U.S. Court of Appeals for the Ninth Circuit, BladeRoom Group Ltd. v. Emerson Electric Co., Docket No. 19-16583

 

Punitive Damages

Breach of Contract Awards

Trade Secret Misappropriation

California Law

 

 

Under California law, a party cannot collect punitive damages for breach of contract awards.

 

(…) Finally, the same reasons support vacating the jury’s damages findings. The jury awarded damages in two lump sums that did not separate damages for breach of contract from misappropriation. As a result, we have no way to know how much damages the jury intended to allocate for each claim. And because we do not know whether the jury would have found Emerson liable under breach of contract or misappropriation, we cannot tell whether the damages findings would be the same. We therefore vacate the jury’s damages findings.

 

(…) Given the complex issues on appeal, we also address a couple of issues for consideration on the awards of damages and prejudgment interest should they be determined after a new trial.

California Civil Code § 3426.3(a) allows an aggrieved party to recover actual damages and any unjust enrichment on a trade secret misappropriation claim. Because the jury here found that Emerson willfully and maliciously misappropriated BladeRoom’s trade secrets, the district court awarded punitive damages equal to the $30 million in compensatory damages.

Under California law, however, a party cannot collect punitive damages for breach of contract awards. Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 516 (1994). Because the jury awarded a lump sum for breach of contract and misappropriation damages, Emerson correctly argued that the district court could not assume that the whole award went to misappropriation.

Courts that apply California law use three factors to award punitive damages. Neal v. Farmers Ins. Exch., 21 Cal. 3d 910, 928 (1978). The second factor, “the amount of compensatory damages awarded,” id., helps balance a punitive damages award with actual harm that is caused. See id. (“In general, even an act of considerable reprehensibility will not be seen to justify a proportionally high amount of punitive damages if the actual harm suffered is small.”). When weighing the second factor, the district court here merely noted that under Neal, 21 Cal. 3d at 928, “compensatory damages are a ‘relevant yardstick’ for punitive damages.” And, in a footnote, the district court explained that “the trial evidence shows that either the breach of contract or misappropriation claim for which the jury found liability could support the amount of compensatory damages it awarded.”

The district court misapplied the second factor for two reasons. One, the district court abused its discretion based on an earlier order denying Emerson’s motion to compel. And second, the district court never explained why it allocated compensatory damages the way it did.

First, in the earlier order, the district court found that “there is no way for the parties or the court to know how much was awarded for breach of contract and how much was awarded for misappropriation of trade secrets.” To be sure, the district court confirmed that “only the jury knows the number.”

A district court abuses its discretion when it “reaches a result that is illogical, implausible, or without support in inferences that may be drawn from the facts in the record.” United States v. Hinkson, 585 F.3d 1247, 1262 n. 21 (9th Cir. 2009) (collecting cases from other circuits). It was illogical for the district court to find how much the jury awarded for each claim when it already found that it had “no way” to do just that. See id. The district court should have explained why its reasoning changed. Instead, after awarding punitive damages, the district court issued another order that adopted the same reasoning in the order that denied Emerson’s motion to compel. In brief, the district court flipped its reasoning twice without explaining why. And the inconsistency visibly benefited BladeRoom because it cost Emerson millions in punitive damages that the district court would not have awarded otherwise. In sum, the inconsistency was “beyond the pale of reasonable justification” and an abuse of discretion. Harman v. Apfel, 211 F.3d 1172, 1175 (9th Cir. 2000).

 

(U.S. Court of Appeals for the Ninth Circuit, August 30, 2021, BladeRoom Group Ltd. v. Emerson Electric Co., Docket No. 19-16583, For Publication)

 

U.S. Court of Appeals for the Eleventh Circuit, Acrylicon USA, LLC v. Silikal GmbH, Docket No. 17-15737

 

Distribution Agreement

 

Licensing Agreement

 

Trade Secret

 

Contract Drafting

 

Remedies:

 

Money Recovery for Both Unjust Enrichment and Actual Damages

 

Direct and Consequential Damages

 

Lost Profits

 

Liquidated Damages

 

Nominal Damages

 

Georgia Law

 

Evidence: Videotaped Depositions

 

 

 

The agreement provided that AC-USA and its affiliate, AcryliCon International, Ltd. (“AC-International”), would be Silikal’s exclusive distributors of 1061 SW and that Silikal would not sell the resin without AcryliCon’s written permission.

 

According to AC-USA, Silikal breached the agreement by selling 1061 SW without its written permission, so it sued Silikal under common law for breach of contract (“Contract” claim) and under the Georgia Trade Secrets Act of 1990 (“GTSA”) for misappropriation of the shared trade secret (“Misappropriation” claim).

 

In 2008, AC-USA was incorporated. That same year, AC-USA entered into a licensing agreement with two affiliates of AC-International—Raliz AG and AcryliCon Distribution Est.—that gave AC-USA the right to import, market, and sell « AcryliCon Systems » in the United States, including the 1061 SW resin. AC-USA was not permitted to sell AcryliCon Systems outside of the United States without permission from AC-International.

 

AC-USA’s Contract claim is based on Paragraph 5 of the GSA Contract, titled “Confidentiality and Use of 1061 SW.” Paragraph 5 provides in full:

Silikal represents and warrants that it has not disclosed the formula for 1061 SW resin or sold or distributed 1061 SW resin, directly or indirectly, to anyone other than AcryliCon during the pendency of the Silikal/AcryliCon relationship. Silikal hereby covenants and agrees that it will preserve the secrecy of the formula for the 1061 SW resin. Silikal will not disclose or use in any way, directly or indirectly, the 1061 SW resin or formula for the 1061 SW resin. Silikal further covenants and agrees NOT to sell or distribute 1061 SW resin to anyone other than AcryliCon, or as expressly permitted in writing by AcryliCon. Within 10 days of this Settlement Agreement, Silikal shall ship by DHL to Bjorn Hegstad . . . all laboratory records and other available documents regarding the formulation and development of the 1061 SW resin.

 

(…) AC-USA presented the testimony of seven witnesses via videotaped depositions.

 

To prove a claim for misappropriation of trade secrets under the GTSA, a plaintiff must show that “(1) it had a trade secret and (2) the opposing party misappropriated the trade secret.” Penalty Kick Mgmt. Ltd. v. Coca Cola Co., 318 F.3d 1284, 1290–91 (11th Cir. 2003).

