NTE LLC v. Kenny Construction Company et al

Filing 110

MEMORANDUM Opinion and Order: In accordance with the accompanying Memorandum Opinion and Order, Defendant Kenny's Motion for Summary Judgment is granted in part and denied in part. The parties shall prepare for trial on Count VI of the First Amended Complaint, the only count remaining. Counsel shall jointly contact the Court's courtroom deputy for available trial dates. Signed by the Honorable James B. Zagel on 4/25/2016. Mailed notice(ep, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
NTE, LLC,
Plaintiff,
v.

No. 14 C 9558
Judge James B. Zagel

KENNY CONSTRUCTION COMPANY, an
Illinois corporation; NALCOR ENERGY, a
Canadian corporation; AMEREN
CORPORATION, a Missouri corporation;
ELECTRIC TRANSMISSION TEXAS LLC,
a Delaware limited liability company;
ARIZONA PUBLIC SERVICE COMPANY,
an Arizona corporation; and DOE SAAS
COMPANY,
Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiff NTE, LLC (“NTE”) filed this copyright infringement suit against several of its former
clients, including Defendant and movant Kenny Construction Company (“Kenny”) on December 1,
2014. Kenny has moved for summary judgment on the seven counts of the First Amended Complaint in
which Kenny is involved, namely: Count I (direct copyright infringement), Count II (contributory
copyright infringement), Count IV(breach of contract—proprietary data), Count V (misappropriation),
Count VI (breach of contract—payment), Count VII (unjust enrichment), and Count VIII (violation of
the Computer Fraud and Abuse Act (18 U.S.C. § 1030)). For the following reasons, Kenny’s motion is
granted in part and denied in part.
LEGAL STANDARD
Summary judgment obviates the need for a trial where there is no genuine issue as to any
material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). A

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genuine issue of material fact exists if “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, 106 S.Ct. 2505, 91
L.Ed.2d 202 (1986). To determine whether any genuine fact issue exists, the court must assess the proof
as presented in the record, including depositions, answers to interrogatories, admissions, and affidavits,
to view the facts in the light most favorable to the non-moving party and draw all reasonable inferences
in that party’s favor. Fed. R. Civ. P. 56(c); Scott v. Harris, 550 U.S. 372, 378 (2007). The court may not
weigh conflicting evidence or make credibility determinations. Omnicare, Inc. v. UnitedHealth Grp.,
Inc., 629 F.3d 697, 704 (7th Cir. 2011). If a claim or defense is factually unsupported, the court should
dispose of it at the summary judgment stage. Celotex Corp. v. Catrett, 477 U.S. 317, 323–24, 106 S.Ct.
2548, 91 L.Ed.2d 265 (1986). The party seeking summary judgment bears the initial burden of proving
there is no genuine issue of material fact. Id. at 323, 106 S.Ct. 2548. In response, the non-moving party
cannot rest on bare pleadings but must designate specific material facts showing there is a genuine issue
for trial. Id. at 324, 106 S.Ct. 2548; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir.2000).
BACKGROUND
I. The Parties’ Relationship
NTE is an Illinois-based software company that provides its clients with computer systems to
improve their supply chain efficiencies. Kenny is an Illinois corporation and wholly-owned subsidiary of
Granite Construction, Inc. Kenny performs logistical management for power transmission projects,
including managing the delivery of parts and equipment used in those projects.
In January 2011, Kenny contracted with NTE to develop logistical management software that
would help Kenny track such information as the location and type of material used in their construction
projects. Kenny manually inputted three types of information into the NTE database for each utility
project: 1) a “material hierarchy,” 2) a “tower makeup,” and 3) the “purchase order input” for that

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material. It is undisputed that this raw data belonged to Kenny. It also undisputed that this raw data
alone did not indicate what materials actually existed at a particular job site.
Using the files input by Kenny, NTE’s software then selected, arranged, and organized the
data using proprietary bar code scanners. These bar codes allowed NTE to track the materials at Kenny’s
various job sites and create tables and charts for Kenny’s use. Kenny’s Area Manager for the Logistics
Solution Team, William Perrich, referred to the bar code identification system as “the head of the fish . .
. that all the other information about a particular item in inventory is centered around,” acknowledging
the bar code system’s critical role in enabling Kenny to track its inventory.
NTE received a Certificate of Registration from the Copyright Office on November 28, 2014.
The copyright encompasses proprietary data including NTE’s barcode identifiers, NTE’s selection and
arrangement of information, and the resulting Item Inventory Reports.
II. The Copyright Dispute
Both parties agree that in July 2014, Kenny began developing its own tracking software
system (“the KCC Internal System”). In a bidding process during this time, Kenny provided screen shots
and data from the NTE database to NTE competitors, at which point NTE temporarily interrupted
Kenny’s service. The parties’ statements of facts significantly diverge at this point. According to Kenny,
on several occasions NTE’s service suffered “serious lag times when pulling and exporting data,” and
required three to four weeks for each new report or coding change. NTE also locked Kenny out of its
system in April 2014, following a dispute between the parties (a fact on which both sides agree.) Kenny
explains that it was its dissatisfaction with NTE’s product that prompted Kenny to recruit programmer
Peter Oswald (“Oswald”) to design the KCC Internal System. Kenny asserts that Oswald was not
familiar with NTE’s software, had no access to the NTE system, and received no guidance as to how to
design the new system. Moreover, Kenny says it implemented controls to prevent all personnel working

