LEXSEE 982 F.2D 693
COMPUTER ASSOCIATES INTERNATIONAL, INC.,
Plaintiff-Appellant-Cross-Appellee, v. ALTAI, INC.,
Defendant-Appellee-Cross-Appellant.
Docket Nos. 91-7893, 91-7935
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
982 F.2d 693; 1992 U.S. App. LEXIS 33369; 119 A.L.R. Fed.
741; 92 Cal. Daily Op. Service 10213
January 9, 1992, Argued
December 17, 1992, Filed
AMENDED OPINION
WALKER, Circuit Judge:
In recent years, the growth of computer science has spawned a number of
challenging legal questions, particularly in the field of copyright law. As
scientific knowledge advances, courts endeavor to keep pace, and sometimes--as
in the area of computer technology--they are required to venture into less than
familiar waters. This is not a new development, though. "From its beginning, the
law of copyright has developed in response to significant changes in technology.
" Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 430, 78 L. Ed. 2d
574, 104 S. Ct. 774 (1984). [**3]
Article I, section 8 of the Constitution authorizes Congress "to promote the
Progress of Science and useful Arts, by securing for limited Times to Authors
and Inventors the exclusive Right to their respective Writings and Discoveries."
The Supreme Court has stated that "the economic philosophy behind the clause . .
. is the conviction that encouragement of individual effort by personal gain is
the best way to advance public welfare . . . ." Mazer v. Stein, 347 U.S. 201,
219, 98 L. Ed. 630, 74 S. Ct. 460 (1954). The author's benefit, however, is
clearly a "secondary" consideration. See United States v. Paramount Pictures,
Inc., 334 U.S. 131, 158, 92 L. Ed. 1260, 68 S. Ct. 915 (1948). "The ultimate aim
is, by this incentive, to stimulate artistic creativity for the general public
good." Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 45 L. Ed. 2d
84, 95 S. Ct. 2040 (1975).
Thus, the copyright law seeks to establish a delicate equilibrium. On the one
hand, it affords protection to authors as an incentive to create, and, on the
other, it must appropriately limit the extent of that protection so as to avoid
the effects of monopolistic stagnation. In applying the federal act [**4] to
new types of cases, courts must always keep this symmetry in mind. Id.
Among other things, this case deals with the challenging question of whether
and to what extent the "non-literal" aspects of a computer program, that is,
those aspects that are not reduced to written code, are protected by copyright.
While a few other courts have already grappled with this issue, this case is one
of first impression in this circuit. As we shall discuss, we find the results
reached by other courts to be less than satisfactory. Drawing upon long-standing
doctrines of copyright law, we take an approach that we think better addresses
the practical difficulties embedded in these types of cases. In so doing, we
have kept in mind the necessary balance between creative incentive and
industrial competition.
This appeal comes to us from the United States District Court for the Eastern
District of New York, the Honorable George C. Pratt, Circuit Judge, sitting by
designation. By Memorandum and Order entered August 12, 1991, Judge Pratt found
that defendant Altai, Inc.'s ("Altai"), OSCAR 3.4 computer program had infringed
plaintiff Computer Associates' ("CA"), copyrighted computer program entitled
[**5] CA-SCHEDULER. Accordingly, the district court awarded CA $ 364,444 in
actual damages and apportioned profits. Altai has [*697] abandoned its appeal
from this award. With respect to CA's second claim for copyright infringement,
Judge Pratt found that Altai's OSCAR 3.5 program was not substantially similar
to a portion of CA-SCHEDULER called ADAPTER, and thus denied relief. Finally,
the district court concluded that CA's state law trade secret misappropriation
claim against Altai had been preempted by the federal copyright act. CA appealed
from these findings.
Because we are in full agreement with Judge Pratt's decision and in
substantial agreement with his careful reasoning regarding CA's copyright
infringement claim, we affirm the district court's judgment on that issue.
However, we vacate the district court's preemption ruling with respect to CA's
trade secret claim, and remand the case to the district court for further
proceedings.
BACKGROUND
We assume familiarity with the facts set forth in the district court's
comprehensive and scholarly opinion. See Computer Assocs. Int'l, Inc. v. Altai,
Inc., 775 F. Supp. 544, 549-55 (E.D.N.Y. 1991). Thus, we summarize [**6] only
those facts necessary to resolve this appeal.
I. COMPUTER PROGRAM DESIGN
Certain elementary facts concerning the nature of computer programs are vital
to the following discussion. The Copyright Act defines a computer program as "a
set of statements or instructions to be used directly or indirectly in a
computer in order to bring about a certain result." 17 U.S.C. § 101. In writing
these directions, the programmer works "from the general to the specific."
Whelan Assoc., Inc. v. Jaslow Dental Lab., Inc., 797 F.2d 1222, 1229 (3d Cir.
1986), cert. denied, 479 U.S. 1031, 93 L. Ed. 2d 831, 107 S. Ct. 877 (1987). See
generally Steven R. Englund, Note, Idea, Process, or Protected Expression?:
Determining the Scope of Copyright Protection of the Structure of Computer
Programs, 88 MICH. L. REV. 866, 867-73 (1990) (hereinafter "Englund"); Peter S.
Menell, An Analysis of the Scope of Copyright Protection for Application
Programs, 41 STAN. L. REV. 1045, 1051-57 (1989) (hereinafter "Menell"); Mark T.
Kretschmer, Note, Copyright Protection For Software Architecture: Just [**7]
Say No!, 1988 COLUM. BUS. L. REV. 823, 824-27 (1988) (hereinafter "Kretschmer");
Peter G. Spivack, Comment, Does Form Follow Function? The Idea/Expression
Dichotomy In Copyright Protection of Computer Software, 35 U.C.L.A. L. REV. 723,
729-31 (1988) (hereinafter "Spivack").
The first step in this procedure is to identify a program's ultimate function
or purpose. An example of such an ultimate purpose might be the creation and
maintenance of a business ledger. Once this goal has been achieved, a programmer
breaks down or "decomposes" the program's ultimate function into "simpler
constituent problems or 'subtasks,'" Englund, at 870, which are also known as
subroutines or modules. See Spivack, at 729. In the context of a business ledger
program, a module or subroutine might be responsible for the task of updating a
list of outstanding accounts receivable. Sometimes, depending upon the
complexity of its task, a subroutine may be broken down further into
sub-subroutines.
Having sufficiently decomposed the program's ultimate function into its
component elements, a programmer will then arrange the subroutines or modules
into what are known as organizational [**8] or flow charts. Flow charts map the
interactions between modules that achieve the program's end goal. See
Kretschmer, at 826.
In order to accomplish these intra-program interactions, a programmer must
carefully design each module's parameter list. A parameter list, according to
the expert appointed and fully credited by the district court, Dr. Randall
Davis, is "the information sent to and received from a subroutine." See Report
of Dr. Randall Davis, at 12. The term "parameter list" refers to the form in
which information is passed between modules (e.g. for accounts receivable, the
designated time frame and particular customer identifying number) and the
information's actual content (e.g. [*698] 8/91-7/92; customer No. 3). Id. With
respect to form, interacting modules must share similar parameter lists so that
they are capable of exchanging information.
"The functions of the modules in a program together with each module's
relationships to other modules constitute the 'structure' of the program."
Englund, at 871. Additionally, the term structure may include the category of
modules referred to as "macros." A macro is a single instruction that initiates
a sequence of operations [**9] or module interactions within the program. Very
often the user will accompany a macro with an instruction from the parameter
list to refine the instruction (e.g. current total of accounts receivable
(macro), but limited to those for 8/91 to 7/92 from customer No. 3
(parameters)).
In fashioning the structure, a programmer will normally attempt to maximize
the program's speed, efficiency, as well as simplicity for user operation, while
taking into consideration certain externalities such as the memory constraints
of the computer upon which the program will be run. See id.; Kretschmer, at 826;
Menell, at 1052. "This stage of program design often requires the most time and
investment." Kretschmer, at 826.
Once each necessary module has been identified, designed, and its
relationship to the other modules has been laid out conceptually, the resulting
program structure must be embodied in a written language that the computer can
read. This process is called "coding," and requires two steps. Whelan, 797 F.2d
at 1230. First, the programmer must transpose the program's structural
blue-print into a source code. This step has been described as "comparable to
[**10] the novelist fleshing out the broad outline of his plot by crafting from
words and sentences the paragraphs that convey the ideas." Kretschmer, at 826.
The source code may be written in any one of several computer languages, such as
COBAL, FORTRAN, BASIC, EDL, etc., depending upon the type of computer for which
the program is intended. Whelan, 797 F.2d at 1230. Once the source code has
been completed, the second step is to translate or "compile" it into object
code. Object code is the binary language comprised of zeros and ones through
which the computer directly receives its instructions. Id., at 1230-31;
Englund, at 868 & n.13.
After the coding is finished, the programmer will run the program on the
computer in order to find and correct any logical and syntactical errors. This
is known as "debugging" and, once done, the program is complete. See Kretschmer,
at 826-27.
II. FACTS
CA is a Delaware corporation, with its principal place of business in Garden
City, New York. Altai is a Texas corporation, doing business primarily in
Arlington, Texas. Both companies are in the computer software
industry--designing, developing [**11] and marketing various types of computer
programs.
The subject of this litigation originates with one of CA's marketed programs
entitled CA-SCHEDULER. CA-SCHEDULER is a job scheduling program designed for IBM
mainframe computers. Its primary functions are straightforward: to create a
schedule specifying when the computer should run various tasks, and then to
control the computer as it executes the schedule. CA-SCHEDULER contains a
sub-program entitled ADAPTER, also developed by CA. ADAPTER is not an
independently marketed product of CA; it is a wholly integrated component of
CA-SCHEDULER and has no capacity for independent use.
Nevertheless, ADAPTER plays an extremely important role. It is an "operating
system compatibility component," which means, roughly speaking, it serves as a
translator. An "operating system" is itself a program that manages the resources
of the computer, allocating those resources to other programs as needed. The IBM
System 370 family of computers, for which CA-SCHEDULER was created, is,
depending upon the computer's size, designed to contain one of three operating
systems: DOS/VSE, MVS, or CMS. As the district court noted, the general rule is
that "a [*699] program [**12] written for one operating system, e.g.,
DOS/VSE, will not, without modification, run under another operating system such
as MVS." Computer Assocs., 775 F. Supp. at 550. ADAPTER's function is to
translate the language of a given program into the particular language that the
computer's own operating system can understand.
The district court succinctly outlined the manner in which ADAPTER works
within the context of the larger program. In order to enable CA-SCHEDULER to
function on different operating systems, CA divided the CA-SCHEDULER into two
components:
--a first component that contains only the task-specific portions of the
program, independent of all operating system issues, and
--a second component that contains all the interconnections between the first
component and the operating system.
In a program constructed in this way, whenever the first, task-specific,
component needs to ask the operating system for some resource through a "system
call", it calls the second component instead of calling the operating system
directly.
The second component serves as an "interface" or "compatibility component"
between the task-specific portion of [**13] the program and the operating
system. It receives the request from the first component and translates it into
the appropriate system call that will be recognized by whatever operating system
is installed on the computer, e.g., DOS/VSE, MVS, or CMS. Since the first,
task-specific component calls the adapter component rather than the operating
system, the first component need not be customized to use any specific operating
system. The second, interface, component insures that all the system calls are
performed properly for the particular operating system in use.
