Trade Secrets and Copyright Infringement

In ATPAC Inc. v. Aptitude Solutions, Inc., (EDCA April 12, 2011), the court considered the issue of whether computer source code that had been registered with the copyright office could be considered a trade secret.  Plaintiff ATPAC creates software and imaging solutions for county clerks.    Under Section 301 of the Copyright Act, any state law claims that are "equivalent" to copyright are preempted by federal law.

Here is the operative language of the Copyright Act:

§ 301. Preemption with respect to other laws



(a) On and after January 1, 1978, 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 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of copyright as specified by sections 102 and 103, whether created before or after that date and whether published or unpublished, are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State.

(b) Nothing in this title annuls or limits any rights or remedies under the common law or statutes of any State with respect to —
(1) subject matter that does not come within the subject matter of copyright as specified by sections 102 and 103, including works of authorship not fixed in any tangible medium of expression; or
(2) any cause of action arising from undertakings commenced before January 1, 1978;
(3) 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 USC 301.

Under the preemption doctrine, if a claim brought under state law is brought that is "equivalent" to a right or remedy under the Copyright Act, it fails.  Thus court look at state law claims and analyze them to see whether the claim adds an "extra element".  If so, it may survive a preemption challenge.

In ATPAC, the plaintiff had registered its source code with the copyright office in such a manner as to keep it confidential.  This is a special procedure designed to preserve computer code as a potential trade secret.

On a summary judgment motion, the district court permitted the "misappropriation of trade secrets" claim to survive because the "extra element" of the plaintiff preserving the secrecy of the trade secrets is qualitatively different from mere copyright infringement and its application would not conflict with copyright law.

In Chapter 10 of Copyright Litigation Handbook, Removal from State Court and Preemption, I cover the preemption doctrine and how it can be used to remove proceedings from state to federal court.

More on the ATPAC suit here and here.

More on trade secrets here.


 http://www.dunnington.com/rdowd_bio.html
 Purchase Copyright Litigation Handbook 2010 by Raymond J. Dowd from West here  

Document Production During Discovery: Search and Redact with Acrobat 8 Pro

Redaction is the process of removing information from documents. You can see from the attached image, which is a slide that I recently used in a litigation, I have redacted the title of the slide using Adobe Acrobat 8 Pro.

One of the most tedious and time-consuming jobs in litigation is producing privilege logs and redacting sensitive proprietary information such as trade secrets, medical information, credit card and social-security information from documents. Mistakes are often made, even by the largest and most sophisticated law firms. Computers and technology can ease the problem, but in the end, any mechanical device will make errors that need to be checked by thinking, trained humans.

The combination of high-speed scanning and electronic filing requirements in many courts have forced the electronic age onto many litigators, and now the game is figuring out how to sort through, organize and work efficiently with large quantities of documents in PDF format.

Fortunately, Adobe has created some powerful tools to save time and money. Let's say you have documents that need to potentially be produced to the adversary. Scan them. You can Bates-number them right in Acrobat (Advanced/Document Processing/Bates Numbering/Add). You probably want to break the documents down into PDFs of manageable size. Under the Acrobat "Document" dropdown menu, use "Recognize text using OCR". OCR is optical character recognition. It means that your computer will read the text contained in the PDF as text, rather than as an image. If a PDF is saved as an image, your computer will not pick up any of the words in the text.

To create a privilege log, in looking for attorney/client or work product-privileged documents, one could simply search, say an attorney's name and go through one-by-one each mention. This is a slow process. If you go to the "Advance" dropdown menu, hit Redaction. Then "Search and Redact". A search on the attorney's name will now mark every instance in the document that the attorney's name appears and give you a handy table so that you can jump to each instance the name appears. Since you probable want to eliminate more information than just the attorney's name, you would mark for redaction (see below) all of the privileged information.

To "blacken out" information that you wish to redact, once you have scanned and saved the PDF, go to the "Advanced" dropdown menu. Click on "Redaction". Click on "Show redaction toolbar". Now you can search the entire document to find every instance of a particular word, "Mark for Redaction" and then "Apply Redactions". Make sure to read the help features. Also make sure to save the document with a new name and to make sure to delete metadata as you are leaving the document (a self-explanatory screen pops up as you leave the document).

Why is this redaction function so important? Well, according to Adobe, it really gets rid of the underlying information so that a tech person cannot figure out a way around it. There are some famous instances, reported here and here of people thinking that they'd blacked out information, but people were able to simply look behind the blackened-out portion to find confidential personal information and important government secrets.