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on the new system from accessing or obtaining information from NTE’s system. While Kenny had
access to NTE’s Software Suite through a web browser that allowed users to view reports and other
NTE-generated information, Oswald himself “did not receive any screen shots, reports, source code,
direction in the types of software to use, direction in the type of database system to use, direction in the
type of hardware to use, process flow, work flows, or any guidance as to how to link the data, or
configure the database queries.”
Rather, Kenny says it explained to Oswald the structure and operations of its projects,
including an outline of the supply chain, materials production, and construction phases. Kenny then
provided Oswald with a list of requirements for its software system (not containing any software code,
sample charts, or screen shots) and Oswald designed the new system to those specifications. Oswald and
two other programmers then developed the design from scratch, resulting in a system that Kenny
considers “significantly better and different than NTE’s Software Suite.” Kenny contends this system is
entirely independent of and does not rely on NTE’s system, though Kenny did admit that for historical
data—that is, any tracking information that pre-dates the implementation of the KCC Internal System—
the new system required old data to be input from NTE-generated reports.
In November 2014, Kenny transitioned its clients from the NTE system to the new Kenny
software. Kenny asserts that it conducted a “blind inventory” to explain the transition to two of its
clients, Ameren and APS. Kenny claims that transition did not involve the use of any information from
the NTE system, but acknowledges that in November 2014, while still authorized to access NTE’s
system, Kenny printed an item inventory report and uploaded factual information from the report into
the KCC Internal System. Kenny’s counsel explained that Kenny extracted “approximately 200,000
pieces of [individual] data” from the NTE system and hand-entered them into Kenny’s system, but
maintains that this only applied to data that belongs to Kenny, not the copyrighted compilation

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belonging to NTE. Kenny’s position as described by William Perrich is that the KCC Internal System
“is a completely new system that was designed without any input or reliance on the NTE Software
Suite.”
NTE’s story differs from Kenny’s on numerous key points. First, NTE denies any recurring
performance issues with its software, claiming that Kenny only experienced one brief service
interruption, which occurred after NTE had discovered that Kenny gave what NTE believes to be
proprietary information to NTE’s competitors. Second, NTE disputes Kenny’s claim that the KCC
Internal System is either better or materially different from NTE’s product. Third, NTE disagrees with
Kenny’s characterization of the system transition as a “blind inventory” process. NTE points out that
Perrich himself testified that during the transition, Kenny extracted information and reports from the
NTE system and input that information into Ameren’s system.
Fourth, NTE disputes Kenny’s representation that Kenny used only two columns of factual
information when it uploaded the NTE reports into the KCC system. NTE and Kenny fundamentally
disagree about how to characterize the nature of the information that was taken from the NTE database
and disbursed to, at various points, NTE competitors and Kenny clients. Where Kenny describes this
information as mere raw factual data, NTE considers it to be proprietary data that was culled,
programmed, and analyzed by NTE software.
Fifth, NTE claims that Kenny “encouraged and facilitated its customers’ copying of NTE’s
data by creating user manuals to help its clients import NTE data into their own database.” NTE cites
materials that Kenny provided its client Nalcor, in which Kenny explained how to complete such tasks
as “Import new Item Inventory from NTE,” “Import Material Receiving Reports from NTE,” and
“Import Fresh Copy of Inventory from NTE.” Kenny denies any intent to export information and illicitly
transfer it into a new system, claiming that the user manuals merely contained instructions on how to use

