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Case: 08-10521 Document: 00511229362 Page: 1 Date Filed: 09/09/2010

CASE NO. 08-10521

IN THE UNITED STATES COURT OF APPEALS


FOR THE FIFTH CIRCUIT

MGE UPS SYSTEMS, INC.


Plaintiff-Appellant-Cross-Appellee
v.
POWER PROTECTION SERVICES LLC; BILL WILKIE
Defendants-Appellees

GE CONSUMER AND INDUSTRIAL INC.;


GE INDUSTRIAL SYSTEMS INC.;
GENERAL ELECTRIC COMPANY;
POWER MAINTENANCE INTERNATIONAL, INC.
Defendants-Appellees-Cross-Appellants

On Appeal From the United States District Court


For The Northern District of Texas, Fort Worth Division

APPELLEES-CROSS-APPELLANTS
GENERAL ELECTRIC COMPANY AND
POWER MAINTENANCE INTERNATIONAL, INC.’S RESPONSE
TO APPELLANT’S PETITION FOR REHEARING EN BANC

Joseph F. Cleveland, Jr.


Richard H. Gateley
J. Heath Coffman
BRACKETT & ELLIS
A Professional Corporation
100 Main Street
Fort Worth, Texas 76102-3090
(817) 338-1700

Attorneys for Appellees-Cross-Appellants


Case: 08-10521 Document: 00511229362 Page: 2 Date Filed: 09/09/2010

CERTIFICATE OF INTERESTED PERSONS

1. Number and Style of Case: Case No. 08-10521, MGE UPS Systems,

Inc., Plaintiff-Appellant-Cross Appellee v. Power Protection Services LLC, Bill

Wilkie, Defendants-Appellees; GE Consumer and Industrial, Inc., GE Industrial

Systems, Inc., General Electric Company, Power Maintenance International, Inc.,

Defendants-Appellees-Cross-Appellants.

2. The undersigned counsel of record certifies that the following listed

persons and entities as described in the fourth sentence of Rule 28.2.1 have or may

have an interest in the outcome of this case. These representations are made in order

that the judges of this court may evaluate possible disqualification or recusal.

A. Parties:

1. Plaintiff/Appellant/Cross-Appellee

• MGE UPS Systems, Inc. which was merged into APC


Sales and Service Corporation on January 1, 2009

2. Corporate parents/affiliates of Plaintiff/Appellee

• American Power Conversion Corp.


• Schneider Electric Holdings, Inc.
• Schneider Electric Industries, SAS
• Schneider Electric, SA

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3. Defendant/Appellee/Cross-Appellant

• General Electric Company


• Power Maintenance International, Inc.
• GE Consumer & Industrial—a division of General Electric
• GE Industrial Systems—a division of General Electric

4. Amici Curiae

• Motion Picture Association of America, Inc.


• Entertainment Software Association
• Business Software Alliance
• Recording Industry Association of America
• Software & Information Industry Association
• The United States of America

B. Attorneys

1. Attorneys of Record for Plaintiff/Appellant/Cross-Appellee:

Stephen A. Kennedy
KENNEDY, CLARK & WILLIAMS, P.C.
1700 Pacific Avenue, Suite 1280
Dallas, TX 75201

Albon O’Neal Head, Jr. (former counsel)


Amanda Bush (former counsel)
Anne Marie Finch (former counsel)
James D. Bradbury (former counsel)
Kerry V. Vacalis (former counsel)
Shannon M. Zmud (former counsel)
JACKSON WALKER, L.L.P. (former counsel)
301 Commerce Street 2400
Fort Worth, TX 76102

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James E. Davis (former counsel)


DAVIS KENNEDY PC
3010 LBJ Freeway, Suite 1200
Dallas, Texas 75234

2. Attorneys of Record for Defendants/Appellees/Cross-


Appellants:

Joseph F. Cleveland, Jr.


