R. READY PRODUCTIONS, INC. v. CANTRELL

MEMORANDUM OPINION AND ORDER

ATLAS, District Judge.

Pending before the Court in this copyright case is the Motion for Summary and Declaratory Judgment ("Defendants' Motion") [Doc. # 31] filed by Defendants Anthony C. Cantrell and Automotive Consulting Company. Plaintiffs Robert Ready, R. Ready Productions, Inc., and CSI Direct have responded in opposition. See Plaintiffs' Opposition to Defendants' Motion for Summary Judgment ("Plaintiffs' Opposition") [Doc. # 41]. In addition, Plaintiffs, Defendants and other third parties have filed pleadings.1 The Court has considered Defendants' Motion, Plaintiffs' Response, all matters of record, and the applicable authorities, and concludes that Defendants' Motion should be GRANTED in part and DENIED in part.

I. FACTUAL BACKGROUND

Overview. — This dispute involves the promotion of retail automobile sales through the use of targeted mailings. Plaintiff R. Ready Productions ("Ready Productions"), formed in 1993 by Plaintiff Robert Ready ("Ready"), is a marketing company that specializes in sales promotions for automobile dealerships. As part of its business, Ready Productions produces and mails a direct mail solicitation letter ("advertising letter") which is sent to selected customers. In 1995, Plaintiffs obtained a copyright for two of its advertising letters. This dispute concerns the legality of Defendants' use of mail solicitations very similar to the copyrighted advertising letters.2

In March 1995, Defendant Anthony Cantrell ("Cantrell") began work for Ready Productions as a salesman. He later became an independent contractor. See Independent Contractor Agreement, Plaintiffs' Response, Defendants' Reply, Exhibit 9. Cantrell soon left Ready Productions and started his own business, Defendant Automotive Consulting Company ("ACC") in October 1995. ACC also conducts sales promotions for automobile dealerships. At ACC, Cantrell used advertising letters similar to the ones used by Ready Productions. See Comparisons of ACC advertising letters and Ready Production advertising letters, Plaintiffs' Response, Exhibits H-J.

Early Promotional Materials and Creators. — The history of direct mail promotions in retail automotive sales, however, reaches far beyond the litigants involved in this case. In 1988, Kevin Bone ("Bone") started a direct mail business in Southern California with Randall Silbert ("Silbert"). See Deposition of Kevin Bone ("Bone Deposition"), Appendix to Defendants' Motion for Summary Judgment [Doc. # 33] ("Defendants' Appendix"), Exhibit 9, at 9. The name of this business originally was Ritz Promotions. Ritz Promotions was incorporated on June 10, 1988 in California. See Defendants' Reply, Exhibit 11 ("Status Inquiry Report" from California Secretary of State); Defendants' Reply, Exhibit 7, Deposition of Randall Silbert ("Silbert Deposition"), at 17.3 Bone and Silbert incorporated their business formally as "The Ritz Corporation" on January 19, 1989, but continued to use the name "Ritz Promotions" and the same mailing address. See Defendants' Appendix, Exhibit 11. From 1988 to approximately 1991, The Ritz Corporation (or a predecessor corporation) operated in several cities in Southern California and Florida. See Bone Deposition, at 10-11. The company's focus was the promotion of retail sales of automobiles through the use of direct mailings known as, "advertising letters" or "mailers." Id. at 29; see also Example of Ritz Mailers, Defendants' Reply, Exhibit 3, at 2-3. These advertising letters were sent to selected potential automobile purchasers, and essentially stated that the recipient was invited to an exclusive, day-long, sales event where a particular automobile dealership would sell its inventory of automobiles at very low prices. See id.

Bone achieved some recognition in the automotive direct mail promotions industry. He states that he was thought of as a founder of the industry and his advertising letters have been copied by "quite a few people" in different parts of the country. See Bone Deposition, at 207-08. In terms of his reputation, he states that "[p]eople refer to me as — I hate to use the terminology, but for lack of a better word, I've heard the king." Id. at 208.

In or about early 1990, James Kennedy ("Kennedy"), a salesman with The Ritz Corporation, resigned and started his own automotive direct mail business named Kennedy Promotions. See Deposition of James Kennedy ("Kennedy Deposition"), Defendants' Appendix, Exhibit 13, at 58, 76. This then became the Presidential Group ("Presidential") when Silbert and several other salespeople left The Ritz Corporation and joined Kennedy. Id. at 59. Presidential also engaged in direct mail automobile sales promotions, and it used advertising letters that were almost identical to those used by Ritz. See Examples of Presidential Materials, Defendants' Reply, Exhibit 4, at 2-3.