Id. at 551. ADAPTER serves as the second, "common system interface" component
referred to above.
A program like ADAPTER, which allows a computer user to change or use
multiple operating systems while maintaining the same software, is highly
desirable. It saves the user the costs, both in time and money, that otherwise
would be expended in purchasing new programs, modifying existing systems to run
them, and gaining familiarity with their operation. The benefits run both ways.
The increased compatibility afforded by an ADAPTER-like component, and its
resulting popularity among consumers, [**14] makes whatever software in which
it is incorporated significantly more marketable.
Starting in 1982, Altai began marketing its own job scheduling program
entitled ZEKE. The original version of ZEKE was designed for use in conjunction
with a VSE operating system. By late 1983, in response to customer demand, Altai
decided to rewrite ZEKE so that it could be run in conjunction with an MVS
operating system.
At that time, James P. Williams ("Williams"), then an employee of Altai and
now its President, approached Claude F. Arney, III ("Arney"), a computer
programmer who worked for CA. Williams and Arney were longstanding friends, and
had in fact been co-workers at CA for some time before Williams left CA to work
for Altai's predecessor. Williams wanted to recruit Arney to assist Altai in
designing an MVS version of ZEKE.
At the time he first spoke with Arney, Williams was aware of both the
CA-SCHEDULER and ADAPTER programs. However, Williams was not involved in their
development and had never seen the codes of either program. When he asked Arney
to come work for Altai, Williams did not know that ADAPTER was a component of
CA-SCHEDULER.
Arney, on the other hand, was intimately familiar [**15] with various
aspects of ADAPTER. While working for CA, he helped improve the VSE version of
ADAPTER, and was permitted to take home a copy of ADAPTER'S source code. This
apparently developed into an irresistible habit, for when Arney left CA to work
for Altai in January, 1984, he took with him copies of [*700] the source code
for both the VSE and MVS versions of ADAPTER. He did this in knowing violation
of the CA employee agreements that he had signed.
Once at Altai, Arney and Williams discussed design possibilities for adapting
ZEKE to run on MVS operating systems. Williams, who had created the VSE version
of ZEKE, thought that approximately 30% of his original program would have to be
modified in order to accommodate MVS. Arney persuaded Williams that the best way
to make the needed modifications was to introduce a "common system interface"
component into ZEKE. He did not tell Williams that his idea stemmed from his
familiarity with ADAPTER. They decided to name this new component-program OSCAR.
Arney went to work creating OSCAR at Altai's offices using the ADAPTER source
code. The district court accepted Williams' testimony that no one at Altai, with
the exception of Arney, affirmatively [**16] knew that Arney had the ADAPTER
code, or that he was using it to create OSCAR/VSE. However, during this time
period, Williams' office was adjacent to Arney's. Williams testified that he and
Arney "conversed quite frequently" while Arney was "investigating the source
code of ZEKE" and that Arney was in his office "a number of times daily, asking
questions." In three months, Arney successfully completed the OSCAR/VSE project.
In an additional month he developed an OSCAR/MVS version. When the dust finally
settled, Arney had copied approximately 30% of OSCAR's code from CA's ADAPTER
program.
The first generation of OSCAR programs was known as OSCAR 3.4. From 1985 to
August 1988, Altai used OSCAR 3.4 in its ZEKE product, as well as in programs
entitled ZACK and ZEBB. In late July 1988, CA first learned that Altai may have
appropriated parts of ADAPTER. After confirming its suspicions, CA secured
copyrights on its 2.1 and 7.0 versions of CA-SCHEDULER. CA then brought this
copyright and trade secret misappropriation action against Altai.
Apparently, it was upon receipt of the summons and complaint that Altai first
learned that Arney had copied much of the OSCAR code from ADAPTER. After [**17]
Arney confirmed to Williams that CA's accusations of copying were true, Williams
immediately set out to survey the damage. Without ever looking at the ADAPTER
code himself, Williams learned from Arney exactly which sections of code Arney
had taken from ADAPTER.
Upon advice of counsel, Williams initiated OSCAR's rewrite. The project's
goal was to save as much of OSCAR 3.4 as legitimately could be used, and to
excise those portions which had been copied from ADAPTER. Arney was entirely
excluded from the process, and his copy of the ADAPTER code was locked away.
Williams put eight other programmers on the project, none of whom had been
involved in any way in the development of OSCAR 3.4. Williams provided the
programmers with a description of the ZEKE operating system services so that
they could rewrite the appropriate code. The rewrite project took about six
months to complete and was finished in mid-November 1989. The resulting program
was entitled OSCAR 3.5.
From that point on, Altai shipped only OSCAR 3.5 to its new customers. Altai
also shipped OSCAR 3.5 as a "free upgrade" to all customers that had previously
purchased OSCAR 3.4. While Altai and Williams acted responsibly to [**18]
correct Arney's literal copying of the ADAPTER program, copyright infringement
had occurred.
After CA originally instituted this action in the United States District
Court for the District of New Jersey, the parties stipulated its transfer in
March, 1989, to the Eastern District of New York where it was assigned to Judge
Jacob Mishler. On October 26, 1989, Judge Mishler transferred the case to Judge
Pratt who was sitting in the district court by designation. Judge Pratt
conducted a six day trial from March 28 through April 6, 1990. He entered
judgment on August 12, 1991, and this appeal followed.
[*701] DISCUSSION
While both parties originally appealed from different aspects of the district
court's judgment, Altai has now abandoned its appellate claims. In particular,
Altai has conceded liability for the copying of ADAPTER into OSCAR 3.4 and
raises no challenge to the award of $ 364,444 in damages on that score. Thus, we
address only CA's appeal from the district court's rulings that: (1) Altai was
not liable for copyright infringement in developing OSCAR 3.5; and (2) in
developing both OSCAR 3.4 and 3.5, Altai was not liable for misappropriating CA
's trade secrets.
CA makes two arguments. [**19] First, CA contends that the district court
applied an erroneous method for determining whether there exists substantial
similarity between computer programs, and thus, erred in determining that OSCAR
3.5 did not infringe the copyrights held on the different versions of its
CA-SCHEDULER program. CA asserts that the test applied by the district court
failed to account sufficiently for a computer program's non-literal elements.
Second, CA maintains that the district court erroneously concluded that its
state law trade secret claims had been preempted by the federal copyright act,
see 17 U.S.C. § 301(a). We shall address each argument in turn.
I. COPYRIGHT INFRINGEMENT
In any suit for copyright infringement, the plaintiff must establish its
ownership of a valid copyright, and that the defendant copied the copyrighted
work. See Novelty Textile Mills, Inc. v. Joan Fabrics Corp., 558 F.2d 1090, 1092
(2d Cir. 1977); see also 3 Melville B. Nimmer & David Nimmer, Nimmer on
Copyright § 13.01, at 13-4 (1991) (hereinafter "Nimmer"). The plaintiff may
prove defendant's copying either by direct evidence or, as is most often the
[**20] case, by showing that (1) the defendant had access to the plaintiff's
copyrighted work and (2) that defendant's work is substantially similar to the
plaintiff's copyrightable material. See Walker v. Time Life Films, Inc., 784
F.2d 44, 48 (2d Cir.), cert. denied, 476 U.S. 1159, 90 L. Ed. 2d 721, 106 S. Ct.
2278 (1986).
For the purpose of analysis, the district court assumed that Altai had access
to the ADAPTER code when creating OSCAR 3.5. See Computer Assocs., 775 F. Supp.
at 558. Thus, in determining whether Altai had unlawfully copied protected
aspects of CA's ADAPTER, the district court narrowed its focus of inquiry to
ascertaining whether Altai's OSCAR 3.5 was substantially similar to ADAPTER.
Because we approve Judge Pratt's conclusions regarding substantial similarity,
our analysis will proceed along the same assumption.
As a general matter, and to varying degrees, copyright protection extends
beyond a literary work's strictly textual form to its non-literal components. As
we have said, "it is of course essential to any protection of literary property
. . . that the right cannot be limited literally to the text, else [**21] a
plagiarist would escape by immaterial variations." Nichols v. Universal Pictures
Co., 45 F.2d 119, 121 (2d Cir. 1930) (L. Hand, J.), cert. denied, 282 U.S. 902,
75 L. Ed. 795, 51 S. Ct. 216 (1931). Thus, where "the fundamental essence or
structure of one work is duplicated in another," 3 Nimmer, § 13.03[A][1], at
13-24, courts have found copyright infringement. See, e.g., Horgan v. Macmillan,
789 F.2d 157, 162 (2d Cir. 1986) (recognizing that a book of photographs might
infringe ballet choreography); Twentieth Century-Fox Film Corp. v. MCA, Inc.,
715 F.2d 1327, 1329 (9th Cir. 1983) (motion picture and television series); Sid
& Marty Krofft Television Prods., Inc. v. McDonald's Corp., 562 F.2d 1157, 1167
(9th Cir. 1977) (television commercial and television series); Sheldon v.
Metro-Goldwyn Pictures Corp., 81 F.2d 49, 55 (2d Cir.), cert. denied, 298 U.S.
669, 80 L. Ed. 1392, 56 S. Ct. 835 (1936) (play and motion picture); accord
Stewart v. Abend, 495 U.S. 207, 238, 109 L. Ed. 2d 184, 110 S. Ct. 1750 (1990)
(recognizing that motion [**22] picture may infringe copyright in book by
using its "unique setting, characters, plot, and sequence of events"). This
black letter proposition is the springboard for our discussion.
[*702] A. Copyright Protection for the Non-literal Elements of Computer
Programs
It is now well settled that the literal elements of computer programs, i.e.,
their source and object codes, are the subject of copyright protection. See
Whelan, 797 F.2d at 1233 (source and object code); CMS Software Design Sys.,
Inc. v. Info Designs, Inc., 785 F.2d 1246, 1247 (5th Cir. 1986) (source code);
Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1249 (3d Cir.
1983), cert. dismissed, 464 U.S. 1033, 104 S. Ct. 690, 79 L. Ed. 2d 158 (1984)
(source and object code); Williams Electronics, Inc. v. Artic Int'l, Inc., 685
F.2d 870, 876-77 (3d Cir. 1982) (object code). Here, as noted earlier, Altai
admits having copied approximately 30% of the OSCAR 3.4 program from CA's
ADAPTER source code, and does not challenge the district court's related finding
of infringement.
In this case, the hotly [**23] contested issues surround OSCAR 3.5. As
recounted above, OSCAR 3.5 is the product of Altai's carefully orchestrated
rewrite of OSCAR 3.4. After the purge, none of the ADAPTER source code remained
in the 3.5 version; thus, Altai made sure that the literal elements of its
revamped OSCAR program were no longer substantially similar to the literal
elements of CA's ADAPTER.
According to CA, the district court erroneously concluded that Altai's OSCAR
3.5 was not substantially similar to its own ADAPTER program. CA argues that
this occurred because the district court "committed legal error in analyzing
[its] claims of copyright infringement by failing to find that copyright
protects expression contained in the non-literal elements of computer software."
We disagree.
CA argues that, despite Altai's rewrite of the OSCAR code, the resulting
program remained substantially similar to the structure of its ADAPTER program.
