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HARBOR SOFTWARE, INC. v. APPLIED SYS.

May 31, 1995

HARBOR SOFTWARE, INC., Plaintiff, against APPLIED SYSTEMS, INC., Defendant.


The opinion of the court was delivered by: BAER

 HAROLD BAER, JR., *fn1" U.S.D.J.

 Defendant Applied Systems has moved for summary judgment on all causes of action except copyright infringement, relying primarily on its assertion that the facts adduced thus far indicate that plaintiff cannot sustain various elements of the subject claims. Def.'s Mem. L. Supp. Mot. Summ. J. at 1. In addition, defendant asserts that the Copyright Act, 17 U.S.C. ยง 301, preempts the trade secret misappropriation and unfair competition claims. Id.

 The Court heard oral argument on this motion on January 31, 1995. For the reasons set forth herein, defendant's motion for summary judgment is DENIED in its entirety.

 I. BACKGROUND

 Plaintiff Harbor Software is a Michigan corporation whose principal product, SCM, was created chiefly by its president Jeffrey Tollaksen. Defendant's representatives saw Tollaksen demonstrate SCM at two insurance industry conventions in late 1988, and asked Tollaksen about the possibility of integrating defendant's program, TAM, with SCM. Tollaksen visited defendant's headquarters in May 1989 to further demonstrate SCM. Before demonstrating the software, Tollaksen requested that Thomas Eustace, who was then managing Applied Systems, sign a confidentiality agreement. Eustace refused to sign the agreement, but, according to plaintiff, assured him that "the confidentiality agreement would be part of whatever business agreement was eventually worked out." Pl.'s Mem. L. Opp'n Mot. Summ. J. at 6.

 Shortly thereafter, plaintiff and defendant entered into an agreement whereby Tollaksen worked at defendant's headquarters to explore the possibility of integrating SCM with TAM. Defendant was then considering either integrating SCM with TAM, or marketing SCM as a stand-alone product. Def.'s Mem. L. Supp. Mot. Summ. J. at 7. Defendant agreed to pay Tollaksen $ 2,000 per month for 40 hours of work each month, plus $ 50 per hour for every additional hour spent working on the integration. Defendant paid Tollaksen $ 8,500 between February 1989 and May 1989 pursuant to this agreement. Id. at 9. While working on this project, Tollaksen loaded portions of the SCM source code onto defendant's computers. Pl.'s Mem. L. Opp'n Mot. Summ. J. at 9. Defendant disputes the period of time during which SCM was loaded onto its computers and denies that its employees could, as a result, access the source code without Tollaksen's knowledge. Def.'s Mem. L. Supp. Mot. Summ. J. at 9.

 Plaintiff asserts that Tollaksen had completed the integration of SCM and TAM by the end of his stay there in May 1989, Pl.'s Mem. L. Opp'n Mot. Summ. J. at 9; defendant, meanwhile, challenges this characterization of the work's state, Def.'s Mem. L. Supp. Mot. Summ. J. at 11. Defendant then ceased negotiations with plaintiff on possibly acquiring licensing rights for SCM. According to plaintiff, this was effected by a phone call from Eustace, who stated, "The business deal is not going to go through." When Tollaksen asked why, Eustace explained that a certain search performed by SCM had been completed "too slowly." When Tollaksen stated that this could be corrected, Eustace allegedly responded that it did not matter. Pl.'s Mem. L. Opp'n Mot. Summ. J. at 10. In the spring of 1990, plaintiff discovered that defendant had released a new version of TAM. Plaintiff relates that the similarities of that software program to SCM prompted this litigation.

 II. THE COPYRIGHT ACT: PREEMPTION OF STATE LAW CLAIMS?

 State law causes of action that have been held not to be preempted by the Copyright Act include breach of confidentiality, breach of trust, unfair competition, and trade secret misappropriation. Computer Assocs. Int'l, 982 F.2d at 717 (stating that many state law causes of action are not preempted (citing Balboa Ins. Co. v. Trans Global Equities, 218 Cal. App. 3d 1327, 267 Cal. Rptr. 787 (Cal. Ct. App.), cert. denied, 498 U.S. 940, 111 S. Ct. 347, 112 L. Ed. 2d 311 (1990))); see also Mayer, 601 F. Supp. at 1536 (1985) (breach of confidentiality and unjust enrichment); DC Comics, Inc. v. Filmation Assocs., 486 F. Supp. 1273 (S.D.N.Y. 1980) (unfair competition). Accordingly, I reject defendant's assertion that plaintiff's trade secret misappropriation and unfair competition claims are preempted.

 III. SUMMARY JUDGMENT STANDARD

 Rule 56 of the Federal Rules of Civil Procedure provides for summary judgment where the evidence shows that "there is no genuine issue as to any material fact and [that] the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 250, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). "Summary judgment is properly regarded . . . as an integral part of the Federal Rules as a whole, which are designed to 'secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986) (quoting Fed. R. Civ. P. 1). In determining whether there is a genuine issue of material fact, a court must resolve all ambiguities, and draw all inferences, against the moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 8 L. Ed. 2d 176, 82 S. Ct. 993 (1962) (per curiam); Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57 (2d Cir. 1987). An issue of credibility is insufficient to preclude the granting of a motion for summary judgment. Neither side can rely on conclusory allegations; instead, the disputed issues of fact must be supported by evidence that would allow a "rational trier of fact to find ...


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