Gates Rubber Co. v. Bando American, Inc., Civ. A. No. 92-S-136.

• Decision Date: 12 August 1992
• Docket Number: Civ. A. No. 92-S-136.
• Citation: 798 F. Supp. 1499
• Parties: The GATES RUBBER COMPANY, a Colorado corporation, Plaintiff, v. BANDO AMERICAN, INC., an Illinois corporation, Steven R. Piderit, an individual, Ron Newman, an individual, Denise Hanano, an individual, and John Does 1-99, Defendants.
• Court: U.S. District Court — District of Colorado

798 F. Supp. 1499

The GATES RUBBER COMPANY, a Colorado corporation, Plaintiff, v. BANDO AMERICAN, INC., an Illinois corporation, Steven R. Piderit, an individual, Ron Newman, an individual, Denise Hanano, an individual, and John Does 1-99, Defendants.

Civ. A. No. 92-S-136.

United States District Court, D. Colorado.

June 24, 1992.

Order on Motions and Amending August 12, 1992.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Rodger Wilson, Denver, Colo., Karl Dakin, Englewood, Colo., for plaintiff.

James Lowe, Duane Burton, Denver, Colo., Thomas Johnson, Baker & McKenzie, Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER GRANTING INJUNCTIVE RELIEF

SPARR, District Judge.

THIS MATTER comes before the Court on Plaintiff's motion for permanent injunction. The issues in this case stem from the traditional conflict in copyright law â how to protect an author's creative expression while preserving competition in the marketplace. This dilemma is nothing new, but the case law and commentators in the area of copyright protection seem woefully illequipped to provide a systematic means for analyzing copyright issues as they arise in the context of computer software. Indeed, the heart of copyright law, designed to accommodate unimaginable varieties of creative expression, has mandated resolution of disputes on a case-by-case basis. What magnifies the underlying dilemma, however, is the realization that copyright law was not designed to accommodate computer software protection. With this stated, the Court must nonetheless proceed to resolve the dispute before it.

Procedural Background

This case was filed by the Plaintiff, Gates Rubber Company, against one of its competitors in the industrial belt market, Bando American, and some of its employees (who also happen to be former Gates employees). Gates currently enjoys the largest market share in the industrial belt manufacturing industry, approximately 38%. The subject of this copyright infringement action, which also contains a claim for misappropriation of trade secrets, is the Plaintiff's computer program known as Design Flex 4.0. This software is designed to aid in the selection of replacement belts for Gates's industrial belt customers. Its primary purpose is as a marketing tool, while its function is to produce multiple drive design (uses in which more than a single belt is required) capability.

The initial hearing in this matter was held on January 28, 1992. After hearing testimony and conferring with counsel, it was determined that a temporary restraining order was not needed at that time, and the motion for temporary restraining order was accordingly denied. The Court further ordered that each party appoint one expert with the experts to agree upon a third independent expert to examine the copyright issues and report back to the Court by February 6, 1992, at which time it was anticipated the preliminary injunction hearing would commence. On February 6, 1992, Plaintiff filed an amended complaint expanding the allegations and parties in the case. It was determined appropriate that the matter be set for permanent injunction hearing to commence on March 26, 1992, at which time the Court would entertain the single issue of whether injunctive relief was appropriate on Plaintiff's claims of copyright infringement by the Defendant Bando's Chauffeur program, and the misappropriation of trade secrets claim. The motion for permanent injunction was filed April 6, 1992. The remaining issues are set for a jury trial, now set to begin in May 1993.

The Defendant corporation Bando American is headed by Mr. Allen Hanano, who presented testimony at the permanent injunction hearing. Mr. Hanano (once employed by Gates Rubber) in turn hired Defendants Newman and Piderit away from Gates.¹ Shortly after the hiring of Defendant Piderit in October 1988, an executable version of the predecessor to the "Chauffeur" program was demonstrated at a convention in Kentucky in June 1989. The Plaintiff alleges that the successor to this program is an infringing copy of the Design Flex program.

