Financial Control Associates v. Equity Builders
| Decision Date | 01 September 1992 |
| Docket Number | No. 92-4192-C.,92-4192-C. |
| Citation | 799 F. Supp. 1103 |
| Parties | FINANCIAL CONTROL ASSOCIATES, INC., Plaintiff, v. EQUITY BUILDERS, INC., Robert V. Bundy, Benjamin F. Blair and Dave Anderson, Defendants. |
| Court | U.S. District Court — District of Kansas |
David A. Hanson, Glenn, Cornish, Hanson & Karns, Chtd., Topeka, Kan., Wendell R. Bird, David J. Myers, Timothy W. Townsend, Bird & Associates, Atlanta, Ga., for plaintiff.
Don M. Bradley, Michael B. Hurd, Shook, Hardy & Bacon, Kansas City, Mo., Jeffrey S. Nelson, Shook, Hardy & Bacon, Overland Park, Kan., for defendants.
On August 10, 1992, Financial Control Associates, Inc., (FCA) filed its complaint alleging violation of its copyright on the "Mortgage Controller" by Equity Builders, Inc., Robert V. Bundy, Benjamin F. Blair, and Dave Anderson.1 The defendants produce a product called the "Equity Builders." The purpose of both products is to provide a system for prepayment of mortgages. The underlying premise of both products is the idea that early payment of principal will result in substantial savings in the total amount of interest to be paid.2
According to the plaintiff's complaint, the defendants have blatantly copied its product in violation of 17 U.S.C. § 106(1) and have prepared a derivative work based upon the Mortgage Controller in violation of 17 U.S.C. § 106(2). The plaintiff also alleges a cause of action for deceptive trade practices and a cause of action for unfair competition. The complaint seeks declaratory relief, injunctive relief, an order impounding and destroying all copies of the Equity Builders, actual damages and wrongful profits, attorneys' fees, and prejudgment and post-judgment interest.
This case comes before the court upon the plaintiff's application for a preliminary injunction against the defendants for alleged copyright infringement, unfair competition and deceptive trade practices. On August 20, 1992, the court conducted an evidentiary hearing on the plaintiff's application. At the hearing, each party was afforded an opportunity to make an opening statement, present evidence, cross-examine witnesses and make closing remarks.3 Although the court offered the parties an additional opportunity to brief the issues presented by this application for a preliminary injunction, the parties ultimately declined that invitation, indicating that they would prefer an expedient decision from the court rather than taking advantage of an additional opportunity to submit additional argument and authority to the court.
Having considered the evidence presented, the briefs and arguments of counsel and the applicable law, the court denies FCA's motion for a preliminary injunction. This order constitutes the court's findings of fact and conclusions of law.
On page three of its complaint, FCA concedes that the "idea of a system for prepaying mortgages is not copyrightable, 17 U.S.C. § 102(b), but the particular words or expression of the idea and of the instructions and examples are copyrightable." FCA contends that "in addition to copying the idea of the Mortgage Controller, the Equity Builders copies the expression or manner of presentation first employed in the Mortgage Controller and is substantially similar to the Mortgage Controller. Specifically, FCA contends that the Equity Builders is similar to its Mortgage Controller in several ways. These are some of the examples of similarities between the two products identified by the plaintiff:
The plaintiff contends that Bundy and Blair, former sales associates of FCA, have purchased and received the Mortgage Controller, as demonstrated by shipping invoices, and have demonstrated copies of the Mortgage Controller and have sold the Mortgage Controller to others. Through Bundy and Blair, Equity and Anderson had access to the Mortgage Controller. Equity, Anderson and Bundy have distributed the Equity Builders to the public.
The plaintiff indicates that Equity and/or Bundy may not have sufficient resources to adequately cover any damages ultimately assessed, after the damage has been done. The plaintiff also argues that it has also demonstrated a substantial likelihood of success upon the merits of its claims under Kansas common law for deceptive trade practices and unfair competition.
In FCA's memorandum in support of its motion for a preliminary injunction, FCA argues that the defendants have violated its copyright by copying the manner of expressing the idea of mortgage prepayment. Specifically, the plaintiff contends that the arrangement of words and the arrangement of mortgage prepayment information is protected by copyright. The plaintiff argues that although the defendants have attempted to disguise their copyrighting, the defendants' product is substantially similar and violative of its copyright.
As to the requirements of a preliminary injunction, the plaintiff argues that it has established all four criteria. On the issue of irreparable harm, plaintiff argues that in the context of copyright infringement, irreparable harm and absence of an adequate remedy are presumed. FCA argues that because the Equity Builders is lower in price, buyers will naturally purchase that product over its Mortgage Controller. FCA associates selling the Mortgage Controller will be reluctant to sell the higher-priced product. Similarly, the plaintiff contends that its competitive market position will be damaged and that assessing actual damages will be difficult. The plaintiffs also argue that the defendants will probably not be able to pay those damages as defendants may possess inadequate resources.
The plaintiff also argues that it has demonstrated substantial likelihood of success upon its claims under Kansas common law for deceptive trade practices and unfair competition. As to the deceptive trade practice claim, the plaintiff points to one FCA associate's confusion about the source of the Equity Builders. As to the unfair competition practices, the plaintiff argues that the sale of the Equity Builders appropriates its property and that allowing the defendants to continue to sell their product will result in unfairness and economic harm. FCA dedicates approximately one page of its brief to these issues.
On August 18, 1992, the defendants filed their response to the plaintiff's motion for a preliminary injunction. While the defendants address each of the criteria to be considered in determining whether a preliminary injunction is appropriate, the defendants primarily contend that the plaintiffs cannot demonstrate a likelihood of success. Specifically, the defendants contend that they have not copied protectable elements of the Mortgage Controller.
The defendants concede that they had access to FCA's mortgage controller booklet and that the Equity Builders conveys the mortgage prepayment idea. The defendants, however, deny that they have copied any portion of the Mortgage Controller which was capable of copyright protection and that the similarity between the two products is so because of the function which they provide.
The defendants contend that the idea of mortgage prepayment is not protectable. The plaintiff has conceded this point, but argue that its expression of the idea is protected by copyright. The defendants deny that they have copied some protectable expression of the idea of the Mortgage Controller.
Specifically, the defendants contend that the Mortgage Controller consists in large part of tables and charts recording financial data determined from amortization programs. The defendants argue that the tables and charts themselves are unprotectable because blank forms are not proper subjects for copyright protection. The defendants argue that the blank form analysis does not change simply because the forms contain numbers generated on amortization principles.
The defendants also argue that when ideas are subject to expression in only a limited number of ways, the expression itself is not protected because it merges with the idea. The defendants also suggest that the similarities between their product and the Mortgage Controller is inevitable or trivial.
As to the issue of irreparable injury, the defendants argue that no presumption of irreparable harm should be found given the substantial issues that they have raised as to the merits of the plaintiff's case. The defendants also argue that FCA's delay in bringing suit should rebut the presumption of irreparable harm. The defendants do not indicate exactly what period of time they are claiming is an indication of delay.4
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