Softel, Inc v Dragon Medical and Scientific Communications, Inc , 118 F 3d 955

8/14/2019 Softel, Inc v Dragon Medical and Scientific Communications, Inc , 118 F 3d 955

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United States Court of Appeals,SecondCircuit.

SOFTEL, INC., Plaintiff-Appellant,

v.DRAGON MEDICAL AND SCIENTIFIC

COMMUNICATIONS, INC.; Dragon GroupLtd., also known as Dragon Medical andScientific Communications, Ltd.; John R.

Darsee; H. Eugene Hodge; Nina Romanoff,Defendants-Appellees.

No. 59, Docket 95-9151.

Argued Sept. 12, 1996.Decided July 9, 1997.

Charla R. Bikman, New York City, forPlaintiff-Appellant.Bruce H. Schneider, New York City,(Gordon M. Kessler, Stroock & Stroock &Lavan, New York City, William A. Rome,Jaffe and Asher, New York City, of counsel),for Defendants-Appellees Dragon Medical& Scientific Communications, Inc., John R.Darsee and H. Eugene Hodge.

Before: MINER, ALTIMARI, andPARKER, Circuit Judges.

PARKER, Circuit Judge:Softel, Inc., a computer software company,brought this action against Dragon Medicaland Scientific Communications, Inc.(Dragon), its parent Dragon Group, Ltd.,and several of its employees (collectivelythe defendants) claiming that thedefendants had infringed copyrights Softel

held in several of its computer programs,and had misappropriated trade secretscontained within the computer code. Softelalso alleged that the defendants were guiltyof reverse palming off under 43(a) of theLanham Act, 15 U.S.C. 1125(a), and thatthe defendant corporation's president was

vicariously and contributorily liable fordamages. In a bench trial, the district court(John M. Cannella, Judge ) found the

defendants liable on some of plaintiff'scopyright infringement and trade secretclaims, but not on others, and rejectedplaintiff's claims based on the Lanham Actand vicarious or contributory liability. In aseparate proceeding, the court (Miriam G.Cedarbaum, Judge ) awarded damagesaccordingly. We affirm in part and, becausethe district court's findings and holdings donot address all of plaintiff's claims, vacateand remand in part.

I. BACKGROUND

Softel is a small New Hampshirecorporation engaged in the business ofcreating and selling computer graphicsproducts. Paul Fiondella is its president andsole shareholder. Dragon is a New Jerseycorporation engaged in the business ofdesigning communications programsrelating to medical and scientific

information. H. Eugene Hodge is Dragon'spresident and a shareholder of Dragon; NinaRomanoff is a Dragon employee who produced various films and videotapes forDragon; John R. Darsee is a medical writerand computer programmer for Dragon. SeeSoftel, Inc. v. Dragon Med. & ScientificCommunications, Inc., No. 87 Civ. 0167,1992 WL 168190, at F.F. 1-6 FN1 (S.D.N.Y.June 30, 1992) ( Softel II).

FN1. Where the district court hasnumbered its findings of fact (F.F.)and conclusions of law (C.L.), wewill cite to those numbered findingsor conclusions.

In January 1993, Fiondella developed
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Videogram 1.0, a paint-and-drawcomputer graphics program.FN2 Later in1983, Fiondella developed an improved

version of this program, Videogram 2.0. In1984, Pfizer Laboratories hired Dragon to produce a program which later becameknown as Heartlab. Darsee saw anadvertisement for Videogram 2.0, and calledFiondella with some questions regarding itscapabilities. Dragon employee Darseepurchased the software, and some hardware,from Fiondella. Fiondella delivered thegoods personally to Dragon's place of business in New York, so that he could

explore any potential business opportunitiesfor his company at Dragon. Fiondella andDarsee discussed forming a joint venture tocreate an authoring language and Darseeasked Fiondella to create a simulation of abeating heart for the Heartlab project.

FN2. Paint and draw programsenable the computer user to creategraphic images on a computerscreen. See Softel IIat F.F. 13.

In January 1985, E.R. Squibb & Sons, Inc.hired Dragon to create an interactivevideotape program for training purposes.This project was called Azactam. Dragonhired Fiondella to write computer code forthis project. Fiondella was careful not toprovide his source code FN3 to Dragon andimbedded a *959 copyright notice in Softel's portion of the source code and in theexecutable FN4 delivered to Dragon.

FN3. Source code is a series ofinstructions written in a computerlanguage such as COBOL, BASIC,or FORTRAN. See ComputerAssocs. Int'l, Inc. v. Altai, Inc., 982F.2d 693, 698 (2d Cir.1992).