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information in the NTE reports and that Kenny paid NTE to generate and provide access to their reports
for exactly this purpose.
Finally, NTE alleges that Kenny took NTE’s barcodes and replaced them with different
barcodes, while Kenny insists it created its own barcodes and used a new tracking system that was not
derived from NTE’s system. The record in this case is unclear and contradictory with regards to Kenny’s
mechanism for replacing NTE barcodes with Kenny barcodes as well as any distinction between the two
sets of barcodes.
III. The Contract Dispute
On January 8, 2014, several months prior to the service difficulties and development of the
KCC Internal System, NTE and Kenny signed a second agreement to cover an initial term of six months.
Kenny had the option to extend the agreement for an additional six months if it communicated its intent
to do so by May 1, 2014. The parties dispute whether or not this option was exercised and produced
numerous conflicting documents in support of both propositions. According to Kenny, after the initial
agreement expired on July 8, 2014, the relationship between the two companies was converted to a
month-to-month contract. Kenny continued to pay monthly invoices for July, August, September,
October, and November 2014. In December 2014, Kenny did not pay its monthly invoice, which it
considers a termination of the month-to-month contract. NTE—believing they were operating under the
extension option of the original contract—considers Kenny’s failure to pay the December 2014 invoice
to be a breach of contract.
In support of its contention that there was no extension to the contract, Kenny produced
several emails from NTE representative Robert Rocque (“Rocque”). In one dated May 6, 2014, Rocque
wrote Karl Miller (“Miller”) of Granite Construction, “Please bear in mind that the May 1st deadline to
extend the current agreement for six more months has passed, without notice from KCC/Granite.” A

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July 3, 2014 email from Rocque to Miller elaborated somewhat obliquely on the state of the relationship
with NTE, stating in part, “I have instructed the NTE accounting team to send to Kenny/Granite an
invoice(s) for the NTE service month of July. During our prior conversation, you, Mike and I agreed to
treat July in isolation in order to provide time to complete a longer agreement, at a rate of $100K for the
month. The rate for July 2014 does not affect the current agreement or negotiations on future long term
agreement.” Finally, a third email dated September 29, 2014 stated, “Please use the same billing process
as you did last month to KCC. We don’t have a signed agreement as of this moment.” However, NTE
argues this last email refers only to a Master Agreement, not the six-month extension that NTE contends
was operative at that time.
NTE also produced an email sent to Rocque by Kenny employee Stacy Southern (“Southern”)
on May 6, 2014, stating in part, “As was discussed between you and Karl prior to May 1, 2014, KCC is
extending the current agreement for an additional 24 months with an addendum outlining the new
pricing and some additional modifications to the current contract. We believe that the addendum can be
executed expeditiously; however, if for some reason, the parties cannot agree then KCC will be
extending the current contract for the additional 6 months per the notification that Karl gave to you and
you accepted.”
In December 2014, NTE filed a copyright infringement, misappropriation, and breach of
contract suit against Kenny and certain of Kenny’s customers. 1 Kenny filed its motion for summary
judgment in November 2015.
DISCUSSION
I. Copyright Infringement and Proprietary Information Claims
A plaintiff alleging copyright infringement must prove “(1) ownership of a valid copyright,
1

Former Defendants Ameren, Arizona Public Service Co., Electric Transmission Texas, and Nalcor
have been dismissed from the case.
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and (2) copying of constituent elements of the work that are original.” Feist Publications, Inc. v. Rural
Telephone service Co., Inc., 499 U.S. 340, 361 (1991). It is well-settled that facts alone are not
copyrightable, while compilations of facts typically are as long as they demonstrate some degree of
originality. Id. at 344-345; 17 U.S.C. § 103(a). Compilation is defined as “a work formed by the
collection and assembly of pre-existing materials or of data that are selected, coordinated, or arranged in
such a way that the resulting work, as a whole, constitutes an original work of authorship.” 17 U.S.C. §
101. “[O]riginality is not a stringent standard; it does not require that facts be presented in an innovative
or surprising way. It is equally true, however, that the selection and arrangement of facts cannot be so
mechanical or routine as to require no creativity whatsoever. The standard of originality is low, but it
does exist.” Feist, 499 U.S. at 362. Even when a compilation is copyrighted, the constituent facts that
make up the compilation are not, themselves, protected. “[C]opyright protects only the elements that
owe their origin to the compiler—selection, coordination, and arrangement of facts.” Feist, 499 U.S. at
359; see also Assessment Techs. of WI, LLC. v. WIREdata, Inc., 350 F.3d 640, 644 (7th Cir. 2005).
Here, Kenny challenges both prongs of the copyright infringement tests, arguing in the first
instance that NTE’s database lacks the originality sufficient to qualify for copyright protection and in the
second that Kenny’s extraction and use of information in the NTE database did not constitute copying.
A. Scope of NTE’s Copyright
The parties disagree as to whether NTE’s copyright encompasses data that is inextricably
linked to NTE’s system of bar code tracking, such as the date and location that materials in Kenny
construction projects were received, moved, or issued. NTE argues that these items are included in the
copyright, not as unadorned facts but as part of an original compilation. Here, NTE says the originality
arises from the “association of bar code numbers with inventory” and the “selection, creativity, and
judgment in selecting which information to include.” NTE claims that the raw data’s value comes only