Caveat: read the help screens and warnings carefully. OCR is not perfect, and it will not pick up handwriting, images, or text that is not properly aligned. For example, the image above of Chief Inspector Benesch contained both text (the title) and a provenance of the artwork that had been scanned as an image. So if I searched the word "Benesch" to redact, the search function would not pick up the word "Benesch" from the image portion of the slide.

DO NOT WORK FROM ORIGINALS. You must make sure that you have an entire original set saved somewhere safe, because redaction actually removes information, thus destroying the original file. Adobe puts warning screens in to remind you of this. There is no technological shortcut that will bypass a trained set of eyes conducting the review, but proper use of this powerful tool should be a big timesaver.

Contracts Involving Uncopyrightable Ideas

Copyright does not protect "ideas". It also doesn't protect facts. But if parties agree by contract that one is going to pay another for an idea, that contract may be enforceable. In my mind, prior to doing any research, the lead case on contracts involving ideas is Buchwald v. Paramount Pictures, 1990 WL 357611 (Cal. Superior), 13 U.S.P.Q.2d 1497, 17 Media L. Rep 1257 (Cal. Super. L.A. Co. 1990)(not reported in Cal. Rptr.). When I say "in my mind" - the story of columnist Art Buchwald submitting a 2.5 page treatment to Paramount Pictures, Paramount agreeing to pay him for the idea, and then reneging by making a film called "Coming to America" starring Eddie Murphy based on that idea without paying Buchwald is so memorable.

But when I conducted an "ALLFEDS" search on Westlaw, I found only one case citing the Buchwald case. Beal v. Paramount Pictures Corp., 20 F.3d 454 (11th Cir. 1994). I didn't check the state database. But there were 68 secondary sources citing Buchwald. So it's a case in which the peanut gallery of legal commentators have great interest, but in which the courts have no interest. Over the last month I read Fatal Subtraction: How Hollywood Really Does Business (The Inside Story of Buchwald v. Paramount) by Pierce O'Donnell and Dennis McDougal (Doubleday 1992). It's a pretty good story for a lawyer to read in terms of case strategy, not giving up, and taking risks on some long shot legal theories where a client has really been wronged. O'Donnell had Buchwald's contract involving the story idea upheld and enforced, then turned around and invalidated its "industry standard" net profits provisions as unconscionable (there is a Buchwald II decision).

Arthur Miller, in Common Law Protection for Products of the Mind: An "Idea" Whose Time Has Come, 119 Harv. L. Rev. 703 (January 2006) argues that courts generally require "concreteness" and "novelty" to enforce agreements involving ideas. He provides a good survey of the case law in the area and argues for more federal protection. He claims a gestation period for the article of 56 years - since he was a 2L.

In Cavagnuolo v. Rudin, 1996 WL 79861 (S.D.N.Y.) the court observed that California has no novelty requirement for contracts involving ideas (citing Desny v. Wilder, 299 P.2d 257 (Cal. 1956) nor does New York (citing Apfel v. Prudential-Bach Securities Inc., 81 N.Y.2d 470 (1993).

Where owners of a database used a "shrink-wrap" license to bar licensees from using the database for commercial mailings, the provision was upheld. ProCD Incorporated v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996). Michigan law doesn't require novelty in contract to submit ideas. Wrench LLC v. Taco Bell, 256 F.3d 446 (6th Cir. 2001). In a case criticized by Miller, at least one court let a contract block reverse-engineering because it was forbidden by the license agreement. Bowers v. Baystate Technologies, Inc., 320 F.3d 1317 (Fed. Cir. 2003)(permitting a party to "contract away" a fair use defense of reverse engineering).

California law will create an implied in fact contract in idea submission cases. Levin v. The Gap, 1998 WL 915897 (S.D.N.Y.). But California will require evidence of industry custom to pay for ideas before doing so. Dallier v. Levi Straus & Co., 86 F.3d 1149 (4th Cir. 1996)(unpublished). But for a court to let a plaintiff pursue an implied-in-fact contract, it should be set forth in the complaint. Willis v. Home Box Office, 57 Fed. Appx. 902 (2d Cir. 2003)(unpublished summary order).

Courts struggle with the problem of preemption: the extent to which Copyright law supplants state law in the area of protecting ideas. The law of trade secrets is a related area -protecting "ideas" unprotectable by copyright by keeping them secret or binding a select few through confidentiality agreements.