Datacarrier S.A. v. Woccu Services Group, Inc.

Brief in Opposition

W.D. Wis.September 8, 2016

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WISCONSIN DATACARRIER S.A., Plaintiff, v. Case No. 16-cv-122 WOCCU SERVICES GROUP, INC., Defendant. PLAINTIFF’S BRIEF IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS COMPLAINT Plaintiff Datacarrier S.A. (“Datacarrier”) submits the following brief in opposition to defendant WOCCU Services Group, Inc.’s (“WSG’s”) Motion to Dismiss Datacarrier’s Amended Complaint in this matter (ECF 35). INTRODUCTION This is a copyright infringement lawsuit. After WSG acquired a license to Datacarrier’s copyrighted software program (“TID Program”), WSG provided copies of the program to affiliates in Mexico and South America (“Affiliates”), including its Peruvian Affiliate Kuskanet. Workers at Kuskanet developed Entura, an infringing software program. WSG evaluated Entura in Wisconsin, acquired ownership of Entura from Kuskanet and continued to develop Entura. WSG has licensed its Affiliates to use the infringing Entura program and has provided technical support from Wisconsin to its affiliates for the Entura program. Authorization Argument. WSG’s motion to dismiss is based on three arguments, all of which fail. First, relying on Subafilms, Ltd. v. MGM-Pathe Communications Co., 24 F.3d 1088 (9th Cir. 1994), WSG argues that the Copyright Act does not apply to domestic authorization of infringement outside the United States and, thus, WSG cannot be held liable for authorizing infringement by its Mexican and South American Affiliates. WSG is wrong. Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 1 of 31 2 Other courts and commentators, including the court in Curb v. MCA Records, Inc., 898 F. Supp. 586 (M.D. Tenn. 1995), have explained that Subafilms’ reasoning is flawed and have confirmed that the Act prohibits domestic authorization of foreign infringement. They have explained that the Act’s plain language compels such a reading, that such holding is consistent with the realities of modern, globally-oriented commerce and that concerns about international comity that underlie the Subafilms decision are unfounded. This is underscored by the fact that WSG has profited directly and to Datacarrier’s damage from WSG’s domestic authorization of the Affiliates’ infringement: Subafilms effectively denies copyright owners the ability to recover such damages. The U.S. Supreme Court and the Seventh Circuit have not addressed whether domestic authorizers of foreign infringement are liable under the Copyright Act. This Court should adopt the better-reasoned Curb holding that such authorizers are liable. Evaluation/Tech Support Argument. Datacarrier has also alleged that WSG infringed the copyrighted TID Program in evaluating Entura in Madison, Wisconsin and in providing Entura-related technical support services to the Affiliates. Datacarrier has identified on information and belief the employees who operated Entura in Madison, Wisconsin during the evaluation process and has stated on information and belief that WSG maintains in the United States copies of Entura and its source code and executable code because such possession is necessary in order to provide support services. WSG does not deny that it has operated Entura or that it maintains such copies in providing support services. Instead, it argues that Datacarrier has not pleaded these claims adequately because it has used the words “on information and belief.” Again, WSG is wrong: WSG confuses the pleadings phase of the case with the merits phase. The Seventh Circuit has held that pleading on information and belief is sufficient, particularly where, as here, the pleading party has explained the basis for Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 2 of 31 3 its allegation and the information necessary to fully develop the claim is in the other party’s hands. Copyrightability Argument. Third, WSG argues that each example of infringement in the Amended Complaint comprises software program features falling within categories the Compendium of U.S. Copyright Office Practices (“Compendium”) has labeled as generally non-copyrightable, and that in any case Datacarrier has insufficiently described the alleged infringement. WSG is wrong on both counts. The courts have made clear that the copyrightability of software program features turns not on abstract categories but on an individual, fact-intensive evaluation of each feature’s characteristics and function. They have also held that the Compendium is not binding authority but is to be considered only for any persuasive value it may have in a given situation. In order to prevail on its Copyrightability Argument WSG must show that Entura’s infringing features referenced in the Amended Complaint are indisputably non-copyrightable, both because WSG is the movant and because Datacarrier’s copyright registration of the TID Program creates a presumption of copyrightability. WSG has made no attempt to meet this burden, and such an attempt would fail in any case. The Complaint presents several examples of infringement and describes them in detail. Each example involves copying of a TID Program feature that is a unique and proprietary expression of an idea and is not indispensable to all program users for operational or market reasons. WSG’s Motion to Dismiss should be denied and the case should proceed on the merits. STATEMENT OF FACTS The Amended Complaint includes the following allegations. Datacarrier developed the TID Program, a proprietary program to process financial transactions and manage ATMs. Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 3 of 31 4 (ECF 28:¶ 9) The Copyright Office issued a copyright registration for the TID Program on December 15, 2014. (Id. ¶ 27; ECF 28-1) Datacarrier authorized Servicios Tecnologicos de Guatemala S.A. (“ServiTech”) to license Datacarrier software, including the TID Program, to ATM operators. (ECF 28:¶ 11) Servitech licensed software including the TID Program to WSG. (Id. ¶ 12) WSG then sublicensed such software to a Mexican company and several South American companies in which it has an ownership interest (collectively “Affiliates”), including Kuskanet, a Peruvian company. (Id. ¶¶ 13-17) The Affiliates used the software in connection with ATMs operated by financial institutions in their respective countries. (Id. ¶ 17) After Kuskanet received the TID Program, persons at Kuskanet developed the Entura program. (ECF 28:¶ 18) WSG evaluated the Entura program at its Wisconsin headquarters and decided to have the Affiliates replace Datacarrier’s software with the Entura program. (Id. ¶ 20) WSG participated in development of the Entura program. (Id. ¶ 21) Among other things, it discussed with Kuskanet personnel what features and programming Entura should include, it monitored development efforts, and it participated in efforts to make the program functional in the Affiliates’ networks. (Id.)1 Kuskanet transferred an ownership interest in and control of the Entura program to WSG. (Id. ¶ 22) Persons at Kuskanet update and modify the Entura program periodically for WSG. (Id.) WSG licensed the Entura program to each of the Affiliates, who then installed and used Entura in their systems that included ATMs of banking and credit unions in each Affiliate’s country. (Id. ¶¶ 13-16, 23-24) WSG has continued to license and develop the Entura program and has provided technical support services from Wisconsin to the Affilliates, and the Affiliates have continued to use the Entura 1 Complaint Exhibits 2 and 3 note that Ecuadorean experts learned during their investigation of the Entura program that “the development and changes of [Entura] version[s] are carried out by the firm WSG.” (ECF 28- 4:102, ¶ 3). Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 4 of 31 5 program, even though WSG’s license to the Datacarrier software, including the TID program, terminated in 2013. (Id. ¶¶ 24-25) WSG declined to provide a copy of the Entura program to Datacarrier so that Datacarrier could compare it with the TID Program. (ECF 28:¶ 28) But during an investigation the Ecuadorean government procured copies of the TID and Entura Programs and had information-technology experts compare them. (Id. ¶ 29) The experts found numerous points of similarity between the two programs, including the following:  Fields and formats used to implement ISO-8583 standard. The ISO-8583 standard for defining message-exchange formats and communications flow is generally used but many different fields and formats can be used to implement it. Datacarrier’s fields were unique and proprietary, but were copied in Entura. (Id. ¶ 30)  DescargaCajero code. The Entura program contains source code identical or similar to source code in the TID Program’s DescargaCajero file - for example, code instructing ATMs to carry out actions in response to an event, such as “press button to continue transaction,” “press button to refer to checking account” and the like. Entura also contains passwords for card reading and an order of screens visible to ATM users during a transaction that are identical to those in the TID Program. (Id. ¶¶ 35-36) Such features are not standard and are not the only features that can be used for such purposes. (Id. ¶ 37)  F632CDC and F632ED sequences. The Entura program contains source code for files used to send messages between local ATM locations and central server locations. Critical portions of the source code, referred to in the Amended Complaint as the F632CDC and F632ED sequences, are coded in a format identical to that used in analogous TID Program files. (Id. ¶¶ 38-39, 41-42) The sequences are not standard sequences for the functions performed by such files and are not the only sequences that can be used for such purposes. (Id. ¶¶ 40, 43)  SCREEN-CosTx-001 and SCREEN-ConfirmDep-000 methods. Both the TID and Entura programs comprise methods (that is, instructions and instruction-implementing Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 5 of 31 6 code) pertaining to transmission of information to ATM users. The Entura methods comprise program logic, text items, signaling signs and print logic identical (or nearly identical) to those in the TID Program’s SCREEN-CosTx-001 and SCREEN- ConfirmDep-000 methods used for transmission of such information. (Id. ¶¶ 44, 46- 49, 51) Such methods and features are not standard for the functions performed by such methods and features, and they are not the only methods and features that can be used for such purposes. (Id. ¶¶ 45, 50)  ATMERRORMSG.COPY file. An Entura file contains logic identical (or nearly identical) to that used in the TID Program’s ATMERRORMSG.COPY file, including nearly identical code sequences that enable identification of items in a chain of characters that refer to discrete items of information or functions. (Id. ¶¶ 52, 54) Such logic is not standard for the functions performed by such method and is not the only logic that can be used for such purposes. (Id. ¶ 53)  Likelihood of additional infringement. Based on the infringing features described in expert reports generated during the Ecuadorean investigation, Datacarrier believes that direct examination of the Entura program that WSG has declined to provide to date (but that will be available through discovery) is likely to provide additional confirmation and evidence that the Entura program infringes the TID Program. (Id. ¶ 55; see Fed. R. Civ. P. 11(b)(3)) The Amended Complaint also alleges that WSG committed additional acts of infringement in connection with evaluation and technical support. In 2012, WSG employees operated Entura in Wisconsin as part of the process of evaluating Entura and other programs as a replacement for the TID Program. (ECF 28:¶¶ 59-60) After WSG licensed Entura to its Affiliates, WSG provided technical support services for Entura from the United States to its Affiliates. In order to provide such services it necessarily would have to maintain an executable copy of Entura and copies of the Entura source code and executable code in the United States, and it operates Entura in the United States in connection with its technical support services. (Id. ¶¶ 63-64, 67.d) Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 6 of 31 7 Additional facts are set forth at pertinent points in the argument below. LEGAL STANDARDS GOVERNING MOTIONS TO DISMISS “In considering a motion to dismiss for failure to state a claim, the court must accept as true the well-pleaded factual allegations in the complaint, drawing all reasonable inferences in favor of the plaintiff.” Hoffman v. Kelz, 443 F. Supp. 2d 1007, 1010 (W.D. Wis. 2006); Burke v. 401 N. Wabash Venture, LLC, 714 F.3d 501, 504 (7th Cir. 2013), citing, inter al., Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The complaint “must contain enough facts to state a claim for relief that is plausible on its face.” Burke, 714 F.3d at 504. The court may dismiss a complaint for failure to state a claim only if “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Hoffman, 443 F. Supp. 2d at 1010 (citation omitted). If a complaint is found deficient but there is a possibility that it could be amended to correct such deficiencies, plaintiff should be given an opportunity to amend. See, e.g., Gorman v. King, 50 F.R.D. 195, 196 (E.D. Wis. 1970); Paul v. Marberry, 658 F.3d 702, 705 (7th Cir. 2011). WSG states that its Authorization and Evaluation/Tech Support Arguments are based on Fed. R. Civ. P. 12(b)(1) (lack of subject-matter jurisdiction) (ECF 36:3, 13, 15) and that its Copyrightability Argument is based on Rule 12(b)(6) (failure to state a claim). (ECF 36:20) Datacarrier’s reliance on Rule 12(b)(1) is misplaced. In the Seventh Circuit, motions predicated on the failure of claims that fall within the scope of a federal statute should not be brought under Rule 12(b)(1) unless the statute clearly states that the limitations on its scope are jurisdictional. Miller v. Herman, 600 F.3d 726, 730 (7th Cir. 2010). The Copyright Act contains no such statement. Furthermore, where, as here, “a defendant’s Rule 12(b)(1) motion is an indirect attack on the merits of the plaintiff’s claim, the court may treat the motion as if it were a Rule 12(b)(6) motion,” Peckmann v. Thompson, 966 F.2d 295, 297 (7th Cir. 1992), Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 7 of 31 8 and may apply Rule 12(b)(6) standards, including the rule that a complaint may not be dismissed unless it is clear from the face of the complaint that there is no subject-matter jurisdiction and that the complaint cannot be amended to show such jurisdiction. See Hoffman, 443 F. Supp. 2d at 1010. ARGUMENT I. WSG’S AUTHORIZATION ARGUMENT FAILS. WSG first argues, relying on Subafilms, that Datacarrier’s claims based on WSG’s authorization of its Affiliates’ infringement should be dismissed because domestic authorization of foreign infringement is not actionable under the Copyright Act. (ECF 36:2- 12) Subafilms is not binding on courts in the Seventh Circuit and, respectfully, Subafilms’ holding that the Copyright Act applies to domestic authorization of infringement within the United States but not outside the United States is wrong. Curb and other courts and commentators have rejected Subafilms’ reasoning and have explained that under the Copyright Act, one who authorizes another’s infringing conduct is liable under the Act regardless of where the other’s infringement takes place. Curb, 898 F. Supp. at 595-96; Expediters Int’l of Wash., Inc. v. Direct Line Cargo Mgmt. Servs., Inc., 995 F. Supp. 468, 475- 77 (D.N.J. 1998); see also, e.g., Sean A. Monticello, Subafilms Revisited: The Case for Imposing Liability on Domestic Authorizers of Extraterritorial Copyright Infringements, 1 Chi-Kent J. Intell. Prop. 101, 114-36 (1999); John Patrick Kelsh, Note, Subafilms, Ltd. v. MGM-Pathe Communications Co., The Berne Convention, & the Extraterritorial Applications of the Copyright Act, 90 Nw. U. L. Rev. 1839, 1843-63 (1996); Fyk v. Roth, No. 94-3826, 1995 WL 290444, *2 (E.D. Pa. May 9, 1995) (stating that infringement will be considered extraterritorial and, thus, outside the scope of the Copyright Act “only insofar as the infringement is wholly an extraterritorial one”; emphasis in original). Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 8 of 31 9 A. The Copyright Act Prohibits Authorization of Another’s Infringing Conduct Regardless of Where That Conduct Takes Place. The Subafilms court reached its conclusion that the Copyright Act prohibits authorization of infringing conduct only where such infringing conduct occurs in the United States through the following chain of reasoning. The Copyright Act provides that a copyright owner “has the exclusive rights to do and to authorize any of the following: ...” 17 U.S.C. § 106 (emphasis added). Section 106 then lists six categories of activity that a copyright owner may do or authorize, including distribution (and authorization of distribution) of copies of the work by “sale or other transfer of ownership.” § 106(3). The Subafilms court noted that Congress added the words “to authorize” to § 106 in 1976, but the court reasoned that such amendment merely “invoke[d] the preexisting doctrine of contributory infringement.” 