As discussed above, a program's structure includes its nonliteral components
such as general flow charts as well as the more specific organization of
inter-modular relationships, parameter lists, and macros. In addition to these
aspects, CA contends that OSCAR 3.5 is also [**24] substantially similar to
ADAPTER with respect to the list of services that both ADAPTER and OSCAR obtain
from their respective operating systems. We must decide whether and to what
extent these elements of computer programs are protected by copyright law.
The statutory terrain in this area has been well explored. See Lotus Dev.
Corp. v. Paperback Software Int'l, 740 F. Supp. 37, 47-51 (D. Mass. 1990); see
also Whelan, 797 F.2d at 1240-42; Englund, at 885-90; Spivack, at 731-37. The
Copyright Act affords protection to "original works of authorship fixed in any
tangible medium of expression . . . ." 17 U.S.C. § 102(a). This broad category
of protected "works" includes "literary works," id. at § 102(a)(1), which are
defined by the Act as
works, other than audiovisual works, expressed in words, numbers, or other
verbal or numerical symbols or indicia, regardless of the nature of the material
objects, such as books, periodicals, manuscripts, phonorecords, film tapes,
disks, or cards, in which they are embodied.
17 U.S.C. § 101. While [**25] computer programs are not specifically listed
as part of the above statutory definition, the legislative history leaves no
doubt that Congress intended them to be considered literary works. See H.R.Rep.
No. 1476, 94th Cong., 2d Sess. 54, reprinted in 1976 U.S.C.C.A.N. 5659, 5667
(hereinafter "House Report"); Whelan, 797 F.2d at 1234; Apple Computer, 714 F.2d
at 1247.
The syllogism that follows from the foregoing premises is a powerful one: if
the non-literal structures of literary works are protected by copyright; and if
computer programs are literary works, as we are told by the legislature; then
the non-literal structures of computer programs are protected by copyright. See
Whelan, 797 F.2d at 1234 ("By analogy to other literary works, it would thus
appear that the copyrights of computer programs can be infringed even absent
copying of the literal elements of the program."). We have no reservation in
joining the company of those courts that have already ascribed to this logic.
See, e.g., Johnson Controls, Inc. v. [*703] Phoenix Control Sys., Inc., 886
F.2d 1173, 1175 (9th Cir. 1989); [**26] Lotus Dev. Corp., 740 F. Supp. at 54;
Digital Communications Assocs., Inc. v. Softklone Distrib. Corp., 659 F. Supp.
449, 455-56 (N.D.Ga. 1987); Q-Co Indus., Inc. v. Hoffman, 625 F. Supp. 608, 615
(S.D.N.Y. 1985); SAS Inst., Inc. v. S & H Computer Sys., Inc., 605 F. Supp. 816,
829-30 (M.D.Tenn. 1985). However, that conclusion does not end our analysis. We
must determine the scope of copyright protection that extends to a computer
program's non-literal structure.
As a caveat, we note that our decision here does not control infringement
actions regarding categorically distinct works, such as certain types of screen
displays. These items represent products of computer programs, rather than the
programs themselves, and fall under the copyright rubric of audiovisual works.
If a computer audiovisual display is copyrighted separately as an audiovisual
work, apart from the literary work that generates it (i.e., the program), the
display may be protectable regardless of the underlying program's copyright
status. See Stern Elecs., Inc. v. Kaufman, 669 F.2d 852, 855 (2d Cir. 1982)
[**27] (explaining that an audiovisual works copyright, rather than a copyright
on the underlying program, extended greater protection to the sights and sounds
generated by a computer video game because the same audiovisual display could be
generated by different programs). Of course, the copyright protection that these
displays enjoy extends only so far as their expression is protectable. See Data
East USA, Inc. v. Epyx, Inc., 862 F.2d 204, 209 (9th Cir. 1988). In this case,
however, we are concerned not with a program's display, but the program itself,
and then with only its non-literal components. In considering the
copyrightability of these components, we must refer to venerable doctrines of
copyright law.
1) Idea vs. Expression Dichotomy
It is a fundamental principle of copyright law that a copyright does not
protect an idea, but only the expression of the idea. See Baker v. Selden, 101
U.S. 99, 25 L. Ed. 841 (1879); Mazer v. Stein, 347 U.S. 201, 217, 98 L. Ed. 630,
74 S. Ct. 460 (1954). This axiom of common law has been incorporated into the
governing statute. Section 102(b) of the Act provides:
In [**28] no case does copyright protection for an original work of authorship
extend to any idea, procedure, process, system, method of operation, concept,
principle, or discovery, regardless of the form in which it is described,
explained, illustrated, or embodied in such work.
17 U.S.C. § 102(b). See also House Report, at 5670 ("Copyright does not
preclude others from using ideas or information revealed by the author's work.
").
Congress made no special exception for computer programs. To the contrary,
the legislative history explicitly states that copyright protects computer
programs only "to the extent that they incorporate authorship in programmer's
expression of original ideas, as distinguished from the ideas themselves." Id.
at 5667; see also id. at 5670 ("Section 102(b) is intended . . . to make clear
that the expression adopted by the programmer is the copyrightable element in a
computer program, and that the actual processes or methods embodied in the
program are not within the scope of copyright law.").
Similarly, the National Commission on New Technological Uses of Copyrighted
Works ("CONTU") established by Congress [**29] to survey the issues generated
by the interrelationship of advancing technology and copyright law, see Pub.L.
No. 93-573, § 201, 88 Stat. 1873 (1974), recommended, inter alia, that the 1976
Copyright Act "be amended . . . to make it explicit that computer programs, to
the extent that they embody the author's original creation, are proper subject
matter for copyright." See National Commission on New Technological Uses of
Copyrighted Works, Final Report 1 (1979) (hereinafter "CONTU Report"). To that
end, Congress adopted CONTU's suggestions and amended the Copyright Act by
adding, among other things, a provision to 17 U.S.C. § 101 which defined the
term "computer program." See Pub.L. No. 96-517, § 10(a), 94 Stat. [*704] 3028
(1980). CONTU also "concluded that the idea-expression distinction should be
used to determine which aspects of computer programs are copyrightable." Lotus
Dev. Corp., 740 F. Supp. at 54 (citing CONTU Report, at 44).
Drawing the line between idea and expression is a tricky business. Judge
Learned Hand noted that "nobody has ever been able to fix that boundary, [**30]
and nobody ever can." Nichols, 45 F.2d at 121. Thirty years later his
convictions remained firm. "Obviously, no principle can be stated as to when an
imitator has gone beyond copying the 'idea,' and has borrowed its 'expression,'"
Judge Hand concluded. "Decisions must therefore inevitably be ad hoc." Peter Pan
Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir. 1960).
The essentially utilitarian nature of a computer program further complicates
the task of distilling its idea from its expression. See SAS Inst., 605 F. Supp.
at 829; cf. Englund, at 893. In order to describe both computational processes
and abstract ideas, its content "combines creative and technical expression."
See Spivack, at 755. The variations of expression found in purely creative
compositions, as opposed to those contained in utilitarian works, are not
directed towards practical application. For example, a narration of Humpty
Dumpty's demise, which would clearly be a creative composition, does not serve
the same ends as, say, a recipe for scrambled eggs--which is a more process
oriented text. Thus, [**31] compared to aesthetic works, computer programs
hover even more closely to the elusive boundary line described in § 102(b).
The doctrinal starting point in analyses of utilitarian works, is the seminal
case of Baker v. Selden, 101 U.S. 99, 25 L. Ed. 841 (1879). In Baker, the
Supreme Court faced the question of "whether the exclusive property in a system
of bookkeeping can be claimed, under the law of copyright, by means of a book in
which that system is explained?" Id. at 101. Selden had copyrighted a book that
expounded a particular method of bookkeeping. The book contained lined pages
with headings intended to illustrate the manner in which the system operated.
Baker's accounting publication included ledger sheets that employed
"substantially the same ruled lines and headings. . . ." Id. Selden's testator
sued Baker for copyright infringement on the theory that the ledger sheets were
protected by Selden's copyright.
The Supreme Court found nothing copyrightable in Selden's bookkeeping system,
and rejected his infringement claim regarding the ledger sheets. The Court held
that:
The fact that the [**32] art described in the book by illustrations of lines
and figures which are reproduced in practice in the application of the art,
makes no difference. Those illustrations are the mere language employed by the
author to convey his ideas more clearly. Had he used words of description
instead of diagrams (which merely stand in the place of words), there could not
be the slightest doubt that others, applying the art to practical use, might
lawfully draw the lines and diagrams which were in the author's mind, and which
he thus described by words in his book.
The copyright of a work on mathematical science cannot give to the author an
exclusive right to the methods of operation which he propounds, or to the
diagrams which he employs to explain them, so as to prevent an engineer from
using them whenever occasion requires.
Id. at 103.
To the extent that an accounting text and a computer program are both "a set
of statements or instructions . . . to bring about a certain result," 17 U.S.C.
§ 101, they are roughly analogous. In the former case, the processes are
ultimately conducted by human agency; in the latter, by electronic means.
[**33] In either case, as already stated, the processes themselves are not
protectable. But the holding in Baker goes farther. The Court concluded that
those aspects of a work, which "must necessarily be used as incident to" the
idea, system or process that the work describes, are also not copyrightable.
101 U.S. at 104. Selden's ledger sheets, therefore, enjoyed [*705] no
copyright protection because they were "necessary incidents to" the system of
accounting that he described. Id. at 103. From this reasoning, we conclude that
those elements of a computer program that are necessarily incidental to its
function are similarly unprotectable.
While Baker v. Selden provides a sound analytical foundation, it offers scant
guidance on how to separate idea or process from expression, and moreover, on
how to further distinguish protectable expression from that expression which
"must necessarily be used as incident to" the work's underlying concept. In the
context of computer programs, the Third Circuit's noted decision in Whelan has,
thus far, been the most thoughtful attempt to accomplish these ends.
The court in Whelan faced substantially [**34] the same problem as is
presented by this case. There, the defendant was accused of making off with the
non-literal structure of the plaintiff's copyrighted dental lab management
program, and employing it to create its own competitive version. In assessing
whether there had been an infringement, the court had to determine which aspects
of the programs involved were ideas, and which were expression. In separating
the two, the court settled upon the following conceptual approach:
The line between idea and expression may be drawn with reference to the end
sought to be achieved by the work in question. In other words, the purpose or
function of a utilitarian work would be the work's idea, and everything that is
not necessary to that purpose or function would be part of the expression of the
idea. . . . Where there are various means of achieving the desired purpose, then
the particular means chosen is not necessary to the purpose; hence, there is
expression, not idea.
797 F.2d at 1236 (citations omitted). The "idea" of the program at issue in
Whelan was identified by the court as simply "the efficient management of a
dental laboratory." Id. at [**35] n.28.
So far, in the courts, the Whelan rule has received a mixed reception. While
some decisions have adopted its reasoning, see, e.g., Bull HN Info. Sys., Inc.
v. American Express Bank, Ltd., 1990 Copyright Law Dec. (CCH) P 26,555 at 23,278
(S.D.N.Y. 1990); Dynamic Solutions, Inc. v. Planning & Control, Inc., 1987
Copyright Law Dec. (CCH) P 26,062 at 20,912 (S.D.N.Y. 1987); Broderbund Software
Inc. v. Unison World, Inc., 648 F. Supp. 1127, 1133 (N.D.Cal. 1986), others have
rejected it. See Plains Cotton Co-op v. Goodpasture Computer Serv, Inc., 807
F.2d 1256, 1262 (5th Cir.), cert. denied, 484 U.S. 821, 108 S. Ct. 80, 98 L. Ed.
