Secure Services Technology v. Time and Space Processing

Citation: Secure Serv. Tech., Inc. v. Time & Space Processing, Inc., 722 F. Supp. 1354 (E.D. Va. 1989).

Factual Background
The plaintiff, Secure Services Technology Inc. (SST), was one of the three manufacturers at that time of TEMPEST facsimile machines and sold those machines only to government agencies. TEMPEST facsimile machines are facsimile machines especially equipped for the secure transmission and receipt of sensitive or classified documents. These machines are typically sold to U.S. government agencies.

Defendant, Time and Space Processing, Inc. (TSP) wanted to enter the TEMPEST machine market. However, since the government had already purchased several of these machines from different manufacturers, a successful market entry depended on interoperability &mdash; the ability for one TEMPEST machine to send and receive documents from another.

Interoperability is achieved between machines by a handshake protocol which governs the content, order and timing of the digital signals transmitted between the sending and receiving machines. The handshake protocol used by the government is called T.30. It is very specific and almost any variation will defeat interoperability. TSP set out to achieve interoperability with all TEMPEST machines and achieved it with two of the 3 manufacturers. The Air Force Logistics Command expressed interest in TSP’s machine but wanted it to achieve interoperability with all the manufacturers. To do so, the Air Force provided TSP with an SST TEMPEST facsimile machine. TSP analyzed the timing of the handshake protocol and achieved interoperability however SST found out about TSP unlocking their handshake protocol and filed suit alleging violation of trade secrets. SST then filed a registration request copyright protection and amended its complaint to include copyright infringement.

Trial Court Proceedings

At trial, the court held that the competitor had not violated California trade secrets law by appropriating manufacturer’s variations in “handshake protocol,” under which facsimile machines communicate with each other, since manufacturer had not safeguarded material as required under statute. The California Uniform Trade secrets act defines trade secrets as “information, including a formula, pattern, compilation, program, device, method, technique or process, that: (1) derives independent economic value, actual or potential, from not being generally known to the public or to other person who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain secrecy.” Cal Civ Code §3426.1(d). The court found that although SST’s protocol satisfies the prefatory paragraph of the Act’s definition, it clearly fails the second prong of the test because SST did not take reasonable efforts to maintain secrecy. SST had sold to the government all rights; title and interest in the machines and no rights were reserved. Furthermore, no notification was given as required by regulation and no markings were placed on the machine or instructions of the presence of proprietary information. The Court noted that even the Act’s official comments state that “public disclosure of information through… carelessness can preclude protection.” The Uniform Trade Secrets Act §1 comment, 14 U.L.A. 369, 373. The Court then compared this case to Acuson Corp. v Aloka Co., 209 Cal.App.3d 425, where a manufacturer of ultrasonic imaging equipment claimed trade secret protection and took steps such as selling the equipment under limited license, confidentiality agreements, and internal padlocks were deemed insufficient for trade secrets protection. The Court also held that SST’s reliance on a general, implied understanding with the government that the protocol variations were proprietary were misplaced because SST relied on a single document which discussed the protocol’s being proprietary but failed to meet the statutory regulations. Therefore, by selling their machine without proprietary rights, SST effectively disclosed its protocol variations. Because the government owned all rights to the machine, TSP’s acquisition of the machine was proper. Furthermore, the Act expressly permits reverse engineering as a method of discovering what would otherwise constitute a trade secret as long as the product as not acquired by improper means. Cal.Civ.Code. §3426.1(a).

The court then proceeded to discuss the copyright claim in which it held that the variations did not meet originality test for copyright purposes and copyright protection was not available for timing of implementation of protocol program. The court held that the variations did not meet the originality test because the T.30 allows for very little variation and therefore it is almost identical with each machine. In fact, the variations allowed by the T.30 protocol are sharply limited by specifying which bit to vary, what the variation means and when the variation can occur. Therefore the protocol lacks even a “faint trace of originality.” The Court found the timing implementation was also not copyright protectable because it is precluded by copyright laws’ exclusion of “any idea, procedure, process, system, method of operation, concept, principle or discovery.” 17 U.S.C. 102(b). Timing is nothing more than the process by which electronic signals are created, transmitted, and received, which the court found analogous to the size of an individual letter on a page of Hamlet.

The Court granted summary judgment for the defendant but in the interest of “judicial husbandry” discussed the other grounds for summary judgment argued for by TSP.

First, the court rejected the argument that possession of copyright registration certificate was necessary to bring an action because registration is enough to file suit under copyright law. One need only prove payment of the required fee, deposit of the work in question and receipt by the copyright office of a registration application.

Second, the court rejected recordation of transfer of copyright on original protocol software was required prior to suit because SST is suing on behalf of its copyright claim, not in the copyright of the handshake protocol software.

Third, the court rejected that omission of copyright notice from facsimile machine did bars suit because it contradicts the plain language of 17 U.S.C. §405(a). It states that the omission of copyright notice does not invalidate the work if registration is made within 5 years and a reasonable effort is made to add notice to all copies after the omission has been discovered. Since SST filed its copyright after commencing this action and has since started placing copyright markings on all of its facsimile machines

Forth, the court found that the first sale doctrine does not apply here because although the government loaned a SST machine to TSP, the first sale doctrine does not allow the person to make copies and SST alleges here that what occurred was in fact reproduction of their protocol variations.

Fifth, TSP alleged that there was no “fixation of SST’s protocol variation. Although fixation includes fixing a copy of the copyrighted material into a computer memory, it must be for more than a transitory duration. The court found that fixation issue is a disputed issue of fact not amenable to summary disposition on the current record.

Sixth, the court found that the regulation providing for copying by government use did not apply and does not produce a waiver of copyright. This is because even if the statute is construed as granting waiver, the SST machine was not copied by the government but rather a private party for its own gain. Even 17 U.S.C. §117 will not dispose of the copyright claim because it allows the copyright owner to use the copyrighted work in conjunction with computer system’s as the owner sees fit but the owner is SST not TSP.

Lastly, the court held the case was properly brought in federal court rather than Claims Court because section 1498(b) applies only when the government expressly authorizes or consents to the copyright infringement but here they are an innocent facilitator of the copyright infringement.

Summary Judgment Granted for the Defendant, TSP.