Compulife Software, Inc. v. Binyomin Rutstein
Unpublished (but marked as [PUBLISH]) (2024)
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Rule of Law:
The arrangement of literal elements of a computer program, such as the sequence of variables in source code, can be a protectable constituent structural part under the abstraction-filtration-comparison test for copyright infringement. Deceptive web scraping that leverages the plaintiff's code to acquire a trade secret constitutes 'improper means' of misappropriation, and under Florida law, trade secret misappropriation is an intentional tort subjecting jointly-acting defendants to joint and several liability regardless of varying culpability.
Facts:
- Compulife Software, Inc. developed software to generate life insurance quotes, which relied on its secret, encrypted database of insurance rates, some obtained ahead of public release.
- Compulife's software code was arranged in a specific sequence of variables (e.g., state, birth month, birth year, sex, smoking status) that had to be followed exactly for the software to function with the database.
- David Rutstein, who was permanently barred from the insurance profession, created several websites that used Compulife’s software without a license, registering these sites in his son Binyomin Rutstein’s name.
- David Rutstein obtained access to Compulife’s software by misleading Compulife into believing he worked with a legitimate licensee.
- Binyomin Rutstein allowed his father, David, to use his insurance agent license number to conduct these unauthorized insurance activities.
- Moses Newman, acting under the direction of David Rutstein and Aaron Levy, supervised a 'scraping attack' on Compulife's website to acquire millions of insurance quotes from its database.
- The defendants then used these millions of acquired quotes for their own websites, causing a decline in Compulife's sales and revenue.
- The defendants' scraping method relied on copying the specific order and formatting of Compulife’s copyrighted code.
Procedural Posture:
- Compulife Software, Inc. sued Moses Newman, Aaron Levy, Binyomin Rutstein, and David Rutstein in the United States District Court for the Southern District of Florida, alleging, among other claims, copyright infringement and misappropriation of trade secrets.
- The parties consented to a magistrate judge and waived their right to a jury trial.
- The magistrate judge conducted a bench trial.
- The magistrate judge's ruling was appealed to the United States Court of Appeals for the Eleventh Circuit, which clarified applicable standards and remanded the case for more specific findings (Compulife I).
- On remand, a new district court judge conducted a second bench trial, incorporating the Eleventh Circuit's findings as the law of the case.
- The district court found against Compulife on its copyright infringement claim but in favor of Compulife on its trade secret misappropriation claim.
- The district court granted Compulife injunctive relief and entered judgment for compensatory and punitive damages against all defendants jointly and severally.
- Both Compulife (as plaintiff-appellee/cross-appellant) and the defendants (as defendants-appellants/cross-appellees) appealed the district court's decision to the United States Court of Appeals for the Eleventh Circuit.
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Issue:
1. Did the district court err by failing to consider the copyrightability of the entire arrangement of Compulife's source code variables as a potentially protectable constituent part under the abstraction-filtration-comparison test? 2. Did the district court err in concluding that the defendants acquired Compulife's trade secret database through 'improper means' via a scraping attack? 3. Did the district court err by holding the defendants jointly and severally liable for misappropriating Compulife’s trade secret despite their varying levels of culpability?
Opinions:
Majority - Brasher, Circuit Judge
1. Yes, the district court erred by failing to consider the copyrightability of the entire arrangement of Compulife's code variables as a constituent component during the abstraction phase of the abstraction-filtration-comparison test. The Eleventh Circuit held that there is no principled distinction between the arrangement of nonliteral and literal elements of a program, and therefore, courts must assess the arrangement of literal elements (like source code) as a potentially protected constituent part. While the court affirmed the district court's filtration of individual elements like variable names, camel case, and radio buttons as unprotectable due to obviousness, industry standards, or the merger doctrine, it found the failure to abstract the overall arrangement of variables to be an error requiring remand for new fact findings on the copyright claim. 2. No, the district court did not err in concluding that the defendants acquired Compulife's trade secret database through 'improper means.' The court reiterated that 'improper means' can include actions that are not independently unlawful, citing E. I. duPont deNemours & Co. v. Christopher. It found that the defendants' deceptive scraping attack, which leveraged the copied order of Compulife's copyrighted code to obtain millions of variable-dependent insurance quotes, resembled the surreptitious acquisition of a trade secret. The court also upheld its prior determination from Compulife I that the database constituted a trade secret subject to reasonable protective efforts, finding no substantially different evidence or manifest injustice to warrant an exception to the law-of-the-case doctrine. 3. No, the district court did not err by holding the defendants jointly and severally liable for misappropriating Compulife’s trade secret. The court affirmed that, under Florida law, trade secret misappropriation is an intentional tort, which is an exception to comparative fault regimes. When defendants act in concert and their tortious acts combine to produce a single injury, joint and several liability applies, treating all defendants as equally responsible regardless of their individual degrees of fault. The court found ample evidence that David Rutstein, Moses Newman, Aaron Levy, and Binyomin Rutstein acted in concert, and their combined actions caused a single injury of lost sales and revenue to Compulife. The defendants forfeited any argument regarding separate punitive damages by not raising it below.
Analysis:
This case significantly clarifies the application of the abstraction-filtration-comparison test in copyright infringement cases involving software, particularly by mandating consideration of the 'arrangement' of literal code elements as a potentially protectable component. It reinforces a broad interpretation of 'improper means' in trade secret misappropriation, affirming that deceptive web scraping, especially when intertwined with leveraging aspects of the plaintiff's code, is actionable. Furthermore, the decision solidifies the application of joint and several liability for intentional torts like trade secret misappropriation under Florida law, emphasizing that varying levels of individual culpability among jointly acting defendants do not preclude such liability.