2d 42 (1987); cf. Synercom Technology, Inc. v. University Computing Co., 462 F.
Supp. 1003, 1014 (N.D.Tex. 1978) (concluding that order and sequence of data on
computer input formats was idea not expression).
Whelan has fared even more poorly in the academic community, where its
standard for distinguishing idea from expression has been widely criticized for
being conceptually overbroad. See, e.g., Englund, at 881; Menell, at 1074, 1082;
Kretschmer, [**36] at 837-39; Spivack, at 747-55; Thomas M. Gage, Note, Whelan
Associates v. Jaslow Dental Laboratories: Copyright Protection for Computer
Software Structure--What's the Purpose?, 1987 WIS. L. REV. 859, 860-61 (1987).
The leading commentator in the field has stated that, "the crucial flaw in
[Whelan's] reasoning is that it assumes that only one 'idea,' in copyright law
terms, underlies any computer program, and that once a separable idea can be
identified, everything else must be expression." 3 Nimmer § 13.03[F], at
13-62.34. This criticism focuses not upon the program's ultimate purpose but
upon the reality of its structural design. As we have already noted, a computer
program's ultimate function or purpose is the composite result of interacting
subroutines. Since each subroutine is itself a program, and thus, may be said to
have its own "idea," Whelan's general formulation that a program's overall
purpose equates with the program's idea is descriptively inadequate.
Accordingly, we think that Judge Pratt wisely declined to follow Whelan. See
[*706] Computer Assocs., 775 F. Supp. at 558-60. In addition to noting the
weakness [**37] in the Whelan definition of "program-idea," mentioned above,
Judge Pratt found that Whelan's synonymous use of the terms "structure,
sequence, and organization," see Whelan, 797 F.2d at 1224 n.1, demonstrated a
flawed understanding of a computer program's method of operation. See Computer
Assocs., 775 F. Supp. at 559-60 (discussing the distinction between a program's
"static structure" and "dynamic structure"). Rightly, the district court found
Whelan's rationale suspect because it is so closely tied to what can now be
seen--with the passage of time--as the opinion's somewhat outdated appreciation
of computer science.
2) Substantial Similarity Test for Computer Program Structure:
Abstraction-Filtration-Comparison
We think that Whelan's approach to separating idea from expression in
computer programs relies too heavily on metaphysical distinctions and does not
place enough emphasis on practical considerations. Cf. Apple Computer, 714 F.2d
at 1253 (rejecting certain commercial constraints on programming as a helpful
means of distinguishing idea from expression because [**38] they did "not
enter into the somewhat metaphysical issue of whether particular ideas and
expressions have merged"). As the cases that we shall discuss demonstrate, a
satisfactory answer to this problem cannot be reached by resorting, a priori, to
philosophical first principals.
As discussed herein, we think that district courts would be well-advised to
undertake a three-step procedure, based on the abstractions test utilized by the
district court, in order to determine whether the non-literal elements of two or
more computer programs are substantially similar. This approach breaks no new
ground; rather, it draws on such familiar copyright doctrines as merger, scenes
a faire, and public domain. In taking this approach, however, we are cognizant
that computer technology is a dynamic field which can quickly outpace judicial
decisionmaking. Thus, in cases where the technology in question does not allow
for a literal application of the procedure we outline below, our opinion should
not be read to foreclose the district courts of our circuit from utilizing a
modified version.
In ascertaining substantial similarity under this approach, a court would
first break down the allegedly [**39] infringed program into its constituent
structural parts. Then, by examining each of these parts for such things as
incorporated ideas, expression that is necessarily incidental to those ideas,
and elements that are taken from the public domain, a court would then be able
to sift out all non-protectable material. Left with a kernel, or possibly
kernels, of creative expression after following this process of elimination, the
court's last step would be to compare this material with the structure of an
allegedly infringing program. The result of this comparison will determine
whether the protectable elements of the programs at issue are substantially
similar so as to warrant a finding of infringement. It will be helpful to
elaborate a bit further.
Step One: Abstraction
As the district court appreciated, see Computer Assocs., 775 F. Supp. at 560,
the theoretic framework for analyzing substantial similarity expounded by
Learned Hand in the Nichols case is helpful in the present context. In Nichols,
we enunciated what has now become known as the "abstractions" test for
separating idea from expression:
Upon any work . . . a great number of patterns [**40] of increasing generality
will fit equally well, as more and more of the incident is left out. The last
may perhaps be no more than the most general statement of what the [work] is
about, and at times might consist only of its title; but there is a point in
this series of abstractions where they are no longer protected, since otherwise
the [author] could prevent the use of his "ideas," to which, apart from their
expression, his property is never extended.
Nichols, 45 F.2d at 121.
While the abstractions test was originally applied in relation to literary
works such [*707] as novels and plays, it is adaptable to computer programs.
In contrast to the Whelan approach, the abstractions test "implicitly recognizes
that any given work may consist of a mixture of numerous ideas and expressions."
3 Nimmer § 13.03[F] at 13-62.34-63.
As applied to computer programs, the abstractions test will comprise the
first step in the examination for substantial similarity. Initially, in a manner
that resembles reverse engineering on a theoretical plane, a court should
dissect the allegedly copied program's structure and isolate each level of
abstraction contained within [**41] it. This process begins with the code and
ends with an articulation of the program's ultimate function. Along the way, it
is necessary essentially to retrace and map each of the designer's steps--in the
opposite order in which they were taken during the program's creation. See
Background: Computer Program Design, supra.
As an anatomical guide to this procedure, the following description is
helpful:
At the lowest level of abstraction, a computer program may be thought of in its
entirety as a set of individual instructions organized into a hierarchy of
modules. At a higher level of abstraction, the instructions in the lowest-level
modules may be replaced conceptually by the functions of those modules. At
progressively higher levels of abstraction, the functions of higher-level
modules conceptually replace the implementations of those modules in terms of
lower-level modules and instructions, until finally, one is left with nothing
but the ultimate function of the program. . . . A program has structure at every
level of abstraction at which it is viewed. At low levels of abstraction, a
program's structure may be quite complex; at the highest level it is trivial.
Englund, [**42] at 897-98. Cf. Spivack, at 774.
Step Two: Filtration
Once the program's abstraction levels have been discovered, the substantial
similarity inquiry moves from the conceptual to the concrete. Professor Nimmer
suggests, and we endorse, a "successive filtering method" for separating
protectable expression from non-protectable material. See generally 3 Nimmer §
13.03[F]. This process entails examining the structural components at each level
of abstraction to determine whether their particular inclusion at that level was
"idea" or was dictated by considerations of efficiency, so as to be necessarily
incidental to that idea; required by factors external to the program itself; or
taken from the public domain and hence is nonprotectable expression. See also
Kretschmer, at 844-45 (arguing that program features dictated by market
externalities or efficiency concerns are unprotectable). The structure of any
given program may reflect some, all, or none of these considerations. Each case
requires its own fact specific investigation.
Strictly speaking, this filtration serves "the purpose of defining the scope
of plaintiff's copyright." Brown Bag Software v. Symantec Corp., 960 F.2d 1465,
1475 [**43] (9th Cir.) (endorsing "analytic dissection" of computer programs in
order to isolate protectable expression), cert. denied, 113 S. Ct. 198, 121 L.
Ed. 2d 141 (1992). By applying well developed doctrines of copyright law, it may
ultimately leave behind a "core of protectable material." 3 Nimmer § 13.03
[F][5], at 13-72. Further explication of this second step may be helpful.
(a) Elements Dictated by Efficiency
The portion of Baker v. Selden, discussed earlier, which denies copyright
protection to expression necessarily incidental to the idea being expressed,
appears to be the cornerstone for what has developed into the doctrine of
merger. See Morrissey v. Procter & Gamble Co., 379 F.2d 675, 678-79 (1st Cir.
1967) (relying on Baker for the proposition that expression embodying the rules
of a sweepstakes contest was inseparable from the idea of the contest itself,
and therefore were not protectable by copyright); see also Digital
Communications, 659 F. Supp. at 457. The doctrine's underlying principle is that
"when there is essentially only one way to express an idea, the idea and its
expression are [**44] inseparable [*708] and copyright is no bar to copying
that expression." Concrete Machinery Co. v. Classic Lawn Ornaments, Inc., 843
F.2d 600, 606 (1st Cir. 1988). Under these circumstances, the expression is said
to have "merged" with the idea itself. In order not to confer a monopoly of the
idea upon the copyright owner, such expression should not be protected. See
Herbert Rosenthal Jewelry Corp. v. Kalpakian, 446 F.2d 738, 742 (9th Cir. 1971).
CONTU recognized the applicability of the merger doctrine to computer
programs. In its report to Congress it stated that:
Copyrighted language may be copied without infringing when there is but a
limited number of ways to express a given idea. . . . In the computer context,
this means that when specific instructions, even though previously copyrighted,
are the only and essential means of accomplishing a given task, their later use
by another will not amount to infringement.
CONTU Report at 20. While this statement directly concerns only the application
of merger to program code, that is, the textual aspect of the program, it
reasonably suggests that the doctrine fits comfortably [**45] within the
general context of computer programs.
Furthermore, when one considers the fact that programmers generally strive to
create programs "that meet the user's needs in the most efficient manner,"
Menell, at 1052, the applicability of the merger doctrine to computer programs
becomes compelling. In the context of computer program design, the concept of
efficiency is akin to deriving the most concise logical proof or formulating the
most succinct mathematical computation. Thus, the more efficient a set of
modules are, the more closely they approximate the idea or process embodied in
that particular aspect of the program's structure.
While, hypothetically, there might be a myriad of ways in which a programmer
may effectuate certain functions within a program,--i.e., express the idea
embodied in a given subroutine--efficiency concerns may so narrow the practical
range of choice as to make only one or two forms of expression workable options.
See 3 Nimmer § 13.03[F][2], at 13-63; see also Whelan, 797 F.2d at 1243 n.43 (
"It is true that for certain tasks there are only a very limited number of file
structures available, and in such cases the structures [**46] might not be
copyrightable . . . ."). Of course, not all program structure is informed by
efficiency concerns. See Menell, at 1052 (besides efficiency, simplicity related
to user accommodation has become a programming priority). It follows that in
order to determine whether the merger doctrine precludes copyright protection to
an aspect of a program's structure that is so oriented, a court must inquire
"whether the use of this particular set of modules is necessary efficiently to
implement that part of the program's process" being implemented. Englund, at
902. If the answer is yes, then the expression represented by the programmer's
choice of a specific module or group of modules has merged with their underlying
idea and is unprotected. Id. at 902-03.
Another justification for linking structural economy with the application of
the merger doctrine stems from a program's essentially utilitarian nature and
the competitive forces that exist in the software marketplace. See Kretschmer,
at 842. Working in tandem, these factors give rise to a problem of proof which
merger helps to eliminate.
Efficiency is an industry-wide goal. Since, as we have already noted, there
may [**47] be only a limited number of efficient implementations for any given
program task, it is quite possible that multiple programmers, working
independently, will design the identical method employed in the allegedly
infringed work. Of course, if this is the case, there is no copyright
infringement. See Roth Greeting Cards v. United Card Co., 429 F.2d 1106, 1110
(9th Cir. 1970); Sheldon, 81 F.2d at 54.
