that are ideas as well as those that possess other non-protected traits. The final step involves comparing the computer programs to determine whether the defendant copied any aspect of the protected expression of the non-literal components, and if so, whether this copying is sufficient to sustain a finding of substantial similarity. Id. at 710.
Applying these principles to the copyright claim here, it is clear that this complaint sufficiently states a claim upon which relief can be granted. Morgan contends that the copyright claim is defective because: (1) Cognotec has failed to specifically allege the original work that is the subject of the copyright claim; (2) Cognotec has failed to allege that Morgan ever had access to AutoDealing's source code; and (3) the alleged copying by Morgan is of a sort that is either not covered by Cognotec's registration or not protected by copyright laws.
Morgan's first contention is clearly incorrect. The amended complaint alleges that the original work that Morgan is infringing is Cognotec's AutoDealing computer program. (See Am. Compl. PP 6-10, 48). While the amended complaint is not artfully pleaded in many respects, it does make clear that the AutoDealing program is the subject of the copyright infringement.
Morgan accurately states that Cognotec has not alleged that it specifically had access to its source code. This omission, however, does not render the copyright claim defective. As noted, the source code is a literal component of a computer program and is protected by copyright law. Non-literal components, however, may also be protected. Thus, the failure to allege access to the source code does not make the pleading defective where the pleading alleges infringement of non-literal components. See Altai, 982 F.2d at 702. Reading the amended complaint liberally, Fed. R. Civ. P. 8(a), (f), Cognotec alleges that protected non-literal components of AutoDealing have been copied. (See Am. Compl. PP 16, 19, 20, 28, 46, and 48). Thus, the fact that Cognotec has not alleged that Morgan had access to AutoDealing's source code does not render the copyright claim defective. It only focuses the claim on the non-literal aspects of the program.
Finally, Morgan argues that the copyright claim fails because the non-literal components that Cognotec alleges were infringed: (1) are not covered by the copyright registration; (2) involve ideas or functions embodied in the program; and/or (3) involve matters that are limited by the demands of the foreign currency industry. As such, Morgan contends that the copyright laws do not protect these non-literal components of AutoDealing.
While it is true that the copyright registration only covers the program itself and not documents that describe the program, these documents may be detailed and original enough to involve protected non-literal components of the program. See Lotus, 740 F. Supp. at 45. In addition, the three step procedure that Altai recommends that district courts apply is necessarily fact determinative and requires detailed comparisons of computer programs. Altai, 982 F.2d at 704, 707-10. To adequately consider Morgan's arguments would require a thorough and detailed factual exploration of AutoDealing, the various documents issued to and by Morgan, the foreign currency industry, as well as Morgan's own program. A motion to dismiss is not the proper procedural mechanism to make this factual inquiry. See Whitbread (US) Holdings v. Baron Phillipe de Rothschild, S.A., 630 F. Supp. 972, 978 (S.D.N.Y. 1986). Accordingly, the copyright claim does not fail to state a claim upon which relief can be granted.
(2) The Lanham Act Claim
Cognotec alleges that Morgan is liable under § 43(a) of the Lanham Act for misrepresenting to third parties that it owns AutoDealing. 15 U.S.C. § 1125(a). (Am Compl. P 67). By its terms, § 43(a) requires that a plaintiff establish that a defendant made a misrepresentation or false designation as to a product in commerce and that this misrepresentation will likely cause confusion as to the origin or source of the product. 15 U.S.C. § 1125(a). See Twentieth Century Wear, Inc. v. Sanmark-Stardust Inc., 747 F.2d 81, 91 (2d Cir. 1984), cert. denied, 470 U.S. 1052, 84 L. Ed. 2d 818, 105 S. Ct. 1755 (1985); Wojnarowicz v. American Family Assoc., 745 F. Supp. 130, 141 (S.D.N.Y. 1990). The underlying purpose of § 1125(a) is to protect consumers from a wide variety of misrepresentations of products and services, implicating "a broad spectrum of marks, symbols, design elements and characters." Warner Bros., Inc. v. Gay Toys, Inc., 658 F.2d 76, 78 (2d Cir. 1981).
