Q-Co Industries, Inc. v. Hoffman

• Decision Date: 24 December 1985
• Docket Number: No. 85 Civ. 4653 (RWS).,85 Civ. 4653 (RWS).
• Citation: 625 F. Supp. 608
• Parties: Q-CO INDUSTRIES, INC., Plaintiff, v. Sidney HOFFMAN, Dilip Som and Computer Prompting Corp., Defendants.
• Court: U.S. District Court — Southern District of New York

625 F. Supp. 608

Q-CO INDUSTRIES, INC., Plaintiff, v. Sidney HOFFMAN, Dilip Som and Computer Prompting Corp., Defendants.

No. 85 Civ. 4653 (RWS).

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

December 24, 1985.

COPYRIGHT MATERIAL OMITTED

Abberley Kooiman Marcellino & Clay, New York City (Barry Magidoff, of counsel), for plaintiff.

Stanley K. Shapiro, New York City, for defendants.

OPINION

SWEET, District Judge.

The plaintiff Q-Co Industries, Inc. ("Q-Co") has moved for a preliminary injunction under Fed.R.Civ.P. 65, seeking to bar defendants Sidney Hoffman ("Hoffman"), Dilip Som ("Som") and Computer Prompting Corp. ("CPC") from selling their CPC-1000 program which is alleged to infringe Q-Co's copyrighted VPS-500 program. The defendants have cross-moved to enjoin Q-Co from interfering with the development of the CPC-1000 program and from representing itself to the sole owner of the VPS-500 program. Both programs are software designed to permit use of personal computers as prompters for television and theatre presentations. Teleprompters or prompters are machines which scroll large characters on a television screen to permit a speaker to read a prepared text by looking directly ahead at the screen, thereby avoiding the appearance of reading. On the facts and conclusions set forth below, the injunctive relief requested by Q-Co on its motion and by defendants on their cross-motion will be denied at this time.

This fact-rich case has presented difficult issues for resolution, particularly since the intellectual property at issue is computer programming, a form not readily comprehended by the uninitiated. The challenge to counsel to make comprehensible for the court the esoterica of bytes and modules is daunting. The absence of direct authority dealing with these issues is matched by the ease of access by the parties to the property involved and by the consequent difficult of resolving not only what happened but the effect of these events on the rights of the parties.

Prior Proceedings

This action was filed on June 14, 1985 and Q-Co promptly sought a temporary restraint. The defendants agreed not to merchandise the CPC-1000 program alleged by Q-Co to have derived from Q-Co's VPS-500 program. Discovery was initiated, and despite disputes over the confidentiality of materials, no present discovery demands are outstanding.

A hearing was held on September 9 and 10, 1985 after which the defendants terminated their voluntary restraint and a motion for temporary restraint was denied. The hearing was resumed on October 10 and completed on the 11th. Final submissions were made on October 24, 1985.

The Facts

Q-Co is a New York corporation with its principal place of business in New York City. Hoffman is a New York resident and Som a resident of the District of Columbia. CPC is a New York corporation organized early in 1985.

Q-Co registered its VPS-500 software program with the Registrar of Copyrights and received a Certificate of Registration Class Tx., No. 1-568-702 on May 29, 1985. This dispute has resulted from the work Hoffman and Som did to devise the VPS-500 program which permitted the user of the program to employ an Atari 800-XL ("Atari") computer as a prompter, and their subsequent development of the CPC program which seeks to permit a user to employ an IBM PC computer for the same purpose.

Q-Co has been in the business of providing prompting equipment and services to various clients in the business, entertainment and governmental communities for over twenty-nine years. There are a number of companies other than Q-Co currently marketing prompting software packages designed for use on the Atari computer. No company has as yet been able to design a commercially viable program capable of performing prompting on the IBM PC. The principle advantages of an IBM PC-based program are the great public recognition and acceptance of the IBM computer and the much larger memory available on the IBM.

However, because of differences between the hardware of the Atari computer and that of the IBM PC, the Atari is simpler and better suited to the development of a prompting program. Three basic functions are required for the development of a computerized prompter:

1) the generation of large characters on a screen;

2) the scrolling the characters up and down at smooth and variable speeds; and

3) word processing and editing capabilities.

While the Atari has a graphics chip built into its hardware which permits the generation of large characters and scrolling through a relatively simple sequence of program commands, the IBM PC has no such hardware. Instead, a lengthy and complicated software program must be developed to enable the IBM to generate large characters and scroll text. This difference has been the principal hurdle blocking the development of a prompting program for the IBM-PC.