FN4. The executable is the versionof the program that actually runs on

the computer. See Softel IIat F.F. 11. It comprises linked modules ofobject code. See id. Object codeis a machine-readable binarytranslation of source code. SeeAltai, 982 F.2d at 698. A compilerprogram translates source code intoobject code. See id.

Dragon had also contracted to producevideodisc programs with Roche

Laboratories. These would come to beknown as Melanoma, Kaposi's Sarcoma(Kaposi), and Hairy Cell Leukemia.Dragon engaged Fiondella to write code tocontrol the operation of the touchscreen andvideodisc player in the program Melanoma,and to retrieve and display graphic imagesproduced by Dragon artists. Fiondella wrotethis code in a modularFN5 style. He also useda manual produced by the hardwaremanufacturer to interface the hardware and

software properly. He billed Dragon on a perdiem basis, delivered only the executableversion of his program, and imbedded acopyright notice in the executable.

FN5. Modules, or subroutines,are discrete portions of a programthat perform subtasks. SeeAltai,982 F.2d at 697.

Fiondella also worked on Kaposi, using

code that was similar to that used inMelanoma. He employed several designtechniques in writing the Kaposi code,including, among others, the use of externalfiles, English language commands, modularstructure, and a hierarchical series of menusand a touchscreen. This program also was
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delivered in executable form only, and withan imbedded copyright notice.

At about the time that Kaposi was finished,Dragon hired Fiondella to work on a projectcalled Sorbinil. Fiondella wrote code for this project and submitted an executable toDragon. However, as the deadline for the project approached, problems developedwith the program. Dragon called Fiondellato ask him to come to Dragon's office in New York and fix the program, butFiondella was out of town. A friend ofFiondella's went to Dragon's office instead,

and managed to fix the immediate problem by following Fiondella's instructions overthe telephone.

Unfortunately, additional problems arose.Fiondella himself went to Dragon's premiseson June 17, 1985. Fiondella and one ofDragon's freelance computer programmersentered into a heated argument over whosecode was causing the problem. Thefreelance programmer demanded that

Fiondella turn over his code, so that theprogrammer could examine it himself. WhenFiondella refused, the programmer statedthat he had the ability to get Fiondella's codeoff Dragon's computers anyway, because hecould unerase the code that Fiondella hadput on the computers during his visits thereand (seemingly) erased upon leaving.Fiondella became enraged. Dragon's president, Hodge, was present at thealtercation and decided that because

Fiondella had acted unprofessionally, hecould no longer work for Dragon. Fiondellasuccessfully fixed the problems with thesoftware shortly after that.

Defendant Darsee then gained access to thecode that Fiondella had put on Dragon's

computers and seemingly erased.

In June 1985, Dragon produced the third

videodisc program for Roche, Hairy CellLeukemia. Roche wanted two versions:Hairy Cell U.S. and Hairy Cell Europe.Dragon produced an interim version calledHairy Cell Roche for distribution to Roche'sEuropean subsidiaries, but did not keep acopy because Dragon considered it to be aninterim program.

In 1986, Dragon made a program for Pfizercalled Low Back Pain. This program

included the Backpain Expert Module.Shortly thereafter, Dragon produced aprogram called Heartlab for Pfizer. Darseewrote the code for this program, except forthe animation and image retrieval routines,which were Fiondella's. Fiondella was paidfor this code.

Defendants admit that Hairy Cell Roche,Low Back Pain, and Heartlab usedFiondella's image retrieval routines.

Late in 1985, Darsee began to develop a paint-and-draw program called Paintbox.The early version of this software included*960 Fiondella's image retrieval routines.Darsee sent a letter to the Kurta Corporationsuggesting that Dragon and Kurta co-marketing some of the programs Dragon haddeveloped, including Paintbox. Nothingcame of this suggestion.

About this time, Dragon began to marketitself as having a division called DragonExpert Systems that specialized ininteractive technology. Dragon sponsored ahospitality suite at a conference of theAmerican Association of FamilyPractitioners on October 9-11, 1985. It
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solicited interest in this presentation bysending letters to prospective clients andissuing a press release describing itself as a

group of physicians and artists capable of producing computer images. No evidencewas adduced showing that any sales resultedfrom this presentation.

In May of 1986, Softel sought, and wasgranted, a copyright registration for a package of programs that included thefollowing: (1) a program written in BASICentitled SHOWPIX.bas, which is animage retrieval routine; (2) a collection of

object code routines called 8068/8 SupportRoutines, which included assembly coderoutines used to retrieve and display images;and (3) the source code for the Kaposiprogram.

In November 1986, Darsee exhibited theprogram Hairy Cell Roche at a meeting ofthe International InteractiveCommunications Society. He did not creditFiondella or Softel for any of the code

contained therein. The presentation did notproduce any business.

