Trandes Corp. v. Guy F. Atkinson Co., Civ. No. Y-91-1698.

• Decision Date: 14 August 1992
• Docket Number: Civ. No. Y-91-1698.
• Citation: 798 F. Supp. 284
• Parties: TRANDES CORPORATION v. GUY F. ATKINSON COMPANY et. al.
• Court: U.S. District Court — District of Maryland

798 F. Supp. 284

TRANDES CORPORATION v. GUY F. ATKINSON COMPANY et. al.

Civ. No. Y-91-1698.

United States District Court, D. Maryland.

August 14, 1992.

COPYRIGHT MATERIAL OMITTED

Richard Murray, and Christian D. Abel, Washington, D.C., for plaintiff.

Thomas B. Dorrier, Robert J. Kniaz, Washington, D.C., for defendant Washington Metropolitan Area Transit Authority.

Richard A. Ifft, John G. DeGooyer, Ronald A. Uitz, Washington, D.C., for defendant Guy F. Atkinson Co.

MEMORANDUM

JOSEPH H. YOUNG, Senior District Judge.

A three day jury trial in this case was concluded on March 25, 1992. Defendant Washington Metropolitan Area Transit Authority ("WMATA") was found guilty of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets. Defendant Guy F. Atkinson Company ("Atkinson") was found guilty of misappropriation of trade secrets. The jury awarded damages in the amount of $17,400 compensatory and $750,000 punitive.

Atkinson has filed a motion for judgment as a matter of law claiming that the alleged "misappropriated software", was not a "trade secret," thus plaintiff's claim is insufficient as a matter of law.¹ WMATA has filed a motion for remittitur of the compensatory damage award, and Trandes has filed a motion to amend the complaint to conform to the evidence.

FACTS

Trandes is the owner of a certain set of computer programs aimed at solving commonly encountered problems in the design and construction of rapid transit systems. These programs are arranged in "modules", and the modules are grouped together to form a system, known as the "Tunnel System." The Tunnel System is comprised of six modules, each of which is useful in a different area of tunnel construction. The computer programs comprising each of the modules are written in "object" or "machine" code, and are unintelligible unless used with computers.

The Tunnel System software receives input from data files that are designed specifically for the Tunnel System and are not useful for any purpose other than as a common database for the various modules of the System.

At trial, James Brusse, president of Trandes and creator of the Tunnel System software, testified that Trandes does not ordinarily license the use of its software, but instead will perform Tunnel System services for its clients and provide them with the results. In November of 1987, however, Trandes issued a license to WMATA to use the Tunnel System software. The licensing agreement placed strict requirements on use and dissemination of the software. WMATA was authorized to:

use the System for its own construction or engineering projects.... make archival copies for the sole purpose of backing-up the software and protecting its investment from loss.... allow its contractor to operate any module only if it is used for Trandes' projects and then only with the expressed written approval of Trandes of each contractor. (emphasis supplied).

The licensing agreement further provided that each of WMATA's contractors would be required to sign similar licensing agreements, "prior to operating" the System. The contractor's license would end when the contractor ceased doing business with WMATA.

Between 1988 and 1990, WMATA contracted with Atkinson to construct a section of the Washington Metro Green Line (the "Green Line Project"). An engineer employed by WMATA at the time of the Project, testified that a copy of the Tunnel System was kept in a trailer at the construction site and was available for use by anyone entering WMATA's trailer. Several witnesses testified that WMATA employees provided Atkinson employees with a users' manual, "Input Data Files", the Tunnel System password, and instruction on how to gain access to and use the System.

Anthony Ciaffoni, a field engineer employed by Atkinson testified that he was introduced to the Tunnel System software at the work site by his supervisor Robert Hultsman. Hultsman assured him that there was a licensing agreement between Atkinson and Trandes "somewhere," but alluded to possible impropriety, and cautioned him not to publicize the fact that the software was being used.

Ciaffoni worked for Atkinson on the Green Line Project from June, 1989 to August, 1991. Before leaving, he trained his replacement, Robert White, on software and discussed with White his belief that the software was being used without a license. White testified that Hultsman later offered him a copy of the software saying that "every company needed one." Atkinson employee Mamo Meaza testified that the software was in use when he began work with Atkinson in August, 1989. Finally, there was evidence of a Tunnel System manual and printouts found in Atkinson's possession, on which the name WMATA as authorized user, had been whited out and replaced with the name Atkinson.

