Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-07049/USCOURTS-caDC-97-07049-0/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 16, 1998 Decided June 2, 1998

No. 97-7049

Stenograph L.L.C.,

Appellee

v.

Bossard Associates, Incorporated, et al.,

Appellants

Appeal from the United States District Court

for the District of Columbia

(No. 95cv00141)

John E. Drury argued the cause and filed the briefs for

appellants.

William H. Crispin, argued the cause for appellee, with

whom Dean R. Brenner was on the brief.

Before: Edwards, Chief Judge, Henderson and Rogers,

Circuit Judges.

Opinion for the Court filed by Chief Judge Edwards.

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Edwards, Chief Judge: Bossard Associates, Inc. and the

estate of Dennis K. Bossard (collectively "Bossard" or "appellants") appeal from the judgment of the District Court in

favor of plaintiff Stenograph, L.L.C., on claims that Bossard

infringed Stenograph's copyright for computer software and

misappropriated its trade secrets. Appellants' primary contention before this court is that Stenograph failed to present

evidence of "copying" sufficient to support an infringement

action under the Copyright Act of 1976 (the "Act") (codified

as amended at 17 U.S.C. s 101 et seq.). Because appellants

correctly concede that copying can be proven through evidence that the software was installed on a computer and then

used for its principal purposes, we affirm the District Court.

I. Background

Stenograph, a Delaware corporation with its principal offices in Illinois, provides goods and services to the court

reporting industry. Stenograph sells several different versions of Computer-Aided Transcription software, which enables court reporters to convert their stenographic notes into

English text. In order to protect against the unauthorized

use of such software, which is copyrighted, the company has

developed "software protect devices" or "keys." When a

court reporter uses Premier Power software--the type of

transcription software at issue in this appeal--to convert

stenographic notes into text, the reporter must put a computer disk containing the notes into a computer that has both the

software and a key plugged into the parallel port of the

computer. Premier Power will not work on a computer

unless a key simultaneously is plugged into the computer.

Stenograph requires that its customers enter into license

agreements for both the Transcription software and the keys.

The company's standard licensing agreement restricts the use

of the licensed materials to a single computer. The license

forbids the customer from transferring the Transcription

software, the key, or the accompanying documentation to any

third party, without the prior written consent of Stenograph.

See Exhibit ("Ex.") 5, at 19-20.

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Stenograph filed its initial complaint on January 20, 1995,

in the United States District Court for the District of Columbia, and its First Amended Complaint on May 22, 1995,

against, as pertinent to this appeal, Bossard Associates and

Dennis K. Bossard (collectively "defendants"). See Ex. 1.

Bossard Associates is a court reporting and litigation support

service located in Washington, D.C. Before his death in

August 1997, Mr. Bossard owned all of the stock of Bossard

Associates and served as the company's president and treasurer. Stenograph sought compensatory and punitive damages and an injunction for copyright infringement and state

law claims of trade secret misappropriation and conversion.

These claims arose from allegations that, from April 1992

through November 1994, Mr. Bossard illicitly purchased Stenograph's Premier Power software and eleven keys from one

of Stenograph's sales representatives, John Baker, with

checks made payable to Baker personally, at a substantial

discount from Stenograph's normal retail price.

A jury trial commenced on November 20, 1996. Stenograph presented evidence that Mr. Bossard obtained the keys

and software from Baker during the alleged time periods.

See Trial Tr. (11/21/96) at Appendix ("App.") 164-66, 200; id.

(11/22/96) at App. 228-36. Stenograph also presented evidence that defendants used the software and one or more of

the keys obtained from Baker, gave four keys to independent

contractors for them to use (at least partly for Bossardrelated jobs), and resold two other keys, all notwithstanding

Mr. Bossard's knowledge that Stenograph required users of

its software to enter into licensing agreements. See id.

(11/22/96) at App. 222-26; id. (11/25/96) at App. 440-46.

Baker testified that Stenograph fired him on November 4,

1994, after he admitted that he sold Premier Power software

and keys to Mr. Bossard for his own personal benefit. See id.

