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Williams v. Genesis Financial Technologies, Inc.

United States District Court, D. Colorado

March 30, 2018



          Marcia S. Krieger Chief United States District Judge.

         THIS MATTER comes before the Court on the Plaintiffs' Motion for Equitable, Injunctive, and Declaratory Relief (# 116), the Defendants' response (# 120), and the Plaintiffs' reply (#129); and the Defendants' Renewed Motion for Judgment as a Matter of Law and Renewed Motion to Dismiss (# 117), the Plaintiffs' Response (# 121), and the Defendants' Reply (# 122). For the reasons that follow, the motions are denied.


         The Court exercises jurisdiction pursuant to 28 U.S.C. § 1332.


         The Court assumes the reader's familiarity with the facts of this case and the proceedings to date, and offers only a cursory summary. The Plaintiffs, Mr. Williams and his associated entity, LNL Publishing, are known for commodities trading strategies. The Defendants, Genesis Financial Technologies (“Genesis”) and its principals, Mr. Larson and Mr. Kilman, are authors of a software program, Trade Navigator, that assists in the analysis of commodities market data.

         At an undetermined time, Mr. Larson and Mr. Williams entered into an oral contract by which Mr. Williams agreed to include his commodities trading strategies in Trade Navigator and that he would promote the software to students at trading seminars he held. In exchange, Genesis would pay Mr. Williams a specified share of profits derived from the sale of Trade Navigator to his students. The parties abided by that agreement for several years, but relations soured. In September 2012, Mr. Williams informed the Defendants that he was terminating the contract and demanded that the Defendants cease using his strategies, name, and likeness. The Defendants continued to use Mr. Williams' strategies and likeness (as set forth herein), and this litigation ensued.

         The case proceeded to a jury trial on the following claims: (1) breach of contract against Genesis and Mr. Larson, (2) breach of contract against Mr. Kilman (relating to a separate nondisclosure agreement), and (3) unjust enrichment against Genesis and Mr. Larson. The jury returned a partial verdict for the Plaintiffs. Specifically, it found that Mr. Larson individually entered into the oral contract with Mr. Williams and that Mr. Williams was entitled to $358, 277.50 for Mr. Larson's breach of that contract. The jury found that Mr. Williams was not entitled to any damages from Genesis for breach of contract. The jury also found in favor of Mr. Kilman on the contract claim against him. Rendering an advisory verdict for the Court as to unjust enrichment, the jury found that Genesis unjustly received a benefit at the Plaintiffs' expense by continuing to use Mr. Williams' strategies and likeness after September 2012. The jury suggested that the Court award $400, 000 to Mr. Williams and $1.5 million to LnL Publishing on this claim.

         In the instant motions, the Plaintiffs request (# 116) that the Court to confirm the jury's advisory verdict and award damages on the unjust enrichment claim consistent with that verdict. They also request, as equitable relief, an order enjoining the Defendants from continuing to offer the Plaintiffs' trading strategies, name, and likeness, and an order requiring the Defendants to return such property to the Plaintiffs. The Defendants move (# 117) for judgment as a matter of law on the contract and unjust enrichment claims, arguing that there is insufficient evidence to support a breach of contract verdict against Mr. Larson and that the record does not warrant any verdict for the Plaintiffs on the unjust enrichment claim.


         Federal Rule of Civil Procedure 50(b) states that after the Court has submitted a claim to the jury, a party “may file a renewed motion for judgment as a matter of law.” The Court may allow judgment on the verdict or direct the entry of judgment as a matter of law. Fed.R.Civ.P. 50(b)(1), (3). In analyzing such a motion, courts should construe the record evidence in the light most favorable to the nonmoving party. Tyler v. RE/MAX Mtn. States Inc., 232 F.3d 808, 812 (10th Cir. 2000). Courts must not “weigh evidence, judge witness credibility, or challenge the factual conclusions of the jury.” Deters v. Equifax Credit Info. Servs. Inc., 202 F.3d 1262, 1268 (10th Cir. 2000). The Court may grant the motion only if the evidence points in a single direction and is not susceptible to any reasonable inferences that may support the nonmoving party's position. Tyler, 232 F.3d at 812.

