General Universal Systems, Inc. v. Lee

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
July 20, 2004
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk

No. 01-21114

GENERAL UNIVERSAL SYSTEMS, INC.;
WORLD TRADE SYSTEMS, INC.;
Plaintiffs - Appellants,

JOSE S. LOPEZ;
Plaintiff - Intervenor Defendant - Appellant,

ELI NASSAR,
Third Party Defendant - Appellant,

versus

LARRY MASON LEE;
LARRY MASON LEE & ASSOCIATES;
Intervenor Plaintiffs - Appellees,

versus

HAL, INC.; ET AL
Defendants,

HAL, INC.; JOE R. HERRIN;
ERNEST ALLEN PARKIN,
Defendants - Third Party Plaintiffs - Appellees,

PANALPINA, INC.; FRITZ COMPANIES, INC.;
US CRATING, INC.; TRANSWORLD LOGISTICS, INC.,
Defendants - Appellees.

_________________________________________________________________

Consolidated with No. 02-20312

GENERAL UNIVERSAL SYSTEMS, INC.,
Plaintiff - Appellant,

versus

BOAZ EXPORT CRATING COMPANY;
CARGO CRATING COMPANY;
DIXIE BOX AND CRATING OF TEXAS, INC.,
Defendants - Appellees.

_________________________________________________________________

Consolidated With No. 02-21002

GENERAL UNIVERSAL SYSTEMS, INC.;
WORLD TRADE SYSTEMS, INC.;
JOSE S. LOPEZ,
Plaintiffs - Counter Defendants - Appellants,

versus

HAL, INC.; JOE R. HERRIN;
ERNEST ALLEN PARKIN,
Defendants - Counter Claimants -
Third Party Plaintiffs - Appellees,

versus

ELI NASSAR,
Third Party Defendant - Appellant.

_________________________________________________________________

Consolidated With No. 02-21311

GENERAL UNIVERSAL SYSTEMS, INC.,
Plaintiff - Appellant,

versus

BOAZ EXPERT CRATING COMPANY;
CARGO CRATING COMPANY;
DIXIE BOX AND CRATING OF TEXAS, INC.,
Defendants - Appellees.

_________________________________________________________________

Consolidated with No. 03-20076

GENERAL UNIVERSAL SYSTEMS, INC.;
WORLD TRADE SYSTEMS, INC.;
JOSE S. LOPEZ,

2
 Plaintiffs - Appellants,

ELI NASSAR,
Third Party Defendant - Appellant,

versus

HAL, INC.; ET AL
Defendants,

HAL, INC.; JOSE R. HERRIN;
ERNEST ALLEN PARKIN,
Defendants - Third Party Plaintiffs - Appellees,

PANALPINA, INC.; FRITZ COMPANIES, INC.;
US CRATING, INC.; TRANSWORLD LOGISTICS, INC.,
Defendant - Appellee.

_________________________________________________________________

Consolidated with No. 03-20092

GENERAL UNIVERSAL SYSTEMS, INC.;
WORLD TRADE SYSTEMS, INC,
Plaintiffs - Appellants,

JOSE S. LOPEZ,
Plaintiff - Intervenor Defendant - Appellant,

ELI NASSAR,
Third Party Defendant - Appellant,

versus

HAL, INC.; ET AL,
Defendants,

HAL, INC.; JOE R. HERRIN;
ERNEST ALLEN PARKIN,
Defendants - Third Party Plaintiffs - Appellees,

PANALPINA, INC.; FRITZ COMPANIES, INC.;
US CRATING, INC.; TRANSWORLD LOGISTICS, INC.,
Defendants - Appellees.

3
 Appeals from the United States District Court
For the Southern District of Texas

Before HIGGINBOTHAM, STEWART, and PRADO, Circuit Judges.

PER CURIAM:

These consolidated cases arise from a copyright dispute

between General Universal Systems, Inc. (“GUS”) and HAL, Inc. GUS

sued HAL, two of its officers, and several of HAL’s customers

claiming that HAL infringed its copyright in a freight packaging

software system, misappropriated related trade secrets, violated

the Lanham Act, and breached a contract with Joe Lopez. The

district court dismissed GUS’s copyright, Lanham Act, and trade

secret claims on summary judgment and, following a jury trial,

granted HAL judgment as a matter of law on the contract claim. GUS

subsequently filed a second suit against several of HAL’s

customers, which the district court dismissed on the basis of

collateral estoppel. The district court also awarded costs and

attorneys’ fees to HAL as the prevailing party on the copyright

claim. GUS has appealed each of the district court’s

determinations.

For the reasons we will explain, we AFFIRM in part, REVERSE in

part, and REMAND to the district court for proceedings consistent

with this opinion.

I

4
 The facts and procedural history of this nine-year-old dispute

are long and, in some instances, in sharp dispute. With the

exception of the contract claim, the underlying claims were each

dismissed on summary judgment, and we view those facts in the light

most favorable to GUS, the non-movant.1 GUS’s contract claim comes

to us in a slightly different posture -- HAL was awarded judgment

as a matter of law after GUS prevailed in a jury trial -- and we

present the facts related to the contract issue in the light most

favorable to GUS.2

A

In 1979, GUS developed a software system -– the CHAMPION

PACKER Computer Software Program -– for one of its clients, Joe

Lopez. The CHAMPION PACKER program was a tracking system designed

for use in the freight forwarding and shipping industry. GUS

licensed the software to Lopez, retaining all rights to any

improvements to the program, and eventually obtained a copyright

registration in 1981.

Sometime later, Lopez created a derivative version of CHAMPION

PACKER by converting it from the BASIC 4 programming language to

the COBOL language, and began selling his version, LOPEZ COBOL, as

1
United States Steel Corp. v. Darby, 516 F.2d 961, 962-63
(5th Cir. 1975).
2
Liberty Mut. Ins. Co. v. Falgoust, 386 F.2d 248, 253 (5th
Cir. 1967).

5
a replacement for CHAMPION PACKER.3 In 1992, he formed a venture

called HAL, Inc. with Ernest Parkin and Joe Herrin to develop and

market a new freight software system that incorporated bar coding

technology. Under their agreement, Lopez was to contribute LOPEZ

COBOL for use in developing the new system; Parkin was to provide

the system design and programming expertise; and Herrin was to

supply industry expertise. Lopez, however, was detained in a

Mexican jail for seven months during the initial stages of the

software development project, and he was ousted from the company

without recompense in March 1993. HAL continued to work on the

software system and eventually began selling a freight tracking

software system called “MEPAW.”

Lopez claimed that MEPAW was an unauthorized copy of LOPEZ

COBOL and that Parkin and Herrin had breached their obligation to

compensate him for providing the LOPEZ COBOL system. Under threat

of litigation from GUS, Lopez assigned his contract claim to GUS

and agreed to assist GUS with a copyright infringement suit against

HAL, Parkin, and Herrin. GUS filed its first suit against HAL on

May 23, 1995 (“GUS 1”), raising various claims under federal and

state law. The focus of the case, however, was GUS’s claim that

HAL had infringed its copyright in the CHAMPION PACKER system by

3
Jose M. Lopez, the son of Joe Lopez, was the programmer who
actually wrote LOPEZ COBOL. In his affidavit, submitted to the
court by GUS, Jose M. Lopez stated that he wrote the LOPEZ COBOL
system “from scratch, utilizing the data entry screens, record
layouts and reports of the General Universal Systems, Inc., BASIC
software as [his] guide.”

6
copying the LOPEZ COBOL system. GUS sought damages, injunctive

relief, and attorneys’ fees.

On November 17, 1997, HAL filed a motion for partial summary

judgment on the issue of copyright infringement, arguing that GUS

could not establish that MEPAW copied the nonliteral elements of

either LOPEZ COBOL or CHAMPION PACKER. In particular, HAL faulted

GUS for failing to conduct an Altai analysis, the methodology used

to analyze claims of nonliteral copying of software, asserting that

without this analysis, GUS could not show that the MEPAW source

code copied protectable elements of either CHAMPION PACKER or LOPEZ

COBOL. In response, GUS argued that Altai did not apply to all of

its infringement claims, such as its claims that HAL copied source

code. GUS asserted that Altai applied only to claims that

nonliteral elements of the software were copied. HAL in turn

challenged GUS’s source code infringement claim, arguing both that

GUS had agreed that Altai analysis would be used to analyze the

infringement claims and that GUS had never before put forth a

theory of literal infringement.

A few months later, on February 13, 1998, HAL filed a second

motion for partial summary judgment, this time focusing on the

issue of copyrightability. HAL argued that GUS could not prove

that it owned a valid copyright in the software because its

copyright registration covered only data entry screens and record

layout samples and not the software as a whole. HAL also noted

7
that GUS had produced no evidence describing their software system

as it existed in 1983, the date when Lopez allegedly copied it,

because there was no extant copy of the 1983 version of GUS’s

CHAMPION PACKER software.4 Without such evidence, GUS could not

prove that MEPAW copied its software system. GUS responded by

pointing to its copyright registration for the freight forwarding

software, which, it asserted, was prima facie evidence of its

ownership of a copyright in the software. GUS also reminded the

court that it owned LOPEZ COBOL, the system that HAL’s MEPAW

software copied.