The Jury found that WMATA breached the terms of its licensing agreement by permitting the Tunnel System modules to be used by Atkinson employees; that Atkinson misappropriated the trade secrets of Trandes by acquiring the Tunnel System and using it without authorization, and that Atkinson acted willfully, wantonly and maliciously.

TRADE SECRETS

In the current motion, Atkinson does not dispute that its employees used the Tunnel System software and Input Data Files without WMATA's consent. Atkinson contends that as a matter of law, the Tunnel System programs do not contain trade secret information, because (1) the computer programs comprising the modules of the system are written in "object code," and are unintelligible to even the most experienced computer hacker, and (2) Trandes has advertised and marketed the programs world wide.

On a motion for judgment as a matter of law, the movant is entitled to judgment if there can be but one reasonable conclusion as to the verdict. Fed.R.Civ.P. 50. See e.g., Wyatt v. Interstate & Ocean Transport Co., 623 F.2d 888, 891 (4th Cir. 1980). Unlike on a motion for summary judgment, "the mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Gairola v. Virginia Dept. of Gen. Services, 753 F.2d 1281, 1285 (4th Cir.1985). When considering the motion, the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor. Lovelace v. Sherwin-Williams Co., 681 F.2d 230, 243 n. 14 (4th Cir.1982); Tights, Inc. v. Acme-McCrary Corp., 541 F.2d 1047, 1055 (4th Cir.), cert. den. 429 U.S. 980, 97 S.Ct. 493, 50 L.Ed.2d 589 (1976).

A trade secret is defined as:

any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers.

Space Aero Products Co. v. R.E. Darling Co., 238 Md. 93, 208 A.2d 74 (1965).²

Atkinson argues that the "secrets" of the Tunnel System are not readily ascertainable, because the programs comprising each module are written in "object code," a computer language that is unintelligible to human beings. Courts have routinely held that such things as computer programs, and user reference manuals constitute protectable trade secrets. See e.g. ISC-Bunker Ramo Corp. v. Altech, Inc., 765 F.Supp. 1310, 1333 (N.D.Ill.1990) and cases cited therein. The fact that the computer programs comprising the modules of the Tunnel System were written in object code, does not change the character of this software as a trade secret. There was sufficient evidence on which the jury could reasonably find that while the components of the Tunnel System, i.e. the modules and the computer programs comprising each module, were written in object code and unintelligible to the average user, the design, use and interrelationship of these components was original and provided Trandes with a competitive advantage in the rapid transit industry. See e.g., ISC-Bunker Ramo Corp. v. Altech, Inc., 765 F.Supp. 1310, 1333-34 (N.D.Ill.1990); Integrated Cash Management Services, Inc. v. Digital Transactions, Inc., 732 F.Supp. 370, 377 (S.D.N.Y.1989) ("Plaintiffs have met their burden of demonstrating that the combination of the several modules, as well as the specific source code of each individual module, constitutes a trade secret...."); O-Co. Industries, Inc. v. Hoffman, 625 F.Supp. 608 (S.D.N.Y.1985) ("It is a well settled principle `that a trade secret can exist in a combination of characteristics and components, each of which, by itself, is in the public domain, but the unified process and operation of which, in unique combination, affords a competitive advantage and is a protectable secret.'" cite omitted).

The evidence shows that, except through improper means, the Tunnel System trade secrets were not generally known. Brusse testified that in general Trandes performs Tunnel System services for its customers, and provides the "results." Trandes repeatedly rejected WMATA's attempts to purchase the Tunnel System source code, and licensed the System under the strict requirement that WMATA obtain Trandes' written approval before permitting the software to be used by an outside contractor. The language of the Licensing Agreement clearly reflects Trandes' intention to keep the System confidential.

There was evidence that Trandes advertised its Tunnel System program for sale to contractors in an engineering trade journal, offered "demonstration diskettes" to potential buyers, and sold "one Tunnel System module" to a tunnel contractor other than WMATA. Atkinson contends that this evidence destroys any secrecy, and reflects an intent not to keep the software confidential. The trade secret at issue in this case is not destroyed by the offer of certain modules for sale. As noted earlier, the "secret" is the combination and...