Free Objection - District Court of Arizona - Arizona

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Peter D. Baird (001978) [email protected] Robert H. McKirgan (011636) [email protected] Richard A. Halloran (013858) [email protected] Kimberly A. Demarchi (020428) [email protected] Lewis and Roca LLP 40 North Central Avenue Phoenix, Arizona 85004-4429 Facsimile (602) 734-3746 Telephone (602) 262-5311 Attorneys for POST Integrations, Inc., et al. George C. Chen (019704) [email protected] Bryan Cave LLP Two North Central Avenue, Suite 2200 Phoenix, Arizona 85004-4406 Facsimile: (602) 364-7070 Telephone (602) 364-7367 Attorneys for Lexcel, Inc. and Lexcel Solutions, Inc.

William McKinnon [email protected] 800 East Ocean Boulevard, Unit 501 Long Beach, California 90802-5449 Nicholas J. DiCarlo [email protected] DiCarlo Caserta & Phelps PLLC 6750 East Camelback Road, Suite 100-A Scottsdale, Arizona 85251 Attorneys for Plaintiff MTSI and Third Party Defendant Gene Clothier

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Merchant Transaction Systems, Inc., ) ) Plaintiff, ) ) vs. ) ) Nelcela, Inc., et al., ) ) Defendants. ) ) ) And Related Counterclaims, Cross-Claims, ) and Third-Party Claims. ) ) No. CIV 02-1954-PHX-MHM JOINT PARTIES' OBJECTIONS TO NELCELA'S PROPOSED ORDER ON ANALYTIC DISSECTION (Assigned to the Honorable Mary H. Murguia)

Pursuant to Local R. Civ. P. 52.1, the Joint Parties hereby raise specific objections

22 to Nelcela's Proposed Order on Analytic Dissection (Dckt. 600-2.) These objections are in 23 addition to, and are not intended to supersede, the Joint Parties' own proposed findings of 24 fact and conclusions of law on file with this Court. (Dckt. 601-2.) 25 I. 26 27 NELCELA WAIVED ITS ANALYTIC DISSECTION DEFENSE AS TO OWNERSHIP. Nelcela's Proposed Order acknowledges that Nelcela did not raise the argument

