Kepner-Tregoe, Inc. v. Leadership Software, Inc. ( 1994 )

United States Court of Appeals,
Fifth Circuit.
No. 92-2481.
KEPNER-TREGOE, INC., Plaintiff-Appellee,
v.
LEADERSHIP SOFTWARE, INC., Defendant-Appellant.
Feb. 2, 1994.
Appeal from the United States District Court for the Southern
District of Texas.
Before JOHNSON, WIENER, and DeMOSS, Circuit Judges.
WIENER, Circuit Judge:
Plaintiff-appellee Kepner-Tregoe, Inc. (K-T) won a permanent
injunction and damages against Defendant-Appellant Leadership
Software, Inc. (LSI) in a suit complaining that LSI's computer
program infringed K-T's exclusive license to copyrighted management
training materials. LSI appeals, raising issues touching on both
copyright law and the Federal Rules of Evidence. We modify in part
the ruling of the district court and, as modified, affirm.
I.
FACTS AND PROCEEDINGS
K-T sued LSI alleging that LSI's computer program called
"Managing Participation in Organization" (MPO) infringed
copyrighted materials (Licensed Materials) that Professor Vroom, a
507 owner of LSI, had exclusively licensed to K-T in a 1972
agreement (the Agreement). Prior to trial, K-T secured a temporary
restraining order and a preliminary injunction prohibiting LSI from
manufacturing, distributing, or selling the MPO computer program.
In a bench trial, the district court found in favor of K-T and
entered a permanent injunction against LSI's distribution of the
MPO program. The court also awarded K-T damages in the amount of
$46,000.
Significantly, the court enjoined distribution of (1) the
original MPO program, (2) a modified MPO program that LSI produced
in an effort to remove just the infringing language,
and—seemingly—(3) all future modifications and revisions of MPO.
The court also awarded K-T attorneys fees, costs, and interest.
LSI timely appealed, asserting that the court erred with respect to
both its application of copyright law and its evidentiary rulings.
K-T, a Maryland corporation with its principal place of
business in Princeton, conducts management training seminars. LSI,
a Texas corporation with its principal place of business in the
Houston area, sells the MPO computer program, which was developed
by Professors Vroom and Jago, the equal owners of LSI. Jago was a
named defendant in the district court proceedings, but K-T could
not compel Vroom's attendance at trial in Houston because he
resides in Connecticut. Neither Vroom nor Jago is a party to this
appeal.
In 1972, K-T signed the Agreement, by which it acquired an
exclusive international license to copyrighted materials entitled
Leadership and Decision Making Cases and Manuals for use in
Leadership Training. In consideration for this exclusive license
K-T paid the authors—Professor Vroom and his former colleague,
Professor Yetton—more than $400,000 in royalties over several
years. K-T ultimately bought out the license for an additional,
one-time payment of $100,000. The Licensed Materials comprise a
management decision-making model called the Vroom-Yetton Model (V-Y
Model) and include descriptions of management problems,
explanations of management decision-making styles, flow charts
presenting decision-making possibilities, and rules designed to
help managers make the best decisions.
Among the copyrighted materials that were exclusively licensed
to K-T are eight "questions" or "problem attributes" and five
"definitions" or "processes." These questions and processes are
the core of the V-Y Model. The questions prompt managers to
evaluate their decision-making landscape. For example, one
question asks if the manager has adequate information to make a
good decision himself. The five definitions or processes describe
various decision-making approaches, from autocratic (the manager
alone) to more democratic (decisions requiring consensus).
Presumably, the V-Y Model rules tell a manager which
decision-making process to use in a given context, based on the
manager's responses to the eight questions.
In 1983, Professor Jago—working closely with Vroom—created the
MPO computer program. The MPO program retains the same eight
questions and five processes that comprise the V-Y Model, but adds
four additional questions. The MPO program also evidently
processes the information generated by the questions differently,
and presumably tells managers which decision-making process to
adopt, without forcing them to consult flow charts and elaborate
decision-making rules. The organization and language of the five
processes and eight questions is virtually identical in K-T's
Licensed Materials and the MPO program.
Vroom and Jago kept key K-T personnel apprised of their work
on the MPO program. In 1987, Vroom and Jago incorporated LSI to
market the MPO program. Shortly thereafter, K-T initiated
negotiations to reach a licensing agreement covering the program;
these negotiations failed.1 In 1990, K-T learned that LSI had been
selling copies of the MPO program. K-T commenced this lawsuit
almost immediately, alleging that MPO infringed the copyright
covering its Licensed Materials. Although K-T became entitled to
copyright protection through an exclusive licensing agreement, this
appeal is not about licensing arrangements. Rather, this is a
straightforward copyright case.
