UNIX SYSTEM LABORATORIES, INC., Plaintiff, v. BERKELEY SOFTWARE DESIGN,
INC., and certain named individuals in their collective capacity as The Regents
of the University of California, Defendants.
Civ. No. 92-1667
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
1993 U.S. Dist. LEXIS 19505; 27 U.S.P.Q.2D (BNA) 1721; Copy. L. Rep. (CCH)
March 3, 1993, Decided
NOTICE: [*1] NOT FOR PUBLICATION
COUNSEL: For Plaintiff: Crummy, Del Deo, Dolan, Griffinger & Vecchione,
P.C., Newark, NJ, By: Gary F. Werner, Esq. Paul, Hastings, Janofsky & Walker,
NY, NY, By: George L. Graff, Esq., James W. Kennedy, Esq.
For Regents of the University of California, Defendant: Crosby, Heafey, Roach &
May, Oakland, CA, By: Joel Linzner, Esq. Post, Polak & Goodsel, Roseland, New
Jersey, By: Frederick B. Polak, Esq. For Berkeley Software Design, Inc.,
Defendant: Saiber Schlesinger Satz & Goldstein, Newark, NJ, By: James H. Forte,
OPINIONBY: DICKINSON R. DEBEVOISE
Debevoise, District Judge.
Plaintiff Unix System Laboratories, Inc. instituted this action to seek relief
from Defendants' ongoing distribution of computer software in alleged violation
of USL's proprietary rights in the UNIX operating system. Plaintiff pleads
eleven claims for relief, including federal copyright and trademark claims, and
state contract, tort, and trademark dilution claims. Defendants now move (i) to
dismiss, for lack of personal jurisdiction because Defendant Regents lack
capacity to be sued and because of improper venue; (ii) to transfer because of
improper venue and inconvenience; and (iii) [*2] to strike parts of the
pleadings. Plaintiff cross-moves to amend its complaint and for a preliminary
injunction. This court has subject matter jurisdiction pursuant to 15 U.S.C. §
1121(a) (jurisdiction over actions under Chapter 22 (Trademarks) of Title 15);
28 U.S.C. §§ 1331 (federal question), 1332 (diversity), and 1338 (copyrights and
trademarks); and supplemental jurisdiction over Plaintiff's state law claims, 28
U.S.C. § 1367(a).
I. STATEMENT OF FACTS
Plaintiff Unix System Laboratories ("USL") is a Delaware corporation and
majority-owned subsidiary of American Telephone and Telegraph Company ("AT&T"),
with its principal place of business in Summit, New Jersey. Plaintiff develops,
manufactures, licenses, and sells computer operating systems and related
products and services. Plaintiff is also the present assignee of AT&T's rights
to UNIX, the computer software at the heart of this dispute. Defendant Berkeley
Software Designs, Inc. ("BSDI") is a recently-formed Delaware corporation with
its principal place of business in Richmond Falls, Virginia. BSDI someday plans
to develop, [*3] manufacture, and sell computer operating systems like
Plaintiff. Defendant individuals are members of the Board of Regents (the
"Regents") of the University of California ("Berkeley"). The Regents are a
non-profit public corporation organized to administer the University of
California pursuant to the California constitution, art. 9 § 9, and California
The central issue here is whether Defendants BSDI and Regents appropriated parts
of Plaintiff's allegedly proprietary program "UNIX," and then used and
distributed these parts without authorization in violation of Plaintiff's
copyrights and trade secrets. UNIX is a computer operating system; that is, it
is a software program that oversees a computer's internal and external
activities, including processing, resource allocation, communications, and
applications use. AT&T's Bell Laboratories developed UNIX in the 1970s, and
registered the name UNIX as Trademark No. 1,392,203 on May 6, 1986. (1st Am.
Compl. Ex. B.) In addition, AT&T has received copyright certificates of
registration on UNIX software and documentation for the Fifth through Seventh
Editions and for version 32V. (Id., Exs. C-F.)
Before exploring the details of Plaintiff's [*4] allegations, it is important
to step back and appreciate the importance of UNIX in the world of computing.
All parties agree that UNIX is one of the most highly-regarded operating systems
in the world. Numerous treatises, courses, graduate student theses, and research
projects have investigated, expounded, and improved upon UNIX. In addition,
programmers at Microsoft, Sun Microsystems, Digital, IBM, and elsewhere have all
developed their own UNIX-like, UNIX-compatible operating systems (some under
license by Plaintiff). (Carson Reply Aff. at PP 11-12.)
After developing UNIX in late 1960s and early 1970s, AT&T quickly began
licensing UNIX to educational, government, and commercial users, including
Berkeley. Berkeley and AT&T apparently collaborated on UNIX's development at
least in the early years, with AT&T personnel often visiting Berkeley for
consultations. The parties executed their first UNIX licensing agreement in
1973, and by 1979 the parties had executed their first agreement covering the
software that Plaintiff now seeks to protect, UNIX version 32V. The parties'
most recent 32V agreement is the Educational Software License Agreement, or
E-SOFT-00089, executed in 1985 ("the [*5] 00089 agreement"). (Forte Aff., Ex.
F.) n1 The 00089 agreement permits the Regents to create derivatives of UNIX
and, to the extent that the derivatives are free of proprietary information, to
distribute them without restriction.
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n1 The 00089 agreement granted Berkeley:
2.01(a) a right to use . . . for educational use . . . [including] a right
to modify such SOFTWARE PRODUCT and to prepare derivative works based on
such SOFTWARE PRODUCT, providing that any such modification or derivative
work that contains any part of a SOFTWARE PRODUCT subject to the Agreement
is treated hereunder the same as such SOFTWARE PRODUCT. AT&T-IS claims no
ownership interest in any portion of such a modification or derivative work
that is not part of a SOFTWARE PRODUCT.
(b) Educational use is limited to uses directly related to teaching and
degree-granting programs and uses in noncommercial research by students and
faculty members, including any uses made in connection with the development
of enhancements or modifications to SOFTWARE PRODUCTS. Such uses are
permitted only provided that (i) neither the results of such research nor
any enhancement or modification so developed is intended primarily for the
benefit of a third party, (ii) such results, enhancements and modifications
(all to the extent that they do not include any portion of SOFTWARE PRODUCTS
are made available to anyone . . . without restriction on use, occupying or
further distribution . . . and (iii) any copy of any such result,
enhancement or modification furnished by LICENSEE is furnished for no more
than the cost of reproduction and shipping.
In addition, the license imposes no restrictions on materials in the public
7.05 (a) . . . If information relating to a SOFTWARE PRODUCT subject to this
Agreement at any time becomes available without restriction to the general
public by acts not attributable to LICENSEE or its employees, students or
faculty members, LICENSEE'S obligations under this section shall not apply
to such information after such time.
(Shapreau Decl., Ex. G.)
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In addition to its source code, AT&T also prepared and distributed copies of 32V
object code beginning in 1984. Object code is simply the source code translated
into the form recognized by computer hardware, a binary sequence of 0s and 1s.
