SAS Inst. Inc. v. World Programming Ltd.

• Decision Date: 29 September 2014
• Docket Number: No. 5:10–CV–25–FL.,5:10–CV–25–FL.
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: SAS INSTITUTE INC., Plaintiff, v. WORLD PROGRAMMING LIMITED, Defendant.

64 F.Supp.3d 755

SAS INSTITUTE INC., Plaintiff

v.WORLD PROGRAMMING LIMITED, Defendant.

No. 5:10–CV–25–FL.

United States District Court, E.D. North Carolina, Western Division.

Signed Sept. 29, 2014.

Entered Oct. 21, 2014.

Pressly M. Millen, Burley Bayard Mitchell, Jr., Raymond M. Bennett, Womble Carlyle Sandridge & Rice, PLLC, Raleigh, NC, Krista S. Schwartz, Jones Day, Chicago, IL, for Plaintiff.

Christopher T. Graebe, Mark R. Sigmon, Graebe Hanna & Sullivan, PLLC, Raleigh, NC, Dennis O. Cohen, Peter Brown, Jessie M. Gabriel, Baker & Hostetler, LLP, New York, NY, for Defendant.

ORDER

(SEALED)¹

LOUISE W. FLANAGAN, District Judge.

This matter comes before the court on plaintiff's motion for partial summary judgment (DE 211) and defendant's motion for summary judgment (DE 220). These motions have been fully briefed and issues raised are ripe for ruling. For the reasons that follow, each motion is granted in part and denied in part.

STATEMENT OF THE CASE

Plaintiff is a North Carolina corporation that produces software products. Defendant is a competing software company, incorporated under the laws of England and Wales. On September 14, 2009, plaintiff filed a lawsuit in the United Kingdom (“U.K.”) against defendant arising out of defendant's creation of a competing software product, asserting claims for copyright infringement and breach of a licensing agreement. That suit was filed in the Chancery Division of the High Court of Justice (“U.K. court”).²

On January 19, 2010, plaintiff initiated the instant suit. The complaint before this court, premised on many of the same facts as the U.K. litigation, includes claims for copyright infringement and breach of the same licensing agreement. In addition, plaintiff added claims for tortious interference with contract, tortious interference with prospective business advantage, and violation of the North Carolina Unfair and Deceptive Trade Practices Act (“UDPTA”), N.C. Gen.Stat. § 75–1.1. On March 17, 2010, defendant filed a motion to dismiss the action for lack of personal jurisdiction pursuant to Rule 12(b)(2), for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6), and for forum non conveniens, or, in the alternative a motion to transfer venue. By order entered March 18, 2011, 2011 WL 1059128, the court granted the motion to dismiss for forum non conveniens, and did not reach other arguments raised for dismissal. Plaintiff appealed and, in a decision issued February 16, 2012, 468 Fed.Appx. 264, the Fourth Circuit Court of Appeals reversed and remanded.

On March 23, 2012, defendant resubmitted its motion to dismiss seeking all the same relief as in its prior motion to dismiss, excepting dismissal for forum non conveniens, and also requesting abstention or a stay pending completion of the U.K. litigation. On June 6, 2012, defendant filed a notice that it was withdrawing all grounds for its motion except for failure to state a claim or change of venue. At hearing held on the motion June 7, 2012, defendant withdrew its request for a change of venue. On October 18, 2012, 2012 WL 5844910, Magistrate Judge James E. Gates entered memorandum and recommendation (“M & R”) recommending that defendant's motion to dismiss be denied. The court entered order adopting the M & R on November 19, 2012, 2012 WL 5844899.

On May 7, 2013, plaintiff filed a motion to amend its complaint, seeking to add a claim that defendant obtained licenses to use certain of plaintiff's software products by fraud. The court granted the motion by order entered August 8, 2013. Plaintiff filed its amended complaint on August 14, 2013.

Meanwhile, the U.K. litigation proceeded somewhat more expeditiously. After a full trial, the U.K. court issued an interim judgment (“U.K. interim judgment”) on July 23, 2010. The court made numerous findings of fact, as well as provisional holdings, but concluded that resolution of the case depended upon important issues of interpretation of European Union law, more specifically, various articles of Council Directive 91/250/EEC of 14 May 1991 on the legal protection of computer programs (“Directive 91/250/EEC”)³ and Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 (“Directive 2001/29/EC”) (collectively “European Directives”). Thus, by order entered July 28, 2010, the U.K. court referred certain questions regarding the interpretation of these articles to the Court of Justice of the European Union (“CJEU”). The CJEU ruled upon these questions May 2, 2012. As relevant here, as quoted by the U.K. court in its final judgment (“U.K. judgment”) the CJEU held that under various articles of the European Directives:

[N]either the functionality of a computer program, nor the programming language and the format of the data files used in a computer program in order to exploit certain of its functions ... are ... protected by copyright in computer programs....