(11/21/96) at App. 164-66; Ex. 6, at 1. Stenograph did not

seek damages for any time after 1995, because in 1996

Christopher Bossard, the son of Mr. Bossard, obtained a

Premier Power key from another court reporter and paid

Stenograph for a license transfer. See id. (11/22/96) at 227-

28; Br. of Appellee at 16.

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At trial, Mr. Bossard defended largely on the theory that

he did not know either that the products obtained from Baker

belonged to Stenograph, or that Baker lacked authority to

make the sales in question. Baker had had a fifteen year

sales relationship with defendants, during which time Baker

legitimately sold other Stenograph goods to Bossard Associates. See Trial Tr. (11/21/96) at App. 163, 173-74; Br. of

Appellee at 11. With respect to the eleven keys, Mr. Bossard

testified that Baker told him that Baker was merely serving

as a "broker" for third parties who wished to get rid of the

products. See Trial Tr. (11/21/96) at App. 212. It is undisputed, however, that after Baker was fired in November 1994,

Stenograph asked defendants to either pay for or return the

Premier Power keys, thereby putting defendants on explicit

notice of the illicit nature of the transactions involving the

keys. See Trial Tr. (11/21/96) at App. 112; Br. of Appellee at

14.

The District Court denied Bossard's motion for judgment

as a matter of law made at the conclusion of Stenograph's

case and renewed at the end of trial. See id. (11/22/96) at

App. 282; id. (11/26/96) at App. 539-40. On December 12,

1996, the jury returned a verdict for Stenograph on all

counts. The jury awarded damages in the amount of

$1,500,000 for copyright infringement; compensatory damages of $710,000 and punitive damages of $750,000 for trade

secret misappropriation; and compensatory damages of

$44,000 and punitive damages of $178,000 for conversion. See

Stenograph Corp. v. Bossard Assocs., Civ. No. 95-0141(NHJ)

(D.D.C. filed Feb. 12, 1997) ("Order"), reprinted at Ex. 3.

The District Court subsequently denied defendants' motion

for a new trial or, alternatively, to amend the judgment and

to stay the enforcement of the judgment. See id. The Court

also entered a separate judgment as a matter of law in favor

of Stenograph on other claims alleged in the lawsuit. See id.

The District Court then entered a judgment on the jury

verdict and awarded Stenograph monetary relief in the total

amount of $3,198,016.17 against Mr. Bossard and Bossard

Associates. See Ex. 4.

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This appeal followed. Because of Mr. Bossard's death, the

estate of Mr. Bossard and Bossard Associates are now the

appellants in this proceeding.

II. Discussion

A.Copyright Infringement

Most of Bossard's numerous challenges to the District

Court's judgment are plainly meritless and thus do not warrant treatment in this opinion. We do, however, address

appellants' contention that the District Court erred in presenting Stenograph's copyright infringement claim to the

jury, on the ground that Stenograph failed to present sufficient evidence of impermissible "copying" of Premier Power

software by Bossard. In reviewing the denial of a judgment

as a matter of law, "the standard we apply is the same as that

applied by a district court considering the motion in the first

instance. Viewing the evidence in the light most favorable to

the non-moving party, we must ask ourselves whether any

reasonable jury could find in its favor." Harbor Ins. Co. v.

Schnabel Foundation Co., 946 F.2d 930, 935 (D.C. Cir. 1991);

see also Smith v. Washington Sheraton Corp., 135 F.3d 779,

782 (D.C. Cir. 1998); Scott v. District of Columbia, 101 F.3d

748, 752 (D.C. Cir. 1996). This entails an examination of "all

uncontradicted evidence offered by the moving party, as well

as all evidence introduced by the non-moving party." Harbor

Ins., 946 F.2d at 935.

A plaintiff seeking to establish copyright infringement must

prove "(1) ownership of a valid copyright, and (2) copying of

constituent elements of the work that are original." Feist

Publications, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361

(1991); Fonar Corp. v. Domenick, 105 F.3d 99, 104 (2d Cir.),

cert. denied, 118 S. Ct. 265 (1997). The copying must be

beyond the scope of a license possessed by the defendant.

See MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d

511, 517 (9th Cir. 1993). In the instant case, the first element

is not in dispute, because Stenograph's certificates of registration for Premier Power, see Ex. 5, at 9-12, constitute

prima facie evidence of the validity of the copyright of the

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software, and Bossard makes no argument that such certificates were improvidently issued. See 17 U.S.C. s 410(c);

Fonar, 105 F.2d at 104 ("possession of a registration certificate creates a rebuttable presumption that the work in question is copyrightable" (internal quotation omitted)). As to the

second element, appellants argue that Stenograph never demonstrated that Bossard copied the protected elements of

Premier Power--i.e., the original parts of the software for

which Stenograph validly held copyright protection.

Case law supports the general proposition that unoriginal

portions of a software program can be copied without resulting in copyright infringement. See Lotus Develop. Corp. v.

Borland Int'l, 49 F.3d 807, 815 (1st Cir. 1995) (holding

copying of uncopyrightable subject matter of software not

copyright infringement), aff'd by an equally divided court,

516 U.S. 233 (1996); Gates Rubber Co. v. Bando Chemical

Indus., Ltd., 9 F.3d 823, 832 (10th Cir. 1993) (copyright

plaintiff had to show that "those elements of the program that

have been copied are protected expression and of such importance to the copied work that the appropriation is actionable"); see generally Rogers v. Koons, 960 F.2d 301, 307 (2d

Cir. 1992) ("[T]hat a whole work is copyrighted does not mean

that every element of it is copyrighted; copyright protection

extends only to those components of the work that are

original to the creator."). Drawing on these principles, appellants posit that Stenograph failed to meet its evidentiary

burden on the copying issue, because Stenograph did not

show that use of Premier Power in tandem with the keys

resulted in the copying of the protected elements of the

software to a Bossard computer's random access memory

("RAM"). In support of this point, appellants contend that

Stenograph did not present an expert witness who could

testify competently on the manner in which Premier Power

software worked inside Bossard's computers.

Appellants' argument on copying--particularly their attention to the issue of whether protected elements of Premier

Power were copied to random access memory--is a nonstarter. Appellants conceded at oral argument, and this court

agrees, that if someone loads validly copyrighted software

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onto his or her own computer without the owner's permission,

and then uses the software for the principal purposes for

which it was designed, there can be no real doubt that the

protected elements of the software have been copied and the

copyright infringed. In other words, the only real question in

this case is whether the jury had sufficient evidence to find

that Bossard installed and used Stenograph's software for its

principal purposes.

As an analytical matter, there are two different ways to

describe the impermissible "copying" that occurred in this

case. First, it can be concluded, quite simply, that copying

occurred when appellants installed and used the software for

the principal purposes for which it was intended. Alternatively, following a line of analysis adopted by a number of

courts, it can be concluded that appellants copied the software

when it was booted up for use for its principal purposes, and

thereby loaded into RAM. These two theories may be two

ways of saying the same thing; but in either of them, the

jury's verdict against appellants was fully justified.

1. Installation

The language of the Copyright Act, case law, and common

sense support the proposition that the installation of software

onto a computer results in "copying" within the meaning of

the Copyright Act. See 17 U.S.C. s 101 (defining "copies" as

"material objects ... in which a work is fixed by any method

now known or later developed, and from which the work can

be perceived, reproduced, or otherwise communicated, either

directly or with the aid of a machine or device"); 2 Melville

B. Nimmer & David Nimmer, Nimmer on Copyright

s 8.08[A][1], at 8-113 (1997) ("Nimmer") (the Act's language

"makes clear that the input of a work into a computer results

in the making of a copy"); cf. Vault Corp. v. Quaid Software

Ltd., 847 F.2d 255, 260 (5th Cir. 1988) ("the act of loading a

program from a medium of storage into a computer's memory

creates a copy of the program"). Appellant does not argue

that the installation of software onto a single computer workstation differs from the installation of software onto an office

network, for purposes of infringement analysis. Moreover, if

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an entire program is thus copied, certainly the "protectible

elements" of the program are also copied. See Fonar, 105

F.3d at 106 (summary judgment for defendants inappropriate

assuming they made "complete copies" of plaintiff's software);

Triad Systems Corp. v. Southeastern Express Co., 64 F.3d

1330, 1335 (9th Cir. 1995) (where defendant's conduct "involved copying entire programs, there is no doubt that protected elements of the software were copied").