Although readable by computers, sequences of 0s and 1s are generally inscrutable
to humans. Relying on this inscrutability for protection from disclosure, AT&T
has distributed 32V object code publicly subject to notice of copyright but
without redistribution restrictions (Pfeffer Reply Decl. at P 4).
Berkeley, a recipient of 32V source code, exercised its contractual right to
derivatize 32V to the hilt. It began to create its own embellishments and
additions, which it called Berkeley Software Distributions ("BSD") releases, and
distributed them via the Regents' Computer Sciences Research Group ("CSRG"). In
the early 1980s, Berkeley only distributed the releases to other licensees
(which now number in the thousands) because the releases contained proprietary
code governed by Berkeley's license with AT&T. But demand for the releases from
unlicensed users grew, so Berkeley began distributing redacted releases with the
proprietary material allegedly [*7] removed. These releases included the
operating system at the heart of the present dispute, Net2, which Plaintiff has
alleged violates its proprietary rights in 32V.
Net2 apparently began as a project to develop a UNIX-like product devoid of AT&T
proprietary code. This product contained both non-proprietary software from the
BSD releases and software written specifically for Net2, sometimes by
volunteers. (Kennedy Aff., Ex. 6.) To guarantee that no proprietary code
remained, CSRG screened and eliminated overlapping code sections in accordance
with criteria developed together with Berkeley's legal counsel. In addition,
Berkeley "repeatedly contacted the USL licensing office, in an attempt to have
them review software we intended to distribute." (McKusick Decl. at 8.)
Plaintiff allegedly refused to cooperate, although it had performed similar
services for others.
Berkeley's decision to excise AT&T's code was motivated by several related
concerns. First, the University of California received substantial benefits by
being the center of UNIX software development, benefits that would increase if
it could expand the family of UNIX users by extending UNIX to non-licensees
(Ibid.); second, [*8] the cost of an AT&T UNIX license had increased to around
$ 200,000, excluding all but the largest users (Ibid.); third, the Net2 version
of UNIX would offer new and improved services (Keith Bostic, Marshall K.
McKusick, & Michael J. Karels, Berkeley UNIX Yesterday, Today and Tomorrow, in
Kennedy Aff. Ex. 8); and finally, the CSRG programmers, at least those who
founded BSDI (Karels, McKusick, and Bostic), presumably saw in Net2 an
opportunity to profit from the widespread interest in UNIX-like systems.
The end result of Berkeley's efforts was a product that, by all accounts,
contains a very small proportion of 32V code. But this is not to say that Net2
fails to display its 32V roots. Plaintiff hired Professor John Carson to unearth
these roots and, after over 400 hours of digging, Professor Carson has now
identified a number of instances where 32V code is embedded in the Net2 system.
(Carson Aff. at P 13.) The legal significance of this code is, of course, a
matter of dispute.
To begin with, it is important to compare Net2 side-by-side with 32V. Net2 has
far outgrown 32V and now weighs in at nearly ten times the size of its parent.
The alleged overlaps between parent and child [*9] probably amount to less
than a percent of the total. (Joint Decl. at PP 12, 13.) Indeed, ignoring header
files and comments (see below), the overlap in the critical "kernel" region is
but 56 lines out of 230,9995, and the overlap elsewhere is 130 lines out of 1.3
million. However, as both sides argue (but to different effect), the nature of
the overlap is more significant than its size.
According to Professor Carson, eighty of the 8,000 Net2 files are "littered with
textual references which are or [sic] identical or substantially similar to
corresponding textual matter in the UNIX/32V source code." (Ibid.) These textual
overlaps include variable and parameter names, function names, the text of
noncoding comments, and the actual sequence of the instruction code itself. (Id.
at P 23.) Most of these textual references are concentrated in files in the
"kernel" of Net2, "which forms the central core of the operating system." (Id.
at P 14.)
To understand the functional importance of this overlap, it is necessary to
understand its nature. Overlap in items such as variable, file, and function
names is functionally irrelevant to the program insofar as the program is wholly
self-referential. [*10] That is, a programmer could name a variable or
function anything at all without disabling the program, as long as the program
did not interface with other programs. n2 But once a program interfaces with
another program, the file, function, or variable names can become significant.
The two programs may have certain files, functions, or variables in common, and
these must have the same names in order for the programs to interface. Programs
written to run with a UNIX-like operating system have now become so common that
industry standards govern the requirements of UNIX interfaces.
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n2 Professor Carson notes that 30% of the internal functions "not published in
SVID or intended for use by programs outside the operating system itself" have
identical names in Net2 and 32V. It would appear that these are the sorts of
names that Defendants could have readily changed without affecting compatibility
with other programs.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -
For example, the UNIX operating systems contain files called "header" files.
Header files are repositories [*11] of common definitions and declarations. If
a programmer knows that an operating system contains a certain header file, then
the programmer can simply refer to the header file and avoid reproducing all of
the definitions and declarations. Of course, such a program can only run with an
operating system having the proper header files. Therefore, Defendants have
included 32V's header files in Net2 as a matter of necessity, to insure that the
many programs written for UNIX-like systems will be compatible with Net2.
Another type of overlap identified by Professor Carson is overlap in code
instructions. Code instructions embody and implement the programmer's solution
to a programming problem -- a solution that directly determines how well or how
poorly the program runs. Professor Carson has found several sections of
instructions that BSDI appears to have copied from 32V. Again, BSDI argues that
these instructions are widespread and well-documented, and that their structure
is substantially dictated by the need to preserve compatibility with other
programs (Joint Decl. at PP 53-61.)
The final type of overlap identified by Professor Carson is "comment" overlap.
All computer programs contain [*12] short explanatory comments annotating the
code in which they are embedded. The function of these comments is simply to
inform programmers of the purpose and operation of particular sections of code.
Comments have no role whatsoever in software performance.
In summary, Professor Carson has examined the traits shared by Net2, BSD/386,
and 32V, and detected a common lineage. Defendants argue that virtually all of
these traits reflect publicly available code, copied comments, or overlap
dictated by compatibility with industry standards. Professor Carson disagrees,
and has allegedly identified at least some overlapping files that are irrelevant
to program interfacing. (Carson Reply Aff. at PP 6(d), 8-15.)
Berkeley began licensing and distributing Net2 in June 1991. Plaintiff has
alleged that the "highest levels," meaning persons reporting directly to the
Regents, approved Net2's release. (E.g. Proposed 2d Am. Compl. at PP 2, 9, 38,
64, 72, 89, 103.) Indeed, Plaintiff has alleged that the University Chancellor
himself approved Net2's release. (Kennedy Aff. P 16.)
In soliciting new licensees, Berkeley distributed promotional materials stating
that Net2 "may be freely redistributed. It is [*13] available to anyone and
requires no previous license, either from AT&T or The Regents of the University
of California." (Bostic Dep. at 76, Kennedy Aff. Ex. 3K.) According to Mr.
Bostic, a member of CSRG, promotional materials were mailed to firms in New
Jersey, although no New Jersey firms were among the approximately 120 firms that
signed a licensing agreement to use Net2.