Silbert's involvement with Presidential triggered a lawsuit by Bone against Silbert; The Ritz Corporation later crossclaimed against Silbert and Presidential. See Cross-Complaint filed in Orange County, California. Bone v. Silbert, Cause Nos. 643804 and 644426 ("Bone/Ritz Suit"). Defendants' Appendix, Exhibits 15, 16. In its cross-complaint, The Ritz Corporation alleged that Silbert and Presidential

Defendants' Appendix, Exhibit 16, at 4, ¶ 16. A settlement was eventually reached in which Silbert agreed to transfer all his stock in The Ritz Corporation back to that corporation. See Transcript of Proceedings in the Bone/Ritz Suit, Defendants' Appendix, Exhibit 17, at 10.

Ready's Involvement. — Plaintiff Ready joined Presidential in March 1991 as a sales trainer. When he joined Presidential, Ready had no experience in direct mail promotions in the automobile industry. See Deposition of Robert Ready ("Ready Deposition"), Defendants' Appendix, Exhibit 5, at 20-21. While employed with Presidential, Ready occupied positions of sales trainer, sales representative, and major accounts representative. Id. at 283-84. Ready admitted that he never helped develop direct mail materials for Presidential. Id. at 55. Moreover, he does not claim he has any ownership interest in Presidential's or The Ritz Corporation's materials. Id. at 55-56.

In June 1992, Ready and Silbert started a new partnership in California named Premier Productions ("Premier").4 See Ready Deposition, at 58-59. Premier was involved in the same promotion business as Ritz and Presidential. Ready admits that Silbert used documents originally obtained from both Ritz and Presidential in developing Premier's materials. Id. at 74. In September 1992, Ready and Silbert moved to Texas and filed a "doing business as" certificate for the name "Premier Productions." Ready states that he explained to Silbert "that we needed to move so that we were not competing nor were we going up against The Presidential Group or The Ritz...." Id. at 71-72.

Ready ended his partnership with Silbert in August 1993. That same month, he formed R. Ready Productions, the second Plaintiff in this case. See Affidavit of Robert Ready ("Ready Affidavit"), Plaintiffs' Response, at 1, ¶ 2. Again, this new business involved the same direct mail promotions for automobile sales as The Ritz Corporation, Presidential, and Premier. See Example of Plaintiffs' direct mail material compared with that of Ritz and Presidential, Plaintiffs' Response, Exhibits M through S.

Ready states, however, that "it was my intention at that time to create a new mailpiece [sic] which would be substantially different from other mailpieces [sic] that were being used in the direct mail advertising business at that time." Ready Affidavit, at 1, ¶ 2. He explains that

Id. at 2, ¶ 4.

On October 20, 1995, Plaintiffs filed copyright applications for two advertising/promotional letters. See Plaintiffs' Patent Applications, Plaintiffs' Opposition, Exhibit Y. These letters are almost identical to each other in content. The first advertising letter was designed for "Gilman Honda," see id. at 3, and the second letter was for "Gilman Mitsubishi," see id. at 6. On the application for each of these works, there is a space in which Plaintiff Ready was asked to "[briefly] describe the nature of material created by this author in which copyright is claimed." On each application, Plaintiffs answered "Entire Text." Id.

Plaintiffs filed another copyright application three years later, on October 6, 1998.5 See id. at 7. The title of this work is: "Best representatives of promotional literature." Plaintiffs list this work as a "compilation" and explain that it is a collection of the "best representative promotional literature which in turn is a derivative work from author's prior versions of promotional literature." Id.

Cantrell's Involvement. — Defendant Cantrell briefly was employed by Ready Productions. In connection with his employment with Ready Productions, Defendant Cantrell signed two contracts. The first document, signed when Cantrell began work on March 6, 1995,6 is entitled "Non-Disclosure and Non-Compete Agreement." See Defendants' Reply, Exhibit 8 (the "March 6th contract"). It states in relevant part that:

Id., at 1. Later, on May 1, 1995, Cantrell signed an "Independent Contractor Agreement." See Defendants' Reply, Exhibit 9 (the "May 1995 contract"). There is no dispute that the May 1995 contract was designed to change Cantrell's relationship with Ready Productions from an "employee" to an "independent contractor."7 The May 1995 contract required that Cantrell "perform his services in a good and workmanlike manner...." and made no reference to confidentiality or non-compete obligations. The May 1995 contract contained the following clause:

Id.

