom, Inc.

Ronald J. Palenski, Morton David Goldberg, Richard Dannay, Jo Recht, ADAPSO Office of the Gen. Counsel, Arlington, Va., for amicus curiae ADAPSO, The Computer Software and Services Industry Association, Inc.

TABLE OF CONTENTS Page I. FACTUAL BACKGROUND ......................................................... 1225 II. PROCEDURAL HISTORY ......................................................... 1227 III. TECHNOLOGICAL BACKGROUND ................................................... 1229 IV. LEGAL BACKGROUND ........................................................... 1231 A. The elements of a copyright infringement action ......................... 1231 B. The appropriate test for substantial similarity in computer program cases ................................................................... 1232 C. The arguments on appeal ................................................. 1233 V. THE SCOPE OF COPYRIGHT PROTECTION OF COMPUTER PROGRAMS ..................... 1233 A. Section 102(b) and the dichotomy between idea and expression ............ 1234 1. A rule for distinguishing idea from expression in computer programs .. 1235 2. Application of the general rule to this case ......................... 1238 B. The CONTU Report ........................................................ 1240 VI. EVIDENCE OF SUBSTANTIAL SIMILARITY ......................................... 1242 A. File structures ......................................................... 1242 B. Screen outputs .......................................................... 1243 C. The five subroutines .................................................... 1245 D. Sufficiency of the evidence ............................................. 1246 VII. CONCLUSION ................................................................. 1248 APPENDIX A ................................................................. 1249 Before GIBBONS, BECKER, and ROSENN, Circuit Judges.

OPINION

BECKER, Circuit Judge.

This appeal involves a computer program for the operation of a dental laboratory, and calls upon us to apply the principles underlying our venerable copyright laws to the relatively new field of computer technology to determine the scope of copyright protection of a computer program. More particularly, in this case of first impression in the courts of appeals, we must determine whether the structure (or sequence and organization) 1 of a computer program is protectible by copyright, or whether the protection of the copyright law extends only as far as the literal computer code. The district court found that the copyright

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law covered these non-literal elements of the program, and we agree. This conclusion in turn requires us to consider whether there was sufficient evidence of substantial similarity between the structures of the two programs at issue in this case to uphold the district court's finding of copyright infringement. Because we find that there was enough evidence, we affirm.

I. FACTUAL BACKGROUND

Appellant Jaslow Dental Laboratory, Inc. ("Jaslow Lab") is a Pennsylvania corporation in the business of manufacturing dental prosthetics and devices. Appellant Dentcom, Inc. ("Dentcom") is a Pennsylvania corporation in the business of developing and marketing computer programs for use by dental laboratories. Dentcom was formed out of the events that gave rise to this suit, and its history will be recounted below. Individual appellants Edward Jaslow and his son Rand Jaslow are officers and shareholders in both Jaslow Lab and Dentcom. Appellants were defendants in the district court. Plaintiff-appellee Whelan Associates, Inc. ("Whelan Associates") is also a Pennsylvania corporation, engaged in the business of developing and marketing custom computer programs.

Jaslow Lab, like any other small- or medium-sized business of moderate complexity, has significant bookkeeping and administrative tasks. Each order for equipment must be registered and processed; inventory must be maintained; customer lists must be continually updated; invoicing, billing, and accounts receivable, must be dealt with. While many of these functions are common to all businesses, the nature of the dental prosthetics business apparently requires some variations on the basic theme.

Although Rand Jaslow had not had extensive experience with computers, he believed that the business operations of Jaslow Lab could be made more efficient if they were computerized. In early 1978, he therefore bought a small personal computer and tried to teach himself how to program it so that it would be of use to Jaslow Lab. Although he wrote a program for the computer, he was ultimately not successful, limited by both his lack of expertise and the relatively small capacity of his particular computer.

A few months later, stymied by his own lack of success but still confident that Jaslow Lab would profit from computerization, Rand Jaslow hired the Strohl Systems Group, Inc. ("Strohl"), a small corporation that developed custom-made software to develop a program that would run on Jaslow Lab's new IBM Series One computer and take care of the Lab's business needs. Jaslow Lab and Strohl entered into an agreement providing that Strohl would design a system for Jaslow Lab's needs and that after Strohl had installed the system Strohl could market it to other dental laboratories. Jaslow Lab would receive a 10% royalty on all such sales. 2 The person at Strohl responsible for the Jaslow Lab account was Elaine Whelan, an experienced programmer who was an officer and half-owner of Strohl.

Ms. Whelan's first step was to visit Jaslow Lab and interview Rand Jaslow and others to learn how the laboratory worked and what its needs were. She also visited other dental laboratories and interviewed people there, so that she would better understand

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the layout, workflow, and administration of dental laboratories generally. After this education into the ways of dental laboratories, and Jaslow Lab, in particular, Ms. Whelan wrote a program called Dentalab for Jaslow Lab. Dentalab was written in a computer language known as EDL (Event Driven Language), so that it would work with IBM Series One machines. The program was completed and was operative at Jaslow Lab around March 1979.

Presumably with an eye towards exploiting the economic potential of the Dentalab program, Ms. Whelan left Strohl in November, 1979, to form her own business, Whelan Associates, Inc., which acquired Strohl's interest in the Dentalab program. Shortly thereafter, Whelan Associates entered into negotiations with Jaslow Lab for Jaslow Lab to be Whelan Associates' sales representative for the Dentalab program. Whelan Associates and Jaslow Lab entered into an agreement on July 30, 1980, according to which Jaslow Lab agreed to use its "best efforts and to act diligently in the marketing of the Dentalab package," and Whelan Associates agreed to "use its best efforts and to act diligently to improve and augment the previously successfully designed Dentalab package." App. at 1779. The agreement stated that Jaslow Lab would receive 35% of the gross price of any programs sold and 5% of the price of any modifications to the programs. The agreement was for one year and was then terminable by either party on thirty days' notice.

The parties' business relationship worked successfully for two years. 3 During this time, as Rand Jaslow became more familiar with computer programming, he realized that because Dentalab was written in EDL it could not be used on computers that many of the smaller dental prosthetics firms were using, for which EDL had not been implemented. Sensing that there might be a market for a program that served essentially the same function as Dentalab but that could be used more widely, Rand Jaslow began in May or June of 1982 to develop in his spare time a program in the BASIC language for such computers. That program, when completed, became the alleged copyright infringer in this suit; it was called the Dentcom PC program ("Dentcom program"). 4

It appears that Rand Jaslow was sanguine about the prospects of his program for smaller computers. After approximately a year of work, on May 31, 1983, his attorney sent a letter to Whelan Associates giving one month notice of termination of the agreement between Whelan Associates and Jaslow Lab. 5 The letter stated that Jaslow Lab considered itself to be the exclusive marketer of the Dentalab program which, the letter stated, "contains valuable trade secrets of Jaslow Dental Laboratory." The letter concluded with a thinly veiled threat to Whelan Associates: "I ... look for your immediate response confirming that you will respect the rights of Jaslow and not use or disclose to others the trade secrets of Jaslow." App. at 1221.

Approximately two months later, on about August 1, Edward and Rand Jaslow, Paul Mohr, and Joseph Cerra formed defendant-appellant Dentcom to sell the Dentcom

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program. 6 At about the same time, Rand Jaslow and Jaslow Lab employed a professional computer programmer, Jonathan Novak, to complete the Dentcom program. The program was...

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