Architectronics, Inc. v. Control Systems, Inc.

• Decision Date: 16 August 1996
• Docket Number: No. 92 Civ. 9174 (MBM).,92 Civ. 9174 (MBM).
• Citation: 935 F. Supp. 425
• Parties: ARCHITECTRONICS, INC., a New York corporation, Plaintiff, v. CONTROL SYSTEMS, INC., a Minnesota corporation, Artist Graphics Corporation, a Minnesota corporation, Cad Source, Inc., a Delaware corporation, and Access Graphics, Inc., a Delaware corporation, Defendants.
• Court: U.S. District Court — Southern District of New York

935 F. Supp. 425

ARCHITECTRONICS, INC., a New York corporation, Plaintiff, v. CONTROL SYSTEMS, INC., a Minnesota corporation, Artist Graphics Corporation, a Minnesota corporation, Cad Source, Inc., a Delaware corporation, and Access Graphics, Inc., a Delaware corporation, Defendants.

No. 92 Civ. 9174 (MBM).

United States District Court, S.D. New York.

August 1, 1996.

Opinion Granting Reargument in Part August 16, 1996.

COPYRIGHT MATERIAL OMITTED

Ronald Abramson, Michael J. Scheer, Hughes Hubbard & Reed, New York City, for Plaintiff.

Thomas F. Caretta, St. Paul, Minnesota, for Defendants Control Systems and Artist Graphics.

James M. Ringer, Keila D. Ravelo, Rogers & Wells, New York City, for Defendants CADSource and Access Graphics.

OPINION AND ORDER

MUKASEY, District Judge.

Architectronics, Inc., a software development firm, has sued two former joint venturers and two related corporations for trade secret misappropriation, breach of contract, tortious interference with contract rights, and copyright infringement. Defendants move for summary judgment on all claims pursuant to Fed.R.Civ.P. 56. For the reasons set forth below, the motion is granted in part and denied in part.

I.

Plaintiff Architectronics is a New York corporation that maintains its principal place of business in Poughkeepsie, New York. (Am. Compl. ¶ 1) Defendants Control Systems, Inc. ("CSI") and Artist Graphics Corporation are commonly-owned Minnesota corporations operating principally in Roseville, Minnesota. (Id. ¶¶ 2-3) Defendants CADSource, Inc. and Access Graphics, Inc. are commonly-owned Delaware corporations operating principally in Boulder, Colorado. (Id. ¶¶ 4-5)

In 1986 and 1987, plaintiff developed prototypes for a new computer software product designed to enhance the capabilities of then-existing computer-aided design ("CAD") software. The product based on those prototypes would "retrofit" a standard CAD program to enable that program to reproduce on the main computer screen a "virtual" but fully-operational version of a hardware input device known as a "digitizer" or graphics tablet. (Lewis Aff. ¶ 9)

Early versions of CAD software required a separate external digitizer to send commands to a personal computer ("PC") running the software. A digitizer was a small rectangular tablet with plastic or paper templates displaying available design elements. The CAD user would make "picks" by touching a special probe to the desired design element, and the digitizer would transmit to the computer the coordinates of the pick. From those coordinates, the computer could determine and generate on the screen the appropriate design element. Plaintiff's programmers sought to replace the external digitizer with a less expensive and less cumbersome software equivalent. Plaintiff's new software would perform the same functions as an external tablet, but would use only those physical components common to virtually all PCs running CAD software: a hard drive, a monitor, a video graphics board, a keyboard, and a "mouse" input device. (Id. ¶¶ 10-11) The ultimate goal was to generate a simulated tablet in a "window" on the main computer screen. CAD users would select locations on the simulated tablet with the mouse, and the software would communicate the appropriate data to the CAD program. Plaintiff's software thus would "move the graphics tablet onto the screen" and eliminate the need for a separate external digitizer. (Id. ¶ 12)

Plaintiff's prototypes were engineered to work with AutoCAD, the leading PC CAD software of the 1980's. AutoCAD demanded high resolution video display capabilities, which were achieved by the video graphics board, a separately installed item of hardware. To make the graphics board work with AutoCAD, an auxiliary piece of software known as a display driver was necessary. A graphics board designed for AutoCAD typically would be shipped from the manufacturer with a floppy disk containing the corresponding AutoCAD display driver. (Id. ¶¶ 13-15)

In March 1987, Architectronics developed a part-software, part-hardware prototype product. That prototype projected a simulated graphics tablet on a custom-built liquid crystal display ("LCD") screen. In June 1987, at a Washington, D.C. trade show, Architectronics President Stephen Lewis demonstrated the LCD prototype in a private hotel suite for Eric Korb, President of CAD-Source, and approximately 20 other people. (Id. ¶ 18, 21) All in attendance signed confidentiality agreements prior to the demonstration. (Id. ¶ 21; Abramson Aff. Ex. 1)