Richard H. Gateley
J. Heath Coffman
BRACKETT & ELLIS
A Professional Corporation
100 Main Street
Fort Worth, Texas 76102-3090

3. Attorneys for Amici Curiae

Kenneth Doroshow
Senior VP, General Counsel
Entertainment Software Association
575 7th Street NW, Suite 300
Washington, DC 20004

Stacy R. Obenhaus
GARDERE WYNNE SEWELL LLP
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201

Jennifer Pariser
Senior VP, Litigation
Recording Industry Association of America
1025 F Street NW, 10th Floor
Washington, DC 20004

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Keith M. Kupferschmid
VP, Intellectual Property Policy & Enforcement
Software & Information Industry Association
1090 Vermont Avenue NW, 6th Floor
Washington, DC 20005

Andy Tindel
PROVOST iUMPHREY LAW FIRM LLP
112 East Line Street, Suite 304
Tyler, Texas 75702

Robert H. Rotstein
Wade B. Gentz
MITCHELL SILBERBERG & KNUPP LLP
11377 West Olympic Blvd.
Los Angeles, California 90064

David Carson
General Counsel
United States Copyright Office
Library of Congress
101 Independence Avenue SE
Washington, DC 20559

Tony West
James T. Jacks
Thomas M. Bondy
Mark R. Freeman
U.S. Department of Justice
950 Pennsylvania Avenue N.W.
Civil Division, Room 7228
Washington, D.C. 20530-0001

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/s/Joseph F. Cleveland, Jr.


Joseph F. Cleveland, Jr.
Richard H. Gateley
J. Heath Coffman
BRACKETT & ELLIS
A Professional Corporation
100 Main Street
Fort Worth, Texas 76102-3090

Attorneys for Defendants/Appellees/Cross-


Appellants General Electric Company and Power
Maintenance International, Inc.

Dated September 9, 2010.

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TABLE OF CONTENTS

Page

CERTIFICATE OF INTERESTED PERSONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . i

TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi

TABLE OF AUTHORITIES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

ARGUMENT AND AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

I. No Evidence of Circumvention of a Technological Measure. . . . . . . 3

II. MGE Did Not Prove Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

CERTIFICATE OF SERVICE

CERTIFICATE OF COMPLIANCE

ECF FILING STANDARDS CERTIFICATIONS

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TABLE OF AUTHORITIES

CASES PAGE

Bonner v. Dawson, 404 F.3d 290 (4th Cir. 2005).. . . . . . . . . . . . . . . . . . . . . . . . 6, 7

Chamberlain Group, Inc. v. Skylink Technologies, Inc.,


381 F.3d 1178 (Fed. Cir. 2004).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Elcor Chem. Corp. v. Agri-Sul, Inc.,


494 S.W.2d 204 (Tex. Civ. App.–Dallas 1973). . . . . . . . . . . . . . . . . . . . . . . 7

In re Bass, 113 S.W.3d 735 (Tex. 2003).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 8

Powell v. Penhollow, 260 Fed. Appx. 683 (5th Cir. 2007).. . . . . . . . . . . . . . . . . . . 7

Travelers Cas. & Sur. Co. of Am. v. Ernst & Young LLP,
542 F.3d 475 (5th Cir. 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Universal City Studios v. Corley,


273 F.3d 429 (2d Cir. 2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

OFFICIAL TEXTS

17 U.S.C. § 504(b).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

17 U.S.C. § 1201(a)(1)(A).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 2, 4, 8

17 U.S.C. § 1201(a)(3)(A).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 5

Senate Report No. 105-90 (1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

MISCELLANEOUS AUTHORITIES

RESTATEMENT (THIRD) OF UNFAIR COMPETITION.. . . . . . . . . . . . . . . . . . . . . . . . . . 7

5th Circuit Rule 35, Internal Operating Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . 3

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ARGUMENT AND AUTHORITIES

In its opinion, the panel affirmed the district court's dismissal of MGE's claim

that General Electric Company and Power Maintenance International, Inc.

(collectively “GE/PMI”) violated § 1201(a)(1)(A) of the Digital Millennium Copyright

Act (“DMCA”), 17 U.S.C. § 1201, et seq. Section 1201(a)(1)(A) provides that “[n]o

person shall circumvent a technological measure that effectively controls access to a

work protected under this title.”

The panel articulated two independent bases for its rejection of MGE's DMCA

claim. First, the panel concluded that MGE’s DMCA claim failed because MGE’s

technology blocked only the ability to use its software, not to copy the software. (Op.

at 7) Second, the panel alternatively concluded that MGE’s DMCA claim failed

because MGE did not produce any evidence that a GE/PMI employee circumvented

MGE’s technological protections. (Id.) (“Without proving GE/PMI actually

circumvented the technology (as opposed to using technology already circumvented),

MGE does not present a valid DMCA claim.”). MGE's petition for rehearing en banc

challenges both of the panel's holdings on the DMCA claim.

