Autoskill v. National Educational Support Systems

Citation
Autoskill v. National Educational Support Systems, Inc., 994 F.2d 1476 (10th Cir. 1993) (full-text).

Factual Background
Autoskill, Inc. (Autoskill), a Canadian corporation, in 1986 obtained a certificate of registration of copyright on a computer program designed to test and train students with reading deficiencies. After National Educational Support Systems, Inc. (NESS), a New Mexico corporation, began marketing similar software in 1990, Autoskill sued for copyright infringement.

Beginning in the late 1970s, Dr. Christina Fiedorowicz and Dr. Ronald Trites, the president of Autoskill, developed a computer software program for use in teaching reading skills to students with reading disabilities. After reviewing some research of others, they designed their program to identify students with reading difficulties in three categories or subtypes: Type O, the oral reading subtype; Type A, the intermodal associative deficit subtype; and Type S, the sequential deficit subtype. Autoskill obtained a United States certificate of registration of the copyright on the software Trites and Fiedorowicz developed, effective January 27, 1986, called “Autoskill: Component Reading Subskills Testing and Training Program.”

NESS was incorporated as a New Mexico corporation in 1989. Two of the principals of NESS, Byron Manning and Ron Neil, were familiar with the Autoskill program. As a salesman for the computer manufacturer UNISYS Corp., Neil sold ICON computers with Autoskill software to educational institutions for about four years between 1986 and 1990. NESS has explained that as “the first alternative for business of the newly organized NESS,” Manning and Neil decided to attempt to obtain a license to market the Autoskill program. However, several months of negotiations between NESS and Autoskill ended in late 1989, without an agreement.

With the licensing negotiations with Autoskill still ongoing, Neil began discussions with a computer programming firm, Automation Consultants, Inc. (ACI), about developing a reading software program for NESS. The president of ACI, Lynn Beckwith, wrote in his notes about his initial conversations with Neil that the NESS software was “to be like AUTOSKILL” and was to be an “AUTOSKILL REPLACEMENT.”

In January 1990, ACI began programming the NESS reading software. NESS specified the substantive and pedantic content of the NESS program to the programming firm. In addition, NESS gave the programmers copies of some of the published articles that had been used as part of the basis of the Autoskill program, as well as an Autoskill sales brochure. By March 1990, the programming firm had produced a preliminary version of the NESS software, called “Nessi: Reading and Language Development Program.”.

With its reading software ready to demonstrate, NESS began a marketing effort in May 1990. A Canadian-based firm, Lifeskills Technology, signed an agreement with NESS to distribute the NESS program in Canada. Both NESS and Lifeskills began hearing rumors that Autoskill was planning to initiate a copyright infringement action against NESS. In April 1991, an attorney for Autoskill sent a letter to Lifeskills stating that Autoskill viewed the NESS software as an infringing program, and warning that Lifeskills could be named in an infringement action.

Trial Court Proceedings
NESS filed a suit in July 1991 for a declaratory judgment that it did not infringe the Autoskill copyright, and other relief. The trial court issued a temporary restraining order that prohibited Autoskill officers and other employees from interfering with the distribution of the NESS software. On September 25, 1991, Autoskill filed suit against NESS for copyright infringement and misappropriation of trade secrets, seeking a preliminary injunction, to prevent continued infringement. Autoskill's action was consolidated with the NESS suit.

On April 21, 1992, the trial court granted Autoskill a preliminary injunction which prohibited NESS from manufacturing, reproducing, duplicating, copying, marketing, selling, renting, lending, distributing, displaying or demonstrating any portion of any NESSI Program or user manual which is substantially similar to the protectible elements of the Autoskill Program and doing any other act which infringes on the protectible portion of the Autoskill Program. The trial court concluded that Autoskill had shown a substantial likelihood of success on the merits and had prevailed on the other three elements-irreparable harm, proof that the threatened injury outweighed the potential harm to NESS from the injunction, and that the injunction would not be adverse to the public interest.

Appellate Court Proceedings
The appellate court held that the factors for granting an injunction were satisfied in that Autoskill Inc. would likely prevail on the merits, would suffer irreparable injury without the injunction, that threatened injury to Autoskill outweighed injunction's damage to NESS, and injunction would not be adverse to the public interest. The appellate court held that the trial court did not abuse its discretion in issuing the injunction and affirmed the decision. The appellate court concluded that NEES failed to rebut prima facie case of infringement so as to justify reversal of preliminary injunction and that Autoskill satisfied its burden on substantial similarity requirement for purposes of preliminary injunction.

The appellate court denied the motion to dismiss the appeal, held that the trial court’s findings were not clearly erroneous and the grant of the preliminary injunction was not an abuse of discretion. The appellate court also affirmed the injunctive order.