Softel, Inc. v. Dragon Medical and Scientific Communications, Inc.
| Decision Date | 09 July 1997 |
| Docket Number | No. 59,D,59 |
| Citation | 118 F.3d 955 |
| Parties | 1997 Copr.L.Dec. P 27,679, 38 Fed.R.Serv.3d 623, 43 U.S.P.Q.2d 1385 SOFTEL, INC., Plaintiff-Appellant, v. DRAGON MEDICAL AND SCIENTIFIC COMMUNICATIONS, INC.; Dragon Group Ltd., also known as Dragon Medical and Scientific Communications, Ltd.; John R. Darsee; H. Eugene Hodge; Nina Romanoff, Defendants-Appellees. ocket 95-9151. |
| Court | U.S. Court of Appeals — Second Circuit |
Charla R. Bikman, New York City, for Plaintiff-Appellant.
Bruce H. Schneider, New York City, (Gordon M. Kessler, Stroock & Stroock & Lavan, New York City, William A. Rome, Jaffe and Asher, New York City, of counsel), for Defendants-Appellees Dragon Medical & Scientific Communications, Inc., John R. Darsee and H. Eugene Hodge.
Before: MINER, ALTIMARI, and PARKER, Circuit Judges.
Softel, Inc., a computer software company, brought this action against Dragon Medical and Scientific Communications, Inc. ("Dragon"), its parent Dragon Group, Ltd., and several of its employees (collectively "the defendants") claiming that the defendants had infringed copyrights Softel held in several of its computer programs, and had misappropriated trade secrets contained within the computer code. Softel also alleged that the defendants were guilty of "reverse palming off" under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and that the defendant corporation's president was vicariously and contributorily liable for damages. In a bench trial, the district court (John M. Cannella, Judge ) found the defendants liable on some of plaintiff's copyright infringement and trade secret claims, but not on others, and rejected plaintiff's claims based on the Lanham Act and vicarious or contributory liability. In a separate proceeding, the court (Miriam G. Cedarbaum, Judge ) awarded damages accordingly. We affirm in part and, because the district court's findings and holdings do not address all of plaintiff's claims, vacate and remand in part.
Softel is a small New Hampshire corporation engaged in the business of creating and selling computer graphics products. Paul Fiondella is its president and sole shareholder. Dragon is a New Jersey corporation engaged in the business of designing communications programs relating to medical and scientific information. H. Eugene Hodge is Dragon's president and a shareholder of Dragon; Nina Romanoff is a Dragon employee who produced various films and videotapes for Dragon; John R. Darsee is a medical writer and computer programmer for Dragon. See SOFTEL, INC. V. DRAGON MED. & SCIENTIFIC COMMUNICATIONS, INC., NO. 87 CIV. 0167, 1992 WL 168190, AT F.F. PP 1-6 (S.D.N.Y. JUNE 30, 1992)1 (" Softel II ").
In January 1993, Fiondella developed Videogram 1.0, a "paint-and-draw" computer graphics program. 2 Later in 1983, Fiondella developed an improved version of this program, Videogram 2.0. In 1984, Pfizer Laboratories hired Dragon to produce a program which later became known as Heartlab. Darsee saw an advertisement for Videogram 2.0, and called Fiondella with some questions regarding its capabilities. Dragon employee Darsee purchased the software, and some hardware, from Fiondella. Fiondella delivered the goods personally to Dragon's place of business in New York, so that he could explore any potential business opportunities for his company at Dragon. Fiondella and Darsee discussed forming a joint venture to create an "authoring language" and Darsee asked Fiondella to create a simulation of a beating heart for the Heartlab project.
In January 1985, E.R. Squibb & Sons, Inc. hired Dragon to create an interactive videotape program for training purposes. This project was called Azactam. Dragon hired Fiondella to write computer code for this project. Fiondella was careful not to provide his source code 3 to Dragon and imbedded a copyright notice in Softel's portion of the source code and in the executable 4 delivered to Dragon.
Dragon had also contracted to produce videodisc programs with Roche Laboratories. These would come to be known as Melanoma, Kaposi's Sarcoma ("Kaposi"), and Hairy Cell Leukemia. Dragon engaged Fiondella to write code to control the operation of the touchscreen and videodisc player in the program Melanoma, and to retrieve and display graphic images produced by Dragon artists. Fiondella wrote this code in a modular 5 style. He also used a manual produced by the hardware manufacturer to interface the hardware and software properly. He billed Dragon on a per diem basis, delivered only the executable version of his program, and imbedded a copyright notice in the executable.