28 that the Court was required to engage in analytic dissection in the ownership phase until
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"[a]fter trial began." (Nelcela's Proposed Order at 2:9-10.) Nelcela's Proposed Order nonetheless goes on to claim, without supporting citation or argument, that "Nelcela did not voluntarily relinquish a known right to insist on analytic dissection," contending that Nelcela "raised the requirement for analytic dissection as soon as it realized this step was required under the Apple precedent." (Id. at 4:11-13.) Nelcela's Proposed Order does not deny that analytic dissection was a defense that Nelcela, not this Court or the Joint Parties, had the burden of both raising and proving. See 4 NIMMER ON COPYRIGHT § 13.03[F][3] p.13-138. As the Ninth Circuit has held, the dual components of analytic dissection ­ the doctrines of merger and scenes a faire ­ are both defenses to infringement rather than barriers to copyrightability. Ets-Hokin v. Skyy Spirits, 225 F.3d 1068, 1082 (9th Cir. 2000) (holding that the doctrines of merger and scenes a faire are defenses to infringement); Satava v. Lowry, 323 F.3d 805, 810 n.3 (9th Cir. 2003) ("The Ninth Circuit treats scenes a faire as a defense to infringement rather than as a barrier to copyrightability."), cert. denied, 540 U.S. 983 (2003). Because they are defenses to infringement, rather than barriers to copyrightability, Nelcela had the burden of both raising and establishing these defenses. Softel v. Dragon Medical, 118 F.3d 955, 965 n.9 (2d Cir. 1997); 4 NIMMER ON COPYRIGHT § 13.03[F][3] p.13-138. Nelcela failed to meet this burden. As set forth in the Joint Parties' proposed Findings of Fact and Conclusions of Law, Nelcela failed to raise its analytic dissection defenses in response to the Joint Parties' Motion for Partial Summary Judgment, in the Joint Proposed Pretrial Order, and prior to the commencement of the trial. Accordingly, Nelcela waived its analytic dissection defenses. Nelcela's only response in its Proposed Order is to claim that it raised analytic dissection "as soon [as] it realized this step was required under the Apple precedent." (Nelcela's Proposed Order at 4.) Nelcela provides no explanation for its claim that it first "realized" analytic dissection was required midway through the trial. Neither the Apple case nor the practice of analytic dissection are new, nor was there a change in the Joint Parties' evidence or position that suddenly brought the issue of substantial similarity to the 2
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fore.1 Moreover, Nelcela's claim that it could not have known analytic dissection was relevant any earlier is completely inconsistent with the history of the proceedings in this case. The Joint Parties' summary judgment motion sought a judgment that Nelcela did not own the Nelcela Software on the basis of evidence that showed (a) substantial similarities between the Nelcela Software and the Lexcel Software and (b) that "the Nelcela Software was unlawfully derived from the software Lexcel owns." (E.g., Dckt. 333 at 2:5-10, 4:1820, 5:25-6:2, 7:17-9:25; see also Dckt. 334 (expert reports submitted by the Joint Parties that found substantial similarities between the Nelcela Software and Lexcel Software as a whole and listed specific examples).) If Nelcela had wanted to raise analytic dissection as a defense, to claim that the similarities were only in uncopyrightable elements, it was required to do so in response to the motion for summary judgment. USA Petroleum Co. v. Atlantic Richfield Co., 13 F.3d 1276, 1283 (9th Cir. 1994) (a party that fails to raise a ground, legal or factual, in opposition to a summary judgment motion cannot later assert that ground to challenge the summary judgment ruling); Fed. R. Civ. P. 56(e). The Nelcela Parties did not ask the Court to engage in analytic dissection of the similarities between the parties' respective software, nor did they articulate any challenge to the substantive copyrightability of the Lexcel Software or the parts of the Lexcel Software that the Joint Parties had identified as similar to the Nelcela Software. (Dckt. 349.) Instead, the Nelcela Parties objected to the entry of summary judgment against them on the basis that the Joint Parties had not demonstrated, through undisputed evidence, whether the Nelcela Software was derived from Lexcel Software or vice versa. (See, e.g., id. at 13:2-7 ("No expert was able to prove which code was derived from the other."); see also id. at 2:8-10, 9:13-17; Dckt. 361 at 2:18-19.) Because they failed to timely raise copyrightability or analytic dissection in response to the Joint Parties' motion for summary judgment, the Nelcela Parties have waived any analytic dissection challenges to this
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Not only did the Joint Parties raise the issue of substantial similarity between the Nelcela Software and Lexcel Software in their motion for summary judgment filed February 17, 2006, the Joint Parties actually cited the Apple case in that motion. (Dckt. 333 at 10:10-13.) 3
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Court's summary judgment ruling that, "Based upon the undisputed similarities between the Lexcel 2001 software, MTSI software and Nelcela software the Court finds that as a matter of law that they are substantially similar beyond the possibility of random chance and that copying took place." (Dckt. 383 at 28.) Likewise, the Nelcela Parties cannot now raise analytic dissection in an effort to set aside the jury's determination that Lexcel, not Nelcela, was the original author and owner of the software at issue. To the extent that this Court's ruling on summary judgment left any room for Nelcela to articulate an analytic dissection defense on ownership, that defense was waived when Nelcela failed to include the defense in the Joint Proposed Pretrial Order and failed to ask the Court to engage in analytic dissection prior to the commencement of the trial. See Fed. R. Civ. P. 16(d)-(e) (pretrial