O.C.G.A. § 10–1–761(2) reads in full: (2) “Misappropriation” means:

(A) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(B) Disclosure or use of a trade secret of another without express or implied consent by a person who:

(i) Used improper means to acquire knowledge of a trade secret;

(ii) At the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was:

(I) Derived from or through a person who had utilized improper means to acquire it;

(II) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

(III) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or

(iii) Before a material change of position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

 

(…) Silikal’s violation of the duties created by the GSA Contract gave AC-USA a claim for breach of contract, not for misappropriation of a trade secret.

 

(…) Silikal argues in its supplemental brief that the District Court erred in entering the revised judgment for AC-USA on its Contract claim because AC-USA failed to prove actual damages from Silikal’s breach. We agree, and hold that AC-USA is instead entitled only to an award of nominal damages.

 

(…) Actual damages for breach of contract, by contrast, “are given as compensation for the injury sustained as a result of the breach of a contract.” O.C.G.A. § 13–6–1 (emphasis added). The fundamental difference between restitution and actual damages, therefore, is that the former is measured by the defendant’s gain, while the latter is measured by the plaintiff’s loss. Dan B. Dobbs, Law of Remedies § 4.1(1), at 555 (2d ed. 1993).

 

A plaintiff who proves misappropriation of a trade secret under O.C.G.A. § 10–1–763 may recover money for both unjust enrichment and actual damages.

 

Actual damages under Georgia law may be direct or consequential. Direct damages “arise naturally and according to the usual course of things from the breach.” Denny v. Nutt, 375 S.E.2d 878, 879 (Ga. App. 1988) (quoting Quigley v. Jones, 334 S.E.2d 664, 665 (Ga. 1985)). Consequential damages, by contrast, arise “as the probable result of the breach.” Id. The key distinction between direct damages and consequential damages is that the former compensate for the value of the promised performance, while the latter compensate for additional losses incurred as a result of the breach. See Imaging Systems Int’l., Inc. v. Magnetic Resonance Plus, Inc., 490 S.E.2d 124, 127 (Ga. Ct. App. 1997) (noting that consequential damages “may include profits which might accrue collaterally as a result of the contract’s performance,” while direct damages “may include profits necessarily inherent in the contract”).

 

A plaintiff may not recover consequential damages for breach unless such damages are within the contemplation of the parties at the time the contract was made, are “capable of exact computation,” and “are independent of any collateral enterprise entered into in contemplation of the contract.” O.C.G.A. § 13–6–8.

 

Lost profits that are not part of the benefit of the bargain may be recovered as consequential damages. Imaging Systems Int’l., 490 S.E.2d at 127. However, “the profits of a commercial business are dependent on so many hazards and chances, that unless the anticipated profits are capable of ascertainment, and the loss of them traceable directly to the defendant’s wrongful act, they are too speculative to afford a basis for the computation of damages.” Johnson Cnty. School Dist. v. Greater Savannah Lawn Care, 629 S.E.2d 271, 273–74 (Ga. Ct. App. 2006). Accordingly, a plaintiff seeking lost profits must provide “information or data sufficient to enable the trier of fact to estimate the amount of the loss with reasonable certainty.” Bearoff v. Craton, 830 S.E.2d 362, 373 (Ga. Ct. App. 2019) (quoting Pounds v. Hosp. Auth. Of Gwinnett Cnty., 399 S.E.2d 92, 94 (Ga. Ct. App. 1990). “This ‘information or data’ must include evidence showing that the business claiming lost profits had ‘a proven track record of profitability.’” Id. (quoting EZ Green Associates v. Georgia-Pacific Corp., 770 S.E.2d 273, 277 (Ga. Ct. App. 2015)). “The plaintiff must also show the expected profit for the relevant time period” including “the business’s projected revenues, as well as its projected expenses, for that time frame.” Id. (quoting Johnson Cnty., 629 S.E.2d at 274).

 

(…) In line with this principle, we note that while Georgia law enforces provisions for liquidated damages, O.C.G.A. § 13–6–7, it only does so to the extent such provisions are not penal in nature, Broadcast Corp. of Ga. v. Subscription Television of Greater Atlanta, 338 S.E.2d 775, 776–77 (Ga. Ct. App. 1985). A provision for liquidated damages will be treated as an unenforceable penalty unless (1) the injury caused by the breach is difficult or impossible to accurately estimate; (2) the parties intended to provide for damages rather than a penalty; and (3) the stipulated sum is a reasonable pre-estimate of the probable loss resulting from the breach. Southeastern Land Fund v. Real Estate World, 227 S.E.2d 340, 343 (Ga. 1976). “Where a designated sum is inserted into a contract for the purpose of deterring one or both of the parties from breaching it, it is penalty.” Broadcast Corp. of Ga., 338 S.E.2d at 777 (quoting Florence Wagon Works v. Salmon, 68 S.E. 866, 866 (Ga. Ct. App. 1910)).

 

If a plaintiff proves a breach of contract but fails to prove actual damages, the plaintiff “may recover nominal damages sufficient to cover the costs of bringing the action.” O.C.G.A. § 13–6–6.

 

Georgia law permits recovery of attorney’s fees “where authorized by some statutory provision or by contract.” Smith v. Baptiste, 694 S.E.2d 83, 87 (Ga. 2010).

An award of nominal damages is sufficient to make the plaintiff a prevailing party. King v. Brock, 646 S.E.2d 206, 207 (Ga. 2007).

 

 

(U.S. Court of Appeals for the Eleventh Circuit, January 26, 2021, Acrylicon USA, LLC v. Silikal GmbH, Docket No. 17-15737, Publish)

 

 

U.S. Court of Appeals for the Sixth Circuit, Ecimos, LLC v. Carrier Corp., Docket No. 19-5436/5519

 

 

Copyright Infringement

 

Copyright on Database-Script Source Code

 

Software

 

Hardware

 

Abstraction-Filtration Test

 

Permanent Injunction – Stayed – Special Master

 

Trade Secret

 

Licensing Terms

 

Contract Drafting

 

Carrier and ECIMOS once had a long-standing business relationship that has now deteriorated. Carrier is a leading manufacturer of residential Heating, Ventilation, and Air Conditioning (“HVAC”) systems and ECIMOS once produced the quality-control system that tested completed HVAC units at the end of Carrier’s assembly line. The present dispute centers on Carrier’s alleged infringement of ECIMOS’s copyright on its database-script source code—a part of ECIMOS’s software that stores test results. ECIMOS alleges that Carrier improperly used the database—indeed copied certain aspects of the code—to aid a third-party’s development of a new testing software that Carrier now employs in its Collierville, Tennessee manufacturing facility. ECIMOS sued for copyright infringement and breach of contract and won a $7.5 million jury award.

