United States District Court, E.D. Texas, Sherman Division
ORDER ADOPTING REPORT AND RECOMMENDATION OF THE
UNITED STATES MAGISTRATE JUDGE
L. MAZZANT UNITED STATES DISTRICT JUDGE
above-entitled and numbered civil action was heretofore
referred to United States Magistrate Judge Caroline M. Craven
pursuant to 28 U.S.C. § 636. On June 17, 2019, the
Magistrate Judge issued a Report and Recommendation
(“R&R”), recommending Defendant MRI Centers
of Texas, LLC's Motion for Summary Judgment (Dkt. #136-1)
be granted and that Plaintiff's copyright infringement
claims against Defendant be dismissed with
prejudice (Dkt. #203). Virtual Chart Solutions I,
Inc. (“Plaintiff” or “VCSI”) filed
objections to the R&R (Dkt. #205). MRI Centers of Texas,
LLC (“Defendant” or “MCT”) filed a
response to the objections (Dkt. #206). The Court conducts a
de novo review of the Magistrate Judge's
findings and conclusions. Plaintiff's request for a
hearing is denied.
an action for copyright infringement, inducement to infringe
copyright, contributory copyright infringement, vicarious
copyright infringement, breach of fiduciary duty, breach of
contract, misappropriation of trade secrets, unfair
competition, and accounting filed by Plaintiff against the
following defendants: (1) Brian Lee Meredith; Tracie Dawn
Davis; Virtual Chart Network, LLC; virtualasc.com (d.b.a.
myPIcase.com); Virtual Chart Solutions, LLC; and Lone Star
VCS, LLC (the “Meredith Defendants”); (2)
Surgical Notes, Inc.; Surgical Notes MDP, LP; Surgical Notes
GP, LLC; and Surgical Notes RCM, LLC (the “Surgical
Notes Defendants”); and (3) MCT (Dkt. #92). MCT is the
only remaining defendant in this case.
to Plaintiff, VCSI employed Brian Meredith
(“Meredith”) from May 2013 until February 19,
2015 (Dkt. #92 ¶¶ 19, 21, 64). On August 30, 2013,
Meredith entered into a Proprietary Information and
Inventions Agreement and a Technology Assignment Agreement
(“TAA”) with Plaintiff (Dkt. #92 ¶¶ 19,
21, 64). In these agreements, Meredith assigned all existing
intellectual property rights he possessed to VCSI, including
his rights to software and all related methods (Dkt. #92
¶¶ 24, 37, 49). In the Second Amended Complaint
(“SAC”), Plaintiff alleges all “such
copyrights that VCSI owns all rights and interest in, and
title to - including the literal sources code underlying the
Billing, vImage, VCS Images, VCN, VCS, vChiro, and VCS Web
modules - as recorded with the United States Copyright Office
in Registration Nos. TXu 2-038-670, et seq.
(‘VCSI Copyright Materials')” (Dkt. #92
alleges that during Meredith's employment with VCSI, he
gave Defendant access to and use of Plaintiff's
proprietary information and copyrighted materials (Dkt. #92
¶¶ 60-62, 75, 179-191). Specifically, Plaintiff
argues Meredith provided Defendant source code in violation
of Meredith's agreements with VCSI (Dkt. #92 ¶¶
60-62, 75, 179-191). According to Plaintiff, upon information
and belief, Defendant “reproduced, reproduces, adapted,
adapts, offered, offers, installed, installs, distributed and
distributes unauthorized copies of VCSI Copyright
Materials;” “used, uses, operated, operates,
offered, offers, installed, installs, distributed and
distributes unauthorized copies of VCSI Copyright Materials
through MCT's operations;” and “[t]he user
interface and database structures of the MCT operations
actually utilize(d) infringing copies of VCSI Copyright
Materials.” (Dkt. #92 ¶¶ 182-84). Plaintiff
seeks injunctive relief and monetary damages for the alleged
infringement (Dkt. #92 at pp. 43-45).
SAC, Plaintiff sued Defendant for (1) trade secret
misappropriation, (2) unfair competition, and (3) copyright
infringement (Dkt. #92). On July 16, 2018, Defendant filed
its first motion for summary judgment, arguing
Plaintiff's claims for trade secret misappropriation,
unfair competition, and for statutory damages or
attorney's fees in its copyright claims should be
dismissed (Dkt. #114). In its response in opposition,
Plaintiff dismissed without prejudice the unfair competition
claims and claims for statutory damages and attorneys'
fees under the Copyright Act (Dkt. #121 at p. 3), leaving
only the trade secret misappropriation claim the subject of
Defendant's first motion for summary judgment.
