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CSS, Inc. v. Herrington

United States District Court, S.D. West Virginia, Charleston Division

January 29, 2018

CSS, INC., Plaintiff,



         Pending before the court is the Defendants' Motion for Summary Judgment [ECF No. 123]. For the following reasons, the Defendants' Motion is GRANTED in part and DENIED in part.

         I. Background

         On February 23, 2016, CSS, Inc. (“CSS”) filed a Complaint [ECF No. 1] against Christopher Herrington, Gene Yoho, and Compiled Technologies, LLC (collectively, “Defendants”). On September 16, 2016, CSS filed its First Amended Complaint [ECF No. 59] against the Defendants, alleging copyright infringement, breach of contract, violation of the duty of loyalty, tortious interference with business relationships, unjust enrichment, and misappropriation of trade secrets.

         CSS is a company that provides software and related support services to county clerks' offices in West Virginia. See Hr'g Tr., Jan. 25, 2017, Auburn Direct, 28:1-9. For over twenty years, CSS has provided software solutions that include a land records indexing package, an estate management package, utility billing, and sheriff's tax collection applications, among others. See Id. at 28:1-4.

         Christopher Herrington began his employment with CSS in October 1991. See Hr'g Tr., Feb. 23, 2017, C. Herrington Direct, 157:8-12, 190:14-15. Herrington worked in the computer software, applications, and programming business related to county government information and document management systems. See Id. at 157:8-12. For the majority of his employment with CSS, Herrington worked as a programmer/developer. See Hr'g Tr., Jan. 25, 2017, Auburn Direct, 14:14-23, 16:22- 17:5. Herrington's work consisted of the development of CSS's software, bug fixes, modifications, and providing support services for CSS's software packages. Id. at 14:14-23, 15:13-23, 16:22-17:5. Specifically, his duties included programming and support responsibilities for both the land indexing software and the estate management software. Id. at 16:2-9.

         Christopher Herrington resigned as an employee of CSS on August 23, 2014. See Hr'g Tr., Feb. 23, 2017, C. Herrington Direct, 190:14-15. On September 6, 2014, Herrington returned to CSS. See Id. at 203:22-24. On September 12, 2014, CSS required Christopher Herrington to sign a Confidentiality Agreement. See Hr'g Tr., Jan. 25, 2017, Auburn Direct, 44:14-45:2. Prior to September 12, 2014, CSS had never required Herrington to sign a confidentiality agreement. See Hr'g Tr., Feb. 23, 2017, McCasker Redirect, 97:6-17. CSS employed Christopher Herrington until June 5, 2015. See Hr'g Tr., Feb. 23, 2017, C. Herrington Direct, 203:22-24.

         Gene Yoho formed Compiled Technologies, LLC (“CT”), on August 12, 2015. See Hr'g Tr., Feb. 24, 2017, C. Herrington Direct, 43:19-44:5. Gene Yoho and Christopher Herrington operate CT. See Id. CT provides licensing for custom computer software applications, including one program for land records recording and indexing and one program for estate management. See Id. at 44:3-5. CT also provides support services to county clerks' offices related to these applications. See Hr'g Tr., Feb. 24, 2017, C. Herrington Cross, 242:9-11. CT competes with CSS for contracts with West Virginia county clerks. See Hr'g Tr., Feb. 24, 2017, C. Herrington Direct, 43:19-44:5.

         In its First Amended Complaint, CSS alleges that the Defendants infringed various copyrights relating to its computer software code for the land indexing and estate management applications. First Am. Compl. ¶¶ 32-39. Specifically, CSS alleges that CT's software programs, which were developed by Christopher Herrington, are substantially similar to CSS's copyrighted programs. CSS also alleges that Christopher Herrington breached the Confidentiality Agreement by using confidential information to create, market, and sell software and support services to CSS's customers. Id. at ¶ 43. CSS alleges that Herrington violated the duty of loyalty by creating competing products, and soliciting CSS's customers to use those competing products, while still employed by CSS. Id. at ¶¶ 47-50. In addition, CSS alleges that the Defendants tortiously interfered with CSS's business relationships with actual and potential customers, that the Defendants misappropriated CSS's trade secrets, and that the Defendants were unjustly enriched by their unlawful use and disclosure of confidential information. Id. at ¶¶ 52-65. Finally, CSS seeks a declaratory judgment that, under the “works for hire” doctrine, CSS is the author of any computer programs developed by Christopher Herrington during his employment with CSS. Id. at ¶ 75.