On February 18, 1998, GUS filed its own motion for partial

summary judgment in which it argued that it could prove as a matter

of law that HAL had infringed its copyright in the freight

forwarding software. Specifically, GUS claimed that it could prove

that HAL had directly or literally copied portions of LOPEZ COBOL,

noting in particular that the MEPAW system used fields, record

layouts, and actual executable code taken directly from LOPEZ

COBOL. As proof, GUS attached four exhibits which it asserted were

examples of direct copying: (1) a database layout listing the

layout of fields used by the MEPAW and LOPEZ COBOL systems; (2) a

4
GUS claimed in filings to the district court that it
submitted a copy of the software source code as well as copies of
data entry screens, reports, and record layouts to the Copyright
Office when it obtained a copyright registration for the system.
The Copyright Office, however, apparently misplaced the source code
print-outs and GUS did not retain a copy of the code as it existed
in 1983.

8
directory list comparing data entry fields used by the two software

systems; (3) a print-out of a program from the MEPAW system

indicating that it was created on October 25, 1983, by Lopez; and

(4) invoices generated by the two systems. HAL challenged each of

these exhibits, arguing that none established improper copying, and

renewed its claim that GUS could not prevail under the Altai

analysis.

A Magistrate Judge recommended granting HAL’s first motion and

dismissing the claims of nonliteral copyright infringement, but

recommended denying HAL’s second motion on copyrightability. The

Magistrate Judge also recommended denying GUS’s motion on literal

copying, concluding that there were genuine issues of material fact

precluding summary disposition.

The district court reviewed the record de novo, concluded that

there was no plain error in the Magistrate Judge’s Memorandum and

Recommendation (M&R), and adopted it as its own. The court

departed from the Magistrate Judge’s recommendation with regard to

GUS’s summary judgment motion on literal copyright infringement.

The court concluded that GUS had failed to raise a genuine issue of

material fact on the issue and granted HAL summary judgment on the

claim.

Having concluded that there was no copyright infringement, the

court soon dismissed GUS’s related Lanham Act, conversion,

misappropriation, and trade secret claims. The sole remaining

9
claim -- Lopez’s breach of contract claim against Parkin and Herrin

-- was tried to a jury in September 2000. After a three day trial,

the jury found that Parkin and Herrin had breached their agreement

with Lopez and awarded him $250,000 in damages plus $106,000 in

attorneys’ fees. However, the court also awarded HAL, Herrin, and

Parkin a total of $448,928.73 in costs, attorneys’ fees, and

expenses incurred in successfully defending the copyright cause of

action.

Approximately one year later, in September 2001, the court

modified this judgment. First, the court concluded that Larry Lee,

GUS’s first attorney who withdrew as counsel-of-record in late

1997, was entitled to receive one-third of Lopez’s judgment as

attorneys’ fees for work performed prior to his withdrawal as

counsel. Lee had filed a complaint-in-intervention in January

1998, but GUS had failed to respond or deny the allegations in that

complaint. Second, on September 26, 2001, the court set aside the

jury verdict altogether and granted HAL, Herrin, and Parkin

judgment as a matter of law on the contract claim. The court

concluded that the evidence presented was legally insufficient to

support the jury’s verdict because Lopez had admitted, in a prior

bankruptcy proceeding, that he did not own any interest in HAL.

HAL, Herrin, and Parkin filed motions seeking to enforce their

judgment, including a motion for turnover relief and a motion to

require GUS to post a $65,000 bond for appellate attorneys’ fees.

In June 2002, the district court granted HAL’s motion requiring the

10
posting of a $65,000 bond. The court later granted HAL’s motion

for turnover and sale of GUS’s Lopez COBOL software, and we denied

GUS’s motion for an emergency stay.

B

In April 2001, nearly two years after the district court

dismissed GUS’s copyright claims on summary judgment, GUS filed a

second, parallel suit against three of HAL’s customers: Boaz Export

Crating Co., Cargo Crating Co., and Dixie Box & Crating of Texas,

Inc.5 GUS argued that, as purchasers of HAL’s infringing software,

Boaz had violated GUS’s copyright in LOPEZ COBOL. In response,

Boaz argued that GUS was collaterally estopped by the decision in

the first suit from relitigating the copyright claim and moved to

dismiss.

While this motion was pending, Parkin allegedly admitted in a

hearing that HAL copied portions of LOPEZ COBOL. Without bringing

this information to the court’s attention, GUS responded to Boaz’s

motion, arguing that LOPEZ COBOL was not at issue in the prior suit

and that collateral estoppel could not apply. The district court

disagreed and granted Boaz’s motion to dismiss.

Shortly thereafter, GUS filed a Rule 60(b) motion in the

original suit against HAL. Pointing to Parkin’s admission of

copying, GUS argued that the judgment was procured through

misconduct. The district court rejected this argument, finding

5
We refer collectively to these parties as “Boaz.”

11
neither perjury nor misconduct on Parkin’s part. GUS appeals the

court’s rejection of its Rule 60(b) motion, and also argues that

Parkin’s alleged perjury should bar the application of collateral

estoppel in the Boaz suit.

C

GUS’s primary focus on appeal is the court’s grant of summary

judgment on the copyright issue. GUS also protests the dismissal

of its trade secret, misappropriation, and Lanham Act claims; the

award of fees to HAL and Boaz based on their successful defense

against GUS’s copyright charges; the court’s grant of judgment as

a matter of law on the contract claim; the order requiring the

posting of a bond, and the turnover order.

We will address each of these issues in turn.

II

At the heart of GUS’s appeal is its claim that the district

court erred in granting HAL summary judgment on the issue of

copyright infringement. GUS protests the court’s decision on a

number of grounds. First, GUS disputes the court’s dismissal of

its copyright claims under Altai, arguing that this doctrine does

not apply to claims of source code copying. Second, GUS argues

that the court impermissibly granted summary judgment on the issue

of literal source code copying even though the Magistrate Judge

admitted that there were genuine issues of material fact on this

issue. Third, GUS contends that the court imposed an improper

12
legal standard by holding that literal infringement requires that

the two computer programs be virtually identical. Finally, GUS

protests several other related decisions, such as the court’s award

of fees to HAL and its turnover order.

A

We review the district court’s grant of summary judgment de

novo.6 Summary judgment should be granted only if there is “no

genuine issue as to any material fact” and the moving party is

entitled to judgment as a matter of law.7 In determining whether

there is a genuine issue of material fact, we review the evidence

and the inferences to be drawn therefrom in the light most

favorable to the non-moving party.8 The moving party bears the

initial burden of demonstrating that summary judgment is

appropriate. If the moving party meets this burden, then the

“nonmovant must go beyond the pleadings and designate specific

facts showing that there is a genuine issue for trial.”9 In

conducting our review of the summary judgment grant, however, we

6
Johnson v. Louisiana, 351 F.3d 616, 621 (5th Cir. 2003);
Olabisiomotosho v. City of Houston, 185 F.3d 521, 525 (5th Cir.
1999).
7
FED. R. CIV. P. 56(c); see also Hunt v. Cromartie, 526 U.S.
541, 552 (1999).
8
Daniels v. City of Arlington, Tex., 246 F.3d 500, 502 (5th
Cir. 2001).
9
Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.
1994) (en banc).

13
examine only the judgment of the district court and are not bound

by its rationale. We may affirm on any grounds argued below and

supported by the record.10

To establish a prima facie case of copyright infringement, a

copyright owner must prove “(1) ownership of a valid copyright, and

(2) copying [by the defendant] of constituent elements of the work

that are original.”11 A certificate of registration, if timely

obtained, is prima facie evidence both that a copyright is valid

and that the registrant owns the copyright. There is no contention

that GUS does not own a valid copyright in CHAMPION PACKER and

LOPEZ COBOL. Rather, the issue is whether GUS provided sufficient

evidence of copying to survive summary judgment under the second

part of the infringement test.

To prove actionable copying under the second prong, a

plaintiff must make two showings. First, the plaintiff must, as a

factual matter, prove that the defendant “actually used the

copyrighted material to create his own work.”12 A plaintiff may

make this showing either with proof of direct evidence of copying

10
See Howard v. Fidelity & Deposit Co. of Maryland (In Matter
of Royale Airlines, Inc.), 98 F.3d 852, 856 (5th Cir. 1996);
Forsyth v. Barr, 19 F.3d 1527, 1534 n.12 (5th Cir. 1994).
11
Feist Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S.
340, 361 (1991); see also Alcatel USA, Inc. v. DGI Technologies,
Inc., 166 F.3d 772, 790 (5th Cir. 1999).
12
See, e.g., Engineering Dynamics, Inc. v. Structural
Software, Inc., 26 F.3d 1335, 1340 (5th Cir. 1994).

14
or through circumstantial evidence demonstrating both (1) that the

defendant had access to the copyrighted work and (2) that the two

works are “probatively” similar.13 The access element is satisfied

if the person who created the allegedly infringing work had a

reasonable opportunity to view the copyrighted work.14 The second

element -- probative similarity -- requires a showing that the

works, “when compared as a whole, are adequately similar to

establish appropriation.”15 In some cases, factual copying may be

proven without a showing of access “[i]f the two works are so

strikingly similar as to preclude the possibility of independent

creation.”16

If the plaintiff demonstrates factual copying, he must next

demonstrate that the copying is legally actionable by showing that

the allegedly infringing work is substantially similar to

protectable elements of the infringed work. “[A] side-by-side

comparison must be made between the original and the copy to

determine whether a layman would view the two works as

13
See Peel & Co., Inc. v. The Rug Market, 238 F.3d 391, 394
(5th Cir. 2001); see also Computer Assoc. Int’l, Inc. v. Altai,
Inc., 982 F.2d 693, 701 (2d Cir. 1992).
14
Ferguson v. Nat’l Broadcasting Co., 584 F.2d 111, 113 (5th
Cir. 1978).
15
Peel, 238 F.3d at 397.
16
Id.