24 F.3d at 1091-92. The court relied heavily on a 1976 Congressional report concerning the amendment at issue (“1976 Report”), which stated in pertinent part that: Use of the phrase “to authorize” is intended to avoid any questions as to the liability of contributory infringers. For example, a person who lawfully acquires an authorized copy of a motion picture would be an infringer if he or she engages in the business of renting it to others for purposes of unauthorized public performance. 24 F.3d at 1093, citing H.R. Rep. No. 1476, 94th Cong., 2d Sess. 61, reprinted in 1976 U.S.C.C.A.N. 5659, 5674 (original emphasis omitted). The Subafilms court believed it would be an “untenable anomaly” to hold a party liable for authorizing another’s foreign infringement because the foreign infringer could not be held liable for direct infringement under the Act. Id. at 1094. Both Curb and Expediters demonstrate that this reasoning is incorrect and reflects “a peculiar interpretation” of § 106 which “appears contrary both to well-reasoned precedent, statutory text, and legislative history.” Curb, 898 F. Supp. at 594; see also Expediters, 995 F. Supp. at 476. As the Curb court explained, the right to “authorize” any of the acts enumerated in § 106 is not ancillary to the right to “do” those acts: it is a separate and equally Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 9 of 31 10 important right that does not depend on where the authorized act is performed. Curb, 898 F. Supp. at 594; see also 2 Paul Goldstein, Goldstein on Copyright, § 6.3.2 at 6:46-47 (2nd ed., 2000 Supp.) (stating that Subafilms “wrongly focuses on the acts occurring abroad rather than on the independently material act of authorization occurring in the United States. Effectively, the 1976 Act creates two sets of discrete rights - the authorization right and the bundle of rights encompassed by section 106(1) - (6)”). Curb’s interpretation of § 106 is consistent with basic rules of statutory construction. Subafilms’ interpretation of § 106 is not, in several respects. First, § 106 confers on copyright owners both the right to authorize and the right to do each of the things enumerated in § 106(1) through § 106(6). It is a basic rule of statutory construction that courts must “give effect, if possible, to every clause and word of a statute.” Khan v. United States, 548 F.3d 549, 554 (7th Cir. 2008) (citation omitted); Shimko v. Jeff Wagner Trucking, LLC, No. 11-cv- 831, 2014 WL 7525657, *4 (W.D. Wis. Mar. 10, 2014) (stating: “We avoid interpreting a statute in a way that renders a word or phrase redundant or meaningless”) (citation omitted). If Congress had not intended to confer an exclusive right to authorize distribution of its product by sale, licensing or other ownership transfer under § 106(3) separate and independent from the § 106(3) right to distribute directly, the word “authorize” would serve no purpose and would have no meaning. Second, Subafilms’ reliance on the 1976 Report for its conclusion that addition of the word “authorize” merely “invoke[d] the preexisting doctrine of contributory infringement,” 24 F.3d at 1092, is misplaced. Courts may not resort to legislative history where the statutory language at issue is unambiguous. Carcieri v. Salazar, 555 U.S. 379, 387 (2009) (stating that if “the statutory text is plain and unambiguous … we must apply the statute according to its terms”); Atunnise v. Mukasey, 523 F.3d 830, 836 (7th Cir. 2008) (same). Section 106 is not Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 10 of 31 11 ambiguous: it makes clear that authorizing, as well as doing, any of the enumerated acts is infringement. Even if the language of § 106 at issue were ambiguous, Subafilms’ conclusion that Congress added the word “authorize” solely to address contributory infringement reads too much into the 1976 Report. The Report’s statement that “[u]se of the phrase ‘to authorize’ is intended to avoid any questions as to the liability of contributory infringers” is best read to say that authorization of infringement is a right that stands on its own, thus, it is not necessary to debate whether contributory or direct infringement principles apply to authorizers. The second Report sentence quoted above confirms this: it says that a person who lawfully acquires a copy of a motion picture is an infringer if he or she leases it to others for purposes of unauthorized use. It does not create an exception where the acquiring person leases the product to others for unauthorized foreign use. Interpreting the statement to “read[ ] the authorization right out of the Act in cases of foreign infringement,” see Curb, 898 F. Supp. at 595, is not appropriate. The Supreme Court has also confirmed that authorization is an independent right and that infringement of authorization rights is not mere contributory infringement: “[T]he lines between direct infringement, contributory infringement, and vicarious liability are not clearly drawn …” The lack of clarity in this area may, in part, be attributable to the fact that an infringer is not merely one who uses a work without authorization by the copyright owner, but also one who authorizes the use of a copyrighted work without actual authority from the copyright owner. [Emphasis added; citation omitted.] Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 435 n.17 (1984) (dictum). Furthermore, if Congress meant to limit the right to “authorize” § 106’s enumerated acts to instances where such authorization merely contributed to direct infringement, it could and would have worded § 106 to state that the right of authorization applies only to authorization of acts of infringement that occur within the United States, not foreign acts. Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 11 of 31 12 Congress chose not to do so, and courts may not constructively add such language to the statute. B. Reading Domestic Authorization of Foreign Infringement Out of the Copyright Act Would Conflict With the Act’s Purpose and Would Sow, Not Discourage, International Discord. The Curb court also pointed out that Subafilms’ interpretation of the Copyright Act, viewed in light of the global nature of modern market incentives to produce creative works, makes no sense because it overlooks the Act’s basic purpose to encourage creation of new works. The Curb court explained: [P]iracy has changed since the Barbary days. Today, the raider need not grab the bounty with his own hands; he need only transmit his go-ahead by wire or telefax to start the presses in a distant land. Subafilms ignores this economic reality, and the economic incentives underpinning the Copyright Clause designed to encourage creation of new works, and transforms infringement of the authorization right into a requirement of domestic presence by a primary infringer. Under this view, a phone call to Nebraska results in liability; the same phone call to France results in riches. In a global marketplace, it is literally a distinction without a difference. 898 F. Supp. at 595. The Expediters court agreed: [T]he policy observations set forth in Curb … appear more closely adapted to our modern age of telefaxes, Internet communication, and electronic mail systems. The purpose behind the Copyright Act is to protect a copyright owner’s right to be free from infringement in the United States. To allow an entity to curtail this right by merely directing the foreign agent to do its “dirty work” would be to hinder the deterrent effect of the statute and to thwart its underlying purpose. 995 F. Supp. at 476-77. Commentators have also agreed. See, e.g., Monticello, 1 Chi.