Mitek Holdings, Inc. v. Arce Engineering Co., Inc.

• Decision Date: 31 October 1994
• Docket Number: No. 91-2629-CIV.,91-2629-CIV.
• Parties: MITEK HOLDINGS, INC. and Mitek Industries, Inc., Plaintiffs, v. ARCE ENGINEERING CO., INC., Defendant.
• Court: U.S. District Court — Southern District of Florida

864 F. Supp. 1568

MITEK HOLDINGS, INC. and Mitek Industries, Inc., Plaintiffs, v. ARCE ENGINEERING CO., INC., Defendant.

No. 91-2629-CIV.

United States District Court, S.D. Florida, Miami Division.

October 31, 1994.

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John H. Quinn, III, Armstrong and Teasdale, St. Louis, MO, for plaintiffs.

Gustavo Guitterez, P.A., Stuart J. McGregor, Gary M. Pappas, Popham, Haik, Schnobrich, Miami, FL, for defendant.

AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW

K. MICHAEL MOORE, District Judge.

This case came before the Court for a nonjury trial on Plaintiffs MiTek Holdings, Inc. and MiTek Industries, Inc.'s claim for statutory damages for copyright infringement. Having considered all the evidence, including the testimony of the witnesses, and being otherwise duly advised, the Court enters its Findings of Fact and Conclusions of Law pursuant to Fed.R.Civ.P. 52.

I. FINDINGS OF FACT

A. BACKGROUND

The parties in this case are in the business of supplying products and services to the wood truss industry. A wood truss is a group of beams that support roofs. A "layout program" is a computer program that graphically draws an architectural blueprint, indicating the size and location of wood trusses on the walls of a structure. This case involves the Plaintiffs' claim, pursuant to 28 U.S.C. § 1338, that a layout program produced by the Defendant, (the "Arce Program") infringed on the copyrights to three of the Plaintiffs' wood truss layout programs, ("Aces Layout Programs," versions 1, 2 and 3).

While any similarity between the programs is hotly disputed, the parties agree that all of the programs share the same author, Emilio Sotolongo ("Sotolongo"). Sotolongo is a largely self-taught computer programmer who began working in the software industry in 1983 on the strength of a karate video game he created after studying computer programming briefly at Miami Dade Community College. While working at Gangnail, a computer software company, Sotolongo was introduced to the wood truss industry.

In 1988, Sotolongo joined Advanced Computer Engineering Specialties, Inc., known as the "Aces/Bemax companies" ("Aces") in Miami, where he was asked to develop a wood truss layout program incorporating the concept of "intersecting planes" to depict three-dimensional representations of truss layouts. At this time, another software company, Online, had developed a program known as "Trusstar" which used intersecting planes and was considered to be superior to existing layout programs that could only depict truss layouts two-dimensionally.

When he was hired, Aces offered Sotolongo two salary options. Sotolongo could receive a straight salary of $700 per week or an annual salary of $25,000, plus 10 percent of the lease revenue generated by the layout program. Having recently married, Sotolongo testified that he chose the higher salary without a percentage of the program. However, Sotolongo testified that he had an informal, oral agreement with his employers that if the layout program was successful, Sotolongo would receive 10 percent of the profits.

A few months after beginning work at Aces, Sotolongo visited a truss manufacturer in the Tampa area to observe Online's Trusstar program firsthand. Trusstar was to serve as a "guide" for the layout program Sotolongo was developing for Aces utilizing intersecting planes. Sotolongo testified that he also intended his program to be more "user friendly" than Trusstar, by logically following the steps a draftsman would go through in developing a layout by hand. Sotolongo testified that his father was a draftsman and that he was familiar with the manner in which layouts were created.

Most of the work on the Aces Program was completed by late 1988, when it was sent to a "beta," or testing site, for debugging purposes. The program was generally distributed for publication purposes on or about March 10, 1989, when Aces displayed it at a seminar to members of the industry. This program, known as Aces Version 1, proved to be extremely successful in a market that had grown increasingly competitive by early 1989, when layout programs were being marketed by other software companies, including Online, Alpine, Hydro-Air and Gang-Nail.

After publishing Version 1 of the Aces Program, Aces directed Sotolongo to work on an improved version that would permit the layout to be printed. Version 1 did not have its own printing functions. Any layout produced by the program had to be input into a different program for printing.

