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Iconics, Inc. v. Massaro

United States District Court, D. Massachusetts

June 27, 2016

ICONICS, INC. Plaintiff,
v.
SIMONE MASSARO, CHRISTOPHER VOLPE, VENTO INDUSTRIES, INC., BAXENERGY GmbH And BAXENERGY ITALIA S.r.L., Defendants.

          MEMORANDUM AND ORDER

          DOUGLAS P. WOODLOCK UNITED STATES DISTRICT JUDGE.

         I. FACTUAL BACKGROUND

         This case involves two sets of business disputes, tied together by a common cast of characters and allegations concerning misappropriation of plaintiff’s intellectual property.

         Plaintiff ICONICS is a software company which produces HMI/SCADA (Human Machine Interface/Supervisory Control and Data Acquisition) systems. HMI/SCADA systems collect data from a machine and transmit that data in a useful, visualized form to client computers. For example, a SCADA system might be connected to a boiler in a factory, allowing a factory operator to see and control data such as water levels or temperature.

         This process necessarily requires customization - by either ICONICS itself or by middlemen known as “system integrators” -to the particular machines being monitored and controlled. Certain aspects of SCADA systems are standardized under the “OPC” interoperability standard. ICONICS’s software includes the GENESIS32, GENESIS64, and BizViz products.

         Defendant Simone Massaro is a former ICONICS employee. Beginning in late 2007, while still employed by ICONICS, Massaro started helping another former ICONICS employee, Chris Volpe, with software development for Volpe’s company, Volpe Industries. The remaining defendants, BaxEnergy GmbH, BaxEnergy Italia, S.r.L., and Vento Industries, Inc. are entities with which Massaro or Volpe was affiliated after Massaro left ICONICS.

         A. Project Foxtrot

         Volpe Industries worked in the surveillance camera business and sought to develop its own surveillance software. This software development project, with which Massaro became involved, was known as Project Foxtrot. Massaro has admitted that while still employed by ICONICS, he took ICONICS source code without permission for use in Project Foxtrot. ICONICS first learned that Massaro was using its code in Project Foxtrot in August, 2008 and confronted him on September 16, 2008. Massaro resigned from ICONICS on January 6, 2009.

         In the wake of the Project Foxtrot initiative, ICONICS commenced state and federal litigation. In December 2009, the Suffolk Superior Court issued a declaratory judgment holding that ICONICS owned all of Massaro’s interest in Project Foxtrot, due to employment contracts between ICONICS and Massaro. ICONICS, Inc. v. Volpe Industries, Inc., No. 09-0361-BLS2 (Mass. Super. Ct. Dec. 14, 2009). In 2010, Volpe Industries filed for bankruptcy. Those bankruptcy proceedings were marred by efforts to conceal the activities of Massaro and Volpe:

It is undisputed that in the bankruptcy proceedings, Vince Volpe, the brother of Chris, set up a shell company to purchase and then wipe Volpe Industries' servers. The Bankruptcy Court expressed concern that it had been defrauded by this purchase and when ICONICS ultimately acquired those servers, found that 80, 000 files had been deleted. It is also undisputed that Chris Volpe testified in the state court proceedings that he never knew that Massaro was using ICONICS software in his Project Foxtrot work but also stated in his deposition for this proceeding that he was in fact aware. ICONICS alleges, but defendants dispute, that in the state court litigation, Massaro and Volpe Industries intentionally withheld part of the source code to hide the fact that he had copied it from ICONICS.

ICONICS, Inc. v. Massaro, No. CV 11-11526-DPW, 2016 WL 199407, at *2 (D. Mass. Jan. 15, 2016).

         B. Energy Studio Pro

         Meanwhile, Massaro moved on to a new enterprise. Two weeks after his resignation, Massaro began communicating with Rüdiger Bax, of the system integrator firm Bax Engineering GmbH, about possible work. By June 2009 - ICONICS contends earlier - Massaro’s new consulting company was working with Bax Engineering on a new wind power software product called Bax Wind Power. In February of 2010, Bax and Massaro formed a new German company, defendant BaxEnergy GmbH, to run renewable energy operations, as well as an Italian subsidiary defendant BaxEnergy Italia SRL (the two companies will be referred to herein as BaxEnergy). The development history of Bax Wind Power begins in February 2010, after the formation of BaxEnergy, leaving a potential gap in the record regarding how the product was coded in the early stages of its development.

         Over time, BaxEnergy developed the Bax Wind Power product into a new product, still focused on wind power, called Energy Studio Pro (“ESP”). ESP includes a SCADA component, which for one of its customers is provided by ICONICS and for other customers is provided by an ICONICS competitor. The Volpe brothers were also involved with BaxEnergy. Vince Volpe eventually purchased Mr. Bax’s majority share of BaxEnergy. Chris Volpe founded a new company, defendant Vento Industries, Inc., which operates as an American partner or division of BaxEnergy providing sales and support in the American market.

