''Comprehensive Technologies International, Inc. v. Software Artisans, Inc.'', 3 F.3d 730 (4th Cir. 1993) was a case in which the U.S. Court of Appeals for the Fourth Circuit discussed legal tests for

software copyright Software copyright is the application of copyright in law to machine-readable software. While many of the legal principles and policy debates concerning software copyright have close parallels in other domains of copyright law, there are a number o ...

infringement, and ruled that trade secret misappropriation requires more than circumstantial evidence. The case also ruled on what terms may be reasonable and enforceable in

non-compete agreement In contract law, a non-compete clause (often NCC), restrictive covenant, or covenant not to compete (CNC), is a clause under which one party (usually an employee) agrees not to enter into or start a similar profession or trade in competition again ...

Background

Virginia Virginia, officially the Commonwealth of Virginia, is a state in the Mid-Atlantic and Southeastern regions of the United States, between the Atlantic Coast and the Appalachian Mountains. The geography and climate of the Commonwealth ar ...

-based Comprehensive Technologies International (CTI) primarily dealt with defense-related services. In 1988, they created a software group and expanded into Electronic Data Interchange with Claims Express, targeted at the medical industries, and EDI Link, designed to make and use a range of forms. In February 1991, with EDI Link incomplete, seven CTI employees left the company and formed Software Artisans, Inc. (SA) in April 1991. Software Artisans created a program called Transend which also used EDI transmission to send forms. Transend was developed and marketed by July 1991. CTI sued Software Artisans and its former employees Marshall Dean Hawkes, Igor Filippides, Randall Sterba, Richard Hennig, David Bixler, Alvan Bixler, and Mark Hawkes for

copyright A copyright is a type of intellectual property that gives its owner the exclusive right to copy, distribute, adapt, display, and perform a creative work, usually for a limited time. The creative work may be in a literary, artistic, educatio ...

infringement,

trade secret Trade secrets are a type of intellectual property that includes formulas, practices, processes, designs, instruments, patterns, or compilations of information that have inherent economic value because they are not generally known or readily ...

misappropriation, breach of confidentiality, and breach of contract. CTI also alleged that Dean Hawkes violated his non-compete agreement. The district court ruled for the defendants on all counts. CTI appealed, and the case was argued in the

Fourth Circuit Court of Appeals The United States Court of Appeals for the Fourth Circuit (in case citations, 4th Cir.) is a federal court located in Richmond, Virginia, with appellate jurisdiction over the district courts in the following districts: * District of Maryland ...

on March 30, 1993.

Copyright infringement

The district court ruled against CTI's claims of

copyright infringement Copyright infringement (at times referred to as piracy) is the use of works protected by copyright without permission for a usage where such permission is required, thereby infringing certain exclusive rights granted to the copyright holder, s ...

, due to findings that Transend was not a literal copy of either of CTI's software programs, nor was it substantially similar to either in structure, sequence, and organization. CTI argued that the court should instead have compared with the “abstraction-flitration-comparison” test used by the

Second Circuit The United States Court of Appeals for the Second Circuit (in case citations, 2d Cir.) is one of the thirteen United States Courts of Appeals. Its territory comprises the states of Connecticut, New York and Vermont. The court has appellate jur ...

. The Fourth Circuit ruled that CTI did not meet their burden of proof because they did not indicate evidence from the trial that would have proven their point, therefore the district court's finding on copyright infringement claims were affirmed for the defendant.

Trade secret misappropriation

CTI's claims of

misappropriation were also denied by the district court due to insufficient evidence. The district court found that CTI's claimed trade secrets did not fulfill the requirements of deriving independent economic value from not generally being known and not being readily ascertainable. In addition, the court concluded that there was no evidence that Software Artisans had copied CTI's claimed secret, which the court equated with misappropriation's requirement of "use" of the secret. Presented evidence of misappropriation was circumstantial: short development time and no documentation of the software design. Software Artisans' programmers testified that they preferred to work on a

whiteboard A whiteboard (also known by the terms marker board, dry-erase board, dry-wipe board, and pen-board) is a glossy, usually white surface for making non-permanent markings. Whiteboards are analogous to blackboards, but with a smoother surface all ...

and annotate their code rather than produce formal documentation, and an expert witnesses testified that it was common for small software companies to neglect formal documentation. This testimony was sufficient for the court to deny the circumstantial evidence that is common in such cases. Mark A. Lemley, Peter S. Menell, Robert P. Merges, and Pamela Samuelson, Software and Internet Law (3d ed. 2006).

Non-compete agreement

The district court declined to enforce Dean Hawkes' covenant not to compete, reasoning that it was broader than necessary according to Virginia's three-part test for assessing whether such restrictive covenants are reasonable: no greater restraint than is necessary from the employer's perspective, not unduly harsh from the employee's perspective, and reasonable in terms of sound public policy. On appeal, the court cited similar restrictions that were not deemed unreasonable in scope, and noted Hawkes' thorough knowledge of CTI's confidential information. With that ruling

vacated A vacated judgment (also known as vacatur relief) makes a previous legal judgment legally void. A vacated judgment is usually the result of the judgment of an appellate court, which overturns, reverses, or sets aside the judgment of a lower court. ...

, the decision on whether Hawkes breached his agreement was remanded to the district court.

References

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