II.
ANALYSIS
On appeal LSI contends that the district court erred both in
its application of copyright law and in its evidentiary rulings.
We consider each topic in turn.
A. Copyright Issues
Concluding that LSI's MPO program infringed K-T's Licensed
Materials, the district court awarded K-T damages and enjoined LSI
from "further copying, producing, distributing, and/or selling the
MPO program." The court also concluded that a modified version of
the MPO program infringed K-T's Licensed Materials. This modified
MPO program resulted from LSI's efforts to remove all infringing
1
K-T's willingness to undertake negotiations with Jago to
buy a license for MPO need not reflect any doubt about the
protectability of the materials K-T licensed under the Agreement.
Clearly MPO contains some original elements that may have
interested K-T. But MPO also clearly contains significant
amounts of text that is substantially similar to portions of the
materials licensed to K-T.
language from the original MPO program. The injunction covers this
modified program too. Finally, the court enjoined all future
modifications and improvements of the MPO program. For clarity,
these programs—(1) the MPO program, (2) the modified MPO program,
and (3) all future modifications of the MPO program, are discussed
separately.
1. The MPO Program
The district court concluded that LSI's MPO program infringed
K-T's Licensed Materials. To reach that conclusion, the court had
to find that (1) K-T owned a valid copyright over the Licensed
Materials, (2) LSI copied portions of the Licensed Materials when
it made the MPO program, and (3) among the portions copied were
substantial protectable elements of the Licensed Materials.2 LSI
does not contest that K-T's Licensed Materials are covered by a
valid copyright. Indeed, Vroom—a 507 partner in LSI—applied to
register the V-Y Model materials that were subsequently licensed to
K-T, evidently reflecting his belief that those materials were the
proper subject of copyright protection.3 Rather, LSI insists that
(1) K-T failed to prove that LSI had actually copied K-T's licensed
materials, and (2) the court erred in extending copyright
protection to inherently unprotectable elements of K-T's materials.
a. Proof of Actual Copying
2
Feist Publications, Inc. v. Rural Tel. Serv. Co., Inc., 499
U.S. 340, 348-49, 361-62, 111 S. Ct. 1282, 1289, 1295-96, 113
L. Ed. 2d 358, 371, 379 (1991).
3
Vroom and Jago also affixed copyright warnings at the
bottom of MPO screen text that displayed the definitions and
processes at issue here, again reflecting their belief that such
text is copyrightable.
LSI argues that the district court erred in finding that it
had actually copied K-T's Licensed Materials, rather than copying
other materials—possessed by third parties—that contained the same
information. We find this argument to be without merit.
As direct evidence of copying is uncommon, plaintiffs
generally demonstrate copyright infringement indirectly or
inferentially by proving that (1) defendants had access to the
copyrighted works, and (2) there is a substantial similarity
between infringed and infringing works.4 These copyright issues of
access and substantial similarity are findings of fact and are
consequently reviewed under the clearly erroneous standard.5 In
this case, the district court found that both Vroom and Jago had
access to the Licensed Materials. As Vroom helped develop and
write those materials, and as Jago relied on them in developing the
MPO program, that finding is not clearly erroneous. Indeed, it is
factually correct.
LSI, however, insists that K-T never demonstrated that LSI
literally copied the specific materials that were licensed to K-T.
But LSI's dogged insistence is nonsensical. Even if LSI did lift
4
Plains Cotton Co-op. Ass'n v. Goodpasture Computer Serv.,
Inc., 807 F.2d 1256, 1260 (5th Cir.), cert. denied, 484 U.S. 821,
108 S. Ct. 80, 98 L. Ed. 2d 42 (1987); Miller v. Universal City
Studios, Inc., 650 F.2d 1365, 1375 (5th Cir.1981); Ferguson v.
National Broadcasting Co., Inc., 584 F.2d 111, 113 (5th
Cir.1978); accord Autoskill, Inc. v. National Educ. Support
Sys., Inc., 994 F.2d 1476, 1489 (10th Cir.), cert. denied, ---
U.S. ----, 114 S. Ct. 307, 126 L. Ed. 2d 254 (1993).
5
See Lakedreams v. Taylor, 932 F.2d 1103, 1108-09 (5th
Cir.1991) (indicating that a "district court's determination
concerning copying" is reviewed under the clearly erroneous
standard); accord McCulloch v. Albert E. Price, Inc., 823 F.2d
316, 318 (9th Cir.1987).
the offending expression from third party sources, its reproduction
of that expression for commercial purposes may be infringing.
Language copied from those third party sources was itself copied or
derived from K-T's Licensed Materials, and its legality depends on
copyright law. In other words, even if LSI copied a copy of K-T's
Licensed Materials, such copying may still constitute infringement.