Magistrate Judge entered a Report and Recommendation on
Defendant's first motion for summary judgment on January
2, 2019 (Dkt. #138). This Report and Recommendation
recommended the motion be granted and Plaintiff's trade
secret misappropriation claim be dismissed with prejudice
(Dkt. #138). The Court adopted the January 2 Report and
Recommendation on February 5, 2019 (Dkt. #149). Only
Plaintiff's copyright infringement claim against
Defendant remained pending.
Defendant filed a motion for leave to file a second motion
for summary judgment, asserting Plaintiff's copyright
infringement claim be dismissed (Dkt. #135). Because this
motion was filed outside the dispositive motion deadline, the
Magistrate Judge denied Defendant's motion (Dkt. #143).
However, during the Final Pretrial Conference before the
undersigned on March 8, 2019, the Court reinstated
Defendant's second motion for summary judgment (Dkt.
#136) for the Magistrate Judge to consider.
FOR SUMMARY JUDGMENT
reinstated motion for summary judgment, Defendant argues it
is entitled to judgment on Plaintiff's copyright
infringement claim because Plaintiff judicially admitted in
its briefing on a prior motion that its failure to designate
an expert or disclose expert testimony prohibits Plaintiff
from providing any evidence on copyright infringement from
which a factfinder could reasonably decide in its
favor (Dkt. #136 at p. 1). Defendant further
asserts Plaintiff cannot prove substantial similarity between
its copyrighted work and the alleged infringing copy (Dkt.
#136 at p. 5).
17, 2019, the Magistrate Judge entered the R&R on
Defendant's second motion for summary judgment,
recommending the Court grant summary judgment on
Plaintiff's copyright infringement claim (Dkt. #203). The
Magistrate Judge first concluded Plaintiff failed to present
sufficient evidence regarding factual copying of its
copyrighted work. R&R at pp. 19-20. In so holding, the
Magistrate Judge agreed with Defendant that there is no
direct evidence that establishes MCT's code is the same
as that source code Plaintiff copyrighted. R&R at p. 19.
Second, the Magistrate Judge found that even if Plaintiff had
presented direct evidence of factual copying, it still failed
to produce evidence of a substantial similarity between the
copyrighted code and the code used by Plaintiff. The
Magistrate Judge noted the Fifth Circuit Court of Appeals has
specifically considered, and rejected, Plaintiff's
argument that direct evidence eliminates the need to produce
evidence of substantial similarity. R&R at p. 20. The
Magistrate Judge concluded no reasonable juror could find
substantial similarity. R&R at p. 23.
filed three objections to the R&R (Dkt. #205). In the
first objection, Plaintiff asserts the R&R
mischaracterizes Plaintiff's direct evidence of copying
and does not view those facts in the light most favorable to
the Plaintiff as the non-movant (Dkt. #205 at p. 1).
According to Plaintiff, Meredith testified he provided the
entire code to MCT (Dkt. #205 at p. 1). Plaintiff argues a
reasonable jury could find Plaintiff's entire copyrighted
software was copied by Defendant based on this direct
evidence (Dkt. #205 at p. 1).
second objection, Plaintiff argues the R&R
“misapplies the proper standard of evidence in lawsuits
alleging such direct infringement and copying.” (Dkt.
#205 at p. 1). Plaintiff asserts the R&R applies the
standard for proving infringement circumstantially. According
to Plaintiff, substantial similarity is not required in this
case because factual copying was shown through direct
evidence and this case also involves alleged infringement
where an entire work was copied as opposed to only some of
the software parts (Dkt. #205 at p. 1-2). Plaintiff maintains
that if the entire work was copied, “then that should
be enough to raise an inference of material
infringement.” (Dkt. #205 at p. 2).
related third objection, Plaintiff disagrees with the
R&R's conclusion that the facts of this case are
distinguishable from the case law cited by Plaintiff in its
response (Dkt. #205 at p. 2). Based on its
objections, Plaintiff requests the Court deny Defendant's
second motion for summary judgment (Dkt. #205 at p. 2).
Rule 56(a) of the Federal Rules of Civil Procedure, summary
judgment is properly granted “if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). A genuine issue of material fact exists
when “the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Anderson
v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986).
moving party must initially show there is no genuine issue of
material fact and that it is entitled to judgment as a matter
of law. Fontenot v. Upjohn Co., 780 F.2d 1190, 1194
(5th Cir. 1986). If the movant bears the burden of proof on
the claim or defense on which it is moving for summary
judgment, it must provide evidence establishing all of the
essential elements of the claim or defense as a matter of
law. Id. at 194. If the nonmovant bears the burden
of proof, the movant may ...