9 F.3d 823 (10th Cir. 1993), 92-1256, Gates Rubber Co. v. Bando Chemical Industries, Ltd.

Docket Nº:92-1256.
Citation:9 F.3d 823
Party Name:28 U.S.P.Q.2d 1503 The GATES RUBBER COMPANY, a Colorado corporation, Plaintiff-Appellee, v. BANDO CHEMICAL INDUSTRIES, LIMITED, a Japanese corporation; Bando Manufacturing of America, Inc., a Kentucky corporation; Bando U.S.A., Inc., a Delaware corporation; Allen Hanano, Defendants, Bando American Inc., an Illinois corporation; Steven R. Piderit; R
Case Date:October 19, 1993
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

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9 F.3d 823 (10th Cir. 1993)

28 U.S.P.Q.2d 1503

The GATES RUBBER COMPANY, a Colorado corporation, Plaintiff-Appellee,



Bando Manufacturing of America, Inc., a Kentucky

corporation; Bando U.S.A., Inc., a

Delaware corporation; Allen

Hanano, Defendants,

Bando American Inc., an Illinois corporation; Steven R.

Piderit; Ron Newman; Denise Hanano, Defendants-Appellants.

No. 92-1256.

United States Court of Appeals, Tenth Circuit

October 19, 1993

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Shelley B. Don of Don & Hiller, Denver, CO (Earl S. Wylder and Watson W. Galleher of Don & Hiller, Denver, CO, and Jonathan

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Band and Bryan A. Schwartz of Morrison & Foerster, Washington, DC, on the brief), for defendants-appellants.

Rodger L. Wilson, Denver, CO (Karl J. Dakin, Englewood, CO, on the brief), for plaintiff-appellee.

Morton David Goldberg, June M. Besek, David O. Carson, Jesse M. Feder of Schwab Goldberg Price & Dannay, New York City and Arthur R. Miller, of counsel, Cambridge, MA, for amici curiae.

Peter M.C. Choy, Mountain View, CA, for amicus curiae.

Before BRORBY, BARRETT, and EBEL, Circuit Judges.

EBEL, Circuit Judge.

The defendants appeal from the June 24, 1992, order of the district court in which it found that the defendants had infringed Gates' copyright on an engineering computer program and wrongfully misappropriated trade secrets. We conclude that the district court erroneously extended copyright protection to certain unprotectable elements of the computer program. We also conclude that the district court failed properly to determine the protectability of many of the elements of Gates' program which it found to have been copied by the defendants. Accordingly, we remand the copyright claims to the district court for a reconsideration of the programs in light of the test we set forth herein, which involves a determination of whether there was copying and a determination of whether the copying constitutes actionable infringement through application of the abstraction-filtration-comparison test.

Considering the trade secret claims, we conclude that Gates' claims were not preempted by federal law, that Gates made an adequate showing that certain of its mathematical constants were valuable trade secrets, and that Gates took adequate steps to protect the confidentiality of such trade secrets below and on appeal. Accordingly, we affirm those portions of the district court's opinion with respect to the trade secret claims.


The plaintiff-appellee, Gates Rubber Co. ("Gates"), is a Colorado corporation that manufactures rubber belts for use in industrial machinery. Gates leads the industry in sales of industrial machine belts. In order to determine the proper rubber belt for a particular machine it is necessary to perform complicated calculations involving numerous variables. The complexity of these calculations is such that they have customarily been performed by an engineer and significant variance in outcome often resulted. In order to facilitate the efficient and accurate selection of belts, and to boost the sales of their products, Gates developed a computer program entitled "Design Flex 4.0." With this program a salesman can input a number of variables and thereby calculate the proper Gates belt for a machine. The program uses published formulas in conjunction with certain mathematical constants developed by Gates to determine belt size. Gates obtained a Certificate of Copyright Registration on its Design Flex program.

The defendant, Bando American ("Bando"), is a division of a Japanese corporation that competes with Gates in the manufacture and sale of industrial belts. Numerous Bando employees were formerly employees of Gates, including the defendants Allen Hanano (Bando's president), Ron Newman, and Steven Piderit.

Until 1988, the defendant, Steven R. Piderit, was a Gates' employee. 1 While at Gates, Piderit had access to Gates' Design Flex program, including its components and the design and access codes. 2 In 1988, Bando hired Piderit away from Gates and assigned him to develop a program that would assist

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in the selection of the proper belts for industrial machinery. In June of 1989, Bando introduced a demonstration copy of "Chauffeur," a computer program similar to Gates' Design Flex program. The Chauffeur program was made available in March of 1990. Piderit claims to be the sole author of the Chauffeur program.