An early Net2 licensee was UUNET, an electronic information exchange for people
interested in UNIX. (Adams Dep. at 149, Kennedy Aff. Ex. 12.) UUNET added Net2
to its standard archives, enabling any subscriber to UUNET to freely and
anonymously copy Net2 to their own computer system. When asked the number of
people who had copied Net2 from UUNET, Mr. Bostic replied that "I've been told
it's in the tens of thousands." (Bostic Dep. at 81, Id.). UUNET is available to
hundreds of thousands of users worldwide, including users in New Jersey. (Rorke
Aff. PP 1-4.)
One organization that obtained Net2 from UUNET was BSDI. (Adams Dep. at 149,
Kennedy Aft. Ex. 12.) BSDI, which is not licensed by AT&T to use UNIX, used Net2
to create its sole product, the operating system BSD/386 Source. (Ans. &
Countercl. at PP 5-6.) BSDI [*14] is now close to bringing BSD/386 to market,
having distributed preliminary "alpha," "beta," and "gamma" versions of BSD/386
as well as promotional literature. This literature states that BSD/386 Source
"contains no AT&T licensed code" and "does not require a license from AT&T."
(1st Am. Compl. Ex. I.)
II. PROCEDURAL HISTORY
Plaintiff filed its complaint in this action on April 20, 1992. On April 29, the
parties agreed to a court-ordered stipulation that BSDI would cease using the
phone number "1-800-ITS-UNIX". Plaintiff filed its First Amended Complaint on
July 24, and on the same date Defendants' motion to dismiss Counts Ten and
Eleven were denied. Defendants answered on September 3 and counterclaimed for
declarations of noninfringement, unenforceability, and invalidity of Plaintiff's
trademark and copyrights in the UNIX name and materials. Plaintiff replied on
September 25, and subsequently moved for a preliminary injunction. The motion
for an injunction was adjourned and consolidated with the present motions.
Defendants move for relief on three separate grounds: this complaint should be
dismissed against the individual Regents pursuant to Rules 12(b) and 12(f)
of [*15] the Federal Rules of Civil Procedure, because the individual Regents
lack the capacity to be sued; Plaintiff has no personal jurisdiction over the
University of California; and venue in New Jersey is improper under 28 U.S.C. §
1391. Plaintiff cross-moves to amend its complaint, in part to correct some of
the defects asserted by Defendants, and for a preliminary injunction.
A. Plaintiff's Motion To Amend
Plaintiff cross-moves to amend its complaint pursuant to Rule 15(a) of the
Federal Rules of Civil Procedure. Rule 15(a) states that, in cases where the
adverse party has served a responsive pleading, "a party may amend the party's
pleading only by leave of court or by written consent of the adverse party; and
leave shall be freely given when justice so requires."
The Supreme Court has held that
in the absence of any apparent or declared reason -- such as undue delay,
bad faith or dilatory motive on the part of the movant, repeated failure to
cure deficiencies by amendments previously allowed, undue prejudice to the
opposing party by virtue of allowance of the amendment, futility of
amendment, etc. -- the leave sought should, as the rules [*16] require, be
Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962).
Plaintiff seeks to amend its complaint to add allegations of wrongdoing on the
part of the individual Plaintiffs (e.g. Proposed 2d Am. Compl. at PP 2, 9, 38,
64, 72, 89, 103); factual allegations concerning the University's distribution
of its Net2 code to persons in New Jersey (e.g. Id. at PP 41, 43, 44); and
allegations of willfulness on the part of the University and BSDI (e.g. Id. at
PP 50, 63-66). In addition, Plaintiff wishes to change the named Defendants from
"the Following Individuals in their Collective Capacity as The Regents etc." to
"The Regents of the University of California and the Following Persons in their
Individual and Official Capacity etc."
There is no evidence that Plaintiff is seeking a second amendment of its
complaint for reasons of bad faith and delay. Plaintiff is simply trying to meet
Defendant's objections to the present complaint, to insert new factual matters
learned through discovery, and to clarify the nature of its claims. Moreover,
the proposed amendments cause no prejudice to Defendants. The amendments do not
eliminate claims which the [*17] Defendants have expended time and resources to
rebut, nor do the amendments drastically alter the expected costs of defense,
length of the action, or nature of the complaint. Consequently, I grant
Plaintiff's motion for leave to amend.
B. Defendant Regents Lack The Capacity To Be Sued
Defendants argue that Plaintiff "has chosen to incorrectly name individual
Regents of the University of California, 'in their collective capacity,' rather
than the legal entity known as the [sic] 'The Regents of the University of
California' as required by federal and state law." (Defs.'s Supp'g Br. at 5.) In
addition, Defendants argue that "Plaintiff has not stated any facts which would
support a claim against individual Regents," and that "claims against
individuals acting in their official governmental capacities may be barred by
qualified immunities." (Defs.'s Supp'g Br. at 6-8.) Defendants base these
arguments in the Federal Rules of Civil Procedure and the California
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n3 Defendants argue that Rule 17(b) of the Federal Rules of Civil Procedure
mandates that "the capacity of a corporation to sue or be sued shall be
determined by the law under which it was organized." According to the California
constitution, article IX, § 9, the University of California is a public trust
administered by the corporation "The Regents of the University of California".
Among its other powers, the Regents corporation "shall also have . . . the power
to sue and to be sued." (See MacDonald Decl. Ex. A.) Consequently, Defendants
conclude, Plaintiff can only sue the Regents by their corporate name, and not
"in their collective capacity" or otherwise.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [*18]
Plaintiff's Second Amended Complaint answers Defendants' "collective capacity"
objection by expressly naming the Regents of the University of California as
Defendants. Defendants' other objection, that Plaintiff has improperly named the
individual Regents, needs no answer. Defendants have not elaborated on their
one-sentence suggestion that Plaintiff has failed to state a claim against these
Accordingly, I must deny Defendants' motions to dismiss all claims against the
individual Regents and to strike the related matters from the pleadings.
C. Personal Jurisdiction Over The Regents
Defendants also allege that this action must be dismissed for lack of
jurisdiction over "the University." The Second Amended Complaint no longer names
"the University" per se, instead naming the Regents in their corporate,
official, and individual capacities. Consequently, this motion will be treated
as a motion to dismiss for lack of jurisdiction over the Regents as named in the
Second Amended Complaint.
This court has personal jurisdiction over a defendant if the exercise of
personal jurisdiction complies with the laws of New Jersey, Fed. R. Civ. P.
4(e), and does not violate due process. [*19] International Shoe Co. v.
Washington, 326 U.S. 310, 90 L. Ed. 95, 66 S. Ct. 154 (1945) (the fourteenth
amendment limits state long-arm statutes); Provident National Bank v. California
Federal Savings & Loan Ass'n, 819 F.2d 434, 436 (3d Cir. 1987) (citing Rule 4(e)
and International Shoe). The due process clause permits a court to exercise
jurisdiction over a party whenever the party has "certain minimum contacts with
[the forum] such that the maintenance of the suit does not offend 'traditional
notions of fair play and substantial justice.'" International Shoe, 326 U.S. at
The dual considerations of state law and Constitutional limits coincide in New
Jersey because New Jersey's long-arm statute reaches as far as the due process
clause of the Fourteenth Amendment permits. Carteret Savings Bank, FA v.