Three amici curiae, including the United States, have raised concerns about the

implications of the panel's first holding, which was based on its interpretation of the

word “access” in § 1201(a)(1)(A) of the DMCA. According to the government, “[t]he

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plain language of section 1201(a)(1)(A) . . . restricts any unauthorized access to a

copyrighted work that is protected by an access control [measure].” (Gov. Br. at

5)(emphasis added) Notably, none of the amici curiae challenge the panel's alternative

holding that MGE’s DMCA claim was also fatally flawed because MGE failed to

present any evidence that GE/PMI circumvented MGE’s technological measures.1 The

only argument MGE can muster to the panel’s alternative holding is an untenable

attempt to excise the circumvention requirement from the plain statutory text.

In light of the reservations raised by the United States (and the other amici

curiae) regarding the potential implications of the panel's interpretation of “access”

beyond the unique circumstances of this case, GE/PMI does not object to the

government’s suggestion that the panel consider withdrawing its discussion of the

types of “access” prohibited by § 1201(a)(1)(A). Because the panel articulated an

independent alternative holding on MGE’s DMCA claim, the government is correct

that “[t]his approach would preserve and respect the finality of the panel’s decision,

while at the same time avoiding the need for en banc or Supreme Court review of the

panel’s interpretation of section 1201(a)(1).” (Gov. Br. at 13) The rejection of MGE's

DMCA claim would be undisturbed because it would be fully supported by the panel’s

alternative holding that MGE failed to produce any evidence on the independent

1
ESA et al. Br. at 2 n.2; MPAA Br. at 2 n.1; Gov. Br. at 12–13.

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statutory requirement of circumvention—an issue that remains dispositive irrespective

of the concerns raised by the government and the other amici curiae. GE/PMI also

respectfully suggests that both the panel and the en banc court deny any further

rehearing beyond this limited revision.

GE/PMI’s response will therefore focus on why the panel's alternative ruling on

“circumvention” is well-supported by the text of the DMCA and does not warrant

reconsideration en banc. GE/PMI’s response also explains why the panel’s ruling that

MGE committed the “fatal error” of failing to prove damages is supported by Fifth

Circuit and Texas precedent and does not require en banc review. As this court has

made clear, “a petition for rehearing en banc is an extraordinary procedure that is

intended to bring to the attention of the entire court an error of exceptional public

importance or an opinion that directly conflicts with prior Supreme Court, Fifth

Circuit, or state law precedent.” 5TH CIR. R. 35 (Internal Operating Procedure).

MGE’s “circumvention” argument and damages issues do not come close to satisfying

this exacting standard.

I. No Evidence of Circumvention of a Technological Measure

The panel correctly concluded that MGE failed to cite any evidence that a

GE/PMI employee or representative was responsible for altering the software to

remove the need for MGE’s technological measure. (Op. at 7) Proof of circumvention

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is indisputably an essential element of a claim under § 1201(a)(1)(A) of the DMCA.

Section 1201(a)(1)(A) provides that “no person shall circumvent a technological

measure that effectively controls access to a work protected under this title.” Because

the DMCA does not apply to mere use of a copyrighted work without proof of

circumvention, which is all that MGE established at trial, the panel correctly held that

MGE failed to present a valid DMCA claim.

The DMCA only targets the circumvention of the technological measure

guarding copyrighted material and “does not concern itself with the use of those

materials after circumvention has occurred.” Universal City Studios v. Corley, 273

F.3d 429, 443 (2d Cir. 2001)(emphasis in original). “‘The prohibition in 1201(a)(1)

was necessary because prior to the DMCA, the conduct of circumvention was never

before made unlawful.’” Chamberlain Group, Inc. v. Skylink Techs., Inc., 381 F.3d

1178, 1195 (Fed. Cir. 2004)(quoting S. REP. NO. 105-90 at 12 (1998)). Copyright law

already existed to prohibit copyright infringement.2

MGE attempts to overcome its failure of proof by advancing the novel theory

that “each time the ‘cracked’ software is launched, a new circumvention occurs.” (Pet.

at 13) The plain language of the DMCA forecloses MGE’s argument. The DMCA

does not equate launching software to circumvention. According to § 1201(a)(3)(A),


2
MGE asserted a copyright infringement claim but this claim suffered from its own
infirmities as discussed in section II below.