Copying a copy of copyrighted materials is a cognizable
contravention of the Copyright Code.6
LSI does not dispute that there is substantial similarity
between the MPO program and K-T's Licensed Materials. Indeed, LSI
admits that the MPO program incorporates the same eight questions
and five processes that the district court characterized as the
"heart and soul" of the V-Y Model, which was licensed to K-T.
Thus, the district court's finding that MPO is substantially
similar to K-T's Licensed Materials is not clearly erroneous. In
summary, neither the district court's finding that LSI had access
to K-T's Licensed Materials, nor its finding that MPO program was
substantially similar to those materials is clearly erroneous.
Consequently, the district court's finding that LSI copied K-T's
Licensed Materials is not clearly erroneous.
b. Protectable and Unprotectable Elements of K-T's Copyrighted
Materials
LSI argues nonetheless that the portions of K-T's licensed
materials that it allegedly copied are but unprotectable ideas or
facts, and that the district court therefore erred in holding that
6
See, e.g., Arica Inst., Inc. v. Palmer, 970 F.2d 1067, 1074
(2d Cir.1992) ("access through a third party is legally
sufficient").
LSI infringed K-T's copyright. LSI is correct that the mere fact
that K-T's Licensed Materials are copyrighted does not mean that
all aspects of those materials are automatically protected.7
Specifically, LSI rightly observes that copyright law protects
tangible, original expressions of ideas, not ideas themselves.8
"[N]o author may copyright facts or ideas. The copyright is
limited to those aspects of the work—termed "expression'—that
display the stamp of the author's originality."9 Thus, if we
conclude that LSI only copied unprotectable elements of K-T's
materials, we must reverse the district court's judgment.
Unfortunately, the line between idea and expression is hard
to draw. Additionally, when an idea can be expressed in very few
ways, copyright law does not protect that expression, because doing
so would confer a de facto monopoly over the idea. In such cases
the idea and expression are said to be merged.10 To determine the
scope of copyright protection in a close case, therefore, a court
may have to filter out ideas, processes, facts, idea/expression
mergers, and other unprotectable elements of plaintiff's
copyrighted materials to ascertain whether the defendant infringed
protectable elements of those materials. In this case, however, we
7
See, e.g., Feist Publications, Inc. v. Rural Tel. Serv.
Co., Inc., 499 U.S. 340, 348-49, 111 S. Ct. 1282, 1289, 113
L. Ed. 2d 358, 371 (1991).
8
Copyright Act of 1976, 17 U.S.C. § 102(a), (b); see also
Mason v. Montgomery Data, Inc., 967 F.2d 135, 138 (5th Cir.1992).
9
Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S.
539, 105 S. Ct. 2218, 2224, 85 L. Ed. 2d 588, 599 (1985); see also
The Copyright Act of 1976, 17 U.S.C. § 102(b).
10
Mason v. Montgomery Data, Inc., 967 F.2d at 138.
disagree with LSI's contention that such a filtration process leads
to the conclusion that the district court erred in finding that
LSI's MPO program infringed K-T's Licensed Materials.
Although there is no evidence that the district court
undertook a rigorous "abstraction-filtration-comparison" analysis
of the sort approved by courts for sophisticated treatment of
copyright cases,11 such an analysis was not absolutely necessary
here. The district court carefully juxtaposed selections from K-
T's Licensed Materials with selections from the MPO program,
thereby demonstrating a damning similarity—nay identity—of
organization and language. This comparison of literal language or
expression provided strong evidence for the court's finding that
the MPO program infringed K-T's Licensed Materials.
Seizing upon the court's statement that the questions and
processes of the Vroom-Yetton model are its "heart and soul," LSI
argues that these elements are "inherent in the leadership
management theory ... of the Vroom models," implying that questions
and processes that comprise the V-Y Model are unprotectable ideas.
LSI contends that there is no protectable expression remaining in
K-T's licensed materials, once all unprotectable elements are
filtered out. But this is absurd.
