Vermont Microsystems, Inc. v. Autodesk, Inc.
| Decision Date | 08 July 1996 |
| Docket Number | 653 and 654,D,Nos. 652,s. 652 |
| Citation | 88 F.3d 142 |
| Parties | VERMONT MICROSYSTEMS, INC., Plaintiff-Counter-Defendant-Appellee-Cross-Appellant, v. AUTODESK, INC., Defendant-Counter-Claimant-Appellant-Cross-Appellee, Otto G. Berkes, Defendant-Counter-Claimant-Appellant, Peter C. Reed, Counter-Defendant-Cross-Appellee. ockets 95-7279, 95-7281 and 95-7291. |
| Court | U.S. Court of Appeals — Second Circuit |
Robert D. Rachlin, Burlington, VT (Walter E. Judge, Jr., Carol L. Shea, Downs, Rachlin & Martin, Burlington, VT, of counsel), for Plaintiff-Counter-Defendant-Appellee-Cross-Appellant.
Ronald S. Rauchberg, New York City (Proskauer, Rose, Goetz & Mendelsohn, New York City, C. Randall Bain, H. Michael Clyde, David M. Barkan, Brown & Bain, Phoenix, AZ, of counsel), for Defendant-Counter-Claimant-Appellant-Cross-Appellee, Autodesk, Inc.
Wynne S. Carvill, San Francisco, CA, Paul A. Winick, New York City (Thelen, Marrin, Johnson & Bridges, San Francisco, CA, of counsel), for Defendant-Counter- Claimant-Appellant, Berkes.
Philip D. Saxer, Burlington, VT (Saxer, Anderson, Wolinsky & Sunshine, Burlington, VT, of counsel), for Counter-Defendant-Cross-Appellee, Reed.
Before: VAN GRAAFEILAND, MINER and CABRANES, Circuit Judges.
This litigation involves the alleged misappropriation of trade secrets. In a judgment of the United States District Court for the District of Vermont Autodesk, Inc. and Otto G. Berkes were held liable to Vermont Microsystems, Inc. ("VMI") for trade secret misappropriation, and Autodesk was assessed $25.5 million in damages.
At issue is certain computer aided design ("CAD") software. CAD is highly sophisticated software used primarily by engineers and architects to render computer drawings. Autodesk is the largest provider of CAD software in the world. Its premier product, AutoCAD, has nearly 80 percent of the CAD market. VMI, a small company based in Winooski, Vermont, is one of many "third party developers" that create AutoCAD accessories to increase the program's functionality. VMI initially concentrated on hardware accessories such as graphics boards, which could be added to a computer to improve the graphics resolution. In 1989, VMI realized that the hardware accessory market was limited and decided to concentrate on software accessories that could be used directly with the AutoCAD program.
Berkes began working for VMI while it was making this shift, first as a summer intern in 1988 and then as a full-time employee in 1989. As a full-time employee, Berkes signed an Invention and Nondisclosure Agreement in which he acknowledged that all trade secrets developed on VMI's time were company property and promised not to disclose such trade secrets for the benefit of himself or others. Berkes worked as a software programmer and was assigned a variety of projects by VMI. He was a gifted programmer who made valuable contributions to VMI's library of software.
When Berkes left VMI in the fall of 1991 and joined Autodesk, Peter Reed, the President and Chief Executive Officer of VMI, sent a letter to Autodesk advising that because Berkes was privy to VMI's trade secrets, Autodesk should exercise caution in assigning him projects. Berkes also was given a copy of this letter. Although Berkes initially was assigned to noncompeting projects, by the fall of 1992, VMI learned that his assignments had changed and that his new work implicated VMI trade secrets. After some unproductive discourse between the two companies, VMI sued Autodesk and Berkes alleging copyright infringement and misappropriation of trade secrets. Berkes, against whom VMI sought only injunctive relief, counterclaimed against VMI and Reed for libel and sought a declaratory judgment that he had a non-exclusive right to use the Berkes-Pilcher Shading ("BPS") algorithm, which bears his name and that of VMI employee Steven Pilcher.
In the course of a seventeen day bench trial, VMI abandoned its copyright infringement claim. However, it was successful on its claim for trade secret misappropriation. Both of Berkes' counterclaims were rejected. The primary trade secrets at issue are the architecture of VMI's display list driver, and its triangle shading algorithm, which are described hereafter in the language of the untutored layman.