15
‘substantially similar.’”17 Typically, the question whether two

works are substantially similar should be left to the ultimate

factfinder, but “summary judgment may be appropriate if the court

can conclude, after viewing the evidence and drawing inferences in

a manner most favorable to the nonmoving party, that no reasonable

juror could find substantial similarity of ideas and expression.”18

It is settled that computer programs are entitled to copyright

protection.19 This protection extends not only to the “literal”

elements of computer software -- the source code and object code20

-- but also to a program’s nonliteral elements, including its

structure, sequence, organization, user interface, screen displays,

and menu structures.21 To assess a claim of software infringement,

17
Creations Unlimited v. McCain, 112 F.3d 814, 816 (5th Cir.
1997) (per curiam).
18
Peel, 238 F.3d at 395; see also Herzog v. Castle Rock
Entertainment, 193 F.3d 1241, 1247 (11th Cir. 1999) ("Summary
judgment historically has been withheld in copyright cases because
courts have been reluctant to make subjective determinations
regarding the similarity between two works. However,
non-infringement may be determined as a matter of law on a motion
for summary judgment, either because the similarity between two
works concerns only non-copyrightable elements of the plaintiff's
work, or because no reasonable jury, properly instructed, could
find that the two works are substantially similar.") (citations
omitted).
19
See Engineering Dynamics, 26 F.3d at 1341.
20
Source code is a textual computer language that human
programmers can read. This source code is translated by a program
called a compiler into object code, the binary language that can be
executed directly by a computer.
21
See, e.g., Kepner-Tregoe, Inc., v. Leadership Software,
Inc., 12 F.3d 527, 536 n.20 (5th Cir. 1994); see also MiTek

16
we have generally endorsed the “abstraction-filtration-comparison”

test first outlined by the Second Circuit in Altai and refined by

the Tenth Circuit in Gates Rubber Co. v. Bando Chemical Industries,

Ltd.22 The Altai test deploys a three-step procedure to assess

whether protectable expression has been improperly copied. First,

at the abstraction stage, the court “dissect[s] the allegedly

copied program’s structure and isolate[s] each level of abstraction

contained within it.” Second, the court filters out unprotectable

expression by examining the structural components at each level of

abstraction to determine whether they can be protected by

copyright. Copyright protection does not extend to ideas,

processes, facts, elements dictated by considerations of

efficiency, elements required by factors external to the program

itself, or items taken from the public domain.23 With these

nonprotectable elements filtered out, there remains a “core of

protectable expression,”24 and we must then “determine whether the

Holdings, Inc. v. Arce Engineering Co., Inc., 89 F.3d 1548, 1556 n.
15 (11th Cir. 1996).
22
See Engineering Dynamics, 26 F.3d at 1342 (5th Cir. 1994)
(citing Computer Assocs. Int'l, Inc. v. Altai, Inc., 982 F.2d 693
(2d Cir. 1992), and Gates Rubber Co. v. Bando Chemical Indus.,
Ltd., 9 F.3d 823 (10th Cir. 1993)).
23
See Engineering Dynamics, 26 F.3d at 1341 n.6; Computer
Management Assistance Co. v. Robert F. DeCastro, Inc., 220 F.3d
396, 401 (5th Cir. 2000).
24
Gates Rubber Co. v. Bando Chemical Industries, Ltd., 9 F.3d
823, 841 (10th Cir. 1993) (quoting Altai, 982 F.2d at 710-711).

17
defendant’s program misappropriated substantial portions of the

plaintiff’s program.”25

B

GUS’s first argument on appeal focuses on the district court’s

use of the Altai test. GUS asserts that Altai applies only to

claims that an infringer has copied a computer program’s nonliteral

elements, like its structure, sequence, organization, and user

interface, and not to claims that source code was copied.26 GUS

urges, therefore, that the court erred in relying on Altai to

dismiss its source code copying claims.

25
Id. at 841.
26
At oral argument, GUS also argued in the alternative that,
even if Altai was the proper test, the district court misapplied
the Altai test. In making this argument, GUS focused primarily on
the allocation of the burden of proof: GUS complained that the
court improperly placed the burden on GUS to prove that copied
elements were protectable expression. According to GUS, all courts
acknowledge that once copying is proven, the burden shifts to the
defendant to prove that the material taken was not copyrightable.
GUS argued that, having proven factual copying through a showing of
access plus probative similarity, the burden should have been
placed on HAL to prove that the material taken was unprotectable.
Because GUS failed to brief this issue, however, we will not
consider it here. See Comsat Corp. v. FCC, 250 F.3d 931, 936 n.5
(5th Cir. 2001) (“Arguments presented for the first time at oral
argument are waived.”). We note, however, that at least one
appellate court disagrees with GUS’s argument. See MiTek Holdings,
Inc. v. Arce Engineering Co., Inc., 89 F.3d 1548, 1555 (11th Cir.
1996) (“Perhaps the best approach for a district court in any
computer program infringement case, whether involving literal or
nonliteral elements, is for it to require the copyright owner to
inform the court as to what aspects or elements of its computer
program it considers to be protectable. This will serve as the
starting point for the court’s copyright infringement analysis.”).

18
 Although we have generally endorsed the Altai test to evaluate

claims that nonliteral software elements were copied, we have not

explicitly addressed whether that test should be used to evaluate

charges that a program’s source or object code was copied. We need

not answer this question today, however, because contrary to GUS’s

claim, the district court did not use the Altai test to decide any

source code copying claims. Rather, the court used Altai only in

its decision to dismiss claims that nonliteral elements were

copied. As the court stated in its order, “[a]bsent a valid Altai

analysis to establish unlawful copying of the non-literal aspects

of the computer programs, Defendants are entitled to summary

judgment.”27

Nor did the district court err in dismissing these claims of

nonliteral copying. On filing this suit, GUS alleged that HAL

copied nonliteral aspects of CHAMPION PACKER and LOPEZ COBOL. When

HAL filed a summary judgment motion on this issue, arguing

essentially that GUS could not prove that MEPAW copied any

nonliteral elements, GUS responded by claiming that source code was

copied. However, nowhere in its response did GUS present evidence

disputing HAL’s assertion that summary judgment was appropriate on

the issue of the copying of nonliteral program elements. More to

the point, nowhere in its submission did GUS complete the Altai

27
Opinion and Order, No. H-95-1582, at 2 (S.D.Tex. June 4,
1998) (order granting partial summary judgment) (emphasis added).

19
analysis necessary to evaluate claims that a program’s nonliteral

elements were copied. Without this analysis, there was no evidence

in the record to support GUS’s claims that nonliteral elements were

copied, and the district court properly dismissed those claims.

We find no error in the district court’s use of Altai or in

its decision granting HAL summary judgment on the issue of

nonliteral infringement.

C

Turning from Altai, we next address GUS’s arguments that the

court applied an overly restrictive test for evaluating its claim

that source code was copied. GUS presents two distinct arguments.

First, GUS urges that there were genuine issues of material fact.

Second, GUS argues that the court imposed an overly rigid standard

for literal copying by requiring that the infringed program be

virtually identical, rather than substantially similar, to the

copyrighted program.

We reject GUS’s arguments and conclude that summary judgment

was appropriate.

1

To evaluate GUS’s claim, some background is necessary.

Shortly after HAL filed its summary judgment motion on the

nonliteral copying issue, GUS filed its own motion for summary

judgment on the issue of source code copying. In this motion, GUS

argued for the first time that HAL “directly” copied LOPEZ COBOL’s

20
source code. GUS attached four exhibits as evidence of this

copying: (1) a printout that purported to be a “database layout”

listing the names of fields used by the MEPAW and LOPEZ COBOL

systems; (2) a directory list giving the names of data entry fields

used by the two software systems; (3) a print-out of a program

contained in MEPAW that was created on October 25, 1983, by Jose

Lopez; and (4) print-outs of invoices generated by the LOPEZ COBOL

and MEPAW systems. GUS argued that the first three of these

exhibits constituted evidence of “direct, line by line copying.”

For the fourth exhibit, GUS argued that the layouts of the MEPAW

and LOPEZ COBOL invoices were almost exactly the same, suggesting

that the source code which generated them must also be strikingly

similar.

HAL filed a lengthy response to GUS’s motion, challenging each

of these exhibits and accusing GUS of misrepresenting the facts.

Specifically, HAL attached an affidavit from Parkin indicating that

the first exhibit was a database layout that Lopez gave to

Defendant Al Parkin to enhance; the second exhibit was not used in

MEPAW; the third exhibit was a program Parkin obtained while he

worked for the General Services Administration and was not authored

by Lopez; and the fourth exhibit was a generic invoice of a type

found in every packing system. HAL also attached several

affidavits from other parties, some of which attested to the

substantial differences between the two software packages while

others disputed GUS’s contention that HAL had access to the

21
CHAMPION and LOPEZ COBOL programs. HAL ended its response with a

charge that there was no evidence supporting GUS’s infringement

claims and with a request that the court dismiss the action in its

entirety. GUS did not reply to HAL’s motion.