The question in the instant case, then, is how installation

could be proven. Here, Mr. Bossard admitted outright at

trial that Premier Power was installed on his company's

computer network. See Trial Tr. (11/22/96) at App. 232-33.

During Mr. Bossard's testimony, after a series of exchanges

between Stenograph's counsel and Mr. Bossard on the issue

of how Bossard originally obtained the software and keys,

Stenograph's counsel elicited the following testimony:

QYou have your Premier Power software installed on

the network. Correct?

AI'll agree to that, okay?

Id. According to appellants, Mr. Bossard's statement only

established that Premier Power was installed on the company's network as of the time of trial--i.e., November 1996.

Thus, they argue, Mr. Bossard's statement does not constitute persuasive evidence of infringement, because earlier in

1996 Christopher Bossard had obtained a license for the

software. See Reply Br. at 7-8.

Appellants' self-serving reading of the record is not enough

to overcome the jury verdict in this case. First, Mr. Bossard

never claimed that his company's installation of Premier

Power occurred only after a license for its use had been

obtained. Second, and more important, Mr. Bossard essentially conceded all of the points in issue when he testified that

Bossard had possessed and used Premier Power software

since 1993.

Bossard does not dispute that a court reporter who seeks

to use the software first must insert a disk containing stenographic notes "into a computer on which the Premier Power

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resides." Br. of Appellee at 7 (emphasis added); also see

Trial Tr. (11/22/96) at App. 322. This is hardly surprising,

because it is consistent with the way in which software is

typically used. See 2 Nimmer, s 8.08[B][1], at 8-118 ("[I]nstalling programs from floppy disks onto the hard drive

(instead of booting them from the floppy drive every time

they are desired) has become almost universal...."). Indeed, even if it were possible to use Premier Power without

prior installation onto a computer, Bossard makes absolutely

no suggestion that it did so in this case. Furthermore,

Bossard makes no claim that it used only computers located

in other offices, on which Premier Power already was installed pursuant to a license from Stenograph. In these circumstances, where installation of the software is a prerequisite to

its use, Stenograph could show that Bossard installed and

therefore copied the software by demonstrating that Bossard

used the software and keys for their principal purposes

during the relevant time periods.

There is substantial evidence in the record showing that

Bossard used Premier Power for the principal purposes for

which it was designed--i.e., to convert stenographic notes

into English text and produce transcripts for sale. First, Mr.

Bossard testified that his company initially obtained Premier

Power in 1993, when Bossard also obtained its first software

protect key from Baker. See Trial Tr. (11/22/96) at App. 234-

35. In addition, Stenograph elicited testimony from Mr.

Bossard that numbered keys were kept in Bossard's offices.

See id. at 229. On those occasions when Bossard would

purchase a key from Baker, the key would "ultimately go to

[Bossard's] computer room" if Baker did not first take it

there himself. Id. (11/25/96) at 381-82. At one point in his

testimony Mr. Bossard admitted that software had been used

from "whenever [the company] got the first Premier Power

key from John Baker." Id. (11/22/96) at 234.1 Mr. Bossard

__________

1 Later in his testimony, when confronted with plaintiffs' exhibits demonstrating that Bossard obtained its first key from Baker in

1993, Mr. Bossard appeared to backtrack from his earlier statement

that the company had been using Premier Power software from

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separately admitted that a Bossard Associate employee used

the software and a key in the company's computer room to

process files and cause transcripts to be printed for sale to

customers. See id. (11/25/96) at 445-46. From these statements, the jury easily could conclude that Bossard--through

both its regular employees and independent contractors--

used the software in tandem with the keys prior to 1996.

In sum, the evidence supports the finding that Bossard

impermissibly copied Premier Power by installing and using

the software for its principal purposes during the time in

question.