Shushan, 954 F.2d 141 (3d Cir.), cert. denied, 121 L. Ed. 2d 29, U.S. , 113
S. Ct. 61 (1992) (citing New Jersey Court Rule 4:4-4, which permits service
"consistent with due process of law"); Charles Gendler & Co., Inc. v. Telecom
Equip. Corp., 102 N.J. 460, 469, 508 A.2d 1127 (1986) [*20] (Rule 4:4-4 allows
"'out-of-state service to the uttermost limits permitted by the United States
Constitution'", citing Avdel Corp. v. Mecure, 58 N.J. 264, 268, 277 A.2d 207
(1971)); Giangola v. Walt Disney World Co., 753 F. Supp. 148, 154 (D.N.J. 1990)
(New Jersey's long-arm statute extends to the limits of the U.S. Constitution).
If a defendant raises the issue of personal jurisdiction, the plaintiff bears
the burden of establishing that the defendant's contacts with the forum state
comport with the requirements of due process. "To carry this burden, plaintiff
must show 'with reasonable particularity' that the forum, and thus the court,
has either: (1) specific jurisdiction (where the cause of action arose from the
defendant's activities within the forum state), or (2) general jurisdiction
(derived from defendant's continuous and systematic conduct in the forum
state)." Giangola, 753 F. Supp. at 154 (citing Provident National Bank, 819 F.2d
Once a court has found that a defendant's contacts with the forum state are
significant enough to confer jurisdiction on the [*21] forum, "in appropriate
cases" the court may evaluate other factors. Burger King, 471 U.S. at 476-77.
These include the "'burden on defendant,' 'the forum State's interest in
adjudicating the dispute,' 'the plaintiff's interest in obtaining convenient and
effective relief,' 'the interstate judicial system's interest in obtaining the
most efficient resolution of controversies,' and the 'shared interest of the
several States in furthering fundamental substantive social policies.'" Id. at
477, citing World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 62 L. Ed.
2d 490, 100 S. Ct. 559 (1980).
To apply these principles in the present case, it is first necessary to briefly
review the connections between the various defendants and the alleged
wrongdoing. Plaintiff's allegations against the Regents, in their various
capacities, stem from the release of Net2 by the CSRG, a group affiliated with
the University of California. The Regents, in their corporate capacity, are
apparently liable under a theory of respondeat superior for the activities of
CSRG. In their official and individual capacities, the Regents are apparently
liable [*22] in so far as they authorized, knew of, or reasonably should have
known of Net2's release. Thus Plaintiff can satisfy the burden of proving
jurisdiction by showing with "reasonable particularity" that CSRG's acts bring
it within this court's jurisdictional ambit, and that the Regents approved those
Plaintiff points to several different activities by the University of California
that give this court specific jurisdiction over the Regents' alleged misdeeds.
The first of these activities was the negotiation and execution of licensing
agreements between Plaintiff and the University: "the University 'reached out
beyond' California and knowingly contracted to obtain and use . . . software
developed in New Jersey." (Pl.'s Opp'g Br. at 19, citing Burger King v.
Rudzewicz, 471 U.S. 462, 476, 85 L. Ed. 2d 528, 105 S. Ct. 2174 (1985).)
The Supreme Court analyzed a similar issue of personal jurisdiction in the
seminal case Burger King v. Rudzewicz. In Burger King, the Michigan defendant
Rudzewicz had contracted with the Florida corporation Burger King for a
restaurant franchise near Detroit. Business lagged at the restaurant, and when
Rudzewicz was unable to meet the lease payments, [*23] Burger King brought an
action for eviction in the Southern District of Florida. Although Rudzewicz's
manager had trained at Burger King headquarters in Florida, Rudzewicz himself
had apparently never even visited there. None the less, the Court found that the
Southern District of Florida had personal jurisdiction over Rudzewicz because
the contract had substantial connections with Florida and because Rudzewicz had
purposefully reached out and availed himself of the benefits of a continuing
relationship with a citizen of Florida.
The Third Circuit has also found personal jurisdiction in cases where a contract
provided the defendant's only contacts with the forum state. In Associated
Business Telephone Systems v. Greater Capital Corp., 861 F.2d 793 (3d Cir.
1988), the court found jurisdiction in New Jersey over a California company that
had contracted with a New Jersey company for telephone services for an Illinois
hotel. Following the methodology prescribed in Burger King, the court examined
the connections between the contract and New Jersey: (1) the defendant had
created long-term (ten-year) obligations between itself and the New Jersey
plaintiff; [*24] (2) the plaintiff would be the exclusive contractor and
manager of the phone system, with 24-hour access to it; (3) all communications
with the plaintiff were with its New Jersey office; (4) the plaintiff
continually monitored phone usage in New Jersey; (5) the plaintiff had the power
to unilaterally disconnect the defendant; (6) the plaintiff sent its personnel
to the defendant's offices; and (7) the defendant knew that its acts would cause
injury in New Jersey.
The contractual contacts here arise out of Count One, a count that names the
Regents in all their capacities. The contacts are less substantial than those in
Burger King and Associated Business, but a side-by-side comparison between the
contacts here and those in Associated Business listed above shows that the
contacts here are not insignificant. (1) Defendants knowingly entered into a
relationship with a New Jersey facility that has now lasted nineteen years,
compared to a ten-year contract in Associated Business. It is true that
Defendants signed the initial contract with AT&T in New York, but they
maintained their operational relationships with Plaintiff in New Jersey at all
times. (2), (4), (5) The New [*25] Jersey facility continued to develop,
distribute, and service the software licensed to Defendants. In addition,
Defendants also participated in the development and distribution of UNIX to
Plaintiff's licensees, to such an extent that Defendants' development efforts
now apparently outstrip those of Plaintiff. (3) Most communications concerning
UNIX were presumably with Plaintiff's New Jersey office. (6) Plaintiff sent
technical people to meet with Defendants in California "on quite a large number
of occasions." (McKusick Dep. at 318, Kennedy Aff. Ex. 5.) (7) Defendants knew
its acts would cause injury in New Jersey.
In sum, Defendants and Plaintiff have worked together for nearly two decades to
develop, expand, and distribute UNIX software to Plaintiff's licensees.
Defendants and Plaintiff are not two organizations whose only contact is an
agreement cemented by fax and phone to engage in a single transaction. See
Colmen Financial Services v. Charter Equip. Leasing, 708 F. Supp. 664 (E.D. Pa.
1989) (no jurisdiction arising out of Plaintiff's contract with out-of-state
Defendant to give financial advise in sale of business). Plaintiff and
Defendants are [*26] long-term business associates, and Defendants should
reasonably have expected to be subject to suit in New Jersey.
Plaintiff asserts a second ground for jurisdiction in that it has alleged that
Defendants committed unlawful acts that inflicted foreseeable harm on New Jersey
residents. Again, this jurisdiction involves the Regents in both their
collective and individual capacities because it arises out of counts alleging
unlawful acts in these capacities. (2d Am. Compl., Counts 3, 4, 6, 8). The U.S.