On the issue of substantial similarity, a Magistrate Judge

concluded that the four exhibits GUS submitted were inadequate to

sustain a finding as a matter of law that MEPAW and LOPEZ COBOL

were substantially similar. She concluded, however, that a genuine

issue of material fact existed as to whether the software systems

were substantially similar. Neither party objected to these

findings.

The district court conducted a de novo review of the record,

concluded that there was no plain error in the Magistrate Judge’s

Memorandum and Recommendation, and adopted the report as its own.

However, the court employed a different analysis of the

infringement issue. The court noted, first, that to prove literal

copying, a plaintiff must show identical or virtually identical

copying of substantial portions of a program. Second, the court

stated that such identical copying would not generally be present

when the two programs are written in a different programming

language. The court concluded that GUS had failed to present

evidence raising a genuine issue of material fact, denied GUS’s

summary judgment motion, and granted summary judgment to HAL.

2

22
 We are ultimately persuaded that summary dismissal was

appropriate because of GUS’s failure to adduce evidence to support

its charges of copying and substantial similarity.28

As a preliminary matter, we reject GUS’s contention that the

district court’s decision to grant summary judgment was

procedurally improper -- that the court granted summary judgment to

HAL sua sponte, without a motion for summary judgment by HAL before

it. In response to GUS’s summary judgment motion, HAL asserted

that it was entitled to a “finding[] that the plaintiffs are unable

to prove both non-literal copying under the Altai analysis, and

direct copying.” Citing GUS’s failure to adduce any evidence

supporting its claims of source code copying, HAL charged that GUS

had no evidence of copying and urged the district court to dismiss

the entire case. While not labeled as a cross-motion for summary

dismissal, HAL sought summary judgment on the issue of literal

copying and requested the court to act accordingly. The court’s

action was not improper.29

28
Holtzclaw v. DSC Communications Corp., 255 F.3d 254, 258
(5th Cir. 2001).
29
Moreover, even if the court’s decision to grant HAL summary
judgment were somehow a sua sponte decision, it was not improper.
In general, a district court may grant summary judgment sua sponte
“so long as the losing party was on notice that she had to come
forward with all of her evidence.” Celotex v. Catrett, 477 U.S.
317, 326 (1986) (“[D]istrict courts are widely acknowledged to
possess the power to enter summary judgments sua sponte, so long as
the losing party was on notice that she had to come forward with
all of her evidence.”); Judwin Properties, Inc., v. United States
Fire Ins. Co., 973 F.2d 432, 436-37 (5th Cir. 1992); see also

23
 We are persuaded that summary judgment was appropriate because

GUS presented no evidence supporting its claims of literal

copyright infringement. At trial, GUS would bear the ultimate

burden of proving that MEPAW copied LOPEZ COBOL. In response to

HAL’s charge that no evidence supported GUS’s claim, GUS was

required to come forward with some evidence supporting the

essential elements of its claim. GUS failed to do so.30 The four

isolated pieces of evidence GUS produced fail on the most basic

level. To prevail on a claim of source code copyright

infringement, GUS would have to prove that MEPAW’s source code is

CHARLES ALAN WRIGHT, ARTHUR R. MILLER, & MARY KAY KANE, 10A FEDERAL PRACTICE
AND PROCEDURE § 2720 (1998). The First Circuit has suggested that
“notice” means “that the targeted party ‘had reason to believe the
court might reach the issue and received a fair opportunity to put
its best foot forward.’” Leyva v. On the Beach, Inc., 171 F.3d 717,
720 (1st Cir. 1999) (quoting Jardines Bacata, Ltd. v. Diaz-Marquez,
878 F.2d 1555, 1561 (1st Cir. 1989)). There is no doubt in this
case that GUS had the requisite notice. It was, after all, GUS
itself that moved for summary judgment on the issue of literal
copying. GUS had discussed the issue at least one other time -- in
its response to HAL’s summary judgment motion -- and it had more
than ample opportunity to marshal its facts and “put its best foot
forward.” Cf. Nowlin v. Resolution Trust Corp., 33 F.3d 498, 504
(5th Cir. 1994). More importantly, HAL explicitly argued to the
court that there was no evidence supporting GUS’s claims and
requested that the court dismiss the newly raised literal copying
charges. Finally, the summary judgment came after the close of
discovery, after the MEPAW source code was produced, and after
expert reports had been filed. Given these circumstances, GUS
clearly had notice that summary judgment was at issue, and was not
deprived of either its ability to ascertain facts or its
opportunity to develop and present its case. The court’s decision
to consider summary dismissal of the literal claims was not
improper.
30
Celotex, 477 U.S. at 322-23.

24
substantially similar to LOPEZ COBOL’s source code. To do so, “a

side-by-side comparison must be made between the original and the

copy.”31 GUS, however, failed to attach any of its own source code

to its summary judgment motion or to compare MEPAW source code to

LOPEZ COBOL source code, despite its conclusory assertions that the

four exhibits were evidence of direct copying.32 Without providing

its own source code for comparison, GUS did not satisfy the

requirement that the infringed and infringing work be compared

side-by-side. Perhaps there was relevant LOPEZ COBOL source code

buried deep in the record somewhere,33 and perhaps the district

court could have waded through the record to find code that looked

similar to the exhibits GUS attached. But the court was not

required to do so. In response to HAL’s motion, the burden was on

GUS to prove that it could support its claims. It did not meet

this burden.

31
Creations Unlimited v. McCain, 112 F.3d 814, 816 (5th Cir.
1997) (per curiam).
32
It bears emphasis that the only infringement claims at issue
in this summary judgment motion were GUS’s claims that HAL copied
source code. As we note below, the exhibits GUS submitted may have
constituted some evidence that nonliteral aspects of CHAMPION
PACKER were copied, but not that source code was copied. GUS’s
nonliteral claims, however, were properly dismissed because of
GUS’s failure to conduct a proper Altai analysis.
33
In GUS’s summary judgment motion, GUS discussed only the
four aforementioned exhibits. In Dr. Nassar’s affidavit, which was
attached to that motion, Dr. Nassar states enticingly that these
four exhibits are but the tip of the iceberg and that there was
substantial other evidence of direct copying in the record. GUS
did not bring this other evidence to the attention of the court.

25
 GUS’s difficulty stems, ultimately, from the muddled nature of

its infringement claims. As the district court noted, when GUS

first filed its infringement suit, it claimed only that HAL

misappropriated nonliteral elements of CHAMPION PACKER, like its

structure, sequence, and organization. GUS broadened its claims in

its summary judgment motion, asserting that HAL directly copied

source code from CHAMPION. The exhibits that GUS attached as

evidence of source code copying, however, did not reflect the

change in the nature of its claims. Two of the exhibits -- the

database layout and directory listing -- are at best evidence that

HAL copied nonliteral elements from LOPEZ COBOL; they do not

provide evidence of source code copying.34 Likewise, the fourth

exhibit -- a comparison of invoice layouts -- is a nonliteral

element of the software programs; GUS’s conclusory remark that the

“similarity of layout in the invoices . . . highlights the fact

that the source code which generated both invoices is strikingly

similar” is both factually questionable and legally insufficient to

state a claim of source code copying. GUS had the MEPAW and LOPEZ

COBOL source codes at its disposal; it should have supported its

assertions with tangible references to these materials rather than

34
We note, too, that GUS failed to refute HAL’s claim that Joe
Lopez provided the database layout to Parkin and that Parkin used
it with Lopez’s consent. Even if we accept GUS’s claim that the
database layout in MEPAW copies the layout in LOPEZ COBOL (and if
we also accept that the database layout relates to source code
copying, rather than nonliteral copying), we are left with an
unchallenged assertion that Parkin was entitled to use the
material.

26
with empty and conclusory statements. “[S]uch conclusory,

unsupported assertions are insufficient to defeat a motion for

summary judgment.”35

Only the third exhibit contains any source code. It is a

print-out of a software program GUS claims Lopez wrote on October

25, 1983. GUS’s expert, Dr. Nassar, asserts that he found this

program in the MEPAW system and that a “strikingly similar” copy

exists in LOPEZ COBOL. GUS, however, fails to provide the copy

from LOPEZ COBOL’s source code for comparison. Nor does GUS refute

HAL’s denial that Lopez wrote the program and that HAL obtained

properly from other channels.

In short, GUS presented insufficient evidence of source code

copying to survive summary judgment. When GUS filed its motion for

summary judgment, it did not need to marshal all its facts to

support its infringement claims. But when HAL responded with an

allegation that GUS could produce no evidence on basic elements of

its claims, GUS was required to come forward with tangible

evidence. It failed to do so, and summary judgment for HAL was

appropriate.

35
Marshall v. E. Carroll Parish Hosp. Serv. Dist., 134 F.3d
319, 324 (5th Cir. 1998).

27
 3

We affirm the dismissal of GUS’s claims of source code

copying.36

D

After dismissing GUS’s copyright claims, the district court

awarded HAL attorneys’ fees as the prevailing party. GUS contests

the award of fees, arguing in particular that because it brought

and litigated its copyright claims in good faith, an award of fees

was inappropriate.

