Free Response - District Court of Arizona - Arizona

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FENNEMORE CRAIG , P.C.
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FENNEMORE CRAIG, P.C. Ray K. Harris (No. 007408) 3003 North Central Avenue Suite 2600 Phoenix, AZ 85012-2913 Telephone: (602) 916-5000 Email: [email protected] Attorneys for the Nelcela Defendants UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Merchant Transaction Systems, Inc., Plaintiff, v. Nelcela, Inc., an Arizona corporation; Len Campagna, an Arizona resident; Alec Dollarhide, an Arizona resident; Ebocom, Inc., a Delaware corporation; POST Integrations, Inc., an Illinois Corp., Defendants. And Related Counterclaims, CrossClaims and Third-Party Claims. The Court's minute entry dated March 20, 2008, directed the parties to "submit a proposed order regarding analytic dissection by April 3, 2008." (Docket No. 595) In response to the proposed order submitted by Nelcela, the Joint Parties have served objections. Although further briefing was not required (nor permitted) by the Court's March 20th minute entry, out of an abundance of caution, Nelcela responds to the objections asserted by the Joint Parties. I. Waiver First, the Joint Parties assert Nelcela "does not deny" that Nelcela has a burden of
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No. CV-02-1954-PHX-MHM RESPONSE TO OBJECTION TO PROPOSED ORDER

Case 2:02-cv-01954-MHM

Document 603

Filed 04/23/2008

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proof. The burden of proof is specifically addressed at pages 6 and 7 of Nelcela's proposed order. To prevail on copyright infringement the plaintiff "must show ownership of a valid copyright ... and that [defendant] copied unlicensed, protected elements" of the copyrighted work. Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435, 1442 (9th Cir. 1994), cert. denied, 513 U.S. 1184 (1995). Nelcela has clearly asserted the better-

reasoned view imposes on Lexcel "the burden to show that these elements constitute protectable expression." Maddog Software, Inc. v. Sklader, 382 F.Supp.2d 268, 282 (D. N.H. 2005). Second, analytic dissection is not limited to application of the doctrines of merger and scenes a faire. Analytic dissection, as described in Apple, is used to "determine whether any of the allegedly similar features are protected by copyright." 35 F.3d at 1442. Nelcela has asserted protection does not exist because the claimed features are not original to Lexcel, are not expressive and are functional. These claims are not coextensive with the scenes a faire doctrine. Third, the summary judgment ruling does not preclude analytic dissection. The Court's summary judgment ruling established that copying occurred. Nelcela does not challenge that ruling. See Nelcela Proposed Order at 9 (however, "not all copying ... is copyright infringement"). Id. at 2, n. 2 and 11, n. 7 (distinguishing substantial similarity from copying). The Court's ruling on copying is not dispositive of the issue now raised. Finally, failure to refer to "analytic dissection" in the pretrial order is not dispositive.1 Nelcela did not realize analytic dissection was required (hence they could not surrender a "known right").
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The rules are liberally applied to secure a just

In the pretrial order and pretrial motions Nelcela argued that Lexcel had to prove copyrightable elements were copied. Joint Pretrial Statement (Docket No. 424), Exhibit 3 at p. 17 of 62 (Mr. Pell would testify that the commonality or "similarity" in code was in the non-functional, non-copyrightable items of code.), Id. Exhibit 11 at pp. 4-5 of 15 (Lexcel must prove copying of material that is copyrightable.), Id. pp. 8-9 and 13 of 15 (Lexcel has to prove copying of "original elements" of work.).
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determination of the action. Fed. R. Civ. P. 1. Many courts, including the Ninth Circuit, have liberalized the rule that omitting a defense from answer waives it, and have allowed parties to raise various affirmative defenses (including the statute of limitations) at any time up to and including trial ­ so long as the other party was not prejudiced by the delay in raising the defense. Tahoe Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 992 F.Supp. 1218, 1224 (D. Nev. 1998), aff'd in part, 216 F.3d 764 (9th Cir. 2000), aff'd, 535 U.S. 302 (2002). [R]ule 15(b) does give the trial court discretion, which a number have exercised, to permit the amendment of pleadings over objection when doing so will promote the presentation of the merits of the action, the adverse party will not be prejudiced by the sudden assertion of the defense, and will have ample opportunity to defend against the substance of the issue. 5 Wright and Miller Federal Practice and Procedure § 1278 at 684-85.2 The Joint Parties are not prejudiced by the analytic dissection analysis and have had ample opportunity to address the merits of this issue. II. Joint Parties Agreement to Analytic Dissection The Court noted in its August 21, 2007 Order that "the parties appear to be in agreement with respect to the future handling of the analytic dissection issue". The Joint Parties now deny any such agreement. Nevertheless, a determination on the merits is desirable and the procedure adopted by the Court to achieve a just determination is proper. III. Role of Court and Jury The Joint Parties argue, for the first time, that if analytic dissection is required the case must be re-tried as it raises a jury question. To the contrary, the Apple court clearly
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The two cases cited by the Joint Parties do not control. In Northwest Acceptance Corp. v. Lynnwood Equipment, Inc., 841 F.2d 918, 924 (9th Cir. 1998), the defense of novation was not raised until the reply brief on appeal. In Eberle v. Anaheim, 901 F.2d 814, 817 (9th Cir. 1990), the party again failed to argue for amendment to the pretrial order until reply on appeal.
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states "the court must determine whether any of the alleged similar features are protected by copyright". Apple, 35 F.3d at 1443. Emphasis added. In response to Nelcela's motion for a new trial, the Court determined that it should proceed with analytic dissection before entering judgment on the jury verdict. If the features presented by the Joint Parties at trial are not protected by copyright, then nothing remains for the jury to decide. The Court, not the jury, determines protectable expression. IV. The Joint Parties Evidence The Joint Parties now assert that trial exhibits 504 and 509 do not reflect all of the asserted similarities between the Lexcel software and the Nelcela software. During the analytic dissection briefing, the Joint Parties have not identified any "more comprehensive list of the similarities." The Joint Parties have not identified in their list of common features (Docket No. 555) or anywhere else in the record, any alleged substantial similarities other than those in Exhibits 504 and 509. The burden is unambiguously on the Plaintiff to "identify the sources of the alleged similarity between his work and the defendant's work." Apple, 35 F.3d at 1443. V. The Originality of the Software Nelcela does not contend that the Lexcel software is not copyrightable; instead, Nelcela contends the specific elements identified as copied are beyond the scope of copyright protection. Proposed Order at 6, ll. 21-23. For purposes of analytic dissection it is Lexcel's burden to prove the significance of the elements copied. The analytic dissection analysis does not rely on similarities between the Lexcel software and Sun West Bank of Albuquerque's computer software. The similarities in field names are due to the Visa Regulations which were identified in Nelcela Exhibit G. VI. Protectable Elements of the Merchant Systems The Joint Parties have not established that the few field names that are identical in
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the Lexcel and Nelcela software constitute a protectable compilation.