Supreme Court has upheld such jurisdiction in several cases. In Calder v. Jones,
465 U.S. 783, 79 L. Ed. 2d 804, 104 S. Ct. 1482 (1984), the Supreme Court held
that parties who intentionally aim their tortious acts at victims in other
states must expect to be haled into court in those states. Id. at 790
(California had jurisdiction over Florida defendants who allegedly libelled a
California plaintiff in a magazine whose primary market is in California). In
Hustler v. Keeton, 465 U.S. 770, 79 L. Ed. 2d 790, 104 S. Ct. 1473 (1984), the
Court held that New Hampshire had jurisdiction in a libel action against Hustler
magazine even though only a fraction of Hustler's sales [*27] occurred in New
Plaintiff relies especially on the case Horne v. Adolph Coors Co., 684 F.2d 255
(3d Cir. 1982). In Horne, the plaintiff alleged that defendant Coors, a Colorado
corporation, manufactured its beer using a device that infringed one of the
plaintiff's patents. Even though Coors had made every effort to prevent the
sales of its beer in New Jersey, the beer remained available in the bootleg
market. Coors also knew that selling its beer anywhere would injure the
plaintiff regardless of whether he resided in a state selling the beer.
Moreover, Coors had allegedly devalued intellectual property, which has a
fictional situs at the residence of the owner. Considering all of these factors,
the court found that Coors was subject to jurisdiction in New Jersey. See also
Paolino v. Channel Home Centers, 668 F.2d 721 (3d Cir. 1981) (out-of-state
manufacturer produced device in violation of agreement with plaintiff to protect
plaintiff's trade secrets, and sold the device to defendant who resold it
Plaintiff argues "unlawful act" jurisdiction, as explained in Calder, Hustler,
and Home, is [*28] proper for several of Defendants' acts. First, jurisdiction
is proper because Defendants mailed an offer to prospective Net2 licensees in
June 1991, allegedly in violation of the Lanham Act. Unlike Coors in Home,
Defendants here targeted UNIX users in New Jersey, offered them the allegedly
proprietary Net2, and encouraged them to distribute it freely to other parties.
Defendants contend that this single offer, which apparently no New Jersey
residents accepted, cannot create personal jurisdiction, especially since
Defendants lacked an "express intention to injure" Plaintiff. (Defs.'s Reply Br.
at 18.) Defendant might be correct if the offers were innocuous absent an
acceptance. But Plaintiff has alleged that the offers themselves create a
violation of the Lanham Act by the Regents in both their individual and
corporate capacities. See, e.g. Calder, 465 U.S. 783, 79 L. Ed. 2d 804, 104 S.
Ct. 1482 (parties who intentionally aim their tortious acts at victims in other
states must expect to be haled into court in those states). In addition,
Defendants had an "express intention to injure" in the sense that they must have
known that their acts could injure Plaintiff.
Second, Plaintiff argues [*29] that "unlawful act" jurisdiction is proper
because Defendants have misappropriated trade secrets and infringed Plaintiff's
copyright by licensing Net2 to UUNET. This act inevitably and foreseeably led to
the downloading of Net2 by tens of thousands of users, whose use of Net2
foreseeably eroded the value of Plaintiff's trade secrets. Plaintiff has not
submitted an estimate of the number of Net2 programs actually downloaded in New
Jersey, but with tens of thousands of copies distributed, the odds are that at
least several hundred reside on disks and tape within this state (in addition to
the copy downloaded by Plaintiff's personnel).
These acts are analogous to acts that gave rise to jurisdiction in Paolino v.
Channel Home Centers, 668 F.2d 721 (3d Cir. 1981). In Paolino, a Pennsylvania
plaintiff confided trade secrets to a Tennessee defendant, who abused
plaintiff's confidences and used the secrets to manufacture its products. The
defendant then sold these products to a third party in New Jersey, who in turn
distributed the goods to customers at its Pennsylvania stores. The court found
jurisdiction even though the defendant was not the party selling [*30] the
goods in Pennsylvania. "[The Defendant], knowing that Paolino had an interest in
intellectual property recognized by the law of Pennsylvania where he resided,
obtained his property in confidence and set out on a course of action which
would destroy it." This behavior sufficed to create jurisdiction in Paolino, and
it suffices to create jurisdiction here as well.
In summary, Plaintiff has pleaded a number of grounds sufficient to create
jurisdiction over Defendant Regents and University. None the less, the Regents
argue that "the presence of some other considerations would render jurisdiction
unreasonable." Burger King, 471 U.S. at 477. Such considerations are usually
handled by means other than denying jurisdiction, such as choice of law rules,
transfer, and change of venue. Ibid. In this case, as discussed below, the
Regents' contentions of improper and inconvenient venue are insufficient to
"render jurisdiction unreasonable." Consequently, I deny the Regents' motion to
dismiss the Second Amended Complaint for lack of personal jurisdiction.
D. Dismissal For Improper Venue Or Transfer
Defendants also move to dismiss for improper venue. [*31] This motion must be
denied as well. Venue is proper under 28 U.S.C. § 1391(b)(2), which applies to
suits where subject matter jurisdiction is based on a federal cause of action.
Section 1391(b)(2) states that venue is proper in "a judicial district in which
a substantial part of the events or omissions giving rise to the claim occurred,
or a substantial part of the property that is the subject of the action is
situated . . . ."
In the present case, Plaintiff's claims are based at least in part on alleged
misrepresentations and trademark violations made in New Jersey, and on alleged
unlawful distributions to individuals in New Jersey. At this early stage of
discovery, it is impossible to know exactly how large a part of the alleged
actions occurred elsewhere, but the record offers no evidence that any state
received substantially more solicitations or distributions than New Jersey.
Furthermore, Plaintiff's trade secrets and, presumably, UNIX trademark are
located at its home in New Jersey. Consequently, Plaintiff's claim involves both
property and acts in New Jersey. See Cottman Transmission v. Metro Distributing,
796 F. Supp. 838 (E.D. Pa. 1992) [*32] (franchisees' unlawful use of trademarks
out-of-state created venue in-state).
Even if venue is proper in New Jersey, Defendants argue that this case must be
transferred to a California district court under 28 U.S.C. § 1404(a), "for the
convenience of parties and witnesses, in the interest of justice". Defendants
bear the burden of persuasion on this issue. Shutte v. Armco Steel Corp., 431
F.2d 22, 25 (3d Cir. 1970), cert. denied, 401 U.S. 910, 27 L. Ed. 2d 808, 91 S.
Ct. 871 (1971). Section 1404(a) leaves transfer decisions to the discretion of
the court, but a court should not lightly disturb Plaintiff's choice of forum.
"'Unless the balance of convenience of the parties is strongly in favor of
defendant, the plaintiff's choice of forum should prevail.'" Ibid. (citing
Owatonna Manufacturing Co. v. Melroe Co., 301 F. Supp. 1296, 1307 (D. Minn.
1969)) (emphasis added in Shutte).