2. Loading Into RAM

It is also evident that copying of Premier Power occurred

through the loading of the software into the random access

memories of Bossard's computers while the software was in

use. Courts that have addressed the issue agree that the

loading of software from some permanent storage medium,

such as a floppy disk or a computer's hard drive, to the

computer's random access memory ("RAM") when the software is "booted up" causes a copy to be made. See MAI

Systems Corp. v. Peak Computer, Inc., 991 F.2d 511, 518 (9th

Cir. 1993) (defendant's "loading of copyrighted software into

RAM creates a 'copy' of that software in violation of the

Copyright Act"); Triad Systems Corp. v. Southeastern Express Co., 64 F.3d 1330, 1335 (9th Cir. 1995); Advanced

Computer Servs. v. MAI Systems Corp., 845 F. Supp. 356, 363

(E.D. Va. 1994); 2 Nimmer s 8.08[A][1], at 8-113 to 8-114

(describing trend recognizing that reproduction of program in

RAM constitutes "copy"); see generally, Jane C. Ginsburg,

Putting Cars on the "Information Superhighway": Authors,

Exploiters, and Copyright in Cyberspace, 95 Colum. L. Rev.

__________

that time. According to Mr. Bossard's later statement, Bossard

Associates only "possibly" had been using the software since 1993,

because the first key obtained from Baker "could be the key that

blew up on us." Trial Tr. (11/22/96) at 235. Of course, it would

have been reasonable for the jury, in determining Mr. Bossard's

credibility as a witness, to resolve contradictions in his testimony

against him.

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1466, 1476 (1995) ("Copies of a work are made ... when a

temporary copy is received into the memory of [a] computer."). Appellants erroneously argue in their brief that the

holding in MAI Systems has no bearing on the instant case

because it only addressed the issue of whether a computer

program in RAM is "fixed" under the Act, independent of the

issue of whether the RAM reproduction constitutes a "copy."

See Br. of Appellant at 9. On the contrary, MAI Systems

held that a RAM reproduction was a copy precisely because it

was fixed under the Act. See 17 U.S.C. s 101 (defining the

terms "copies" and "fixed"); MAI Systems, 991 F.2d at 518;

Advanced Computer, 845 F. Supp. at 362-64 (rejecting contention that program in RAM was not "fixed").

We do not read appellants' arguments to seriously challenge the holding in MAI Systems and other cases that a

RAM reproduction constitutes a copy, although this holding

has drawn some criticism. See, e.g., Jessica Litman, The

Exclusive Right to Read, 13 Cardozo Arts & Ent. L.J. 29, 40

(1994) (protesting result in which all acts of reading or

viewing a digitalized work with the use of computer involves

"actionable reproduction"); see generally, Ginsburg, 95 Colum. L. Rev. at 1476 n.39 (citing critics). Rather, appellants

complain that Stenograph failed to prove that the protected

elements of Premier Power were reproduced into RAM in the

first instance. But this argument is specious, because, at oral

argument, appellants conceded that the protected elements of

Premier Power were copied if in fact the software was used

for the principal purposes for which it was designed. As

described above, there was ample evidence from which the

jury could conclude that Bossard used Premier Power to

convert stenographic notes into English text and produce

transcripts for sale, without a license from Stenograph.

Equally important, appellants do not argue that they had any

reason to use Premier Power other than for the software's

principal purposes. Thus, evidence of Bossard's use of Premier Power served as sufficient evidence that protected elements were copied, insofar these elements were reproduced

into RAM. On the current record, it is simply irrelevant that

Stenograph never presented an expert witness who could

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testify that specific parts of Premier Power were reproduced

into RAM when the software was used by Bossard.