Each question and process in the V-Y Model is presented in a
paragraph of text. There are countless ways of expressing the
content of each paragraph,12 so there was no need for the MPO screen
11
See, e.g., Computer Assocs. Int'l, Inc. v. Altai, Inc.,
982 F.2d 693, 707 (2d Cir.1992).
12
LSI inadvertently conceded that the questions and
processes that comprise the V-Y Model can be written in several
text to copy exactly the language of K-T's materials. Even if each
of the eight questions and five processes conveys unprotectable
ideas, the specific words, phrases, and sentences selected to
convey those ideas are protectable expression under any reasonable
abstraction analysis. As LSI's MPO program copied those words,
phrases, and sentences verbatim, we conclude that—far from being
clearly erroneous—the district court's finding that the MPO program
infringed K-T's Licensed Materials was correct and must be
affirmed.13
2. The Modified MPO Program
The district court also concluded that LSI's modified MPO
program infringed K-T's Licensed Materials. As noted above, the
modified MPO program was the end result of LSI's surgical efforts
to remove only the infringing language from the original MPO
program. As this effort was partially successful, we cannot affirm
the district court's conclusion that the modified MPO program
infringes K-T's copyright merely by making a cursory comparison of
the modified MPO program's language with that of K-T's materials.
ways when it undertook to create a modified MPO program that was
devoid of infringing language. LSI did this—of course—by
selecting alternative formulations or expressions of the same
questions and processes, thereby proving that alternative
expressions were possible. Unfortunately, LSI's did not change
the expression enough to escape infringement.
13
K-T is also correct that Arica Inst., Inc. v. Palmer, 970
F.2d 1067 (2d Cir.1992), supports a finding of infringement. LSI
argues that the court in Arica juxtaposed selections of disputed
text—just as the district court did in this case—and found that
"copyright protection does not attach" to such passages. But
this is an inaccurate statement of the holding in Arica. The
court in Arica found that the compared passages "pass[ed] the
substantial similarity threshold." Arica, 970 F.2d at 1074. The
court thus probably would have found infringement had it not held
that the defendant was entitled to a fair use defense.
As with the original MPO program, there is no doubt that LSI
copied K-T's materials in creating its modified MPO program. As
noted above, evidence of LSI access to K-T's materials and the
substantial similarity of the original MPO program overwhelmingly
suggest copying. The same is true for the modified MPO program,
which is just a post factum rearrangement of the original MPO
program, itself a wholesale plagiarism of the definitions and
processes that were licensed to K-T. Our finding of copying does
not, however, lead automatically to the conclusion of infringement:
the question remains whether LSI's modified MPO program copied any
protectable elements of K-T's Licensed Materials.14 We conclude
that it did.
The main purpose or function of K-T's Licensed Materials is
to teach managers how to analyze their own decision making, and how
to make the best decision in each decision-making context. Clearly
this basic idea of a management training program is unprotectable.15
Likewise unprotectable is the more specific idea of training
managers by asking them a series of questions about their
14
Feist Publications, Inc. v. Rural Tel. Serv. Co., Inc.,
499 U.S. 340, 348-49, 111 S. Ct. 1282, 1289, 113 L. Ed. 2d 358, 371
(1991) ("The mere fact that a work is copyrighted does not mean
that every element of the work may be protected"); Baker v.
Selden, 101 U.S. 99, 101-03, 25 L. Ed. 841 (1879) (liability for
copyright infringement only obtains where protected elements of a
work are copied); accord Autoskill, Inc. v. National Educ.
Support Sys., Inc., 994 F.2d 1476, 1496-98 (10th Cir.), cert.
denied, --- U.S. ----, 114 S. Ct. 307, 126 L. Ed. 2d 254 (1993);
Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1475-77 (9th
Cir.), cert. denied sub nom. B.B. Asset Management, Inc. v.
Symantec Corp., --- U.S. ----, 113 S. Ct. 198, 121 L. Ed. 2d 141
(1992).
15
See, e.g., Whelan Assocs., Inc. v. Jaslow Dental Lab.,
Inc., 797 F.2d 1222, 1236-38 (3d Cir.1986), cert. denied, 479
U.S. 1031, 107 S. Ct. 877, 93 L. Ed. 2d 831 (1987).
decision-making landscape, and then—based on their
answers—suggesting a preferred decision-making process.
At the other end of the abstraction spectrum, the specific
words, phrases, and sentences used to formulate the questions and
processes clearly constitute protected expression.16 But the
intermediate levels of abstraction, consisting of such factors as
the structure, sequence, and organization of a copyrighted work,
are more problematic: courts' judgments about the protectability
vel non of such elements are inevitably ad hoc and fact specific.17
In this case, we conclude that the modified MPO program copied
substantial protectable elements of K-T's Licensed Materials and
thus infringed K-T's copyright.
Like the district court, we are unimpressed by LSI's shallow
efforts to remove the infringing language from the MPO program.
Although it is true that the modified MPO program does not
identically trace the language of the definitions and processes
contained in K-T's Licensed Materials (as did the original MPO
program), the modified MPO program's language is still
substantially similar to that of K-T's materials. True, "you solve
the problem yourself" has been replaced with "you reach a solution
alone." And "you consult one-to-one with those that report to you"
replaces "you share the problem with relevant subordinates." But
such modifications do not completely dispel the similarity of
expression shared by infringed and infringing materials.
