Course No. 9200-704 (and 804)-801
ID No. 16545
MW 3:00 - 4:30 p.m.
Room 231D (IP Alcove)
|Copyright © 2000, 2002, 2003, 2006, 2008 Jay Dratler, Jr. For permission, see CMI.|
Secure Services Technology, Inc. v. Time and Space Processing, Inc.722 F. Supp. 1354, 12 U.S.P.Q.2d (BNA) 1617 (E.D. Va. 1989)
[*1356] MEMORANDUM OPINION
Ellis, III, United States District Judge.
In general, facsimile machines are devices that transmit and receive
printed or pictorial matter on documents from one location to another,
typically over telephone lines. The facsimile devices in issue transmit
the material by scanning input documents and producing a series of digital
pulses electrically related to the scanned printed or pictorial images.
The digital pulses are sent via wire to a receiving machine which,
when synchronized with the sending machine, is able to reproduce the transmitted
[The T.30 protocol specifies the content, length, order and timing of each of the binary signals needed to maintain communication between two secure fax machines. Strict adherence to these signal parameters as specified by the protocol was crucial for interoperability. The protocol, however, did permit limited types of signal variations. For example, it might specify all but the last bit of and eight-bit bite (say, 1010101X, where X could be either zero or one), where the last bit might represent a variable parameter chosen by the user. For some complex operations, the protocol also permitted the use of signals that were entirely optional.]
* * *SST took advantage of these limited opportunities to vary the content and timing of various signals within the constraints of the T.30 protocol. SST claims that these variations in timing and content, collectively referred to as "protocol variations", deserve trade secret protection. And because the content variations can be transcribed into alphanumeric form, SST also claims copyright protection.(6)
TSP spent over $ 800,000 in an apparently successful effort to achieve interoperability with the Ricoh and Valutec machines. At that point, TSP also believed it had achieved interoperability with the SST-T1, the SST TEMPEST facsimile machine. Thereafter, in March 1988, the Air Force expressed an interest in purchasing TSP's TEMPEST machines. In this connection, government representatives requested that TSP demonstrate the interoperability of the SST and TSP machines. This demonstration was achieved through the transmission of test documents from an SST facsimile machine at a government facility to a TSP machine at TSP's plant. At that time, TSP used a protocol analyzer(7) to verify that the SST machine was following the T.30 protocol and to adjust its machine's handshake protocol to achieve interoperability with the SST machine. TSP also allegedly fixed in the memory of the protocol analyzer the digital code representing SST's handshake protocol, including the protocol variations. Even so, it appears that TSP achieved only substantial, but not complete, interoperability.
In June 1988, TSP again demonstrated its machine's interoperability with the SST machine at the Armed Forces Communication Electronics Association ("AFCEA") trade show. Here again, substantial, but not complete interoperability was achieved. Nonetheless, TSP began marketing its TEMPEST facsimile machine as interoperable with SST's TEMPEST machines. Among those who purchased the TSP facsimile machine was the Air Force Logistics Command (AFLC). In early 1989, the AFLC Special Projects Officer discovered [*1359] that an interoperability problem still existed between the TSP and SST facsimile machines. In February 1989, he asked TSP to remedy this. To this end, TSP was loaned a government-owned SST-T1 to allow TSP to make whatever adjustments might be required to achieve complete interoperability with the SST machine. In this effort, TSP technicians again analyzed the timing of the SST machine's handshake protocol. TSP then took the SST facsimile machine to another AFCEA trade show and was now able to demonstrate complete interoperability with the SST machine. At this trade show, SST's representatives discovered, for the first time, that TSP had somehow gained possession of an SST TEMPEST facsimile machine.
SST's marketing practices are central to the resolution of this dispute. SST sells its TEMPEST facsimile machines only to government agencies. From October 1985, when sales of the SST-T1 machine began, the United States government purchased all right, title, and interest in these machine. The sales contracts contained no reservation of proprietary rights. There were no contract provisions prohibiting the government from supplying the SST facsimile machines to third parties. Moreover, neither the facsimile machine, nor the operator's manual, contained any restrictive or proprietary legends or any copyright notices. Nor did SST notify the government prior to the sale that SST claimed or might claim proprietary rights in the SST-T1 TEMPEST facsimile machine.
