copyright rather than to the copy, then the fact that the license is perpetual does not determine the duration of the transfer of the copy because the intellectual property rights are distinct from the personal property rights. See 17 U.S.C. § 202 ("nor, in the absence of an agreement, does transfer of ownership of a copyright or of any exclusive rights under a copyright convey property rights in any material object"). Brownstone could argue that if the license applies to the copyright, then the transfer of copies "as part of the license" signifies that the duration of the transfer of the copies must equal the perpetual duration of the license of the copyright. However, the phrase "as part of the license" does not unambiguously provide that the terms of the transfer of a copy should be the same as the terms of the copyright license. In short, the court finds it reasonable to interpret the Agreement as a license of the copyright with no terms defining the transfer of a copy.
Even assuming the license unambiguously refers to the copy rather than to the copyright, Brownstone's argument ignores the ambiguity in the Agreement surrounding the other half of Professor Nimmer's equation -- the single payment. Brownstone's payments are not made all at once but are divided into three different payment periods. Agreement, P 2. The separation of Brownstone's payment for the software into three different periods suggests that the Agreement is not a simple sale of a copy of software that has been attached to a label of "license." Because the Agreement is not a simple sale masquerading as a license or lease, the court cannot conclude that it unambiguously transfers ownership of a copy of software to Brownstone. Instead, as Professor Nimmer suggests, extrinsic evidence is necessary to understand the parties' intentions. See Shann v. Dunk, 84 F.3d 73, 80 (2d Cir. 1996) (court may look to extrinsic evidence to determine the intent of the parties to an ambiguous agreement).
The extrinsic evidence in the record does not resolve the ambiguity in the Agreement regarding whether Brownstone owns a copy of the computer program. While David Isacowitz, AIM's president, testified that he did not intend the Agreement to convey to Brownstone the ownership of a copy of software, Isacowitz Dep. at 29, 47, a trier of fact could view the terms of the Agreement as providing for the sale of a copy of the software. Thus, there exists a genuine issue of material fact as to whether Brownstone owns a copy of the software, and summary judgment is inappropriate on Brownstone's claim that Section 117 provides a defense to AIM's copyright claim.
III. What is the Scope of the License AIM issued to Brownstone?
Brownstone seeks summary judgment on AIM's breach of contract claim, arguing that Brownstone's use of the software is consistent with the provisions of the Agreement. If true, the Agreement would also serve as a defense to AIM's copyright claim because a copyright owner cannot claim a copyright infringement for activities that he has licensed. Gilliam v. Am. Broadcasting Co., 538 F.2d 14, 21 (2d Cir. 1976). Thus, both the copyright claim and the contract claim are insufficient as a matter of law if the Agreement encompasses Brownstone's activities. Bourne v. Walt Disney Co., 68 F.3d 621, 631 (2d Cir. 1995).
The Agreement provides that AIM grants Brownstone "a license to use" the Application Software, and that license is "perpetual, non-exclusive and non-transferable." AIM claims that the word "use" in the license allows Brownstone only to run the software. See, e.g., Isacowitz Dep. at 29, 47. Brownstone does not believe that the Agreement constitutes a license at all. Because the parties have not fully developed for the court the proper scope of the license that AIM granted to Brownstone, the court cannot conclude as a matter of law whether Brownstone has exceeded the scope of its license. Thus, the court denies the motion for summary judgment on the copyright violation claim and the breach of contract claim at this time and without prejudice to later renewal.
IV. Unfair Competition and Misappropriation of Trade Secrets
Brownstone also seeks summary judgment on AIM's claims that Brownstone misappropriated trade secrets and committed the tort of unfair competition. In order to demonstrate misappropriation of a trade secret, AIM must prove (1) that it possessed a trade secret and (2) that Brownstone is using that trade secret either in breach of an agreement, confidence, or duty or as a result of discovery by improper means. Integrated Cash Management, Inc. v. Digital Transactions, Inc., 920 F.2d 171, 173 (2d Cir. 1990).
New York courts have cited with approval the definition of trade secrets provided by Restatement of Torts § 757, comment b, which defines a trade secret as "any formula pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it." Ashland Management, Inc. v. Janien, 82 N.Y.2d 395, 407, 604 N.Y.S.2d 912, 624 N.E.2d 1007 (1993). Though not explicitly detailed in its Complaint, PP 28-31, AIM apparently is arguing that it possessed some form of intangible trade secret relating to its method for developing computer software.
In particular, AIM alleges that the defendants "infringed AIM's rights by servicing, modifying, and performing maintenance on the Software and in the process by utilizing trade secrets belonging to AIM." Complaint, P 31. For purposes of this motion, the court must assume that unwritten program structuring does exist and that it is a trade secret. Cf., Integrated Cash Management, 920 F.2d at 174 (manner in which non-secret computer programs interact constitutes a trade secret).
However, AIM must also prove that Brownstone has misappropriated that trade secret.
Because trade secret law exists to protect "one who has a trade secret [who] may be harmed merely by the disclosure of his secret to others as well as by the use of his secret in competition with him," Restatement of Torts, § 757, comment c, quoted in Omnitech Int'l, Inc. v. Clorox Co., 11 F.3d 1316, 1325 (5th Cir. 1994), a party can prove misappropriation either through improper disclosure or use in competition. There is no allegation that Brownstone disclosed AIM's trade secret to any third party. Additionally, there is no allegation that Brownstone has used the trade secret or will use it in competition with AIM. Cf., R.W. Sims v. Mack Trucks, Inc., 463 F. Supp. 1068, 1070 (E.D. Pa. 1979) (citing Restatement of Torts and finding that Pennsylvania common law tort of misappropriation of trade secrets applies only to, competitors); Omnitech, 11 F.3d at 1325, 1326 n.14 (citing Restatement of Torts and finding that Louisiana trade secrets act applies only to competitors). Thus, as a matter of law, AIM cannot prove that Brownstone misappropriated AIM's trade secret. Brownstone's motion for summary judgment on AIM's claim of misappropriation of trade secrets is therefore granted.
AIM has also raised a claim of unfair competition against Brownstone. While the Second Circuit earlier had found the tort to be "adaptable and capacious" and "capable of mischievous application" because it had been broadly described as "encompassing 'any form of commercial immorality,'" Roy Export Co. Establishment v. Columbia Broadcast Syst., Inc., 672 F.2d 1095, 1105 (2d Cir. 1982) (Newman, J.) (citations omitted), the Second Circuit now recognizes that the "essence of unfair competition under New York common law is 'the bad faith misappropriation of the labors and expenditures of another, likely to cause confusion or to deceive purchasers as to the origin of the goods." Jeffrey Milstein, Inc. v. Greger, Lawlor, Roth, Inc., 58 F.3d 27, 34 (2d Cir. 1995) (Newman, C.J.). Brownstone in this case did not attempt to cause any confusion or deceive any third party with regard to AIM's product. Instead, it sought to use the product for itself. Consequently, Brownstone's motion for summary judgment on the unfair competition claim is granted.
For the foregoing reasons, Brownstone's motion for summary judgment is granted as to AIM's unfair competition and misappropriation of trade secrets claims but denied as to AIM's copyright and breach of contract claims.
Allyne R. Ross
United States District Judge
Dated: March 3, 1997
Brooklyn, New York