In early 1987, Softel filed this suit alleging,inter alia, that the defendants had infringedcopyrights Softel held in its programs, hadmisappropriated trade secrets in the code,and had violated 43(a) of the Lanham Act.

In 1988, after the commencement of thislitigation, Dragon made the following

programs, which Softel claims are alsoinfringing: Unasyn, Micro, OB/GYN,Managed Health Care, Heart Command(collectively, the post-litigationprograms). These programs are written in adifferent computer language than Fiondella'soriginal code, and are designed to work with

different hardware.

During discovery, Softel attempted to

change its outside trial expert witness,FN6

butthe new expert was unable to meet adiscovery deadline imposed by MagistrateJudge Nina Gershon. Magistrate JudgeGershon forbade Softel to rely at trial on anyoutside expert other than its original one.The district court affirmed this preclusionorder. See Softel, Inc. v. Dragon Med. & Scientific Communications, Inc.,No. 87 Civ.0167, 1990 WL 164859, at *8 (S.D.N.Y.Oct. 24, 1990) (Softel I ). The case then

went to a bench trial before Judge Cannellain late April and early May 1991. The Judgefound, inter alia, that the defendants' pre-litigation programs infringed Softel's programs, and that the defendants hadmisappropriated the trade secrets containedwithin Softel's image retrieval routines.There is no appeal from those findings or thedamages ultimately assessed in connectionwith them. However, the judge rejectedSoftel's claims of infringement in the post-

litigation programs, as well as its LanhamAct and trade secret claims. See SoftelII.Several years later, the issue of damageswas tried before the Hon. Miriam G.Cedarbaum, who awarded Softel $34,880.28compensatory damages on its copyrightinfringement and trade secretmisappropriation claims, as well as$100,000 punitive damages against Darseeand $150,000 punitive damages againstDragon for willful trade secret

misappropriation. See Softel, Inc. v. Dragon Med. & Scientific Communications,Inc., 891 F.Supp. 935, 946 (S.D.N.Y.1995)(Softel III ). Judge Cedarbaumsubsequently reduced the punitive damagesawards to $35,000 against Darsee and$50,000 against Dragon. See Softel, Inc. v.
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Dragon Med. & Scientific Communications

Inc.,No. 87 Civ. 0167, 1995 WL 606307, at*2 (S.D.N.Y. Oct. 16, 1995). Softel appeals

the trial court's preclusion of its trial expertand the rejection of its copyrightinfringement claims relating to the post-litigation programs. It also appeals thedismissal of its Lanham Act and trade secretclaims (including the damages calculationunder the latter) and the court's rejection ofits *961 claim that Hodge was vicariously orcontributorily liable for infringement. Weaffirm the trial court's rulings, except that weremand the case for further consideration of

Softel's claims that Dragon's post-litigation programs infringed the copyrightablestructure of Softel's programs, and that the post-litigation programs misappropriatedtrade secrets in Softel's programs.

FN6. Fiondella also presented experttestimony for the plaintiff at trial.

II. DISCUSSION

A.Preclusion of Softel's Expert

[1] In December 1989, Magistrate JudgeGershon set a discovery cutoff date ofJanuary 30, 1990. At a pretrial conferenceon December 6, 1989, Softel advisedMagistrate Judge Gershon that it wassubstituting a new expert, Dr. Thomas A.DeFanti, for its former expert, AaronGrosky. Magistrate Judge Gershon agreed toallow Softel to serve a report by its new

expert, but said that the new expert's reportmust be submitted by December 22, so thatDragon would have time to respond beforethe deadline. Softel I at *2. Softel alsoannounced that its first expert, Grosky,refused to return the diskettes that containedthe programs at issue in the litigation,

because of a fee dispute. Apparently, Softelhad not made duplicates of the diskettes before giving them to Grosky. Dragon

agreed to duplicate the disks it had, anddelivered 175 disks to Softel a few dayslater, on December 11, and a few remainingdiskettes a week later, on December 18,three days before the discovery cutoffdeadline. On December 21 (the day beforethe deadline), Softel asked that the date beextended, as DeFanti needed more time toreview the materials. On January 8, 1990,Magistrate Judge Gershon refused to extendthe deadline, holding that Softel had

produced no justified explanation. OnJanuary 12, Magistrate Judge Gershonexplained this preclusion order asdisallowing Softel from presenting at trialthe testimony of any expert witness fromoutside the company except that of theexpert originally designated, i.e., Grosky.Softel objected to these rulings pursuant toFed.R.Civ.P. 72(a) but Judge Cannellaupheld both rulings. See id. At trial, JudgeCannella also rejected Softel's attempt to

have DeFanti's report introduced as rebuttalevidence, stating that the tenor of his firstorder had been that Grosky would be theonly outside expert witness for Softel, andthat this order included Softel's rebuttal case.Softel challenges these rulings as abuses ofdiscretion on the part of the district court.