         ICONICS contends, among other things, that ESP was developed using misappropriated ICONICS code, provided by Massaro, violating both copyright protection and trade secrets law. There is no dispute that at least some ICONICS code appears in ESP. A small, 150-line file of javascript ICONICS code known as webHMI.js can be found on the BaxEnergy source code repository. Most of that code was also copied into a different file titled ScadaAutomation.js. WebHMI.js allows clients to view relevant data visualizations over a web browser. That said, plaintiff’s technical expert opined that webHMI.js is the only directly copied ICONICS code he found in Energy Studio Pro. ICONICS alleges additional copyright and trade secret violations based on the development process itself.

         II. PROCEDURAL HISTORY

         The original complaint in this proceeding was filed in August 2011, alleging only one count (copyright infringement) against only Massaro, for claims related to Project Foxtrot. ICONICS has amended its complaint twice, in May 2013 and April 2014, and now pleads ten causes of action against the current list of defendants. Almost immediately after this litigation began, discovery disputes arose. By the summer of 2014, ICONICS was complaining - as it still does - that it was being improperly denied access to BaxEnergy code, while defendants were complaining - as they still do - that ICONICS had not properly identified its trade secrets with specificity. These issues, which have been litigated aggressively, have required consistent judicial oversight and intervention since then, as have other discovery matters. They remain intertwined with the instant summary judgment motions, both on the merits and as a continuing source of contention between the parties and their counsel.

         In May, 2014, a separate settlement was reached that resolved all claims against Vince Volpe. He is no longer a defendant in this matter. Otherwise, motion practice has failed to narrow the scope of this litigation substantially. On September 17, 2014, by oral order, I denied motions to dismiss by BaxEnergy and by Chris Volpe (with the exception of dismissing on preemption grounds state unfair business practice claims concerning copyright infringement) and denied defendants’ motion to strike trade secret claims.

         Earlier this year, on defendant’s motion for partial summary judgment, I entered an order denying the motion in part (as to Massaro) on statute of limitations defenses and granting the motion in part (as to the trade secrets, intentional interference with contractual relations and DMCA claims against Christopher Volpe, and as to the copyright infringement claims related to Volpe Industries). ICONICS, Inc. v. Massaro, No. CV 11-11526-DPW, 2016 WL 199407, at *1 (D. Mass. Jan. 15, 2016).

         Now before me are two separate summary judgment motions brought by defendants, one concerning plaintiff’s civil RICO and civil conspiracy claims and one concerning all other claims insofar as they relate to Energy Studio Pro (but focused almost entirely on the intellectual property issues). Notably, this means that summary judgment is not sought as to the non-BaxEnergy defendants for eight of ten counts. For its part, Plaintiff has moved for summary judgment on its claims under the Digital Millennium Copyright Act (“DMCA”). In addition, there are three motions to strike expert witness testimony under Daubert, two from plaintiff, one as to defendant’s technical expert, Arthur Zatarain, and the other as to defendant’s damages expert, Bradford J. Kullberg, and one from defendants (as to Jimmy S. Pappas, plaintiff’s damages expert). Finally, ICONICS has a pending motion to compel discovery and for sanctions based on long-standing discovery controversies.

         In this Memorandum and Order I consider and reject all summary judgment motions with respect to the issues presented except those raising trade secret claims, which I reserve, awaiting the development of additional initiatives to clarify the trade secrets at issue. I will allow Plaintiff’s motion to compel as a predicate for further developments and clarification of the disputed trade secrets. I will treat as moot the motions to strike the expert witness submission as to trade secrets in light of such further trade secret claim clarification initiatives. I will reserve the motions to strike the damages experts until further clarification of the substantive claims.

         III. STANDARD OF REVIEW

         Under Rule 56, I may only grant summary judgment if there is no genuine dispute of material fact and if the undisputed facts demonstrate that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Carmona v. Toledo, 215 F.3d 124, 132 (1st Cir. 2000). An issue is genuine if it “may reasonably be resolved in favor of either party.” Vineberg v. Bissonnette, 548 F.3d 50, 56 (1st Cir. 2008). A fact is material if it could sway the outcome of the litigation. Id. In determining whether genuine disputes of material fact exist, all reasonable inferences must be drawn in the non-movant’s favor. Id. Once the moving party has carried its burden, the burden shifts to the non-moving party, which must provide specific and supported evidence of disputed material facts. LeBlanc v. Great Am. Ins. Co., 6 F.3d 836, 841 (1st Cir. 1993). The non-moving party “may not rest upon mere allegation or denials” and must “establish a trial-worthy issue.” Id.

         IV. BAXENERGY COPYRIGHT CLAIMS

         ICONICS has alleged both direct copying - specifically, in the form of the single webHMI.js file - and indirect copying in which defendants used ICONICS code while developing the Energy Studio Pro software but ultimately did not retain that code in ESP. Defendants raise two general arguments against ICONICS’ copyright claims. First, they argue that the copyright allegations are extraterritorial and therefore outside the scope of domestic copyright law. Second, they argue that the copyright registrations covering ICONICS’ products do not cover the relevant, potentially copied code, barring an infringement suit. With respect to allegations of indirect copying, defendants argue that the evidence of infringement is only circumstantial and refuted by direct record evidence. As for WebHMI.js, where copying is admitted, defendants assert that the file was either permissibly used under license or copied in a de minimis fashion. I address these contentions in turn.

         A. ...


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