order "controls the course of the action unless the court modifies it" and may only be modified "to prevent manifest injustice"); Rockwell Int'l Corp. v. United States, 127 S.Ct. 1397, 1408 (2007) (pretrial order "supersede[s] all prior pleadings and control[s] the subsequent course of the action"); Northwest Acceptance Corp. v. Lynnwood Equipment, Inc., 841 F.2d 918, 924 (9th Cir. 1988) (defense not raised in pretrial order is waived); Eberle v. Anaheim, 901 F.2d 814, 817 (9th Cir. 1990) (same).2 This Court's order on analytic dissection as it pertains to the issue of ownership can and should end with Nelcela's waiver of that defense, and the parties should be permitted to begin the long-delayed Phase II of these proceedings. II. THE JOINT PARTIES DID NOT AGREE TO NELCELA'S UNTIMELY ASSERTION OF ANALYTIC DISSECTION AS A DEFENSE TO OWNERSHIP. Nelcela's Proposed Order next attempts to assert that it was the Joint Parties who waived rights ­ specifically, the right to object to Nelcela's untimely attempt to raise an analytic dissection challenge to both this Court's ruling on summary judgment and the jury's verdict on ownership. (Nelcela's Proposed Order at 4:18-20.) In support of their
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To the extent that Nelcela argues that it was "precluded" from putting on evidence of copyrightability when it raised that issue mid-trial (Nelcela's Proposed Order at 7 n.3), Nelcela was precluded only because of its own failure to timely raise the defense prior to trial. 4
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assertion that the Joint Parties consented to reexamination of the ownership determination, which appears at multiple points in their Proposed Order, the Nelcela Parties do not cite any actual statement of the Joint Parties. (See Proposed Order at 3:7-8, 3:26-4:2, 4:16-18.) When the actual statements of counsel for the Joint Parties are examined, they reveal neither consent to Nelcela's untimely assertion of analytic dissection or any waiver of the timeliness issue. Rather, the Joint Parties specifically and expressly objected that analytic dissection was a defense Nelcela had been required to plead and prove much earlier, and argued that any remaining analytic dissection defense was limited (to the extent one was still available) to issues remaining for Phase II of the proceedings. Specifically, in the Joint Parties' Response Opposing the Nelcela Parties' Motion for Judgment as a Matter of Law, the Joint Parties expressly objected that (a) "Nelcela's failure to raise its analytic dissection argument during the summary judgment proceedings means that Nelcela has waived this challenge to the Court's summary judgment ruling," and (b) Nelcela waived its analytic dissection defense during the Phase I trial because "Nelcela did not raise its analytic dissection defense prior to trial." (Dckt. 522 at 4-5.) Then, at oral argument on Nelcela's post-trial motion, the Joint Parties again objected, arguing that "Nelcela chose not to raise the analytical dissection argument. It was their burden to do so. The Court had no su[a] sponte [obligation]." (See Aug. 15, 2007 Trans. at 16:5-19:24 (Dckt. 552).) The Joint Parties have thus consistently objected to Nelcela's untimely effort to assert an analytic dissection defense. The Joint Parties did not, and do not now, consent to Nelcela's attempt to assert now a defense to ownership that the Nelcela Parties were required to assert two years ago, in the Nelcela Parties' response to the Joint Parties' motion for summary judgment. III. NELCELA'S PROPOSED ORDER MISCOMPREHENDS THE ROLES OF THE COURT AND JURY IN PHASE II. As set forth above, Nelcela waived any analytic dissection defense with regard to the issue of ownership when it failed to raise that defense at summary judgment and in the pretrial order. However, to the extent that any portion of the analytic dissection issue 5
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could remain alive as to infringement in Phase II, Nelcela's proposed order misstates the role of the Court in evaluating that defense. When conducting analytic dissection for the purpose of an infringement claim, courts use a two-part analysis is used to determine whether two works are substantially similar to amount to copyright infringement. In part one, the Court must conduct an objective "extrinsic analysis" of substantial similarity, and in part two, the jury must conduct a subjective "intrinsic analysis" of substantial similarity. Swirsky v. Carey, 376 F.3d 841, 845 (9th Cir. 2004). The extrinsic analysis considers whether two works share a similarity of ideas and expression as measured by external, objective criteria, and involves "analytical dissection of a work and expert testimony." Id. The role of the Court is to determine if there is "a genuine issue regarding whether the ideas and expressive elements of the works are substantially similar." Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1472 (9th Cir. 1992). If there is "indicia of a sufficient disagreement concerning the substantial similarity of [the] two works," the extrinsic test is satisfied. Swirsky, 376 F.3d at 846; see also Veritas Operating Corp. v. Microsoft Corp., 2008 U.S. Dist. LEXIS 8166, *29-*31 (W.D.Wash. Feb. 4, 2008) (applying extrinsic analysis). The role of the Court is not to resolve that disagreement, but instead to submit the case to the jury. Swirsky, 376 F.3d at 844. Unless the Court finds that "no reasonable juror could find substantial similarity of ideas and expression" between the Lexcel and Nelcela Software, the issue of copyright infringement must be sent to the jury. Id. Nelcela's Proposed Order miscomprehends both the role of the Court, and the evidence of substantial similarity presented by the Joint Parties. The Joint Parties have presented substantial evidence, including the declaration and testimony of Dr. David Posner and the declaration of Carl Kubitz showing that the ideas and expressive elements of the Lexcel Software and the Nelcela Software are substantially similar. Additionally, the testimony of Nelcela's own expert, Mr. Jeffrey Pell ­ both in response to questioning by the Court and during cross-examination ­ supports the substantial similarity of the 6