In this case, Cognotec has failed to allege essential elements of a § 43(a) claim. In particular, Cognotec has failed to allege that any of the infringing materials were disseminated "in commerce." Indeed, the amended complaint makes clear that Morgan developed a program to use internally for its currency customers. (See Am. Compl. PP 40, 44-46). In other words, Morgan's program is not disseminated "in commerce" as is required by a § 43(a) claim. See Licata & Co. v. Goldberg, 812 F. Supp. 403, 409 (S.D.N.Y. 1993). While Morgan's alleged conduct may violate other laws, it does not violate § 43(a) of the Lanham Act. Therefore, the Lanham Act claim fails to state a claim upon which relief can be granted.
In addition, Cognotec fails to allege a misrepresentation or false designation. It simply claims that Morgan's copyright infringement amounts to a false designation as to the source of the computer program. (See Am. Compl. P 55). Copyright infringement, by itself, does not amount to a misrepresentation or false designation to establish a claim under § 43(a). Kregos v. Associated Press, 937 F.2d 700, 711 (2d Cir. 1991). In other words, there must exist some affirmative act whereby Morgan falsely represented itself as the owner of AutoDealing.
The amended complaint fails to allege any such misrepresentation; consequently, it fails to state a claim upon which relief can be granted. Id.
(3) The Quantum Meruit Claim
Cognotec alleges that it provided Morgan "with hundreds of man hours in good faith anticipation of an executed agreement, based upon months of negotiations which were eventually agreed to in principle." (Am Compl. P 85). Morgan contends that this claim should be dismissed because the amended complaint states that an express compensation agreement existed. Under New York law, "where an express contract exists between the parties, recovery under a quantum meruit theory is precluded." Clark-Fitzpatrick, Inc. v. Long Island R. Co., 124 A.D.2d 534, 507 N.Y.S.2d 679, 681 (2d Dep't), aff'd, 70 N.Y.2d 382, 521 N.Y.S.2d 653, 516 N.E.2d 190 (1987).
While Morgan's recitation of the law is correct, its reading of the quantum meruit claim is not. The amended complaint alleges that Cognotec provided these services in anticipation that an contract agreed to in principle would be executed. Thus, Cognotec does not allege that a fully executed agreement existed. It simply alleges that the terms of such an agreement were agreed to, but the execution of the agreement never occurred. (See Am. Compl. PP 37, 43, 85). Thus, the agreement was never completed and did not exist. Accordingly, the quantum meruit claim does not fail to state a claim upon which relief can be granted.
(4) Motion to Strike
Morgan also moves to strike the requests for: (1) statutory damages and attorneys fees in the copyright claim, and (2) punitive damages in the breach of the confidentiality agreement claim. Cognotec alleges that Morgan infringed its copyright by issuing the FANS Requirement in November 1992. The Certificate of Registration, annexed as Exhibit A to the amended complaint, establishes that the effective date of the registration was May 10, 1993. Any awards of statutory damages or of attorneys fees are precluded when the infringement occurs prior to the effective date of registration. 17 U.S.C. § 412(1). See Shapiro & Son Bedspread Corp. v. Royal Mills Assocs., 764 F.2d 69, 73 n.4 (2d Cir. 1985). Thus, it is clear that Cognotec's requests for statutory damages and attorneys fees in its copyright claim must be stricken.
Cognotec's Third Cause of Action alleges a "breach of the confidentiality agreement freely executed by the parties." (Am. Compl. P 76). It is black-letter law that punitive damages are not available for a breach of contract claim. See Fort Howard Paper Co. v. William D. Witter, Inc., 787 F.2d 784, 793 (2d Cir. 1986); Thyssen, Inc. v. S.S. Fortune Star, 777 F.2d 57, 62-63 (2d Cir. 1985). Accordingly, Cognotec's request for punitive damages under the breach of the confidentiality agreement is also stricken.
For the forgoing reasons, Morgan's motion to dismiss is granted only as to the Lanham Act claim but denied as to all the other claims. In addition, Morgan's motion to strike is granted in its entirety.
DATED: New York, New York
August 3, 1994
KEVIN THOMAS DUFFY, U.S.D.J.