The decision to impose costs lies in the sound discretion of

the district court,37 reviewable only for an abuse of discretion.38

This circuit adheres to the practice that such fees are

“discretionary but routinely awarded.”39 Under this approach, we

cannot agree that the district court abused its discretion in

awarding HAL fees. The court carefully considered GUS’s conduct

36
Because we do so on grounds different from those expressed
by the district court, we need not address the specific rationale
asserted by the district court that literal copying requires
virtual identity.
37
17 U.S.C. § 505 (“In any civil action under this title, the
court in its discretion may allow the recovery of full costs by or
against any party other than the United States or an officer
thereof. Except as otherwise provided by this title, the court may
also award a reasonable attorneys’ fee to the prevailing party as
part of the costs.”).
38
See McGaughey v. Twentieth Century Fox Film Corp., 12 F.3d
62, 65 (5th Cir. 1994).
39
Hogan Systems, Inc. v. Cybresource Intern., Inc., 158 F.3d
319, 325 (5th Cir. 1998).

28
during the course of the litigation -- conduct which in some cases

bordered on the overzealous -- and noted the tremendous burden that

GUS’s zealous representation placed upon HAL. GUS provides no

persuasive reason why the award should be upset, and we therefore

affirm the award of fees.40

III

GUS next disputes the district court’s dismissal of its Lanham

Act claims. GUS argued to the district court that HAL, by copying

and marketing GUS’s software as HAL’s own, engaged in “reverse

palming off” in violation of § 43(a) of the Lanham Act.41 The

district court rejected GUS’s claim, relying heavily on its earlier

conclusion that GUS failed to present evidence of actionable

copying. GUS contends on appeal that the court’s decision was

error for two reasons: first, because there is substantial evidence

that MEPAW is a copy of LOPEZ COBOL that has only been modified

slightly, and second, because a Lanham Act claim does not require

40
Having upheld the dismissal of GUS’s copyright claims on the
merits as well as the court’s order imposing attorneys’ fees, we
find it unnecessary to address whether the court erred in ordering
the turnover of LOPEZ COBOL or in requiring GUS to post a $65,000
bond to cover HAL’s fees on appeal. Nor need we address HAL’s
contention that GUS’s claims must be dismissed because of GUS’s
failure to post that bond.
41
15 U.S.C. § 1125(a)(1). “Reverse palming off” (or “reverse
passing off,” as it is sometimes called) occurs when “[t]he
producer misrepresents someone else’s goods or services as his
own.” Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S.
23, 28 n.1 (2003). “A defendant may also be guilty of reverse
palming off by selling or offering for sale another’s product that
has been modified slightly and then labeled with a different name.”
Roho, Inc. v. Marquis, 902 F.2d 356, 359 (5th Cir. 1990).

29
the Altai-type analysis that the district court used to dismiss

GUS’s copyright claims. We find neither argument persuasive.

GUS’s first argument depends entirely upon its copyright

argument, which we have rejected. The district court committed no

error in dismissing GUS’s copyright infringement claims. GUS’s

first Lanham Act argument must fail as well.

GUS’s second argument is more problematic. In just one

sentence, GUS asserts that a Lanham Act claim does not require that

a defendant prove “substantial similarity” through the type of

Altai-analysis that the district court demanded in this case. GUS

offers no argument or explanation on this point, and cites no

authority for its statement. Failing to adequately brief this

contention, GUS has waived it.42

Even were we inclined to flesh out GUS’s argument, its Lanham

Act claim would face the Supreme Court’s recent decision in Dastar

Corp. v. Twentieth Century Fox.43 Dastar revolved around a 1949

television series called “Crusader in Europe,” which was based on

General Eisenhower’s written account of the Allied campaign in

Europe. Twentieth Century Fox owned the exclusive rights in the

television series, but it failed to renew its copyright

registration, and the copyright expired in 1977, leaving the series

42
See, e.g., Cavallini v. State Farm Mut. Auto Ins. Co., 44
F.3d 256, 260 n.9 (5th Cir. 1995).
43
539 U.S. 23 (2003).

30
in the public domain. In 1995, Dastar purchased copies of the

original, public domain television series, and then copied and

edited them. In particular, Dastar substituted a new opening

sequence, credit page, and final closing, and made various other

similar changes. Fox and several licensees brought suit, alleging,

inter alia, that Dastar’s sale of its version of the series without

proper attribution to the Crusade series constituted “reverse

passing off” in violation of § 43(a) of the Lanham Act.

The Court rejected the plaintiffs’ claim, concluding that the

term “origin” in § 43(a) applies only to “the producer of the

tangible goods that are offered for sale, and not to the author of

any idea, concept, or communication embodied in those goods.”44 In

so doing, the Court carefully distinguished Lanham Act claims from

copyright claims; the former “were not designed to protect

originality or creativity,” while the latter were. The Court

concluded that claims of false authorship and reverse passing off,

when raised to protect an author’s interest in the intellectual

content of communicative products, were not actionable under §

43(a) and should instead be pursued under copyright law. “To hold

otherwise would be akin to finding that § 43(a) created a species

of perpetual patent and copyright, which Congress may not do.”45

44
Id. at 37.
45
Id.

31
 While there are some differences between Dastar and the

situation at hand, we find Dastar’s reasoning controlling. GUS has

not accused HAL of taking tangible copies of its software, removing

its trademarks, and selling them as its own. Rather, GUS asserts

that HAL copied the ideas, concepts, structures, and sequences

embodied in its copyrighted work. In sum and substance, GUS’s

claim is simply a claim that HAL has infringed its copyright in

LOPEZ COBOL. Dastar makes clear that such claims are not

actionable under § 43(a).

The district court’s grant of summary judgment to HAL on GUS’s

Lanham Act claims is affirmed.

IV

GUS next contests the district court’s dismissal of its state

law claim of trade secret theft. Shortly before trial, HAL filed

a summary judgment motion on this issue, arguing that GUS could not

prove all of the essential elements of its claim. The district

court agreed, disposing of GUS’s claim on two alternative grounds.

First, the court concluded that Texas law requires that the claimed

trade secret have been discovered through improper means. The

court found no improper means in this case because the HAL

Defendants obtained access to the LOPEZ COBOL System pursuant to a

written agreement with Lopez. Second, the court observed that

Texas law requires that a person asserting a trade secret must take

reasonable precautions to protect the claimed trade secret. The

32
court found that the undisputed evidence showed that GUS had failed

to do so. Based on these two alternative grounds, the court

concluded that LOPEZ COBOL, “was not properly protected as a trade

secret.”

GUS argues that the court applied an outmoded and overly

restrictive test for trade secret misappropriation. We agree.

A

We review a district court’s interpretation of state law de

novo.46 To state a claim for trade secret misappropriation under

Texas law, a plaintiff must (1) establish that a trade secret

existed; (2) demonstrate that the trade secret was acquired by the

defendant through a breach of a confidential relationship or

discovered by improper means; and (3) show that the defendant used

the trade secret without authorization from the plaintiff.47 Only

the first and second factors of this test are at issue in this

appeal. “The existence of a trade secret is properly considered a

question of fact to be decided by the judge or jury as

fact-finder.”48

46
Salve Regina College v. Russell, 499 U.S. 225, 239 (1991).
47
Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772,
784 (5th Cir. 1999) (analyzing the cause of action for trade secret
misappropriation under Texas law); see also IBP, Inc. v. Klumpe,
101 S.W.3d 461 (Tex. App.–Amarillo 2001, writ denied) (citing Taco
Cabana Int'l v. Two Pesos, Inc., 932 F.2d 1113, 1123 (5th Cir.
1991)); Elcor Chemical Corp. v. Agri-Sul, Inc., 494 S.W.2d 204, 210
(Tex. Civ. App.–Dallas 1973, writ ref’d n.r.e.).
48
RESTATEMENT (THIRD) UNFAIR COMPETITION § 39 cmt. (1995).

33
 B

The district court first concluded that GUS could not prevail

under the first prong of the trade secret theft test. The court

held that Texas law requires that a person asserting a trade secret

take reasonable precautions to protect it.49 The district court

concluded that Lopez did not take reasonable measures in this case,

and concluded that LOPEZ COBOL was not properly protected as a

trade secret.

The Texas Supreme Court recently clarified that to determine

whether there is a trade secret protected from disclosure or use,

a court must examine six relevant but nonexclusive criteria: (1)

the extent to which the information is known outside the business;

(2) the extent to which it is known by employees and others

involved in the business; (3) the extent of measures taken to

safeguard the secrecy of the information; (4) the value of the

information to him and to his competitors; (5) the amount of effort

or money expended in developing the information; and (6) the ease

or difficulty with which the information could be properly acquired

or duplicated by others.50 The court expressly held that “the party

claiming a trade secret should not be required to satisfy all six

factors because trade secrets do not fit neatly into each factor

49
For legal support, the district court cited a Fifth Circuit
opinion, E.I. duPont deNemours & Co. v. Christopher, 431 F.2d 1012,
1015 (5th Cir. 1970), which had attempted to predict the content of
Texas law. The district court did not cite any Texas cases.
50
In re Bass, 113 S.W.3d 735, 739-40 (Tex. 2003).

34
every time.”51 Determining whether any given piece of information

is entitled to trade secret protection, then, is a contextual

inquiry which must evaluate a number of factors.

The district court did not engage in this broad inquiry, but

instead focused solely on Lopez’s alleged failure to take

“reasonable precautions” to protect LOPEZ COBOL, pointing to Lopez

having allowed Parkin to copy LOPEZ COBOL onto a personal computer

and take it with him to Arizona. The court, however, overlooked

the fact that Lopez and Parkin were engaged in a joint venture to

exploit that very software. There was also uncontroverted evidence

that Lopez carefully secured his software system from parties other

than Herrin and Parkin -- that is, that Lopez took reasonable

precautions to protect LOPEZ COBOL from persons other than those

selected by Lopez to have access for limited purposes.