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from its relationship to the NTE barcodes and its contextual meaning within the NTE system, and it is
this created meaning—not the bare facts themselves—that Kenny allegedly extracted and that NTE
argues is subject to copyright protection. NTE cites numerous cases where courts have found sufficient
originality to protect compilations of facts that are similar to the compilation at issue here, including a
factual compilation of yacht listings, BUC Int’l Corp. v. Int’l Yacht Council Ltd., 489 F.3d 1129, 1134
(11th Cir. Fla. 2007); maps dividing the United States into distinct television marketing regions, Nielsen
Co. (US), LLC v. Truck Ads, LLC, 2011 WL 3857122 (N.D. Ill. 2011); and electronic parts catalogs for
clients in the automotive and heavy equipment industries, Snap-On Bus. Solutions Inc. v. O’Neil &
Assocs., 708 F. Supp. 2d 669, 685 (N.D. Ohio 2010) (plaintiff had valid copyright in database where
plaintiff organized defendant’s data “in an original data tree and create[d] relationships between the
levels of the tree that would not otherwise exist”).
By contrast, Kenny asserts that the NTE’s copyright only extends to the particular data selection,
arrangement, and coordination in the NTE system and not to simple collections of facts. Kenny
considers the contested data to be factual information with meaning independent of its relationship to
NTE’s system. Defined in this way, the data would belong to Kenny under both the common law and the
terms of the January 2014 agreement between the parties.
As discussed above, the threshold of originality required to enforce a copyright is low. Feist, 499
U.S. at 345 (“[T]he requisite level of originality is extremely low . . . The vast majority of works make
the grade quite easily.”). In an analogous case, the Seventh Circuit found that a real estate assessment
program that organized and arranged data met the originality requirements “because no other real estate
assessment program arranges the data collected by the assessor in these 456 fields grouped into these 34
categories, and because this structure is not so obvious or inevitable as to lack the minimal originality
required . . . as it would if the compilation program simply listed data in an alphabetical or numerical

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order.” Assessment Techs. 350 F.3d at 643 (citations omitted). Here, too, NTE’s organization and
selection system—in particular the barcode system—is sufficiently original to extend copyright
protection to the NTE program’s specific arrangement and organization of the data.
Thus, I find that NTE’s valid copyright does extend to the selection, arrangement and
coordination of the data in the NTE system, including the particular way in which NTE’s barcodes
imbue the data with meaning. But this does not end the inquiry, for as we shall see below, the fact that
raw data is entangled with copyrighted technology does not automatically render extraction of the data
an infringement.
B. The Proprietary Information Claims (Counts IV, V, VII and VIII)
Kenny insists that it extracted only the raw data that it already owns from the NTE database,
and describes NTE’s contribution as providing an “empty database that was filled with data from
Kenny’s work sites.” Unsurprisingly, NTE firmly rejects this characterization and argues that the data is
empty of meaning without the organizing principle and tracking history provided by NTE’s barcodes. I
do not consider NTE’s product to be merely an empty database, but, as the Seventh Circuit has
intimated, Kenny may be entitled nonetheless to retrieve its raw data even when that data is somewhat
intermingled with NTE software.
In Assessment Techs., the Seventh Circuit declared that it could constitute “copyright misuse”
to prevent a company from utilizing its own data. Assessment Techs., 350 F.3d at 646-47. While the
facts of that case involved data that was more easily extricable from copyrighted arrangement and
selection processes than the Kenny data is from the NTE system, the court in Assessment Techs. did
contemplate a situation like the one at hand and concluded, “AT [the copyright holder] would lose this
copyright case even if the raw data were so entangled with [AT’s product] that they could not be
extracted without making a copy of the program.” Id. at 644-45. Of course, Kenny did not make a literal