Defendants assert that "virtually all the witnesses and all the defendants
reside a considerable distance from New Jersey's state borders," and that
California has a considerable interest in the litigation. [*33] (Def.'s Supp'g
Br. at 15.) Defendants are surely correct with regard to the issue of whether
the Regents individually committed unlawful acts.
However, as shown by the briefs arguing Plaintiff's motion for a preliminary
injunction against BSDI, the threshold issues here are not issues of who did
what, but rather issues of similarity among source codes, of contract
interpretation, and of law. How closely does Net2 or BSD/386 resemble 32V? Was
32V published without notice of copyright? What sorts of publications do
Berkeley's licenses permit? Can any part of 32V possibly be considered a trade
secret, given that much of it is industry standard and known to a generation of
users and programmers? These are all issues without a particular geographical
Consequently, I will not disturb Plaintiff's decision to bring this action in
New Jersey. Considering the various issues that must be tried in this case, a
New Jersey forum is not so burdensome for Defendants as to require transfer or
dismissal in the interests of convenience and justice.
E. Preliminary Injunction
Plaintiff moves for a preliminary injunction against further distribution of the
source code by BSDI (the Regents have [*34] voluntarily ceased distributing the
source code at issue here). Federal district courts have the power to grant
preliminary injunctions pursuant to Rule 65(a) of the Federal Rules of Civil
Procedure. Preliminary injunctions allow a court to "prevent the judicial
process from being rendered futile by defendant's action or refusal to act."
Charles A. Wright and Arthur R. Miller, Federal Practice and Procedure § 2947
(1973). In other words, a preliminary injunction allows a court to maintain the
status quo until trial. To obtain a preliminary injunction, the movant must
(1) the reasonable probability of eventual success in the litigation and (2)
that the movent will be irreparably injured pendente lite if relief is not
granted. Moreover, while the burden rests upon the moving party to make
these two requisite showing[s], the district court "should take into
account, when they are relevant, (3) the possibility of harm to other
interested persons from the grant or denial of the injunction, and (4) the
Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797 (3d Cir. 1989).
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n4 The standards for preliminary injunctions are determined by federal law, even
though they provide interim relief for state-law claims. Rule 65(a) "'may be
read as a codification of the traditional federal equity practice . . . .'"
Instant Air Freight, 882 F.2d at 799 n. 4 (quoting 11 C. Wright and A. Miller,
Federal Practice and Procedure, § 2943).
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [*35]
1. Copyright Infringement
Plaintiff claims that BSDI has violated Plaintiff's copyright in the UNIX source
code and, unless I enjoin further violations, BSDI's continuing violations will
irreparably harm Plaintiff. The first factor to be considered is whether
Plaintiff has a reasonable probability of prevailing on the merits of this
In order to prevail, Plaintiff must prove that it has a valid copyright in the
UNIX code. Plaintiff's chief difficulty here is the "publication doctrine." The
publication doctrine denies copyright protection to works which the copyright
owner "publishes," unless the owner has properly affixed a notice of copyright
to the published work. This doctrine has suffered steady erosion over the years,
and it now applies in full force only for works published prior to January 1,
1978. For works such as 32V (published in 1978), which were published after that
date but before March 1, 1989, the doctrine is subject to the escape provisions
of 17 U.S.C. § 405(a) and the common-law "limited publication rule." For works
published after March 1, 1989, the publication doctrine has been eliminated by
the Berne Convention Implementation [*36] Act, 102 Stat. 2857 (1988).
Because Plaintiff copyrighted 32V in 1992, Plaintiff benefits from a statutory
presumption of validity and BSDI has the burden of proving otherwise. Williams
Electronics, Inc. v. Artic International, Inc., 685 F.2d 870, 873 (3rd Cir.
1982). BSDI seeks to carry this burden by proving that AT&T and Plaintiff have
widely published 32V without proper notice. Publication is defined as
the distribution of copies or phonorecords of a work to the public by sale
or other transfer of ownership, or by rental lease or lending. The offering
to distribute copies or phonorecords to a group of persons for purposes of
further distribution, public performance, or public display, constitutes
publication. A public performance or display of a work does not of itself
17 U.S.C. § 101. Version 32V source code has now been distributed, without
notice, to literally thousands of licensees. n5 Consequently, Plaintiff can have
no valid copyright on 32V unless it can fit within one of the statutory or
common-law escape provisions.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n5 Version 32V object code has also been distributed, but this code was
apparently accompanied by appropriate copyright notices. (Pl.'s Supp'g Br. at
11.) See Sega Enterprises, Ltd. v. Accolade, Inc., 977 F.2d 1510, 1526 n. 8 (9th
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [*37]
The three statutory escape provisions are listed in section 405(a). These
provisions relieve a copyright owner from the harsh consequences of noticeless
publication if the owner (i) omitted the notice from a "relatively small number
of copies;" (ii) registers the work within five years of publication, and then
makes a "reasonable effort" to add notices to the noticeless copies already
distributed; or (iii) proves that a third party omitted notice in violation of
an express agreement in writing. 17 U.S.C. § 405(a)(1)-(3).
Plaintiff cannot avail itself of any of these provisions. Notice was omitted
from thousands of copies of 32V; no contractual agreements require the licensees
to affix notice; Plaintiff failed to copyright 32V until 1992, well over five
years after 32V was published; and Plaintiff has not yet made reasonable efforts
to add notices to the many notice less publications of 32V. Consequently,
Plaintiff must try to fit within the common-law doctrine of limited publication.
Under the common-law doctrine of limited publication, a publication will not
divest an author of copyright protection if the author "'communicates the
contents of [*38] a manuscript to a definitely selected group and for a
limited purpose, and without the right of diffusion, reproduction, distribution
or sale . . . .'" Rexnord, Inc. v. Modern Handling Systems, Inc., 379 F. Supp.
1190, 1197 (D. Del. 1974) (quoting White v. Kimmell, 193 F.2d 744, 746-47 (9th
Cir. 1952), cert. denied, 343 U.S. 957, 96 L. Ed. 1357, 72 S. Ct. 1052 (1952);
see also American Visuals Corp. v. Holland, 239 F.2d 740, 744 (2d Cir. 1956)
(quoting White v. Kimmell). There is some question as to whether the doctrine of
limited publication survived the 1976 amendments to federal copyright law, but
the weight of authority holds that its has. See Nimmer on Copyrights, § 4.13[B]
(1992), and the cases cited therein ("the doctrine of limited publication
continues under the current Act").
For the present dispute, the key criterion is that the alleged copyright owner
must only have distributed the works to a "selected group." To qualify as a
"selected group," those receiving the work must be more than just customers
self-selected by their desire to purchase the work. Otherwise, "all the [*39]
purchasers of the work" would qualify as a "selected group," and all
publications would be limited publications. For example, if a programmer sells
software to anyone willing to meet the asking price, then the programmer can
hardly be said to have communicated the work to a selected group. See Brown v.