Further factual development may shed light on whether trade

secret protection is appropriate. We conclude, therefore, that a

genuine dispute of material fact precludes determination whether

LOPEZ COBOL was properly protected as a trade secret.

C

Summary judgment may yet have been appropriate if the district

court’s second basis for judgment independently bars GUS’s claim.

As an alternative basis for dismissing GUS’s trade secret claim,

the court concluded that GUS could not satisfy the second prong of

51
Id. at 740.

35
the trade secret claim. Specifically, the court concluded that HAL

did not acquire LOPEZ COBOL through improper means.

However, Texas trade secret law does not impose liability only

when improper means are used. Under Texas law, there is liability

for trade secret misappropriation if either “(a) he discovers the

secret by improper means, or (b) his disclosure or use [of the

trade secret] constitutes a breach of confidence reposed in him by

the other in disclosing the secret to him.”52 The district court

did not consider whether there was a confidential relationship

among Lopez, Perkins, and Herrin that imposed upon them a duty not

to use the trade secret. There may have been an appropriate

confidential relationship: although the facts available in the

record are unclear, it appears that Lopez, Perkins, and Herrin may

have formed a partnership to exploit the LOPEZ COBOL system.53

Under Texas law, a partnership can be considered a confidential

52
Elcor Chemical, 494 S.W.2d at 211 (emphasis added); see also
IBP, Inc., 101 S.W.3d at 472.
53
It is unclear, for example, precisely when the partnership
or joint venture was formed. In its brief, GUS argues, quite
curiously, that the parties “anticipated” signing a confidentiality
agreement, implying that they had not yet reached the stage where
fiduciary duties would be imposed. Perhaps this reflects a tacit
admission that the parties had not yet formalized their venture and
that Lopez shared the code with Perkins and Herrin before any duty
of confidentiality could reasonably be implied.

36
relationship, and participants in a joint venture are often held to

owe duties to one another.54

HAL, for its part, vigorously asserts that there was no

confidential relationship among the parties.55 HAL also contends

54
See, e.g., Abetter Trucking Co. v. Arizpe, 113 S.W.3d 503,
508 (Tex. App.–Houston [1st Dist.] 2003, n.w.h.) (“There are two
types of fiduciary relationships; one is a formal fiduciary
relationship which arises as a matter of law and includes the
relationships between attorney and client, principal and agent,
partners, and joint venturers, while the other is an informal
fiduciary relationship which may arise from a moral, social,
domestic or purely personal relationship of trust and confidence,
generally called a confidential relationship.”); Hyde Corp. v.
Huffines, 314 S.W.2d 763, 769-70 (Tex. 1958) (“The chief example of
a confidential relationship under [the Restatement’s view of trade
secret misappropriation] is the relationship of principal and
agent. . . . Such is also the relationship between partners or
other joint adventurers. But this confidence may exist also in
other situations.”); Holman v. Dow, 467 S.W.2d 547 (Tex. Civ.
App.–Beaumont 1971, writ ref’d n.r.e.) (“We have concluded from a
study of the contract as a whole that plaintiff did not establish
as a matter of law, a partnership between the parties; and,
therefore, the trial court did not err in failing to hold a
relationship of trust and confidence existed between the parties
which was fiduciary in nature.”).
Indeed, former Section 757 of the Restatement of Torts, a
provision which the Texas courts have cited approvingly in the
past, cites a partnership as an example of the type of relationship
imposing a duty not to misuse a trade secret. See RESTATEMENT OF TORTS
§ 757, cmt. on clause (b).
55
For example, HAL argues that the lack of a formal
confidentiality agreement is evidence that there was no duty of
confidentiality among the three men, a proposition which finds some
support in Texas law. See, e.g., Daily Intern. Sales Corp. v.
Eastman Whipstock, Inc., 662 S.W.2d 60, 63 (Tex. App.–Houston [1st
Dist.] 1983, no writ) (“Although an express contractual provision
is not required to establish a duty of confidentiality, the absence
of an agreement restricting disclosure of information is a factor
the court may consider.”). Daily International, however, dealt
with a contractual arrangement among corporations; it did not
address a partnership arrangement, where partners owe one another
a duty of confidentiality. More importantly, at least one Texas

37
that the district court reviewed the entire record and found that

HAL’s use of LOPEZ COBOL was unrestricted, an assertion which finds

no support in the text of the district court’s opinion. In the

end, HAL’s argument highlights the presence of disputed material

facts.

The district court erred in not considering whether GUS might

prevail by demonstrating a breach of a confidential relationship.

On the present record, there is a genuine issue of material fact

and summary judgment was inappropriate.

C

We reverse the district court’s grant of summary judgment in

favor of HAL on GUS’s claim of trade secret theft.

V

GUS’s next set of arguments focuses on its contract claims.56

Unlike its copyright claims, GUS tried its contractual allegations

to a jury, which ruled in GUS’s favor. Over two years after the

jury returned its verdict, the district court granted HAL judgment

as a matter of law. GUS appeals this decision, and also appeals a

court has expressly rejected HAL’s argument, holding that “[w]hen
a claim of improper disclosure or use of trade secrets arises from
a confidential relationship, the injured party is not required to
rely upon an express agreement that the offending party will hold
the trade secret in confidence.” T-N-T Motorsports, Inc. v.
Hennessey Motorsports, Inc., 965 S.W.2d 18, 22 (Tex. App.–Houston
[1st Dist.] 1998, pet. dism’d).
56
Lopez assigned his rights under the breach of contract claim
to GUS. For simplicity’s sake, we will refer to these claims
throughout as GUS’s claims.

38
decision by the district court to limit the manner in which GUS

could prove contractual damages.

Finding no reversible error on either issue, we affirm.

A

GUS first contends that the court abused its discretion in

excluding evidence of HAL’s sales or the value of the market for

HAL’s software at the time of trial. Specifically, the court

refused to allow GUS to question defense witnesses regarding

statements on HAL’s website that the market for HAL’s software was

one billion dollars per year. The court also refused to allow GUS

to introduce evidence that Parkin copied LOPEZ COBOL to create

MEPAW, HAL’s primary asset. GUS also contends that the court

abused its discretion in instructing the jury that Lopez’s damages

were to be measured at the time of HAL’s breach, rather than at the

time of trial, and in refusing to charge the jury that Lopez might

be entitled to specific performance.

1

We examine first the court’s contested evidentiary rulings.

We review a district court’s exclusion of evidence for abuse of

discretion.57

As a preliminary matter, we reject GUS’s contention that the

court’s refusal to allow evidence of the value of the market for

HAL’s software was error. This evidence was irrelevant to

57
United States v. Wilson, 322 F.3d 353, 359 (5th Cir. 2003).

39
determining the value of HAL either at the time of the breach or at

trial. Similarly, we find no error in the court’s exclusion of

evidence that HAL copied LOPEZ COBOL to create MEPAW. This is

admittedly a closer question because evidence that HAL used LOPEZ

COBOL might serve as evidence of the value of his contribution to

the joint venture or possibly even the value of HAL at the

inception of the partnership. However, the issue before the court

was solely whether HAL breached its agreement with Lopez, not

whether HAL copied LOPEZ COBOL or whether Lopez was entitled to

restitution for the value of his contribution. Given the limited

focus of the trial and the nature of GUS’s breach of contract

claim, we find no abuse of discretion in the district court’s

ruling.

2

A somewhat more difficult question is raised by GUS’s twin

assertions that Lopez’s contractual damages should have been

measured as of the time of trial, rather than the time of breach,

and that Lopez should have received specific performance instead of

damages. HAL responds that GUS’s claim for damages measured as of

trial is nothing more than a request for specific performance,

which is disfavored under Texas law and not merited in this case.58

The district court rejected GUS’s request for specific performance

58
HAL also suggests that GUS did not plead specific
performance, but we find this contention without merit. GUS’s
Complaint was sufficient to place HAL on notice that GUS sought
specific performance.

40
and limited GUS’s recovery to damages calculated as of the time of

the breach. The jury, in turn, awarded Lopez $250,000, a sum which

corresponded to his testimony regarding the amount he expended to

create LOPEZ COBOL pursuant to his contract with Parkin and Herrin.

We review jury instructions for abuse of discretion.59 We ask

“‘whether the court’s charge, as a whole, is a correct statement of

the law and whether it clearly instructs jurors as to the

principles of the law applicable to the factual issues confronting

them.’”60 We review the district court’s interpretation of Texas

law de novo.61 Where a party argues on appeal that the district

court erred in refusing to give a proffered jury instruction, that

party must “show as a threshold matter that the proposed

instruction correctly stated the law.”62

We find no error in the district court’s decision rejecting

GUS’s request of specific performance. Under Texas law, specific

performance is an equitable remedy that is normally available only

when the complaining party cannot be fully compensated through the

legal remedy of damages or when damages may not be accurately

59
United States v. Daniels, 281 F.3d 168, 183 (5th Cir. 2002).
60
Id. (quoting United States v. Dien Duc Huynh, 246 F.3d 734,
738 (5th Cir. 2001)).
61
Stine v. Marathon Oil Co., 976 F.2d 254, 259 (5th Cir.
1992).
62
Federal Deposit Ins. Corp. v. Mijalis, 15 F.3d 1314, 1318
(5th Cir. 1994).