Both experts

acknowledge the field names are logically related to the Visa Regulations and reflect the data contained in the field. expression. The scenes a faire doctrine does not require that the programmer be left with only one (1) possible field name (that is the merger doctrine). Scenes a faire merely holds that the inclusion of standard elements is not copyrightable expression. The field names necessarily follow from the industry custom of labeling fields to identify content and the required content dictated by the Visa Regulations. See, e.g., Savata v. Lowry, 323 F.3d 805, 810 (9th Cir. 2003) (elements that follow naturally from an idea are not protected), cert. denied, 540 U.S. 983 (2003). Although the Joint Parties' claim copying of a database schema, their own expert offered no evidence of a database schema. Lexcel offered no evidence to show four table names and a small percentage of the total number of field names is substantial. No evidence was offered pertaining to the constraints defining relationships between the tables or indexes used to access the tables. See, Posner Testimony at 48 and 55. The Joint Parties now assert that Nelcela "translated" the database schema. This does not satisfy Plaintiff's burden of proof. A copy which is so changed as to be The naming convention does not represent meaningful

unrecognizable is no longer a copy. Bucklew v. Hawkins, Ash, Baptie & Co., LLP, 329 F.3d 923, 930 (7th Cir. 2003); See v. Durang, 711 F.2d 141, 142 (9th Cir. 1983); 4 Nimmer Copyright § 13.02[B][i][b] at 13-70. Nor can Lexcel claim copyright ownership of the idea of a single database. 17 U.S.C. § 102(b). VII. Protectable Elements of the Authorization System While the Joint Parties assert the authorization system software reflects creative choices, they offer no evidence that alternative choices would be equally efficient or that the elements allegedly copied are significant in the overall operation of the authorization
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system. Proving the authorization system as a whole is copyrightable will not suffice. The Joint Parties have wholly failed to prove that the specific elements allegedly copied are substantial or can be performed in an equally efficient manner in some other way. VIII. The Scope of Protection While Plaintiff's expert (Dr. Posner) did in fact testify that there are a million ways the field names could have been implemented, that testimony is simply not credible in light of established practice that the field name describes its contents. Where the choices were dictated by the Visa Regulations, the functionality required of the software, or the need to process specific ISO error messages, the scope of protection is inescapably thin. For both the field names and the Authorization System the individual elements are unprotected and the compilation of elements is entitled to only thin protection. Apple, 821 F.Supp. at 623 (N.D. Cal. 1993), aff'd, 35 F.3d at 1349; Savata, 323 F.3d at 812; EtsHokin v. Skyy Spirits, Inc., 323 F.3d 763, 766 (9th Cir. 2003). IX. Other Errors These matters are not material to the Order and the disputed references can be deleted. The jury found that Lexcel owns its database; however, the Joint Parties have not identified any element of the database allegedly infringed. CONCLUSION The Court should enter the Proposed Order that Nelcela submitted. DATED this 23rd day of April, 2008. FENNEMORE CRAIG, P.C. By s/Ray K. Harris Ray K. Harris Attorneys for Nelcela Defendants

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CERTIFICATE OF SERVICE I hereby certify that on April 23, 2008, I electronically transmitted the attached document to the Clerk Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/EMF registrants:
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Nicholas J DiCarlo [email protected] Local Counsel for Merchant Transaction Systems William Albert McKinnon [email protected] Attorney for Merchant Transaction Systems Peter D Baird [email protected] Robert H McKirgan [email protected] Richard A Halloran [email protected] Kimberly Anne Demarchi [email protected] Attorneys for POST and Ebocom George Chun Chen [email protected] Attorneys for Lexcel, Inc.

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s/Melody Tolliver

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