Later that summer, Architectronics developed a more sophisticated prototype implemented entirely in software. The second prototype generated a virtual graphics tablet on the screen of an ordinary, though separate, monitor. The final step in the project was to move the simulated graphics tablet into a window on the main computer screen along with the primary CAD image, and thereby eliminate the need for a second monitor. That technology, which plaintiff called "DynaMenu," was to be implemented in a new display driver. (Lewis Aff. ¶¶ 16-17, 21-22)

At the time Architectronics was developing DynaMenu, CSI was a leading manufacturer of graphics boards used in PCs to run AutoCAD, and CADSource was a distributor for CSI. Plaintiff believed that CSI's graphics boards would provide the best hardware platform from which to launch DynaMenu. Plaintiff hoped to secure CSI's cooperation in the development of a new DynaMenu display driver that would work with CSI graphics boards and could be sold to CSI's customers as an add-on product. (Id. ¶ 23-24)

Lewis proposed such a joint venture to CSI Vice President Horace Beale at a meeting held at CSI's Minnesota headquarters on August 13, 1987. (Id. ¶¶ 24-25) Prior to a presentation of technical specifications and a demonstration of the LCD and dual monitor prototypes, Beale signed a memorandum stating that CSI would keep all disclosures confidential and would not "use or disclose to others any parts of these developments which are not already published, patented or recorded in CSI's files, except with Lewis' advance written permission." (Abramson Aff. Ex. 2) The meeting was attended by Lewis, Korb, Beale, and several other representatives of CSI, including two engineers, Shailendra Jain and Jim Hooker. (Lewis Aff. ¶¶ 25-28)

CSI's Beale and CADSource's Korb both expressed interest in the idea, and on September 1, 1987, representatives of Architectronics, CSI, and CADSource signed a Software Development and License Agreement ("SDLA") that had been drafted by CSI. (Abramson Aff. Ex. 4) The SDLA provided that Architectronics would license the source code for its prototypes to CSI to permit CSI to develop a "Derivative Work," a new AutoCAD display driver configured for CSI graphics boards. (Id. ¶ 2.1) The new display driver was to perform the following functions:

1. Display upon command from within an application program such as AutoCAD a rasterized¹ image from a binary file stored on disk or extended memory or expanded RAM.² Architectronics will provide the means for creating these rasterized image files and will provide the file structure and simple files.

2. Provide a cursor to indicate the location of pointing device within the logical pointing space corresponding to the menu displays. Mouse will be the primary input pointing device.

3. Provide for menu commands to be sent back to application program preferably using AutoCAD's own menu command interpreter. Menuing must be designed primarily for mouse input devices. Architectronics will provide a mouse driver which uses the ADI³ AutoCAD interface to define separate logical areas within the pointing space which can be used to refer to tablet and screen definitions for AutoCAD's menu interpreter.

(Id. Ex. C)

Under the SDLA, CSI would own the copyright to the Derivative Work, but would grant Architectronics and CADSource jointly an exclusive worldwide license to "use, copy and distribute" the technology. (Id. ¶ 3.1) Architectronics and CADSource agreed to pay CSI a $20-per-copy royalty on sales of the display driver. (Id. ¶ 5) In addition, Architectronics agreed to pay CSI a one-time "software development fee" of $2,000. (Id. ¶ 4 & Ex. B) Architectronics then sent CSI a check for $2,000 along with the source code for its prototypes. (Lewis Aff. ¶ 33)

Shortly after the signing of the SDLA, Autodesk, Inc., the manufacturer of AutoCAD, introduced Release 9 of the AutoCAD program, which offered, inter alia, an improved graphical user interface. CSI and CADSource believed that Release 9 rendered plaintiff's DynaMenu technology less extraordinary, and sought to abandon the joint venture. (Id. ¶ 36) In November 1987, CSI drafted and circulated to CADSource and Architectronics an agreement purporting to terminate the SDLA. (Abramson Aff. Ex. 9) Architectronics refused to sign that document. CSI subsequently drafted an agreement dated April 28, 1988 terminating the SDLA as between CSI and CADSource. That agreement was signed by Beale and Korb. (Id. Ex. 10) CSI retained but never cashed the $2,000 development fee check from Architectronics. (Lewis Aff. ¶ 37)

In June 1990, CSI released a product called "GT FLEXICON" that plaintiff describes as "a full-blown tablet replacement program that implemented a number of advanced features drawn directly from Architectronics' original 1987 prototypes and specifications." (Id. ¶ 49) Plaintiff alleges that GT FLEXICON is a "Derivative Work" based on the Architectronics prototypes, and that CSI has breached the exclusive licensing provision of the SDLA by selling the product. CADSource and Access Graphics, it is alleged, have participated in the distribution and marketing of GT FLEXICON.

Plaintiff filed this lawsuit on December 18, 1992. Plaintiff has since amended its complaint and now alleges that "GT ICON," a display driver for AutoCAD that CSI released on January 15, 1989, also incorporates Architectronics trade secrets. (Id. ¶...