Q-Co hired Hoffman as a prompter technician in mid-1976 on a part-time basis. In late 1983, Q-Co learned that Hoffman had recently been awarded an advanced degree in the field of computer science and in January, 1984, hired him on a full-time basis to develop a software program to utilize the Atari 800-XL as a prompter. Shortly thereafter, at the suggestion of Hoffman, Q-Co also employed Som, a close personal friend of Hoffman, to work on a hand control device to be a part of the computerized prompter and to assist Hoffman in the development of the program. No employment contracts, confidentiality agreements or agreements not to compete were entered into. Hoffman was an employee at will and Som a consultant. Som is a physicist with a masters degree from the University of Calcutta, and a Ph.D. from the City University of New York, who is presently a post-doctoral research assistant at George Washington University where he is developing research programs.

At the end of January, 1984, Hoffman commenced work as a full-time employee of Q-Co, to create the computer prompter program for Q-Co which was later entitled the VPS-500. In creating the VPS-500, Hoffman and Som, utilized only Q-Co's equipment and supplies, including textbooks, provided by Q-Co, albeit in almost all cases purchased by either Som or Hoffman and reimbursed by Q-Co. The equipment included the Atari computers used by both Som and Hoffman for carrying out all their programming efforts. A program devised by Compu-Prompt, a Q-Co competitor, for use in employing the Atari as a prompter was also provided by Q-Co to Hoffman.

Hoffman had "overall responsibility for the computer prompting project" under Alvin S. Eisenberg ("Eisenberg"), an executive vice-president of Q-Co, but Hoffman worked so closely with Som that "things were so, like, intertwined together" and it was not possible to separate their work. Hoffman reported to Q-Co's officers on how the overall project was progressing. Although Som ultimately became the principal programmer for the VPS-500 project, other Q-Co employees or officers were never informed of that fact. In any event, Som and Hoffman both worked very closely together, even though geographically separated in New York City and Washington, D.C. during the period February through July, conversing by telephone almost daily and speaking directly during Hoffman's weekend trips to Som's house once every three weeks when they would work for eight hours a day together. The program as it was developed was the joint product of both men. During this period Hoffman had one or more conversations with Q-Co officers and employees to the effect that it would be desirable to develop a prompting program for the IBM PC once the Atari program was completed.

In early August, 1984, Hoffman and Jerry Berg, a Q-Co employee ("Berg"), Hoffman's immediate supervisor, travelled to a suburb of Detroit, Michigan to prepare the text for a prompting job Q-Co was to perform for Marritz Communications Co. ("Marritz") which was acting on behalf of Ford Motor company (the "Ford Show"). While preparing such text, David Davis, an official of Marritz, advised Berg and Hoffman that many of Marritz' customers, including Ford, had need of a computerized prompter to operate on an IBM PC and that he looked forward to an IBM PC program for the following year's Ford show.

After several days in Detroit, Berg and Hoffman travelled to Las Vegas, Nevada to begin rehearsals for the Ford show. Because the VPS-500 was still in the developmental stages, it had insufficient memory for the job and as such required the use of two Atari's being operated in tandem to provide sufficient memory. Berg concluded that he and Hoffman would require assistance in Las Vegas, and Som travelled to Las Vegas for that purpose. In Las Vegas there were again discussions in which Hoffman was involved about a computerized prompter for an IBM PC. In response to Berg, Som on several occasions stated it would be possible to develop an IBM PC computer prompter but that it was very difficult.

Upon returning from Las Vegas in late August, Hoffman, during a luncheon meeting in New York City with his friend of several years, Geoffrey Pope ("Pope"), told Pope that he was thinking about going into his own business with his friend Som and possibly to sell a program for a computerized prompter. In the same period, Hoffman suggested to Eisenberg and Berg that development of the VPS-500 would continue more quickly if he were to move to Washington, D.C. and work more closely with Som. Q-Co agreed and Hoffman moved to Washington, D.C. in early September for the months of September, October and November, 1984.

In the beginning of December, 1984, Hoffman returned to New York City and advised Q-Co that he was going to look for other employment and that he felt the VPS-500 would be completed by December 31, 1984, but that in the event there were any loose ends, he would ask Som to assist Q-Co. On Friday, December 28, 1984, Som and Hoffman demonstrated the latest version of the VPS-500 to Q-Co personnel in Q-Co's New York office.

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