[2] We review the district court's order forabuse of discretion. See Update Art, Inc. v. Modiin Publ'g, Ltd., 843 F.2d 67, 71-72 (2d

Cir.1988). In determining whether a districtcourt has exceeded its discretion, weconsider the following factors: (1) theparty's explanation for the failure to complywith the discovery order; (2) the importanceof the testimony of the precluded witness;(3) the prejudice suffered by the opposing
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party as a result of having to prepare to meetthe new testimony; and (4) the possibility ofa continuance. See Outley v. City of New

York, 837 F.2d 587, 590-91 (2d Cir.1988).

With respect to the first Outley factor, wenote that Softel was allowed to change itsexpert roughly sixty days before thediscovery deadline on the condition that thenew expert file his report roughly a monthlater, i.e. by December 22. Softel'sexplanation for its failure to comply withthis deadline was that DeFanti did not haveenough time to conduct his inquiry because

he did not have access to the relevantdiskettes until shortly before the deadline.This explanation is inadequate. Softel couldhave provided its new expert with additionaltime in a variety of ways: it could haveretrieved its diskettes from Grosky bypaying him the disputed fee and then suingfor the alleged overcharge, it could havemade copies of the diskettes before givingthem to Grosky, or, most obviously, it couldhave notified the court and the defendant of

the fee dispute several months earlier than itdid. Dragon cannot be charged with the burden of producing the diskettes fromwhich DeFanti was to work: it gaveadditional copies of these disks to Softel asan accommodation.

Softel directs our attention toPotlatch Corp.v. United States, 679 F.2d 153 (9thCir.1982). In that case, which involved acomplicated tax dispute, the government

advised the court when it was first setting*962 discovery deadlines that it had not yethired an expert, and that all of the experts ithad interviewed had estimated that work onthe project would take six months. See id.at 154. The court set a deadline of sixmonths later. When the government failed to

meet this deadline, the district courtexcluded the experts' testimony. The NinthCircuit reversed, taking into account the

following facts: the district court's deadlinecould reasonably have been construed by thegovernment to have been a precatory one;government attorneys must endureconsiderable red tape in order to hire anexpert; the government did not control theexperts; and, finally, the taxpayer delayedalso. See id. at 155-56. We believePotlatch is distinguishable on these facts. Inthis case, the deadline was clearly notprecatory, Softel did not have to deal with

governmental red tape to hire its witness,and, perhaps most importantly, the districtcourt was not notified that the expert wouldnot be able to comply with the deadline untilthe day before the deadline itself-a far cryfrom the situation in Potlatch where thegovernment notified the court at the initialstatus conference. Discovery in this casebegan in early 1987 and ended in January1990: Softel does not claim that an expertcould not have completed the required

analysis within that time. Instead, it claimsthat the time it was granted after it decidedto change experts late in the period, andafter it had (not irretrievably) lost its onlycopy of the relevant materials to its firstexpert, was inadequate for it to alter or bolster portions of discovery that hadalready taken place. On these facts,Potlatchavails them naught.

The second Outley factor-the importance of

the testimony of the precluded witness-cutsin favor of Softel, but only slightly. While itis of course important to have an expert in atechnical trial such as this, Softel did haveanother expert it could, and did, use: Softel'spresident, Fiondella. Softel was denied theopportunity to bolster Fiondella's testimony
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with DeFanti's, but this prejudice is slightwhen compared with, for example, thatsuffered by the plaintiff in Outley, whose

only corroborating fact witnesses had beenexcluded in a trial in which credibility wasthe crucial issue. See Outley, 837 F.2d at590-91. Moreover, Softel was given anopportunity to enter both of Grosky's reportsinto evidence, but apparently chose not to doso. Under these circumstances, the prejudiceresulting from the preclusion of DeFanti wasslight, and hardly tantamount to adismissal, as Softel claims.

The third Outley factor is the prejudicesuffered by the opposing party as a result ofhaving to prepare to meet the new testimony.In Outley, this burden was slight. There, the plaintiff alleged police misconduct, andsought to put on two eyewitnesses. ThisCourt noted that a brief interview wouldhave allowed the [defendant] to probe theability of the witnesses to observe, to findout why [the witnesses] were on the street,and to uncover weaknesses or conflicts in

their testimony. Id. at 591. We alsospecifically noted that the testimony [of thewitnesses] was not the technical orspecialized evidence given by an expertwitness. Id. Here, the excluded testimonywas expert testimony. Moreover, the parameters of the dispute in a highlytechnical case such as this are largelydefined by expert testimony. Therefore, anydifferences between DeFanti's testimony andGrosky's would have redrawn the

boundaries of the case and almost certainlyhave prejudiced Dragon's ability to meetSoftel's attack. Because Dragon would have been forced, at a very late date in thediscovery process, to accommodatepotentially significant shifts in the theoriesbeing offered against it, this factor cuts in

favor of Dragon.