16
See, e.g., The Gates Rubber Co. v. Bando Chemical Indus.,
Ltd., 9 F.3d 823, 836 (10th Cir.1993).
17
Id.
LSI argues that the modified MPO program is merely
substantially similar to unprotectable conceptual elements of K-T's
materials, that the modified MPO program communicates the same
concepts as K-T's Licensed Materials, but with different
expression. We disagree.
As an analogy, consider the familiar quote from Romeo and
Juliet: "O Romeo, Romeo! wherefore art thou Romeo?"18
Reformulating this quote in a manner analogous to LSI's
modification of K-T's copyrighted language, we might write: "Ah
Romeo, Romeo! Why did you have to be born Romeo?" Are these two
quotes alike only in conceptual substance? Obviously not! Yes,
they both express the same concept: why did Juliet have to fall in
love with Romeo, scion of Montague—her family's bitterest foe? But
they are also quite alike in expression. They are not identical,
but they are alike. Both sentences embrace the dramatic repetition
of Romeo's name. Both sentences are phrased as questions. Both
have the quality of a sigh: the gasping resignation of a woman
marvelling at the fateful irony of life. Although the two
sentences are not identical, they are manifestly similar in
expression, as well as in conceptual content.
The language of LSI's modified MPO program is likewise similar
to that of K-T's materials: their paragraphs are about the same
size, their phrases are similar, their ideas are presented in the
same order; in short, parts of the modified MPO program are but a
transparent, syntactic rearrangement of portions of K-T's
copyrighted materials. While no longer identical to those
18
William Shakespeare, Romeo and Juliet act II, sc. 2.
materials, the modified MPO program still bears many telltale signs
of its origins. It is still a copy—still a child of infringement.
Additionally, we conclude that the modified MPO program
infringes upon elements of K-T's materials, which—although existing
at a higher level of organizational abstraction—are nonetheless
protectable under copyright law. As we have noted, generalizing
about the degree of copyright protection owed to intermediate
levels of abstraction, such as the structure, sequence, and
organization of copyrighted works, is difficult. A fairly broad
consensus has emerged, however, that such non-literal elements of
computer programs and other copyrightable works may be protected.19
Generally speaking, then, we join that consensus.20
19
See, e.g., Computer Assocs. Int'l, Inc. v. Altai, Inc.,
982 F.2d 693, 702-03 (2d Cir.1992); Whelan Assocs., Inc. v.
Jaslow Dental Laboratory, Inc., 797 F.2d at 1236-38; Lotus Dev.
Corp. v. Paperback Software Int'l, 740 F. Supp. 37 (D.Mass.1990).
20
We do not purport to define the precise scope of copyright
protection for non-literal elements of copyrighted works in this
case. We note in passing, however, that our statements are not
inconsistent with Plains Cotton Cooperative Assoc. v. Goodpasture
Computer Serv. Inc., 807 F.2d 1256 (5th Cir.1987). In that case
we upheld the district court's denial of a preliminary injunction
against an alleged infringer of a computer program because the
copyright holder had failed to demonstrate a substantial
likelihood of success on the merits. In Plains Cotton, we
declined to embrace the broad scope of copyright protection for
computer programs announced in Whelan Associates, Inc. v. Jaslow
Dental Laboratory, Inc., 797 F.2d 1222 (3d Cir.1986), but not
because we wanted to restrict copyright protection to the literal
text of copyrighted works. Rather, we declined to embrace Whelan
because (1) we were reviewing a motion for preliminary injunction
and thus were "one step removed from the merits of the case," 807
F.2d at 1262, (2) the record was—in consequence—only partially
developed, and (3) the sequence and organization of the allegedly
infringing program were dictated by externalities of the cotton
market, thus implicating the scenes a faire doctrine. 807 F.2d
at 1262; see also The Gates Rubber Co. v. Bando Chemical Indus.,
Ltd., 9 F.3d 823, 838 (10th Cir.1993) (for a general discussion
of the scenes a faire doctrine). Our analysis of this case thus
does not conflict with our decision in Plains Cotton.
LSI argues that the V-Y Model, which was described in the
materials licensed to K-T, amounts to a law of nature like Newton's
Law of Gravitation, the constant W (for discussing the geometry of
circles and spheres) or Einstein's E = MC2. Specifically, LSI
contends that the eight definitions and five processes that
comprise the V-Y Model are fundamental, ineluctable aspects of a
managerial relationship—that intelligent discussion of managerial
decision-making is impossible without specific reference to these
universal definitions and processes. Although there is a kernel of
truth in this assertion, it is a small kernel: in the main, we
disagree with this LSI's self-aggrandizing characterization of the
V-Y Model.
