IP Law Daily, COPYRIGHT—D.P.R.: Software created by bank did not infringe, as a matter of law, (Feb 4, 2014)

By Thomas Long, J.D.

A software company could not go forward with claims that a bank unlawfully copied a piece of software, the federal district court in San Juan, Puerto Rico has decided (UpdateCom, Inc. v. FirstBank P.R., Inc., January 30, 2014, Carreño-Coll, S.). As a matter of law, the bank did not literally copy the company’s software, and the parties’ respective software products were not substantially similar. However, genuine issues of material fact precluded a determination on summary judgment as to whether the bank infringed the company’s copyright by using the company’s software inconsistently with a license agreement.

Ownership of copyright. Plaintiff UpdateCom alleged that a piece of software created by FirstBank, called “ATM Transaction Broker” (“AAB”) infringed UpdateCom’s copyright for software named “End2End.” UpdateCom alleged that End2End was created exclusively by UpdateCom employees and was licensed to FirstBank. FirstBank alleged that UpdateCom operated only on a consultative basis, and the software that became End2End was created for FirstBank, which jointly or solely authorized it. Because this question was in dispute, it could not be resolved on summary judgment, the court said.

Infringement based on copying. Even if the copyright for End2End was owned by UpdateCom, the court determined that no reasonable factfinder could conclude that AAB versions 1.0 and later infringed End2End’s copyright.

UpdateCom’s expert analyzed the source code of four versions of AAB and produced a report concluding that they were copied from End2End. In essence, the expert made two assertions: (1) AAB copied End2End’s general architecture and (2) AAB copied specific portions of End2End’s source code.

Copying of source code. The expert’s report gave four examples of short sections of code—totaling 11 or 13 lines—found in AAB version 1.0 that the report said were “identical” to sections of code found in End2End. Although UpdateCom alleged that AAB copied “thousands” of lines of code from End2End, the expert report did not provide any evidence that AAB copied more than, at most, these short sections of code. In the court’s view, this small amount—approximately 0.22 percent of the total lines of code in the End2End software—constituted de minimis copying, which was not actionable.

Moreover, the court said, the few examples of purportedly “identical” code were not, in fact, identical; at most, they were similar. Although UpdateCom was entitled to allege the nonliteral copying of its source code, its expert report failed to make such a showing. The report pointed to similarities between lines from the respective software products that were superficial but contained differences. The report failed to explain the significance of the similarities and differences; it provided only a cursory explanation of the function of the code and concluded that the excerpted sections were “identical.” The report did not explain why the similarities were significant and not similarities required by efficiency or external constraints. Therefore, the court stated, the report’s determination that the AAB code infringed End2End was purely conclusory and did not meet the requirements of Federal Rule of Civil Procedure 26(a)(2)(B), which requires expert reports to state the basis and reasoning behind their opinions.

Therefore, the court found that there was no issue of material fact with regard to FirstBank’s AAB version 1.0’s alleged copying of literal elements from End2End.

Copying of architectural elements. UpdateCom alleged that AAB version 1.0 copied End2End’s architecture. First, the expert report provided a diagram of AAB’s architecture that showed, in a general way, what AAB did. According to this diagram, AAB communicated with various other pieces of software, including the bank’s financial software and an interbank network that connected the ATMs of various financial institutions in Puerto Rico and the Caribbean. Although the report did not actually make the comparison, the diagram was similar—but not identical—to a basic diagram of End2End’s functions as described elsewhere in the report. In both instances, the software at issue was represented only by a single box, with no detail as to how the software accomplished any task. The diagrams merely showed that End2End and AAB allowed interactions between other, disparate pieces of software.

In the court’s view, these extremely general diagrams could not accurately be referred to as “architectural.” UpdateCom could not claim to own a copyright for this highly generalized structure, which was really nothing more than an uncopyrightable idea for a piece of software, the court said. Therefore, the diagram was neither evidence nor explanation for the report’s assertion that the AAB architecture “follows the same path as the End2End Software Architecture.”

UpdateCom’s expert also relied on a table, supported by three non-contextualized images described by the court as “confusing,” which purportedly showed that the AAB architecture was identical to the End2End architecture. This table constituted nothing more than unexplained, unsupported conclusions, the court said.

Because these two sections of the report were the only ones that dealt with whether AAB versions 1.0 and later were substantially similar to End2End, the court concluded that no material issue of fact existed with regard to those programs’ substantial similarity. Accordingly, the court concluded that the parties’ respective pieces of software were not substantially similar, and AAB versions 1.0 and later did not infringe any copyright that UpdateCom had in End2End.

Date on which AAB software went into effect. The parties also disputed the date on which AAB went into effect. According to FirstBank, End2End was removed from use and version 1.0 of AAB was installed on September 15, 2010. An expert witness for UpdateCom opined, however, that version 1.0 was not compiled until October 10, 2012, and, therefore, it could not have been in use before that date. Therefore, UpdateCom asserted, from September 15, 2010 until at least October 10, 2012, either End2End or similar software that predated version 1.0 of AAB must have been in use.

However, the court said, the expert report failed to provide any real description of the expert’s thought process or reasoning in reaching the conclusion that the AAB software was compiled on the asserted date. The report contained two figures, both of which seemed to be images of a Windows file manager screen. Each figure showed an extensive hierarchy of file folders, with the contents of some of the file folders listed and highlighted. According to the images, these files had a modified and created date of October 10, 2012, or later. The report did not explain why the folders and the files were significant in any respect, and it failed to explain why the creation date as registered by the Windows file manager mattered or why it was an appropriate basis on which to determine the date that AAB was compiled.

Therefore, the court concluded that AAB version 1.0 was implemented on September 15, 2010, and that it did not infringe any copyright that UpdateCom had in End2End. In addition, the court concluded that up until September 15, 2010, FirstBank was running an unmodified version of End2End.

Infringement based on unauthorized use. UpdateCom asserted that FirstBank infringed the copyright to End2End by using it inconsistently with a license agreement. As previously noted, there was a factual issue as to ownership of the End2End software and the existence of a nonexclusive license for FirstBank to use the software. Therefore, summary judgment was not possible regarding UpdateCom’s infringement claims regarding End2End.

The case is Civ. No. 10-1855(SCC).

Attorneys: Samuel F. Pamias-Portalatin (Hoglund & Pamias, PSC) for UpdateCom, Inc. Fernando J. Gierbolini-Gonzalez (Gierbolini Law Office) for First Bank P.R., Inc.

Companies: UpdateCom, Inc.; FirstBank, P.R., Inc.

Cases: Copyright TechnologyInternet PuertoRicoNews