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Lexcel and Nelcela Software. Given this evidence, there is no basis for a determination that "no reasonable juror could find substantial similarity of ideas and expression" between the Lexcel and Nelcela Software. Swirsky, 376 F.3d at 844. Consequently, the issue of copyright infringement must be sent to the jury. Id.; Veritas Operating Corp. v. Microsoft Corp., 2008 U.S. Dist. LEXIS 8166. Conversely, to the extent the Court finds a disagreement between the evidence offered by the Joint Parties and the evidence offered by Nelcela concerning the substantial similarity of the Lexcel Software and the Nelcela Software, the existence of such disagreement requires that the case be submitted to the jury. Swirsky, 376 F.3d at 844. Either way, Nelcela's Proposed Order misstates the role of the Court and would have the Court enter an erroneous ruling. IV. TRIAL EXHIBITS 504 AND 509 WERE EXAMPLES OF NELCELA'S COPYING ­ NOT AN ITEMIZATION OF ALL OF NELCELA'S COPYING. Nelcela's Proposed Order focuses on Trial Exhibits 504 and 509 as though those exhibits constitute the sum and total of the similarities that this Court and all of the parties' experts found between the Nelcela Software and its predecessor, the Lexcel Software. By doing so, Nelcela attempts to suggest that Nelcela's copying of the Lexcel copyrighted software found by this Court at summary judgment is somehow too little to impugn Nelcela's claim to ownership. Nelcela's argument is flawed both as a matter of fact and as a matter of law. The evidence of copying submitted by the Joint Parties is far broader than Exhibits 504 and 509. Exhibits 504 and 509 are examples offered at trial of some of the verbatim copying of the Nelcela Software from the Lexcel Software. By the time the parties reached trial, this Court had found the software to be substantially similar and the only issue remaining was who copied from whom. Given the time constraints of trial, the Joint Parties did not elect to provide the same kind of exhaustive analysis of total copying represented in the expert reports provided at the summary judgment phase, instead using examples of the copying to assist the jury in determining who copied. Once Nelcela raised the analytic dissection issue and this Court ordered further briefing, the Joint Parties provided a more 7
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comprehensive list of the similarities between the Lexcel Software and the Nelcela Software, including illustrative passages of copying demonstrating the protectable nature of what Nelcela copied. (Dckt. 555, 565.) Nelcela's attempt to limit the copying at issue to the trial examples used to illuminate the issue of which software was written first is a manifestation of the injustice they seek to do by insisting on analytic dissection now, when the issue of ownership has been fully resolved. V. THE LEXCEL SOFTWARE IS ORIGINAL. Originality is one of the hallmarks of copyrightability. Lexcel's copyrights in its Authorization System, Merchant System, and Database are prima facie evidence that the Lexcel Software is original. To rebut this presumption, the Nelcela Parties were required to come forth with evidence to demonstrate why the copyrights are not valid. Johnson Controls v. Phoenix Control Sys., 886 F.2d 1173, 1175 (9th Cir. 1989). Nelcela has sought to meet this burden by claiming that Lexcel copied its source code from third party sources. But to rely on third-party sources to rebut the presumption of originality, the Nelcela Parties were required to do more than make the allegation. The Nelcela Parties were required to (1) come forth with proof of the third party sources that were supposedly copied, and (2) establish that Lexcel's source code "is substantially similar to the prior work in both ideas and expression." North Coast Indus. v. Jason Maxwell, Inc., 972 F.2d 1031, 1033-34 (9th Cir. 1992). The Nelcela Parties have offered nothing more than third-party sources that do not match the copying at issue and unverified tales of programming manuals they have never produced. In their Proposed Order, the Nelcela Parties continue this course of accusation without substantiation. Nelcela's Proposed Order makes a passing reference, without any record citation, to unidentified similarities alleged to exist between the Lexcel database and the Sun West Bank of Albuquerque's computer software. (Nelcela's Proposed Order at 10:4-5.) But, the printed data screen from Sun West Bank to which Nelcela has referred in the past does not correspond to Lexcel's actual copyrighted database. Although the Sun West Bank document does correspond to a set of handwritten notes found in Lexcel's 8
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development files, those notes do not themselves turn up in the Lexcel source code. Nelcela has offered no evidence (and none exists) that the actual database created by Lexcel contains any similarity to the Sun West Bank print out. Rather, as shown by the evidence, the Sun West Bank printout was not copied by Lexcel in its source code and is not substantially similar to the Lexcel Software. (Compare Dckt. 560 Exs. D, E & G (Sun West materials) with Dckt. 565 Exs. 1-10 (portions of Lexcel's actual source code).) VI. NELCELA COPIED PROTECTIBLE ELEMENTS OF THE LEXCEL MERCHANT SYSTEM AND DATABASE. The numerous database field names appearing in both the Nelcela Merchant System and the Lexcel Software were copied; they are not the result of repeated coincidence. Nelcela can say as many times as it wants that the identical database field names that show Nelcela copied Lexcel's database are some kind of "industry standard" or are somehow "dictated" by the Visa technical requirements regarding transmission (but not storage) of the data, but merely repeating those assertions will not make them true. While copyright law does not protect individual, commonplace words, it does protect creative expression that uses those words in a combination and order selected by the author in his discretion. Mr. Pell, Nelcela's own expert, whose Visa-specific expertise Nelcela touts, admitted at trial that every single database field used by Lexcel could have been named differently and that none of them were actually dictated by Visa.3 (Trans. at 1370:25-1371:1, 1360:3-9, 1364:16-19, 1356:22-1357:2 (April 19, 2007) (Dckt. 531).) At the hearing on analytic dissection, Mr. Pell again had to agree, despite his repeated efforts to assert otherwise, that the database field names evidencing Nelcela's copying were in fact within the discretion of Lexcel's programmers and not controlled by industry standards, good programming
