United States Court of Appeals
For the First Circuit
Nos. 08-1543; 08-1585
SITUATION MANAGEMENT SYSTEMS, INC.,
Plaintiff, Appellant/Cross-Appellee,
v.
ASP. CONSULTING LLC,
Defendant, Appellee/Cross-Appellant,
ASP. CONSULTING GROUP,
Defendant.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Lynch, Chief Judge,
Torruella and Boudin, Circuit Judges.
William F. Dolan with whom Jones Day, Ryan C. Siden, and Siden
& Associates, P.C. were on brief for appellant/cross-appellee.
Evan Fray-Witzer and Law Office of Evan Fray-Witzer on brief
for the Association of Learning Providers and Blanchard Training
and Development, Inc., amici curiae.
James J. Foster with whom Wolf, Greenfield & Sacks, P.C. was
on brief for appellee/cross-appellant.
March 19, 2009
LYNCH, Chief Judge. The plaintiff consulting company, as
part of its services to domestic and international clients, uses
copyrighted training materials of several hundred pages geared
toward teaching techniques for effective communication and
negotiation within the workplace. It sued a competitor saying that
the competitor had copied and used training materials substantially
similar to plaintiff's in violation of the copyright laws.
This case concerns the proper application of two
definitional criteria for what subject matter is eligible for
copyright protection. The first is the originality requirement,
see 17 U.S.C. § 102(a) ("Copyright protection subsists . . . in
original works of authorship . . . ."), which is a constitutional
prerequisite for copyright protection. See Feist Publ'ns, Inc. v.
Rural Tel. Serv. Co., 499 U.S. 340, 351 (1991). The second is the
statutory codification of the exclusion from copyright protection
for processes and systems. See 17 U.S.C. § 102(b) ("In no case
does copyright protection for an original work of authorship extend
to any idea, procedure, process, system, method of operation,
concept, principle, or discovery, regardless of the form in which
it is described, explained, illustrated, or embodied in such
work."). Indeed, the statutory restriction in § 102(b) is a
codification of "[t]he most fundamental axiom of copyright law
. . . that '[n]o author may copyright his ideas or the facts he
narrates.'" Feist, 499 U.S. at 344-45 (second alteration in
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original) (quoting Harper & Row Publishers, Inc. v. Nation Enters.,
471 U.S. 539, 556 (1985)).
Here, the district court considered the plaintiff's works
"largely noncopyrightable because they are devoted to describing a
process or because they are not original." Situation Mgmt. Sys. v.
ASP Consulting Group, 535 F. Supp. 2d 231, 240 (D. Mass. 2008). To
reach this conclusion, the district court treated the originality
requirement as functionally equivalent to a novelty standard.
E.g., id. at 243 (finding that the plaintiff's work "does not
constitute original expression because it is merely a summary of
common-sense communication skills"). It read the statutory
exclusion of processes and systems from copyright protection as
barring protection for descriptions of processes and systems.
E.g., id. at 240 (finding the plaintiff's works largely unprotected
by copyright because "they focus on concepts and teach a
noncopyrightable process"). The court also found the plaintiff's
works noncopyrightable based upon its own subjective assessment of
the works' creative worth. E.g., id. at 239 (describing SMS's
works as "fodder for sardonic workplace humor" and as "aggressively
vapid").
A brief from amici, an industry association along with
another company that produces corporate training materials, argues
that the district court's conclusions have implications far beyond
the dispute between the parties to this case and put at risk the
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legitimate copyright expectations of the more than $100 billion
management training industry. Indeed, amici argue that under the
district court's approach, those in the training industry would
have difficulty obtaining effective copyright protection for their
works. We vacate the district court's finding of noninfringement
and remand for further proceedings consistent with this opinion.
I.
For more than thirty years, plaintiff Situation
Management Systems, Inc. ("SMS") has provided consulting services
aimed at improving employee communication and negotiation skills
within the workplace. As part of its services, SMS has developed
a series of training materials focused on teaching effective
communication and negotiation techniques. Companies buy these
materials from SMS and use them in employee training workshops.
SMS typically charges its clients $200 to $250 per participant for
the use of its materials. SMS's clients include Anheuser-Busch,
General Mills, NASA, Pfizer, Procter & Gamble, Verizon, and
companies abroad.