Tabb, 714 F.2d 1088, 1092 (11th Cir. 1983) (the group containing all of the
potential purchasers of a jingle was not a "selected group"); Academy of Motion
Picture Arts v. Creative House Promotions, 944 F.2d 1446 (9th Cir. 1991) (Oscar
winners are not a selected group because Plaintiff did not distribute its Oscars
generally to the public). Situations where courts have found selected groups
include distribution of manuscripts by authors to a small collection of friends;
of floor plans to contractors so they can prepare bids; of advance copies of
works to colleagues for criticism or review; of samples to potential customers;
and of promotional material to dealers. Nimmer on Copyright, § 4.13[A] (1992).
As the above examples suggest, the traditional scope of the limited publication
doctrine is narrow. But courts have shown [*40] a tendency to expand the scope
of this doctrine when applying it to computer products. See Nimmer on Copyright,
§ 4.13[A], . For example, several courts have declined to find a
publication where a copyright owner has communicated support materials to
customers buying computers. One such case is Hubco Data Products Corp. v.
Management Assistance Inc., 219 U.S.P.Q. 450 (D. Idaho 1983), where the court
faced the issue of whether the plaintiff computer manufacturer had published the
operating system distributed with its computers. The computers (complete with
operating systems) apparently were available to anyone willing to pay their
price, but the court none the less found only a limited publication of the
operating system. The court reasoned that the "operating systems were only
offered to owners of [plaintiff's] computers." Id. at 455. See also Data General
Corp. v. Digital Computer Controls, Inc., 188 U.S.P.Q. 276 (Del. Ch. 1975)
(schematic drawings were the subject of a limited publication because they were
only distributed to those who bought computers).
The limited-publication [*41] variations endorsed in Hubco and Data General,
even if valid, are of no help to Plaintiff here. Version 32V was not distributed
as an ancillary communication supporting the sale of a computer -- 32V was the
actual product itself. Consequently, the only question is whether AT&T and
Plaintiff limited 32V's distribution or offered it to whomever could pay.
Plaintiff argues that it has only distributed 32V to three select groups of
licensees: educational organizations, U.S. government agencies, and
carefully-screened corporate entities. Although the former two groups could
conceivably qualify as "selected," the latter can qualify only if the screening
process is suitably restrictive. According to depositions of Plaintiff's
personnel, the screening includes investigating the kind of code a potential
customer seeks (source or binary); detailed information about the nature of the
customer's business; the customer's financial ability to pay; and whether the
customer is in a country that protects trade secrets. Plaintiff needs all of
this information to assess three features of its prospective customers: which
product is best for the customer, whether the customer can pay, and
whether [*42] the customer will take good care of Plaintiff's intellectual
property. (Kennedy Decl., Ex. C at 16-22, Ex. D at 111-12; Pl.'s Reply Br. at
Even accepting this description of Plaintiff's screening process as true, it is
hard to see how the screening would yield a selected group of corporations
within the meaning of the doctrine of limited publication. Plaintiff essentially
seeks what any lessor of property seeks: someone who will take good care of the
property and pay the bills as they fall due. If this were enough to create a
selected group, then practically anyone who leased property would belong to a
The copyright laws in effect prior to 1989 do not allow such expansive
protection against the consequences of noticeless publication. As quoted above,
publication includes distributing copies by "renting, leasing, or lending." 17
U.S.C. § 101. Under Plaintiff's construction of the doctrine of limited
publication, "renting, leasing, or lending" would not constitute publication
whenever the owner of the copyright screened out irresponsible customers. It
seems unlikely that Congress drafted this section with this purpose in mind.
Consequently, I find that Plaintiff has failed to demonstrate a likelihood that
it can successfully defend its copyright in 32V. Plaintiff's claims of copyright
violations are not a basis for injunctive relief.
2. Trade Secret Misappropriation
Plaintiff also claims that BSDI misappropriated trade secrets when, via Net2,
BSDI incorporated parts of 32V into BSD/356. This claim raises two key issue.
First, is Plaintiff's claim preempted by federal copyright law? And second,
after a generation of scrutiny and imitation as a highly-regarded computer
operating system, does any part of 32V remain secret?
Section 301 of Title 17 expressly preempts state laws protecting illegal or
equitable rights that are equivalent to any of the exclusive rights within the
general scope of copyright as specified by section 106." Section 301 explains
the scope of this preemption by listing the exceptions:
(1) subject matter that does not come within the subject matter of copyright
as specified by sections 102 and 103, including works of authorship not
fixed in any tangible medium of expression; or
(2) any cause of action arising from undertakings commenced before January
1, 1978; or
(3) activities [*44] violating legal or equitable rights that are not
equivalent to any of the exclusive rights within the general scope of
copyright as specified by section 106.
Section 106 lists the rights protected by copyright law, including the right to
"reproduce the copyrighted work . . . ; to prepare derivative works . . . ;
[and] to distribute copies."
Net2 fails to meet the first preemption exception, because computer programs
fall "within the subject matter of copyright." Accordingly, the key issue is
whether state misappropriation laws protect activities that are equivalent to
those protected by the copyright laws.
To test whether a particular state law is preempted, courts have generally
adopted an "extra element" test:
If, under state law, the act of reproduction, performance, distribution or
display . . . will in itself infringe the state created right, then such
right is preempted. But if other elements are required, in addition to or
instead of, the acts of reproduction, performance, distribution or display,
in order to constitute a state created cause of action, then the right does
not lie "within the general scope of copyright," and there is no preemption.
SBK Catalogue Partnership v. Orion Pictures, 723 F. Supp. 1053, 1066 (D.N.J.
1989) [*45] (quoting Nimmer on Copyright, § 1.01[B]); see also Harper & Row
Publs., Inc. v. Nation Enter., 723 F.2d 195, 199-200 (2d Cir. 1983) (if the
elements of a state-law cause of action also state a claim under the copyright
laws, the state-law cause of action is preempted).
In the present case, the state law in question is either that of New York or New
Jersey. Plaintiff assumes that New Jersey law should apply, and Defendants note
that the licenses require the application of New York law. I need not decide
this issue now, however, because both New York and New Jersey have adopted laws
substantially similar to section 757 of the Restatement of Torts. See Elnicky
Enterprises, Inc. v. Spotlight Presents, Inc., 213 U.S.P.Q. 955 (S.D.N.Y. 1981);
Rohm and Haas Co. v. Adco Chemical Co., 689 F.2d 424 (3d Cir. 1982).
According to section 757, "[a] trade secret may consist of any formula, pattern,
device or compilation of information which is used in one's business, and which
gives him an opportunity to obtain an advantage over competitors who do not know
or use it." Restatement of Torts § 757 cmt. [*46] b (1939). n6 Thus, by
definition, a trade secret claim requires Plaintiff to prove an element not
present in a copyright claim: the existence of a trade secret. Because of this
extra element, section 757 does not protect rights equivalent to those protected
by the copyright laws, and hence is not preempted. See Brignoli v. Balch Hardy
and Scheinman, Inc., 645 F. Supp. 1201, 1205 (S.D.N.Y. 1986) (allegations that
computer programs are trade secrets protects them from preemption); Nimmer on
Copyright, § 1.01[B][h] (1992) ("actions for disclosure and exploitation of
trade secrets require a status of secrecy, not required for copyright, and hence
are not preempted.")