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to “circumvent a technological measure” means “to descramble a scrambled work, to

decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or

impair a technological measure, without the authority of the copyright owner.” MGE

states that the software was “altered to remove the code lines for MGE’s security key”

but then says that “[t]he act[] of altering the software, by itself, does not ‘circumvent’

anything.” (Pet. at 4, 12–13) This nonsensical argument is the equivalent of saying

the act of breaking the lock on the door does not break the lock on the door.

According to MGE’s logic, the lock is not actually broken until the door is opened,

and each time the door is opened, the lock is broken again. MGE’s bizarre

interpretation, for which MGE cites absolutely no authority, is not consistent with the

plain wording of the Act.3

The panel correctly determined that “[w]ithout proving GE/PMI actually

circumvented the technology (as opposed to using technology already circumvented),

MGE did not present a valid DMCA claim.” (Op. at 7)

3
The government confirms that MGE has “no authority for its argument on this score.” (Gov.
Br. at 13)

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II. MGE Did Not Prove Damages

MGE also brought claims for copyright infringement, misappropriation of trade

secrets, and unfair competition. But the panel concluded MGE committed the “fatal

error” of failing to prove damages. (Op. at 11–12)4 MGE erroneously claims that the

panel reversed the $4.6 million damage award “[b]ecause MGE allegedly did not

disclose that it intended to pursue disgorgement of profits as a legal remedy.” (Pet.

at 13) In fact, the panel reversed because MGE “fail[ed] to prove damages under 17

U.S.C. § 504(b).” (Op. at 13) MGE also erroneously contends that “[t]he panel erred

because it . . . concluded that MGE was required to prove something more than PMI’s

revenues related to infringement.” (Pet. at 14) In fact, the panel concluded that “[i]n

meeting its initial burden, . . . a copyright owner must show more than the defendant’s

total revenue from all of its profits streams . . . . Rather, ‘gross’ revenue refers only

to revenue reasonably related to the infringement.” (Op. at 9)(citing Bonner v.

Dawson, 404 F.3d 290, 294 (4th Cir. 2005))(emphasis in original) The panel

concluded that the only evidence introduced by MGE was PMI’s total revenue, which

far exceeded the approximately 10% of revenue reasonably related to the infringement

of MGE’s copyright. (Op. at 12)

4
In its principal brief, GE/PMI stated that MGE’s failure to prove damages is yet another
independent ground for disposing of MGE’s DMCA claim. Because the panel did not reach this
issue (Op. at 15), GE/PMI will not address it in this proceeding.

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MGE also chides the panel for failing to “apply or even cite” the court’s

unpublished opinion in Powell v. Penhollow, 260 Fed. Appx. 683 (5th Cir. 2007), a

case MGE never even bothered to cite in any of its briefs. In Powell, the Fifth Circuit

held that “the copyright owner . . . bears the burden of putting on evidence of

Defendants’ gross revenue attributable to the infringement.” 260 Fed. Appx. at 686

(citing Bonner v. Dawson, 404 F.3d 290, 294 (4th Cir. 2005)). Powell is of no help

to MGE because it is entirely consistent with the panel’s decision in this case.

Finally, MGE argues that the panel misapplied In re Bass, 113 S.W.3d 735

(Tex. 2003). (Pet. at 15) The panel correctly noted that “Texas courts have not

adopted RESTATEMENT (THIRD) OF UNFAIR COMPETITION in its entirety and whether

§ 45's comment f is controlling in Texas courts is still an open question.” (Op. at 14)

Therefore, the panel made an “Erie guess” that the Texas Supreme Court would not

adopt the burden-shifting damage procedure contemplated by comment f based on the

clearest available statement of Texas law.5 The panel based its opinion in part on

Elcor Chem. Corp. v. Agri-Sul, Inc., 494 S.W.2d 204, 214 (Tex. Civ. App.—Dallas

1973, writ ref’d n.r.e.), which held that in a misappropriation of trade secrets case, a

plaintiff cannot recover damages without offering evidence “to show the actual profit

5
If no state court decisions control, this court must make an “ Erie guess” as to how the Texas
Supreme Court would apply state law. Travelers Cas. & Sur. Co. of Am. v. Ernst & Young LLP, 542
F.3d 475, 483 (5th Cir. 2008).