         Mr. Larson moves for judgment as a matter of law in his favor on the Plaintiffs' breach of contract claim against him. In an abbreviated argument, he contends that the contract with Mr. Williams, and all performance thereupon, was made by Genesis (the entity), not Mr. Larson (the individual). The Court finds that there was sufficient evidence in the record to permit the jury to conclude that the Plaintiffs made the contract with Mr. Larson, individually. The date on which the contract was entered into, and the existence or corporate form of Genesis at that time, were matters that were significantly disputed by the parties. Mr. Williams testified that the contract was formed in “late '99, 2000, ” and made directly with Mr. Larson. Mr. Larson testified that the agreement was formed in 2002, and was made on behalf of a predecessor entity of Genesis, although there was significant cross-examination as to the particular nature of that corporate entity at that time.

         The jury was free to consider and weigh the parties' various testimony on these issues, and they appear to have credited Mr. Williams' testimony. For purposes of this motion, the Court must also draw all inferences in favor of the Plaintiffs, and the Court finds that there was sufficient evidence to justify the conclusion that Mr. Larson was a party to the oral contract. The Court does not understand Mr. Larson's motion to challenge the amount of the jury's breach of contract verdict. Thus, the Court denies Mr. Larson's motion for judgment as a matter of law on the breach of contract claim against him and enters judgment in favor of the Plaintiffs and against Mr. Larson in the amount of $358, 277.50.


         The Plaintiffs' unjust enrichment claim is premised on allegations that, after Mr. Williams terminated the parties' oral contract in September 2012, Genesis continued to benefit from the use of Mr. Williams's intellectual property in Trade Navigator and from Genesis' use of Mr. Williams' name and likeness in its marketing. Genesis argues that: (i) as to Mr. Williams' “libraries” of trading strategies, the unjust enrichment claim is preempted by the Copyright Act; and (ii) the Plaintiffs did not present enough evidence to prove that Genesis enjoyed any particular benefit at the Plaintiffs' expense. The Plaintiffs argue that the Court should adopt the jury's advisory verdict on the unjust enrichment claim in the amounts returned by the jury, and also enter injunctive relief: (i) restraining the Defendants from using any of the Plaintiffs' “personal property/data, ” (ii) requiring the Defendants to return various libraries to the Plaintiffs, and (iii) disable certain Genesis employees' ability to use the libraries in question. Because the Court acts as factfinder on the equitable claim for unjust enrichment, it treats the parties' motions on these issues as trial briefs, and after considering all of the evidence presented at trial, finds and concludes as follows.

         An unjust enrichment claim is governed by Colorado law. To prove an unjust enrichment claim, a plaintiff must demonstrate that: (1) the defendant received a benefit (2) at the plaintiff's expense (3) under circumstances rendering it unjust to allow the defendant to retain the benefit without compensation. Robinson v. Colo. State Lottery Div., 179 P.3d 998, 1007 (Colo. 2008). The Court understands the Plaintiffs to argue that Genesis received three types benefits at the Plaintiffs' expense after September 2012: possession and use of the libraries themselves, receipt of data fees from customers who used Trade Navigator with the libraries enabled, and use of Mr. Williams name or likeness to promote Trade Navigator.

         A. The Libraries

         Trade Navigator is a software program that receives and displays market data for a variety of commodities markets. Customers purchase the Trade Navigator software from Genesis, and in addition pay Genesis a monthly subscription fee in order to have access to current market data. The monthly fees vary in amount depending on the comprehensiveness of market data and the speed by which it is delivered.

         A “library” is a package of indicators or strategies that comprise “a grouping of technical analysis” or techniques. Tr. 455:16-19. In other words, they are one or more mathematical algorithms or formulas, written in a programming language readable by Trade Navigator, through which users can filter and analyze the raw commodities market data.[1] See Tr. 879:1-6. By all appearances, the libraries in Trade Navigator are simply the formulas themselves, unaccompanied by any interpretive or explanatory material. To understand how to use and interpret the results of Mr. Williams' libraries, [2] users had to attend Mr. Williams' seminars. See Tr. 879:7-15.

