Telerate Systems, Inc. v. Caro
| Citation | 689 F. Supp. 221 |
| Decision Date | 10 June 1988 |
| Docket Number | No. 85 Civ. 9132 (DNE).,85 Civ. 9132 (DNE). |
| Parties | TELERATE SYSTEMS, INC., Plaintiff, v. Marshall CARO and Programit, Inc., Defendants. |
| Court | U.S. District Court — Southern District of New York |
COPYRIGHT MATERIAL OMITTED
Leventhal & Senter, Washington, D.C. (Meredith S. Senter, of counsel), Hartman & Craven, New York City (Gary Stahl, of counsel), Ropes & Gray, Washington, D.C., for plaintiff.
Milberg, Weiss, Bershad, Specthrie & Lerach, New York City (Jared Specthrie and Sanford P. Dumain, of counsel), Fryer, Ross & Gowen, New York City (Hugh N. Fryer, of counsel), for defendants.
Plaintiff, Telerate Systems, Inc. ("Telerate"), a provider of financial information, has moved preliminarily to enjoin the defendants, Programit, Inc. ("Programit"), and its chairman and chief executive officer, Marshall Caro ("Caro"), from selling, manufacturing, and distributing a software package called "Excel-A-Rate." Plaintiff claims that defendants have 1) violated the copyright laws; 2) misappropriated plaintiff's trade secrets; 3) interfered with contracts between Telerate and some of their customers; and 4) violated the Telecommunications Act.1 Defendants have cross-moved preliminary to enjoin plaintiff from disconnecting Excel-A-Rate users from the Telerate network. Defendants contend that plaintiff has violated the federal antitrust laws. Plaintiff's motion is granted. Defendants' motion is denied.2
Telerate is a provider of computerized financial information. Specifically, plaintiff provides "real time" prices, rates, and other information for various financial instruments and commodities, as well as a news wire. Programit is a computer software development company that has manufactured and sold a program it calls "Excel-A-Rate." The "Excel-A-Rate" program permits a subscriber to use a personal computer ("PC") to receive and to analyze the financial information provided by Telerate.
Plaintiff offers access to its database by several different methods. The most commonly used access method is through the Standard Telerate Network ("STN"). STN uses a number of telephone "party lines," each of which serves up to 16 subscribers. Each of the 16 parties on the line uses a terminal, called the Standard Telerate Terminal, which is leased to them by Telerate. Terminals on the STN may both receive and transmit data. The STN is the focus of this lawsuit.
Plaintiff also offers access to its database through the STN "party lines" using a subscriber's own equipment, typically a personal computer ("PC"). See Cowles Reply Affid. ¶¶ 16, 17.3 To use this "hybrid" service, a subscriber must obtain permission from Telerate, which then supplies the subscriber with a floppy disk to program the PC. This service is more expensive than the STN service using the Telerate terminal.
The information in the Telerate database may also be received using Standard Output Protocol ("SOP") service. Under SOP service, a Telerate regional computer is connected directly by a point-to-point communication line to the customer's computer. Telerate does not provide a terminal to SOP customers. SOP subscribers not only can receive data, but also may store the data, process it and display it on multiple screens that are connected to their computer. This service is significantly more expensive than STN and is economical only if a number of terminals are used.
Telerate also offers Telerate Access Service ("TAS"). TAS subscribers use their own terminals and access the database through Tymnet, a private network. As under the "hybrid" STN service, Telerate provides a TAS subscriber with a floppy disk containing a program that allows access to the system.
Telerate also offers two related services: Broadcast Service, whereby subscribers receive information via satellite and Sideband Service by which subscribers receive information through an FM radio link. Under these two access modes, the customer uses his own equipment, usually a PC, and a floppy disk provided by Telerate. These two services do not allow access to the entire database. Telerate also provides access to its database through other financial information networks by means of such other networks' equipment, and has also provided a number of multi-drop "party lines" to a company in Canada that relicenses access to the ultimate consumer.
Plaintiff advised defendants that it considered the use of the Excel-A-Rate to be a violation of the Standard Telerate Agreement, which is the contract between Telerate and STN subscribers. Plaintiff has also advised subscribers that have informed Telerate of plans to install Excel-A-Rate that this would constitute a violation of the standard agreement.