The final Outley factor is the availability of

a continuance. Here, no trial date had beenset, and a continuance was available.However, expeditious management ofdiscovery schedules is especially importantin cases of this nature because they requireextensive expert involvement over lengthyperiods of time. Therefore, the burden on thetrial court of granting a continuance isgreater than in some other cases. Softelpoints to the fact that this case did not go totrial for many months after the preclusion

order as evidence of the propriety of acontinuance. This of course is 20/20hindsight. Had the court granted acontinuance for Softel, it probably wouldhave had to grant additional time for Dragonto respond. When trial courts permitdeadline slippage of this sort, *963 trialscannot be scheduled when they ought to be,resulting in the backup of other cases andeventual scheduling chaos as a series of bottlenecks builds. Additionally, the

enormous length of every step of the proceedings in this case militated againstany more continuances. Denial of acontinuance in the circumstances wascertainly within the sound discretion of thetrial judge.

The first, third, and fourth Outley factors cutagainst Softel; the second cuts only slightlyin its favor. On balance the Outley factorsmake clear that the lower court's ruling was

not an abuse of discretion. We thereforeaffirm it.

B. Copyright Infringement

[3] [4] In any suit for copyrightinfringement, the plaintiff must establish its
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ownership of a valid copyright, and that thedefendant copied the copyrighted work.Computer Assocs. Int'l, Inc. v. Altai, Inc.,

982 F.2d 693, 701 (2d Cir.1992). Copyingmay be shown by direct evidence or byshowing that (1) the defendant had accessto the plaintiff's copyrighted work and (2)that defendant's work is substantially similarto the plaintiff's copyrightable material. Id.Judge Cannella found that Dragon hadaccess to Softel's source code, Softel II atF.F. 62, and that some of this code wascopied directly into two of Dragon's pre-litigation programs, see id. at F.F. 70, 74.

Judge Cannella held that these two programsinfringed Softel's copyrights. See id. atC.L. 9-24. However, Judge Cannellarejected Softel's claim that several ofDragon's post-litigation programs infringedSoftel's copyrights as well. He held that thepost-litigation programs were not similar toSoftel's programs in any way that wascopyrightable. See id. at C.L. 28-34.

[5] On this appeal, Softel renews its claim

that Dragon's post-litigation programsinfringed copyrights held by Softel. Softelargues that it claimed in the district courtthat its software combined certain computer programming design elements in anexpressive way and that Dragon had copiedthat expression, but that Judge Cannellaignored this claim and instead addressed(and rejected) a claim that Softel had notmade, to wit, that each of the designelements, taken individually, was protectible

expression.

[6] [7] It is well-established in this Circuitthat non-literal similarity of computer programs can constitute copyrightinfringement. See Altai, 982 F.2d at 702.We have prescribed an abstraction-

filtration-comparison method of analysisfor determining whether a program has beeninfringed. See id. at 706-12. Under this

analysis, the allegedly infringed program isfirst broken down and examined at varyinglevels of abstraction. See id. at 706-07.Second, the allegedly infringed program isfiltered at each level of abstractionthrough various copyright doctrines thatdeny protection to certain types of materials.For example, the scene a faire doctrinedenies protection to program elements thatare dictated by external factors such as themechanical specifications of the computer

on which a particular program is intended torun or widely accepted programmingpractices within the computer industry. Id.at 709-10. Third, the resulting protectibleexpression is compared with the allegedlyinfringing program. See id. at 710-11.

Our application of this method of analysis tothe facts of Altai demonstrates that anallegation of infringement based onsimilarities in architecture cannot be ignored

merely because many or all of the designelements that make up that architecture arenot protectible when considered at a lowerlevel of abstraction. In Altai, the districtcourt held many aspects of the program atissue in that case to be not protectible forvarious reasons (e.g., because they were inthe public domain or were computerscenesa faire ). Nevertheless, the court proceededto a higher level of abstraction andresponded to the plaintiff's claim of

infringement based on alleged similaritiesbetween the two programs' organizationalcharts. Computer Assocs. Int'l, Inc. v. Altai, Inc., 775 F.Supp. 544, 562(E.D.N.Y.1991). In reviewing that claim, thetrial court made no effort to remove from itsanalysis those elements of the program that
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had been found unprotectible at the lowerlevel of abstraction. Instead, analyzing theprogram at the higher level of abstraction, it

rejected the organizational claim on the*964 grounds that the structure alleged tohave been infringed was simple andobvious to anyone exposed to the operationof the program[s]. Id.This Court approvedthat approach, adding only that the districtcourt's use of the word obvious should beunderstood to be a holding that thepurportedly infringed structure was a scenea faire. SeeAltai, 982 F.2d at 714-15.