SST claims that it chose not to take these precautions because the government and the other TEMPEST machine manufacturers generally understood that the information contained in the handshake protocol was proprietary information. SST also claims that it took sufficient measures to ensure that its handshake protocol remained secret in its dealings with other TEMPEST machine manufacturers. And, as might well be expected of a manufacturer of TEMPEST facsimile machines, all of SST's facilities are guarded by a complex security system. Since the inception of this dispute, SST has begun placing proprietary legends and copyright marks on all of its facsimile machines.
On February 14, 1989, this suit was filed alleging claims of trade secret misappropriation and of conversion. On May 3, 1989, SST filed a registration request for copyright protection with the United States Copyright Office. Two days later, SST amended its complaint and added a claim of copyright infringement. The Copyright Office has not, as yet, issued a copyright registration certificate to SST for its handshake protocol.
I. Trade Secret ProtectionSST argues that its protocol variations are a trade secret entitled to protection under the California Uniform Trade Secrets Act ("the Act"). Cal. Civ. Code § § 3426.1 to 3426.10 (West 1989). In California, what constitutes a trade secret is a question of law. Acuson Corp. v. Aloka Co., 209 Cal. App. 3d 425, 257 Cal. Rptr. 368, 373, 10 U.S.P.Q.2d (BNA) 1814 (6th Dist. 1989) . . . . Summary judgment is particularly appropriate, where, as here, the data or information claimed to be protected is not disputed.
The Act defines a trade secret in the following manner:
"(1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
"(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."
In any event, even assuming subsection (d)(1) is met, it is plain beyond dispute that subsection (d)(2) is not; SST failed to take reasonable steps to maintain the secrecy of the protocol variations. SST sold to the government all right, title, and interest in the SST-T1 machines. No rights were reserved. No notification was given, as required by regulation, that the SST-T1 machine included any proprietary information. See 48 C.F.R. § 227.473-1. No markings were placed on the machine or in the related instructional material to indicate the presence of proprietary information. See 48 C.F.R. § 227.473-3. Significantly, this silence on the presence of proprietary information occurred despite the purchase order's reference to 48 C.F.R. § 252.227-7013, which allows sellers of goods to the military to claim protection for proprietary information. SST, for whatever reason, failed to do so. The government, therefore acquired unlimited rights in the TEMPEST SST-T1 machines.
Precisely this situation was considered in the official comment to the Act.(9) There, it is acknowledged that "public disclosure of information through . . . carelessness can preclude protection." The Uniform Trade Secrets Act § 1 comment, 14 U.L.A. 369, 373 (Supp. 1989). Here, SST was careless by not properly reserving its rights to the protocol. An express statement of proprietary interest was required. 48 C.F.R. § § 227.473-1, 252.227-7013(b). None was made prior to TSP's discovery of the information. Since SST failed to indicate in any way that it retained proprietary interest in information contained in its facsimile machine, it waived trade secret protection in the protocol variations. See Conax Fla. Corp. v. United States, 263 U.S. App. D.C. 144, 824 F.2d 1124, 1130-31 (D.C. Cir. 1987) (in sale to government, failure to identify information for which proprietary interest was claimed constituted a waiver of the manufacturer's rights in that information).
A comparison of this case with the precautions taken by the Acuson Corporation (Acuson) in Acuson Corp. v. Aloka Co., 209 Cal. App. 3d 425, 257 Cal. Rptr. 368, 10 U.S.P.Q.2d (BNA) 1814 (1989) is instructive. In that case, Acuson claimed trade secret protection in processes used in its ultrasonic imaging equipment, a non-invasive medical diagnostic tool. Acuson took several precautions to prevent disclosure of these imaging processes: [*1361]
SST's reliance on a general, implied understanding with the government that the protocol variations were proprietary information, and that the government had a concomitant duty to protect them, is misplaced; SST's evidence that the government considered the protocol variations to be proprietary, rests on too slender a reed. In its memorandum, SST relies on a single government document which states that "proprietary protocols are now being used by various secure facsimile machines" and continues that the various TEMPEST facsimile machines contain "ten different, non-compatible proprietary protocols." There is, of course, a significant difference between the government referring to handshake protocols as "proprietary protocols" in a document studying interoperability problems and recognizing that the TEMPEST facsimile machines it purchased were sold under a limitation of proprietary rights. And this is particularly true when the seller failed to inform the military that it claimed proprietary rights in the handshake protocols as required by the Federal Acquisition Regulations. See 48 C.F.R. § 227.473-1.
