E-Steps, LLC v. Americas Leading Fin., LLC
| Decision Date | 24 March 2021 |
| Docket Number | CIVIL ACTION NO. 20-01245-WGY |
| Parties | E-STEPS, LLC, Plaintiff, v. AMERICAS LEADING FINANCE, LLC, TRAKSECURE CORP., CENTERBRIDGE PARTNERS, LP, NICOLAS KOGAN, JANE DOE, CAROLA ACUM, JOSÉ CORREA, RACHEL ROE, RICARDO CRUZ, SUSAN DOE; JOSÉ ORTEGA, MARY ROE, VICTOR GARCIA PORRATA, SUSAN ROE, LUIS O'FARRIL, JANE ROE and their conjugal partnerships, CORPORATION ABC, PARTNERSHIP DEF, LIMITED LIABILITY COMPANY GHI, Defendants. |
| Court | U.S. District Court — District of Puerto Rico |
YOUNG, D.J.1
This memorandum of decision addresses the issue of whether non-literal copying of a computer program violates the Copyright Act if the structure, sequence, and organization ("SSO") of a vendor's computer program are copied by a customer who participated in the development of the software, but had nodirect access to the source code, later provides that information to a competitor who thereafter creates a similar computer program with that same SSO for the use of that customer. Specifically, the plaintiff, e-STEPS, LLC ("e-STEPS"), brought this action primarily for copyright infringement against Americas Leading Finance, LLC ("American"), its investor, Centerbridge Partners, LP ("Centerbridge"), and Traksecure Corp. ("Traksecure"), along with certain officers and employees of American and Traksecure. e-STEPS created a Total Control GPS program ("Total Control GPS") and incorporated it into a system to track the location of automobiles financed by American with subprime borrowers. According to e-STEPS, American and Traksecure took e-STEPS' expression of the non-literal SSO portions of its Total Control GPS, its requirements and certificate and, at the urging of American's investor Centerbridge, created their own version, cutting e-STEPS out. At a hearing on January 14, 2021, the Court dismissed the action as to all counts as to Centerbridge, and all counts as to the remaining defendants, but took under advisement e-STEPS' First Cause of Action for Copyright Infringement. For the reasons stated below, the Court rules that e-STEPS has albeit barely sufficiently, pleaded a claim for copyright infringement, and therefore denies the remaining defendants' motions to dismiss as to this remaining count.
The parties have been litigating in the local Puerto Rico and federal courts since 2019. Compl. ¶¶ 259-262, ECF No. 1. In federal court, e-STEPS initially filed a claim on similar but not identical facts. e-STEPS, LLC v. Americas Leading Fin., LLC, CIVIL 19-1637CCC (D.P.R. filed July 2, 2019) ("e-STEPS I"). At the motion to dismiss stage, that court dismissed the action without prejudice because the allegations were insufficient to sustain the claims. e-STEPS I, 2019 WL 9834429, at *6 (D.P.R. Sept. 25, 2019). The judgment was entered without prejudice. e-STEPS I, Judgment, ECF No. 43. American and Traksecure, among others, jointly moved to amend the judgment to dismiss to reflect that only the state law claims were dismissed without prejudice after the federal claims had apparently been dismissed on the merits. e-STEPS I, Joint Mot. Amend J., ECF No. 44. E-STEPS opposed the motion to amend the judgment, arguing that the Court's dismissal was proper because the pleading of additional facts could correct the pleading deficiencies. e-STEPS I, Opp'n Defs.' Mot. Amend J., ECF No. 45. The Court denied the motion. e-STEPS I, Order, ECF No. 49. The current action followed.
At the January 14, 2021 hearing, the Court heard the following motions to dismiss:
At the hearing, the Court ALLOWED Centerbridge's motion to dismiss in its entirety and ALLOWED in part and DENIED in part the American Defendants' and Traksecure Defendants' motions to the extent that all that remains to be decided is whether Count I, Copyright Infringement, survives.
