Cases from Wiener

United States Court of Appeals for the Fifth Circuit
Fifth Circuit Affirms Preliminary Injunction for Misappropriation of Dietary Supplement Research Compilation

On an interlocutory appeal from the Southern District of Texas, the Fifth Circuit affirmed that court's grant of preliminary injunction against the former sales partner of a dietary supplements manufacturer.

Plaintiff Daniels Health Sciences ("DHS") had "compiled a distilled version of the science and research behind [its seaweed-based supplement] Provasca into a PowerPoint presentation titled 'The Path to Provasca.'" It shared this information with its marketing partner, Vascular Health Sciences ("VHS"). Despite the fact that DHS and VHS were led by brothers, this marketing relationship soured, and VHS allegedly relied on DHS's compiled research to develop and market a competing product.

The Fifth Circuit held that the grant of preliminary injunction was proper on DHS's breach of confidentiality agreement and trade secret misappropriation claims. The court rejected the defendant's argument that no evidence of confidential information, or of the existence of a trade secret, had been presented. The court called these distinct arguments "largely repetitive," but analyzed them under the parties' contractual definition, and Texas trade secret law (which adopts the Restatement) respectively.

United States Court of Appeals for the Fifth Circuit
The Fifth Circuit holds that Trade Secrets Fixed Within Software Fall within Copyrightable Subject Matter

On June 30, 2015, the Fifth Circuit affirmed the lower court's decision which found Spear Marketing's (SMI) Texas Theft Liability Act and trade secret misappropriation claims precluded by the Copyright Act.

Spear Mktg., Inc. v. Bancorpsouth Bank involved a dispute over cash management software. SMI, producer of the software VaultWorks, alleged that its competitor, Argo, had stolen both technical and business trade secrets related to VaultWorks. On April 1, 2010, SMI had approached Argo to measure Argo's interest in acquiring SMI. In the pursuit of this deal, SMI provided a demonstration of its software and sent Argo screenshots of its software interface. The instant controversy arose when Argo launched its own cash management software at the end of 2011 and SMI's client, BancorpSouth Bank (BCS), had informed SMI that it had no intention of renewing its licensing contract with SMI.

An issue of first impression for the Fifth Circuit, the court confronted the intersection of trade secrets and the preemption purview of federal copyright law. Because processes and methods are excluded from copyright protection per section (102)(b) of the Copyright Act, SMI argued that their trade secrets fell outside the scope of the Act. Thus, the court was presented with whether processes and systems that had been fixed in a tangible medium of expression may be copyrightable subject matter for purposes of preemption, even though such matter may not be copyrightable matter generally.

The court addressed the issue by noting the current circuit split and followed the majority of its sister circuits,* holding that ideas fixed within tangible matter falls within the scope of copyright subject matter for preemption purposes, even if some of the underlying matter is not copyrightable. The court first stated that the Copyright Act protects computer software as a tangible medium. Then the court noted that the ideas that were allegedly stolen were fixed within the provided screenshots and the overall computer software. Therefore, SMI's trade secrets were fixed within the software, falling under the scope of the Copyright Act's preemption provision.



*The Second, Fourth, Sixth, Seventh and Ninth Circuits recognize that the Copyright Act's preemption provision, ยง 301(a), covers ideas fixed in tangible media. See Forest Park Pictures v. Universal Television Network, Inc., 683 F.3d 424 (2d Cir. 2012); U.S. ex rel. Berge v. Bd. of Trustees of the Univ. of Ala., 104 F.3d 1453 (4th Cir. 1997); Stromback v. New Line Cinema, 384 F.3d 283 (6th Cir. 2004); ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996); Montz v. Pilgrim Films & Television, Inc., 649 F.3d 975 (9th Cir. 2011) (en banc). The Eleventh Circuit disagrees, finding that ideas are categorically excluded from copyright protection, even if the matter is fixed in a tangible medium. See Dunlap v. G&L Holding Grp., Inc., 381 F.3d 1285 (11th Cir. 2004).