         On November 23, 2016, CSS filed Plaintiff's Motion for Preliminary Injunction [ECF No. 65], wherein it asserted that it was likely to succeed on the merits of its copyright infringement, misappropriation of trade secrets, and breach of contract claims. The court conducted a hearing on the Plaintiff's Motion on January 25, February 23, and February 24, 2017. On August 1, 2017, the court issued a Memorandum Opinion and Order [ECF No. 209] denying the Plaintiff's Motion. On August 4, 2017, the court issued an Amended Memorandum Opinion and Order (“Prelim. Inj. Op.”) [ECF No. 213] that corrected clerical errors in the earlier Opinion. In denying the Plaintiff's Motion, the court found that CSS was not likely to succeed on its claims for copyright infringement, misappropriation of trade secrets, or breach of contract.

         On April 27, 2017, the Defendants filed a Motion for Summary Judgment [ECF No. 123] and a Memorandum in Support of the motion [ECF No. 124]. On May 11, 2017, CSS filed a Response to Defendants' Motion for Summary Judgment [ECF No. 130]. On May 18, 2017, the Defendants filed their Reply [ECF No. 134]. Thus, the Defendants' Motion is ripe for adjudication.

         II. Legal Standard

         To obtain summary judgment, the moving party must show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). In considering a motion for summary judgment, the court will not “weigh the evidence and determine the truth of the matter.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Instead, the court will draw any permissible inference from the underlying facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986).

         Although the court will view all underlying facts and inferences in the light most favorable to the nonmoving party, the nonmoving party nonetheless must offer some “concrete evidence from which a reasonable juror could return a verdict” in his or her favor. Anderson, 477 U.S. at 256. Summary judgment is appropriate when the nonmoving party has the burden of proof on an essential element of his or her case and does not make, after adequate time for discovery, a showing sufficient to establish that element. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The nonmoving party must satisfy this burden of proof by offering more than a mere “scintilla of evidence” in support of his or her position. Anderson, 477 U.S. at 252. Likewise, conclusory allegations or unsupported speculation, without more, are insufficient to preclude the granting of a summary judgment motion. See Dash v. Mayweather, 731 F.3d 303, 311 (4th Cir. 2013); Stone v. Liberty Mut. Ins. Co., 105 F.3d 188, 191 (4th Cir. 1997).

         III. Discussion

         A. Copyright Infringement

         “Copyright protection subsists . . . in original works of authorship fixed in any tangible medium of expression . . . from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.” 17 U.S.C. § 102(a). Computer programs can be protected as “literary works.” See H.R. Rep. No. 1476, 94th Cong., 2d Sess. 54 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5667 (“The term ‘literary works' does not connote any criterion of literary merit or qualitative value: it includes . . . computer data bases, and computer programs to the extent that they incorporate authorship in the programmer's expression of original ideas, as distinguished from the ideas themselves.”). Indeed, “copyright protection can extend to both literal and non-literal elements of a computer program.” Oracle Am., Inc. v. Google Inc., 750 F.3d 1339, 1355 (Fed. Cir. 2014). “The literal elements of a computer program are the source code and object code.” Id. “The non-literal components of a computer program include, among other things, the program's sequence, structure, and organization, as well as the program's user interface.” Id. at 1355-56.

         However, “[t]he mere fact that a work is copyrighted does not mean that every element of the work may be protected.” Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 348 (1991). “In 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). In the case of computer programs, this limitation “is intended, among other things, 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 the copyright law.” H.R. Rep. No. 1476, 94th Cong., 2d Sess. 54 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5670.