-Kent J. Intell. Prop. at 136 (stating that Subafilms leaves copyright owners essentially powerless to prevent foreign exploitation of their works and thus threatens incentives to create new works); Kelsch, 90 Nw. U. L. Rev. at 1843 (stating that the Subafilms holding “creates a situation where the true owner … has no more legitimacy than any other party that chooses to negotiate with foreign firms for foreign distribution rights” and “destroys a very valuable part of the limited monopoly that the Copyright Act is designed to give to creators”). That is particularly true here: Datacarrier has alleged that WSG has profited directly, to Datacarrier’s damage, Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 12 of 31 13 from its authorization of infringement and other infringing acts (ECF 28:¶¶ 68-69). Under Subafilms, Datacarrier would have no effective remedy for, or ability to recover, such damages. In short, the Subafilms court discounted without explanation the disincentives to new works that its holding would create. The Subafilms court also relied (as does WSG, see ECF 36:1-3, 6-7) on the “Aramco presumption,” see E.E.O.C. v. Arabian Am. Oil Co., 499 U.S. 244, 248 (1991), that federal laws are presumed to apply only within the United States unless Congress clearly indicates the contrary. Subafilms, 24 F.3d at 1095. The court’s reliance was misplaced in several respects. First, by definition domestic authorizers of foreign infringement are acting within the United States. Second, the Subafilms court conceded that extraterritorial application of the Copyright Act is permitted in some situations, 24 F.3d at 1096, but it reasoned that “application of the presumption is particularly appropriate when ‘[i]t serves to protect against unintended clashes between our laws and those of other nations which could result in international discord.’” Id. at 1097 (citation omitted). The Subafilms court reasoned that by acceding to the Berne Convention, Congress expressed the view that industries depending on copyrights can best secure protection by increasing their reliance on foreign laws. Id. at 1095 n.10. The court reasoned that holding authorizers of foreign infringement liable under the Copyright Act “would be contrary to the spirit of the Berne Convention, and might offend other member nations by effectively displacing their law.” Id. at 1097. The Subafilms court did not explain how application of the Copyright Act to domestic authorizers of foreign infringement would threaten comity and sow international discord. It would not. To the contrary, excluding domestic authorizers of foreign infringement from the scope of the Act would effectively cede to foreign countries all right to address the behavior Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 13 of 31 14 of any actor in a domestic authorization-foreign infringement situation, and could effectively confer immunity upon domestic authorizers in such situations. See Monticello, 1 Chi-Kent J. Intell. Prop. at 134-35 (describing the practical difficulties copyright owners face in suing domestic authorizers abroad). Conversely, holding domestic authorizers liable under the Copyright Act would not affect other nations’ rights to address conduct within their own borders. Furthermore, the Subafilms court’s conclusion that liability would contravene the spirit of the Berne Convention is based on a misreading of the Convention. Rather than create a unitary international copyright law, the Convention’s members chose to require each signatory nation to guarantee certain rights to copyright owners of all subscribing nations, including an owner’s right to authorize use of its works: Authors of literary and artistic works protected by this Convention shall have the exclusive right of authorizing the reproduction of these works, in any manner or form. [Emphasis added.] Berne Convention for the Protection of Literary and Artistic Works (Paris Text, 1971) art. 9(1), reprinted at 4 Paul Goldstein, Goldstein on Copyright, Annex 73, 80 (3rd ed. 2005). The Convention does not say that authors shall have exclusive rights of authorization except where a domestic entity authorizes infringement outside the borders of the signatory nation. The Convention also requires signatory nations such as the United States to enforce such rights within their borders as to citizens of other Convention members: Authors shall enjoy … in countries of the Union other than the country of origin, the rights which their respective laws do now or may hereafter grant to their nationals, as well as the rights specially granted by this Convention. Art. 5(1), Goldstein, Annex at 84. The Subafilms court did not reference these provisions and apparently did not consider them. The court’s holding effectively denies foreign copyright owners such as Datacarrier their right under Articles 5(1) and 9(1) of the Berne Convention to have their exclusive right Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 14 of 31 15 of authorization enforced against unlawful authorizers within the United States. Conversely, enforcement of authorization rights against domestic authorizers of foreign infringement, such as WSG, will not create a risk of “international discord” or “offend other member nations by effectively displacing their law” as the Subafilms court posited (see 24 F.3d at 1097): the Copyright Act applies to domestic authorizers only. Datacarrier is making claims in this Court against WSG, a domestic corporation (ECF 28:¶ 2), not against WSG’s Affiliates in Mexico and South America. C. The Other Cases on Which WSG Relies Do Not Help Its Argument. WSG argues that this Court should follow Subafilms because Subafilms represents the majority rule. (ECF 36:8-9) This argument fails for several reasons. First, as WSG concedes, neither the U.S. Supreme Court nor the Seventh Circuit has addressed the issue of whether domestic authorization of foreign infringement falls within the scope of the Copyright Act. (ECF 36:5) Decisions issued by courts other than the Supreme Court and the Seventh Circuit are not binding on this Court and “will normally be entitled to no more weight than their intrinsic persuasiveness merits.” Budgetel Inns, Inc. v. Micros Sys., Inc., 34 F. Supp. 2d 720, 725 (E.D. Wis. 1999) (citation omitted); RLJCS Enters., Inc. v. Prof’l Ben. Trust Multiple Employer Welfare Benefit Plan & Trust, 487 F.3d 494, 499 (7th Cir. 2007) (stating: “[D]ecisions of district judges have no authoritative effect”).2 The cases cited by WSG have no persuasive value for several reasons. Nearly all of them relied on Subafilms without any critical analysis of Subafilms’ reasoning and without any independent analysis of whether domestic authorization of foreign infringement is outside 2 WSG notes (ECF 36:5, n. 1) that one district court in the Seventh Circuit has followed the Subafilms holding. Seals v. Compendia Media Group, No. 02-C-0920, 2003 WL 731369 (N.D. Ill. Feb. 28, 2003). The rule just stated applies to other district courts in the Seventh Circuit: this Court is not bound by holdings of such courts and is not required to give such holdings any weight. Furthermore, the Seals court cited Subafilms but did not state in any detail the reasons for its decision to follow that holding, and its decision is flawed for the same reasons that the Subafilms holding is flawed. Seals, 2003 WL 731369 at *4-5. Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 15 of 31 16 the scope of the Copyright Act. See Iverson v. Grant, 946 F. Supp. 1404, 1411-12 (D.S.D. 1996), aff’d, 133 F.3d 922 (8th Cir. 1998); Geophysical Servs., Inc. v. TGS-Nopec Geophysical Servs., No. 14-1368, 2015 WL 6869733, *7-8 (S.D. Tex. Nov. 9, 2015); Rundquist v. Vapiano SE, 798 F. Supp. 2d 102, 128-29 (D.D.C. 2011); Bridgeport Music, Inc. v. Robert Hill Music, No. 3:05-0377, 2006 WL 3720349, *6 (M.D. Tenn. Dec. 14, 2006); Well-Made Toy Mfg. Corp. v. Lotus Onda Indus. Co., No. 02 Civ. 1511, 2003 WL 42001, *5 (S.D.N.Y. Jan. 6, 2003); Nat’l Football League v. PrimeTime 24 Joint Venture, No. 98 CIV 3778, 1999 WL 163181, *4 (S.D.N.Y. Mar. 24, 1999); Levitin v. Sony Music Entm’t, 101 F. Supp. 3d 376, 384-86 (S.D.N.Y. 2015); Fun-Damental Too, Ltd. v. Gemmy Indus. Corp., No. 96 Civ 1103, 1996 WL 724734, *5-6 (S.D.N.Y. Dec. 17, 1996); Elektra Entm’t Grp., Inc. v. Barker, 551 F. Supp. 2d 234, 245-46 (S.D.N.Y. 2008); Seals, 2003 WL 731369 at *4-5; Illustro Sys. Int’l, LLC v. Int’l Bus. Mach. Corp., No. 3:06-CV-1969, 2007 WL 1321825, *12- 13 (N.D. Tex. May 4, 2007);3 Music Sales Ltd. v. Charles Dumont & Son, Inc., 800 F. Supp. 2d 653, 657-60 (D.N.J. 2009); Bridgeport Music, Inc. v. Robert Hill Music, No. 3:05-0377, 2006 WL 3720349 (M.D. Tenn. Dec. 14, 2006).4 None of these cases addressed the points made in Curb and Expediters and by commentators that placing domestic authorization of foreign infringement outside the scope of the Copyright Act: (i) would contravene the plain language of Act § 106 which makes 3 The Illustro court cited comments in William Patry’s treatise on copyright law criticizing Curb and Expediters as motivated by a “swashbuckling passion to do battle with modern international copyright pirates” and as having a “breathtaking view of U.S. federal courts’ authority and role.” Illustro, 2007 WL 1321825 at *13. But Patry’s view of the scope of the Copyright Act is unduly narrow and is unsupported by authority. In particular, Patry argues that no domestic predicate act, even domestic copying, can support liability for foreign infringement - a view which even the Ninth Circuit (which decided Subafilms) has rejected. William F. Patry, Patry on Copyright § 25:87 (2016); L.A. News Serv. v. Reuters Television Int’l. Ltd., 149 F.3d 987, 991-92 (9th Cir. 1998) (holding that domestic authorization of foreign infringement combined with predicate act of domestic copying will support liability). 