 

ECIMOS also filed a post-trial motion and asked the court to enjoin Carrier from using or disclosing ECIMOS’s trade secrets and from using its third-party-developed database until a new, non-infringing database could be developed from scratch. ECIMOS also moved to amend the jury award so that it could receive even more damages from Carrier. The district court: (1) enjoined Carrier from using its new database, but stayed the injunction until Carrier could develop a new, non-infringing database subject to the supervision of a special master; (2) enjoined Carrier from disclosing ECIMOS’s trade secrets, but also held that certain elements of ECIMOS’s system were not protectable as trade secrets (such as ECIMOS’s assembled hardware) and thus did not enjoin Carrier from using ECIMOS’s system; and (3) rejected ECIMOS’s motion to amend the jury award. ECIMOS now appeals those decisions.

 

In 2004, ECIMOS began formally incorporating licensing terms into the proposals that it sent to Carrier. These terms prohibited the “unauthorized copying, reverse engineering, decompiling, disassembling, decrypting, translating, renting, sub-licensing, leasing, distributing, and/or creating derivative works based on the software, in whole or in part.” This 2004 iteration of the Carrier-ECIMOS contract is the operative contract that underlies the contract-breach-damages argument on appeal.

 

(…) However, Carrier never accepted the proposal. Instead, in early 2015, Carrier accelerated its work with Amtec to develop a new, competing quality-control system. This Amtec-developed system included both a software application (the “Runtest Execution System” or “RES”) and a new storage database (the “Manufacturing Execution System” or “MES”). For simplicity’s sake, we will refer to all components of the Amtec-developed system as the “RES.” The RES went live at Carrier’s Collierville plant in October 2015.

 

Copyright-Infringement

To succeed on a copyright-infringement claim, a plaintiff must establish “(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original.” Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). The first part “tests the originality and non-functionality of the work” to ensure that it is a protectable expression rather than an unprotectable idea. Registration of a valid copyright (as ECIMOS has done for its IPCS database) is prima facie evidence that the work is entitled to protection. Lexmark, 387 F.3d at 534. The second part of the analysis “tests whether any copying occurred (a factual matter) and whether the portions of the work copied were entitled to copyright protection (a legal matter).” Ibid. It is undisputed that ECIMOS holds a valid copyright in its IPCS database-script source code. However, Carrier contends that it did not infringe upon any protectable element of that copyright, and that—even if it did—any copying was de minimis and was not actionable as a matter of law.

 

(…) This court’s dictates for an “abstraction-filtration comparison” when evaluating whether there has been a copyright infringement in cases where evidence of direct copying—the actual sale of copyrighted material— is sparse. See Kohus v. Mariol, 328 F.3d 848, 855 & n.1 (6th Cir. 2003). Developed by the Second Circuit in its opinion in Computer Associates Int’l, Inc. v. Altai Inc., 982 F.2d 693, 706 (2d Cir. 1992), the comparison proceeds (by most accounts) in three steps. First, protectable expression is separated from abstract ideas. For example, the general function of a computer program—at the highest level—is an unprotectable idea, but the code of the program that expresses a unique way to achieve the goals of the program is generally considered a protectable form of expression. Id. at 706–07. Next, unprotectable elements of the work are “filtered” out from the protectable expressive form. These unprotectable elements include “elements dictated by efficiency,” “stock” elements that are common or expected in any type of code on that subject, and elements from the public domain. Id. at 707–10. Finally, once the unprotectable elements of the work are filtered out, the remaining elements of both programs are compared to see if they are substantially similar. Id. at 710–11.

 

De Minimis

See Ringgold v. Black Ent. Television, Inc., 126 F.3d 70, 74 (2d Cir. 1997) (“De minimis in the copyright context can mean what it means in most legal contexts: a technical violation of a right so trivial that the law will not impose legal consequences.”).

 

Damages - Valuation

(…) The only copyright that was infringed was ECIMOS’s database-script source code. Even if the IPCS hardware and software applications were linked to the database, there is no evidence that the database, by itself, had a fair-market value of anywhere close to $1 million. Although ECIMOS provided Carrier with the 2014 proposal for a system upgrade, which totaled more than $1 million, there was nothing in the proposal that adverted to ECIMOS’s valuation of the database. The only reasonable basis upon which to calculate the amount is ECIMOS’s valuation of how much its IPCS software (which included the database) was worth on a license-per-station basis. This amount was $50 per month for each of the 103 runtest stations at Carrier’s Collierville plant. When this rate is factored alongside the amount of time that the infringement was ongoing at Collierville before trial (32 months—from the time that the infringing RES database went live at Collierville to the time that the trial started), the maximum supportable amount of actual copyright damages is $164,800.

 

(…) There is ample evidence to conclude that ECIMOS met its burden of presenting proof of Carrier’s gross revenues, and that it was reasonably related to the infringement. The jury was presented with Carrier’s financial records from October 2015 to December 2016, and the jury heard testimony that the records were “created by Carrier’s finance department” and were prepared “in accordance with Generally Accepted Accounting Principles.” The testimony discusses estimates of Carrier’s monthly revenues, costs, and liabilities for the period in question. ECIMOS also limited its revenue presentation to the Collierville plant and, notably, Carrier does not dispute that Carrier’s estimates of its gross revenue or profits were accurate. Thus, ECIMOS clearly met its burden of presenting “proof only of the infringer’s gross revenue.” 17 U.S.C. § 504(b). (…) In our case, there is no dispute as to the fact that every Carrier HVAC unit would have undergone tests on the IPCS—and thus would have necessarily utilized aspects of the database where the test results were stored—before being shipped for sale. Thus, the impact of ECIMOS’s intellectual property on Carrier’s profits likely had an even larger impact than the copyrighted photograph had on Hustler’s profits in Balsley and yet the jury concluded that only 0.4% of Carrier’s revenues were attributable to its infringing use of the IPCS database. This is not excessive.