Under these circumstances, the fact that two programs contain the same
efficient structure may as likely lead to an inference of independent creation
as it does to one of copying. See 3 Nimmer § 13.03[F][2], at 13-65; cf. Herbert
Rosenthal [*709] Jewelry Corp., 446 F.2d at 741 (evidence of independent
creation may stem from defendant's standing as a designer of previous similar
works). Thus, since evidence of similarly efficient structure is not
particularly probative of copying, it should be disregarded in the overall
substantial similarity analysis. See 3 Nimmer § 13.03[F][2], at 13-65.
We find support for applying the merger doctrine in cases that have already
addressed the question of substantial [**48] similarity in the context of
computer program structure. Most recently, in Lotus Dev. Corp., 740 F. Supp. at
66, the district court had before it a claim of copyright infringement relating
to the structure of a computer spreadsheet program. The court observed that "the
basic spreadsheet screen display that resembles a rotated 'L'. . ., if not
present in every expression of such a program, is present in most expressions."
Id. Similarly, the court found that "an essential detail present in most if not
all expressions of an electronic spreadsheet--is the designation of a particular
key that, when pressed, will invoke the menu command system." Id. Applying the
merger doctrine, the court denied copyright protection to both program elements.
In Manufacturers Technologies, Inc. v. Cams, Inc., 706 F. Supp. 984, 995-99
(D. Conn. 1989), the infringement claims stemmed from various alleged program
similarities "as indicated in their screen displays." Id. at 990. Stressing
efficiency concerns in the context of a merger analysis, the court determined
that the program's method of allowing the [**49] user to navigate within the
screen displays was not protectable because, in part, "the process or manner of
navigating internally on any specific screen displays . . . is limited in the
number of ways it may be simply achieved to facilitate user comfort." Id. at
995.
The court also found that expression contained in various screen displays (in
the form of alphabetical and numerical columns), was not the proper subject of
copyright protection because it was "necessarily incident to the ideas" embodied
in the displays. Id. at 996-97. Cf. Digital Communications, 659 F. Supp. at 460
(finding no merger and affording copyright protection to program's status screen
display because "modes of expression chosen . . . are clearly not necessary to
the idea of the status screen").
We agree with the approach taken in these decisions, and conclude that
application of the merger doctrine in this setting is an effective way to
eliminate non-protectable expression contained in computer programs.
(b) Elements Dictated By External Factors
We have stated that where "it is virtually impossible to write [**50] about
a particular historical era or fictional theme without employing certain 'stock'
or standard literary devices," such expression is not copyrightable. Hoehling
v. Universal City Studios, Inc., 618 F.2d 972, 979 (2d Cir.), cert. denied, 449
U.S. 841, 66 L. Ed. 2d 49, 101 S. Ct. 121 (1980). For example, the Hoehling case
was an infringement suit stemming from several works on the Hindenberg disaster.
There we concluded that similarities in representations of German beer halls,
scenes depicting German greetings such as "Heil Hitler," or the singing of
certain German songs would not lead to a finding of infringement because they
were "'indispensable, or at least standard, in the treatment of'" life in Nazi
Germany. Id. (quoting Alexander v. Haley, 460 F. Supp. 40, 45 (S.D.N.Y. 1978)).
This is known as the scenes a faire doctrine, and like "merger," it has its
analogous application to computer programs. Cf. Data East USA, 862 F.2d at 208
(applying scenes a faire to a home computer video game).
Professor Nimmer points out that "in many instances it is virtually
impossible to write [**51] a program to perform particular functions in a
specific computing environment without employing standard techniques." 3 Nimmer
§ 13.03[F][3], at 13-65. This is a result of the fact that a programmer's
freedom of design choice is often circumscribed by extrinsic considerations such
as (1) the mechanical specifications of the computer on which a particular
program [*710] is intended to run; (2) compatibility requirements of other
programs with which a program is designed to operate in conjunction; (3)
computer manufacturers' design standards; (4) demands of the industry being
serviced; and (5) widely accepted programming practices within the computer
industry. Id. at 13-66-71.
Courts have already considered some of these factors in denying copyright
protection to various elements of computer programs. In the Plains Cotton case,
the Fifth Circuit refused to reverse the district court's denial of a
preliminary injunction against an alleged program infringer because, in part,
"many of the similarities between the . . . programs [were] dictated by the
externalities of the cotton market." 807 F.2d at 1262.
In Manufacturers Technologies, the district court [**52] noted that the
program's method of screen navigation "is influenced by the type of hardware
that the software is designed to be used on." 706 F. Supp. at 995. Because, in
part, "the functioning of the hardware package impacted and constrained the type
of navigational tools used in plaintiff's screen displays," the court denied
copyright protection to that aspect of the program. Cf. Data East USA, 862 F.2d
at 209 (reversing a district court's finding of audiovisual work infringement
because, inter alia, "the use of the Commodore computer for a karate game
intended for home consumption is subject to various constraints inherent in the
use of that computer").
Finally, the district court in Q-Co Industries rested its holding on what,
perhaps, most closely approximates a traditional scenes a faire rationale.
There, the court denied copyright protection to four program modules employed in
a teleprompter program. This decision was ultimately based upon the court's
finding that "the same modules would be an inherent part of any prompting
program." 625 F. Supp. at 616.
Building upon this existing [**53] case law, we conclude that a court must
also examine the structural content of an allegedly infringed program for
elements that might have been dictated by external factors.
(c) Elements taken From the Public Domain
Closely related to the non-protectability of scenes a faire, is material
found in the public domain. Such material is free for the taking and cannot be
appropriated by a single author even though it is included in a copyrighted
work. See E.F. Johnson Co. v. Uniden Corp. of America, 623 F. Supp. 1485, 1499
(D. Minn. 1985); see also Sheldon, 81 F.2d at 54. We see no reason to make an
exception to this rule for elements of a computer program that have entered the
public domain by virtue of freely accessible program exchanges and the like. See
3 Nimmer § 13.03[F][4]; see also Brown Bag Software, 960 F.2d at 1473 (affirming
the district court's finding that "'plaintiffs may not claim copyright
protection of an . . . expression that is, if not standard, then commonplace in
the computer software industry.'"). Thus, a court must also filter out this
material from the allegedly [**54] infringed program before it makes the final
inquiry in its substantial similarity analysis.
Step Three: Comparison
The third and final step of the test for substantial similarity that we
believe appropriate for non-literal program components entails a comparison.
Once a court has sifted out all elements of the allegedly infringed program
which are "ideas" or are dictated by efficiency or external factors, or taken
from the public domain, there may remain a core of protectable expression. In
terms of a work's copyright value, this is the golden nugget. See Brown Bag
Software, 960 F.2d at 1475. At this point, the court's substantial similarity
inquiry focuses on whether the defendant copied any aspect of this protected
expression, as well as an assessment of the copied portion's relative importance
with respect to the plaintiff's overall program. See 3 Nimmer § 13.03[F][5];
Data East USA, 862 F.2d at 208 ("To determine whether similarities result from
unprotectable expression, analytic dissection of similarities may be [*711]
performed. If . . . all similarities in expression arise from use of common
ideas, then no substantial [**55] similarity can be found.").
3) Policy Considerations
We are satisfied that the three step approach we have just outlined not only
comports with, but advances the constitutional policies underlying the Copyright
Act. Since any method that tries to distinguish idea from expression ultimately
impacts on the scope of copyright protection afforded to a particular type of
work, "the line [it draws] must be a pragmatic one, which also keeps in
consideration 'the preservation of the balance between competition and
protection. . . .'" Apple Computer, 714 F.2d at 1253 (citation omitted).
CA and some amici argue against the type of approach that we have set forth
on the grounds that it will be a disincentive for future computer program
research and development. At bottom, they claim that if programmers are not
guaranteed broad copyright protection for their work, they will not invest the
extensive time, energy and funds required to design and improve program
structures. While they have a point, their argument cannot carry the day. The
interest of the copyright law is not in simply conferring a monopoly on
industrious persons, but in advancing the public [**56] welfare through
rewarding artistic creativity, in a manner that permits the free use and
development of non-protectable ideas and processes.
In this respect, our conclusion is informed by Justice Stewart's concise
discussion of the principles that correctly govern the adaptation of the
copyright law to new circumstances. In Twentieth Century Music Corp. v. Aiken,
he wrote:
The limited scope of the copyright holder's statutory monopoly, like the
limited copyright duration required by the Constitution, reflects a balance of
competing claims upon the public interest: Creative work is to be encouraged and
rewarded, but private motivation must ultimately serve the cause of promoting
broad public availability of literature, music, and the other arts.
The immediate effect of our copyright law is to secure a fair return for an
"author's" creative labor. But the ultimate aim is, by this incentive, to
stimulate artistic creativity for the general public good. . . . When
technological change has rendered its literal terms ambiguous, the Copyright Act
must be construed in light of this basic purpose.
422 U.S. 151, 156, 95 S. Ct. 2040, 45 L. Ed. 2d 84 (1975) (citations and
footnotes omitted). [**57]
Recently, the Supreme Court has emphatically reiterated that "the primary
objective of copyright is not to reward the labor of authors. . . ." Feist
Publications, Inc. v. Rural Tel. Serv. Co., 113 L. Ed. 2d 358, 111 S. Ct. 1282,
1290 (1991) (emphasis added). While the Feist decision deals primarily with the
copyrightability of purely factual compilations, its underlying tenets apply to
much of the work involved in computer programming. Feist put to rest the "sweat
of the brow" doctrine in copyright law. Id. at 1295. The rationale of that
doctrine "was that copyright was a reward for the hard work that went into
compiling facts." Id. at 1291. The Court flatly rejected this justification for
extending copyright protection, noting that it "eschewed the most fundamental
axiom of copyright law--that no one may copyright facts or ideas." Id.
Feist teaches that substantial effort alone cannot confer copyright status on
an otherwise uncopyrightable work. As we have discussed, despite the fact that
significant labor and expense often goes into computer program flow-charting and
debugging, that process [**58] does not always result in inherently protectable
expression. Thus, Feist implicitly undercuts the Whelan rationale, "which
allowed copyright protection beyond the literal computer code . . . [in order
to] provide the proper incentive for programmers by protecting their most
valuable efforts. . . ." Whelan, 797 F.2d at 1237 (footnote omitted). We note
that Whelan was decided prior to Feist when the "sweat of the brow" doctrine
still had vitality. In view of the Supreme [*712] Court's recent holding,
however, we must reject the legal basis of CA's disincentive argument.
Furthermore, we are unpersuaded that the test we approve today will lead to
the dire consequences for the computer program industry that plaintiff and some
amici predict. To the contrary, serious students of the industry have been
highly critical of the sweeping scope of copyright protection engendered by the
Whelan rule, in that it "enables first comers to 'lock up' basic programming
techniques as implemented in programs to perform particular tasks." Menell, at
1087; see also Spivack, at 765 (Whelan "results in an inhibition of creation by
virtue of the copyright [**59] owner's quasi-monopoly power").
To be frank, the exact contours of copyright protection for non-literal
program structure are not completely clear. We trust that as future cases are
decided, those limits will become better defined. Indeed, it may well be that
the Copyright Act serves as a relatively weak barrier against public access to
the theoretical interstices behind a program's source and object codes. This
results from the hybrid nature of a computer program, which, while it is
literary expression, is also a highly functional, utilitarian component in the
larger process of computing.