4 Curb and Bridgeport were decided by different judges in the same district. In Bridgeport, the court indicated that the parties agreed that Subafilms applied and it cited Subafilms without any discussion or analysis of the Subafilms court’s reasoning. The court did not cite Curb or Expediters, did not examine the reasons given in Curb and Expediters for holding that domestic authorization of foreign infringement violates the Copyright Act, and apparently was not aware of Curb or Expediters. Bridgeport, 2006 WL 3270349 at *6-7. Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 16 of 31 17 authorization an “independently material act” of infringement, 2 Paul Goldstein, Goldstein on Copyright, § 6.3.2 at 6:46-47 (2nd ed., 2000 supp.); (ii) would ignore the economic reality of the global, Internet-oriented economy; (iii) would effectively leave copyright owners powerless to prevent domestic entities from exploiting owners’ works by authorizing foreign infringement and would thus impede the Copyright Act’s goal of encouraging new works; and (iv) would be contrary to, not consistent with the Berne Convention. Id. None of the decisions on which WSG relies cited or indicated any awareness of the Curb line of authority other than the Rundquist and Levitin courts, which noted Curb but failed to address its points, and the Fun-Damental court which conceded, based on Curb, that “reasonable minds might find such domestic authorization sufficient to grant a court jurisdiction over the extraterritorial acts of infringement.” Rundquist, 798 F. Supp. 2d at 128; Levitin, 101 F. Supp. 3d at 385-86; Fun-Damental, 1996 WL 724734 at *7. Second, several of the cases’ statements of approval of Subafilms were dicta, either because those cases did not involve domestic authorization of foreign infringement or because their decisions did not turn on the Authorization Issue. See Iverson, 946 F. Supp. at 1411-13 (the authorizing conduct and infringing acts at issue took place outside the United States); Rundquist, 798 F. Supp. 2d at 129 (same); Geophysical Serv. Inc. v. ConocoPhillips Co., No. CV 15-2766, 2016 WL 2839286, *3-5 (S.D. Tex. May 13, 2016) (the plaintiff did not argue that authorization of infringement constituted an independent form of infringement and the court dismissed the case based on the act of state doctrine, not based on Subafilms). Two of the cases on which WSG relies do not support WSG’s position for other reasons. In Capitol Records, Inc. v. Thomas, 579 F. Supp. 2d 1210, 1220-23 (D. Minn. 2008) the court discussed and agreed with Subafilms’ reasoning, but its reasoning is flawed for the same reasons as Subafilms’ reasoning. For example, the Capitol Records court noted that the Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 17 of 31 18 Supreme Court employed language in New York Times Co. v. Tasini, 533 U.S. 483, 506 (2001) indicating that authorization of infringing conduct itself constitutes infringement. The Capitol Records court went to great lengths to explain away that language, see 579 F. Supp. 2d at 1222-23, but it failed to note that such language confirmed the Supreme Court’s previous statement in Sony Corp. 464 U.S. at 435 n.17, that “an infringer is not merely one who uses a work without authorization by the copyright owner, but also one who authorizes the use of a copyrighted work without actual authority from the copyright owner.” WSG also argues, relying on Venegas-Hernandez v. Asociacion de Compositores, 424 F.3d 50, 57 (1st Cir. 2005), that authorization cannot be an independent act of infringement because if it were, “statutory damages might be available without proof of later copying.” (ECF 36:9) This argument fails for two reasons. First, it is entirely appropriate to assess statutory damages even if no copying has taken place. The Copyright Act’s statutory- damages provision, 17 U.S.C. § 504, is designed to deter future infringement as well as compensate copyright owners for damages. See, e.g., Jasperilla Music Co. v. Wing’s Lounge Ass’n, 837 F. Supp. 159, 161 (S.D. W. Va. 1993). And as the Venegas-Hernandez court recognized, “harm might be done by … an improper authorization even without a further infringing act - for example, it might discourage the purported licensee from seeking a license from the copyright’s true owner.” 424 F.3d at 57. Second, WSG’s argument is moot: the Amended Complaint specifically alleges copying and use of Datacarrier’s copyrighted TID Program, and that Datacarrier has been damaged as a result of such copying. (ECF 28:¶¶ 23-24, 58-59) Another case cited by WSG, Elektra Entertainment Group, approved of the Curb court’s holding. Like the Curb court, the Elektra court recognized the need to address Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 18 of 31 19 domestic authorization of foreign infringement under the Copyright Act (551 F. Supp. 2d at 246): [T]he Curb court was addressing a scenario in which the authorizer was subject to jurisdiction in the United States but the authorizee - the person violating the distribution right - was beyond the jurisdictional reach of the laws of the United States. The Curb court’s construction of the statute was directed, in part, in an effort to construe the statute so as to give copyright holders some remedy at law against international infringers. The Elektra court attempted to reconcile Curb with Subafilms by suggesting that because the Curb court also found that the defendant had directly distributed infringing copies, Curb effectively holds that a defendant is liable for domestic authorization of foreign infringement only when the authorizer has performed an enumerated § 106 act as well as authorized such an act. 551 F. Supp. 2d at 246-47. WSG makes the same argument. (ECF 36:10) But the Curb court forged no such link: it explicitly stated that “domestic violation of the authorization right is an infringement,” 898 F. Supp. at 595, and that authorization is an “equally sanctionable” act of infringement under § 106. Id. at 596. In sum, the Copyright Act makes authorization of infringement an independent act of infringement, and it does so regardless of whether the authorized infringement occurs within or without the United States. The Act does not exempt domestic authorizers of foreign infringement from liability - a result that would violate, not promote the Berne Convention, and would effectively insulate such authorizers from liability in any forum. The Curb line of cases recognizes this; Subafilms and the other cases cited by WSG do not. This Court should adopt the better-reasoned Curb line of authority and should reject WSG’s Authorization Argument. Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 19 of 31 20 II. WSG’S EVALUATION/TECH SUPPORT ARGUMENT FAILS. A. The Evaluation/Tech Support Allegations. In addition to alleging domestic authorization of foreign infringement, the Amended Complaint alleges that WSG committed other acts of infringement in the United States, namely:  WSG employees operated Entura as part of the process of evaluating Entura as a possible replacement for the TID Program and “on information and belief, at least the following WSG employees operated the infringing Entura software in Madison, Wisconsin: Steve Schaefer, Mark Cifuentes, and Jaime Maestre.” (ECF 28:¶ 59)  After licensing Entura to its Affiliates WSG provided technical support for Entura from the United States. Retaining an executable copy of Entura in the United States would be a standard and necessary practice in order for WSG to provide such support, and, thus, “on information and belief, WSG has maintained at least an executable copy of the Entura program in the United States.” (Id. ¶ 63)  Having copies of Entura source code and executable code in the United States would be a standard and necessary practice in order for WSG to provide technical support services, including replication of Entura-related problems and other errors as part of the services process and, thus, “on information