S.O.S., Inc. v. Payday, Inc.
| Decision Date | 10 February 1989 |
| Docket Number | 88-5878,Nos. 88-5817,s. 88-5817 |
| Citation | 886 F.2d 1081 |
| Parties | , 1989 Copr.L.Dec. P 26,469, 12 U.S.P.Q.2d 1241 S.O.S., INC., Plaintiff-Appellee, v. PAYDAY, INC., Defendant-Appellant. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Dennis G. Martin, Ashen, Golant Martin & Seldon, Los Angeles, Cal., for defendant-appellant.
Vincent Cox, Leopold, Petrich & Smith, Los Angeles, Cal., for plaintiff-appellee.
Appeal from the United States District Court for the Central District of California.
Before FLETCHER, PREGERSON and LEAVY, Circuit Judges.
BACKGROUND
This appeal from grants of summary judgment turns on the interpretation of a computer software agreement and presents issues of copyright law as well as pendent state law claims arising under trade secret, contract, and tort law. We affirm in part, reverse in part, and remand.
We review grants of summary judgment de novo. Darring v. Kincheloe, 783 F.2d 874, 876 (9th Cir.1986). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Ashton v. Cory, 780 F.2d 816, 818 (9th Cir.1986). Because we begin our review with the district court's grants of summary judgment in favor of Payday, we view the facts initially in the light most favorable to S.O.S.
S.O.S., Inc. specializes in furnishing computer hardware and software to companies that process payrolls, ledgers, and accounts receivable. Payday, Inc. is a company which provides payroll and financial services to the entertainment industry.
In October 1978, S.O.S. acquired from Hagen Systems (not a party to this action) a non-exclusive license to unpublished business software called "Brown Tank." Under the license, S.O.S. could sublicense Brown Tank to end users provided Hagen Systems' proprietary and confidential rights in the software were protected. S.O.S. also had the right to prepare derivative works based on Brown Tank.
In November or December 1983, Payday's outside accountant, Mike Waldrip, told S.O.S.'s president, Bob Oliver, that Payday wanted to computerize in order to attract an important client. The initial understanding between Oliver and Waldrip was that Payday would use software furnished by S.O.S. on Waldrip's computer instead of installing a computer in its own office.
On December 14, 1983, Oliver sent Payday a draft contract, which Payday's president signed, providing for the purchase of a terminal and other hardware, to be installed in Payday's office; the lease of a disk drive and other hardware to be installed at Waldrip's office; and a software agreement. The software agreement provides, in full:
A software agreement covering the software outlined in the documentation furnished PAYDAY by SOS. The total purchase price of this software is $5,325 including sales tax. SOS agrees to modify the system to produce a text file capable of transfer in ASCII string code to magnetic tape at 800BPI for transfer of information to EDP (Service Bureau). This series of programs is the property of SOS, and PAYDAY is acquiring the right of use, SOS retains all rights of ownership. The payment schedule covering the software is $1,325 upon execution of this agreement and $1,000 on the 14th day of each month until a total of $5,325 has been paid. Changes and modifications other than those mentioned above, will be on a time and material basis at the rate of $50 per hour.
(Emphasis added.)
The contract does not use the terms "copyright" or "trade secrets." The parties did not discuss the meaning of the highlighted language referring to rights of "ownership" and "use."
Most of the programming of the payroll software was done by two employees of S.O.S., Eiichi Koyama and Bacchus Chu. 236 separate programs comprise the total package prepared for Payday. Of these, approximately 89 were derived or adapted from Brown Tank. Payday's controller, Sharon Goodman, was the liaison to the programming team. She described Payday's needs to S.O.S. but did not participate in the coding process.
The system (software and hardware) that S.O.S. provided was adequate for Payday's new client but not for Payday's entire business. In March 1984, S.O.S. and Payday modified portions of the contract. Under the modified agreement, Payday was to use S.O.S.'s computer for a monthly fee of $1,500; also, Payday agreed to pay monthly an additional $1,500 against accumulated programming charges. S.O.S. continued developing programs for Payday.