Generally, we think that copyright registration--with its indiscriminating
availability--is not ideally suited to deal with the highly dynamic technology
of computer science. Thus far, many of the decisions in this area reflect the
courts' attempt to fit the proverbial square peg in a round hole. The district
court, see Computer Assocs., 775 F. Supp. at 560, and at least one commentator
have suggested that patent registration, with its exacting up-front novelty and
non-obviousness requirements, might be the more appropriate rubric of protection
for intellectual property [**60] of this kind. See Randell M. Whitmeyer,
Comment, A Plea for Due Processes: Defining the Proper Scope of Patent
Protection for Computer Software, 85 NW. U. L. REV. 1103, 1123-25 (1991); see
also Lotus Dev. Corp. v. Borland Int'l, Inc., 788 F. Supp. 78, 91 (D. Mass.
1992) (discussing the potentially supplemental relationship between patent and
copyright protection in the context of computer programs). In any event, now
that more than 12 years have passed since CONTU issued its final report, the
resolution of this specific issue could benefit from further legislative
investigation--perhaps a CONTU II.
In the meantime, Congress has made clear that computer programs are literary
works entitled to copyright protection. Of course, we shall abide by these
instructions, but in so doing we must not impair the overall integrity of
copyright law. While incentive based arguments in favor of broad copyright
protection are perhaps attractive from a pure policy perspective, see Lotus Dev.
Corp., 740 F. Supp. at 58, ultimately, they have a corrosive effect on certain
fundamental tenets of copyright doctrine. [**61] If the test we have outlined
results in narrowing the scope of protection, as we expect it will, that result
flows from applying, in accordance with Congressional intent, long-standing
principles of copyright law to computer programs. Of course, our decision is
also informed by our concern that these fundamental principles remain
undistorted.
B. The District Court Decision
We turn now to our review of the district court's decision in this particular
case. At the outset, we must address CA's claim that the district court erred by
relying too heavily on the court appointed expert's "personal opinions on the
factual and legal issues before the court."
1) Use of Expert Evidence in Determining Substantial Similarity Between Computer
Programs
Pursuant to Fed.R.Evid. 706, and with the consent of both Altai and CA, Judge
Pratt appointed and relied upon Dr. Randall Davis of the Massachusetts Institute
of Technology as the court's own expert witness on the issue of substantial
similarity. Dr. Davis submitted a comprehensive written report that analyzed the
various aspects of the computer programs [*713] at issue and evaluated the
parties' expert evidence. At trial, Dr. Davis was extensively [**62]
cross-examined by both CA and Altai.
The well-established general rule in this circuit has been to limit the use
of expert opinion in determining whether works at issue are substantially
similar. As a threshold matter, expert testimony may be used to assist the fact
finder in ascertaining whether the defendant had copied any part of the
plaintiff's work. See Arnstein v. Porter, 154 F.2d 464, 468 (2d Cir. 1946). To
this end, "the two works are to be compared in their entirety . . . [and] in
making such comparison resort may properly be made to expert analysis. . . ." 3
Nimmer § 13.03[E][2], at 13-62.16.
However, once some amount of copying has been established, it remains solely
for the trier of fact to determine whether the copying was "illicit," that is to
say, whether the "defendant took from plaintiff's works so much of what is
pleasing to [lay observers] who comprise the audience for whom such [works are]
composed, that defendant wrongfully appropriated something which belongs to the
plaintiff." Arnstein, 154 F.2d at 473. Since the test for illicit copying is
based upon the response of ordinary lay observers, expert [**63] testimony is
thus "irrelevant" and not permitted. Id. at 468, 473. We have subsequently
described this method of inquiry as "merely an alternative way of formulating
the issue of substantial similarity." Ideal Toy Corp. v. Fab-Lu Ltd. (Inc.), 360
F.2d 1021, 1023 n.2 (2d Cir. 1966).
Historically, Arnstein's ordinary observer standard had its roots in "an
attempt to apply the 'reasonable person' doctrine as found in other areas of the
law to copyright." 3 Nimmer § 13.03[E][2], at 13-62.10-11. That approach may
well have served its purpose when the material under scrutiny was limited to art
forms readily comprehensible and generally familiar to the average lay person.
However, in considering the extension of the rule to the present case, we are
reminded of Holmes' admonition that, "the life of the law has not been logic: it
has been experience." O. W. Holmes, Jr., THE COMMON LAW 1 (1881).
Thus, in deciding the limits to which expert opinion may be employed in
ascertaining the substantial similarity of computer programs, we cannot
disregard the highly complicated and technical subject matter at the heart of
these claims. [**64] Rather, we recognize the reality that computer programs
are likely to be somewhat impenetrable by lay observers--whether they be judges
or juries--and, thus, seem to fall outside the category of works contemplated by
those who engineered the Arnstein test. Cf. Dawson v. Hinshaw Music Inc., 905
F.2d 731, 737 (4th Cir.) ("departure from the lay characterization is warranted
only where the intended audience possesses 'specialized expertise'"), cert.
denied, 112 L. Ed. 2d 523, 111 S. Ct. 511 (1990). As Judge Pratt correctly
observed:
In the context of computer programs, many of the familiar tests of similarity
prove to be inadequate, for they were developed historically in the context of
artistic and literary, rather than utilitarian, works.
Computer Assocs., 775 F. Supp. at 558.
In making its finding on substantial similarity with respect to computer
programs, we believe that the trier of fact need not be limited by the
strictures of its own lay perspective. See Dawson, 905 F.2d at 735; Whelan, 797
F.2d at 1233; Broderbund, 648 F. Supp. at 1136 [**65] (stating in dictum: "an
integrated test involving expert testimony and analytic dissection may well be
the wave of the future in this area. . . ."); Brown Bag Software, 960 F.2d at
1478-79 (Sneed, J., concurring); see also 3 Nimmer § 13.03[E][4]; but see Brown
Bag Software, 960 F.2d at 1475 (applying the "ordinary reasonable person"
standard in substantial similarity test for computer programs). Rather, we leave
it to the discretion of the district court to decide to what extent, if any,
expert opinion, regarding the highly technical nature of computer programs, is
warranted in a given case.
In so holding, we do not intend to disturb the traditional role of lay
observers in judging [*714] substantial similarity in copyright cases that
involve the aesthetic arts, such as music, visual works or literature.
In this case, Dr. Davis' opinion was instrumental in dismantling the
intricacies of computer science so that the court could formulate and apply an
appropriate rule of law. While Dr. Davis' report and testimony undoubtedly shed
valuable light on the subject matter of the litigation, Judge Pratt remained, in
the final [**66] analysis, the trier of fact. The district court's use of the
expert's assistance, in the context of this case, was entirely appropriate.
2) Evidentiary Analysis
The district court had to determine whether Altai's OSCAR 3.5 program was
substantially similar to CA's ADAPTER. We note that Judge Pratt's method of
analysis effectively served as a road map for our own, with one exception Judge
Pratt filtered out the non-copyrightable aspects of OSCAR 3.5 rather than those
found in ADAPTER, the allegedly infringed program. We think that our
approach--i.e., filtering out the unprotected aspects of an allegedly infringed
program and then comparing the end product to the structure of the suspect
program--is preferable, and therefore believe that district courts should
proceed in this manner in future cases
We opt for this strategy because, in some cases, the defendant's program
structure might contain protectable expression and/or other elements that are
not found in the plaintiff's program. Since it is extraneous to the allegedly
copied work, this material would have no bearing on any potential substantial
similarity between the two programs. Thus, its filtration would be wasteful
[**67] and unnecessarily time consuming. Furthermore, by focusing the analysis
on the infringing rather than on the infringed material, a court may mistakenly
place too little emphasis on a quantitatively small misappropriation which is,
in reality, a qualitatively vital aspect of the plaintiff's protectable
expression.
The fact that the district court's analysis proceeded in the reverse order,
however, had no material impact on the outcome of this case. Since Judge Pratt
determined that OSCAR effectively contained no protectable expression
whatsoever, the most serious charge that can be levelled against him is that he
was overly thorough in his examination.
The district court took the first step in the analysis set forth in this
opinion when it separated the program by levels of abstraction. The district
court stated:
As applied to computer software programs, this abstractions test would
progress in order of "increasing generality" from object code, to source code,
to parameter lists, to services required, to general outline. In discussing the
particular similarities, therefore, we shall focus on these levels.
Computer Assocs., 775 F. Supp. at 560. While [**68] the facts of a different
case might require that a district court draw a more particularized blueprint of
a program's overall structure, this description is a workable one for the case
at hand.
Moving to the district court's evaluation of OSCAR 3.5's structural
components, we agree with Judge Pratt's systematic exclusion of non-protectable
expression. With respect to code, the district court observed that after the
rewrite of OSCAR 3.4 to OSCAR 3.5, "there remained virtually no lines of code
that were identical to ADAPTER." Id. at 561. Accordingly, the court found that
the code "presented no similarity at all." Id. at 562.
Next, Judge Pratt addressed the issue of similarity between the two programs'
parameter lists and macros. He concluded that, viewing the conflicting evidence
most favorably to CA, it demonstrated that "only a few of the lists and macros
were similar to protected elements in ADAPTER; the others were either in the
public domain or dictated by the functional demands of the program." Id. As
discussed above, functional elements and elements taken from the public domain
do not qualify for copyright protection. [**69] With respect to the few
remaining parameter lists and macros, the district court could reasonably
conclude that they did not warrant a [*715] finding of infringement given
their relative contribution to the overall program. See Warner Bros., Inc. v.
American Broadcasting Cos., Inc., 720 F.2d 231, 242 (2d Cir. 1983) (discussing
de minimis exception which allows for literal copying of a small and usually
insignificant portion of the plaintiff's work); 3 Nimmer § 13.03[F][5], at
13-74. In any event, the district court reasonably found that, for lack of
persuasive evidence, CA failed to meet its burden of proof on whether the macros
and parameter lists at issue were substantially similar. See Computer Assocs.,
775 F. Supp. at 562.
The district court also found that the overlap exhibited between the list of
services required for both ADAPTER and OSCAR 3.5 was "determined by the demands
of the operating system and of the applications program to which it [was] to be
linked through ADAPTER or OSCAR. . . ." Id. In other words, this aspect of the
program's structure was dictated by the nature of other programs with which it
was [**70] designed to interact and, thus, is not protected by copyright.
Finally, in his infringement analysis, Judge Pratt accorded no weight to the
similarities between the two programs' organizational charts, "because [the
charts were] so simple and obvious to anyone exposed to the operation of the
programs." Id. CA argues that the district court's action in this regard "is not
consistent with copyright law"--that "obvious" expression is protected, and that
the district court erroneously failed to realize this. However, to say that
elements of a work are "obvious," in the manner in which the district court used
the word, is to say that they "follow naturally from the work's theme rather
than from the author's creativity." 3 Nimmer § 13.03[F][3], at 13-65. This is
but one formulation of the scenes a faire doctrine, which we have already
endorsed as a means of weeding out unprotectable expression.
CA argues, at some length, that many of the district court's factual
conclusions regarding the creative nature of its program's components are simply
wrong. Of course, we are limited in our review of factual findings to setting
aside only those that we determine are clearly erroneous. [**71] See Fed. R.