 

(…) ECIMOS is already being compensated for any post-trial use of its copyright by Carrier. The district court’s post-trial injunction requires Carrier to pay the equivalent of a licensing fee ($50 per month) for a period beginning August 1, 2018 for each runtest station in its Collierville plant, and continuing until Carrier stops using its RES database. The $50 per station per month is a reasonable rate that was based on ECIMOS’s quoted figure for licensing fees in its 2014 proposal to Carrier. In short, the district court concluded that requiring Carrier to pay licensing fees for continued use of the RES database would put ECIMOS in no worse a position than if Carrier had actually obtained a valid license for use of the database at each runtest station. This is not unreasonable.

 

(…) The licensing fee of $50/month for the use of 103 stations for the 87 months from April 2011 through June 2018 adds up to $448,050, not $474,150. The $474,150 number is likely calculated from the $50/month licensing fee for 109 stations for 87 months. However, on appeal it appears that Carrier’s use of the ECIMOS system at only 103 stations is undisputed.

 

(…) It may be helpful to re-summarize the facts. In 2004, ECIMOS began incorporating terms into its IPCS licensing contract that prohibited the “unauthorized copying, reverse engineering, decompiling, disassembling, decrypting, translating, renting, sub-licensing, leasing, distributing, and/or creating derivative works based on the software, in whole or in part.” The terms also stated that “the Software may not be duplicated or copied” except for specific purposes, and that “no part of the software . . . may be reproduced or transmitted in any form or by any means.” It is undisputed that, in 2011, Carrier installed the VB6 software directly onto Windows 7, which the jury found to be a breach of the parties’ licensing contract. In 2014, ECIMOS proposed to sell Carrier an upgrade to the entire IPCS, which it quoted as costing a total of $1,021,000. The $1,021,000 figure included a $118,000 fee for “Software migration from VB6 to VB.net” for all runtest stations, as well as assorted other fees for: (1) software licensing (quoted at $600/year per station, which is $50/month); (2) specialized licensing fees (for special programs associated with VB.Net); and (3) hardware-repair fees to the runtest stations.

 

Permanent Injunction

(…) After trial, the district court granted a permanent injunction enjoining Carrier from using its RES database. However, it stayed the injunction until Carrier could implement a new, non-infringing database, meaning that Carrier was permitted to continue using the RES—subject to its payment of licensing fees—until then. The district court appointed a special master to oversee the process.

 

Trade Secret

(…) Here, ECIMOS voluntarily disclosed its assembled hardware to third parties, including Carrier, by selling it as a product. Indeed, ECIMOS claimed throughout trial that it had customers other than Carrier, and so it is safe to presume that other third parties also received the hardware. Put simply, ECIMOS’s hardware was a marketed product that was sold and freely shared, and it is not a trade secret.

 

 

 

(U.S. Court of Appeals for the Sixth Circuit, August 21, 2020, Ecimos, LLC v. Carrier Corp., Docket No. 19-5436/5519, Recommended for Publication)

 

Publikation der Sanktionsverfügung der CH-Wettbewerbskommission

Publikation der Sanktionsverfügung der CH-Wettbewerbskommission
Ziele der Veröffentlichung
Publikation vor der Rechtskraft der Sanktionsverfügung
Nikon-Urteil
Reputationsschaden
Veröffentlichung des Namens der Parteien
Schwärtzungsanträge: Pflicht, alle Anträge sofort zu stellen


3.2. Das Bundesgericht hat im Nikon-Urteil die die Ziele der durch die Veröffentlichung von Verfügungen der WEKO wie folgt zusammengefasst (BGE 142 II 268 E. 4.2.5 S. 273 f.) :

3.2.1. Erstens haben Entscheide im Rahmen des Kartellgesetzes einen Einfluss auf das Wirtschaften der Unternehmer; es ist deshalb naheliegend, dass die Verfügungen der Öffentlichkeit zur Kenntnis gebracht werden, damit diese ihr Verhalten an der Praxis der Wettbewerbsbehörden ausrichten können. Dies ist zum einen wegen der geringen Anzahl von höchstrichterlichen Entscheiden und angesichts der - aufgrund von zu beantwortenden komplexen Fragen - langen Verfahrensdauer und zum anderen wegen der Tatsache, dass nicht jede ursprünglich strittige Frage bis vor das Bundesgericht getragen wird, besonders angezeigt. Insofern dient die Veröffentlichung zunächst der Prävention und der Rechtssicherheit.

Das öffentliche Interesse wird auch nicht dadurch hinfällig, dass die Publikation vor der Rechtskraft der Sanktionsverfügung bzw. der Rechtskraft der Publikationsverfügung erfolgt. Wie das Bundesgericht im Nikon-Urteil feststellt (BGE 142 II 268 E.4.2.5.4 S. 274), hält der Gesetzgeber eine Publikation von (nicht rechtskräftigen) Entscheiden der WEKO als notwendig, um volkswirtschaftlich oder sozial schädliche Auswirkungen von Kartellen und anderen Wettbewerbsbeschränkungen zu verhindern und somit wirksamen Wettbewerb verwirklichen zu können und nimmt dabei in Kauf, dass publizierte Verfügungen der WEKO in einem späteren Verfahrensstadium auch aufgehoben oder korrigiert werden können.

4.2.4 (…) Schliesslich sei die Veröffentlichung zumutbar, da das öffentliche Interesse das private Interesse der Beschwerdeführerin an der Vermeidung eines allfälligen Reputationsschaden überwiege. Dem Privatinteresse werde ausreichend Rechnung getragen dadurch, dass für jedermann ersichtlich ist, dass die Sanktionsverfügung noch nicht in Rechtskraft erwachsen ist.

4.2.5 (…) Wenn auch eine gekürzte Fassung der Verfügung zur Erreichung der Zielsetzungen ausgereicht hätte, so kann der WEKO mangels eines solchen Antrags nicht vorgeworfen werden, dies nicht von Amtes wegen getan zu haben. Was die Veröffentlichung des Namens der Parteien anbelangt, ist Art. 28 KG zu berücksichtigen. Danach wird die Eröffnung der Untersuchung u.a. mit den Namen der Adressaten der Untersuchung publiziert. Diese Vorgabe hat verbindlichen Charakter (Art. 190 BV). Der Name ist insofern dem Publikum bekannt. Die Sanktionsverfügung liesse sich zudem wohl kaum mehr so anonymisieren, dass keine Rückschlüsse auf die Namen möglich ist. Des Weiteren gilt zu beachten, dass auch im Strafgerichtsverfahren Urteile grundsätzlich samt Namen verkündet werden; für eine Anonymisierung müssen besondere Voraussetzungen gegeben sein (vgl. Art. 149 Abs. 2 und 150 StPO).