Fiondella also worked on Kaposi, using code that was similar to that used in Melanoma. He employed several design techniques in writing the Kaposi code, including, among others, the use of external files, English language commands, modular structure, and a hierarchical series of menus and a touchscreen. This program also was delivered in executable form only, and with an imbedded copyright notice.
At about the time that Kaposi was finished, Dragon hired Fiondella to work on a project called Sorbinil. Fiondella wrote code for this project and submitted an executable to Dragon. However, as the deadline for the project approached, problems developed with the program. Dragon called Fiondella to ask him to come to Dragon's office in New York and fix the program, but Fiondella was out of town. A friend of Fiondella's went to Dragon's office instead, and managed to fix the immediate problem by following Fiondella's instructions over the telephone.
Unfortunately, additional problems arose. Fiondella himself went to Dragon's premises on June 17, 1985. Fiondella and one of Dragon's freelance computer programmers entered into a heated argument over whose code was causing the problem. The freelance programmer demanded that Fiondella turn over his code, so that the programmer could examine it himself. When Fiondella refused, the programmer stated that he had the ability to get Fiondella's code off Dragon's computers anyway, because he could "unerase" the code that Fiondella had put on the computers during his visits there and (seemingly) erased upon leaving. Fiondella became enraged. Dragon's president, Hodge, was present at the altercation and decided that because Fiondella had acted unprofessionally, he could no longer work for Dragon. Fiondella successfully fixed the problems with the software shortly after that.
Defendant Darsee then gained access to the code that Fiondella had put on Dragon's computers and seemingly erased.
In June 1985, Dragon produced the third videodisc program for Roche, Hairy Cell Leukemia. Roche wanted two versions: Hairy Cell U.S. and Hairy Cell Europe. Dragon produced an interim version called Hairy Cell Roche for distribution to Roche's European subsidiaries, but did not keep a copy because Dragon considered it to be an interim program.
In 1986, Dragon made a program for Pfizer called Low Back Pain. This program included the Backpain Expert Module. Shortly thereafter, Dragon produced a program called Heartlab for Pfizer. Darsee wrote the code for this program, except for the animation and image retrieval routines, which were Fiondella's. Fiondella was paid for this code.
Defendants admit that Hairy Cell Roche, Low Back Pain, and Heartlab used Fiondella's image retrieval routines.
Late in 1985, Darsee began to develop a paint-and-draw program called Paintbox. The early version of this software included Fiondella's image retrieval routines. Darsee sent a letter to the Kurta Corporation suggesting that Dragon and Kurta co-marketing some of the programs Dragon had developed, including Paintbox. Nothing came of this suggestion.
About this time, Dragon began to market itself as having a division called Dragon Expert Systems that specialized in interactive technology. Dragon sponsored a hospitality suite at a conference of the American Association of Family Practitioners on October 9-11, 1985. It solicited interest in this presentation by sending letters to prospective clients and issuing a press release describing itself as a group of physicians and artists capable of producing computer images. No evidence was adduced showing that any sales resulted from this presentation.
In May of 1986, Softel sought, and was granted, a copyright registration for a package of programs that included the following: (1) a program written in BASIC entitled "SHOWPIX.bas," which is an image retrieval routine; (2) a collection of object code routines called "8068/8 Support Routines," which included assembly code routines used to retrieve and display images; and (3) the source code for the Kaposi program.
In November 1986, Darsee exhibited the program Hairy Cell Roche at a meeting of the International Interactive Communications Society. He did not credit Fiondella or Softel for any of the code contained therein. The presentation did not produce any business.
In early 1987, Softel filed this suit alleging, inter alia, that the defendants had infringed copyrights Softel held in its programs, had misappropriated trade secrets in the code, and had violated § 43(a) of the Lanham Act.
In 1988, after the commencement of this litigation, Dragon made the following programs, which Softel claims are also infringing: Unasyn, Micro, OB/GYN, Managed Health Care, Heart Command (collectively, the "post-litigation programs"). These programs are written in a different computer language than Fiondella's original code, and are designed to work with different hardware.
During discovery, Softel attempted to change its outside trial expert witness, 6 but the new expert was unable to meet a discovery deadline imposed by Magistrate Judge Nina Gershon. Magistrate Judge Gershon forbade Softel to rely at trial on any outside expert other than its original one. The district court affirmed this preclusion order. See Softel, Inc. v. Dragon Med. & Scientific...
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