In arriving at the determination of appropriate size and other dimensions or capacities for replacement belts, the user of Design Flex provides information for use by the program, answering relevant questions which assemble the data necessary for the program to perform its calculations. A central issue of this action concerns in particular the calculation methods. Using published formulas, the Design Flex program employs certain mathematical constants to design a drive and for which to determine belt size. The formulas and constants are the same ones used by Gates engineers when calculations are made manually. One reason the Design Flex, as well as its alleged copy produced by Defendant Bando, the Chauffeur program, is so attractive a marketing tool is that the sales staff, who are otherwise not trained to perform such calculations, can use the program while "in the field" and can determine readily, and usually without the aid of an engineer, the type of belt a customer requires.

With regard to the sale of new industrial belts, Gates uses a program known as "Life in Hours" to determine, among other things, when replacement belts will be necessary. This Life in Hours program is the subject of Plaintiff's misappropriation of trade secrets claim. The determination of the trade secrets issues is found in the final portion of this decision.

This Court has jurisdiction to hear this action pursuant to 28 U.S.C. § 1338. In addition, jurisdiction is appropriate as to the copyright infringement action as the Plaintiff has met the registration requirements of 17 U.S.C. § 411(a). By virtue of this fact, the scope of the remedy available to the Plaintiff for copyright infringement is dictated by the scope of the copyright actually registered. Cable News Network v. Video Monitoring Services, 940 F.2d 1471, 1480 (11th Cir.1991). The registration of Plaintiff's copyright for Design Flex, version 4.0 is before this Court as Plaintiff's exhibit 9.

Statement of the Issues

The issues before this Court have been limited for purposes of the permanent injunction hearing to those arising from the alleged copyright infringement of the Plaintiff's Design Flex program, and the injunctive relief sought arising from the Plaintiff's misappropriation of trade secret claim on its Design Flex program. The two primary elements of an infringement action consist of proving ownership of the copyright by the plaintiff and copying of the work by defendant.² These two elements will be discussed in turn.

I. Prima Facie Case: Ownership and Registration of the Copyright

To establish copyright infringement, Plaintiff must prove both ownership of a valid copyright in the Design Flex program (which it has done) and copying by the Defendants of the copyrighted work (here the Court examines Bando's program known as "Chauffeur"). Sid & Marty Krofft Television Products, Inc. v. McDonalds Corp., 562 F.2d 1157, 1162 (9th Cir.1977). The Copyright Act hereafter referred to as "the Act" at 17 U.S.C. § 102 (1989) states the general requirements of copyright protection:

(a) Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. Works of authorship include the following categories:

(1) literary works;

. . . . .

(6) motion pictures and other audiovisual works; and

(b) In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.

The Act defines a computer program as a "set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result." 17 U.S.C. § 101 (1989). Many copyright principles applicable to literary works apply with equal force to computer programs. Computer software which is copyrightable can be protected as a literary work. See Kutten, Computer Software: Protection/Liability/Law/Forms § 2.021a at 2-18 (1990). See also M. Kramer Manuf. Co., Inc. v. Andrews, 783 F.2d 421, 435-36 (4th Cir.1986). As a literary work, two requirements must be met in order for it to be considered copyrightable: it must be fixed in a tangible medium of expression; and it must be original. See 17 U.S.C. § 102(a). These two elements are not effectively in dispute in this proceeding, as the issues in this dispute involve a much narrower scope of the copyright law â namely, whether there is substantial similarity of protected expression. Plaintiff has alleged that Defendants copied its Design Flex program in producing its Chauffeur program. Copying is a "shorthand reference to the act of infringing any of the copyright owner's five exclusive rights set forth at 17 U.S.C. § 106." Ford Motor Co. v. Summit Motor Products, Inc., 930 F.2d 277, 291 (3d Cir.1991), citing Paramount Pictures v. Video Broadcasting Systems, 724 F.Supp. 808, 819 (D.Kan.1989). Defendants assert at least two arguments relevant to this stage of inquiry: that Plaintiff's copyright is not enforceable as it is submitted; and that Plaintiff's claims arising from the infringement of contents of the registration are not capable of recognition in copyright law due to the nature (unprotectable) of the claims.

The Court here has divided the scope of inquiry along the lines suggested by the statute and established case law. As stated above, Plaintiff must show a valid copyright and then must demonstrate evidence of copying (substantial similarity and access). However, the Defendants' defenses are based upon the argument that no action or remedy is appropriate here because Plaintiff's program ...