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That is why, when Mr. Pell was asked during trial to produce the "industry standard" field names that, under Nelcela's theory, should have appeared verbatim in both Nelcela and Lexcel's Software, he could not ­ every single one of his abbreviations was different from those found in the Nelcela and Lexcel Software because, unlike Nelcela, he actually came up with them himself, during trial. Not one of the field names Mr. Pell wrote down matched the field names that appear verbatim in both the Lexcel Software and the Nelcela Software. (Trans. at 1358:18-1361:25, 1363:3-1364:15, 1365:9-1367:25, 1370:1-24 (April 19, 2007) (Dckt. 531).)
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practices, or VISA itself. (Trans. at 88:18-89:25, 90:1-91:3, 93:1-23 (Mar. 11, 2008) (Dckt. 597).) Mr. Pell testified that, while he had "in general" seen three particular variable names used in other computer software, he had never seen every single one of the database field names highlighted in exhibit 6 to the Joint Parties' Analytic Dissection Brief used in other computer software. (Id. at 96:14-98:10, 99:15-25.) The scenes a faire doctrine simply does not apply ­ the identical, idiosyncratic names evidencing Nelcela's copying of the merchant system and database were dictated by nothing more than the independent, creative discretion of Carl Kubitz and other Lexcel programmers when they sat down before a blank computer screen to write the software. Moreover, as to the Merchant System, Nelcela's dogged focus on the database field names themselves, out of context, misstates the copying at issue. The Joint Parties do not claim that Nelcela merely copied more than 100 field names from Lexcel. Rather, the Joint Parties claim that Nelcela copied the entire copyrighted Lexcel database schema ­ the "golden nugget" at the heart of Lexcel's software ­ and that Nelcela then attempted to cover its tracks by translating at least part of the Nelcela Merchant System into a different computer language, making a direct comparison to find copying more challenging, but not impossible. (See Expert Reports, Dckt. 334.) The appearance of many dozens of identical, idiosyncratic field names in the Lexcel and Nelcela softwares demonstrates Nelcela's wholesale copying of the Lexcel database schema and merchant system software, rather than representing the only instances of copying. Indeed, as Nelcela's own expert notes, the field names copied by Nelcela from Lexcel are idiosyncratic ­ such as inconsistent abbreviations between names (such as where Lexcel used "num" to abbreviate "number" in some instances, and "no" in others). (See Dckt. 560 Ex. 11; see also Trans. at 61:19-62:2 (Mar. 11, 2008) (Dckt. 597) (Dr. Posner's testimony that the fields could have been named by Lexcel in "a million ways").) What the verbatim copying, without variation and including inconsistencies, of dozens of these field names demonstrates is not that Nelcela copied just the names ­ it is that Nelcela copied and translated the whole Lexcel database schema and software, leaving the 10
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idiosyncratic field names intact. And that database schema was indisputably copyrightable, as even the case Nelcela prominently cites in its Proposed Order acknowledges. See OP Solutions, Inc. v. Intellectual Property Network, Ltd., 1999 WL 47191, 50 U.S.P.Q. 2d 1399 (S.D.N.Y. Feb. 2, 1999) (finding that copying of action grid constituting "the heart of plaintiff's program" was actionable); see also Johnson Controls, 886 F.2d at 1175; Positive Software Solns. v. New Century Mort., 259 F. Supp. 2d 531, 535 (N.D. Tex. 2003); Szen Corp v. Anderson, 2007 WL 1728717 (E.D. Wash. 2007). The undisputed testimony at trial and hearing demonstrated the critical role of the single Lexcel database Nelcela copied. The database is key to the entire functioning of the Lexcel authorization and merchant systems, much like an engine is to a car. Without the single database designed by Lexcel to store all transaction data, the authorization and merchant systems cannot run. As Carl Kubitz testified that the database component of the Lexcel System is crucial; "the database is what glued it all together" and allowed the authorization system and merchant system components of the Lexcel System to communicate with each other. (Trans. at 225, 272-273 (April 11, 2007) (Dckt. 526).) Mr. Kubitz further testified that without the database, the other components of the Lexcel System would not function. (E.g., id. at 226.) Dr. Posner ­ a database subject matter expert who writes databases of all kinds for a living ­ likewise testified at the hearing on analytic dissection that Lexcel's database schema is critical to the functioning of the database. (Trans. at 57:20-25 (Mar. 11, 2008) (Dckt. 597).) The database is an indispendable part of the Lexcel software ­ a key to its total functioning ­ and Nelcela copied it. VII. NELCELA COPIED PROTECTABLE ELEMENTS OF THE AUTHORIZATION SYSTEM TOO. The assertions in Nelcela's Proposed Order about the nature and scope of the additional verbatim copying in the Nelcela Authorization System source code are equally unsupported in fact and law. 11