Some unprotectable fundamental concepts are undoubtedly
buried in the definitions and processes of the V-Y Model. For
example, the idea that a manager can make a decision without
consulting his subordinates is unprotectable: it is simply one of
the relational possibilities that exist between managers and
subordinates. As noted above, however, the specific ways that the
Neither did our citation—in Plains Cotton—to Synercom
Technology, Inc. v. University Computing Co., 462 F. Supp.
1003 (N.D.Tex.1978), reflect an intention generally to
restrict copyright protection to the literal text of
copyrighted works. Synercom, a district court case, is
binding neither in its legal holding nor by compelling
factual analogy. Consequently, we need not embark on a full
analysis of that case, and we refrain from so doing. All
that we do here is embrace the general, noncontroversial
proposition that non-literal aspects of copyrighted
works—like structure, sequence, and organization—may be
protected under copyright law: a proposition that has been
approved by Supreme Court precedent. See, e.g., Feist
Publications, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S.
340, 111 S. Ct. 1282, 113 L. Ed. 2d 358 (1991) (indicating that
the selection and arrangement—i.e., the organization—of
facts may be protected under copyright law.
questions and processes are formulated—the exact words, phrases,
and sentences used to describe decision-making processes or
questions—are protectable expression. And other, more abstract
organizing principles of the V-Y Model are protectable as well.
In dissecting the problems of management decision-making into
five processes and eight questions, Vroom and Yetton unquestionably
originated a useful model of managerial decision-making. Yet they
obviously did not discover the single, unique, unavoidable
description of human managerial relations. In creating the MPO
program, for example, Jago added four more questions to the eight
that were part of the V-Y Model. Such an expansion of the original
theory indicates that the first eight questions did not
exhaustively and uniquely portray human management relations.
Close analysis of the V-Y processes and questions reveals that
the ideas they encapsulate can be packaged in different ways. For
example, one process (designated AII) instructs a manager to gather
information from subordinates, then make the relevant management
decision himself. The process states that the manager "may or may
not tell subordinates" the nature of the problem in getting
information from them. This makes two separate logical
possibilities, so this process could—in a different model—be broken
into two different processes. In short, not only does the V-Y
Model fail to describe all conceivable features of the management
decision-making landscape, it also fails to organize and package
its managerial truisms in a single, unique, ineluctable way: there
are many ways of organizing those same insights.
This point is driven home by examining the way different
processes and questions are designated in the V-Y Model. The five
processes of that model are designated respectively AI, AII, CI,
CII, and GII. How did LSI designate the five processes of its
modified—and putatively non-infringing—MPO program? Not
surprisingly, AI, AII, CI, CII, and GII. Are these designations
fundamental constants supplied by nature, like W for a circle or
Plank's constant in quantum physics? Clearly not, they are
arbitrarily selected characters: the V-T Model would work just as
well if its processes were designated a, b, c, d, and e! These
features of the V-Y Model are thus original, protectable
expression, not fundamental constants of nature; and LSI's copying
of these features—and other related features—is thus technically
infringing.21
LSI obviously uses V-Y Model designations in its modified MPO
program, and does so intentionally. The V-Y Model has been wildly
successful, and the MPO program could benefit from that success by
incorporating recognizable, original expression from the V-Y Model,
whether that expression is the verbatim formulation of questions
and processes, the organization of the model, or the arbitrary
designations of the model's constituent parts. But the MPO program
is not supposed to benefit from such incorporation. It was
precisely the right to benefit from such copying that Vroom and
Yetton licensed exclusively to K-T for half a million dollars.
LSI attempts to obscure this point by noting that the V-Y
Model is reproduced, discussed, and described all over the United
21
Such technical infringement, however, is not entitled to a
remedy unless it is substantial.
States, suggesting that the V-Y Model is thus in the public domain
and therefore unprotectable. But protected expression does not
lose its protection simply because it is widely disseminated. If
the V-Y Model is widely discussed, described, and reproduced, it is
presumably with the permission of the copyright holder.
Alternatively, it is because such discussion, description, and
reproduction constitutes fair use.22 "[F]air use of a copyrighted
work ... for purposes such as criticism, comment, new reporting,
teaching (including multiple copies for classroom use),
scholarship, or research, is not an infringement of copyright."23
Conspicuously absent from the list of fair uses is use for
commercial purposes, which is exactly the sort of use LSI wants us
to approve.