Contrary to appellants' contentions, this conclusion is not in

tension with Fonar Corp. v. Domenick, 105 F.3d 99 (2d

Cir.1997), cert. denied, 118 S. Ct. 265 (1997). In Fonar, the

plaintiff sued for copyright infringement on the theory that

the defendant copied plaintiff's software when the defendant

booted up the software for use. Although the district court

granted summary judgment to the defendant primarily on the

ground that plaintiff failed to establish a valid copyright, the

court of appeals reversed and stated, in pertinent part, "at

trial Fonar will undoubtedly have to break down its software

into its constituent parts in order to allow the examination of

these parts" for protected elements. Id. at 104. That a

copyright plaintiff should have to demonstrate a software's

protected elements for purposes of establishing a valid copyright does not lend support to Bossard's contention that the

same plaintiff must specifically show reproduction of these

elements into RAM during defendant's unauthorized use of

the software, for purposes of showing "copying." Indeed, the

Fonar court assumed, in reversing the district court, that

loading a program into RAM resulted in "wholesale copying,"

id. at 103, and that therefore whatever protected elements

that were contained in the software were copied during the

software's use. See id. at 106. Thus, Fonar supports, rather

than undermines, our position that impermissible copying

occurs when a validly copyrighted program is used for its

principal purposes.

Our holding in this case does not address a situation in

which it might be claimed that no copying occurred through

prior installation. See, e.g., Fonar, 105 F.3d at 101-02 (infringement action brought against company that uses programs residing on third parties' computer systems); MAI

Systems, 991 F.2d at 517 (same). Nor does this case involve

a claim that defendant used only the unoriginal--or unprotected--portions of a program. In other words, a defendant

might claim that he or she used only those elements of a

software program that are common to other programs and,

therefore, by themselves, not copyrightable. In such a case,

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it might be argued that such limited use of the software by

the defendant does not support an action for infringement,

because the limited use did not cause any of the software's

protected elements to be reproduced into RAM. We leave

these questions for another day.

B. Damages

The total damages awarded by the District Court to Stenograph reflected, in part, the jury's awards of $1,500,000 for

copyright infringement and "$710,000 for actual losses and

unjust enrichment" on the claim of trade secret misappropriation. Order, at 1. Appellants' arguments attacking these and

other aspects of the total damages award are without merit.

The amount of $1,500,000 presumably represents Bossard

Associates' total revenues ($1,700,000) for the time period

under dispute (December 1994 through December 1995), minus an estimation of expenses related to the use of Premier

Power software (approximately $200,000). Bossard's challenge to the $1,500,000 figure is meritless because, after

Stenograph introduced the statement containing Bossard Associates' gross revenues for the relevant time period, see Ex.

5, at 25-27; Trial Tr. (11/22/96) at App. 236-37, the burden

shifted to Bossard under 17 U.S.C. s 504(b) to "prove his or

her deductible expenses and the elements of profit attributable to factors other than the copyrighted work." Id. Because appellants clearly failed to carry their burden under

s 504(b), we have no reason to disturb the copyright infringement award of $1,500,000. See s 504(b), Notes of the Committee on the Judiciary on Actual Damages and Profits; cf.

Blackman v. Hustler Magazine, Inc., 800 F.2d 1160, 1163

(D.C. Cir. 1986) (holding, where defendants failed to meet

burden under 1909 Copyright Act, that "the gross figure is

left to stand as the profit factor" (internal quotation omitted)).

We are perplexed, however, as to how the jury reached the

amount of $710,000 "for actual losses and unjust enrichment"

on the trade secret misappropriation claim. The trial judge

instructed the jury that "unjust enrichment" was based upon

"Defendants' profits from the misappropriation." Trial Tr.

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(11/27/96) at App. 613. The trial judge further stated that

such profits should be determined through a burden-shifting

process largely identical to the one it had set forth for the

copyright infringement claim. Id. To the extent Stenograph

was awarded damages based on Bossard Associates' 1995

profits for both the misappropriation of trade secrets claim

and the copyright claim, it would appear that Stenograph

obtained a questionable double remedy. See Softel v. Dragon

Med. & Scientific Communications, 118 F.3d 955, 969 (2d

Cir. 1997) (upholding district court's refusal to award damages on trade secret claim because such damages would have

been "coextensive with the damages it had already awarded

for copyright infringement"), cert. denied, 118 S. Ct. 1300

(1998). However, Bossard never raised this issue, either at

trial or on appeal, so we have no valid basis upon which to

disturb the judgment of the District Court.

III. Conclusion

For the foregoing reasons, the judgment of the District

Court is affirmed.

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