and belief, WSG possesses a copy of such source code and executable code in the United States for such purposes.” (Id. ¶ 64)  WSG operated the Entura software in the United States in eonnection with monitoring and technical support activities provided from the United States. (Id. ¶ 67.d) B. The Evaluation/Tech Support Allegations Adequately State a Claim Against WSG. WSG does not dispute that operation of infringing software (for evaluation purposes or for any other purpose) and possession and maintenance of an executable copy and of source Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 20 of 31 21 code and executable code of infringing software for use in replicating problems and providing technical support services all constitute separate acts of infringement.5 Instead, WSG, relying primarily on America’s Best Inns, Inc. v. Best Inns of Abilene, L.P., 980 F.2d 1072 (7th Cir. 1992), contends that the claims referenced in paragraphs 59-64 of the Amended Complaint must be dismissed because “allegations based ‘upon information and belief’ are insufficient to establish subject-matter jurisdiction.” (ECF 36:13) WSG is wrong. In Medical Assurance Co. v. Hellman, 610 F.3d 371 (7th Cir. 2010), the Seventh Circuit made clear that jurisdictional allegations may be made on information and belief at the pleadings stage, particularly where a defendant has not presented facts refuting such allegations and controls some of the information relevant to jurisdiction. The Court rejected defendant’s argument that it should dismiss the case for lack of diversity jurisdiction because the complaint alleged the citizenship of some parties on information and belief. The Court explained (610 F.3d at 376): Although we have said that affidavits alleging citizenship based on “the best of my knowledge and belief” are, by themselves, insufficient to show citizenship in a diversity case [citing Best Inns], the plaintiff here offered more than that … and the defendants - who are in the best position to furnish evidence of their citizenship - have declined the opportunity to challenge the factual basis of [plaintiff’s] allegation. … This is enough for now; obviously, if information to the contrary emerges on remand, the district court must stand ready to re-evaluate its jurisdiction. Best Inns is not on point here. In Best Inns, the Seventh Circuit held that plaintiff’s post-trial affidavit stating a party’s citizenship on information and belief was not sufficient to establish diversity jurisdiction, but the Court indicated that subject-matter jurisdiction need 5 Nor could it. See, e.g., Stenograph L.L.C. v. Bossard Assocs., 144 F.3d 96, 100 (D.C. Cir. 1998) (“The language of the Copyright Act, case law, and common sense support the proposition that the installation of software onto a computer results in ‘copying’ within the meaning of the Copyright Act.”); MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 519 (9th Cir. 1993) (“However, since we find that the copy created in the RAM can be ‘perceived, reproduced, or otherwise communicated,’ we hold that the loading of software into the RAM creates a copy under the Copyright Act.”); DocMagic, Inc. v. Ellie Mae, Inc., 745 F. Supp. 2d 1119, 1148 (N.D. Cal. 2010) (citing MAI Sys., 991 F.2d at 581, “loading the program into the computer’s RAM constitutes an act of ‘copying’ for the purposes of copyright law.”). Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 21 of 31 22 not be conclusively established at the pleadings stage. It dismissed the case because plaintiff had had repeated opportunities to present proof of diversity and had been specifically reminded of the need to do so, but had not presented such proof at any stage. 980 F.2d at 1073-74.6 Hellman and Best Inns are consistent with the general rule that alleging facts on information and belief is proper “where a plausible claim may be indicated ‘based on what is known’” and “some of the information needed may be in the control of [the] defendants.” Menard v. CSX Transp., Inc., 698 F.3d 40, 45 (1st Cir. 2012) (citation omitted); Carolina Cas. Ins. Co. v. Team Equip., Inc., 741 F.3d 1082, 1087 (9th Cir. 2014) (holding that plaintiffs are permitted to plead facts relevant to jurisdiction on information and belief, and noting that such pleading sometimes is “a practical necessity” and that to prohibit such pleading would be “unduly restrictive” to parties who have plausible claims but do not have access to full information regarding jurisdiction). Hellman and Best Inns are also consistent with the rule that plaintiffs who do not have access to complete jurisdictional information will be given an opportunity to conduct jurisdictional discovery and amend their pleadings if appropriate before jurisdictional issues are decided. See, e.g., Rual Trade Ltd. v. Viva Trade LLC, 549 F. Supp.2d 1067, 1073 (E.D. Wis. 2008) (stating: “If the plaintiff raises a plausible basis for jurisdiction but has problems of proof because the defendant controls relevant evidence, the court may permit limited discovery”); Lithgow v. Edelmann, 247 F.R.D. 61, 63 (D. Conn. 2007) (stating: “In a motion 6 The other cases WSG cites in support of its position likewise are not on point. In each case the court stated in general terms, relying on Best Inns, that allegations on information and belief are not sufficient to establish subject-matter jurisdiction. The courts did not address the question of when in a lawsuit full jurisdictional information should be required and they did not dismiss the lawsuits at the pleadings stage. Harley-Davidson Inc. v. Hartford Acc. & Indem. Co., No. 12-C-691, 2014 WL 1338815, *3-4 (E.D. Wis. Apr. 3, 2014); Principle Sols. LLC v. Feed.ing BV, No. 13-C-223, 2013 WL 2458630, *1-2 (E.D.Wis. June 5, 2013); SJ Props. Suites, BuyCo, EHF v. Dev. Opportunity Corp., No. 09-C-0533, 2009 WL 3790009, *4 (E.D. Wis. Nov. 12, 2009); Gohil v. Edward Rose of Ind., L.P., No. 1:08-CV-223, 2008 WL 4493308, *1-2 (N.D. Ind. Oct. 1, 2008). Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 22 of 31 23 to dismiss for lack of subject matter jurisdiction brought pursuant to Rule 12(b)(1), ‘the party opposing the motion must be allowed discovery of the facts demonstrating jurisdiction at least where the facts are peculiarly within the knowledge of the opposing party’”; citation omitted). Datacarrier has alleged on information and belief that WSG through its employees, including Messrs. Schaefer, Cifuentes and Maestre, infringed the copyrighted TID Program by operating Entura in Wisconsin when WSG evaluated Entura. (ECF 28:¶ 59) At present only WSG has full knowledge of what each of its employees did. As to WSG’s maintenance of an executable copy of Entura and of Entura source code in order to provide technical support services, at present only WSG has full knowledge of the nature of such services. But Datacarrier has alleged that: (a) WSG provides technical support to its Affiliates, communicates with technicians from the United States and replicates Entura-related problems and errors as part of its support work, and (b) that it would be necessary (as well as standard practice) for WSG to maintain copies of Entura and Entura codes in order to perform such work. (ECF 28:¶¶ 63-64, 67.d) Those allegations clearly support a conclusion that WSG has maintained and used such copies in the United States. It is difficult to see what else Datacarrier could allege prior to obtaining direct information about WSG’s practices and the acts of its employees through discovery. This Court could in theory allow limited discovery as to the Evaluation/Tech Support Argument, but that would be inefficient and unnecessary. General discovery is already underway, and if WSG is serious about pursuing its Evaluation/Tech Support Argument, it should do so in a merits-based motion or at trial after Datacarrier has had a full opportunity for discovery as to WSG’s evaluation of Entura and its technical support services. Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 23 of 31 24 III. WSG’S COPYRIGHTABILITY ARGUMENT FAILS. WSG concedes for purposes of its motion that Datacarrier has adequately alleged ownership of a valid copyright and WSG’s access to the TID Program. (ECF 36:18-19) But WSG argues that the Amended Complaint must be dismissed because the TID Program features alleged to have been copied are unprotectable as a matter of law. (ECF 36:19-20) Relying on cases including Computer Assocs. International, Inc. v. Altai, Inc., 982 F.2d 693 (2nd Cir. 1992) and on Compendium § 721.7’s statement that copyright in a computer program does not extend to “functional aspects of a computer program, such as the program’s algorithm, formatting, functions, logic, system design, or the like,” WSG argues that all of the TID Program features referenced in the Amended Complaint fall within these categories and therefore no plausible claim for infringement is stated. WSG also argues that the Amended Complaint does not provide sufficient detail as to the alleged infringement. (ECF 36:18-20) These arguments for dismissal fail for the following reasons. A. Datacarrier’s Complaint Meets and Exceeds the Notice-Pleading Requirement for Copyright Infringement Claims. First, copyright infringement complaints “are sufficient when they allege present copyright ownership by the plaintiff, registration in compliance with the applicable statute and infringement by the defendant.” Loud Records LLC v. Minervini, 621 F. Supp. 2d 672, 677 (W.D. Wis. 2009); Mid Am. Title Co. v. Kirk, 991 F.2d 417, 421-22 (7th Cir. 1993). Generally, identification of the infringed and infringing works and a general description of the nature of the infringement is sufficient to comply with the pleading requirements of Fed. R. Civ. P. 8, including the plausible-claim requirement that originated in Iqbal, supra. See Loud Records, 621 F. Supp. 2d at 677 (holding that plaintiff’s identification of its copyrighted materials allegedly infringed and its allegation that defendant used a P2P network to download and distribute the materials was sufficient to state an infringement claim); Kirk, 991 Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 24 of 31 25 F.2d at 421-22 (court reversed dismissal of complaint, explaining that “[t]he element of copyrightable originality … is often subtle, and therefore a determination at the pleading stage will often be impossible,” noting that defendants were put on notice of the basic issue and would “have abundant opportunity to pursue the matter in detail through the discovery process,” and concluding that “[t]hese matters are more properly addressed at the summary judgment stage” when “the full range of information may be evaluated by the court”). Datacarrier has more than satisfied the pleading standard enunciated in Kirk and Loud Records. Datacarrier has identified the infringed work (the copyrighted TID Program) and the infringing work (the Entura program). (See, e.g., ECF 28:¶¶ 26, 30-55) Datacarrier has also identified and described numerous examples of infringement including: (1) Entura’s use of proprietary fields and formats embodied in the TID Program to implement the ISO-8583 standard; (2) Entura’s use of the TID Program’s DescargaCajero file source code; (3) Entura’s use of the TID Program’s F632CDC source code sequence used to send messages between local ATM locations and central server locations; (4) Entura’s use of the TID Program’s F632ED source code sequence used for the same purpose; (5) Entura’s use of the TID Program SCREEN-CosTx-001 method’s logic, text items, signaling signs and print logic pertaining to transmission of information to ATM users; (6) Entura’s use of the TID Program SCREEN-ConfirmDep-000 method’s logic, text items, signaling signs and print logic for the same purpose; and (7) Entura’s use of logic identical or nearly identical to logic used in the TID Program’s ATMERRORMSG.COPY file. (See id.) B. Datacarrier’s Registered Copyright Is Presumed Valid and WSG Has Not Demonstrated that the Amended Complaint Shows Otherwise. WSG has a double burden to show that the TID Program features at issue were not copyrightable and that the Amended Complaint does not adequately allege infringement. WSG has that burden as the movant for dismissal, and WSG must also overcome the legal Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 25 of 31 26 presumption that the TID Program was copyrightable. The Copyright Act provides that “[i]n any judicial proceedings the certificate of a registration made before or within five years after first publication of the work shall constitute prima facie evidence of the validity of the copyright and of the facts stated in the certificate.” 17 U.S.C. § 410(c). Datacarrier obtained a registered copyright for the TID Program within five years after first publication (ECF 28:¶ 27, 28-1). The Copyright Office looked at Datacarrier’s application and approved registration of the TID Program. That registration creates a presumption that the copyright is valid and that “the Copyright Office’s decision to issue [the] registration[ was] consistent with its views expressed in [the Compendium].” Media.net Adver. FZ-LLC v. NetSeer, Inc., 156 F. Supp. 3d 1052, 1063 (N.D. Cal. 2016); see also Gates Rubber Co. v. Bando Chem. Indus., Ltd., 9 F.3d 823, 831-32 (10th Cir. 1993). WSG has failed to meet its double burden - especially at this early pleading stage before discovery has been completed. WSG claims in conclusory terms that the software features at issue fall within the non-copyrightable categories set forth in Compendium § 727.1 (ECF 36:19), but it does not make any effort to explain how that is so and in any case, as explained in section C below, its position is incorrect. WSG also claims in conclusory terms that the Amended Complaint does not provide adequate detail as to the similarities between Entura and the TID Program (id.), but it makes no effort to explain how that is so. As explained in section D below, it is not so. C. Compendium § 727.1 Is Not Binding on the Courts and Does Not Show that the TID Program Features at Issue Are Non-Copyrightable. WSG suggests that the Compendium’s statement that the Copyright Office will not register “functional aspects … such as the program’s algorithm, formatting, functions, logic, system design, or the like,” Compendium § 727.1, is entitled to judicial deference (ECF 36:17- 19) and WSG contends that Datacarrier’s Complaint should be dismissed because it refers Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 26 of 31 27 only to functions that fall within the just-quoted categories. (ECF 36:17-19) WSG is wrong on both counts. First, the courts have made clear that the Compendium is not entitled to special deference. Courts will “defer to the Copyright Office’s views expressed in such materials only to the extent that those interpretations have the power to persuade.” Media.net, 156 F. Supp. 3d at 1060 (citation and internal quotations omitted). More important, courts have consistently rejected the idea that the divide between copyrightable and non-copyrightable program features can be expressed in terms of categories or any other bright line. See Kirk, 991 F.2d at 421-22. Courts do not accept “the notion that anything that performs a function is necessarily uncopyrightable.” Oracle Am., Inc. v. Google Inc., 750 F.3d 1339, 1357 (Fed Cir. 2014), cert. denied 135 S. Ct. 2887 (2015). It is well established that copyright protection can extend to both literal elements of a computer program (that is, source code and object code) and to non-literal elements, which “include, among other things, the program’s sequence, structure, and organization, as well as the program’s user interface.” Oracle, 750 F.3d at 1355-56. Several of the examples of infringement set forth in the Amended Complaint involve source code and object code which “are without question protected by copyright law.” See Cognotec Servs. Ltd. v. Morgan Guar. Trust Co. of New York, 862 F. Supp. 45, 49 (S.D.N.Y. 1994); Altai, 982 F.2d at 702; Gates Rubber, 9 F.3d at 836-37. Many courts have adopted the “abstraction-filtration-comparison” test first developed in Altai in “assessing whether the non-literal elements of a computer program constitute protectable expression.” See Oracle, 750 F.3d at 1357; Woods v. Resnick, 725 F. Supp. 2d 809, 818 (W.D. Wis. 2010) (citing Altai and discussing the abstraction-filtration-comparison test with approval). Under that test, first, a computer program’s structure is dissected and levels of abstraction are isolated; the process “begins with the code and ends with an Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 27 of 31 28 articulation of the program’s ultimate function.” Altai, 982 F.3d at 707. Then the structural components at each level are examined to determine whether they are “merged” into an idea (that is, whether “there is essentially only one way to express an idea” so that “the idea and its expression are inseparable”) or whether they constitute scenes a faire (that is, they are viewed by the public or by the relevant market as standard or