In October 1995, Cantrell left Ready Productions and formed his own business, ACC. See Affidavit of Anthony Cantrell, Defendants' Appendix, Exhibit 29, at 3, ¶ 5. Cantrell states that ACC provides direct mail services to automobile dealers in Texas and half a dozen other states. Id. at 1, ¶ 2. In doing so, ACC uses direct mail literature that Cantrell alleges is common within the direct mail industry. Id. at 2, ¶ 3. Cantrell states that at the time he created his sales materials, he believed that the materials used by Ready Productions were similar to materials used by Ritz and Presidential. Id. at 3, ¶ 4. There is no meaningful dispute that Cantrell's and ACC's materials are very similar to Ready Production's copyrighted mailers.

Scope of Pending Litigation. — On February 11, 1998, Plaintiffs filed their complaint [Doc. # 1] in federal court. As amended, Plaintiffs' complaint asserts two causes of action. See First Amended Original Complaint of Plaintiffs R. Ready Productions, Inc. and Robert Ready [Doc. # 15]. In their first cause of action, Plaintiffs claim that they have obtained a valid copyright for two of their versions of the advertising letter, and that Defendants' use of phrases from this letter constitutes copyright infringement. Id. at 5, ¶ 14.

Plaintiffs' second cause of action is less clear. Plaintiffs alleged that "[a]ll of Defendants' actions also constitute unfair competition." Id. at 5, ¶ 15. Plaintiffs allege more specifically that an integral part of Cantrell's employment contracts with Ready Productions is an agreement "not to disclose or use information designated as `Confidential Information' upon the termination of his relationship with Ready" (Id. at 3, ¶ 8), and that Cantrell breached this duty when he "wrongfully misappropriated copies of the direct mail advertising letter/mailpiece which he wrongfully used in his own business." Id. at 4, ¶ 10.

Assignment of Rights from Kennedy, Ritz and Presidential. — In May 1998, shortly after Plaintiffs filed suit, Cantrell purportedly purchased the rights to the materials used by The Ritz Corporation and Presidential. First, Cantrell purchased a "Quitclaim Assignment" from James Kennedy. See Defendants' Appendix, Exhibit 44. This assignment transferred "the full and exclusive right, title and interest in and to the following intellectual property...." Id. This property, listed as Exhibit A to the assignment, included Presidential's training materials, direct mail pieces, pitch book and training videotape. Id. On November 24, 1998, Cantrell obtained a similar "Quitclaim Assignment" from Kevin Bone. See Defendants' Appendix, Exhibit 45. This instrument transferred a 40% ownership interest in the intellectual property owned by Bone and Ritz. Listed as an Exhibit to the Bone Quitclaim Assignment were the materials covered by this assignment, which included Ritz's training materials, direct mail pieces, and pitch book. Id.

In relation to these assignments, Defendants have filed a counterclaim. See Defendants Anthony C. Cantrell's and Automotive Consulting Company's Answer to Plaintiffs' First Amended Complaint and Counterclaim [Doc. # 16], at 4. In their counterclaim, Defendants assert seven causes of action: copyright infringement, unfair competition under the Lanham Act, common law service mark infringement, unjust enrichment, unfair competition, conversion, and tortious interference with prospective contracts. In terms of their copyright infringement claim, Defendants state that they have filed separate applications with the United States Copyright Office covering the Presidential and The Ritz Corporation's (and Kevin Bone's) promotional materials that were transferred through the above assignments. Id. at 6-7. Defendants argue that Plaintiffs have willfully infringed Defendants' rights in all of these materials. Id. at 8.

II. SUMMARY JUDGMENT STANDARDS

In deciding a motion for summary judgment, the Court must determine whether "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc); Boze v. Branstetter, 912 F.2d 801, 804 (5th Cir.1990). Material facts are those facts "that might affect the outcome of the suit under the governing law." Smith v. Brenoettsy, 158 F.3d 908, 911 (5th Cir.1998) (quoting Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The facts are to be reviewed with all "justifiable inferences" drawn in favor of the party opposing the motion. See Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir.1998) (citing Anderson, 477 U.S. at 255, 106 S.Ct. 2505). However, factual controversies are resolved in favor of the nonmovant "only when there is an actual controversy — that is, when both parties have submitted evidence of contradictory facts." Laughlin v. Olszewski, 102 F.3d 190, 193 (5th Cir.1996).

The party moving for summary judgment has the initial burden of demonstrating the absence of a material fact issue with respect to those issues on which the movant bears the burden of proof at trial. The movant meets this initial burden by showing that the "evidence in the record would not permit the nonmovant to carry its burden of proof at trial." Smith, 158 F.3d at 911. The burden then shifts to the nonmovant to demonstrate that summary judgment is inappropriate. See Morris, 144 F.3d at 380. This is accomplished by producing "significant probative evidence" that there is an issue of material fact so as to warrant a trial. See Texas Manufactured Housing Ass'n v. Nederland, 101 F.3d 1095, 1099 (5th Cir.1996), cert. denied, 521 U.S. 1112, 117 S.Ct. 2497, 138 L.Ed.2d 1003 (1997); Taylor v. Principal Financial Group, Inc., 93 F.3d 155, 161 (5th Cir.1996); Transamerica Ins. Co. v. Avenell, 66 F.3d 715, 718-19 (5th Cir. 1995); Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir.1994), and evidence "sufficient to support a jury verdict." Morris, 144 F.3d at 380; accord Doe v. Dallas Indep. School District, 153 F.3d 211, 215 (5th Cir.1998).