A number of SMS employees, including Dane Harwood and
Alexander Moore, left SMS after Sharon Malouf acquired the company
through bankruptcy proceedings in 2001. Following the end of
Harwood's noncompete period, Harwood and Moore, along with an
executive from a former European sublicensee of SMS, Alon Shklarek,
founded defendant ASP. Consulting LLC ("ASP") in 2003. ASP offers
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training programs similar to SMS's, and the two compete for the
same customers. ASP also has a series of training materials that
focus on the same subject matter and teach similar communication
and negotiation strategies as SMS's.
SMS claims ASP infringed its copyright in three of SMS's
training workbooks: Positive Power & Influence ("PPI"), Positive
Negotiation Program ("PNP"), and Promoting and Implementing
Innovation ("PII"). PPI was first published in 1976 and is
currently in its fourth edition. PPI is SMS's most widely
circulated work and generates approximately seventy-five percent of
SMS's revenues. More than a quarter million people have taken the
PPI course. PNP, now in its third edition, was first published in
1978 and accounts for approximately fifteen percent of SMS's
revenues. PII was first published in 1993 and is a much smaller
part of SMS's business than the other two works at issue. SMS's
works contain hundreds of pages of text, flowcharts, and
illustrations teaching techniques for communication and negotiation
within the workplace.
This suit claims infringement by three of defendant ASP's
workbooks: Communicating 2 Influence ("C2I"), Negotiating
Successful Agreements ("NSA"), and Championing Ideas ("CI"). SMS
claims that ASP's C2I infringes its copyright to PPI, that NSA
infringes PNP, and that CI infringes PII. ASP's works address the
same topics as SMS's. Considering the circumstances under which
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ASP developed its materials, the district court found that this
similarity was no coincidence. Situation Mgmt., 535 F. Supp. 2d at
235. In particular, Harwood, Moore, and Shklarek each had access
to SMS's works prior to forming ASP; Harwood even kept copies of
SMS's works in the attic of his home after he left SMS. And
Harwood and Moore were intimately familiar with SMS's works, having
authored several editions of PPI, PNP, and PII while working at
SMS. Moreover, Harwood and Moore together authored each of the
allegedly infringing works relatively quickly after forming ASP.
For example, they prepared a version of C2I over a period of six to
thirty-four days.
On September 24, 2003, one of SMS's European licensees
contacted Malouf to tell her that ASP's new C2I program was the
same as SMS's PPI. Malouf then visited ASP's website and read a
brief description of C2I, which she found strikingly similar to the
PPI program. Malouf contacted ASP and asked to see ASP's written
materials so that she could assess whether SMS had a claim against
ASP for copyright infringement. SMS and ASP were unable to reach
an agreement regarding the conditions under which Malouf could
inspect ASP's works, and Malouf did not view ASP's works before
filing suit.
On December 28, 2005, based upon the tip from the
European licensee and the information on ASP's website, Malouf
believed that SMS had a viable claim of copyright infringement and
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sued ASP in federal district court in New Hampshire, where SMS has
its principal place of business. That suit was ultimately
dismissed on August 15, 2006 for lack of personal jurisdiction over
ASP.
SMS then sued ASP in the District of Massachusetts on
September 1, 2006. The district court denied the parties cross-
motions for summary judgment, and the parties agreed to treat the
matter as a case stated. The district court held a hearing on
ASP's liability for copyright infringement on November 7, 2007. At
the hearing, SMS stated that it would seek statutory damages, not
its actual damages. SMS had sued ASP before it had incurred any
substantial actual damages as a result of ASP's alleged
infringement. In its post-hearing briefing, SMS explained that it
was seeking statutory damages of $75,000 for each infringing work,
instead of actual damages, because ASP's "sales were apparently
limited (to just a few customers) but [its] conduct was
deliberate."
The district court found that ASP had copied SMS's works.
It recognized that "[i]t is undisputed that Harwood and Moore had
intimate familiarity with SMS's programs because they helped write
them" and that "Harwood, Moore, and at least one other ASP employee
had access to SMS's works during the period when they generated the
accused works." Situation Mgmt., 535 F. Supp. 2d at 235. This
level of access to and familiarity with SMS's works, coupled with
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"[t]he fact that ASP's works address the same topics as SMS's" and
the speed with which ASP produced its own works, indicated "that
the creators of ASP's programs used SMS's materials in creating
their own." Id.