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copy of NTE’s system, but it did borrow the idea of a barcode system and extracted historical data
whose meaning was inextricable from its relationship to NTE’s copyrighted selection and arrangement
process. The Seventh Circuit opined, however, that such a case would be governed by a Ninth Circuit
opinion holding that “intermediate copying” of a copyrighted operating system was a fair use, “since the
only effect of enjoining it would be to give [the copying party] control over noninfringing products.” Id.
at 645, citing Sega Enterprises Ltd. V. Accolade, Inc., 977 F.2d 1510, 1520-28 (9th Cir. 1992). Here,
after extracting the NTE reports, Kenny ended up in possession only of data that it undeniably owns or
is in the public domain, which is to say the facts pertaining to the location of Kenny’s materials across
time. The contested data was input into the NTE system by Kenny in the first place and does not cease
to belong to Kenny just because it is manipulated by a copyrighted software system. 2 Feist, 499 U.S. at
359. Just as in the Assessment Techs. hypothetical, Kenny’s activities may have skirted the boundaries of
the copyright, but ultimately only served to give Kenny control over noninfringing products. Therefore,
I am granting Kenny’s motion for summary judgment with respect to the proprietary information claims.
C. The Copyright Claims (Counts I and II)
NTE’s copyright claims pertain to Kenny’s alleged infringement of proprietary data as well as
the alleged reverse engineering of NTE’s system to design the KCC Internal System. “The Seventh
Circuit uses the substantial similarity test to determine whether a copyright has been infringed.” Skyline
Design, Inc. v. McGrory Glass, Inc., 2014 WL 258564 at *5 (N.D. Ill. 2014) (citing Wildlife Express Corp. v.
Carol Wright Sales, Inc., 18 F.3d 502, 508-09 (7th Cir. 1994)). This two-part test asks 1) “whether the
alleged infringer had access to the copyrighted work” and 2) “whether an ordinary observer would consider
the allegedly infringing work to be substantially similar to the copyrighted work.” Id. (citations omitted).
Here, access is established via Kenny’s documented, contracted-for use of the NTE system.

2

Kenny also argues that it was authorized to remove the data and export reports by the terms of the January 2014 agreement.
There is no need to examine this argument, as the analysis above resolves the claim in Kenny’s favor.

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However, the record is not developed enough for an “ordinary observer,” let alone a jury, to determine if the
KCI Internal System meets the substantial similarity test. “One of the principal purposes of the summary

judgment rule is to isolate and dispose of factually unsupported claims or defenses. . .” Celotex
Corp., 477 U.S. at 323–24. Here, NTE has provided very little evidence that the KCC Internal System is
actually modeled on or structurally related to the NTE system, except insofar as both systems made use
of a barcode tracking system. Even in that regard, there is no evidence that Kenny’s barcodes utilize the
same selection, arrangement, or organization scheme as NTE’s barcodes. NTE alleges, but does not
support, that Kenny simply replaced NTE’s barcodes with different codes generated by Kenny, and
further points to Kenny’s extraction of two columns of data from the NTE system. But neither of these
allegations speaks to whether Kenny copied NTE’s selection, arrangement, and coordination scheme,
which are the only copyrighted elements of its work. Thus, because the record does not provide enough
evidence for a reasonable jury to find in favor of the Plaintiff, I am granting Kenny’s motion for
summary judgment on the copyright claims.
II. Unpaid Fees Claim (Count VI)
“[S]ummary judgment will not lie if the dispute about a material fact is ‘genuine,’ that is, if the
evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v.
Liberty Lobby, 477 U.S. at 248. “[W]eighing the evidence and determining the credibility of witnesses
are functions of the jury, not this Court.” Equal Employment Opportunity Comm’n v. Costco Wholesale
Corp., 2015 WL 9200560, at *9 (N.D. Ill. 2015).
As outlined above, the factual record regarding the alleged extension of the contract is riddled
with contradictions and conflicting accounts. Both sides produced emails in support of their respective
positions, but neither offers enough context to corroborate or clarify the state of the contract. Just as the
May 6, 2014 email from Robert Rocque indicated that the deadline to extend the agreement had passed
without renewal, an email from Stacey Southern on the same day noted that Kenny still believed it
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would be able to exercise the 6-month extension option. The September 29, 2014 email stating “We
don’t have a signed agreement as of this moment” is also inconclusive, as both parties offer plausible
interpretations that ultimately raise questions of credibility, which are not appropriate for this Court to
decide on a summary judgment motion. Because the evidence presented on this count is sufficiently
disputed that a reasonable jury could return a verdict in favor of either party, I deny Kenny’s motion for
summary judgment with regard to Count VI, the unpaid fees claim.
CONCLUSION
For the foregoing reasons, Defendant Kenny’s Motion for Summary Judgment is granted in
part and denied in part. The parties shall prepare for trial on Count VI of the First Amended Complaint,
the only count remaining.
ENTER:

James B. Zagel
United States District Judge
DATE: April 25, 2016

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