4.2.6. Der Name ist also bereits früher - und zwar zu Recht - bekannt. Die gesetzlich vorgesehene Namensnennung ist dabei Folge einer vom Gesetzgeber vorgenommenen Abwägung zwischen dem Interesse der Beschwerdeführerin und anderer Wirtschaftsteilnehmer (vgl. BGE 142 II 268 nicht publizierte E. 8.4.1). Auch die Rüge der Unzumutbarkeit der Veröffentlichung der Publikationsverfügung vor Eintritt der Rechtskraft der Sanktionsverfügung geht fehl. Diese Rechtsfolge wurde vom Gesetzgeber ausdrücklich in Kauf genommen (vgl. BGE 142 II 268 nicht publizierte E. 8.4.1).

5.2. (…) Das Bundesgericht hat im Nikon-Urteil festgehalten, dass die Publikation der Sanktionsverfügung vor Rechtskraft die Unschuldsvermutung nicht verletze, da Art. 6 Abs. 2 EMRK den staatlichen Behörden nicht verbiete, die Öffentlichkeit über laufende strafrechtliche Untersuchungen und Verfahren zu informieren. (BGE 142 II 268, nicht publizierte E. 8.3 und 8.4.1). Diese Rechtsprechung ist auch im vorliegenden Fall zu berücksichtigen (…).

6.2. (…) Soweit sie die Verletzung von verfassungsmässigen Rechten rügt, kann darauf mangels ausreichender Substantiierung nicht eingegangen werden. Das Argument, sie habe ihre Rechtslage nicht durch die Stellung von Schwärzungsanträgen schwächen wollen, ist nicht nachvollziehbar. Es wäre vielmehr ihre prozessökonomische Pflicht gewesen, alle Anträge sofort zu stellen. Indem sie auch auf die zweite Aufforderung der WEKO, Schwärzungsanträge zu stellen, nicht eingegangen ist, durfte die Vorinstanz annehmen, sie habe auf weitere rechtserhebliche Vorbringen verzichten wollen.


Urteil 2C_994/2017 des Bundesgerichts, II. öffentlichrechtliche Abteilung, vom 26. Juni 2019 in Sachen Bringen AG, Beschwerdeführerin, vertreten durch [...] gegen Wettbewerbskommission – Gegenstand: Publikation der Sanktionsverfügung vom 29. Juni 2015, Beschwerde gegen das Urteil des Bundesverwaltungsgerichts, Abteilung II, vom 24. Oktober 2017 (B-149/2017), in RPW 2019/4, 1346-1350

U.S. Court of Appeals for the Second Circuit, Universal Instruments Corp. v. Micro Sys. Engʹg, Inc., Docket No. 17‐2748‐cv

Sale of Equipment and Software for an Automated Assembly System
Contract Drafting
Breach of Contract
Preemption by the Copyright Act
Copyright Infringement
License Rights
Misappropriation
Unfair Competition
Trade Secret
Tolling
Tort: Continuing Tort Theory
Equitable Relief
Computer Source Code
Software
17 U.S.C. § 117(a)
Choice of Law


Appeal from a judgment entered in the United States District Court for the Northern District of New York (Sharpe, J.), dismissing plaintiffʹs claims for breach of contract, copyright infringement, misappropriation, and unfair competition arising from its sale of equipment and software for an automated assembly system. On appeal, plaintiff contends that the district court erred in granting defendantsʹ motion for judgment as a matter of law.
Affirmed.

Corporation (ʺUniversalʺ) developed and sold an automated assembly system to defendant‐counter‐plaintiff‐appellee Micro Systems Engineering, Inc. (ʺMSEIʺ) in 2007 pursuant to a purchase agreement. MSEI developed a multi‐phase plan to build a system to automate the handling of medical devices during its quality testing process, and Universal won the bid to provide the equipment for the first phase. MSEI awarded the second and third phases of the project not to Universal, but to Universalʹs competitor, defendant‐counter‐plaintiff‐appellee Missouri Tooling & Automation, Inc. (ʺMTAʺ). In implementing phases two and three, MSEI and MTA used intellectual property, including computer source code, that Universal had provided for phase one.
(…) Test Handling System (the ʺTHSʺ)

Universal brought this action below alleging, inter alia, that MSEI and MTA had infringed Universalʹs copyright in its source code, breached the terms of the purchase agreement, and misappropriated Universalʹs trade secrets. Certain claims were dismissed on defendantsʹ motion for judgment on the pleadings, and, after discovery, the parties proceeded to a jury trial on the remaining claims. At the close of the evidence, however, the district court granted defendantsʹ motion for judgment as a matter of law. Universal appeals.

Beginning in 2006, MSEI obtained bids from suppliers for phase one. One of the bidders was Universal, a developer of automated assembly platforms. MSEI awarded phase one to Universal, and the parties memorialized their agreement in an Equipment Purchase Agreement (the ʺEPAʺ), executed in June 2007.

The THS ultimately developed by Universal had two software components: the station software and the server software. The station software was embedded on each individual Polaris station and ʺmanaged the operation of conveyors, elevators, stacks and robotic arms.ʺ J. Appʹx at 2606. This software was stored on each stationʹs programmable logic controller and could be downloaded on site by physically connecting a computer to the station and downloading the source code. Id. at 1299‐1300, 1480‐81, 1532‐34. The server software, on the other hand, was the ʺbrains of the operation,ʺ id. at 988, which ʺsynchronized the activities of the hardware and softwareʺ and was ʺresponsible for coordinating the movement of the module trays,ʺ id. at 2606.
The source code for the server could not be downloaded in the same way as the station software, and under the EPA, Universal was under no obligation to provide the server source code to MSEI. Id. at 2344 (providing that ʺsource code will not be providedʺ). The parties agreed, however, in their Final Customer Acceptance letter (the ʺFCAʺ) that Universal would provide MSEI with a copy of the server source code at the time of delivery. The THS was delivered in October 2008.