         “Originality remains the sine qua non of copyright; accordingly, copyright protection may extend only to those components of a work that are original to the author.” Feist, 499 U.S. at 348. “[H]owever, the originality requirement is not particularly stringent.” Id. at 358. “Original, as the term is used in copyright, means only that the work was independently created by the author (as opposed to copied from other works), and that it possesses at least some minimal degree of creativity.” Id. at 345.

         1. CSS's and CT's Computer Programs

         CSS's claims of copyright infringement pertain to three of its computer programs: CSS-Index, CSS-Estate, and CSS-Search. Each of these programs corresponds, in terms of function, to one of CT's programs: CT-Index, CT-Estate, and CT-Search, respectively. The Index programs create and maintain indexes for recorded documents. Mot. by Defs. for Leave to File Under Seal Ex. 1, at 3 [ECF No. 70-1] (“McCasker Expert Report”). The Estate programs process information related to decedents. Id. The Search programs allow the public to search for indexed documents online. Id.

         Both CSS's and CT's programs use a client/server architecture. Client/server describes “a program relationship in which one program (the client) requests a service or resource from another program (the server).” Mot. by Defs. for Leave to File Under Seal Ex. 2 (“Zeidman Expert Report”), Ex. J at 1 [ECF No. 70-2]. The “client side” is also called the “front end, ” while the “server side” is also called the “back end.”

         The parties' programs use three programming languages: COBOL, Microsoft Visual Basic Version 6 (“VB6”), and C#. COBOL is an early programming language, introduced in 1959, that was widely used in the 1970s and 1980s. See Zeidman Expert Report 3; McCasker Expert Report 25. COBOL is “exclusively owned, developed and maintained by Micro Focus, ” and thus is not the intellectual property of any of the parties in this case. Defs.' Mem. Opp. Pl.'s Mot. Prelim. Inj. Ex. 9, at 2 [ECF No. 68-9] (“Letter from Courtney Wood, Associate General Counsel for Micro Focus”). The server sides of both CSS's and CT's programs are written in COBOL. Specifically, CSS uses RM/COBOL version 11, and CT uses RM/COBOL version 12. CSS's client-side applications are written in VB6, while CT's client-side applications are written in C#.

         CSS-Index contains the following architecture components:

• CSS-Index Client Application: presents the screens and other user interface components; accepts user inputs; displays responses back to the user.
• CSS-Search Client Application: launches when a user clicks “Inquiry” from within the CSS-Index Client Application.
• CSS Network Communication Interface (VanGUI): bridges communication between the client application and the back-end COBOL programs; runs over Transmission Control Protocol (“TCP”) sockets; built using VanGUI interface.
• CSS-Index Application Server: reads, writes, updates, and deletes records in the permanent COBOL data files; writes records to temporary COBOL data files.
• CSS-Index Persistent Data Repository: comprises the permanent COBOL data files. When a user enters information in the CSS-Index Client Application and clicks “save, ” the information is sent to a COBOL program that manipulates the information and saves it into one or more permanent data files.
• CSS Report Engine (Crystal Reports): uses report definition files to execute reports, which in turn access data using an Open Database Connectivity (“ODBC”) interface.
• CSS Data Bridge (Relativity Server): provides an application with access to COBOL data files via an ODBC interface.
• CSS-Index Reporting Data Repository: temporary data files that contain the data that will be used in a report requested by the user.

McCasker Expert Report 7-9.

         CT-Index contains the following architecture components: CT-Index Client Application; CT-Search Client Application; CT Network Communication Interface (Louis); CT-Index Application Server; CT-Index Persistent Data Repository; CT Report Engine (Crystal Reports); CT Data Bridge (Relativity Server); CT-Index Reporting Data Repository. Id. at 9-11. The description of each of these components is essentially the same as that of the corresponding component of CSS-Index described above. See Id. One notable difference is that the CSS Network Communication Interface uses the communication middleware VanGUI, while the CT Network Communication Interface uses Louis.

