Sun Media Systems, Inc. v. Kdsm, LLC

• Decision Date: 01 July 2008
• Docket Number: No. 4:06-cv-106.,4:06-cv-106.
• Citation: 564 F.Supp.2d 946
• Parties: SUN MEDIA SYSTEMS, INC., Plaintiff, v. KDSM, LLC and Sinclair Broadcast Group, Inc., Defendants.
• Court: U.S. District Court — Southern District of Iowa

Page 946

564 F.Supp.2d 946

SUN MEDIA SYSTEMS, INC., Plaintiff, v. KDSM, LLC and Sinclair Broadcast Group, Inc., Defendants.

No. 4:06-cv-106.

United States District Court, S.D. Iowa, Central Division.

July 1, 2008.

COPYRIGHT MATERIAL OMITTED

Trent C. Keisling, Meredith K. Lowry, Stephen Douglas Schrantz, John M. Scott, Keisling Pieper & Scott PLC, Fayetteville AR, Eric F. Turner, Turner Law Offices, West Des Moines, IA, for Plaintiff.

Michael J. Collins, Michael S. Libowitz, Thomas & Libowitz PA, Baltimore, MD, J. Campbell Helton, Whitfield & Eddy, PLC, Des Moines, IA, for Defendants.

ORDER

ROBERT W. PRATT, Chief Judge.

Before the Court is Defendants' Motion for Summary Judgment, filed November 1, 2007. Clerk's No. 54. Plaintiff filed a resistance to the motion on November 26, 2007 (Clerk's No. 60), and Defendants replied on December 28, 2007. Clerk's No. 71. A hearing was held on March 25, 2008. Clerk's No. 83. The matter is fully submitted.

I. FACTUAL BACKGROUND

Defendant Sinclair Broadcast Group, Inc. ("Sinclair") is a Maryland corporation that, through its subsidiaries and affiliates, owns, operates, programs and/or provides sales services to fifty-eight television stations in thirty-six markets throughout the United States. Defs.' Statement of Material Facts ¶ 1. Defendant KDSM, LLC ("KDSM") is a Sinclair subsidiary that owns, operates, programs, and/or provides sales services to the Des Moines, Iowa television station KDSM Fox 17. Id. ¶ 2; Pl.'s Response to Defs.' Statement of Material Facts ¶ 2. Plaintiff Sun Media Systems, Inc. ("Sun Media" or "Plaintiff)¹ is an Arkansas corporation that is in the business of conducting direct mail promotions in the broadcast industry. Defs.' Statement of Material Facts ¶ 3.

In 1999, Sun Media sued Comcast Cablevision of Little Rock, Inc. and Comcast Cable Communications, Inc. (collectively "Comcast") in the United States District Court for the Eastern District of Arkansas, alleging copyright infringement, fraud, and deceit. During that litigation, Sun Media filed its manual, entitled "Sales Person's Guide to Success!" with the court. Id. ¶ 4. The manual was not identified as a confidential document and it was not filed under seal.² Id. On or about January 29, 2001, Michael Rosen and James Tandy ("Tandy"),³ two Sun Media employees, met with Sinclair employees to present their business concept of conducting direct mail promotions in the broadcast industry. Id. ¶ 5. According to Sinclair and KDSM (collectively referred to as "Defendants"), Sun Media explained its entire business concept in explicit detail, without any written or oral confidentiality agreement. Id. Sun Media denies this assertion, claiming that it required a confidentiality agreement before divulging proprietary material, and pointing out that it could not divulge its trade secrets in the limited amount of time typically allotted for an initial presentation. Pl.'s Response to Defs.' Statement of Material Facts ¶ 5.

On or about May 3, 2001, Sinclair Media II, Inc. (a separate entity from Sinclair) engaged Sun Media to conduct a direct mail advertising campaign for one of its stations in the Las Vegas, Nevada television market. Defs.' Statement of Material Facts ¶ 6. In approximately July 2001, various Sinclair affiliated companies engaged Sun Media to conduct campaigns for television stations in Kansas City, Missouri, and in Oklahoma City, Oklahoma.⁴ Id. ¶ 7. In December 2001, additional Sinclair affiliates in Winston Salem, North Carolina, Raleigh, North Carolina, and Des Moines, Iowa (KDSM) engaged Sun Media to conduct advertising campaigns as well. Id. Sinclair asserts that it was not a party to any of these contracts between Sun Media and the Sinclair affiliates.⁵ Id.

In the KDSM contract with Sun Media, there is a section entitled "Terms and Conditions," which contains the following confidentiality clause:

Client hereby acknowledges that any marketing, sales, promotional or production information, manuals, customer lists, artwork, methods of operation or material it may acquire from [Sun Media] in the performance of or in connection with or as a result of this Agreement are [Sun Media] trade secrets and Client agrees not to divulge any of [Sun Media's] trade secrets to any third party whatsoever without [Sun Media's] written permission. Client acknowledges the ongoing nature of the business contemplated by the Agreement and agrees that it will not use any of [Sun Media's] trade secrets, trademarks, trade names or marks or symbols descriptive thereof for any purpose whatsoever after the expiration of this Agreement.