In 2009, MSEI solicited bids for the next phase (ʺTHS2ʺ). The bid documents for THS2 indicated that MSEI had the responsibility to provide the software for the station and server source code to be used in the project. In April 2010, MSEI awarded the project to MTA, a competitor of Universal, which submitted a lower bid for the project. On April 8, 2010, MSEI and MTA entered into an agreement (the ʺMTA Agreementʺ). On April 16, Universal and MTA were notified by email that MSEI had ʺawarded the business to MTA for the THS line two project.ʺ J. Appʹx at 2878. MTA subsequently sought to purchase Polaris stations from Universal for use in THS2, but on August 4, 2010, Universal declined to sell them to MTA. Thereafter, MSEI downloaded the source code from the individual Polaris stations and the server source code that Universal gave to MSEI on delivery of phase one; it then gave the code to MTA to use in the production of THS2. MSEI and MTA subsequently modified the server source code to meet the requirements of THS2.

The EPA contains several provisions relating to the partiesʹ intellectual property rights. Section 8 is entitled ʺIntellectual Property.ʺ Section 8.2(d) provides that
if [Universal] uses any Pre‐Existing Intellectual Property in connection with this Agreement, [Universal] hereby grants MSEI, MSEIʹs subcontractors, or suppliers, a non‐exclusive, royalty‐free, worldwide, perpetual license, to use, reproduce, display, of the Pre‐Existing Intellectual Property for MSEIʹs internal use only. J. Appʹx at 2336. ʺPre‐Existing Intellectual Propertyʺ is defined as ʺany trade secret, invention, work of authorship, mask work or protectable design that has already been conceived or developed by anyone other than MSEI before [Universal] renders any services under the Agreement.ʺ Id.
Exhibit E to the EPA, entitled ʺEquipment Acceptance Form,ʺ contained a blank form for the parties to fill in upon final delivery and acceptance.

On October 31, 2008, Universal and MSEI signed a negotiated ʺFinal Customer Acceptanceʺ letter, which stated, among other things, that Universal agrees to provide the THS server code as is with the understanding that MSEI assumes the risk of invalidating the warranty in the event a change made by MSEI to the source code causes damage to any of the THS line hardware. J. Appʹx at 2361.

It is undisputed that in completing phases two and three, MSEI and MTA used source code that Universal had provided for phase one. The principal issue presented is whether the EPA permitted them to do so. We hold that defendantsʹ conduct did not breach § 8.2(d) of the EPA and was non‐infringing because that provision permitted defendants to reproduce and use the station and server source code; defendantsʹ adaptation of the server source code was non‐infringing because it was authorized by 17 U.S.C. § 117(a); Universalʹs contract claim that defendantsʹ modification of the server source code breached the EPA is preempted by the Copyright Act; Universalʹs claim of misappropriation of trade secrets is time‐barred; and MTA did not unfairly compete with Universal because its conduct was not in bad faith. Accordingly, we affirm.

Copyright Infringement
Universalʹs copyright infringement claim turns on whether defendantsʹ conduct fell within the scope of the non‐exclusive license provided in the EPA. This is so because a valid license ʺimmunizes the licensee from a charge of copyright infringement, provided that the licensee uses the copyright as agreed with the licensor.ʺ Davis v. Blige, 505 F.3d 90, 100 (2d Cir. 2007). Where a claim turns on the scope of a license, ʺthe copyright owner bears the burden of proving that the defendantʹs [use] was unauthorized.ʺ Tasini v. N.Y. Times Co., 206 F.3d 161, 171 (2d Cir. 2000) (quoting Bourne v. Walt Disney Co., 68 F.3d 621, 631 (2d Cir. 1995)). Whether the partiesʹ license agreement encompasses the defendantsʹ activities is ʺessentiallyʺ a question of contract interpretation. See Bourne, 68 F.3d at 631. ʺA written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.ʺ Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (2002) (citing R/S Assocs. v. N.Y. Job Dev. Auth., 98 N.Y.2d 29, 32 (2002)). Where, however, ʺthe language used is susceptible to differing interpretations, each of which may be said to be as reasonable as another, then the interpretation of the contract becomes a question of fact for the jury and extrinsic evidence of the partiesʹ intent properly is admissible.ʺ Bourne, 68 F.3d at 629. The existence of an ambiguity, if any, is to ʺbe ascertained from the face of an agreement without regard to extrinsic evidence.ʺ Reiss v. Fin. Perf. Corp., 97 N.Y.2d 195, 199 (2001); see also Duane Reade Inc. v. St. Paul Fire & Marine Ins. Co., 411 F.3d 384, 390 (2d Cir. 2005).

We hold, for the reasons discussed below, that the EPA unambiguously permitted MSEI and MTA to reproduce and use Universalʹs pre‐existing intellectual property in subsequent phases of the THS. Defendantsʹ conduct was, therefore, not infringing. We further conclude that MSEI and MTAʹs adaptation of the server source code for use in additional testing stations was authorized by 17 U.S.C. § 117(a) and thus non-infringing.

(…) There is no evidence that the source code was used by MSEI and MTA for anything other than developing and implementing phases two and three of MSEIʹs internal test handling system.

(…) This understanding is reinforced by our recent holding that ʺunder long‐established principles of agency law, a licensee under a non‐exclusive copyright license may use third‐party assistance in exercising its license rights unless the license expressly provides otherwise.ʺ Great Minds v. Fedex Office & Print Servs., Inc., 886 F.3d 91, 94 (2d Cir. 2018). Here, the license expressly provided that the rights extended to MSEIʹs suppliers, which surely included MTA. Hence, MSEI and MTAʹs reproduction of the source code for MSEIʹs internal use did not, as a matter of law, exceed the scope of the license.

Choice-of-Law
The EPA does not contain a choice‐of‐law provision, but the parties agree that New York law applies. See Federal Ins. Co. v. Am. Home Assur. Co., 639 F.3d 557, 566 (2d Cir. 2011) (noting that where, during the course of litigation, ʺthe parties agree that New York law controls, this is sufficient to establish choice of lawʺ).