In late February 1985, Chu and Koyama left S.O.S. to form an independent consulting Notes taken by Goodman indicate concern over the cost of securing a copy of the payroll programs. She noted that Chu and Koyama could "make [a] copy and put [it] somewhere." Chu and Koyama told her they could change the programs 20%, and that this would make them new programs, no longer the property of S.O.S. They planned to copy the payroll programs into Payday's computer and then convert them into a different computer language called "BITS BASIC." Payday intended to send a letter to S.O.S. in July 1985, telling S.O.S. that Payday needed a copy of the payroll programs, but this letter was never sent. Instead, Payday solicited a competing bid from S.O.S. to provide an in-house computer system. 1
service, but continued to render services for S.O.S. They continued to work on modifications to the payroll programs, for which they billed S.O.S. $28.00 an hour. They were also entrusted with systems backup, the routine copying of S.O.S.'s programs to protect against accidental loss. In April 1985, Chu and Koyama proposed to Goodman that Payday purchase an in-house computer system equipped with a broad array of software to provide financial services to the entertainment industry. Payday would make this software available to its customers on a timesharing basis. Chu and Koyama would perform programming services for Payday directly, at less than the $50.00 an hour Payday was currently paying S.O.S. for these services.
Chu and Koyama met with Oliver on July 6, 1985. They told Oliver that Payday would pay its account balance with S.O.S. if S.O.S. would give Payday an unprotected copy of the payroll programs. Oliver rejected this proposal.
On July 7, 1985, Koyama went to the S.O.S. office and made at least one copy of the payroll software, which he gave to Payday. 2 Oliver began monitoring S.O.S.'s computers for unauthorized entry, and changed the passwords. A day or two later, Chu or Koyama made an unauthorized entry into S.O.S.'s computer system by circumventing the password program.
Payday installed its new computer on July 14, 1985. The next day, Chu and Koyama put into Payday's computer the payroll software and various other programs taken from S.O.S.'s computer. During the next few days, Chu and Koyama converted the payroll programs from their original language into a format called "ASCII," which was in turn translated into the BITS BASIC computer language. Payday continued to request a copy of the payroll programs from S.O.S., requests intended, according to S.O.S., to conceal its software piracy. S.O.S. offered to install a protected copy of the software on Payday's computer, a copy which Payday could use but not enter, copy or change. Payday rejected this offer.
S.O.S. now suspected that Payday had copied its programs, because Payday was servicing its clients and Oliver did not believe Payday had had time independently to create new programs. S.O.S. registered the payroll programs on Oct. 11, 1985, in anticipation of litigation. Payday continued to modify the payroll programs on its computer. S.O.S. and Payday sued one another.
S.O.S. sued for infringement of copyright and pendent state law claims for breach of contract, misappropriation of trade secrets, and account stated. Payday counterclaimed under various state law theories, including abuse of process, breach of contract and tortious breach of the covenant of good faith and fair dealing, and sought a declaratory judgment that S.O.S.'s copyright is invalid. The district court granted summary judgment in favor of Payday on S.O.S.'s copyright infringement, breach of contract, and misappropriation claims, and
in favor of S.O.S. on its account stated claim and on Payday's counterclaims.
Payday asserts that S.O.S. did not appeal the denial of its motion for reconsideration, and thus evidence presented for the first time at the hearing on that motion should not be considered here. The motion for reconsideration was denied on January 4, 1988; the final judgment was entered March 9, 1988. The notice of appeal was filed March 11, 1988, purporting to appeal from the entire final judgment but only specifying denials of earlier motions. An amended notice of appeal was filed April 6, 1988, specifically appealing the motion for reconsideration as incorporated in the final judgment. The amended notice was filed within the 30 days provided by Fed.R.App.P. 4(a)(1).