When Vroom and Yetton sold K-T an exclusive license to
copyrighted materials, which included the V-Y Model, they signed
away the right to copy, at least for commercial purposes,
protectable elements of the V-Y Model. LSI may not now incorporate
substantially similar expression into computer programs for
commercial sale: it was precisely the right to make such
commercial use of the V-Y Model that Vroom and Yetton sold to K-T
for hundreds of thousands of dollars.
In summary, we conclude that the district court did not err in
holding that the modified MPO program infringed K-T's Licensed
Materials. As LSI was partially successful in removing infringing
expression from the MPO program, the judgment that the modified MPO
22
The Copyright Act of 1976, 17 U.S.C. § 107.
23
Id.
program infringes K-T's copyright is a fairly close one.
Nonetheless, we agree with the district court that, although the
modified MPO program does not identically trace the language of the
definitions and processes delineated in K-T's Licensed Materials,
it infringes substantial portions of the protected expression
contained in those materials.
3. All Future Modifications of the MPO Program
We are uncertain whether the district court really intended
to enjoin all future modifications of the MPO program, and if so,
what it meant by such an injunction. The court's language in its
Findings of Fact and Conclusions of Law is certainly broad enough
to suggest that it enjoined all future modifications and
improvements of the MPO program. But the Judgment obscures the
court's intentions by enjoining all "modifications [of MPO] ...
which are the subject of the Temporary Restraining Order (TRO)
issued March 15, 1990," because no MPO modifications were expressly
the subject of the TRO. Indeed, no modifications of MPO existed at
the time the TRO was entered: no legal action by K-T had yet
compelled such modifications. We hold, however, that whatever the
court intended in that regard, it lacked the authority to enjoin
generically all future modifications of MPO. Rather, the most that
it could enjoin were future modifications and improvements of MPO
that are substantially similar to K-T's copyrighted Materials.24
24
The court probably based its expansive language on the
1972 Agreement, which grants K-T exclusive rights to all
"modifications of and improvements to" its licensed materials.
But the Agreement probably cannot be read as conferring any more
rights upon K-T than are provided by copyright law, because the
Copyright Act preempts all legal and equitable rights that fall
within the scope of copyright law. See Vault Corp. v. Quaid
Under copyright law, the district court could enjoin only
those future versions of MPO that are substantially similar to K-
T's Licensed Materials. LSI is free to continue its efforts to
devise a non-infringing management training program,
notwithstanding any expansive language in the district court's
opinion to the contrary.25
B. Evidentiary Issues
LSI also raises a handful of evidentiary issues, none of which
is meritorious. LSI contends that the district court erred in
failing to recognize LSI's right to use K-T's Licensed Materials.
This contention actually subsumes three arguments made by LSI: 1)
that Vroom retained the right to continue work on the V-Y Model
when he signed the Agreement with K-T, 2) that K-T's conduct
indicates that it granted LSI a non-exclusive license to use its
Licensed Materials, and 3) that K-T is estopped from claiming that
Software Ltd., 847 F.2d 255, 268-70 (5th Cir.1988) (holding that
software licensing agreements made in accordance with the
Louisiana Software License Enforcement Act were nugatory, because
the relevant portions of the Louisiana Act were preempted by the
Copyright Act of 1976).
Moreover, even if this preemption argument were wrong,
a court would still have to decide what constitutes a
modification or improvement under the Agreement, before it
could evaluate whether future programs infringe K-T's
copyright. The most obvious construction of these terms is
that they have the meaning ascribed to them by copyright
law. In any case, at oral argument the parties acknowledged
that this case does not concern the coverage of the
Licensing Agreement: those issues are being litigated in
another jurisdiction.
25
In essence, copyright law creates a standing injunction
against works that are substantially similar copies of
protectable portions of copyrighted materials. This is the
injunction to which LSI's future efforts to produce management
training software are subject. Copyright law is the measure of
whether those efforts will prove to be infringing.
LSI infringed its license because it encouraged and supported LSI's
development of the MPO program. None of these arguments is
persuasive.
Both the Licensing Agreement and doctrines of copyright law
(e.g. the fair use defense) give Vroom the right to continue his
theoretical work on the V-Y Model.26 But they emphatically do not
give Vroom (or LSI) the right to exploit, for his commercial
purposes, expression that Vroom or LSI exclusively licensed to K-T.
As, this is all that the trial court held, our foregoing resolution
of the copyright issues should ensure the proper balance between K-
T's exclusive license and Vroom's right to continue his research.
LSI refers to various expressions of encouragement and support
volunteered by key K-T personnel and suggests that these
expressions were "congruent with the granting [to LSI] of an
implied license" to use K-T's Licensed Materials. The court
rejected this argument and found that "there is no evidence that K-
T had any knowledge that the program [MPO] was being sold to the
public ..." at the time that its employees offered support and
encouragement for LSI's efforts. K-T's encouragement of LSI's
efforts makes sense, given K-T's exclusive right to all future
iterations of its Licensed Materials.