Modification of the Source Code was Authorized by 17 U.S.C. § 117(a)
It is axiomatic that ʺan unlicensed use of the copyright is not an infringement unless it conflicts with one of the specific exclusive rights conferred by the copyright statute.ʺ Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 447 (1984). The Copyright Act grants copyright holders a bundle of exclusive rights, including the rights to ʺreproduce . . . in copies,ʺ ʺprepare derivative works,ʺ ʺdistribute copies,ʺ ʺperform,ʺ and ʺdisplayʺ their works. 17 U.S.C. § 106. Source code, the human‐readable literal elements of software, is copyrightable. See Oracle Am., Inc. v. Google Inc., 750 F.3d 1339, 1355‐56 (Fed. Cir. 2014). It is also well established that copyright owners may grant others license to use their rights. John Wiley & Sons, Inc. v. DRK Photo, 882 F.3d 394, 410 (2d Cir. 2018). But because copyright licenses prohibit any use not authorized, a licensee infringes the ownerʹs copyright if its use exceeds the scope of its license. Gilliam v. Am. Broad. Cos., 538 F.2d 14, 20 (2d Cir. 1976) (noting that ʺone who obtains permission to use a copyrightedʺ work ʺmay not exceed the specific purpose for which permission was grantedʺ and concluding that ʺunauthorized editing of the underlying work, if proven, would constitute an infringement of the copyright in that work similar to any other use of a work that exceeded the license granted by the proprietor of the copyrightʺ); see also S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1088 (9th Cir. 1989). Thus, § 8.2(d) of the EPA arguably prohibits, at least impliedly, MSEI and its suppliers from modifying Universalʹs pre‐existing intellectual property.

The Copyright Act, however, provides an affirmative defense that allows the owner of a copy of a computer program to copy or modify the program for limited purposes without incurring liability for infringement. See 17 U.S.C. § 117(a). Section 117(a) provides, in relevant part:
Notwithstanding the provisions of section 106 [which lists the exclusive rights of a copyright holder], it is not an infringement for the owner of a copy of a computer program to make or authorize the making of another copy or adaptation of that computer program provided:

(1)that such a new copy or adaptation is created as an essential step in the utilization of the computer program in conjunction with a machine and that it is used in no other manner . . . .

Thus, a defendant seeking protection under § 117(a) must demonstrate that the new adaptation (1) was made by the ʺowner of a copy of the computer program,ʺ (2) was ʺcreated as an essential step in the utilization of the computer program in conjunction with a machine,ʺ and (3) was ʺused in no other manner.ʺ 17 U.S.C. § 117(a); see Krause v. Titleserv, Inc., 402 F.3d 119, 122 (2d Cir. 2005).

MSEI Is the ʺowner of a copy of a computer programʺ
We have held that ʺownerʺ as used in § 117(a) does not require formal title in a program copy. Titleserv, 402 F.3d at 123. Instead, ʺcourts should inquire into whether the party exercised sufficient incidents of ownership over a copy of the program to be sensibly considered the owner of the copy for purposes of § 117(a).ʺ Id. at 124.
In Titleserv, we found the following facts sufficient to consider defendant an owner under § 117(a): defendant paid plaintiff ʺsubstantial consideration to develop the programs for its sole benefitʺ; plaintiff ʺcustomized the software to serve defendantʹs operationsʺ; plaintiff stored copies ʺon a server owned by [defendant]ʺ; plaintiff ʺnever reserved the right to repossess the copies used by [defendant] and agreed that [defendant] had the right to continue to possess and use the programs forever, regardless whether its relationship with [defendant] terminatedʺ; and ʺ[defendant] was similarly free to discard or destroy the copies any time it wished.ʺ Id.

(…) We further held that the ʺaddition of new features,ʺ which ʺwere not strictly necessary to keep the programs functioning, but were designed to improve their functionality in serving the business for which they were created,ʺ were also ʺessential.ʺ Id.; see also Final Report of the National Commission on New Technological Uses of Copyrighted Works 13 (1978) [hereinafter ʺCONTU Reportʺ] (ʺA right to make those changes necessary to enable the use for which it was both sold and purchased should be provided. The conversion of a program from one higher‐level language to another to facilitate use would fall within this right, as would the right to add features to the program that were not present at the time of rightful acquisition.ʺ). In doing so, however, we noted an important limitation: an ʺessentialʺ improvement ought not to ʺharm the interests of the copyright proprietor.ʺ Id. at 129 (citing CONTU Report at 13).

(…) MSEIʹs use did not inhibit Universalʹs ability to market or sell its server software to others, nor did it divulge sensitive Universal information or enrich MSEI or MTA at the expense of Universal. MSEI made and authorized the making of minor modifications, narrowly tailored to adapting the server software for the use for which it was designed ‐‐ orchestration of the test handing stations to ensure the quality of MSEIʹs implantable medical devices.

The Adaptation was ʺused in no other mannerʺ
Finally, to warrant the protection of § 117(a), MSEI must show that the server software was ʺused in no other manner,ʺ that is, it was used only to make an adaptation as an essential step in utilizing the software in conjunction with the test handling system. Universal argues that MSEIʹs modification of the server software to operate with new machines, rather than the existing machines created by Universal, defeats MSEIʹs claim to protection from § 117(a).

ʺWhether a questioned use is a use in another manner . . . depends on the type of use envisioned in the creation of the program.ʺ Titleserv, 402 F.3d at 129. The server software was designed to be the ʺbrains of the operation,ʺ J. Appʹx at 988, which ʺsynchronized the activities of the hardware and softwareʺ and was ʺresponsible for coordinating the movement of the module trays,ʺ id. at 29 2606. These are precisely the purposes for which MSEI and MTA made modifications, as indicated in the Statement of Work. See id. at 2366 (ʺUpdate THS Server software to add functionality for the new stations.ʺ); see also id. at 2367 (ʺScope of the project . . . is first to replicate the existing system . . . , and then expand this configuration to add the capability to add three . . . electrical testers . . . , one RF testing stations and one Shaker test station.ʺ). There is nothing in the record to suggest that the server source code was used for any purpose other than to adapt the system to handle new testing stations for MSEIʹs internal use. See Titleserv, 402 F.3d at 130 (ʺWhat is important is that the transaction for which the programs are used is the type of transaction for which the programs were developed.ʺ). Thus, MSEI ʺsimply increased the versatility of the programs by allowing themʺ to interoperate with new test handling stations, which ʺconstitutes use in the same manner, with the benefit of an adaptation increasing versatility.ʺ Id.

Breach of Contract & Preemption by the Copyright Act
MSEI and MTAʹs use and reproduction of Universalʹs pre‐existing intellectual property for use in subsequent phases of the THS was non‐infringing because defendants were expressly licensed to do so under § 8.2(d) of the EPA. See supra Part I.B.1. It necessarily follows that MSEIʹs use and reproduction of the source code was not in breach of the EPA. See Davis, 505 F.3d at 100; Bourne, 68 F.3d at 631. Universalʹs breach of contract claim is thus reduced to its assertion that MSEI breached the EPA by modifying the server source code. We do not reach the merits of this question, however, because what remains of Universalʹs breach of contract claim is preempted by the Copyright Act.