Civ. P. 52. Upon a thorough review of the voluminous record in this case, which
is comprised of conflicting testimony and other highly technical evidence, we
discern no error on the part of Judge Pratt, let alone clear error.
Since we accept Judge Pratt's factual conclusions and the results of his
legal analysis, we affirm his dismissal of CA's copyright infringement claim
based upon OSCAR 3.5. We emphasize that, like all copyright infringement cases,
those that involve computer programs are highly fact specific. The amount of
protection due structural elements, in any given case, will vary according to
the protectable expression found to exist within the program at issue.
II. TRADE SECRET PREEMPTION
In its complaint, CA alleged that Altai misappropriated the trade secrets
contained in the ADAPTER program. Prior to trial, while the proceedings were
still before Judge Mishler, Altai moved to dismiss and for summary judgment on
CA's trade secret misappropriation claim. Altai argued that section 301 of the
Copyright Act preempted CA's state law cause of action. Judge Mishler denied
Altai's motion, reasoning that "'the elements of the tort of appropriation of
trade secrets [**72] through the breach of contract or confidence by an
employee are not the same as the elements of a claim of copyright infringement.'
" Computer Assocs., 775 F. Supp. at 563.
The parties addressed the preemption issue again, both in pre-and post-trial
briefs. Judge Pratt then reconsidered and reversed Judge Mishler's earlier
ruling. The district court concluded that CA's trade secret claims were
preempted because "CA--which is the master of its own case--has pleaded and
proven facts which establish that one act constituted both copyright
infringement and misappropriation of trade secrets [namely, the] copying [*716]
of ADAPTER into OSCAR 3.4 . . . ." Computer Assocs., 775 F. Supp. at 565.
In our original opinion, Computer Assocs. Int'l, Inc. v. Altai, Inc., 1992
U.S. App. LEXIS 14305 (2d Cir. 1992), we affirmed Judge Pratt's decision. CA
petitioned for rehearing on this issue. In its petition for rehearing, CA
brought to our attention portions of the record below that were not included in
the appendix on appeal. CA argued that these documents, along with Judge Mishler
's disposition of Altai's [**73] motion to dismiss and for summary judgment,
established that CA advanced non-preempted trade secret misappropriation claims
before both Judge Mishler and Judge Pratt. CA further contended that Judge Pratt
failed to consider its theory that Altai was liable for wrongful acquisition of
CA's trade secrets through Arney. Upon reconsideration, we have granted the
petition for rehearing, withdrawn our initial opinion, and conclude in this
amended opinion that the district court's preemption ruling on CA's trade secret
claims should be vacated. We accordingly vacate the judgment of the district
court on this point and remand CA's trade secret claims for a determination on
the merits.
A. General Law of Copyright Preemption Regarding Trade Secrets and Computer
Programs
Congress carefully designed the statutory framework of federal copyright
preemption. In order to insure that the enforcement of these rights remains
solely within the federal domain, section 301(a) of the Copyright Act expressly
preempts
all legal or equitable rights that are equivalent to any of the exclusive rights
within the general scope of copyright as specified by section 106 in works
[**74] of authorship that are fixed in a tangible medium of expression and come
within the subject matter of copyright as specified by sections 102 and 103 . .
. .
17 U.S.C. § 301(a). This sweeping displacement of state law is, however,
limited by section 301(b), which provides, in relevant part, that
nothing in this title annuls or limits any rights or remedies under the common
law or statutes of any State with respect to . . . activities violating legal or
equitable rights that are not equivalent to any of the exclusive rights within
the general scope of copyright as specified by section 106. . . .
17 U.S.C. § 301(b)(3). Section 106, in turn, affords a copyright owner the
exclusive right to: (1) reproduce the copyrighted work; (2) prepare derivative
works; (3) distribute copies of the work by sale or otherwise; and, with respect
to certain artistic works, (4) perform the work publicly; and (5) display the
work publicly. See 17 U.S.C. § 106(1)-(5).
Section 301 thus preempts only those state law rights that "may be abridged
by an act which, in and of itself, would infringe [**75] one of the exclusive
rights" provided by federal copyright law. See Harper & Row, Publishers, Inc. v.
Nation Enters., 723 F.2d 195, 200 (2d Cir. 1983), rev'd on other grounds, 471
U.S. 539, 85 L. Ed. 2d 588, 105 S. Ct. 2218 (1985). But if an "extra element" is
"required instead of or in addition to the acts of reproduction, performance,
distribution or display, in order to constitute a state-created cause of action,
then the right does not lie 'within the general scope of copyright,' and there
is no preemption." 1 Nimmer § 1.01[B], at 1-14-15; see also Harper & Row,
Publishers, Inc., 723 F.2d at 200 (where state law right "is predicated upon an
act incorporating elements beyond mere reproduction or the like, the [federal
and state] rights are not equivalent" and there is no preemption).
A state law claim is not preempted if the "extra element" changes the "nature
of the action so that it is qualitatively different from a copyright
infringement claim." Mayer v. Josiah Wedgwood & Sons, Ltd., 601 F. Supp. 1523,
1535 (S.D.N.Y. 1985); see Harper & Row, Publishers, Inc., 723 F.2d at 201.
[**76] To determine whether a claim meets this standard, we must determine
"what plaintiff seeks to protect, the theories in which the matter is thought to
be protected and the rights sought to be enforced." 1 Roger M. Milgrim, Milgrim
on Trade Secrets [*717] § 2.06A[3], at 2-150 (1992) (hereinafter "Milgrim"). An
action will not be saved from preemption by elements such as awareness or
intent, which alter "the action's scope but not its nature . . . ." Mayer, 601
F. Supp. at 1535.
Following this "extra element" test, we have held that unfair competition and
misappropriation claims grounded solely in the copying of a plaintiff's
protected expression are preempted by section 301. See, e.g., Walker v. Time
Life Films, Inc., 784 F.2d 44, 53 (2d Cir.), cert. denied, 476 U.S. 1159, 90 L.
Ed. 2d 721, 106 S. Ct. 2278 (1986); Warner Bros. Inc. v. American Broadcasting
Cos., 720 F.2d 231, 247 (2d Cir. 1983); Durham Indus., Inc. v. Tomy Corp., 630
F.2d 905, 919 & n. 15 (2d Cir. 1980). We also have held to be preempted a
tortious interference with contract claim grounded in the impairment [**77] of
a plaintiff's right under the Copyright Act to publish derivative works. See
Harper & Row, Publishers, Inc., 723 F.2d at 201.
However, many state law rights that can arise in connection with instances of
copyright infringement satisfy the extra element test, and thus are not
preempted by section 301. These include unfair competition claims based upon
breach of confidential relationship, breach of fiduciary duty and trade secrets.
Balboa Ins. Co. v. Trans Global Equities, 218 Cal. App. 3d 1327, 1339-53, 267
Cal. Rptr. 787, 793-803 (Ct. App. 3rd Dist.), cert. denied, 111 S. Ct. 347, 112
L. Ed. 2d 311 (1990).
Trade secret protection, the branch of unfair competition law at issue in
this case, remains a "uniquely valuable" weapon in the defensive arsenal of
computer programmers. See 1 Milgrim § 2.06A[5][c], at 2-172.4. Precisely because
trade secret doctrine protects the discovery of ideas, processes, and systems
which are explicitly precluded from coverage under copyright law, courts and
commentators alike consider it a necessary and integral part of the intellectual
property protection [**78] extended to computer programs. See id.; Integrated
Cash Management Servs., Inc. v. Digital Transactions, Inc., 920 F.2d 171, 173
(2d Cir. 1990) (while plaintiff withdrew copyright infringement claim for
misappropriation of computer program, relief for theft of trade secret
sustained); Healthcare Affiliated Servs., Inc. v. Lippany, 701 F. Supp. 1142,
1152-55 (W.D.Pa. 1988) (finding likelihood of success on trade secret claim, but
not copyright claim); Q-Co Indus., Inc., 625 F. Supp. at 616-18 (finding
likelihood of success on trade secret claim, but no merit to copyright claim);
Kretschmer, at 847-49.
The legislative history of section 301 states that "the evolving common law
rights of . . . trade secrets . . . would remain unaffected as long as the
causes of action contain elements, such as . . . a breach of trust or
confidentiality, that are different in kind from copyright infringement." House
Report, at 5748. Congress did not consider the term "misappropriation" to be
"necessarily synonymous with copyright infringement," or to serve as the
talisman of preemption. Id.
Trade secret [**79] claims often are grounded upon a defendant's breach of a
duty of trust or confidence to the plaintiff through improper disclosure of
confidential material. See, e.g., Mercer v. C.A. Roberts Co., 570 F.2d 1232,
1238 (5th Cir. 1978); Brignoli v. Balch Hardy and Scheinman, Inc., 645 F. Supp.
1201, 1205 (S.D.N.Y. 1986). The defendant's breach of duty is the gravamen of
such trade secret claims, and supplies the "extra element" that qualitatively
distinguishes such trade secret causes of action from claims for copyright
infringement that are based solely upon copying. See, e.g., Warrington Assoc.,
Inc. v. Real-Time Eng'g Sys., Inc., 522 F. Supp. 367, 369 (N.D. Ill. 1981);
Brignoli, 645 F. Supp. at 1205; see also generally Balboa Ins. Co., 218 Cal.
App. 3d at 1346-50, 267 Cal. Rptr. at 798-802 (reviewing cases).
B. Preemption in this Case
The district court stated that:
Were CA's [trade secret] allegations premised on a theory of illegal
acquisition of a trade secret, a charge that might have been alleged against
[**80] Arney, who is not a defendant in this case, the [*718] preemption
analysis might be different, for there seems to be no corresponding right
guaranteed to copyright owners by § 106 of the copyright act.
Computer Assocs., 775 F. Supp. at 565. However, the court concluded that CA's
trade secret claims were not grounded in a theory that Altai violated a duty of
confidentiality to CA. Rather, Judge Pratt stated that CA proceeded against
Altai solely "on a theory that the misappropriation took place by Altai's use of
ADAPTER--the same theory as the copyright infringement count." Id. The district
court reasoned that "the right to be free from trade secret misappropriation
through 'use', and the right to exclusive reproduction and distribution of a
copyrighted work are not distinguishable." Id. Because he concluded that there
was no qualitative difference between the elements of CA's state law trade
secret claims and a claim for federal copyright infringement, Judge Pratt ruled
that CA's trade secret claims were preempted by section 301.
We agree with CA that the district court failed to address fully the factual
and theoretical [**81] bases of CA's trade secret claims. The district court
relied upon the fact that Arney--not Altai--allegedly breached a duty to CA of
confidentiality by stealing secrets from CA and incorporating those secrets into
OSCAR 3.4. However, under a wrongful acquisition theory based on Restatement
(First) of Torts § 757 (1939), Williams and Altai may be liable for violating CA
's right of confidentiality. Section 757 states in relevant part:
One who discloses or uses another's trade secret, without a privilege to do so,
is liable to another if . . . . (c) he learned the secret from a third person
with notice of the fact that it was a secret and that the third person
discovered it by improper means or that the third person's disclosure of it was
otherwise a breach of his duty to the other . . . .
