Finding that the plaintiff created a genuine dispute of material fact regarding the copyrightability of the subject matter in dispute, the U.S. Court of Appeals for the Tenth Circuit vacated the district court’s grant of summary judgment and remanded the case for further proceedings. R.W. Beck, Inc. v. E3 Consulting, LLC, Case No. 08-1344 (10th Cir., Aug. 14, 2009) (Hartz, J.).
Beck and E3 are competing firms that provide consulting services in connection with the financing of energy-related projects. In the typical course of business, both companies analyze various aspects of a project, including technical, environmental, regulatory and commercial aspects of the project, then submit an independent engineer’s report memorializing any such analysis.
In 2006, E3 created one such report for Calyon Corporate and Investment Bank in connection with the financing of two coal-fired cogeneration plants owned by Windsor Financing (the Windsor Report). Beck contends that a section in the Windsor Report was copied from similar sections included in two of Beck’s reports dating back almost 20 years, including a report for the Sacramento Power Authority (the Sacramento Report) and a report for the Orange Cogeneration Limited Partnership Project (the Orange Report). Beck filed suit against E3, raising a claim for copyright infringement under the federal Copyright Act and claims for unfair competition, unjust enrichment and deceptive trade practices under Colorado law. E3 moved to dismiss the complaint for failure to state a claim. The lower court, treating the motion to dismiss as a motion for summary judgment since both parties referred to materials outside of the pleadings, granted summary judgment to E3 on all claims. Beck appealed.
On appeal, the court affirmed the dismissal of the unfair competition and unjust enrichment claims as being pre-empted by the Copyright Act. The court also affirmed the judgment on the deceptive trade practices claim because Beck cannot establish that the alleged deceptive practice significantly impacted the public.
As to the copyright claim, E3 argued that most of the language at issue in the copyrighted Beck report is not protected by copyright law because Beck took the language from a third-party report that predated the Sacramento and Orange Reports, as well as that the language in those reports was not protected because it had not been copyrighted and had entered the public domain.
With regards to the original author issue, the court noted that to prevail on its copyright claim, Beck must establish that it possesses valid copyrights in the Sacramento Report and Orange Report and that E3 copied protected elements of that report. In the district court proceedings E3 presented evidence in the form of a declaration from a current E3 employee who was previously employed by Beck and was involved in the preparation of the Sacramento Report and the Orange Report, stating that the language from the Sacramento and Orange Reports were taken from a report that was prepared by a third party. In response, Beck filed a declaration of two managing employees who asserted that E3’s declarant would not have been permitted to copy a third-party report and also authenticated other Beck reports (predating the third-party report) that contained essentially the same pertinent language as the Sacramento Report and Orange Report. Viewing this evidence, the court found that there was a genuine issue of material fact as to whether the language in the Sacramento Report and Orange Report was original to Beck that should preclude summary judgment.
The court also rejected E3’s argument that the language in Beck’s reports was taken from earlier reports, that the language in those reports was not protected by copyright and that it had entered the public domain. The court found that the Sacramento Report and Orange Report had not entered the public domain because Beck produced evidence that it had previously copyrighted these earlier reports and had affixed copyrights notices to them. As before, the court found conflicting evidence as to E3’s originality and public-domain arguments that preclude summary judgment on these issues.
The court also noted that E3 had raised two additional arguments on appeal that it had not raised at the district court. First, E3 argued that Beck’s claim for copyright infringement must fail because it is an attempt to protect ideas rather than expressions in violation of the functionality requirement of the copyright laws. Under the functionality requirements, when a work describes how to perform a task or function, there is no copyright protection for the knowledge that is conveyed. E3 argued that Beck’s complaint relates to only an alleged copying of functional elements of the report, namely, the concepts of “disclaiming liability, qualifying assumptions, and identifying standard risk factors with respect to the reported findings and conclusions.”
E3 argued on appeal that under the merger doctrine, Beck was improperly seeking protection of ideas that may only be expressed in a limited number of ways. The merger doctrine limits protection when a given idea is inseparably tied to a particular expression. E3 argued that there are only so many ways to express disclaimer liability and as a result, Beck’s form of expression is not protected under the merger doctrine. Noting that that there was considerable force to these arguments, the court noted that nevertheless they could not be relied on to affirm summary judgment made on other grounds because the arguments relating to functionality and merger were raised for the first time on appeal. The court noted that Beck should have had an opportunity to respond further to the new argument before the district court.