The following facts are taken almost verbatim from the complaint; quotations are omitted. e-STEPS owns a valid copyright over the program known as Total Control GPS, a platform which links individuals to the vehicles American finances; locates those vehicles as needed; and tracks vehiclesas needed, using GPS technology. Compl. ¶ 17, Ex. 2, Certificate Registration TX 8-679-684 ("Cert. of Reg. TX 8-679-648"), ECF 1-2. It also owns a valid copyright over the platform's functional specifications, and a Certificate of Installation produced by the platform. Compl. ¶ 18, Ex. 3, Certificate Registration TX-706-911 ("Cert. of Reg. TX-706-911"), ECF 1-3; id. Ex. 4, Certificate Registration TX-733-463 ("Cert. of Reg. TX-733-463"), ECF 1-4.
The Total Control GPS platform is a specific automotive tracking resource and business process management platform. Compl. ¶ 19, Ex. 5, Aff. Professor Eric Koskien ("Koskien Aff."), ECF 1-5. Although there are several GPS tracking programs on the market, Total Control GPS is more than just "tracking software," and e-STEPS owns infrastructure to track vehicles. Compl. ¶¶ 20-21.
In early 2015, American needed a GPS tracking system for the vehicles it intended to finance and decided that because it lacked the expertise and proper means, it would outsource the work instead of developing a software solution in-house. Id. ¶¶ 22-23.
American initially asked Traksecure for a proposal, but Traksecure's president, codefendant Víctor García Porrata, upon learning that American officer Juan Ramon (Moncho) Gutierrez Rodriguez was an acquaintance of his, inflated the proposal andits potential profit. Id. ¶¶ 24-25. Gutierrez noticed the change, and the evaluating committee rejected the proposal and sought another provider. Id. ¶¶ 26-27.
On June 18, 2015, American entered into a contract ("the Contract") with e-STEPS to provide a complete information technology ("IT") solution to track the spatial location of motor vehicles that served as liens to the loans that American had made to its clients. Id. ¶ 30.
When e-STEPS contracted with American, it had never tracked a vehicle, used GPS technology to track vehicles, or created business processes to accomplish this objective. Id. ¶ 56. American had no requirements and never gave any to e-STEPS for the development of the Total Control GPS. Id. ¶ 67.
When the contract began, e-STEPS had to create and provide American with processes from which it then derived in a separate creation stage, non-literal elements and functionalities for the software that it incorporated through the contracted license into the service platform with certain components necessary for the tracking of vehicles. Id. ¶ 58.
One of the most critical, foundational aspects of a software process is the need to develop so-called specifications or "requirements," which express how the software should behave or work. Id. ¶ 61. Requirements are needed to inform engineers of everything from the largest of matters to the smallest ofdetails in order for the project ideas and concepts to be translated into computer code. Id. ¶ 62. When there is less precedent for the software, great effort in terms of time and cost must be invested to create the requirements. Id. ¶ 64. This is called "requirements engineering," and it can be time-consuming and costly, necessitating identifying all aspects of the system, including both the functional (e.g., features) and non-functional (e.g., performance, security, etc.) aspects as to how the system should work and what it must do. Id. ¶¶ 63-66.
The end result of the requirements is the developer's expression of the structure, sequence, and organization (commonly known as "SSO") of the specific software solution. Id. ¶ 68. After the expression of SSO, there is only one more element to finish the software: creating the source code and object code. Id. ¶¶ 69-70.
Here, the end result is the Total Control GPS platform, among e-STEPS' most valuable assets, composed of the following modules and outputs: (a) GPS Installation; (b) Condition Report; (c) Reporting; (d) Ticket Management; (e) GPS Tracking; (f) Billing; and (g) Certification. Id. ¶¶ 71-73.
American was, at the time, the only financial institution in Puerto Rico that used GPS technology to track vehicles that serve as collateral to the auto loans. Id. ¶ 31. In turn, the solution developed by e-STEPS, comprised of its source code,object code, and the structure, sequence, and organization of both the program as an integrated whole and the program's individual elements, became a competitive advantage that e-STEPS painstakingly gained over its competitors, among them the disgruntled codefendant Traksecure. Id. ¶ 32.
Under the Contract, e-STEPS would sell to American the GPS units (initially purchased in California and then imported from China) that e-STEPS would then install in the vehicles, which American then financed to the purchasers. Id. ¶¶ 38-45. As part of the service lease, e-STEPS granted American a limited use license of e-STEPS' Total Control GPS. Id.
In May 2016, almost a year after e-STEPS and American signed their contract, codefendant Nicolás Kogan ("Kogan"), American's founder and CEO, told e-STEPS that...
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