[8] The foregoing approach is consistentwith the Supreme Court's decision in Feist Publications, Inc. v. Rural Telephone

Service Co., 499 U.S. 340, 111 S.Ct. 1282,113 L.Ed.2d 358 (1991), discussed by thisCourt inAltai, 982 F.2d at 711-12. In Feist,the Court made quite clear that acompilation of non-protectible elements canenjoy copyright protection even though itsconstituent elements do not. SeeFeist, 499U.S. at 344-51, 111 S.Ct. at 1286-90. A

district court in another circuit has illustratedthe danger of overlooking this aspect ofcopyright law with an astute hypothetical:

Suppose defendant copied plaintiff's abstract painting composed entirely of geometricforms arranged in an original pattern. Thealleged infringer could argue that eachexpressive element (i.e., the geometricforms) is unprotectible under thefunctionality, merger, scenes a faire, and

unoriginality theories and, thus, all elementsshould be excluded prior to the substantialsimilarity of expression analysis. Then, therewould be nothing left for purposes ofdetermining substantial similarity ofexpression. In this example, elimination ofunprotectible elements would result in a

finding of no copyright infringement, whichwould be clearly inconsistent with thecopyright law's purpose of providing

incentives to authors of original works.

Apple Computer, Inc. v. Microsoft Corp.,

779 F.Supp. 133, 136 (N.D.Cal.1991), aff'din relevant part and rev'd and remanded in

part,35 F.3d 1435, 1444 (9th Cir.1994).Scholars agree:Although the ... scrutiny involved in thelevel-by-level analysis may deny protectionto some individual program elements, itmust be remembered that a combination of

these elements may be protectable. Anoriginal arrangement of uncopyrightable or public domain works-even facts-is ascopyrightable as a compilation in thecomputer context as it is elsewhere incopyright law. Thus, individual programelements that are filtered out at one levelmay be copyrightable when viewed as partof an aggregate of elements at another levelof abstraction.

Arthur R. Miller, Copyright Protection forComputer Programs, Databases, andComputer-Generated Works: Is Anything

New Since CONTU?, 106 Harv. L.Rev. 977,1003 (1993) (footnote omitted); see also 3Melville B. Nimmer & David Nimmer,Nimmer on Copyright 13.03[F][5], at 13-145 (1996) (Nimmer) (In performing thefiltering, the court should be sensitive to themyriad ways in which copyrightablecreativity can manifest itself; the analysis

should not proceed mechanically simply byisolating physical elements out of thecopyrightable work.).FN7 Indeed, whenapplied to the context of literary works, this point becomes quite obvious: takenindividually, the words that constitute aliterary work are not copyrightable, yet this
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fact does not prevent a literary text, i.e., acollection of words, from enjoying copyrightprotection. See Nimmer 13.03[F][5], at

13-145 n.345.1 (explaining that the fact thatHamlet's soliloquy can be atomized intounprotectible words does not mean that thesoliloquy as a whole lacks originality forcopyright purposes).FN8

FN7. Our statement inA.A.Hoehlingv. Universal City Studios, Inc., 618F.2d 972 (2d Cir.1980), that [t]herecannot be any such thing ascopyright in the order of presentation

of the facts, nor, indeed, in theirselection,id. at 978 (quoting Myersv. Mail & Express Co., 36 C.O. Bull.478, 479 (S.D.N.Y.1919) (L.Hand,J.)), may at first blush appear tocontradict this. However, we haveexplained this statement as referringonly to compilations of facts that failto display the constitutionalminimum of originality. See AricaInst., Inc. v. Palmer, 970 F.2d 1067,

1075 (2d Cir.1992).

FN8. We also note that there may be protectible expression within anunprotectible element as well. Ourscene a faire cases have made thispoint for many years. For example,in Walker v. Time Life Films, Inc.,784 F.2d 44 (2d Cir.1986), weobserved that scenes a faire are notprotectible except to the extent they

are given unique-and thereforeprotectible-expression in an originalcreation,id. at 50. Similarly, inHoehlingwe stated the following:

We are aware ... that indistinguishing between themes,

facts, andscenes a faire on the onehand, and copyrightable expressionon the other, courts may lose sight

of the forest for the trees. Byfactoring out similarities based onnon-copyrightable elements, acourt runs the risk of overlookingwholesale usurpation of a priorauthor's expression. A verbatimreproduction of another work, ofcourse, even in the realm ofnonfiction, is actionable ascopyright infringement.