Plaintiff's burden cannot be met by mere reliance on the allegations or denials in the non-movant's pleadings. See Morris, 144 F.3d at 380. Likewise, "unsubstantiated or conclusory assertions that a fact issue exists" do not meet this burden. See id. Instead, the nonmoving party must present specific facts which show "the existence of a `genuine' issue concerning every essential component of its case." Id. Dispute about a material fact is "genuine" only if evidence is such that reasonable jury could return a verdict for nonmoving party. See Stafford v. True Temper Sports, 123 F.3d 291, 294 (5th Cir. 1997); Hanks v. Transcontinental Gas Pipe Line Corp., 953 F.2d 996, 997 (5th Cir.1992).

In the absence of any proof, the court will not assume that the nonmovant could or would prove the necessary facts. See McCallum Highlands, Ltd. v. Washington Capital Dus, Inc., 66 F.3d 89, 92 (5th Cir.), revised on other grounds upon denial of reh'g, 70 F.3d 26 (5th Cir.1995); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc), 37 F.3d at 1075 (citing Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990)). Rule 56 mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a sufficient showing of the existence of an element essential to the party's case, and on which that party will bear the burden at trial. See Little, 37 F.3d at 1075 (citing Celotex, 477 U.S. at 322, 106 S.Ct. 2548).

III. APPLICABLE COPYRIGHT LAW

A. Subject of Copyright Laws

Copyright protection is available for "original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." 17 U.S.C. § 102(a). Copyright protection does not, however, "extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery...." 17 U.S.C. § 102(b).

A key element in any copyright claim is originality. The Supreme Court has stressed that "[t]he sine qua non of copyright is originality. To qualify for copyright protection, a work must be original to the author." Feist Publications v. Rural Tel. Service, 499 U.S. 340, 345, 111 S.Ct. 1282, 113 L.Ed.2d 358 (1991). Originality requires "that the work was independently created by the author (as opposed to copied from other works), and that it possesses at least some minimal degree of creativity." Id. at 358, 111 S.Ct. 1282 (citing 1 M. NIMMER & D. NIMMER, NIMMER ON COPYRIGHT §§ 2.01[A], [B] (1990)); Norma Ribbon & Trimming, Inc. v. Little, 51 F.3d 45, 47 (5th Cir.1995). Although the amount of required creative input by the author to meet the originality standard is low, "it does exist." See Feist, 499 U.S. at 362, 111 S.Ct. 1282. There must be a "distinguishable variation [that is] substantial and not merely trivial." Norma Ribbon, 51 F.3d at 47.

The principle of originality mandates that objective "facts" and scientific discoveries are not copyrightable. Feist, 499 U.S. at 347, 111 S.Ct. 1282 ("[N]o one may claim originality as to facts."), and passim; Engineering Dynamics, Inc. v. Structural Software, Inc., 26 F.3d 1335, 1344 (5th Cir.1994); see Kepner-Tregoe, Inc. v. Leadership Software, Inc., 12 F.3d 527, 534 (5th Cir.1994); Churchill Livingstone, Inc. v. Williams & Wilkins, 949 F.Supp. 1045, 1050 (S.D.N.Y.1996); NIMMER ¶ 2.11[A].

Similarly, "expressions that are standard, stock or common to a particular subject matter or are dictated by external factors are not protectable under copyright law". See Engineering Dynamics, 26 F.3d at 1344. This principle governing common expressions is known as the "scenes a faire"8 doctrine. Id.

In addition, ideas or concepts, processes or methods, per se, are not protectable. "[W]here there is only one or so few ways of expressing an idea that protection of the expression would effectively accord protection to the idea itself, then the expression is unprotected as well." Kepner-Tregoe, 12 F.3d at 533; Kregos v. Associated Press, 937 F.2d 700, 702 (2d Cir.1991). This principle, known as the merger doctrine, requires courts to

Hodge E. Mason and Hodge Mason Maps, Inc. v. Montgomery Data, Inc., 967 F.2d 135, 138-40 (5th Cir.1992).

Summarizing the above statutory and common law principles of copyright law, the Fifth Circuit has stated that:

Engineering Dynamics, 26 F.3d at 1344.