         VanGUI is a communication middleware that allows back-end applications written in COBOL to communicate with graphical user interface (“GUI”) front-end applications written in programming languages that support VB6. Letter from Courtney Wood, Associate General Counsel for Micro Focus 6-7. VanGUI is a third-party component that is not the intellectual property of any of the parties in this case. Louis is an interface builder that works in conjunction with COBOL platforms and GUIs. Louis is “exclusively owned, developed and maintained by Micro Focus, ” and therefore is not the intellectual property of any of the parties in this case. Id. at 2.

         The other third-party components used by both of these programs are Relativity and Crystal Reports. Relativity is a data access middleware product that improves access to data stored in COBOL applications. Id. at 4-5. Specifically, Relativity is an ODBC-accessible relational database management system. Id. It is a COBOL-specific database engine/driver that is “exclusively owned, developed and maintained by Micro Focus.” Id. at 2. Crystal Reports is a business intelligence application that helps generate reports, and is not the intellectual property of any of the parties in this case. Zeidman Expert Report, Ex. H at 2.

         The CSS-Search program can either be launched from within the CSS-Index program, or it can run independently. McCasker Expert Report 13. The same is true of the CT-Search program. Id. The architecture components of these two programs have already been described within the description of the CSS-Index and CT-Index programs. See Id. The architecture components of the CSS-Estate and CT-Estate programs are very similar to those of the CSS-Index and CT-Index programs, as described above, so I will not repeat them here. Id. at 14-15.

         Two particular features of these programs require further explanation. First, both companies' programs contain a name search algorithm that allows a user to search for records stored on the server using an individual's name. Id. at 23. Both programs store an individual's name in the permanent COBOL data files in two different ways: exactly as entered by the user (e.g., first, middle, and last names), and with all spaces and punctuation removed (“letters-only”). Id. When a user initiates a search using the individual's first, middle, and/or last name, the server converts the name into the letters-only version to conduct the search through the data files. Id.

         Second, both companies' programs contain a single entry point to perform both login validation and password change. Id. at 24. In both cases, the client application requests the following information from the user: username, password, new password, confirm new password. Id. at 23-24. The server then validates the login by comparing the username and password against records in a COBOL data file. Id. at 24. If the login is validated, the program looks to see if a new password was entered. Id. If so, the program compares the “new password” entry with the “confirm new password” entry. Id. If the entries match, the server updates the password in the COBOL data files with the new password and then exits. Id.

         2. CSS's Copyright Ownership and the Defendants' Access

         “To establish a claim for copyright infringement, a plaintiff must prove that it owned a valid copyright and that the defendant copied the original elements of that copyright.” Humphreys & Partners Architects, L.P. v. Lessard Design, Inc., 790 F.3d 532, 537 (4th Cir. 2015) (quoting Lyons P'ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 801 (4th Cir. 2001)). A certificate of copyright registration is prima facie evidence of the validity of the copyright. 17 U.S.C. § 410(c).

         CSS is the registered owner of three copyrights relating to its computer programs: Document Indexing and Imaging for Counties 2015 (TX 8-230-758) (i.e., CSS-Index), Estate Management 2015 (TX 8-230-809) (i.e., CSS-Estate), and Web Inquiry 2013 (TX 8-230-816) (i.e., CSS-Search). The Defendants do not dispute the validity of these copyrights in their Motion for Summary Judgment or Memorandum in Support. Therefore, I FIND that CSS owns valid copyrights in its computer programs, and I turn to the issue of copying.

         CSS alleges that the Defendants committed copyright infringement by copying the non-literal elements of its computer software.[1] To establish copying through circumstantial evidence, CSS must prove that the Defendants “had access to the work and that the supposed copy is substantially similar to [CSS's] original work.” Humphreys, 790 F.3d at 537 (quoting Bouchat v. Balt. Ravens, Inc., 241 F.3d 350, 353-54 (4th Cir. 2001)). The Defendants do not dispute that they had access to CSS's software code, and the evidence of such access is clear. Christopher Herrington worked for CSS as a programmer/developer for almost twenty-four years. He was responsible for developing computer programs, programming software solutions, and servicing the software for CSS's clients. In the course of his employment with CSS, Christopher Herrington worked directly with CSS's copyrighted computer programs. Accordingly, I FIND that the Defendants had access to CSS's copyrighted works. I now must determine whether the Defendants' computer programs are substantially similar to CSS's original works.

