Judge Clears Lotus in Copyright Case

Business

Judge Clears Lotus in Copyright Case

Jane Fitz Simon
The Boston Globe

November 8, 1988

A federal judge has thrown out copyright infringement claims filed against Lotus Development Corp. and company founder Mitchell D. Kapor by Software Arts Production Corp.

In his opinion, Judge Robert E. Keeton found that SAPC gave up the right to sue Lotus for copyright infringement when it sold most of its assets to Lotus in 1985.

The judge's opinion, issued late Friday in US District Court in Boston, strikes at the heart of SAPC's $100 million lawsuit against Lotus and Kapor, filed in April 1987.

Nonetheless, an attorney for SAPC yesterday refused to concede defeat, saying SAPC's right to sue Lotus and Kapor over copyright infringement was one of a number of issues to be resolved in the case.

"It's disappointing but it's only one round in a long and complicated battle," said SAPC attorney Mark A. Michelson, of the Boston firm of Choate Hall & Stewart.

Lotus attorneys saw it differently. "We are delighted and feeling vindicated," said Thomas M. Lemberg, vice president and general counsel at Lotus. Added Thomas J. Dougherty, representing Lotus from the Boston office of Skadden, Arps, Slate, Meagher & Flom: "If SAPC doesn't recognize this as a determination directly adverse to their request for relief, then they ought to reread it."

Kapor said yesterday he felt "vindicated," but he was hesitant to declare an all-out victory. 'It is good news, but some of the details remain to be resolved," Kapor said.

Among the aspects of the case not specifically addressed in Keeton's opinion are charges brought by SAPC against Kapor for breach of contract and misappropriation of confidential information and trade secrets.

Keeton's opinion ends Phase 1 of a trial that appears to have no Phase 2 forthcoming. Last spring, all parties involved in the case agreed to separate from the larger and more complex issues of copyright infringement the determination of whether SAPC had a right to sue for copyright infringement, or whether it transferred that right when it sold substantially all of its assets to Lotus.

In finding that SAPC does not have the right to sue, Judge Keeton appears to have agreed with Kapor's testimony that he understood Lotus to be acquiring Software Arts "lock, stock and barrel."

SAPC is the skeletal, corporate remains of Software Arts, the company that created VisiCalc, the first popular, personal computer spreadsheet. Kapor worked for a brief period in 1980 for Personal Software Inc., the exclusive marketing agent for VisiCalc, and later acted as a tester for an enhanced version of VisiCalc.

After Kapor founded Lotus Development Corp. in 1982 and introduced the Lotus 1-2-3 electronic spreadsheet, VisiCalc died a quick death. A chance meeting on a plane between Kapor and Software Arts co-founder Dan Bricklin led to negotiations for the sale of Software Arts to Lotus.

The negotiations resulted in an Asset Purchase Agreement, of June 7, 1985, in which Lotus purchased most of Software Arts assets.

The task before Keeton was to determine whether the agreement included the purchase of future copyright infringement claims. Under the phased trial agreed upon by all, Keeton was not called upon to rule on the merits of the case, that is, whether 1-2-3 infringes on the copyright of VisiCalc.

Keeton concluded: "It would be unreasonable to find that Lotus acquired every other right associated with the computer programs for VisiCalc, but failed to acquire a possible claim that the seller (SAPC) had against the buyer in connection with the very same computer programs and copyrights. The language of the agreement as a whole makes clear that the parties fashioned a comprehensive transfer of SAPC's software business sand software works . . ."

"I conclude that I need not determine the scope of the rule governing the transfer of copyrights, or the scope of any exception to that rule, because the Asset Purchase Agreement unambiguously assigns not only the VisiCalc copyrights but also any then-existing claims for infringement."

Still to be resolved are counterclaims filed by Lotus, which seek damages to cover legal expenses associated with the SAPC litigation. A conference has been scheduled for Dec. 14 at which time Keeton will enter judgment for the defendants.

JSIMON;11/07 NIGRO ;11/09,08:46 LOTUS08

Caption: PHOTO

Globe file photo / MITCHELL D. KAPOR / Feeling vindicated