Plains Cotton v. Goodpasture Computer

Citation: Plains Cotton Co-op v. Goodpasture Computer Serv., Inc., 807 F. 2d 1256, 1262 (5th Cir. 1987).

The appellate court affirmed the district court's denial of a preliminary injunction which plaintiff sought for the purpose of enjoining, prior to trial, "organizational copying" which defendants submitted were due to the methods of the cotton industry for which the program was designed.

Factual Background
The plaintiff, an agricultural cooperative, had developed computer software called the "Telcot system." The Telcot system operated on a mainframe computer and, through telecommunications, permitted cooperative members to obtain regularly updated displays of information pertaining to cotton prices and availability as well as accounting and order processing. The individual defendants had worked on the development of the Telcot system for plaintiff but "[n]one of these employees was required to sign confidentiality agreements as a condition of his employment with Plains."

The individual defendants thereafter left Plains and went to work for a company called CXS. Plains and CXS had previously entered an agreement whereby CXS was licensed to create a personal computer version of the Telcot system with both parties becoming joint owners of the resulting work. When the individual defendants left to join CXS, Plains sought to terminate the licensing arrangement. Thereafter, CXS became insolvent and filed for bankruptcy. While CXS was bankrupt, Plains and CXS reached an agreement regarding termination and regarding Plains' option to purchase all rights in the software that had been created up to that time. Plains did not exercise this option.

The corporate defendant, Goodpasture, thereafter hired the individual defendants and put them to work on the personal computer version of the Telcot system. Just twenty days after arriving at Goodpasture, the former Plains employees had completed a design of the personal computer version of the Telcot system and just several months later, Goodpasture began marketing it under the name "GEMS."

The District Court found that the four former Plains employees had access to the Telcot system, that one of them had brought a diskette containing Telcot system programming design information to Goodpasture, and that at least one Telcot subroutine had been copied into and as part of the programming for GEMS. Nevertheless, the District Court refused to enter a preliminary injunction because of its finding that the underlying program code for the two programs had not been copied (with the exception of the one subroutine which was replaced as of the date of the preliminary injunction hearing). The Appellate Court affirmed and in doing so, made clear that it was not prepared to embrace a broad scope of protection for software copyrights:

The legal finding by the district court ultimately rests on a judgment about the extent of the protection offered by appellant's copyright. On that issue, we look to our colleague Judge Higginbotham's opinion in Synercom Technology Inc. v. University Computing Co., 462 F. Supp. 1003 (N.D. Tex. 1978). In that case, Judge Higginbotham held that "input formats" of a computer program--the organization and configuration of the information fed to the computer--were ideas, not expressions, and thus were not protected by copyright. 462 F. Supp. at 1014.

To the extent that input formats represent a level of computer software design more specific than functional design and more general than line-by-line program design, the issue of their copyrightability is relevant to the issue of whether GEMS infringes on protected Telcot designs. Appellant urges that we adopt the reasoning of Whelan Associates. Inc. v. Jaslow Dental Laboratory Inc., 797 F. 2d 1222 (3rd Cir. 1986), which admittedly is "at odds with Judge Higginbotham's scholarly opinion." Id. at 1239. Whelan rejects the premise developed in Synercom that "there [is] a difference between the copyrightability of sequence and form in the computer context and in any other context," id. at 1240, holding that the structure, sequence, and organization of computer programs are copyrightable. We decline to embrace Whelan for two reasons. First, the issue is presented to us on review of a denial of a motion for a preliminary in- junction. Thus, the record is only partially developed, and our review is one step removed from the actual merits of the case. Second, appellees presented evidence that many of the similarities between the GEMS and Telcot pro- grams are dictated by the externalities of the cotton market. To that extent, the facts of this case fit squarely within Synercom's powerful analogy to the hypothetical develop- ment of gear shift patterns. 462 F. Supp. at 1013. The record supports the inference that market factors play a significant role in determining the sequence and organization of cotton marketing software, and we decline to hold that those patterns cannot constitute "ideas" in a computer context.

807 F. 2d at 1262 (emphasis added).

In a footnote further explaining the phrase "externalities of the cotton market" which "play a significant role in determining the sequence and organization of cotton marketing software," the Fifth Circuit Court states:

For example, appellees' witnesses testified that their cotton marketing program was de- signed to present the same information as is contained on a cotton recap sheet, within the confines imposed by use of a computer. By contrast, appellant's expert witness admitted on cross-examination that he had no knowledge of the cotton recap sheet, and thus could not comment on whether the similarity between GEMS and Telcot arises from an attempt of both programs to convey the same standardized information to the user.

807 F. 2d at 1262 n. 4.

The Fifth Circuit thus concluded that Plains Cotton had failed to demonstrate that the District Court's factual findings were clearly erroneous or that its findings of law were incorrect. This decision was the first officially reported post- Whelan appellate decision to not find or affirm an infringement based on less than a literal copying of underlying program code.

While finding that defendant's program was "very similar to Telcot on the functional specification, programming and documentation levels," the Court refused to follow Whelan and instead held, that at that early stage of the litigation where no adjudication had yet occurred, the structure, sequence, and organization of the plaintiff's program was not necessarily expression but could, as a factual matter, be found after trial to constitute an unprotectable "idea." Id. at 1262.

Thus, the Fifth Circuit held that whether structure, sequence, or organization of a computer program is protected expression or unprotectable idea must be determined factually on a case-by-case basis by looking at the computer program in the context of the particular industry in which it is employed and whether that industry of necessity demands that the visual displays of such programs be organized in a certain manner because of the custom and practice in the particular industry in which the computer program is designed to operate.