The standard Telerate agreement provides that the subscriber shall not move Telerate equipment and that no foreign equipment shall be interfaced with Telerate equipment. For a fee, Telerate will waive this provision and permit subscribers to attach equipment to the Telerate terminal including a printer or a PC using the Excel-A-Rate program.
The Excel-A-Rate program permits an STN subscriber to receive Telerate data through a PC rather than a Telerate Terminal. Excel-A-Rate enables the PC to emulate the Telerate Terminal because it contains the Standard Telerate Protocol ("STP"). A protocol is a series of procedures and conventions that govern communications between a computer and various terminals linked to that computer. See Affidavit of Anthony Sabatini, Jr. ¶ 2 ("Sabatini Affid.").4 Put another way, the protocol tells the computer "how" as opposed to "what" to communicate. See Sabatini Affid. ¶ 2.
A PC equipped with Excel-A-Rate does more than the basic Telerate terminal. In addition to simply sending, receiving, and displaying data, Excel-A-Rate permits the user continuously to update data requests and also to obtain a hard copy of the data. Excel-A-Rate also allows the subscriber to copy the data onto a disk and analyze the data. Further, Excel-A-Rate enables the user to attach additional terminals to the system.
Defendants have marketed Excel-A-Rate as a "way to get the most from Telerate." See Plaintiff's Ex. 4. A fact sheet distributed by defendants describes the Excel-A-Rate as a software package that replaces the Telerate terminal and enables a subscriber to connect a PC directly to the Telerate data line. Defendants promotional literature has also focused on the updating and copying features of the program.
From late 1980 until early 1983, defendant Caro worked for Telerate as a consultant. Caro's first project was to develop a terminal that would permit a user to obtain multiple page updates of data and to display them on multiple screens. As part of this project, Caro worked on a written description of the Standard Telerate Protocol. In order to create this document, Caro was given access to the STP. In May of 1981, Caro completed the description of the STP. The completed document contained the following legend:
Copyright 1981 by Telerate Systems Incorporated. All rights reserved. The information contained herein is proprietary and may not be reproduced in whole or in part without the explicit written permission of Telerate Systems Incorporated.
Caro was also involved in a number of other projects for Telerate including: writing a description and implementation guide for the SOP; development of a PC terminal that would use the STP; work on a "driver" for a PC that would use a standard industry protocol; and work on documenting a broadcast protocol. Sabatini Reply Affid. ¶ 62. The PC terminal project and the broadcast protocol project both involved access to the STP.
In this circuit, the standard for the issuance of a preliminary injunction is a showing of "(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious question going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary injunctive relief." Kaplan v. Board of Educ., 759 F.2d 256, 259 (2d Cir.1985); accord Patchogue Nursing Center v. Bowen, 797 F.2d 1137, 1141 (2d Cir.1986), cert. denied, ___ U.S. ___, 107 S.Ct. 873, 93 L.Ed.2d 828 (1987).
To establish tortious interference with contract under New York law, plaintiff must prove that:
Forty Exchange Co. v. Cohen, 125 Misc.2d 475, 481-82, 479 N.Y.S.2d 628, 633 (Civ.Ct. 1984); see Universal City Studios, Inc. v. Nintendo Co., 797 F.2d 70, 75 (2d Cir. 1986).
There is no dispute that there is a valid contract between the plaintiff and its subscribers. Further, it is clear that defendants had knowledge of the contract as a result of the work performed for Telerate and based on letters from Telerate advising defendants of the contracts. It is also clear that defendants induced subscribers to use the Excel-A-Rate program instead of the Telerate terminal. The defendants' advertising and "fact sheets" pointedly seek to have subscribers disconnect their Telerate terminals and use a PC to perform functions that the terminal cannot. Finally, the use of Excel-A-Rate will cause delays in response time for requested information. This delay damages the performance of the system and diminishes plaintiff's reputation. If the delays are frequent many subscribers are likely to switch to another information provider. This satisfies the fourth element of the test.
The only dispute regarding this claim centers on the meaning of the Telerate contract. Depending on the interpretation, the use of Excel-A-Rate...
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