In this case, by selling its machine without reserving proprietary rights, SST effectively disclosed its protocol variations. Because the government owned all the rights to the machine, TSP's acquisition of the SST machine was entirely proper. TSP's subsequent successful reverse engineering of the protocol variations to achieve interoperability,(11) therefore, was no less proper. The Act expressly permits reverse engineering as a method of discovering what would otherwise constitute a trade secret as long as the product was not acquired by improper means. Cal. Civ. Code § 3426.1(a) (West 1989) ("reverse engineering . . . alone shall not be considered improper means"); Acuson Corp., 257 Cal. Rptr. at 379-80; see also Kewanee Oil Co. v. Bicron Corp, 416 U.S. 470, 476, 94 S.Ct. 1879, 40 L.Ed.2d 315 (1974) (construing Ohio law based on Restatement of Torts § 757(a) (1939)) . . . . Accordingly, the Court concludes that even assuming the protocol variations are protectible proprietary information, SST's failure to take the necessary, minimal precautions to safeguard this information when it sold the TEMPEST machines to the government [*1362} renders the information ineligible for trade secret protection.
II. Copyright Infringement
* * *
[On the copyright claim, the court decided, inter alia, that SST's variations in the standard protocol were insufficiently original to merit copyright protection. In reaching this conclusion, the court relied on the fact that "the protocol specifies which bit to vary, what the variation means, and when the variation can occur." Id. at 1363.]
* * * [*1365]But the flaws in TSP's other arguments do not change the Court's conclusion that SST's handshake protocols do not deserve copyright protection because they lack the requisite authorship and originality. On the contrary, the Court is persuaded that SST's remedy, if any, to protect its protocol variations was through the trade secret protections afforded by California. Summary judgment on the copyright claim is, therefore, appropriate.
* * *
1. [court's footnote 1] The Amended Complaint
originally included four countsa common law conversion claim, a
copyright violation claim and two claims for trade secret misappropriation,
one under Virginia law and one under California law. Plaintiff withdrew
the Virginia trade secret claim and the conversion claim, leaving for
this Court's resolution the copyright claim and the claim of misappropriation
of a trade secret under California law.
2. [court's footnote 2] Also before the Court
was defendant's motion for sanctions pursuant to Rule 11, Fed. R. Civ.
P, based on plaintiff's filing of the copyright infringement claim. Although
the copyright claim failed, it cannot be said that it was not "well founded
in fact and . . . warranted by . . . a good faith argument for the extension,
modification, or reversal of existing law." Rule 11, Fed. R. Civ.
P. Given this, Rule 11 sanctions are unwarranted.
4. [court's footnote 5] All facsimile machines
communicate in accordance with handshake protocols. In fact, the
title of the protocol in issue here, the CCITT T.30, is "Procedures for
Document Facsimile Transmission in the General Switched Telephone Network".
This indicates that all facsimile machines connected via telephone
lines use this protocol.
6. [court's foonote 10] SST's handshake protocol
is generated by a computer program apparently copyrighted by Jacob Keilsohn,
who licensed the software to SST. Keilsohn and SST dispute the ownership
of this software. This dispute is not directly relevant to the
case at bar.
8. [court's footnote 14] In order to satisfy
subsection (d)(1), SST's protocol variations must "derive independent
economic value" from not being "generally known" by its competitors. To
satisfy this test's first prong, the variations must provide SST a competitive
advantage. See Religious Technology Center v. Wollersheim,
796 F.2d 1076, 1090 (9th Cir. 1986), cert. denied, 479 U.S.
1103 (1987). The record is insufficiently developed on this point
to permit summary judgment consideration. Worth noting, however,
is that SST's success on the trade secret claim may actually be a competitive
disadvantage. If SST's trade secret hinders interoperability, purchasers
seeking machines that can communicate with the other types of machines
in use may be discouraged from buying the SST-T1.
9. [court's footnote 15] The official comment
to the Uniform Trade Secrets Act has been adopted as the California Senate
Legislative Committee's Comment to California's version of the Act. Cal.
Civ. Code § 3426.1 comment (West Supp. 1989)
11. [court's footnote 17] TSP's actions
in this case constitute reverse engineering in perhaps its simplest form.
There is no evidence to suggest that TSP ever opened the SST machine
or examined its internal parts or software in any manner; TSP merely connected
a protocol analyzer and a break out box to the SST machine and analyzed
the output signal. TSP then adjusted its handshake protocol to allow
its machine to communicate with the SST machine.