...

[A] licensee is entitled to determine the ideas and principles which underlie any element of the computer program if he does so while performing any acts of loading, displaying, running, transmitting or storing that program which he is entitled to do.

...

[T]he reproduction, in a computer program or a user manual for that program, of certain elements described in the user manual for another computer program protected by copyright is capable of constituting an infringement of the copyright in the latter manual....

U.K. judgment ¶¶ 10.46, 12.54, 14.70 (quoting the CJEU ruling).

Based upon the CJEU's rulings, on January 25, 2013, the U.K. court entered its final judgment adopting its interim judgment and finding for defendants on all claims but for infringement of the SAS manuals pursuant to the dictates of the European Directives. Plaintiff appealed portions of the U.K. judgment, all of which were affirmed by the Court of Appeal. On July 9, 2014, the Supreme Court of the United Kingdom denied plaintiff's request to appeal.

On April 14, 2014, plaintiff filed its motion for partial summary judgment on its claims for breach of contract and tortious interference with contract. That same day, defendant filed its motion for summary judgment on all claims.

STATEMENT OF UNDISPUTED FACTS

A. Plaintiff and the SAS System

Plaintiff is the world's largest privately-held software company. Patricia Brown April 14, 2014, Decl. (“Brown I Decl.”) ¶ 2. Plaintiff creates an integrated suite of business software products which are known as the “SAS System.” Id. The SAS System allows users to perform a variety of data access, management, analysis, and presentation tasks. Id. The core component of the SAS System is known as “Base SAS” or “BASE/SAS,” but the SAS System includes other separate components that users may separately license and install and which provide additional capabilities. Id.

Computer programs are made up of lines of text written in a computer language, called the “source code” of that program. Source code cannot be read directly by computers, which can only read what is known as “machine code.” Thus, in order for a program to run on a computer, that program must be translated through a different program serving as a compiler or interpreter of computer language. Very basically, a compiler is a program that translates source code into machine code readable by a computer. An interpreter is a program that translates the source code of a program and directs the execution of that code. See Def.'s Ex. 1, Nell Dale & John Lewis, Computer Science Illuminated 295–97 (5th ed.2013).

The SAS System can be run on various kinds of computers ranging from personal computers to mainframe computers. Id. ¶ 3. SAS System users can access, manage, and analyze data by writing programs in a programming language developed by plaintiff known as the “SAS Language.” Id. These programs can be run through the SAS System and thereby perform certain tasks known as “SAS Procedures.” Id. Thus, among other things, the SAS System is a combination of compilers and interpreters for SAS Language programs.⁴ See Def.'s Ex. 59, Richard Langston January 9, 2014, Dep. (“Langston I Dep.”) 12:17–22.⁵

The idea of the SAS Language was conceived in 1964 by Anthony J. Barr (“Barr”). Barr Aff. ¶¶ 6–7. He began to develop this language in 1966 while working at North Carolina State University (“N.C. State”). Id. ¶ 9. The SAS Language is a high-level computer language used by thousands of institutions around the world. Id. ¶ 16. Thousands of users write programs in the SAS Language. Def.'s Ex. 2, Langston I Dep. 26:8–9. Anyone can write a program in the SAS Language, and it is undisputed that no license is needed to do so. Id. at 32:8–18; see also Def.'s Ex. 41, Michael Creech Dep. 179:12–17.

Concurrent with his creation of the SAS Language, Barr created a compiler/interpreter for the language. Barr Aff. ¶¶ 9, 12. This compiler/interpeter is a program separate from any SAS Language program. Id. ¶ ¶ 9–10, 12. The source code for the compiler/interpreter was written in the computer language of IBM/360 assembler. Id. ¶ 10. James Goodnight (“Goodnight”), and John Sail (“Sail”), who were colleagues of Barr at N.C. State, joined in developing the SAS compiler/interpreter in 1968 and 1969, respectively. Id. ¶ 14. This group first distributed an early version of their program to various universities in 1968. Id. ¶ 15.

In 1972, Barr, Goodnight, and Sail finished a commercial version of their SAS compiler/interpreter they called “SAS72.” Barr Aff. ¶ 19. The group decided to rewrite a new version of the SAS compiler/interpreter, which was completed in 1976, and called “SAS76.” Id. ¶ 23. Jane Helwig (“Helwig”), who joined the group in 1973 or 1974, who wrote a new SAS manual. Id. ¶ 24. Because the program was becoming popular, the expanded group decided to leave N.C. State and found a for-profit company to market the compiler/interpreter. Id. ¶ 25. This company, the SAS Institute—plaintiff in this action—was incorporated in 1976. Id. ¶ 26. Barr left the company in ...