Applied Innovations, Inc. v. Regents of University of Minnesota, s. 88-1072

• Decision Date: 30 May 1989
• Docket Number: Nos. 88-1072,88-5052,s. 88-1072
• Citation: 876 F.2d 626
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: , 1989 Copr.L.Dec. P 26,428, 54 Ed. Law Rep. 146, 11 U.S.P.Q.2d 1041 APPLIED INNOVATIONS, INC., Appellant/cross-appellee, v. REGENTS OF THE UNIVERSITY OF MINNESOTA and National Computer Systems, Inc., Appellees/cross-appellants.

Page 626

876 F.2d 626

58 USLW 2026, 1989 Copr.L.Dec. P 26,428,

54 Ed. Law Rep. 146,

11 U.S.P.Q.2d 1041

APPLIED INNOVATIONS, INC., Appellant/cross-appellee, v. REGENTS OF THE UNIVERSITY OF MINNESOTA and National Computer Systems, Inc., Appellees/cross-appellants.

Nos. 88-1072, 88-5052.

United States Court of Appeals Eighth Circuit.

Submitted April 11, 1988.

Decided May 30, 1989.

William F. Patry, Washington, D.C., for appellant/cross-appellee.

Thomas Tinkham, Minneapolis, Minn., for appellees/cross-appellants.

Before McMILLIAN, Circuit Judge, BRIGHT, Senior Circuit Judge and BOWMAN, Circuit Judge.

McMILLIAN, Circuit Judge.

Applied Innovations, Inc. (defendant), appeals from a final judgment entered in the District Court ¹ for the District of Minnesota, after a bench trial, in favor of the Regents of the University of Minnesota (the university) and National Computer Systems, Inc. (NCS) (together referred to as plaintiffs), finding that AI had infringed the university's copyrights in a psychological test, the Minnesota Multiphasic Personality Inventory (MMPI). Regents of University of Minnesota v. Applied Innovations, Inc., No. 3-86-CIV-683 (D.Minn. Oct. 9, 1987) (reported at 685 F.Supp. 698), amended (Jan. 4, 1988) (order).

For reversal defendant argues the district court erred in (1) holding that the university had standing to sue for copyright infringement, (2) holding that the university owned a valid copyright in works funded in part with government grants, (3) holding that the work was copyrightable and that defendant had infringed the university's copyrights, and (4) calculating the amount of the damages. On cross-appeal, plaintiffs argue the district court erred in (1) holding that the social introversion and correction (K) scales and the correlation or conversion tables are copyrightable only as compilations, (2) refusing to require defendant to recall and destroy software from its customers, and (3) refusing to award reasonable attorney's fees.

For the reasons discussed below, we affirm the judgment of the district court. The appeal and cross-appeal are denied. Defendant's motion to strike the first 19 pages of plaintiffs' reply brief is granted.

PROCEDURAL BACKGROUND

Much of the following statement of facts is taken from the district court memorandum opinion (as amended by order dated January 4, 1988).

NCS is a Minnesota corporation and the university's exclusive commercial licensee in the United States for marketing the MMPI and associated products and services; its principal place of business is located in Minnesota. Defendant is a New Jersey corporation; its principal place of business is located in Rhode Island.

The MMPI is a psychometric test used by medical and psychological professionals to make objective assessments of major personality characteristics that affect professional and social adjustment, such as truthfulness, hypochondria, introversion, depression, and sexual orientation. Plaintiffs describe the MMPI as a revolutionary development in the field of psychological testing. The MMPI consists of four types of materials: (1) 550 "test statements," or short declarative sentences, to which subjects respond by answering "true," "false," or "cannot say"; (2) scale membership or definitions (there are 10 clinical scales and 4 validity scales); (3) normative statements (t-scores); and (4) correlation or conversion tables. The test statements can be administered at random in card format or in one of three "Form" booklets. The correlation or conversion tables sort the test statements in each format of the MMPI by identification number. The responses can be "hand-scored," but hand-scoring is time-consuming. Most tests are scored by computer. NCS markets the MMPI test and related products and services, including several forms of computerized scoring services. NCS bills its customers on a per-test or per-use basis.