indispensable). Id. at 707-09 (citation omitted). Finally, the court compares the components that have not been eliminated from the analysis as ideas or as scenes a faire to determine whether they are substantially similar. Id. at 710; see also, e.g., Gates Rubber, 9 F.3d at 834 (applying similar test); Cognotec, 862 F. Supp. at 49-50 (same). Thus, infringement cannot be evaluated purely on the basis of whether one of the labels mentioned in Compendium § 727.1 can be pinned on the program feature at issue. WSG makes no attempt to explain its position as to non-copyrightability using the abstraction-filtration-comparison test; indeed, WSG does not mention, much less address, the copyrightability of non-literal elements. The overarching purpose of a program (here, the concept of providing instructions to ATMs and communication between ATMs and central servers) is an unprotectable idea but “intermediate levels of abstraction, such as structure, sequence, organization, and the like, are less prone to generalizations.” Gates Rubber, 9 F.3d at 836. Generally, application of the abstraction-filtration-comparison test is fact-intensive, Altai, 982 F.2d at 704, 707-10, Oracle, 750 F.3d at 1356, and expert testimony is often helpful in evaluating the merits. Gates Rubber, 9 F.3d at 834-35. In Cognotec the court explained that these factors weigh strongly against use of motions to dismiss based on contentions that the infringed elements on which plaintiff relies are not copyrightable (862 F. Supp. at 50): [T]he three step procedure that Altai recommends that district courts apply is necessarily fact determinative and requires detailed comparisons of computer programs. To adequately consider Morgan’s arguments would require a thorough and detailed factual exploration of AutoDealing [the allegedly infringed program], Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 28 of 31 29 the various documents issued to and by Morgan, the foreign currency industry [the market for the infringed and infringing programs], as well as Morgan’s own program. A motion to dismiss is not the proper procedural mechanism to make this factual inquiry. Accordingly, the copyright claim does not fail to state a claim upon which relief can be granted. [Emphasis added; citations omitted.] Here, likewise, a motion to dismiss is not the proper device for testing the merits of Datacarrier’s claims.7 D. The Complaint Adequately Alleges Infringement of Copyrightable Features of the TID Program. In addition, the Amended Complaint makes clear that its infringement claims concern copyrightable features and it contains more than enough detail to enable WSG to respond to the infringement claims. The Complaint identifies at least seven examples of infringement. Three of the examples set forth in the Amended Complaint, namely those concerning the DescargaCajero code (ECF 28:¶¶ 35-37),8 the F632CDC sequence (id. ¶¶ 38-40) and the F632ED sequence (id. ¶¶ 41-43), allege that Entura source code infringes TID Program source code. As noted above, source code is clearly copyrightable. Cognotec, 862 F. Supp. at 49; Altai, 982 F.2d at 702; Gates Rubber, 9 F.3d at 836. The DescargaCajero example also alleges copying of a proprietary password which is copyrightable expression, not an uncopyrightable abstract idea (ECF 28:¶ 36). “[E]ven a short phrase may command copyright protection if it exhibits sufficient creativity.” Oracle, 750 F.3d at 1362 (citation omitted). The Complaint alleges that these copyrighted features are not standard and are not the only 7 WSG, quoting from Gaiman v. McFarlane, 360 F.3d 644, 648 (7th Cir. 2004) argues that “copyrightability is always an issue of law” and therefore there is no need to engage in a fact-intensive analysis before deciding that issue. ECF 36:16. WSG mischaracterizes Gaiman. In that case, the Seventh Circuit noted that it had held that copyrightability was “an issue of law” in the sense that it is an issue for the court and not a jury. 360 F.3d at 648-49. The court immediately went on to say that “[w]hether a particular work is copyrightable is fact- specific,” and it did not in any way suggest that copyrightability issues are generally suitable for disposition at the pleadings stage. Id. 8 The Ecuadorean report identifies similarity due, in part, to “[t]he number of lines bearing the same code (executing the same statement twice or thrice).” (ECF 28-4:102, ¶ 3) Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 29 of 31 30 such features that can be used for the purpose at issue (id. ¶¶ 37, 40, 43); thus, it does not support a contention that the merger doctrine or scenes a faire is applicable.9 Four additional examples, namely those concerning the specific implementation of the ISO-8583 standard (ECF 28:¶ 30), the SCREEN-CosTx-001 method (id. ¶¶ 44-48), the SCREEN-ConfirmDep-000 method (id. ¶¶ 49-51) and the ATMERRORMSG.COPY file (id. ¶¶ 52-54), allege infringement of TID Program methods, which are employed using instructions and instruction-implementing code. “[A]lthough an element of a work may be characterized as a method of operation, that element may nevertheless contain expression that is eligible for copyright protection.” Oracle, 750 F.3d at 1366 (citation omitted). This is effectively source code or object code, which is indisputably copyrightable, at one higher level of abstraction. Put another way, the written instructions to execute functions and the underlying source code are proprietary and, as the Amended Complaint alleges, they are not standard and are not the only instructions and code that can be used for the purpose at issue. (ECF 28:¶¶ 30.a, 45, 50, 53) The Amended Complaint, together with the facts contained in the expert reports that it incorporates (ECF 28-3, 28-4), provides detail about the nature of the instructions and code that is more than sufficient to enable WSG to understand and respond to the claims against it.10 9 Furthermore, the merger and scenes a faire doctrines are affirmative defenses to infringement claims and thus are not directly relevant to a motion to dismiss for purportedly inadequate pleading. See, e.g., Oracle, 750 F.3d at 1358; Reed-Union Corp. v. Turtle Wax, Inc., 77 F.3d 909, 914 (7th Cir. 1996). In any event, the Amended Complaint denies that the merger or scenes a faire doctrines apply to the copyrighted code, see, e.g., ECF 28:¶¶ 30.a, 37, 40, 43, 45, 50, 53. 10 WSG argues in passing, without citing authority, that the Amended Complaint is insufficient because it does not state that Entura is “substantially similar” to the TID Program. (ECF 36:19, n.3) “Infringement is shown by a substantial similarity of protectable expression, not just an overall similarity between the works.” 4 M. Nimmer and D. Nimmer, Nimmer on Copyright (2014), § 13.03(F), pp. 13-124.3 - 13-125; Design Basics, LLC v. J. & V. Roberts Invs., Inc., 130 F. Supp. 3d 1266, 1276 (E.D. Wis. 2015) (stating that substantial similarity turns on “whether the allegedly infringing work is ‘substantially similar’ to protectable elements of the artist’s work”). As previously explained, the Amended Complaint contains multiple examples of copyrightable aspects of the copyrighted TID Program and Entura that are substantially similar, and it explains the similarities in detail. That is more than sufficient for pleading purposes. Loud Records, 621 F. Supp. 2d at 677; Kirk, 991 F.2d at 421-22. Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 30 of 31 31 In short, Datacarrier has met and exceeded the copyright-infringement pleading requirements specified in Kirk and Loud Music. The Amended Complaint’s examples of infringement describe in detail the TID Program features that WSG has infringed and the infringing portions of the Entura program. They also demonstrate that the infringed features are proprietary, copyrightable expressions, not non-copyrightable general ideas, and are not expressions that are indispensable for operational or market purposes. WSG’s claim to the contrary is wrong. CONCLUSION For all of the reasons set forth above, WSG’s Authorization, Evaluation/Tech Support and Copyrightability Arguments should be rejected and its Motion to Dismiss Datacarrier’s Amended Complaint should be denied. Dated: September 8, 2016. /s/ Joseph A. Ranney Joseph T. Leone (WBN # 1018149) Joseph A. Ranney (WBN # 1005007) Joseph T. Miotke (WBN # 1033986) DEWITT ROSS & STEVENS S.C. 2 East Mifflin Street, Suite 600 Madison, WI 53703 (608) 283-5612 jar@dewittross.com Attorneys for Plaintiff Case: 3:16-cv-00122-jdp Document #: 37 Filed: 09/08/16 Page 31 of 31