         3. Substantial Similarity and the AFC Test

         CSS argues that CT's software programs copy the structure, architecture, and transactional flow of CSS's software programs. In his report, CSS's expert, Andrew McCasker, found that the two Index programs use the same architecture, the two Estate programs use the same architecture, and the two Search programs use the same architecture. Id. at 26. In addition, CSS notes that both companies' programs contain the following elements: use of the COBOL programming language on the back end, COBOL data files, temporary data files, Crystal Reports, Relativity, “the same or nearly identical network interface used to communicate with the back end, ” “the same grouping for its business logic and reporting logic, ” “the same unique back-end structure to [their] log-in and password change functions, ” “and a unique name stripping search algorithm.” Pl.'s Resp. Defs.' Mot. Summ. J. 16.

         I will begin by noting “that the application of copyright law in the computer context is often a difficult task.” Oracle Am., 750 F.3d at 1354. The Fourth Circuit has not yet established a test for determining substantial similarity of the non-literal elements of computer programs.[2] Many jurisdictions endorse the Second Circuit's abstraction-filtration-comparison test (“AFC Test”) to address this issue. See Comput. Assocs. Int'l, Inc. v. Altai, Inc., 982 F.2d 693, 706-11 (2d Cir. 1992) (outlining the AFC test). The Fifth, Ninth, Tenth, and Eleventh Circuits apply the AFC Test. See Gen. Universal Sys., Inc. v. Lee, 379 F.3d 131, 142 (5th Cir. 2004); MiTek Holdings, Inc. v. Arce Eng'g Co., 89 F.3d 1548, 1559 (11th Cir. 1996); Gates Rubber Co. v. Bandon Chem. Indus., Ltd., 9 F.3d 823, 833 (10th Cir. 1993); Sega Enters. Ltd. V. Accolade, Inc., 977 F.2d 1510, 1525 (9th Cir. 1992). The Sixth Circuit also uses a similar test. See Lexmark Int'l, Inc. v. Static Control Components, Inc., 387 F.3d 522, 534 (6th Cir. 2004). The First Circuit, in a case of first impression, viewed the AFC Test favorably, but ultimately did not rely on it because the case involved literal (rather than non-literal) infringement of computer software. See Lotus Dev. Corp. v. Borland Int'l Inc., 49 F.3d 807, 814-15 (1st Cir. 1995).

         The Second Circuit designed the AFC Test to address the complexities of determining substantial similarity that “result[] 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.” Comput. Assocs. Int'l, 982 F.2d at 712. Essentially, the test is applied as follows:

In ascertaining substantial similarity under this approach, a court would first break down the allegedly 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 possible 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.

Id. at 706.[3]

         As the Second Circuit recognized, “[t]his approach breaks no new ground; rather, it draws on such familiar copyright doctrines as merger, scenes a faire, and public domain.” Id. Indeed, the AFC Test “has the major advantage of being entirely consistent with the infringement calculus used for infringement issues concerning other types of works. In effect, it is an adaptation of the traditional infringement test to the medium of computer programs.” Howard B. Abrams, Copying of Protected Expression-Technology, Functionality and the Ordinary Observer Test- Commentary, 2 The Law of Copyright § 14:33 (2016). Accordingly, I will apply the AFC Test to determine whether CT's software programs are substantially similar to the protectable elements of CSS's software programs.

         i. Step One: Abstraction

         The first step in determining whether the non-literal elements of the computer programs are substantially similar is abstraction.

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 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.

Comput. Assocs. Int'l, 982 F.2d at 707.

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 ...

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