Before a drawing can be displayed on a computer screen, AutoCAD has to generate its constituent elements: 1) vectors (straight lines of various lengths); and 2) polygons (closed objects, such as rectangles or pentagons). If the user makes a change in the drawing, AutoCAD is required to regenerate or rebuild the individual lines and vectors that make up the entire image. Regeneration also is required if the AutoCAD user wants to zoom in and work on a particular section of the drawing or pull back and pan the entire drawing. This process is cumbersome and slows down AutoCAD's graphics speed.
A display list driver that sends the image to the computer screen can help alleviate the speed problem. Rather than the drawing being reconstructed from scratch, the display list driver keeps a list of the constituent vectors and polygons in its memory. When AutoCAD needs to regenerate the entire drawing, it can access the necessary vectors and polygons from the list kept by the display list driver. The result is faster graphics speed.
Prior to 1993, Autodesk did not include a display list driver in AutoCAD. Instead, it relied on third party developers, such as VMI, to provide display list drivers to those users who needed enhanced graphics speed. VMI's display list driver, called "AutoMate," was considered one of the leading add-on, display list drivers on the market.
In early 1992, both Autodesk and VMI recognized the growing importance of Windows, a process that creates so-called "operating environments" through the display of multiple individual programs on the computer's display screen. Prior to that time, CAD software was designed almost exclusively for MS-DOS, a traditional "Disk Operating System." Unlike MS-DOS, Windows permits the user to run several programs at the same time by dividing the computer screen into smaller program areas. That portion of the screen to which activity is currently limited is called a "window." See Allen L. Wyatt, COMPUTER PROFESSIONAL'S DICTIONARY, at 344 (1990). It was expected that, because of Windows' ease of use and enhanced graphics capabilities, it would replace MS-DOS as the standard for graphics programs such as AutoCAD and AutoMate. The anticipated market shift to a Windows operating environment meant that software manufacturers such as Autodesk and VMI had to create Windows versions of their programs.
In April 1992, Autodesk released a Windows add-on to its MS-DOS version of AutoCAD. Because Autodesk's then-current MS-DOS version of AutoCAD was called "Release 11," the Windows add-on was named "Release 11 AutoCAD Extension for Windows" and abbreviated to "R11 AEW." R11 AEW did not contain a display list driver and, consequently, was not well received by consumers who objected to its slow graphics speed. One month after R11 AEW was released, VMI offered a companion, display list driver.
By this time, Autodesk was developing a "stand alone" Windows version of AutoCAD called "Release 12 Windows" or "R12 Windows." Autodesk's R12 Windows development team understood that fast graphics speed would be essential to the product's success. Berkes was working for Autodesk by then but was not assigned to the R12 Windows project. Aware of the importance of speed, Berkes lobbied his supervisors to include a display list driver in R12 Windows. In March 1992, less than three months after he arrived at Autodesk, Berkes sent an e-mail to his colleagues detailing the technical specifications for such a display list driver. The specifications mirrored those of VMI's AutoMate. Without being asked to do so, Berkes worked from the specifications to create a prototype display list driver, to which he gave the file name "RCVESA3D."
The similarity between AutoMate and RCVESA3D was not accidental. As the self-described architect of AutoMate, Berkes was familiar with the program's structure and when he left VMI in late 1991, Berkes retained the source code for AutoMate, ostensibly to enable him to act as a consultant during the two months that preceded his employment by Autodesk. Berkes worked on the display list driver as a "hobby project" and continued to lobby the R12 Windows programmers for inclusion of a display list driver. By July 1992, Autodesk agreed with Berkes and officially assigned him the task of developing a display list driver. Using RCVESA3D as a model, Berkes created the display list driver that subsequently was included in R12 Windows.
VMI quickly learned that Berkes was developing a display list driver for Autodesk, thus possibly jeopardizing its trade secrets, and notified Autodesk of its concerns in writing on August 25, 1992. In fact, Autodesk already was sensitive to the issue. An e-mail message sent the day before by the R12 Windows project manager suggested that Berkes' role in the product's development not be mentioned "lest his ex-cohorts at VMI turn apoplectic." After VMI's expression of concern, Autodesk conducted an internal investigation, described by the district court as "superficial and inadequate," which raised questions about whether Berkes did make wrongful use of VMI trade secrets in developing the display list driver. During the investigation, Berkes suggested that Autodesk remove the display list driver from R12 Windows. Also, two Autodesk employees, after comparing the source code that Berkes wrote for the display list driver with the source code provided by VMI, suggested that Berkes' efforts may not have been from scratch.
In October 1992, Autodesk met with VMI in an effort to resolve the parties' differences. In that...
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