It is possible to have copyright protection in a work that is only partially original. Derivative works are those works that are "based upon one or more preexisting works." 17 U.S.C. § 101. With derivative works, copyright protection "covers only those elements contained therein that are original with the copyright claimant." NIMMER § 3.04[A]. Protection again hinges upon the work's originality, as "copyright protection may extend only to those components of a work that are original to the author." Feist, 499 U.S. at 348, 111 S.Ct. 1282.9

B. Copyright Infringement

In order to establish copyright infringement, a plaintiff must establish (1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original. Feist, 499 U.S. at 361, 111 S.Ct. 1282; Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772, 787 n. 57 (5th Cir.1999).

Ownership. — Ownership is demonstrated by establishing proof of originality, copyrightability, and compliance with applicable statutory formalities. See Norma Ribbon & Trimming, Inc. v. Little, 51 F.3d 45, 47 (5th Cir.1995); Engineering Dynamics, 26 F.3d at 1340. "[N]o action for infringement of the copyright in any work shall be instituted until registration of the copyright claim has been made in accordance with this title." 17 U.S.C. § 411(a). Failure to register a work does not invalidate the copyright, but rather, it precludes any infringement actions on that work until a valid registration is obtained. See Raquel v. Education Management Corp., 196 F.3d 171, 176 (3d Cir.1999).

A valid copyright certificate of registration constitutes prima facie evidence of the validity of a copyright. See Norma Ribbon, 51 F.3d at 47 (citing 17 U.S.C. § 410(c)). This presumption, however, is rebuttable, as the burden of proof is shifted to the defendant to prove the invalidity of the plaintiff's copyright. See Entertainment Research v. Genesis Creative Group, 122 F.3d 1211, 1217 (9th Cir. 1997); CMM Cable Rep, Inc. v. Ocean Coast Properties, Inc., 97 F.3d 1504, 1513 (1st Cir.1996); Masquerade Novelty v. Unique Industries, 912 F.2d 663, 668 (3d Cir.1990). In cases in which the originality of a plaintiff's registered work is at issue, the defendant must offer proof "that the plaintiffs product was copied from other works or similarly probative evidence." See Ocean Coast Properties, 97 F.3d at 1513 (citing Masquerade Novelty, 912 F.2d at 668, 669). Once the defendant offers such proof, the burden shifts back to the plaintiff to demonstrate originality. See Ocean Properties, 97 F.3d at 1513.

Copying. — Copying may be established either directly or indirectly. A plaintiff may indirectly establish copying by demonstrating (1) that defendant had access to the copyrighted material, and (2) there are probative similarities between the copyrighted material and the allegedly copied material. See Feist, 499 U.S. at 361, 111 S.Ct. 1282 (proof or access and substantial similarity between the protected or original elements of the works); King v. Ames, 179 F.3d 370, 375 (5th Cir.1999); Engineering Dynamics, 26 F.3d at 1340; Kepner-Tregoe, 12 F.3d at 532. If the works are "so strikingly similar as to preclude the possibility of independent creation, `copying' may be proved without a showing of access." Ferguson v. National Broadcasting Co., 584 F.2d 111, 113 (5th Cir.1978); accord Country Kids `N City Slicks, Inc. v. Sheen, 77 F.3d 1280, 1284 n. 4 (10th Cir.1996).

Not all copying, however, constitutes copyright infringement. See Engineering Dynamics, 26 F.3d at 1341; Kepner-Tregoe, 12 F.3d at 533. In order to establish copyright infringement, the plaintiff must establish that defendant copied the protectable elements of plaintiffs copyright. See Kepner-Tregoe, 12 F.3d at 533; see also Feist, 499 U.S. at 348, 111 S.Ct. 1282 ("[A]ccordingly, copyright protection may extend only to those components of a work that are original to an author.").

Copying is shown through a detailed side by side comparison of the copyrighted and allegedly infringing works. See King, 179 F.3d at 376; Creations Unlimited, Inc. v. McCain, 112 F.3d 814, 816 (5th Cir.1997). This determination, the Fifth Circuit has emphasized, "is an issue to be determined by comparison of works, not credibility." Id. If there is not literal infringement, there nevertheless may be copyright infringement if there is a "substantial similarity between the two works." Engineering Dynamics, 26 F.3d at 1341. Substantial similarity is often determined by the "ordinary observer" test, which provides:

Arica Institute, Inc. v. Palmer, 970 F.2d 1067, 1072 (2d Cir.1992) (quoting Peter Pan Fabrics, Inc. v. Martin Weiner Corp., 274 F.2d 487, 489 (2d Cir.1960)); Churchill Livingstone, 949 F.Supp. at 1052-53. When a work contains both protectable and unprotectable elements, however, the court must apply the "`more discerning' ordinary observer" test. See Hamil America Inc. v. GFI, 193 F.3d 92, 101 (2d Cir.1999); see also Nihon Keizai Shimbun, Inc. v. Comline Business Data, Inc., 166 F.3d 65, 70 (2d Cir.1999); Kepner-Tregoe, 12 F.3d at 534-35. "Finally, to determine substantiality of any portion found arguably to have been copied, a court must determine the copied `portion's relative importance with respect to the [the copyrighted] over-all work." Churchill Livingstone, 949 F.Supp. at 1053 (citing Altai, 982 F.2d at 710).