Aces Version 2, first published on September 26, 1990, featured several improvements, including the ability to print, expanded memory to include more than 100 walls and 100 trusses and a rearrangement of the screen, from a three-box to a four-box display, with a top bar main menu. The company published a third version of the program, Aces Version 3, on March 13, 1991. Version 3 included a "viewcut" feature, which color highlighted on the display screen the intersection of adjacent planes as each such intersection was defined.

On or about September, 1990, while Sotolongo was in the process of developing Aces Version 3, MiTek's President of Operations, Art Sordo, approached Sotolongo and offered him a job and a significant raise, to work for MiTek. Sordo wanted Sotolongo to develop an improved version of the Aces layout program for MiTek. Sordo assured Sotolongo that there would be no copyright problems as long as Sotolongo wrote the new program "from scratch." The Plaintiffs offered Sotolongo a $70,000 annual salary as an employee or a $79,000 annual salary as an independent contractor.

After mulling the offer, Sotolongo decided to remain with Aces. Sotolongo testified that his main concern was that he would not be able to work within the constraints of a large company bureaucracy. MiTek required its programmers to keep detailed notes and logs of the steps they took in writing their programs. Sotolongo testified that he worked without notes, often running complex sections of programs over in his mind. Antonio Arce, President of the Defendant Arce Engineering, testified that Sotolongo was one of the most talented programmers he had ever seen. According to Antonio Arce, Sotolongo was able to solve a programming problem in hours that would take a more experienced software designer a month to unravel.

Sotolongo testified that he reported his job offer from MiTek to his employers at Aces. Sotolongo explained his concerns and expressed his desire to remain with the company. But Sotolongo was also concerned about rumors MiTek planned to acquire Aces. Sotolongo testified that he was assured that there were no plans by MiTek to purchase Aces. Aces rewarded Sotolongo's loyalty with a raise to $49,000 per year.

On April 1, 1991, MiTek purchased Aces for $2.5 million and received an assignment of its copyrights to the Aces Layout Programs which are at issue in this litigation. Eugene M. Toombs, MiTek's President and Chief Executive Officer, testified that MiTek's primary motive in acquiring Aces was to obtain the rights to the Aces Layout Programs, principally written by Sotolongo.

Sordo, MiTek's President of Operations, testified that Sotolongo contacted him after the sale was announced and asked if he could accept MiTek's job offer. Sordo testified he told Sotolongo that the offer was no longer on the table because now that MiTek had acquired the Aces Layout Programs it had no need for Sotolongo. However, Sordo testified he told Sotolongo that MiTek wanted him to stay on and offered him a less lucrative salary package, including incentives.

According to Gilles Bouchacourt, one of Aces' co-owners, Sotolongo approached the four co-owners of Aces in approximately February 1991 and asked them to each pay him $50,000, representing 10 percent of the $500,000 each of the owners was to receive as their share of MiTek's payment for the company. The Aces owners refused.

At about the same time, Antonio Arce contacted Sotolongo and met with him to find out if Sotolongo was interested in coming to work for Arce to develop a layout program. Arce knew that Sotolongo was the principal programmer of the three versions of the Aces layout Program.

Arce had an existing layout program but was dissatisfied with it because it could only work on Hewlett Packard equipment and was not compatible with IBM compatible personal computers. Arce told Sotolongo that he wanted him to develop a layout program to be used on IBM compatible equipment in the Windows environment.

Although extremely successful, the Aces programs were written for the MS-DOS operating system, which was rapidly being replaced by the more user-friendly Windows.¹ The Aces programs mimicked a Windows-type program by giving the user the option of either typing in commands by hand or using a mouse to activate functions of the program through the use of pull-down menus.

There are certain features which commonly appear in application programs written for the Windows environment. These features include the use of icons instead of words, a "frame" around the program which contains certain elements such as a "button" at the top left, scroll bar arrows at the right and the bottom, and a menu bar at the top. A Windows program also has certain file access features, help features, and printing features different from traditional DOS programs, the Plaintiffs' Expert Witness, Dr. Randall Davis testified.

Antonio Arce testified that he instructed Sotolongo to develop the Arce layout program "from scratch." Sotolongo testified that is exactly what he did. Sotolongo did not refer to any notes from the Aces Layout Programs because he had not taken any notes. Sotolongo also erased all source and object codes related to the Aces Layout Programs from his computer at home. All of the Aces Layout Programs were written in C language to operate within a DOS environment. The Arce Program was written...