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Computer Assoc. Int'l, Inc. v. Altai, Inc., 982 F.2d 693 (2d Cir. 1992) (full-text).

Factual Background[]

The court had to determine whether and to what extent the "non-literal" aspects of a computer program — those aspects that are not reduced to written code — are protected by copyright. The case was one of first impression in the circuit. The appeal came from the United States District Court for the Eastern District of New York, in which Judge Pratt found that Altai's OSCAR 3.4 computer program infringed Computer Associates' ("CA"), copyrighted computer program entitled CA-SCHEDULER. Judge Pratt also found that Altai's OSCAR 3.5 program was not substantially similar to a portion of CA-SCHEDULER called ADAPTER, and therefore denied relief. In addition, the district court concluded that CA's state law trade secret misappropriation claim against Altai was preempted by the federal Copyright Act. CA appealed.

Appellate Court Proceedings[]

The court first discusses computer program design. The Copyright Act defines a computer program as "a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result."[1] The first step in the procedure is to identify a program's ultimate function or purpose. Once the goal has been achieved, a programmer breaks down the program's ultimate function into simpler subtasks, which are also known as subroutines or modules. Sometimes depending on the complexity of its task, a subroutine may be broken down further into sub-subroutines. Then the programmer will arrange the subroutines or modules into an organizational or flow chart, which will map the interactions between modules that achieve the program's end goal.

To accomplish the intra-program interactions, a programmer must carefully design each module's parameter list, which is the information sent to and received from a subroutine; the information passed between modules and the information's actual content. Each module's relationship to other modules constitutes the structure of the program which includes "macros."

Once each necessary module has been identified, designed, and its relationship to the other modules has been laid out conceptually, the resulting program structure must be embodied in a written language that the computer can read. This process is called "coding," and requires two steps. First, the programmer must transpose the program's structural blueprint into source code. The source code may be written in any one of several computer languages, such as COBOL, FORTRAN, BASIC, EDL, etc., depending upon the type of computer (e.g., scientific, business) for which the program is intended. Once the source code has been completed, the second step is to translate or "compile" it into object code. After the coding is finished, the programmer will run the program on the computer in order to find and correct any logical and syntactical errors. This is known as "debugging" and, once done, the program is complete.

CA, a Delaware corporation and Altai, a Texas corporation, are both in the computer software industry, in which they both design, develop and market various types of computer programs. The litigation originated with one of CA's programs entitled CA-SCHEDULER which is a job scheduling program designed for IBM mainframe computers. Its primary functions are to create a schedule specifying when the computer should run various tasks, and then to control the computer as it executes the schedule. CA-SCHEDULER contains a sub-program entitled ADAPTER, also developed by CA, which is not an independently marketed product of CA. ADAPTER is a wholly integrated component of CA-SCHEDULER and has no capacity for independent use.

ADAPTER is an operating system compatibility component and serves as a translator. Its function is to translate the language of a given program into the particular language that the computer's own operating system can understand. ADAPTER allows a computer user to change or use multiple operating systems while maintaining the same software, and it saves the user the costs in both time and money.

In 1982, Altai began marketing its own job scheduling program entitled ZEKE. The original version of ZEKE was designed for use in conjunction with a VSE operating system, and by late 1983, in response to customer demand, Altai decided to rewrite ZEKE so that it could be run in conjunction with an MVS operating system. At that time, James P. Williams ("Williams"), then an employee of Altai and now its President, approached Claude F. Arney, III ("Arney"), a computer programmer who worked for CA. Williams and Arney were longstanding friends, and had been co-workers at CA for some time before Williams left CA to work for Altai's predecessor. Williams wanted to recruit Arney to assist Altai in designing an MVS version of ZEKE.

Williams was aware of both the CA-SCHEDULER and ADAPTER programs, however, he was not involved in their development and had never seen the codes of either program. When he asked Arney to come work for Altai, Williams did not know that ADAPTER was a component of CA-SCHEDULER. While working for CA, Arney helped improve the VSE version of ADAPTER, and was permitted to take home a copy of ADAPTER's source code. When Arney left CA to work for Altai in 1984, he took copies of the source code for both the VSE and MVS versions of ADAPTER. And Arney did this in knowing violation of the CA employee agreements that he had signed.

