IP Law Daily, COPYRIGHT—S.D.N.Y.: Rent control: Lawsuit over alleged infringement of landlord-tenant software will go to trial, (Apr 4, 2022)

By Matthew Hersh, J.D.

The software company’s claims of copyright infringement and trade secret misappropriation were backed by enough evidence to survive summary judgment.

A software company will be entitled to move forward on its allegation that a law firm duplicated its computer program for managing landlord-tenant relations in violation of its rights under the Copyright Act and the Defend Trade Secrets Act, the federal district court in Manhattan has ruled. The court, brushing away a summary judgment motion filed by the law firm, underscored the well-established rule that the copying of non-literal organizational elements of a software program, even without any copying of the code itself, could constitute copyright infringement (Automated Management Systems, Inc. v. Rappaport Hertz Cherson Rosenthal, P.C., March 31, 2022, Swain, L.).

The case involves a computer program designed to manage the legal aspects of the landlord-tenant relationship known as the Landlord Tenant Legal System. A software company named Automated Management Systems, Inc., wrote the program and licensed it to a law firm named Rappaport Hertz Cherson Rosenthal, P.C. At some point in 2016, the law firm asked the software company to do some maintenance work on the program. While doing this work, the software company allegedly noticed that thousands of its files had been copied onto another server—a server that, the software company alleges, was being used by the law firm for the development of a separate program that would replace the original.

The software company sued the law firm, as well as its named partners and several other individuals allegedly involved in the copying, for copyright infringement, trade secret misappropriation, and a host of state law claims. The law firm (along with the individuals) moved for summary judgment, leading to this opinion.

Copyright infringement. The court denied the motion for summary judgment on copyright infringement, finding that the software company had put forward enough evidence to warrant a jury trial.

The court first found that there was substantial similarity between the replacement software and those aspects of the original software that were protectable by law. The software company alleged that the firm copied three different components of the original, namely the so-called “alert” or automatic email function, the so-called “maintenance” or data entry function, and the so-called “data dictionary” that explains the structure of the software database. The alert and data dictionary components—the only components challenged as to protectability—constituted original expression, the court held, because each involved a unique compilation and organization of preexisting material and data. As to substantial similarity, the court found, the law firm failed to proffer any argument warranting summary judgment. The law firm tendered only conclusory assertions about differences between the programs—assertions amply rebutted by the software company—and argued that that the difference in coding language and source code rendered it safe from an infringement claim. But this was not so. “That two programs do not share literal code or even the same coding language does not defeat a plaintiff’s claim to infringement,” the court held—especially where, as here, the dispute revolved around the software company’s organization and compilation and not the precise code itself.

Infringement defenses. Nor could the law firm be saved by any concept relating to fair use, the court held. Fair use itself was not applicable, the court held, because the software company alleged much more than merely intermediate copying for the purpose of making the two programs interoperable but rather copying on a permanent basis. The former was covered under fair use, but not the latter.

The court also rejected two arguments based on Section 117 of the Copyright Act, a provision establishing two fair use-like safe havens for software programs. The program could not be protected under the so-called “essential step” provision—requiring that a copy be created “as an essential step in the utilization of a computer program” and that it be “used in no other manner”—because that doctrine only protected the right to make necessary modifications to existing software, not to create an entirely new program that would compete with the original. For similar reasons, the court held, the law firm’s alleged copying could not fall within the “maintenance and repair” exception of Section 117.

Misappropriation of trade secrets. The court also denied the law firm’s summary judgment motion on trade secrets misappropriation. The court required only a few paragraphs to reach this conclusion. The most substantive argument leveled against the claim was that there was no evidence of the interstate or international commerce necessary for a claim under the Defend Trade Secrets Act, or DTSA. But the software company proffered adequate evidence that the New York-based law firm sent alerts to clients and staff in New Jersey and other states and that it disclosed the software to a Maryland company as part of negotiations around a possible joint venture. That was enough, the court reasoned, to bring the case to a jury.

The case is No. 1:16-cv-04762-LTS-JW.

Attorneys: Howard Alan Wintner (Abramson Law Group) for Automated Management Systems, Inc. Kevin Joseph O'Connor, Sr. (Peckar & Abramson, PC) for Rappaport Hertz Cherson Rosenthal, PC.

Companies: Automated Management Systems, Inc.; Rappaport Hertz Cherson Rosenthal, PC

Cases: Copyright TechnologyInternet TradeSecrets NewYorkNews GCNNews