The district court, however, determined that ASP's
copying was not actionable because ASP's works were not
substantially similar to the copyright protected aspects of SMS's
works. It found that "the works at issue are so dominated by
nonprotectable material that it is impossible to reduce the work to
a copyrightable essence or structure." Id. at 240. Accordingly,
it held that the copyright protection for SMS's works "is limited
to little more than [their] original text and formatting." Id. at
241.
Having narrowly defined the scope of SMS's copyright
protection and excluded from consideration a great deal of SMS's
materials, the district court then evaluated the similarities
between the limited universe of SMS's and ASP's works it thought
was subject to copyright protection. The district court recognized
a "few minor incidents of verbatim repetition" between C2I and PPI.
Id. at 244. But after excising from consideration "much of the
substance" of PPI as "simply not copyrightable," id. at 242, it
found that C2I and PPI "as a whole are not substantially similar,"
id. at 244. Likewise, it held that CI "successfully avoided
infringement" of PII because "[t]here is no verbatim replication of
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words or phrases, and the graphical depictions are quite distinct."
Id. at 246. Finally, it found "no structural similarity" between
NSA and PNP, dismissing instances of verbatim copying as "few and
far between" and "of minimal importance." Id. at 248. Finding no
substantial similarity between the aspects of SMS's and ASP's works
that it considered protectable, the district court entered a
judgment of noninfringement. Id. at 249.
SMS timely appealed. The Association of Learning
Providers, an industry association serving training companies, and
Blanchard Training and Development, Inc., who like SMS and ASP
sells corporate training materials, filed a brief as amici curiae
in support of reversal.
The district court denied ASP's request for attorneys'
fees as the prevailing party in a copyright suit under 17 U.S.C.
§ 505. ASP cross-appeals that decision, arguing that SMS brought
this "expensive, unmeritorious litigation" to drive ASP out of
business. The cost of defending this suit, ASP represents, has
rendered it insolvent.
II.
"In a case stated, the parties waive trial and present
the case to the court on the undisputed facts in the pre-trial
record. The court is then entitled to 'engage in a certain amount
of factfinding, including the drawing of inferences.'" TLT Constr.
Corp. v. RI, Inc., 484 F.3d 130, 135 n.6 (1st Cir. 2007) (quoting
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United Paperworkers Int'l Union, Local 14 v. Int'l Paper Co., 64
F.3d 28, 31 (1st Cir. 1995)). We review the district court's
factual findings for clear error and its legal conclusions de novo.
Bunch v. W.R. Grace & Co., 555 F.3d 1, 3 n.4 (1st Cir. 2009). Of
course, a district court's use of incorrect relevant legal
standards will lead to reversal unless that use had no prejudicial
effects.
To establish copyright infringement, the plaintiff must
prove two elements: "(1) ownership of a valid copyright, and (2)
copying of constituent elements of the work that are original."
Feist, 499 U.S. at 361; accord Mag Jewelry Co. v. Cherokee, Inc.,
496 F.3d 108, 114 (1st Cir. 2007). ASP does not dispute that SMS
owns a valid copyright interest in its works, and SMS's
certificates of copyright are prima facie evidence of its ownership
of valid copyright interests in its works, see Johnson v. Gordon,
409 F.3d 12, 17 (1st Cir. 2005).
Our analysis, therefore, focuses entirely on whether the
district court properly applied the second element of the Feist
test. That prong "itself involves two steps: the plaintiff must
show (a) that the defendant actually copied the work as a factual
matter, . . . and (b) that the defendant's 'copying of the
copyrighted material was so extensive that it rendered the
infringing and copyrighted works "substantially similar."'" T-Peg,
Inc. v. Vt. Timber Works, Inc., 459 F.3d 97, 108 (1st Cir. 2006)
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(citations omitted) (quoting Johnson, 409 F.3d at 18). On appeal,
ASP wisely does not contest the district court's finding of actual
copying, so our analysis centers on the district court's
application of the test for substantial similarity.