The Copyright Act exclusively governs a claim when (1) the particular work to which the claim is being applied falls within the type of works protected by the Copyright Act under 17 U.S.C. §§ 102 and 103, and (2) the claim seeks to vindicate legal or equitable rights that are equivalent to one of the bundle of exclusive rights already protected by copyright law under 17 U.S.C. § 106. Briarpatch L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 305 (2d Cir. 2004). ʺA state law right is equivalent to one of the exclusive rights of copyright if it may be abridged by an act which, in and of itself, would infringe one of the exclusive rights.ʺ Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424, 430 (2d Cir. 2012). ʺʹBut if an extra element is required instead of or in addition to the acts of reproduction, performance, distribution or display, in order to constitute a state‐created cause of action,ʹ there is no preemption.ʺ Id. (quoting Comput. Assocs. Intʹl, Inc. v. Altai, Inc., 982 F.2d 693, 716 (2d Cir. 1992)). Preemption, therefore, turns on ʺwhat the plaintiff seeks to protect, the theories in which the matter is thought to be protected and the rights sought to be enforced.ʺ Comput. Assocs., 982 F.2d at 716.

As we have recognized, ʺpreemption cannot be avoided simply by labeling a claim ʹbreach of contract.ʹʺ Forest Park, 683 F.3d at 432; see also 5 Nimmer on Copyright § 19D.03[C][2][b] (suggesting that a contract that ʺdoes not purport to give [the plaintiff] any protection beyond that provided . . . by copyright law itselfʺ would be preempted). In Forest Park, we held the contract at issue not to be preempted because it included an ʺextra elementʺ of a promise to pay, and plaintiff sought contract damages when defendant used plaintiffʹs copyrighted work without paying for the privilege. Forest Park, 683 F.3d at 428. Here, by contrast, there is no dispute over payment. Universal does not argue that defendants violated the EPA by failing to pay for use of the intellectual property.

Misappropriation of Trade Secrets
A plaintiff claiming misappropriation of a trade secret must prove that (1) ʺit possessed a trade secret,ʺ and (2) the trade secret was used by defendant ʺin breach of an agreement, confidence, or duty, or as a result of discovery by improper means.ʺ Integrated Cash Mgmt. Servs., Inc. v. Digital Transactions, Inc., 920 F.2d 171, 173 (2d Cir. 1990). We do not reach the merits of this claim, however, because it is time‐barred by the applicable statute of limitations.

In New York, a cause of action for the misappropriation of trade secrets is governed by a three‐year statute of limitations, while claims for equitable relief are subject to a six‐year statute of limitations. Compare N.Y. C.P.L.R. § 214(4) (providing three‐year‐statute of limitations for claims of misappropriation of trade secrets), with id. § 213(1) (providing six‐year statute of limitations for claims seeking equitable relief). Universal argues that its claim for injunctive relief is governed by the more generous six‐year limitations period.

ʺCourts determine the applicable limitations period . . . by analyzing the substantive remedy that the plaintiff seeks.ʺ ABS Entmʹt, Inc. v. CBS Corp., 163 F. Supp. 3d 103, 108 (S.D.N.Y. 2016) (applying New York law). ʺWhere the remedy sought is purely monetary in nature, courts construe the suit as alleging ʹinjury to propertyʹ within the meaning of CPLR 214(4), which has a three‐year limitations period.ʺ IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 139 (2009). In IDT, the equitable relief was incidental to the damages sought, so ʺlooking to the reality, rather than the form, of the action,ʺ the New York State Court of Appeals concluded that IDT principally sought a monetary remedy and, thus, held that the three‐year statute of limitations applied. Id. at 139‐40. Similarly, in this case, the main remedy that Universal seeks is monetary damages. Universalʹs Third Amended Complaint requested that it be awarded profits and a royalty, not just an injunction, in connection with its misappropriation of trade secrets claim, as well as double damages, punitive damages, and attorneysʹ fees. Therefore, because the reality of the cause of action is that it is one for damages, not injunctive relief, the three‐year statute of limitations applies.

Universal argues that this statute of limitations should be tolled or extended on a continuing tort theory. ʺA continuing tort theory may apply . . . where the plaintiff alleges that a defendant has kept a secret confidential but continued to use it for commercial advantage.ʺ Andrew Greenberg, Inc. v. Svane, Inc., 830 N.Y.S.2d 358, 362 (App. Div. 2007). ʺWhere, however, the ʹplaintiff had knowledge of the defendantʹs misappropriation and use of its trade secret, the continuing tort doctrine does not apply.ʹʺ PaySys Intʹl, Inc. v. Atos Se, No. 14‐ 10105, 2016 WL 7116132, at * 9 (S.D.N.Y. Dec. 5, 2016) (quoting VoiceOne Commcʹns, LLC v. Google Inc., No. 12‐9433, 2014 WL 10936546, at *10 (S.D.N.Y. Mar. 31, 2014)) (citing cases). Here, Universal had knowledge of MSEI and MTAʹs alleged misappropriation and use of its trade secret and, accordingly, the continuing tort theory does not apply.

Unfair Competition
Universalʹs remaining claim against MTA for unfair competition was also properly dismissed. ʺThe essence of an unfair competition claim under New York law is that the defendant has misappropriated the labors and expenditures of anotherʺ with ʺsome element of bad faith.ʺ Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037, 1044 (2d Cir. 1980). MTA was informed prior to executing the MTA Agreement that MSEI and its suppliers were licensed to use and reproduce Universalʹs source code. Moreover, Bob Archer, MTAʹs CEO and co‐owner, testified at trial that MTA relied on the language of the EPA in agreeing to supply MSEI with subsequent phases of the THS.

As we have held, the EPA in fact authorized MTA as MSEIʹs supplier to use and reproduce Universalʹs pre‐existing intellectual property for the THS replication project. See supra Part I.B.1. And to the extent MTA adapted the server source code, such adaptions were authorized under federal law.


(U.S. Court of Appeals for the Second Circuit, May 8, 2019, Universal Instruments Corp. v. Micro Sys. Engʹg, Inc., Docket No. 17‐2748‐cv)