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Mr. Pell, Nelcela's own expert, admitted that the expression of functionality in the Lexcel Authorization System source code is not required by the programming languages used, and that it was Lexcel's independent creative choice how to express the credit card processing functionality in Lexcel's source code. (Trans. at 1381:11-13, 1386:5-7 (April 19, 2007) (Dckt. 531).) Mr. Pell also admitted that the file names, variable names, functions names, and even programmer comments that appear verbatim in the Lexcel Software and the Nelcela Software are not required by industry practice, the programming languages used, programming manuals, or other third-party sources, but rather reflect creative choices made by the Lexcel programmers when they wrote the Lexcel Software. (E.g., id. at 1372:24-1373:3, 1373:21-25, 1382:7-19, 1382:24-1383:1, 1387:10-24.) To the extent that Nelcela argues that its copying is trivial because one passage of the copied Lexcel Software involves display of a "spinning asterisk" (Nelcela's Proposed Order at 17), even Mr. Pell testified at trial that there are other ways to write source code to perform that particular functionality. (Trans. at 1379:17 ­ 1380:15 (April 19, 2007) (Dckt. 531).) The Joint Parties' expert witness, Dr. Posner, who has extensive experience in computer software and database design and implementation and is an expert in computer programming, computer programming languages, and computer databases, confirmed that the Lexcel Authorization System source code copied by Nelcela reflects the creative expression of Lexcel's programmers, not the results of constraints imposed by the programming languages, third-party sources, VISA requirements, or standard programming practices. (Trans. at 45:11 ­ 46:13, 49:15 ­ 50:223 (Mar. 11, 2008) (Dckt. 597).) The Lexcel code thus falls within the scope of copyright protection. Cf. Johnson Controls, 886 F.2d at 1175 ("the standard for originality required for a copyright is minimal" and can be satisfied by showing that programmers made expressive choices in achieving the ideas expressed in the program using available language and syntax); see also Aharonian v. Gonzales, 77 U.S.P.Q. 1449, 1453 (N.D. Cal. 2006).