The burden is on the plaintiff to prove substantial
similarity between the plaintiff's and defendant's works. T-Peg,
459 F.3d at 108. Substantial similarity exists "if a reasonable,
ordinary observer, upon examination of the two works, would
'conclude that the defendant unlawfully appropriated the
plaintiff's protectable expression.'" Id. at 112 (quoting Johnson,
409 F.3d at 18).
At oral argument, counsel for ASP argued that the
district court's conclusion should best be understood as being that
the amount of copying done was so small as to be de minimis. See
Situation Mgmt., 535 F. Supp. 2d at 244 ("Such de minimis
duplication does not amount to infringement."). Even if that were
accurate, it not sufficient to salvage the district court's finding
of noninfringement, however, for it ignores the fact that the court
first excluded from consideration of the works copied the bulk of
SMS's materials on the grounds that it was not subject to
protection at all. If the court erred in that exclusion, then it
used the wrong measure for substantial similarity.
Further, the de minimis copying doctrine in copyright
does not operate as broadly as ASP suggests. The extent of copying
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from the plaintiff's work is, of course, relevant to the analysis
of substantial similarity. If such a small amount of the
plaintiff's work is copied that the two works cannot be said to be
substantially similar, then no infringement results.1 See 2 Nimmer
& Nimmer, Nimmer on Copyright, § 8.01[G], at 8-26 (2008) ("[F]or
similarity to be substantial, and hence actionable, it must apply
to more than simply a de minimis fragment."). "Used in this
fashion, 'de minimis copying' represents simply the converse of
substantial similarity." Id.
This statement should not be misunderstood. That the
copying involved only a small portion of the plaintiff's work does
not by itself make the copying permissible. Indeed, "even if the
similar material is quantitatively small, if it is qualitatively
important, the trier of fact may properly find substantial
similarity." 4 id. § 13.03[A][2][a], at 13-55. As a result, de
minimis copying is best viewed not as a separate defense to
copyright infringement but rather as a statement regarding the
strength of the plaintiff's proof of substantial similarity.2
1
The extent of copying is also relevant to the fair use
defense, where one factor that determines the applicability of the
defense is "the amount and substantiality of the portion used in
relation to the copyrighted work as a whole." 17 U.S.C. § 107(3).
ASP has not raised a fair use defense in this case.
2
Further, commentators have viewed the de minimis copying
doctrine as relating to instances of fragmented literal similarity,
applicable only where "no more than a line, or a paragraph, or a
page or chapter of the copyrighted work has been appropriated." 4
Nimmer & Nimmer, supra, § 13.03[A][2], at 13-53; see also id.
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Where substantial similarity exists and the fair use doctrine, as
here, is inapplicable, "the overwhelming thrust of authority
upholds liability even under circumstances in which the use of the
copyrighted work is of minimal consequence." 2 Nimmer & Nimmer,
supra, § 8.01[G], at 8-26.
Here, the district court correctly recognized that the de
minimis nature of the copying could lead to a finding of no
substantial similarity. See Situation Mgmt., 535 F. Supp. 2d at
244. But its finding that the ASP's copying was not actionable
because of its de minimis nature was based on its improper
exclusion from consideration of large portions of SMS's works.
The district court also correctly stated the test for
substantial similarity, but then misapplied it. Substantial
similarity "focuses not on every aspect of the copyrighted work,
but on those 'aspects of the plaintiff's work [that] are
protectible under copyright laws and whether whatever copying took
place appropriated those [protected] elements.'" T-Peg, 459 F.3d
at 112 (alterations in original) (quoting Johnson, 409 F.3d at 19).
After identifying the aspects of the plaintiff's work that are
protected by copyright, substantial similarity is assessed by
§ 13.03[A][1][e], at 13-52 to -53 (discussing substantial
similarity under the heading "Similarity of Limited Segments"). On
the facts of this case, however, where SMS has identified hundreds
of instances of verbatim copying and rough paraphrasing in ASP's
works and has also alleged infringement through the overall
structure and arrangement of ASP's works, that aspect of the de
minimis doctrine simply does not arise.
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comparing the protected elements of the plaintiff's work as a whole
against the defendant's work. Johnson, 409 F.3d at 18. In
performing the substantial similarity analysis, a court should be
careful not to over-dissect the plaintiff's work, causing it to
ignore the plaintiff's protectable expression. See CMM Cable Rep,
Inc. v. Ocean Coast Props., Inc., 97 F.3d 1504, 1515 (1st Cir.