41
ascertained.63 When one party breaches an agreement to provide

stock, Texas courts have consistently held that the damages remedy

is adequate, and GUS offers no argument why specific performance

was warranted under the facts of this case.64 We reject this

contention.

We also reject GUS’s claim that its damages should have been

calculated as of the time of trial rather than at the time of

breach. “[T]he rule in Texas has long been that contract damages

are measured at the time of breach, and not by the bargained-for

goods’ market gain as of the time of trial.”65 Texas courts have

applied this rule in cases involving a failure to provide stock.

In Walden v. Affiliated Computer Services, Inc., for example, the

Texas Court of Appeals held that damages in a breach of contract

claim brought by stock option holders against a corporation should

have been calculated based on the value of the corporation’s stock

on the first day after the corporation’s breach, not the value of

63
See Guzman v. Acuna, 653 S.W.2d 315, 318 (Tex. App.–San
Antonio 1983, writ dism’d) (“Specific performance is warranted
where the remedies at law are inadequate and the existence of a
valid contract is established.”); Griffin's Estate v. Sumner, 604
S.W.2d 221, 225 (Tex. Civ. App.–San Antonio 1980, writ ref’d
n.r.e.) (“The purpose of specific performance is to compel a party
who is violating a duty to perform under a valid contract to comply
with his obligations.").
64
Perhaps conceding that specific performance is not required
in this case, GUS’s brief on appeal focuses solely on its argument
concerning the proper measure of damages.
65
Miga v. Jensen, 96 S.W.3d 207, 214 (Tex. 2002).

42
the stock at the time of trial.66 The court explained that, “[i]n

a case involving a contract to deliver stock, the proper measure of

damages for breach of that contract is the same as for other

contracts: the difference between the price contracted to be paid

and the value of the article at the time when it should have been

delivered.”67

The Texas Supreme Court reinforced this rule in Miga v.

Jensen.68 Miga sought to recover damages for the value of the stock

that Jensen refused to sell him in 1994 plus his lost profits. The

only evidence of lost profits, however, was the increased market

value of the stock at the time of trial. The jury awarded him

damages based on that increase, but the Texas Supreme Court

reversed. Reiterating the rule that contract damages are measured

at the time of breach, the Court concluded that the damages Miga

was awarded under the rubric “lost profits” was actually the market

gain, to which he was not entitled. In this case, GUS is

attempting to recover precisely what Miga held is not recoverable

66
97 S.W.3d 303, 328 (Tex. App.–Houston [14th Dist.] 2003,
pet. denied).
67
Id. at 328-39; Miga, 96 S.W.3d at 213-14 (citing Randon v.
Barton, 4 Tex. 289, 293 (1849)).
68
See Miga, 96 S.W.3d at 214 (citing Heilbroner v. Douglass,
45 Tex. 402, 407 (1876) and Whiteside v. Trentman, 170 S.W.2d 195,
196 (Tex. 1943)).

43
under Texas law.69 We find no error in the district court’s

decision limiting GUS’s recovery to damages as of the time of the

breach.

B

We next review the court’s decision granting HAL judgment as

a matter of law on the contract claim. The district court based

its decision on two independent grounds. First, the court

concluded that statements made by Lopez in a prior bankruptcy

proceeding were judicial admissions that barred his contract

claim.70 The court concluded that these statements constituted

judicial admissions and revealed that Lopez had no ownership

interest in HAL, Inc. Second, the court concluded that the

evidence was legally and factually insufficient to support the

jury’s findings of breach of contract and damages.

69
See also Walden, 97 S.W.3d at 328-29 (holding that damages
in breach of contract claim brought by stock option holders against
corporation should have been calculated based on the value of the
corporation’s stock on the first day after the corporation’s breach
on which the option holders were entitled to receive their stock).
70
Specifically, in September, 1993, Lopez stated in bankruptcy
filings that he was not an officer, director, partner, or managing
executive of any corporation and did not own 5% or more of any
corporation’s voting or equity securities within the two years
immediately preceding the commencement of the bankruptcy. Lopez
further stated that he did not own any “[o]ther contingent and
unliquidated claims of every nature including tax refunds,
counterclaims of the debtor and rights to set off claims” as to
Hal, Inc. The district court concluded that these statements
revealed that he had no ownership interest in HAL, fatally
undermining his claim that Herrin and Parkin breached a contract
with him.

44
 GUS presents two arguments against the district court’s

invocation of judicial estoppel: first, that HAL waived the

judicial estoppel argument by not raising it before the district

court, and second, that Lopez’s prior statements were not judicial

admissions. There is a strong argument that the court abused its

discretion in treating these statements as judicial admissions: the

jury heard the statements Lopez made in his bankruptcy filing but

accepted Lopez’s explanation at trial, and neither HAL nor the

court itself ever thought to treat these statements as judicial

admissions until over two years after trial.

We need not decide that issue, however, because GUS fails to

overcome the court’s second basis for granting JMOL -- that the

evidence was legally insufficient to support the verdict. Indeed,

GUS presents no argument on this issue at all: it focuses its

entire argument on the court’s invocation of judicial estoppel.71

By failing to advance arguments in the body of its brief supporting

its claim on appeal, GUS has abandoned this issue.72 Since the

insufficiency of the evidence provides an independent foundation

71
The only reference GUS makes to this issue is in the
statement of issues, where it states that “[t]he Court erred in
granting judgment as a matter of law . . . because substantial
evidence supported the jury’s verdict.” In the body of its brief,
it never supports this contention with argument, factual support,
or legal support. GUS seems to have assumed that judicial estoppel
was the only basis for the court’s order of JMOL.
72
Gann v. Fruehauf Corp., 52 F.3d 1320, 1328 (5th Cir. 1995);
FED. R. APP. P. 28(a).

45
for the court’s order, and GUS fails to refute it, the order must

stand.

Even were we to reach the issue, we find no error in the

district court’s conclusion on this issue. At trial, the only

evidence of damages presented was Lopez’s testimony that he spent

$250,000 in the development of LOPEZ COBOL. The jury clearly

seized upon this figure and granted him damages in that amount.

However, while this testimony may have been evidence of his

investment in the venture, it did not speak to the value of the

company itself at the time of breach, and it thus provided no basis

for the award of damages for breach of contract. To recover on its

contract claim, GUS was required to prove damages. To do so, it

had to introduce evidence showing the value of the stock that HAL

wrongfully withheld from Lopez. It could have done so in many ways

-- by proving the market value of that stock, or, since this was a

closely corporation, by proving the market value of the assets of

the company after deducting its liabilities73 -- but it did not do

so. Instead, it introduced evidence of Lopez’s investment in HAL

and in effect received restitution for that investment, a measure

of damages neither pled nor argued nor merited under the facts of

the case. This was insufficient, and JMOL was proper.

73
Pabich v. Kellar, 71 S.W.3d 500, 509 (Tex. App.-Fort Worth
2002, pet. denied).

46
 C

Finding no error, we affirm the district court’s order

granting HAL judgment as a matter of law.74

VI

After losing its copyright claim against HAL, GUS filed suit

against several of HAL’s customers (collectively “Boaz”) for

copyright infringement based on their use of MEPAW. Boaz moved to

dismiss the suit, arguing that the HAL case conclusively decided

the issue of MEPAW’s infringement and that collateral estoppel

barred GUS from re-litigating the same issue. The district court

agreed and dismissed the case.

Events that occurred in that proceeding, however, form the

basis of several of GUS’s claims on appeal. According to GUS, HAL

made two admissions in the Boaz suit that MEPAW copied portions of

LOPEZ COBOL. Specifically, GUS alleges that Parkin testified

during a hearing that MEPAW copied certain elements of LOPEZ COBOL,

a claim that Professor Davis, an expert hired by HAL, essentially

reiterated in an expert report. Armed with these alleged

admissions, GUS filed a Rule 60(b) motion for relief from judgment

in the original HAL suit, seeking to overturn the original

judgment. GUS argued that the admissions were evidence that HAL

committed fraud and perjury in the first suit and that GUS was

74
This holding renders moot the dispute regarding Intervenor-
Plaintiff-Appellee’s entitlement to attorneys fees, which was based
solely on an alleged contingent-fee relationship.

47
entitled to postjudgment relief. The district court denied GUS’s

motion, and GUS appeals that decision.

For the same basic reason, GUS challenges the district court’s

use of collateral estoppel in the Boaz suit, contending that the

HAL suit does not merit collateral estoppel effect in light of

Parkin’s admission of copying. GUS also contests the court’s

decision granting Boaz attorneys’ fees, arguing that the case was

dismissed on a procedural technicality and that an award of fees is

inappropriate.

A

We first examine GUS’s arguments concerning the denial of its

Rule 60(b) motion. GUS contends that, given HAL’s misconduct,

relief is justified on two grounds: first, because HAL committed

fraud and perjury within the meaning of Rule 60(b)(3), and second,

because Parkin’s and Davis’s admissions constituted “newly

discovered evidence” under Rule 60(b)(2). We find neither basis

persuasive.