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made by [defendant].” Contrary to MGE’s argument, the Texas Supreme Court in In

re Bass did not adopt wholesale the RESTATEMENT (THIRD) OF UNFAIR COMPETITION;

instead, the court simply “agree[d] with the RESTATEMENT and the majority of

jurisdictions that the party claiming a trade secret should not be required to satisfy all

six factors” before a trade secret is established. 113 S.W.3d at 740. The court’s

comments about the six factors in the RESTATEMENT have no bearing on any of the

issues in this case. The panel did not misapply In re Bass because no Texas court has

adopted comment f’s burden-shifting damage procedure. The panel therefore correctly

held that “[g]iven that comment f’s standard sets a plaintiff’s burden of proof for trade

secret damages lower than the standard applied in Elcor, we conclude that the Texas

Supreme Court would not adopt the burden-shifting procedure of comment f.” (Op.

at 14-15).

CONCLUSION

For the foregoing reasons, appellees-cross-appellants do not oppose the

government’s request that this court withdraw its discussion of the types of “access”

prohibited by §1201(a)(1)(A) and otherwise deny MGE’s petition for rehearing en

banc.

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Respectfully submitted,

/s/Joseph F. Cleveland, Jr.


Joseph F. Cleveland, Jr.
Texas State Bar No. 04378900
jcleveland@belaw.com
Richard H. Gateley
Texas State Bar No. 07752500
rgateley@belaw.com
J. Heath Coffman
Texas State Bar No. 24059591
hcoffman@belaw.com

BRACKETT & ELLIS


A Professional Corporation
100 Main Street
Fort Worth, Texas 76102-3090
Telephone: 817/338-1700
Metro: 817/429-9181
Facsimile: 817/870-2265

ATTORNEYS FOR APPELLEES-CROSS-


APPELLANTS GENERAL ELECTRIC
COMPANY AND POWER MAINTENANCE
INTERNATIONAL, INC.

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CERTIFICATE OF FILING AND SERVICE

I hereby certify that I electronically filed the foregoing Response to Appellant’s

petition for rehearing en banc with the Clerk of the Court for the United States Court

of Appeals for the Fifth Circuit by using the appellate CM/ECF system on September

9, 2010.

I further certify that the foregoing brief is being served this day on all counsel

of record either via transmission of Notices of Electronic Filing generated by the

Court’s CM/ECF or by U.S. mail for those counsel who are not authorized to receive

Notices of Electronic Filing from the Fifth Circuit Court of Appeals CM/ECF system.

/s/Joseph F. Cleveland, Jr.


Joseph F. Cleveland, Jr.
Case: 08-10521 Document: 00511229362 Page: 19 Date Filed: 09/09/2010

CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME


LIMITATION, TYPEFACE REQUIREMENTS,
AND TYPE STYLE REQUIREMENTS

Undersigned counsel, after reviewing the brief, hereby certifies the following:

1. This brief complies with the type-volume limitation of Federal Rule of

Appellate Procedure 32(a)(7)(B) because this brief contains 8 pages, excluding the

parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii).

2. This brief complies with the typeface requirements of Federal Rule of

Appellate Procedure 32(a)(5) and the type style requirements of Federal Rule of

Appellate Procedure 32(a)(6) because this brief has been prepared in a proportionally

spaced typeface using WordPerfect 12 in 14 point Times New Roman font for text

and 12 point Times New Roman font for footnotes.

/s/Joseph F. Cleveland, Jr.


Joseph F. Cleveland, Jr.
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ECF FILING STANDARDS CERTIFICATIONS

I hereby certify that any and all privacy redactions required by 5th Circuit Rule

25.2.13 have been made.

I also certify that the electronic submission of this document is an exact copy

of the paper document pursuant to 5th Circuit Rule 25.2.1.

/s/Joseph F. Cleveland, Jr.


Joseph F. Cleveland, Jr.

346046.3