In early 1984 defendant had developed personal computer software to administer, score and interpret the MMPI test. One version of defendant's software, MMPI Scoring Program I, included 38 MMPI test statements known as the "Grayson critical items" and scored and interpreted the test. A second version of the software, MMPI Scoring Program II, did not include any test statements and only scored and interpreted the test. Defendant sold its MMPI software and on an unlimited-use per program basis. Plaintiffs promptly informed defendant that its MMPI scoring software infringed plaintiffs' MMPI copyrights. In 1986 plaintiffs filed a five-count complaint against defendant, alleging copyright infringement, trademark infringement and unfair competition, and deceptive trade practices. Defendant denied any copyright infringement and counterclaimed for a declaratory judgment that plaintiffs' claimed copyrights were invalid or had not been infringed, misuse of copyright, intentional interference with business relations, and antitrust violations.

In the meantime, in April 1985, NCS had begun marketing its own personal computer software for scoring the MMPI, Microtest. However, Microtest was more expensive than defendant's MMPI software.

The district court dismissed defendant's counterclaims against the university except to the extent that they sought declaratory or prospective injunctive relief. The district court also dismissed the misuse of copyright counterclaim against NCS. The parties agreed to bifurcate for later trial the intentional interference and antitrust counterclaims. After an eight-day bench trial, the district court generally found in favor of plaintiffs on their copyright claims, but in favor of defendant on the trademark infringement, unfair competition, and deceptive practices counts. The parties stipulated that, in developing its MMPI scoring software, defendant had copied directly or indirectly 38 test statements (the Grayson critical items), scale membership and item direction scoring for 13 basic scales, t-scores for those scales, the correction (K) factors or scale, the Minnesota adult norms for five corrected (K) scales, and the correlation or conversion tables (from the Form R booklet to the Group Form booklet).

The district court found that defendant's MMPI scoring software copied everything of commercial significance with regard to the scoring and interpreting of MMPI scores and held that defendant's software infringed plaintiffs' MMPI copyrights, except for the social introversion and correction (K) scales and the correlation or conversion tables. The district court permanently enjoined defendant from reproducing or distributing software, documentation or copies of the MMPI test statements and scale definitions, correction (K) factors and normative or t-scores for 12 MMPI scales and from inducing or authorizing others to reproduce any portion of those parts of the MMPI, and required defendant to deliver to plaintiffs all of its copies of the infringing software and documentation. The district court awarded NCS $226,598 for lost profits and the university $162,161 for lost royalty payments, plus costs and disbursements. The district court denied plaintiffs' request for attorney's fees. This appeal and cross-appeal followed.

THE MMPI

Two University of Minnesota professors, Starke R. Hathaway and J. Charnley McKinley, developed the MMPI over a 10-year period during the late 1930s and early 1940s. Other university researchers, in particular Paul E. Meehl and Lewis E. Drake, also worked on the MMPI. Hathaway and McKinley began their work with psychometric tests used to evaluate mental patients and then simplified and revised them for use on "normal" individuals. Their basic hypothesis was that individuals who share a particular psychological symptom or personality trait or characteristic were likely to respond to certain groups of test statements in the same way and that each response to a particular test statement was indicative of a particular psychological symptom or personality trait or characteristic.

Their basic research method, greatly simplified, involved administering the test statements to clinical patients and "adult normals," comparing the responses given by the clinical patients with those of the "adult normals," converting the "raw scores" into normative scores or "t-scores," reviewing the t-scores and assigning varying "weights" to particular test statements and responses in light of their clinical experience and expertise, and then testing the accuracy of the resulting scores by using validation tests. For example, the correction (K) scale adjusted the score to account for a subject's conscious and unconscious efforts to make his or her score "look better."

Sometime before August 1942, Hathaway and McKinley had distributed test statements to a limited group of individuals for research and comment purposes, including the United States Navy, Dr. Burton P. Grimes of the state hospital in Fort Benning, Georgia, Mr. H.D. Rempel of the federal reformatory at El Reno, Oklahoma, and Col. G.W. Guthrie of the Minnesota State Home for Girls.

The hypochondriasis scale was the first to be developed. Hathaway and McKinley published two articles about the MMPI in a 1940 issue of the Journal of Psychology. Part I described the MMPI in general; Part II described the hypochondriasis scale and included 103 test statements and scoring direction and t-score conversion data. There was a general copyright notice to the Journal Press, the publisher of the Journal of Psychology, but no copyright notice to Hathaway and McKinley or to the university.

In May 1942 Hathaway and McKinley published the Minnesota Multiphasic Personality Schedule (MMP Schedule ). The copyright notice was in the name of the university. The MMP Schedule was a comprehensive work and contained the 550 test statements, scale membership, scoring direction, and t-score conversion data for the hypochondriasis, depression, hysteria, psychopathic deviate, sexual interest, question, truthfulness,...