This court has the inherent power to permit a party to amend a notice of appeal even without a formal motion. Pope v. Savings Bank of Puget Sound, 850 F.2d 1345, 1347 (9th Cir.1988). The amendment generally will be allowed where the intent to appeal a specific judgment can fairly be inferred and the appellee is not prejudiced by the mistake. Id. Both requirements are met here. The principal effect of including the motion for reconsideration within the notice of appeal is to expand the factual record on appeal. No new legal claims are presented. Payday was not prejudiced: it was able to deal with the "new" facts in both its briefs. See Lynn v. Sheet Metal Workers' Int'l Ass'n, 804 F.2d 1472, 1481 (9th Cir.1986), aff'd, --- U.S. ----, 109 S.Ct. 639, 102 L.Ed.2d 700 (1989)....
To continue reading
Request your trial
-
Armento v. Laser Image, Inc.
...a rebuttable presumption. See e.g., Whimsicality, Inc., v. Rubie's Costume Co., Inc., 891 F.2d 452 (2d Cir.1989); S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081 (9th Cir.1989); Eckes v. Card Prices Update, 736 F.2d 859 (2d Cir.1984); Ganz Bros. Toys v. Midwest Importers of Cannon Falls, Inc., ......
-
Yellowcake, Inc. v. Morena Music, Inc.
...or ideas; one must ‘translate an idea into a fixed tangible expression entitled to copyright protection." S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087 (9th Cir. 1989) ; Ashton-Tate, 916 F.2d at 521. Therefore, in the Ninth Circuit, a "joint work" has four elements: (1) a copyrightable ......
-
Aurora World Inc. v. Ty Inc.
...of any of the copyright owner's ... exclusive rights, described [in section 106 of the Copyright Act].” S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1085 n. 3 (9th Cir.1989). 1. Aurora's Ownership of a Valid Copyright a. The Bush Babies, Fennec, Lemur, Capuchin, and Squirrel Plush Toys The ......
-
Rimini St., Inc. v. Oracle Int'l Corp.
...of that provision. Id. Construing the scope of a license is principally a matter of contract interpretation.18 S.O.S., Inc. v. Payday, Inc. , 886 F.2d 1081, 1088 (9th Cir. 1989). The starting point for the interpretation of any contract is the plain language of the contract. Klamath Water U......
-
Table Of Cases
...635 F. Supp. 1211 (S.D. Tex. 1986), 101. Ruiz v. A.B. Chance Co., 234 F.3d 654 (Fed. Cir. 2000), 42. S S.O.S., Inc., v. Payday, Inc., 886 F.2d 1081 (9th Cir. 1989), 71. SCM Corp. v. Xerox Corp., 645 F.2d 1195 (2d Cir. 1981), 130, 208. Sage Products v. Devon Indus., 45 F.3d 1575 (Fed. Cir. 1......
-
Table of Cases
...Trade Secrets Sokol Crystal Prods., Inc. v. DSC Comms. Corp. 15 F.3d 1427 (7th Cir. 1994), 132, 137 S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081 (9th Cir. 1989), 146 Southernmost Foot and Ankle Specialists, P.A. v. Torregrosa, 891 So. 2d 591 (Fla. Dist. Ct. App. 2004), 103 Speedry Chem. Prod......
-
BIG MAC EU Trademark Revoked for Nonuse
...11.4 (2017)); see also Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115, 1121–23 (9th Cir. 1999); S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087 (9th Cir. 1989); Gilliam v. Am. Broad. Cos., 538 F.2d 14, 20–21 (2d Cir. 1976). Published in Landslide ® magazine, Volume 12, Number 5,......
-
§ 5.03 Analysis of the Act
...151 (2d Cir. 1996). Ninth Circuit: MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511 (9th Cir. 1993); S.O.S., Inc. v. Payday Inc., 886 F.2d 1081 (9th Cir. 1989); Pixion, Inc. v. PlaceWare, Inc., 421 F. Supp. 2d 1233 (N.D. Cal.), aff'd 177 F. App'x 85 (Fed. Cir. 2006). [90] See, e.g., W......