jointly and severally liable Archives

Insuring Innovation: Software Code May Be Protected as an Arrangement

The US Court of Appeals for the Eleventh Circuit once again remanded a trade secret and copyright dispute involving software for generating life insurance quotes, finding that the district court erred by failing to consider the copyrightability of the source code’s arrangement. As to the trade secret claim, however, the Eleventh Circuit found that the district court did not err in finding that the defendants misappropriated the trade secrets at issue and could be held jointly and severally liable, despite varying levels of culpability. Compulife Software, Inc. v. Newman, Case No. 21-14074 (11th Cir. Aug. 1, 2024) (Jordan, Brasher, Abudu, JJ.)

Compulife’s software generates life insurance quotes using a proprietary database of insurance rates. The software produces a quote by using blocks of code, arranged in a particular manner, that correspond to different data points such as state, birth month, birthday, birth year, sex and smoking status. Compulife licenses its software to customers and offers an online version to the public.

David Rutstein is a former insurance agent who is permanently barred from the profession. Rutstein misled Compulife into giving him its software by pretending that he worked with someone who had a license to use it. Rutstein then created and registered several websites in his son’s name using Compulife’s software in connection with the sites. One of the websites was later owned by Aaron Levy. Rutstein and Levy directed an employee, Moses Newman, to launch a scraping attack on Compulife’s website to get millions of quotes, which they used for their own websites. Compulife’s sales declined as a result.

Compulife sued Rutstein, Rutstein’s son, Levy and Newman for copyright infringement and misappropriation of trade secrets, among other claims. After a bench trial, the parties appealed, and the Eleventh Circuit directed the district court to make more specific findings. After a second bench trial, the district court determined that the defendants did not infringe Compulife’s software by copying it and using it for their own website, but they did misappropriate Compulife’s trade secrets. The defendants were held jointly and severally liable despite differing degrees of culpability. All parties appealed.

Compulife argued that the district court erred in concluding that the defendants did not infringe its copyright. The Eleventh Circuit agreed in part, finding that the district court incorrectly applied the abstraction-filtration-comparison test used in software copyright infringement analyses. Compulife claimed that the arrangement of its various source code elements (e.g., state, birth month, birthday, birth year and sex) was a creative and therefore protectable form of expression. The Court agreed that the arrangement was potentially protectable, similar to its holding in another case that the arrangement of yacht listings in a boat guide could be protectable. BUC Int’l v. Int’l Yacht Council (11th Cir. 2007). The Court remanded the copyright infringement analysis to the district court, finding that it erred in the abstraction step because it “never identified the entire arrangement of these variables in the code as a constituent component of the code.” The Eleventh Circuit disagreed, however, with [...]

Continue Reading

Court to Counsel: Be Frivolous at Your Own Risk

The US Court of Appeals for the Federal Circuit may “award just damages and single or double costs to the appellee” under the Federal Rule of Appellate Procedure 38 if an appeal is frivolous as filed or as argued. In a non-precedential decision, the Court granted-in-part and denied-in-part a party’s motion for sanctions and request to hold the opposing party’s counsel jointly and severally liable. Pop Top Corp. v. Rakuten Kobo Inc., Case No. 21-2174 (Fed. Cir. July 14, 2022) (Moore, C.J.; Newman, Stoll, JJ.) (per curiam). (Newman, J., dissenting). The Court granted attorneys’ fees and double costs, although it lowered the requested amount for attorneys’ fees.

Pop Top owns a patent describing methods and systems related to enabling highlighter functionality on web pages. The patent’s claim requires an “internet document [that] includes code for invoking a highlighting service to operate with the internet document.” Pop Top alleged that Kobo’s e-books on an app infringed as they are “highlightable” and “include code.” Kobo explained that all highlighting-related code was in the app, not the e-books, an assertion supported by a declaration from its chief technology officer. The district court granted summary judgment of noninfringement.

Pop Top appealed, arguing that the district court erred by not resolving the parties’ alleged claim construction dispute regarding the limitation “code for invoking,” and by deciding that Pop Top’s citation of the Kobo declaration and the infringement contentions (for the first time on appeal) was insufficient evidence of infringement to survive summary judgment.

An appeal is frivolous as filed if “the judgment by the tribunal below was so plainly correct and the legal authority contrary to appellant’s position was so clear that there really is no appealable issue.” The Federal Circuit decided that the appeal was frivolous as filed, explaining that there was no reasonable basis to appeal the summary judgment. The district court had determined that Pop Top offered “no evidence whatsoever” that the e-books included “code for invoking a highlighting service” but relied solely on the Kobo declaration, which stated that the app, not the e-books, contained the highlighting functionality.

An appeal is frivolous as argued if “the appellant engages in misconduct in arguing the appeal.” The Federal Circuit decided that Pop Top’s appeal was frivolous as argued because it “blatantly misconstrue[d] Kobo’s position” when arguing disputed scope for “code for invoking.” Kobo explained that there was no dispute; even under Pop Top’s construction, there was no infringement because the e-books do not contain code invoking the highlighting service. Pop Top further compounded its misconduct in arguing that it presented sufficient evidence to survive summary judgment, failing to explain how any cited evidence, such as the Kobo declaration, showed that Kobo’s e-books contain code related to highlighting.

The Federal Circuit explained that it may hold that counsel be jointly and severally liable for a sanctions award if “an appeal is frivolous due to the nature of the advocacy in support of it.” Because Pop Top’s appeal was frivolous “entirely because of the baseless [...]

Continue Reading

Insuring Innovation: Software Code May Be Protected as an Arrangement

Court to Counsel: Be Frivolous at Your Own Risk

BLOG EDITORS

STAY CONNECTED

TOPICS

ARCHIVES

RECENT POSTS