Id. ¶ 8; Defs.' App. at 94. Sun Media admits that it does not have any written trade secrets, but asserts that it previously had written trade secrets in its 2002 manuals and in other proprietary material. Pl.'s Response to Defs.' Statement of Material Facts ¶ 9.

In 2002, KDSM utilized Sun Media as a vendor to assist it with direct mailers for use in conjunction with its local television advertising campaign. Defs.' Statement of Material Facts ¶ 10. In May 2002, a direct mailer (the "KDSM Spring 2002 Mailer") was mailed to the public. Id. ¶ 11. While Defendants assert that the KDSM Spring 2002 Mailer was "in large part created and put together by KDSM," Sun Media argues that the KDSM Spring 2002 Mailer was a "joint effort" between KDSM and Sun Media. Id. ¶ 12; Pl.'s Response to Defs.' Statement of Material Facts ¶ 12. Specifically, Sun Media contends that it "provided guidance in the creation of the mailer and provided copyrighted materials that assisted in the production and layout of the KDSM Spring 2002 Mailer." Pl.'s Response to Defs.' Statement of Material Facts ¶ 12. Sun Media also claims that it provided assistance with the mailer's cover design, contest pages, layout, and by providing guidance about obtaining advertisements, amongst other things. Id. There is no dispute, however, that the KDSM Spring 2002 Mailer was not registered with the United States Copyright Office. Defs.' Statement of Material Facts ¶ 13. In addition to the KDSM Spring 2002 Mailer, a PowerPoint presentation was developed (the "KDSM Spring 2002 Presentation"), as an element of the direct mail aspect of the local television advertising sales campaign.⁶ Id. ¶ 14.

In 2002, Sun Media was engaged by more Sinclair affiliated stations to assist with direct mailers for use in conjunction with each station's local television advertising campaigns.⁷ Id. ¶ 15. Sinclair again claims that it was not a party to any of its affiliates' contracts with Sun Media.⁸ Id. None of the mailers prepared during the 2002 period were registered with the United States Copyright Office. Id. In February 2003, Sinclair and Sun Media began discussing plans for a Fall 2003 direct mail campaign for various Sinclair markets. Id. ¶ 16. Sun Media drafted proposed contracts for the individual stations that would be taking part in this campaign. Id. The contracts were dated February 10, 2003, but were never executed by either the individual stations or by Sinclair, because a dispute had arisen between Sinclair and Sun Media concerning the right of Sinclair's affiliate stations to conduct their own local television advertising sales using direct mail as an inducement for potential advertisers to advertise with the affiliate stations. Id. On April 1, 2003, James Tandy, as President of Sun Media, wrote a letter to Sinclair, providing in pertinent part:

I am sending you this today via e-mail because as of this time you [have] not returned my attorney's call. And, because I feel that we must get the fall program situation settled.

I appreciate the pressures which revolve around the broadcast industry today and especially around your position. I also understand the need to be as flexible as possible to take advantage of market opportunities. I enjoy Sun Media's relationship with you and your company and want to do everything possible to continue to make that partnership work. We are completing your spring promotion at this time and I think it has been a huge success.

However, with regards to the fall promotion, my comptroller, my finance manager, my intellectual attorney, and my corporate attorney are all over me to make sure that I do not diminish or weaken our major asset which is our system/sequence — our copyrights....

If you choose to stay with us in 2004, we will be most happy. If you choose to take the program in-house, fine. Develop your own system and have at it. We just need to protect our assets. We have experience in these "in-house" situations and they have suffered loss of revenue levels and found the programs to be dismal failures....

Sun Media devised and developed an original direct mail campaign for use by broadcast media. I am obligated to protect any of its copyrighted materials involved in its system/sequence including its step-by-step proprietary programs, manuals, time lines, invitations, presentation packages, direct mail/on-air audience contest, production sources and techniques, sales advertising report, software packages, and direct mail target area compilation program....

Let's get the fall done — we all have commitments — then let's talk about the future.

Id. ¶ 17; Defs.' App. at 397-98. Three days later, on April 4, 2003, Sun Media entered into the following letter agreement (the "April 2003 Letter Agreement") with Sinclair regarding its services:

This will confirm that [Sinclair] has agreed to go forward with [Sun Media] as the provider of the printing and distribution services for the direct mailpieces that the Sinclair stations listed on exhibit A⁹ to this letter plan to undertake during the fall of 2003. As you are aware, we will not be signing a formal contract with regard to this engagement because we have been unable to agree on a number of the provisions to be contained in a contract. Notwithstanding that, this letter agreement shall constitute a binding contract and the parties agree that...