618 F.2d at 979-80.

*965[9] We now turn to Softel's argumentthat Judge Cannella's findings and holdingsfail to address adequately its claim ofstructural infringement in the post-litigationprograms.FN9 Softel points out that in itsPost-Trial Memorandum of Law itsummarized its claim as follows:

FN9. In its briefs, Softel makes such

statements as [t]he District Courtnever discerned the structure of theprogram, and [the court] did notexamine the code of Plaintiff'scomputer program nor attempt tounderstand the purpose and functionof Plaintiff's routines or subroutinesor the structure of its program. Ifby these statements Softel means toargue that the district court wasobliged to conduct its own inquiry of

Softel's evidence sua sponte, thenSoftel misunderstands the role of thecourt in a proceeding such as this.Altai articulated the proper copyrightanalysis to be applied to evidenceproperly adduced in cases involvingallegations of non-literal similarity in
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computer programs; it did not decreea new role for courts in adducingsuch evidence. Our statements in

Altai referring to the court's role inanalyzing non-literal infringementclaims (for example, that a court[should] first break down theallegedly infringed program into itsconstituent structural parts, Altai,982 F.2d at 706 (emphasis added), orthat in a manner that resemblesreverse engineering on a theoreticalplane, a court should dissect theallegedly copied program's structure

and isolate each level of abstractioncontained within it,id. at 707(emphasis added)), should be takenonly as statements as to what thecourt should do to analyze evidenceproperly brought before it by a party.

See Mitek Holdings, Inc. v. Arce

Eng'g Co., 89 F.3d 1548, 1555 (11thCir.1996) ([I]f the copyright holder presents the court with a list offeatures that it believes to be

protectable (i.e., original and outsideof 17 U.S.C. 102(b)), the courtneed not abstract further suchfeatures.). Therefore, we will takeSoftel's arguments that JudgeCannella inadequately analyzed theirclaims to refer only to the Judge'sanalysis of evidence that Softelproperly presented to the Judge.

Plaintiff makes no claim that the individual

elements used to create the copyrighted codeare themselves separately copyrightable inthe abstract. What plaintiff claims is that theway the elements are expressed in computercode and the way the elements are integratedwith each other constitutes copyrightablematter.

Pl.'s Responsive Post-Trial Mem. of Law at8-9 (cited by Appellant's Br. at 28-29). Inthis same document, Softel also asserted that

plaintiff's authoring language whichintegrates hierarchical menus, touchscreens,modules, external files and English-language commands is an originalexpression which is copyrightable. Id. at12 n. 4. Finally, in its Trial Memorandum,which Judge Cannella cites in his summaryof Softel's claims, see Softel IIat C.L. 28,Softel makes the following statement:

The genius of the structure, sequence and

organization of plaintiff's program is theway in which it receives, assembles,calculates, retains, correlates and producesinformation on screen. Since there are otherways of performing those functions toachieve the same purpose as the Softelprogram, plaintiff's copyrighted work is aprotectable expression of ideas which cannotbe infringed with impunity.

Pl.'s Trial Mem. at 38 (emphasis in original

and internal quotation marks omitted).FN10

FN10. It is also interesting to notethat Dragon apparently understoodSoftel's claims to include a claim thatthe choice and manner of combination of the design elementswere protectible expression. Itargued that [t]aken alone ortogether, each of these elements mustbe filtered out from the substantial

similarity inquiry, since all areunprotectable as a matter of law.Def.'s Post-Trial Mem. at 45(emphasis added and citationsomitted).

Softel supported this theory with the
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testimony of Fiondella and with cross-examination of the defendants' expert, Cain.Fiondella testified that his software used

external files, modular programming, andEnglish language commands, and that eachcommand in those external command files istranslated by the program into the executionof certain modules. He asserted that [y]ouwould find in the Dragon programs the samestructure. He also testified that the specificcommands employed in Dragon's program*966 were functionally identical with thefifteen commands employed in Softel'ssoftware. He then explained that the menus

cued the command files. Finally, in its cross-examination of Dragon's expert, Softelexplored the question of whether there werealternative ways to design a program such asSoftel's, and whether Dragon's post-litigation programs had evolved fromSoftel's.

Thus, Fiondella testified regardingrelationships between all four of the designelements at issue: apparently, the menus

cued external files which read Englishlanguage commands into the main program,where the commands cued modules of code.Standing alone, these allegations may nothelp answer the question of how many waysexisted to design a computer program withthe same functionality as Softel's. However,when they are combined with an allegationthat the specific commands used by Dragonwere nearly identical with Softel's, they doappear to establish at least a colorable claim

that there was a modicum of expression inthe design of the program and that Dragoninfringed that expression. That is, even ifthere were few ways to design such aprogram, it does not seem likely that Dragonwould have to use an identical structure andcopy approximately fifteen out of fifteen

commands.