Id. (citing 3 NIMMER ON COPYRIGHT § 13.03[A], at 13-29 (1996)). However, even if the amount copied is relatively small, as long as the "copied portion is qualitatively important, the finder of fact may properly find substantial similarity under copyright law...." Id. (citing Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1564-65 (Fed.Cir.1992) (citations omitted)); compare Arica, 970 F.2d at 1072 (presence of words or phrases similar to those in plaintiff's book on seventy pages in the defendant's book, was insufficient to produce substantial similarity between the two works as a whole).

In determining whether there is substantial similarity that will suffice for proof of infringement, the Court should first filter out all of those elements that are not protected under copyright laws.10 See Transwestern Publishing Co. v. Multimedia Marketing Associates, Inc., 133 F.3d 773, 777 (10th Cir.1998); Williams v. Crichton, 84 F.3d 581, 583 (2d Cir.1996); Knitwaves, Inc. v. Lollytogs Ltd., 71 F.3d 996, 1002 (2d Cir.1995); Engineering Dynamics, 26 F.3d at 1344; Kepner-Tregoe, 12 F.3d at 534. The Court thus must filter out non-protectable material such as facts, ideas, information in the public domain, and words that are encompassed by scenes a faire. See Engineering Dynamics, 26 F.3d at 1344.

IV. DISCUSSION

Defendants contend that they are entitled to judgment as a matter of law on all of Plaintiffs' claims. First, Defendants argue that Plaintiffs should not be allowed to maintain a copyright action, as Plaintiffs have acted with unclean hands and have committed a fraud on the Copyright Office. Second, Defendants contend that Plaintiffs' alleged copyrighted works are not subject to copyright protection since they each are derivative or are copies of prior works, and any potentially original elements are not protectable under copyright law. Third, Defendants argue that if Plaintiffs are proper owners of the alleged copyrighted material, they are co-owners with Defendants. As co-owners, Defendants are not liable to Plaintiffs for copyright infringement.

Defendants further contend that Plaintiffs' state court claims are without legal and factual merit. Defendants argue that Plaintiffs' unfair competition claim is barred under the applicable statute of limitations. Furthermore, Defendants claim that the contract clause on which Plaintiffs rely was voided by a superceding employment contract between Cantrell and Plaintiffs.

Defendants by their motion also seek the affirmative relief of entry of declaratory judgment that they are the owners or co-owners of the subject works and, conversely, that Plaintiffs are not the owners of the subject works. Finally, Defendants request a judicial declaration that Defendants are entitled to an accounting from Plaintiffs for Plaintiffs' use of copyrighted works to which Defendants have rights superior to Plaintiffs' rights.

A. Scope of Plaintiffs' Copyright Claim

In their Motion, Defendants argue that Plaintiffs lack standing to assert the intellectual property rights of certain third parties. In their Response, Plaintiffs agree with Defendants, and moot this issue by repeatedly stating that all copyright causes of action in Plaintiffs' amended complaint relate only to the mailers that are registered with the United States Copyright Office. See, e.g., Plaintiffs' Response, at 8.11

B. Plaintiffs' Copyright Infringement Claim

In order to succeed on a copyright infringement suit against Defendants, Plaintiffs must demonstrate that they have a valid copyright on the allegedly infringed works and that Defendants copied protectable elements of Plaintiff's copyrighted works. Plaintiffs have a certificate of registration from the United States Copyright Office, i.e., registered copyright, for the two advertising letters (or "mailers") in question. See Plaintiffs' Response, Exhibit Y. Plaintiffs thus have established a prima facie case of validity.

Defendants respond that Plaintiffs' copyright is not valid because Plaintiffs' works are not original. Defendants contend that Plaintiffs copied these works from materials previously published by The Ritz Corporation and Presidential. Thus, Defendants argue the presumption created by Plaintiffs' copyright certificate is rebutted. Defendants do not deny Plaintiffs' allegations that Defendants copied Plaintiffs' works.