Gates filed this action in the U.S. District Court for the District of Colorado on January 4, 1992, alleging unfair competition, misappropriation of trade secrets, infringement of copyright, and breach of contract. On January 28, 1992, the district court held a hearing on Gates' request for a TRO, which was denied, and ordered experts appointed. On February 26, 1992, the plaintiff filed an amended complaint expanding its claims, naming additional parties, and requesting a permanent injunction. A hearing on the permanent injunction was held on March 26, 1992. On June 24, 1992, the district court issued its opinion finding that the defendants had infringed Gates' copyright and willfully and maliciously misappropriated trade secrets. In an order dated August 12, 1992, the court amended typographical errors in its opinion, and denied the defendant's motions to make additional findings, to alter and amend the judgment, for a new trial and to stay enforcement. This appeal was filed on August 25, 1992. The appellants claim that the district court erred when it (i) extended copyright protection to facts and ideas in the Design Flex program, and (ii) granted relief on Gates' trade secret claim.

This case presents a number of issues that have never been squarely before a panel of this circuit, most notably the proper test to be applied to determine the scope of copyright protection for computer programs. In an attempt to aid the district courts in this determination and to bring clarity to this difficult area of the law, we first set forth what we consider to be the best means to determine the scope of protection. 3 In this first section, we seek to draw together the major issues that must be addressed and we try to organize the issues within a coherent framework that will be useable to the district courts that must address these claims in the first instance. We next briefly summarize the constitutional and statutory principles and the key judicial decisions that control and illuminate our analysis. As this analysis demonstrates, our approach is consistent with the evolving law in this area. We then apply our legal analysis to the facts in this case, finding that, in several respects, the district court erred in its application. Finally, we consider the trade secrets issues raised by the appellants. 4



A. The Test for Determining Whether the Copyright of a Computer Program Has Been Infringed.

In order to prevail on a claim of copyright infringement, the plaintiff must show: (1) ownership of a valid copyright, and (2) copying by the defendant of protected components of the copyrighted material. Feist Publications v. Rural Telephone Service Co., 499 U.S. 340, 361, 111 S.Ct. 1282, 1296, 113 L.Ed.2d 358 (1991); Autoskill v. National Educational Support Systems, Inc., 994 F.2d 1476, 1487 (10th Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 307, 126 L.Ed.2d 254 (1993). A Certificate of Registration, if timely obtained, constitutes prima facie evidence of the validity of the copyright.

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17 U.S.C. Sec. 410(c); Autoskill, 994 F.2d at 1487. Once the presumption pursuant to 17 U.S.C. Sec. 410(c) is established, the defendant has the burden of overcoming it. Autoskill, 994 F.2d at 1487.

Williams Electronics, Inc. v. Artic International, Inc., 685 F.2d 870, 873 (3d Cir.1982). 5

Once the plaintiff has shown that it holds a valid copyright, it must next prove that the defendant unlawfully appropriated protected portions of the copyrighted work. This question involves two separate inquiries: 1) whether the defendant, as a factual matter, copied portions of the plaintiff's program; 6 and 2) whether, as a mixed issue of fact and law, those elements of the program that have been copied are protected expression and of such importance to the copied work that the appropriation is actionable. 3 Melville B. Nimmer, Nimmer on Copyright Sec. 13.01[B], at 13-8 to 13-15 (1993) (hereinafter "Nimmer"); see Arnstein v. Porter, 154 F.2d 464, 472-73 (2d Cir.1946).

A plaintiff can establish that the defendant copied his program either through the presentation of direct evidence, or through indirect evidence that shows (1) that the defendant had access to the copyrighted program, and (2) that there are probative similarities between the copyrighted material and the allegedly copied material. 7 Autoskill, 994 F.2d at 1489; Atari Games Corp. v. Nintendo of America Inc., 975 F.2d 832, 837-38 (Fed.Cir.1992); Whelan Associates v. Jaslow Dental Laboratory, Inc., 797 F.2d 1222, 1231-32 (3d Cir.1986), cert. denied 479

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U.S. 1031, 107 S.Ct. 877, 93 L.Ed.2d 831 (1987); Arnstein, 154 F.2d at 468; 3 Nimmer Sec. 13.01[B], at 10-12. 8 Direct proof of copying is rare, Whelan, 797 F.2d at 1231; Roth Greeting Cards v. United Card Co., 429 F.2d 1106, 1110 (9th Cir.1970), and plaintiffs will typically rely on the indirect method of proof. Ultimately, to prove factual copying, the plaintiff must come forward with sufficient evidence that a reasonable factfinder, taking together the evidence of access and the similarities between the programs, 9 could find that the second work was copied from the first. 10

Although we...

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