Softel presented an argument, supported by

some evidence, that the manner in which ithad combined certain computer designelements was expressive for purposes ofcopyright law, and that Dragon had copiedthis expression. Keeping in mind that therequisite level of originality for copyright protection is minimal and extremelylow, Feist, 499 U.S. at 345, 111 S.Ct. at1287 we cannot say that Softel's claim waswithout merit on its face. However, severalaspects of Judge Cannella's opinion reveal

that he either ignored or misanalyzedSoftel's argument, and consequently failed to perform the Altai analysis at the highestlevel of abstraction-here, theinterrelationships among the four identifiedelements.

First, the Judge's statements of hisunderstanding of Softel's claims reveal thatthe Judge understood Softel to be claimingonly that each element, taken individually,

was expressive. In his findings of fact, JudgeCannella summarized his understanding ofSoftel's claims as follows:

Plaintiff argues that [certain of Fiondella's programming decisions] constitute thestructure, sequence and organization of hiscopyrighted work and that Dragon's post-litigation programs are infringing becausethey contain these elements. The elementswhich plaintiff claims are entitled to

copyright protection are the use of thefollowing:

(1) an external file structure;

(2) English language command[s];
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however, do not alter the conclusion that thedistrict court ignored or misanalyzed Softel'sclaim. The court's announcement that it

would not engage in Altai comparisonanalysis, see supra, makes it very doubtfulthat the court had compared Softel'sselection and arrangement of commands orcode modules that were individuallyunprotectible when it made the formerstatement, or that it considered mimicking astructure comprising unprotectible elementsto be derivation when it made the latter.

Whether the district court ignored Softel's

claim or misanalyzed it, its treatment of thatclaim was inadequate, because it failed toapply the Altai test to the interrelationshipamong the design elements. Therefore, wevacate the district court's judgment as toSoftel's claim of non-literal infringement inDragon's post-litigation programs andremand so that the district court may enter afinding as to whether the manner in whichSoftel combined the various design elementsin its software was protectible expression,

and, if it was, whether Dragon infringed thatexpression. We express no opinion as to themerit of Softel's claim.

C. Trade Secret

1. Choice of Law

As this case has contacts with at least threestates-Softel is a New HampshireCorporation; Dragon is a New Jersey

corporation; and the theft of the trade secretsapparently occurred at Dragon's officeslocated in New York-we pause to considerthe applicable state law. Neither party hasdirectly addressed the issue of which lawshould apply to this case: Dragon, in itsbrief, has cited New York cases and federal

cases construing New York law, while Softelhas cited cases from all over the map.

[10] [11] [12] Softel's trade secret claims aregoverned by state law. See Franke v.Wiltschek, 209 F.2d 493, 494 (2d Cir.1953).In choosing the applicable state law, weemploy the choice of law rules of the forumstate, in this case New York. See Wm. Passalacqua Builders, Inc. v. Resnick

Developers S., Inc., 933 F.2d 131, 137 (2dCir.1991) (citing Krauss v. Manhattan Life Ins. Co., 643 F.2d 98, 100 (2d Cir.1981)); see alsoKlaxon Co. v. Stentor Elec. Mfg.

Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020,1021-22, 85 L.Ed. 1477 (1941). New Yorkapplies an interest analysis to its choice oflaw, under which the law of the jurisdictionhaving the greatest interest in the litigationcontrols. See Passalacqua Builders, 933F.2d at 137 (citing *968IntercontinentalPlanning, Ltd. v. Daystrom, Inc., 24 N.Y.2d372, 382, 248 N.E.2d 576, 582, 300N.Y.S.2d 817, 825 (1969)). Although bothDragon and Softel are out-of-state

corporations, we are convinced that a NewYork court would apply New York law tothis case for the following reasons: (1) thedefendant maintains offices in New York;(2) the plaintiff apparently maintains anapartment and de facto office in New York;and (3) the misappropriation, if any,apparently took place in New York, atDragon's offices. Cf. Cousins v. InstrumentFlyers, Inc., 44 N.Y.2d 698, 699, 376 N.E.2d914, 915, 405 N.Y.S.2d 441, 442 (1978) (per

curiam) (It is true that lex loci delictiremains the general rule in tort cases to bedisplaced only in extraordinarycircumstances.).

2. New York Substantive Law of TradeSecrets
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Documents

Softel, Inc v Dragon Medical and Scientific Communications, Inc , 118 F 3d 955