Defendants may establish circumstantially that Plaintiffs copied their mailers from prior works by demonstrating that Plaintiffs had access to the prior works and that Plaintiffs' work is substantially similar to The Ritz Corporation's and Presidential's materials.12

Access. — Plaintiffs' own evidence conclusively establishes that Plaintiffs had access to The Ritz Corporation and Presidential materials. Access may be found to exist when the relevant party "had an opportunity to view the protected item." Wildlife Express Corp. v. Carol Wright Sales, Inc., 18 F.3d 502, 508 n. 5 (7th Cir.1994) (citing 3 NIMMER ON COPYRIGHT, § 13.02[A], at 13-16 (1990)). In his affidavit, Ready states that "[u]ntil some time in December, 1995, I did have in my office a file which contained several Presidential Group letters and contracts with dealers." Ready Affidavit, at 4, ¶ 13. Later in his affidavit, Ready states, "Mr. Silbert informed me that the marketing materials that we used in our business, under the name of Premier Productions Group, had been created by Mr. Silbert and Mr. Kevin Bone, the other founder of The Ritz Corporation." Id. at 6, ¶ 19. This testimony is corroborated by a letter sent by Silbert to Ready on February 7, 1997, submitted to the Court by Plaintiffs. See Plaintiffs' Response, Exhibit Z. The letters (which Ready concedes he basically drafted) states that:

Id. Silbert also stated in his deposition that "in my association with Robert [Ready] I feel that he was privy to the information I brought with me." Silbert Deposition, Defendants' Appendix, Exhibit 9, at 66.

Substantial Similarity. — In cases in which the work at issue contains both protectable and unprotectable elements, the test "must be the `more discerning' [ordinary observer test], excluding the unprotectable elements from consideration." Nihon Keizai, 166 F.3d at 70; see Hamil America, 193 F.3d at 100-01; Kepner-Tregoe, 12 F.3d at 534-35.

The Court thus must ascertain which portions of Plaintiffs' copyrighted works are protectable. To do so, the Court will identify and eliminate the unprotectable elements in Plaintiffs' copyrighted works. See Kepner-Tregoe, 12 F.3d at 534.

The Court will analyze Plaintiffs' copyrighted works at various levels of abstraction.13 When Plaintiffs' works are considered on the most general level, Plaintiffs' works do not appear original. In addition, direct mail advertising through personalized letters to customers by automobile dealers to potential customers was the business of The Ritz Corporation and Presidential, and Plaintiffs do not contest this fact. Therefore, Plaintiffs' concept of a direct mail personalized flyers mailed to potential automobile purchasers is not protectable.14

When Plaintiffs' works are considered at the "intermediate level of abstraction, such as the structure, sequence and organization of the copyrighted works," see Kepner-Tregoe, 12 F.3d at 536, Plaintiffs works also lack originality. Plaintiffs' works contain clearly unprotectable elements and phrases. For ease of analysis, the Court's findings and conclusions on the non-protectable elements of Plaintiffs' works are set forth in chart form, with each phrase or element listed with the copyright doctrine the Court finds applicable.

                 CHART I: UNPROTECTABLE ELEMENTS IN PLAINTIFFS' MAILER

                   PHRASE                                    REASON UNPROTECTABLE

"Mitsubishi: The New Thinking in Automobiles"    Scenes a faire: slogan provided by dealer

"by GILLMAN MITSUBISHI"                          Scenes a faire: factual information provided
                                                 by dealer

"a Giant Summer Clearance Sale"                  Scenes a faire: standard retail sales slogan

"GILLMAN MITSUBISHI IS OUT TO                    Scenes a faire: information supplied by dealer
REDUCE ITS INVENTORY BY MORE
THAN A MILLION DOLLARS!"

"If you are currently in the market for a        Scenes a faire: standard retail sales slogan
new MITSUBISHI or a quality pre-owned            Factual information provided by dealer;
vehicle, don't miss this"                        merger doctrine

"Each vehicle will be assigned a Special         Scenes a faire: standard retail sales slogan
discount from M.S.R.P"                           Factual information provided by dealer;
                                                 merger doctrine

"No negotiation will be necessary"               Scenes a faire: standard retail sales slogan
                                                 Factual information provided by dealer
                                                 Merger doctrine

"The Greatest Sell-Off of the Season"            Scenes a faire: standard retail sales slogan

"Rock Bottom Prices"                             Scenes a faire: standard retail sales slogan

"with immediate credit approval"                 Scenes a faire: factual information provided
                                                 by dealer

"YOUR TRADE-IN (paid off or not)"                Scenes a faire: factual information provided
                                                 by dealer

"PAYOFF ON YOUR TRADE"                           Scenes a faire: factual information provided
                                                 by dealer

                PHRASE                                           REASON UNPROTECTABLE

"Select from more than 100 new MITSUBISHI        Scenes a faire: standard retail sales slogans
sedans, coupes, and trucks including
Mirages, Diamantes, Monteros,
3000GT's, 4X4 Trucks, THE ALL NEW
1995 RESTYLED GALANT AND
ECLIPSE, and much more! Test drive
any one of these vehicles and be prepared
to purchase the vehicle of your choice.
YOU COULD SAVE THOUSANDS!"