The court also observed that a transfer of copyright is not
valid unless in writing. LSI quibbles with the court's observation
by suggesting that K-T transferred a non-exclusive oral license.
But at trial LSI never characterized its putative license as
26
The Agreement allows Vroom and Yetton to retain
"nonassignable rights to use the licensed material for their own
teaching and private consultation work."
non-exclusive. And LSI ignores the court's finding that K-T never
intended to grant LSI any kind of license at all. In view of these
observations, the court's finding that LSI had no license to use K-
T's materials is not clearly erroneous.
Finally, LSI argues that these same expressions of support
estop K-T from asserting infringement of its license. The court's
finding that those expressions of support pre-dated K-T's
realization that MPO was being sold to the public is relevant in
this context as well, and—again—that finding is not clearly
erroneous. Moreover, LSI neither cites any applicable law nor
elaborates the legal elements of its estoppel argument. We
therefore reiterate the admonition pronounced by Justice Holmes
when he wrote: "We see what you are driving at, but you have not
said it, and therefore we shall go on as before."27
LSI also insists that the court abused its discretion by
excluding evidence of K-T's knowledge, support, and encouragement
of the MPO program. K-T correctly responds that LSI did not make
an offer of proof, which is required for error to be predicated on
the exclusion of evidence. But even if the court had thus erred,
which it did not, the error would have been harmless because,
again, LSI offered no evidence that K-T knew LSI was selling copies
of the MPO program at the time K-T personnel were expressing their
support and enthusiasm for the program's development.
Finally, LSI argues that the court abused its discretion by
admitting the 1972 Agreement over LSI's hearsay objection. LSI
made its hearsay objection while K-T was trying to introduce the
27
Johnson v. United States, 163 F. 30, 31 (1908).
Agreement into evidence during its cross-examination of Jago. LSI
could have objected that no proper foundation had been laid for the
admission of the Agreement, but it objected on the grounds of
hearsay instead. Surprisingly, both K-T and the court were thrown
by this objection: the district court ultimately admitted the
Agreement, saying that it did not think that the document was being
"offered for the truth of the matter stated."
The objection was—in fact—inapposite. "Signed instruments
such as wills, contracts, and promissory notes are writings that
have independent legal significance, and are nonhearsay."28 A
contract is a verbal act.29 It has legal reality independent of the
truth of any statement contained in it. Under the objective theory
of contracts, the fact that two parties signed a contract is enough
to create legal rights, whatever the signatories might have been
thinking when they signed it. The admission of a contract to prove
the operative fact of that contract's existence thus cannot be the
subject of a valid hearsay objection.30 To introduce a contract,
28
Thomas A. Mauet, Fundamentals of Trial Techniques 180
(1988).
29
See, e.g., Casey v. Western Oil & Gas, Inc., 611 S.W.2d
676, 680 (Tex.Civ.App.—Eastland 1981, writ ref'd n.r.e.)
(contracts are not "incompetent hearsay," for they are verbal
acts).
30
See, e.g., United States v. Continental Casualty Co., 414
F.2d 431, 434 (5th Cir.1969) (with verbal acts the "inquiry is
not the truth of the words said, but merely whether they were
said"); Byrd Int'l of Dallas, Inc. v. Electronic Data Systems
Corp., 629 S.W.2d 177, 179 (Tex.App.—Dallas 1982, writ ref'd
n.r.e.) (when the existence of a contract constitutes a necessary
part of the cause of action or is part of the ultimate issue "the
utterance or writing of [the contract] is itself the fact to be
proved [and] the admission of this "verbal act' is not hearsay").
a party need only authenticate it. Thus, in this case, LSI's
objection to the admission of the 1972 Licensing Agreement on the
grounds of hearsay was inapt.
III.
CONCLUSION
We affirm the district court in all of its evidentiary rulings
and in its conclusion that the MPO program infringes copyrighted
materials that were exclusively licensed to K-T under the 1972
Agreement. We also affirm the court's conclusion that the modified
MPO program infringed those materials. We clarify the court's
judgment, however, to the extent that it seems to enjoin all future
modifications and revisions of the MPO program, regardless of
whether they are substantially similar to K-T's copyrighted
materials. Copyright law is the measure of whether LSI's future
efforts will be infringing, and copyright law limits infringement
to modifications that are substantially similar to protectable
elements of infringed materials. To the extent that the district
court's judgment could be read more broadly than that, we modify
that judgment. As thus modified, the judgment of the district
court is in all respects
AFFIRMED.