1996) (recognizing "the potential 'danger . . . that courts . . .
will so "dissect" the work as to classify all its elements as
unprotectable . . . [thereby possibly] blind[ing it] to the
expressiveness of their ensemble'" (alterations in original)
(quoting J.C. Ginsburg, Four Reasons and a Paradox: The Manifest
Superiority of Copyright over Sui Generis Protection of Computer
Software, 94 Colum. L. Rev. 2259, 2561 (1994))).
Here, the district court erred in determining which
aspects of SMS's works were subject to copyright protection. This
error prevented it from meaningfully analyzing the similarities
between SMS's and ASP's works, caused prejudice, and requires
reversal. We explain.
A. The Originality Requirement
The originality requirement for copyright protection is
not particularly rigorous. "Original, as the term is used in
copyright, means only that the work was independently created by
the author (as opposed to copied from other works), and that it
possesses at least some minimal degree of creativity." Feist, 499
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U.S. at 345. "[T]he requisite level of creativity is extremely
low; even a slight amount will suffice." Id.
Originality under copyright -- unlike the intellectual
property protection provided under patent law, see 35 U.S.C.
§ 102 -- "does not signify novelty," Feist, 499 U.S. at 345. It
merely means that the author did not himself copy his work from
another source. Indeed, even a work that is identical to another
is original for purposes of copyright protection so long as the
author created it independently. Id. at 345-46.
Similarly, a work's entitlement to copyright protection
does not depend in any way upon the court's subjective assessment
of its creative worth. See Bleistein v. Donaldson Lithographing
Co., 188 U.S. 239, 251 (1903) ("It would be a dangerous undertaking
for persons trained only to the law to constitute themselves final
judges of the worth of pictorial illustrations . . . ."); see also
Feist, 499 U.S. at 345 (recognizing that the "vast majority of
works" possess the requisite "creative spark" for originality, "'no
matter how crude, humble, or obvious' it might be" (quoting 1
Nimmer & Nimmer, Nimmer on Copyright § 1.08[C][1] (1990))).
Here, the district court stated the correct standard for
originality under copyright law, see Situation Mgmt., 535 F. Supp.
2d at 238, but misapplied it. The district court erroneously
treated copyright law's originality requirement as functionally
equivalent to a novelty standard. For example, the district court
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found SMS's works unoriginal because, in its view, they are "filled
with generalizations, platitudes, and observations of the obvious,"
id. at 239, contain "not-so-stunning revelation[s]," id. at 240,
and teach, "[a]t their creative zenith, . . . common-sense
communication skills," id. at 241.
Moreover, the district court's originality analysis was
obviously tainted by its own subjective assessment of the works'
creative worth. Its assessment of originality displayed nothing
but pejorative disdain for the value of SMS's works. E.g., id. at
239 ("[The plaintiff's works] are dominated by unprotectable
material. These works exemplify the sorts of training programs
that serve as fodder for sardonic workplace humor that has given
rise to the popular television show The Office and the movie Office
Space. They are aggressively vapid -- hundreds of pages filled
with generalizations, platitudes, and observations of the obvious."
(footnote omitted)). Yet neither the works' absolute novelty nor
their creative value determines whether they are original for
purposes of copyright protection.
On the record evidence and applying the correct standard,
SMS's works easily satisfy the originality requirement for
copyright protection. ASP never argued that SMS had copied its
works from another source, making them unoriginal to SMS. And
SMS's works, which include text, flowcharts, and illustrations
explaining techniques for communication and negotiation, certainly
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demonstrate the requisite "minimal degree of creativity," Feist,
499 U.S. at 345, for copyright protection. Thus, the district
court erroneously excluded large portions of SMS's works from
consideration under its substantial similarity analysis based upon
its misapplication of the originality requirement. This mistake
mattered to the outcome of the case. We hold that SMS has
satisfied the originality requirement for the three works in
question.
B. The Statutory Exclusion for Processes and Systems
The copyright statute excludes from protection the
processes and systems described in a work. See 17 U.S.C. § 102(b).