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VIII. THE LEXCEL SOFTWARE IS ENTITLED TO BROAD COPYRIGHT PROTECTION. As explained above and as further detailed in the Joint Parties' proposed Findings of Fact and Conclusions of Law, the evidence offered by the Joint Parties shows that the substantial similarities between the Lexcel Software and the Nelcela Software involve expressive choices made by the Lexcel programmers when creating the Lexcel source code. Nelcela's Proposed Order simply ignores this evidence to argue that "broad" copyright protection is not available. By ignoring the evidence, Nelcela's Proposed Order is in error. The evidence shows that the ideas expressed by the parties' software ­ the processing of credit card transactions ­ are separable from the computer source code and database components used to express the ideas and functionality. And, the evidence shows that there multiple ways that Lexcel could have chosen to express these ideas and functionality. Therefore, the similarities between the Lexcel Software and the Nelcela Software are entitled to "broad" copyright protection. See Apple v. Microsoft, 35 F.3d at 1446-47 (broader protection is available where more variations of expression are available). IX. OTHER ERRORS IN THE PROPOSED ORDER. The Proposed Order also contains a number of smaller errors in factual recitation or terminology, which are briefly addressed in the numbered paragraphs below. 1. The Proposed Order states that POST and Nelcela "removed" related state

court litigation to this Court. (Proposed Order at 1:22-23.) There was no removal under 28 U.S.C. § 1441 et seq. Rather, POST and Nelcela stipulated to the dismissal of their claims in the state court litigation and amended their pleadings in this action to include the claims previously involved in the state court action. (See Dckt. 83, 84.) 2. POST is not merely a defendant in this litigation but also has stated