Once at Altai, Arney and Williams discussed design possibilities for adapting ZEKE to run on MVS operating systems. Arney persuaded Williams that the best way to make the needed modifications to the original program was to introduce a "common system interface" component into ZEKE. However, he did not tell Williams that his idea stemmed from his familiarity with ADAPTER. They decided to name this new component-program OSCAR.

Copyright infringement[]

In a copyright infringement suit, the plaintiff must establish its ownership of a valid copyright, and that the defendant copied the copyrighted work. For the purpose of analysis, the district court assumed that Altai had access to the ADAPTER code when creating OSCAR 3.5. Thus, in determining whether Altai had unlawfully copied protected aspects of CA's ADAPTER, the district court narrowed its focus of inquiry to ascertaining whether Altai's OSCAR 3.5 was substantially similar to ADAPTER. The appellate court proceeded along the same assumption.

The literal elements of computer programs, i.e., their source and object codes, are the subject of copyright protection. Here, Altai admitted having copied approximately 30% of the OSCAR 3.4 program from CA's ADAPTER source code, and did not challenge the district court's finding of infringement.

The contested issues surround OSCAR 3.5, the product of Altai's rewrite of OSCAR 3.4. After the purge, none of the ADAPTER source code remained in the 3.5 version; thus, Altai made sure that the literal elements of its revamped OSCAR program were no longer substantially similar to the literal elements of CA's ADAPTER.

The court stated that since the non-literal structures of literary works are protected by copyright, and computer programs are literary works, then the non-literal structures of computer programs are protected by copyright. The Court had to determine the scope of copyright protection that extended to a computer program's non-literal structure.

The court held that there was no infringement in the second version and applied a new test for substantial similarity, known as the "abstraction/filtration/comparison" test, was developed that was largely based on the reasoning in Nichols v. Universal Pictures Co. The filtration test first examined the allegedly infringed program and excludes from consideration design elements made for efficiency, elements dictated by external factors, and elements taken from the public domain. Anything left over is protectable. In this case, Altai successfully defended against the copyright claim because everything CA claimed to be infringing was filtered out.

The court also stated that in deciding the limits to which expert opinion may be employed in ascertaining the substantial similarity of computer programs, the court could not disregard the highly complicated and technical subject matter at the heart of the claims. The court recognized the reality that computer programs are likely to be somewhat impenetrable by lay observers, whether they be judges or juries, and seem to fall outside the category of works contemplated by those who engineered the Arnstein test.[2]

Trade secret claim[]

Further, the court agreed with CA that the district court failed to address fully the factual and theoretical bases of CA's trade secret claims. Restatement (First) of Torts § 757 states provides that "One who discloses or uses another's trade secret, without a privilege to do so, is liable to another if . . . . (c) he learned the secret from a third person with notice of the fact that it was a secret and that the third person discovered it by improper means or that the third person's disclosure of it was otherwise a breach of his duty to the other. . . ."

It was undisputed that, when Arney stole the ADAPTER code and incorporated it into his design of OSCAR 3.4, he breached his confidentiality agreement with CA. The district court noted that while such action might constitute a valid claim against Arney, CA is the named defendant in this lawsuit. Additionally, the district court found, as a matter of fact, that "no one at Altai, other than Arney, knew that Arney had the ADAPTER code. . . ." However, the district court did not consider fully Altai's potential liability for improper trade secret acquisition. It did not consider the question of Altai's trade secret liability in connection with OSCAR 3.4 under a constructive notice theory, or Altai's potential liability under an actual notice theory in connection with OSCAR 3.5.

The Court vacated the judgment of the district court and remand for reconsideration of those aspects of CA's trade secret claims related to Altai's alleged constructive notice of Arney's theft of CA's trade secrets and incorporation of those secrets into OSCAR 3.4. It noted that CA may be unable to recover damages for its trade secrets which are embodied in OSCAR 3.4 since Altai had conceded copyright liability and damages for its incorporation of ADAPTER into OSCAR 3.4. Further, that CA may not obtain a double recovery where the damages for copyright infringement and trade secret misappropriation are coextensive.


  1. 17 U.S.C. §101.
  2. Cf. Dawson v. Hinshaw Music, Inc., 905 F.2d 731, 737, 15 U.S.P.Q.2d (BNA) 1132 (4th Cir. 1990) (full-text).