When Congress revised the copyright code in 1976, it recognized
that "[§] 102(b) in no way enlarges or contracts the scope of
copyright protection under the present law. Its purpose is to
restate, in the context of the new single Federal system of
copyright, that the basic dichotomy between expression and idea
remains unchanged." H.R. Rep. No. 94-1476, reprinted in 1976
U.S.C.C.A.N. 5659, 5670 (1976).
That idea/expression dichotomy is the "most fundamental
axiom of copyright law," Feist, 499 U.S. at 344, and "assures
authors the right to their original expression, but encourages
others to build freely upon the ideas and information conveyed by
a work," id. at 349-50. That is, descriptions of a process or
system are copyrightable, but the underlying process or system
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itself is not. See Matthews v. Freedman, 157 F.3d 25, 27 (1st Cir.
1998) ("[C]opyright protects the original expressions of ideas but
not the ideas expressed."). At least one circuit court has
rejected as "absurd" the argument that management training
materials contain no protectable expression because they teach a
noncopyrightable process. See Kepner-Tregoe, Inc. v. Leadership
Software, Inc., 12 F.3d 527, 534 (5th Cir. 1994).
Thus, to the extent that SMS's works teach a process or
system for effective communication and negotiation, others may
freely describe that process or system by using their own original
expression. But others may not appropriate SMS's expression when
describing that process or system.
Here, the district court improperly denied copyright
protection to large portions of SMS's works because it, in an error
of law, found "they focus on concepts and teach a noncopyrightable
process." Situation Mgmt., 535 F. Supp. 2d at 240; see also id. at
241 (finding that "the structure or essence of SMS's works is not
copyrightable" because, unlike a work of fiction that has a plot
and characters, they merely discuss processes and ideas). The fact
that SMS's works describe processes or systems does not make their
expression noncopyrightable. See Feist, 499 U.S. at 350-51
(holding that a factual compilation may be entitled to copyright
protection if it features an original selection or arrangement of
facts even though the underlying facts themselves are
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noncopyrightable). SMS's creative choices in describing those
processes and systems, including the works' overall arrangement and
structure, are subject to copyright protection. See id.
(recognizing that the original selection and arrangement of
noncopyrightable elements is entitled to copyright protection).
The district court's analysis did what we cautioned against in CMM
Cable, 97 F.3d at 1515: it lost sight of the expressiveness of the
works as a whole by focusing too closely on their noncopyrightable
elements.
Because the original selection and arrangement of
noncopyrightable elements is itself copyrightable, the district
court also erred in limiting the narrow copyright protection it
allowed for SMS's works "to little more than [their] original text
and formatting." Situtation Mgmt., 535 F. Supp. 2d at 241. There
are numerous ways to teach the concepts and processes disclosed in
SMS's works and so SMS need not show "'near identity' between the
works at issue" to prove copyright infringement. Concrete Mach.
Co. v. Classic Lawn Ornaments, Inc., 843 F.2d 600, 606 (1st Cir.
1988) (quoting Sid & Marty Krofft Television Prods., Inc. v.
McDonald's Corp., 562 F.2d 1157, 1167 (9th Cir. 1977)). This is
not a situation where the idea and expression have merged because
"there is essentially only one way to express an idea," making
copying of the expression permissible. Id. Because of its legal
error, the court's resulting factual conclusions regarding
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substantial similarity are clearly erroneous. These determinations
are vacated and may be determined at a new trial.
III.
The district court's analysis of substantial similarity
improperly excluded from consideration large portions of SMS's
works under the mistaken belief that they are unoriginal or a
noncopyrightable process or system, making its assessment of
substantial similarity clearly erroneous. We leave undisturbed the
district court's finding of actual copying and hold, as a matter of
law, that SMS's works both satisfy the originality requirement for
copyright protection and are entitled to protection beyond the
textual level even though they describe processes and systems. We
leave the analysis of the question of substantial similarity
between SMS's and ASP's works within the framework we have outlined
to be addressed on remand.
We vacate the district court's finding of noninfringement
and remand for further proceedings consistent with this opinion.
Because we vacate the district court's finding of noninfringement,
we need not address the substance of the attorneys' fees issue
raised by ASP's cross-appeal. See 17 U.S.C. § 505 (allowing the
award of fees to the prevailing party in a copyright infringement
suit). Each party will bear its own costs.
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