affirmative counterclaims and third-party claims for relief. (See Dckt. 84.)

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3.

Nelcela's Proposed Order describes the Lexcel Software as "a Merchant

System and Authorization System" and states that the jury's verdict determined that the "Merchant System and Authorization System were owned by Lexcel." (Nelcela's Proposed Order at 2:16-17, 3:3-4.) The jury also found that Lexcel owns its database. (Dckt. 501.)4 All three components comprise the Lexcel Software at issue in this lawsuit, and Lexcel holds U.S. Copyright registrations in each component: No. TX-5-462-976 ­ Merchant; No. TX-4-4672-975 ­ Authorization-VISA; and No. TX-5-509-439 ­ Database Architecture. (Trial Exhibits 576, 579, 580 (Dckt.498).) Nelcela registered only two copyright registrations, for portions of the software it named the "Nelcela Merchant System" (No. TX-u-905-930) and the "Nelcela Authorization System" (No. TX-u-905929). (Trial Exhibits 133 & 140 (Dckt. 498).) The three components of the Lexcel System have been infringed by Nelcela in its "Authorization System" and "Merchant System" software. 4. Nelcela's extended quotation from the Apple case appears to suggest that

there is a relevant license agreement in this case, whose provisions would need to be addressed by this Court's order. (Nelcela's Proposed Order at 5:7-9.) The only license agreement governing the Lexcel Software is the one between Lexcel and CCS, MTSI's predecessor, which expressly provided that Lexcel retained ownership of the Lexcel Software and any derivative works of the Lexcel Software. (Trial Ex. 3 (Dckt. 498).) 5. Nelcela's Proposed Order suggests, without record citation, that the Lexcel

Software was not functional. (Nelcela's Proposed Order at 14:10-11.) Even if the operability of the Lexcel Software were legally relevant, whether or not the Lexcel Software was operational and did process transactions is a disputed issue of fact, addressed by Carl Kubitz's trial testimony that the Lexcel Software was in fact functional and able to process credit card transactions. (Trans. at 526:13-627:10 (April 12, 2007) (Dckt. 527).)

Case 2:02-cv-01954-MHM

The Joint Parties sought and were granted judgment as a matter of law, during the trial, on Lexcel's ownership of its other two copyrights ­ the Card Production and Authorization/Tsystedit.C/Tstedit.H copyrights. (Trans. at 1714:12-1715:2. (Dckt. 533).) 14
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X.

CONCLUSION. For the foregoing reasons, this Court should reject the proposed order submitted by

Nelcela. RESPECTFULLY SUBMITTED this 14th day of April, 2008. BRYAN CAVE LLP By __s/ George C. Chen ____________ George C. Chen Attorneys for Lexcel, Inc. and Lexcel Solutions, Inc. DICARLO CASERTA & PHELPS PLLC Nicholas J. DiCarlo and LAW OFFICES OF WILLIAM McKINNON By s/ William McKinnon_______________ William McKinnon Attorneys for Merchant Transaction Systems, Inc., Gene Clothier, and Tone Clothier CERTIFICATE OF SERVICE I hereby certify that on April 14, 2008, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Merrick B. Firestone [email protected] Veronica L. Manolio [email protected] Ronan & Firestone, PLC 9300 East Raintree Drive, Suite 120 Scottsdale, Arizona 85260 Attorneys for Defendants Nelcela Incorporated, Alec Dollarhide, and Len Campagna Ray K. Harris [email protected] FENNEMORE CRAIG, P.C. 3003 North Central Avenue, Suite 2600 Phoenix, Arizona 85012 LEWIS AND ROCA LLP By __s/ Kimberly A. Demarchi________ Peter D. Baird Robert H. McKirgan Richard A. Halloran Kimberly A. Demarchi Attorneys for POST Integrations, Inc., Ebocom, Inc., Mary L. Gerdts, and Douglas McKinney

s/
Document 602

Debi Garrett
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