Actual notice is not required for such a third party acquisition claim;
constructive notice is sufficient. A defendant is on constructive notice when,
"from the information which he has, a reasonable man would infer [a breach of
confidence], or if, under the circumstances, a reasonable man would be put on
inquiry and an inquiry pursued with reasonable intelligence and diligence would
disclose [**82] the [breach]." Id., comment 1; Metallurgical Indus., Inc. v.
Fourtek, Inc., 790 F.2d 1195, 1204 (5th Cir. 1986); Vantage Point, Inc. v.
Parker Bros., Inc., 529 F. Supp. 1204, 1210 n.2 (E.D.N.Y. 1981), aff'd, 697 F.2d
301 (2d Cir. 1982); see also Rohm and Haas Co. v. Adco Chem. Co., 689 F.2d 424,
431 (3rd Cir. 1982) ("Defendants never asked where the 'Harvey process' had come
from. Defendants therefore were charged 'with whatever knowledge such inquiry
would have led to.'") (citation omitted); Colgate-Palmolive Co. v. Carter
Prods., Inc., 230 F.2d 855, 864 (4th Cir.) (per curiam) (defendant "'must have
known by the exercise of fair business principles'" that its employee's work was
covered by an agreement not to disclose) (citation omitted), cert. denied, 352
U.S. 843, 1 L. Ed. 2d 59, 77 S. Ct. 43 (1956); 1 Milgrim § 5.04[2][c].
We agree with the district court that New Jersey's governing governmental
interest choice of law analysis directs the application of Texas law to CA's
trade secret misappropriation claim. See Computer Assocs., 775 F. Supp. at 566.
[**83] Texas law recognizes trade secret misappropriation claims grounded in
the reasoning of Restatement section 757(c), see, e.g., Fourtek, 790 F.2d at
1204, and the facts alleged by CA may well support such a claim.
It is undisputed that, when Arney stole the ADAPTER code and incorporated it
into his design of OSCAR 3.4, he breached his confidentiality agreement with CA.
The district court noted that while such action might constitute a valid claim
against Arney, CA is the named defendant in this lawsuit. Additionally, the
district court found, as a matter of fact, that "no one at Altai, other than
Arney, knew that Arney had the ADAPTER code . . . ." Computer Assocs., 775 F.
Supp. at 554. However, the district court did not consider fully Altai's
potential liability for improper trade secret acquisition. It did not consider
the question of Altai's trade secret liability [*719] in connection with OSCAR
3.4 under a constructive notice theory, or Altai's potential liability under an
actual notice theory in connection with OSCAR 3.5.
The district court found that, prior to CA's bringing suit, Altai was not on
actual notice of [**84] Arney's theft of trade secrets, and incorporation of
those secrets into OSCAR 3.4. However, by virtue of Williams' close relationship
with Arney, Williams' general familiarity with CA's programs (having once been
employed by CA himself), and the fact that Arney used the ADAPTER program in an
office at Altai adjacent to Williams during a period in which he had frequent
contact with Williams regarding the OSCAR/VSE project, Williams (and through him
Altai) may well have been on constructive notice of Arney's breach of his duty
of confidentiality toward CA. The district court did not address whether Altai
was on constructive notice, thereby placing it under a duty of inquiry; rather
the court's finding that only Arney affirmatively knew of the theft of CA's
trade secrets and incorporation of those secrets into OSCAR 3.4 simply disposed
of the issue of actual notice in connection with the creation of OSCAR 3.4. CA's
claim of liability based on constructive notice, never considered in the
district court's opinion, must be determined on remand.
With respect to actual notice, it is undisputed that CA's first complaint,
filed in August 1988, informed Altai of Arney's trade secret violations [**85]
in connection with the creation of OSCAR 3.4. The first complaint alleged that
Arney assisted in the development of ADAPTER, thereby obtaining knowledge of CA
's related trade secrets. It also alleged that Altai misappropriated CA's trade
secrets by incorporating them into ZEKE.
In response to CA's complaint, Altai rewrote OSCAR 3.4, creating OSCAR 3.5.
While we agree with the district court that OSCAR 3.5 did not contain any
expression protected by copyright, it may nevertheless still have embodied many
of CA's trade secrets that Arney brought with him to Altai. Since Altai's
rewrite was conducted with full knowledge of Arney's prior misappropriation, in
breach of his duty of confidentiality, it follows that OSCAR 3.5 was created
with actual knowledge of trade secret violations. Thus, with regard to OSCAR
3.5, CA has a viable trade secret claim against Altai that must be considered by
the district court on remand. This claim is grounded in Altai's alleged use of
CA's trade secrets in the creation of OSCAR 3.5, while on actual notice of Arney
's theft of trade secrets and incorporation of those secrets into OSCAR 3.4. The
district court correctly stated that a state law claim based [**86] solely upon
Altai's "use", by copying, of ADAPTER's non-literal elements could not satisfy
the governing "extra element" test, and would be preempted by section 301.
However, where the use of copyrighted expression is simultaneously the violation
of a duty of confidentiality established by state law, that extra element
renders the state right qualitatively distinct from the federal right, thereby
foreclosing preemption under section 301.
We are also convinced that CA adequately pled a wrongful acquisition claim
before Judge Mishler and Judge Pratt. In ruling that CA failed to properly plead
a non-preempted claim, Judge Pratt relied heavily upon two allegations in CA's
amended complaint. Id. at 563-64. They read as follows:
P 57. By reason of the facts stated in paragraph 39 and by copying from
CA-SCHEDULER into ZEKE, ZACK and ZEBB the various elements stated in paragraphs
39-51, 54 and 55, defendant Altai has infringed [CA's] copyright in
CA-SCHEDULER.
* * *
P 73. Defendant's incorporation into its ZEKE, ZACK and ZEBB programs of the
various elements contained in the ADAPTER component of [CA's] CA-SCHEDULER
program as set out in paragraphs 39-51, [**87] 54 and 55 constitutes the
willful misappropriation of the proprietary property and trade secrets of
plaintiff [CA].
[*720] From these pleadings, Judge Pratt concluded that the very same act,
i.e., Altai's copying of various elements of CA's program, was the basis for
both CA's copyright infringement and trade secret claims. See id. at 564. We
agree with Judge Pratt that CA's allegations are somewhat inartfully stated.
However, when taken together, the terms "incorporation" and "misappropriation"
in paragraph 73 above suggest to us an act of a qualitatively different nature
than the infringement pled in paragraph 57. House Report, at 5748 ("
'misappropriation' is not necessarily synonymous with copyright infringement").
In support of our reading, we note that paragraphs 65-75 of CA's amended
complaint alleged facts that reasonably comprise the elements of a wrongful
acquisition of trade secrets claim. CA averred that, while he was employed at
CA, Arney learned CA's trade secrets regarding the ADAPTER program. CA further
alleged that after Arney went to work for Altai, Altai misappropriated those
trade secrets by incorporating CA's ADAPTER program into its [**88] own
product. Finally, CA claimed that the trade secret misappropriation was carried
out "in a willful, wanton and reckless manner in disregard of [CA's] rights." In
other words, Altai could have reasonably inferred from CA's allegations that CA
's claim, in part, rested on Williams' "wanton and reckless" behavior in the
face of constructive notice.
In addition, while responding to Altai's preemption argument in its motion to
dismiss and for summary judgment, CA specifically argued in its brief to Judge
Mishler that "it can easily be inferred that Mr. Arney was hired by Altai to
misappropriate [CA's] confidential source code for Altai's benefit." At oral
argument, CA further contended that:
The circumstances of Mr. Arney's hiring suggested that Mr. Williams wanted more
than Mr. Arney's ability and in fact got exactly what he wanted. And that is
Computer Associates' confidential Adapter technology.
* * *
[Arney testified that he] surreptitiously took that code home from Computer
Associates after giving notice he was going to go to work for Altai, and after
being hired by Mr. Williams to come to Altai and reconstruct Zeke, to work on
the MVS operating system.
In the aftermath [**89] of Judge Mishler's ruling in its favor on Altai's
motion to dismiss and for summary judgment, CA reasonably believed that it had
sufficiently alleged a non-preempted claim. And, in light of CA's arguments and
Judge Mishler's ruling, Altai clearly was on notice that the amended complaint
placed non-preempted trade secret claims in play. See 5 Charles A. Wright &
Arthur R. Miller, Federal Practice and Procedure § 1215, at 136-38 (2d ed. 1990)
(federal pleading standards require plaintiff to provide defendant with fair
notice of claim and grounds it rests on).
Accordingly, we vacate the judgment of the district court and remand for
reconsideration of those aspects of CA's trade secret claims related to Altai's
alleged constructive notice of Arney's theft of CA's trade secrets and
incorporation of those secrets into OSCAR 3.4. We note, however, that CA may be
unable to recover damages for its trade secrets which are embodied in OSCAR 3.4
since Altai has conceded copyright liability and damages for its incorporation
of ADAPTER into OSCAR 3.4. CA may not obtain a double recovery where the damages
for copyright infringement and trade secret misappropriation are coextensive.
However, [**90] additional trade secret damages may well flow from CA's
creation of OSCAR 3.5. Judge Pratt correctly acknowledged that "if CA's claim of
misappropriation of trade secrets did not fail on preemption grounds, it would
be necessary to examine in some detail the conflicting claims and evidence
relating to the process by which Altai rewrote OSCAR and ultimately produced
version 3.5." Computer Assocs., 775 F. Supp. at 554-55; see also 1 Milgrim §
5.04[2][d], at 5-148 ("after notice, the [innocent] second user should cease the
use, and if he does not he can be enjoined and held liable for damages arising
from such use subsequent to notice"). Since we hold that CA's trade secret
claims [*721] are not preempted, and that, in writing OSCAR 3.5, Altai had
actual notice of Arney's earlier trade secret violations, we vacate and remand
for such further inquiry anticipated by the district court. If the district
court finds that CA was injured by Altai's unlawful use of CA's trade secrets in
creating OSCAR 3.5, CA is entitled to an award of damages for trade secret
misappropriation, as well as consideration by the district court of CA's request
for injunctive relief on [**91] its trade secret claim.
CONCLUSION
In adopting the above three step analysis for substantial similarity between
the non-literal elements of computer programs, we seek to insure two things: (1)
that programmers may receive appropriate copyright protection for innovative
utilitarian works containing expression; and (2) that non-protectable technical
expression remains in the public domain for others to use freely as building
blocks in their own work. At first blush, it may seem counter-intuitive that
someone who has benefited to some degree from illicitly obtained material can
emerge from an infringement suit relatively unscathed. However, so long as the
appropriated material consists of non-protectable expression, "this result is
neither unfair nor unfortunate. It is the means by which copyright advances the
progress of science and art." Feist, 111 S. Ct. at 1290.
Furthermore, we underscore that so long as trade secret law is employed in a
manner that does not encroach upon the exclusive domain of the Copyright Act, it
is an appropriate means by which to secure compensation for software espionage.
Accordingly, we affirm the judgment of the district [**92] court in part;
vacate in part; and remand for further proceedings. The parties shall bear their
own costs of appeal, including the petition for rehearing.
DISSENT:
ALTIMARI, Circuit Judge, Concurring in part and Dissenting in part:
Because I believe that our original opinion, see Computer Assoc. Int'l v.
Altai, 1992 U.S. App. LEXIS 14305, 1992 WL 139364 (2d Cir. 1992), is a reasoned
analysis of the issues presented, I adhere to the original determination and
therefore concur in Part 1 and respectfully dissent from Part 2 of the amended
opinion.