1

Rule 60(b)(3) allows a district court to relieve a party from

a final judgment if the adverse party committed fraud,

misrepresentation, or other misconduct.75 “This subsection of the

Rule is aimed at judgments which were unfairly obtained, not at

75
FED. R. CIV. P. 60(b)(3).

48
those which are factually incorrect.”76 To merit relief, the

complaining party must “establish by clear and convincing evidence

(1) that the adverse party engaged in fraud or other misconduct and

(2) that this misconduct prevented the moving party from fully and

fairly presenting his case.”77 Misconduct may be shown by evidence

that the opposing party withheld information called for by

discovery78 or willfully committed perjury.79

Determining whether a party has made a sufficient showing to

warrant relief lies in the sound discretion of the district court.

We therefore review the court’s decision only for an abuse of

discretion.80 We find no error here.

GUS bases its argument on two isolated statements from the

Boaz record, but neither is sufficient to demonstrate misconduct.

First, during a hearing in the Boaz case, Parkin stated on cross-

examination that “[s]ome of the data fields in the purchase order

system was supplied by Mr. Lopez. I have never denied that.

76
Rozier v. Ford Motor Co., 573 F.2d 1332, 1339 (5th Cir.
1978); see also Johnson v. Offshore Exploration, Inc., 845 F.2d
1347, 1359 (5th Cir.), cert. denied, 488 U.S. 968 (1988).
77
Montgomery v. Hall, 592 F.2d 278, 278-79 (5th Cir. 1979);
see also Diaz v. Methodist Hosp., 46 F.3d 492, 496 (5th Cir. 1995);
Washington v. Patlis, 916 F.2d 1036, 1039 (5th Cir. 1990).
78
Rozier, 573 F.2d at 1339.
79
Diaz, 46 F.3d at 496-97.
80
In re Ginther, 791 F.2d 1151, 1153 (5th Cir. 1986); Rozier,
573 F.2d at 1341.

49
Didn’t deny it in the other case.” Second, Professor Davis stated

in an expert report that “[i]t is my understanding that as one

consequence of this agreement [between Parkin, Lopez, and Herrin],

Mr. Parkin used some components of Lopez COBOL code in the creation

of MEPAW, with the full knowledge, permission, and indeed the

active cooperation of Mr. Lopez.” GUS urges that these two

statements reveal that HAL did indeed copy LOPEZ COBOL and that

HAL’s representations to the contrary in the original suit were

false. We disagree.

First, GUS misunderstands what was at issue in the first case

and why its copyright charges were dismissed. As we explained

above, to prove copyright infringement, a plaintiff must

demonstrate factual copying -- that the defendant actually copied

the software -- and then actionable copying -- that the allegedly

infringing work is substantially similar to protected elements of

the infringed work. GUS’s copyright claims were dismissed because

it failed to adduce evidence supporting the second prong of this

test, not because GUS could not prove that HAL had actually copied

MEPAW. It was assumed, for purposes of the summary judgment

motion, that factual copying had occurred. Yet the evidence that

GUS points to now -- Parkin’s statements -- is at best evidence of

factual copying, if it is even that. It says nothing about whether

such copying was actionable. In short, it does nothing to unsettle

the reasoning behind the district court’s dismissal of GUS’s

50
copyright claims or to correct the fundamental deficiency in GUS’s

infringement argument.81 GUS had every opportunity in the prior

case to prove that MEPAW was substantially similar to LOPEZ COBOL,

but it failed to do so. It must live with that failure; it may not

use a Rule 60(b) motion as an occasion to relitigate its case.

Moreover, GUS overstates the import of Parkin’s and Davis’s

statements by taking them out of context and misrepresenting the

conflict with the position taken by HAL in the original suit. GUS,

for example, fails to report that Parkin also stated repeatedly in

that hearing that HAL did not copy LOPEZ COBOL, that it only used

information and expertise supplied by Lopez, and that Lopez

consented to this use. All of these statements were consistent

with statements made by HAL in the original litigation.82

Certainly, the district court, which had the benefit of observing

Parkin’s testimony and the testimony of other witnesses in the Boaz

trial, concluded that there was no such conflict, and we cannot say

the court abused its discretion in reaching that conclusion. To

merit relief, GUS was required to prove misconduct with clear and

convincing evidence. It failed to do so.

81
We disagree, moreover, with GUS’s assertion that Parkin’s
statement, even if it were an admission of literal source code
copying, would make an Altai analysis unnecessary.
82
Most notably, in the original litigation, HAL submitted an
affidavit in which Parkin stated that he used certain data fields
and structures from LOPEZ COBOL with Lopez’s permission. Given
this evidence, it is difficult to see how Parkin’s testimony in the
second case is either perjury or misconduct.

51
 2

Under Rule 60(b)(2), a losing party may seek relief from a

judgment because of “newly discovered evidence which by due

diligence could not have been discovered in time to move for a new

trial under Rule 59(b).” As with Rule 60(b)(3) motions, the

decision whether to grant relief lies within the sound discretion

of the court.83 “To succeed on a motion for relief from judgment

based on newly discovered evidence, our law provides that a movant

must demonstrate: (1) that it exercised due diligence in obtaining

the information; and (2) that the evidence is material and

controlling and clearly would have produced a different result if

present before the original judgment.”84 Moreover, “[t]he newly

discovered evidence must be in existence at the time of trial and

not discovered until after trial.”85 GUS has not made a sufficient

showing.

First, as the district court noted, the newly discovered

evidence was not available at the time of trial: Parkin’s statement

occurred in a hearing held on November 16, 2001, and Davis’s report

was prepared on November 1, 2001. These statements, then, were

created after the entry of final judgment on September 27, 2001.

83
In re Grimland, Inc., 243 F.3d 228, 233 (5th Cir. 2001).
84
Goldstein v. MCI WorldCom, 340 F.3d 238, 257 (5th Cir. 2003)
85
Longden v. Sunderman, 979 F.2d 1095, 1102-03 (5th Cir.
1992).

52
 More importantly, GUS has not shown either that the evidence

is material or that it would have produced a different result in

the original case. Indeed, the precise opposite is apparent. As

noted above, GUS’s infringement claims were dismissed because GUS

failed to provide evidence of substantial similarity. Parkin’s and

Davis’s bare statements do nothing to unsettle this holding.

3

Finding no abuse of discretion, we affirm the district court’s

rejection of GUS’s motion for relief from judgment.

B

For similar reasons, we also reject GUS’s argument that the

district court erred in invoking collateral estoppel to dismiss the

Boaz suit. GUS argues, again, that the prior HAL judgment was

procured by fraud and perjury which prevented GUS from fully and

fairly presenting its case against HAL. GUS further argues that

Parkin’s and Davis’s admissions constitute new evidence that

distinguishes the factual basis of the HAL and BOAZ suits, making

collateral estoppel inappropriate. However, GUS failed to present

any of these arguments to the district court, and it has waived its

right to present them here.86

86
FDIC v. Mijalis, 15 F.3d 1314, 1327 (5th Cir. 1994)
(holding that, to preserve error for appeal, “the litigant must
press and not merely intimate the argument during the proceedings
before the district court. If an argument is not raised to such a
degree that the district court has an opportunity to rule on it,
[the appellate court] will not address it on appeal”).

53
 GUS urges that we should nonetheless consider its argument and

overrule the district court’s finding of collateral estoppel in

order to avoid a gross miscarriage of justice.87 GUS suggests --

without argument or justification -- that such an exception is

appropriate in this case. We rejected above GUS’s claim that its

new evidence tainted the original proceeding.

Finding no error, we affirm the district court’s invocation of

collateral estoppel in the Boaz suit.

C

GUS next argues that the district court abused its discretion

in awarding attorneys’ fees to Boaz on its defense of the copyright

claims. As we noted above, the decision to impose costs to the

prevailing party in a copyright infringement action lies in the

sound discretion of the district court.88 We find no abuse of

discretion in this case.

The district court carefully considered the issue in the Boaz

case and applied the factors endorsed by the Supreme Court in

87
Although appellate courts will usually not hear issues
brought for the first time on appeal, “an exception is sometimes
made . . . where the interest of substantial justice is at stake.”
In re: Novack, 639 F.2d 1274, 1276-77 (5th Cir. 1981).
88
17 U.S.C. § 505 (“In any civil action under this title, the
court in its discretion may allow the recovery of full costs by or
against any party other than the United States or an officer
thereof. Except as otherwise provided by this title, the court may
also award a reasonable attorneys’ fee to the prevailing party as
part of the costs.”).

54
Fogerty v. Fantasy.89 In Fogerty, the Supreme Court quoted with

approval certain nonexclusive factors identified by the Third

Circuit as particularly relevant to the purposes of a fee award

under the Copyright Act. These factors include the frivolousness

of the action, the party’s motivation in bringing it, the objective

unreasonableness in the factual and legal components of the case,

and the need in particular circumstances to advance considerations

of compensation and deterrence.90 All of the factors support an

award of fees in this case. After losing its copyright suit

against HAL, GUS turned around and filed suit against HAL’s

customers, raising on the same basic copying issues. To quote the

district court, GUS’s action was “little more than an

attempt . . . to get a second bite at the copyright apple.”

We affirm the court’s award of fees.

VII

For the foregoing reasons, we affirm the decisions of the

district court, reversing only the district court’s dismissal of

General Universal’s trade secret claim in Case Number 01-21114. We

remand that claim to the district court for further proceedings not

inconsistent with this opinion. All outstanding motions are

denied.

89
510 U.S. 517, 534 n.19 (1994).
90
Id. (quoting Lieb v. Topstone Indus., Inc., 788 F.2d 151,
156 (3d Cir. 1986)).

55