R.C. Olmstead, Inc. v. CU Interface, LLC

606 F.3d 262, 94 U.S.P.Q. 2d (BNA) 1897, 2010 U.S. App. LEXIS 10172, 2010 WL 1980167
Court of Appeals for the Sixth Circuit·Decided May 19, 2010·No. 09-3428·Published·Cited by 136 cases

Opinions

OPINION

ROGERS, Circuit Judge.

R.C. Olmstead appeals the district court’s grant of summary judgment to defendants in this copyright and trade secret infringement case brought by one provider of credit union software against the developer of a competing credit union software. Olmstead challenges several of the district court’s discovery rulings, which Olmstead argues unfairly inhibited its ability to prove its claims. Among other things, the district court rejected plaintiffs inadequate expert report under F.R.C.P. 26, and refused to draw adverse inferences based on a third party’s destruction of evidence. The district court granted summary judgment for defendant CUI after determining that Olmstead had failed to raise a genuine issue of material fact as to whether CUI created its software by copying Olmstead’s software, and that Olmstead’s end use product was not a trade secret. Because the district court did not abuse its discretion with respect to its subsidiary rulings, and because Olmstead did not create a genuine issue of material fact with respect to either the copyright claim or the trade secret claim, the district court properly granted summary judgment.

I.

R.C. Olmstead, Inc., (“Olmstead”) develops and sells data processing software, hardware, and related services to credit unions. One of the credit unions to which Olmstead sold its software was Canton School Employees Federal Credit Union (“the CSE Credit Union”). In 1999, Olmstead and the CSE Credit Union entered into a data processing agreement whereby Olmstead licensed the use of its hardware and RCO-1 credit union processing software to the CSE Credit Union for a term of five years. Under the terms of the agreement, Olmstead provided several pieces of hardware, including the server upon which the RCO-1 software was to run. The server contained the executable version of the Olmstead code, which used emulators to run the software through “dumb terminals,” which could be emulated by personal computers connected to the server. The agreement did not expressly limit access to the software or the emulators on which it would run, but the agreement did state that Olmstead would maintain ownership of all software and hardware. On the subject of support, the agreement stated: “Personal computers may be integrated with the R.C. Olmstead system through the use of terminal emulation software. It is the Credit Union’s responsibility to acquire a local Personal Computer support firm to perform mainte[266]*266nance, and support of all personal computers.”

As permitted by the agreement, the CSE Credit Union hired CU Interface, LLC, and its independent contractor, Thomas Burkhardt (collectively “CUI”), a developer, marketer and seller of credit union data processing software, to provide its maintenance and support. Among other things, CUI had developed a terminal emulation program that enabled older dumb terminal applications, such as RCO-1, to run on personal computers using Windows. In 2003, CUI and the CSE Credit Union entered into a Software Development Agreement to develop a credit union data software processing system. Under the terms of the development agreement, the CSE Credit Union identified certain software programs that CUI was to develop according to a schedule contained in the agreement. The CSE Credit Union was to pay CUI a development fee, retain a perpetual license to use the software programs that were developed, and have an option to purchase a 30% ownership interest in the software catalog.

As part of the development process, CUI programmer Jason Akin interviewed several CSE Credit Union employees regarding their needs in developing credit union software. Neither CUI nor the CSE Credit Union placed limits on what Akin could discuss during these interviews, and Akin asked at least one teller, Tracie Rodriguez, about her experiences with the Olmstead software. During this time, Akin was provided with a teller-level user-name and password to the Olmstead software at the CSE Credit Union facility. This allowed him to access the RCO-1 interface, but not its source code. Akin testified at his deposition that he accessed the Olmstead software several times per week over the course of the development project.

One of CUI’s other main programmers, Jay Lash, was a former CSE Credit Union teller with some educational background in computer programming. Lash began to do small projects for CUI in early 2004, while he was still employed by the CSE Credit Union, and he joined CUI officially in 2005. Lash testified that, while employed at CUI as an independent contractor (and later as an employee of CUI), he wrote most of the interface for the CUI software — the visual representation of the program on the computer screen that the customers and tellers would see. Lash was familiar with the Olmstead interface from his time as a teller, but he also testified that he had worked with a few different systems. Lash testified that all of the software systems with which he had worked had the same basic functions, but that Olmstead’s software was an account-based system, whereas CUI’s software was a person-based system. While he was employed at CUI, Lash retained his CSE Credit Union username and password, and he also interviewed several CSE Credit Union employees about their needs regarding credit union software.

As CUI developed portions of its software, the CSE Credit Union ran those programs alongside the Olmstead software. One CSE Credit Union employee, Tracie Rodriguez, testified as follows about the final transition from Olmstead to CUI software:

A. What I remember is that one day we were using R.C. Olmstead and the next day we were not.
Q. Okay, so by taking that answer, am I correct that you don’t remember any formal training as to hey, here it is, it’s just a seamless transition?
A. That I can recall, yes.
[267]*267Q. Okay. Do you recall it being a seamless transition?
A. There was work involved. I mean, there was [sic] problems at first.

Rodriguez also testified that she received training on the CUI interface software, but that she could not recall when she received that training. Lash testified that there was “a lot” of support for employees when the conversion from Olmstead to CUI software took place, and that there was “quite a bit” of training on the new system, although Lash could not recall exactly how much. Lash testified that overall, there were “a couple weeks” dedicated to explaining the new software to CSE Credit Union employees.

Olmstead and the CSE Credit Union extended their original license agreement, but Olmstead exercised its option to terminate the agreement when it discovered that the CSE Credit Union was developing its own software. Olmstead informed the CSE Credit Union that it would be collecting the hardware and software leased to the CSE Credit Union under the terms of the agreement. When the CSE Credit Union learned that the representative sent by Olmstead to collect the hardware was accompanied by a third-party computer forensic analyst, the CSE Credit Union refused to allow Olmstead to remove the software because of concerns over the customer financial information stored on the server.

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R.C. Olmstead, Inc. v. CU Interface, LLC, 606 F.3d 262, 94 U.S.P.Q. 2d (BNA) 1897, 2010 U.S. App. LEXIS 10172, 2010 WL 1980167 (6th Cir. 2010).

606 F.3d 262 (R.C. Olmstead, Inc. v. CU Interface, LLC) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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