Rouse v. Walter & Associates, L.L.C.

513 F.Supp.2d 1041 (2007)

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Nature of the Case

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Facts

Dr. Gene Rouse (Rouse) and Dr. Doyle Wilson (Wilson) were employed by Iowa State University of Science and Technology (ISU). Viren Amin is an Associate Scientist with the ISU Department of Animal Science. Biotronics, Inc., is an Iowa corporation that was formed in 1998 by Wilson, Rouse, Amin, and Craig Hayes. (All known as Ps). Defendant, Walter & Associates, L.L.C., markets and provides agricultural consulting services in the United States, Canada, and Latin America. Defendant Marvin J. Walter is President and Chairman of Walter & Associates, L.L.C., and was a member of the board of directors of the Iowa State University Research Foundation (ISURF) prior to the formation of Walter & Associates. ISURF is a not-for-profit corporation that is a separate entity from ISU. ISURF owns and licenses ISU's intellectual property. The Office of Intellectual Property and Technology Transfer (OIPTT) at ISU is charged with serving ISU as the vehicle for marketing and licensing intellectual property owned by ISURF. Dr. Kenneth Kirkland is the Executive Director of ISURF and the Director of OIPTT. Nita Lovejoy is the Associate Director of ISURF and OIPTT. Ps researched the ability to use an ultrasound machine to scan cattle to determine the quality of the beef on live cattle before the cattle are slaughtered. This was paid for with multiple grants from various entities, including the United States Department of Agriculture, the American Angus Association, and the Beef Industry Council, among others. They raised $ 1.6-million in outside grant funding. The research resulted in the development of live animal intramuscular fat prediction software (LAIPS). LAIPS was used to predict the degree of intramuscular fat shown on the cattle scans in the lab and contains algorithms that analyze data and provide comprehensive information in terms of the percentage of intramuscular fat. The initial LAIPS algorithms were designed to work with the Aloka ultrasound device. Rouse and Wilson assigned the copyright to the software to ISURF in February of 1995. ISU began to license the LAIPS program to third parties in approximately May of 1995. Rouse, Wilson, and Amin received royalties from ISURF's licensing of the LAIPS software until 2001. LAIPS requires the use of another 'front-end' interface program, to serve as a user interface and a means to display the images. Using a small part of the $ 1.6-million in grant money, the ISU Department of Animal Science purchased new computers that had increased processor speed and used Windows as an operating system. Amin developed a Windows-compatible front-end program that could process large numbers of images. They called the program USOFT. In May 1995, Amin contacted Evergreen Technologies, Inc., in order to obtain a license for Evergreen's VisionTools software. Amin obtained a license for VisionTools from Evergreen. Pursuant to this license agreement, ISU was granted a nonexclusive, nontransferable license to copy the VisionTools software for the sole purpose of incorporating the software into ISU's programs. The license also permitted the distribution of the software within the departments of the University on a noncommercial basis. The software was not to be distributed commercially to any person or organization. ISU was not permitted to, reproduce, sub-license, distribute, or dispose of the software, in whole or in part, other than as permitted under the license agreement. Amin signed the license agreement as an employee of ISU. USOFT when used with LAIPS, allows for the analysis of real-time ultrasound images collected on live beef cattle. VisionTools is a necessary component of USOFT. Amin alone was the one who wrote the software code but Rouse and Wilson were involved in calculating and preparing certain algorithms used in the USOFT program. Rouse and Wilson also directed and planned the type of information that would be beneficial to an individual using the software and how to display the information on the screen. Amin programmed the USOFT menu pages with '© Iowa State University' on each screen of the program. The software also displays the following message to users: 'This software is developed at Iowa State University (U.S.A.) and copyrighted by the ISU Research Foundation, Inc.' USOFT was never assigned to ISURF in written form, and an express written agreement regarding the ownership of the USOFT copyright does not exist between Ps and Amin and ISU. In July of 1996, pursuant to a Material Transfer and Limited Use License Agreement, ISURF licensed LAIPS and USOFT to the Animal Genetics and Breeding United at the University of New England in Armidale, Australia. The Agreement identified the research materials as 'Ultrasound Software for Beef Quality Research (U-Soft)/ISURF 01480' and stated the research materials identified were the property of ISURF. Wilson signed this Material Transfer Agreement in July of 1996. In October of 1997, Rouse, Wilson, and Amin executed a 'gold sheet' research proposal for 'Centralized Processing of Real Time Ultrasound Images Research Project.' The funding for the project involved grants from the AAA to ISU in the amount of $ 200,000 over a two-year period from January 1, 1998, through December 31, 1999. Wilson, Rouse, and Amin agreed to develop a centralized ultrasound processing (CUP) laboratory and to develop the structure that would allow for transitioning of the CUP lab to the private sector. ISU agreed to make available approximately $63,000 in University resources annually, including faculty, secretarial staff, facilities, and equipment. Rouse and Wilson agreed to assign the rights to any intellectual property arising from the sponsored research to ISURF. As part of the two-year research project, the ISU Department of Animal Science developed an intramuscular fat prediction model for the Classic ultrasound scanner. USOFT, which was being used in the CUP lab, was updated by Amin during the time it was in use, but there is no evidence these updates constituted anything more than updates occurring in the normal life of a research software tool. LAIPS was also being used in the CUP lab. Disclosures from Rouse and Wilson of newly developed software were not given to ISURF. Walter (D) was approached to take the CUP lab into the private sector. ISURF, the entity responsible for handling the licensing of intellectual property for ISU, became involved in the negotiation of a licensing agreement with D. At this time Amin stated that USOFT was 'free to anyone who wants it.' An agreement was signed and the software was delivered to D. The distribution of the VisionTools software to D constituted a breach of the specific terms of the license agreement ISU had entered into with Evergreen Technologies. In 2002, Rouse, Wilson, and Amin, through their company, Biotronics, decided to establish a commercial business and compete in the ultrasound market. Biotronics would thus be directly competing with D. Biotronics does not use USOFT in the course of its ultrasound business. In January 2005, Rouse and Wilson drafted a letter asserting for the first time that they, along with Amin, were the exclusive owners of USOFT. On April 14, 2005, counsel for Rouse and Wilson sent a letter to ISURF, requesting that it sign a form admitting that Rouse, Wilson, and Amin, and not ISURF, were the owners of USOFT. ISURF refused to sign the document and sent a letter to counsel for Rouse and Wilson that stated, 'In response to the above memo, it is acknowledged that the Iowa State University Research Foundation, Inc. does not own the copyright to the USOFT software.' On June 8, 2005, Wilson, Rouse, and Amin filed a Certificate of Registration with the United States Copyright Office for the USOFT program. The copyright was registered on June 9, 2005. At some time during 2005, prior to the filing of the present suit, Rouse and Wilson sent a cease and desist letter to D, claiming USOFT was independently owned by them. D refused to discontinue their use of the USOFT program. P sued D. On May 1, 2007, Ds filed a Motion for Partial Summary Judgment contending that Rouse and Wilson's claims for copyright infringement must be dismissed because Rouse and Wilson cannot establish as a matter of law that USOFT is an expression of their creation, rather than merely their idea, which is not subject to copyright protection, and that USOFT was created by Amin, Rouse, and Wilson within the scope of their employment at ISU and thus is owned by ISU as work made for hire. Rouse, Wilson, and Amin have resisted this Motion for Partial Summary Judgment.