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n6 Section 757 sets forth the elements of Plaintiff's cause of action as
One who discloses or uses another's trade secret, without a privilege to do
so, is liable to the other if
(a) he discovered the secret by improper means, or
(b) his disclosure or use constitutes a breach of confidence reposed in him
by the other in disclosing the secret to him, or
(c) he learned the secret from a third person with notice of the facts that
it was a secret and that the third person discovered it by improper means or
that the third person's disclosure of it was otherwise a breach of his duty
to the other, or
(d) he learned the secret with notice of the facts that it was a secret and
that its disclosure was made to him by mistake.
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [*47]
Given that Plaintiff's trade secret claims are not preempted, the next question
is whether Plaintiff still has any trade secrets to protect. Plaintiff argues
that these programs contain a variety of materials that Defendants could have
obtained only from proprietary sources, sources subject to contractual
guarantees against redistribution. If so, then Plaintiff has not lost its
secrets. Trade secrets need not actually be secret, as long as the owner of the
secrets controls their dissemination. For example, the owner may disclose it to
employees or to others pledged to secrecy. In addition, the components of the
secrets may all lie in the public domain as long as their combination does not.
"The fact that every ingredient is known to the industry is not controlling for
the secret may consist of the method of combining them which produces a product
superior to that of competitors." Sun Dial Corp. v. Rideout, 16 N.J. 252, 257,
108 A.2d 442 (1954).
Plaintiff's first argument is that Defendants have copied the filenames and
header files from 32V. Defendants insist that filenames and the contents of
header files can be readily printed from Plaintiff's binary code (Joint [*48]
Decl. at P 28.1.1.), which Plaintiff has apparently distributed without
restriction on redistribution. In addition, some of this code is available in
reference manuals distributed by Plaintiff. (Carson Reply Aff. at P 9.)
Plaintiff also argues that Defendants have copied certain non-operational
aspects of the code, such as allocation of functions to files and the exact
wording of comments. Even though these matters might be "secret," they have only
small significance to Net2's value as an operating system. As such, Defendants
would not seem to have obtained an "advantage over competitors" by their use.
Finally, Plaintiff argues that Defendants have copied 32V in writing the
instructions and organizing the logical structure of Net2. Defendants counter
that even if Plaintiff does retain trade secrets in Unix, Defendants carefully
plucked these secrets out of Net2 and BSD/386. This argument is an argument over
facts, and Plaintiff and Defendants have joined it with their experts. At the
present state of the record, it seems that the side who gets in the last word
wins. In an affidavit accompanying Plaintiff's supporting brief, Professor
Carson identified two sets of instructions as examples [*49] of copying: the
functions "bread" and "biodone." In an affidavit accompanying the opposing
brief, Defendants' experts rebutted these arguments by explaining how they could
have replicated "bread" and "biodone" from publicly-available information.
(Joint Decl. at PP 53-56.) n7 In an affidavit accompanying the reply brief,
Professor Carson identified further examples of copying. (Carson Reply Aff.)
Defendants have now submitted a surreply and rebutted these examples. (2nd Joint
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n7 Professor Carson also argues that Plaintiff has used its knowledge of
proprietary code to write nonproprietary programs that integrated more
efficiently with the 32V proprietary kernel. (Carson Aft. at P 60.) Such
nonproprietary programs would seem to be expressly authorized by the licensing
agreement as derivative works.
n8 One example of direct copying that Defendants do not dispute is the copying
of the CPIO file. However, the parties do dispute whether Defendants copied CPIO
on their own initiative or at AT&T's behest. (2nd Joint Decl. at P 6.3; Tr. at
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [*50]
After reviewing the affidavits of Plaintiff's and Defendants' experts, a great
deal of uncertainty remains as to what trade secrets Net2 might contain. One
fact does seem clear: the header files, filenames, and function names used by
Defendants are not trade secrets. Defendants could have printed these off of any
of the thousands of unrestricted copies of Plaintiff's binary object code.
(Kashtan Aff. at PP 9-11.) Moreover, the nonfunctional elements of the code,
such as comments, cannot be trade secrets because these elements are minimal and
confer no competitive advantage on Defendants. The copied elements that contain
instructions, such as BREAD and CPIO, might perhaps be trade secrets, but
Defendants' experts have argued persuasively that these instructions are either
in the public domain or otherwise exempt. As Defendants have repeatedly
emphasized, much of 32V seems to be publicly available.
On the other hand, even if Defendants are correct, it is not clear whether 32V
is publicly available in a form suitable to BSDI's purposes. There is an
enormous difference between an expert programmer sitting down with a pile of
textbooks and disjointed segments of code to write out an operating [*51]
system from scratch, and that same programmer downloading the operating system
intact from a public network. In the first case, the programmer could expend
large amounts of time writing, testing, and debugging the newly-created system,
with an uncertain prospect of immediate success. But in the second case,
immediate success would be virtually assured. Thus, even if all of the pieces of
the 32V code had been thoroughly revealed in publicly-available literature, the
overall organization of the code might remain a trade secret unless it too had
On the present record, however, it is impossible to determine whether the
overall organization of Net2 has been disclosed. The record itself contains
little information directly pertinent to this issue. Moreover, the parties'
submissions hint that some of 32V's organization may already be publicly
available. Berkeley has apparently released nonproprietary programs such as Net1
n9 since 1987 (Regents Am. Opp'g Br. at 13), programs that presumably have
divulged at least some information about 32V's organization.
- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -
n9 Plaintiff apparently does not believe that Net1 discloses proprietary
- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - [*52]
A further consideration is that 32V's overall organization may not even be
protectable in the first place. Berkeley's license to use 32V protects 32V
derivatives only to the extent that they contain certain proprietary
information. If Berkeley excises the proprietary information (as it attempted to
do with Net2), Berkely is free to distribute derivatives without restriction.
Berkeley has utilized this freedom in the past to distribute a number of
non-proprietary systems and portions of systems, all apparently without
objections from AT&T. These distributions, to some degree, must have disclosed
the overall organization of 32V. Thus, Berkeley's activities under the licensing
agreement, and AT&T's acceptance of those activities, are evidence that Berkeley
and AT&T interpreted the agreement to allow the disclosure of at least some of
In summary, I find that I am unable to ascertain whether any aspect of Net2 or
BSD/386, be it an individual line of code or the overall system organization,
deserves protection as Plaintiff's trade secret. Since Plaintiff has failed to
provide enough evidence to establish a "reasonable probability" that Net2 or
BSD/386 contain trade [*53] secrets, I find that Plaintiff has failed to
demonstrate a likelihood of success on the merits of its claim for
misappropriation of trade secrets. No preliminary injunction will issue.
I grant Plaintiff's motion to amend, and deny Plaintiff's motion for a
preliminary injunction. I deny Defendants' motion to dismiss for lack of
jurisdiction and venue, and I deny Defendants' motion to transfer.
Dickinson R. Debevoise U.S.D.J.
Date: March 3, 1993