         Users obtained the right to use a given library by paying to attend a seminar by Mr. Williams that explained the library in question. The user could then download the library into their personal copy of Trade Navigator, and Genesis would enable their ability to use the library to review data. Tr. 423:1-2. Once a user obtained permission to use a library, he or she retained that right to continue to use it seemingly in perpetuity (unless the customer left Trade Navigator for more than 60 days and later returned, in which case Mr. Williams would have to give his approval to reauthorize access for that user), without the need to make any additional payments to Mr. Williams or Trade Navigator. Tr. 423:8-25, 432:9-15. It is clear that, after termination of the contract in September 2012, Genesis continued to allow users who had been enabled for Mr. Williams' libraries to continue to use them. Tr. 143:12-22.

         The Plaintiffs argue that Genesis received a benefit at their expense after September 2012 by continuing to enable Mr. Williams' libraries to be used by Trade Navigator customers. Such a benefit would be at the Plaintiffs' expense only if the Plaintiffs have some continuing property right to control the distribution and use of the libraries. Property interests in intellectual property can arise in a variety of ways: they may spring from a contractual agreement covering the use of the intellectual property; they may be protected by law, such as copyright or trademark law; or they may receive common-law protection. It is undisputed that, after September 2012, the parties had no contractual agreement governing the use of the libraries, so the Court turns to the copyright law and the common law to examine whether those sources confer the Plaintiffs some property right in the libraries.

         1. Copyright and Copyright Preemption[3]

         Genesis argues that the Plaintiffs' unjust enrichment claim (at least as it relates to Mr. Williams' libraries) is preempted by the operation of the Copyright Act. The Copyright Act preempts state-law causes of action if: (i) the work at issue is within the subject matter of copyright, and (ii) the rights granted under state law are equivalent to the exclusive rights within the general scope of copyright. Gates Rubber Co. v. Bando Chem. Indus. Ltd., 9 F.3d 823, 847 (10th Cir. 1993) (citing 17 U.S.C. § 301(a)-(b)). The general subject matter of copyright covers “original works of authorship fixed in any tangible medium of expression” from which they can be reproduced or communicated. 17 U.S.C. § 102(a). Copyright protection does not extend to an idea, “regardless of the form in which it is described, explained, illustrated, or embodied.” 17 U.S.C. § 102(a)-(b). Even if a work contains un-copyrightable material, it may nevertheless fall within the subject matter of copyright if it is fixed in a copyrightable medium or if it contains copyrightable material as well. See Forest Park Pictures v. Universal TV Network Inc., 683 F.3d 424, 429 (2d Cir. 2012).

         The scope of exclusive copyright rights are: (1) to reproduce the work, (2) to prepare derivative works, (3) to distribute copies of the work, (4) to perform the work publicly, and (5) to display the work publicly. 17 U.S.C. § 106. To determine whether a common-law claim is preempted, the Court must conduct a factual analysis as well as a legal analysis of the required elements of the common-law claim. See R.W. Beck Inc. v. E3 Consulting LLC, 577 F.3d 1133, 1147-48 (10th Cir. 2009). The Tenth Circuit uses the “extra-element test” to determine whether a state-law cause of action grants rights beyond the rights in § 106, resulting in a qualitatively different cause of action. Gates Rubber, 9 F.3d at 847.

         The parties devote most of their argument to the similarity of the unjust enrichment claim to the scope of rights under § 106, but they seem to agree that the libraries are not copyrightable under § 102. Even though Mr. Williams testified that he believed he had copyright-like control over the libraries, the Plaintiffs have made their position on copyright clear: the libraries, which are comprised of formulas and algorithms resulting in indicators and strategies, are not copyrightable. The Court agrees.

         The libraries are not covered by the subject matter of copyright because they are ideas that are not fixed to a work of tangible expression.[4]See 17 U.S.C. § 102(a)-(b). It is possible, and may even be likely, that the written materials Mr. Williams circulates at his seminars, which explain how the formulas in the libraries work and how to use the libraries, come within the subject matter of copyright. See Ex. 599. But such materials are not at issue in this claim; the claim concerns only the libraries as they interface with Trade Navigator. Accordingly, because the libraries are not within the subject matter of copyright, the Court rejects Genesis' argument that the doctrine of Copyright Preemption precludes an unjust enrichment claim. In ...

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