"YOU COULD SAVE THOUSANDS!"                      Scenes a faire: standard retail sales slogans

"OVER 150 PRE-OWNED VEHICLES                     Scenes a faire: standard retail sales slogans
WILL BE AVAILABLE DURING THIS                    factual information provided by dealer
SALE" "HUGE SELECTION OF PRE-OWNED
PROGRAM AND DEMONSTRATOR
VEHICLES ALSO ON SALE!"

"No phony gifts, no gimmicks, just great         Unprotectable marketing idea Merger doctrine
savings"

"July 22 from 12:00 PM - 6:00 P.M." [Place       Scenes a faire: factual information provided
and time of sale]                                by dealer

"Use your current vehicle as a down payment."    Scenes a faire: standard retail sales slogans

"Your trade may never be worth more!"            Scenes a faire: standard retail sales slogans

"If there is severe inclement weather on         Scenes a faire: factual information provided
date of sale, voucher will be honored on         by dealer
7/24/95"

"Open to private sector. No dealers allowed."    Scenes a faire: factual information provided
                                                 by dealer

Many elements of Plaintiffs' works are covered by the scenes a faire doctrine because they are "expressions that are standard, stock or common to a particular subject matter or are dictated by external factors." Engineering Dynamics, 26 F.3d at 1344. Plaintiffs argue that the question of whether certain elements constitute scenes a faire doctrine is, in fact, a question of material fact for the jury. See Plaintiffs' Response, at 20 (citing FASA Corp. v. Playmates Toys, Inc., 869 F.Supp. 1334, 34 U.S.P.Q.2d 1481, 1493 (N.D.Ill. 1994)). The case cited by Plaintiffs in no way supports Plaintiffs' broad proposition.15

Plaintiffs argue also that their expression of the idea that there will be "no phony gifts, no gimmicks" was new and thus is protectable. The Court disagrees. This phrase is unprotectable for two reasons. The phrase merely conveys in a direct manner the marketing concept that no gifts will be given out to customers at the sale. See Engineering Dynamics, 26 F.3d at 1344 ("Copyright protects the expression of ideas, not the ideas themselves.") There is no artful or creative phrasing included in Plaintiffs' mailers. Moreover, the copyright merger doctrine renders unprotectable Plaintiffs' manner of expression of the idea concerning no gifts. Here, the expression is nothing but the bare minimum to communicate the idea in issue. Plaintiffs' expression lacks any flourishes that might separate it from the actual idea. See Montgomery Data, 967 F.2d at 138-39. Therefore, the Court finds that Plaintiffs' expression of the idea of no gifts or gimmicks to be indistinguishable from the idea itself, and the expression is not a protectable element of Plaintiffs' works. Plaintiffs have failed to establish a genuine question of material fact concerning this marketing concept.

The Court therefore concludes that each of the phrases and elements from Plaintiffs' work in the chart above are either such common slogans in retail advertising and sales for automobiles, as well as innumerable other products, or are mere explanations of facts provided by the dealer, that no reasonable person could find the scenes a faire doctrine inapplicable to the quoted phrases.

Copied Elements. — In order to determine whether summary judgment is appropriate on the issue of substantial similarity in the case at bar, the Court must determine what portions of the potentially protectable elements of the copyrighted works are in fact original expressions or phrases. Defendants have offered a variety of examples of allegedly relevant prior work from The Ritz Corporation and Presidential. For purposes of this analysis, the Court will examine the works on which Plaintiffs focus their arguments. See Plaintiffs' Response, at 18, and Exhibits M through S, encompassing Defendants' Exhibits 54 (Presidential's mailer), 64 (Presidential's mailer), 68(b) (Ritz's mailer), 68(c) (Ritz's mailer), 68(d) (Ritz's mailer), 68(e) (Ritz's mailer), and 68(f) (Ritz's mailer).

The Court finds that Plaintiffs' own exhibits and argument reveal that most, if not all, of the potentially protectable phrases in Plaintiffs' work are not original. A side-by-side comparison of The Ritz Corporation and Presidential advertising letters with Plaintiffs' registered works demonstrates that the potential protectable portion of Plaintiffs' works, as a matter of law16 are substantially similar to various prior works. The elements of Plaintiffs' work that are substantially similar to those in prior works are cross-referenced below with the pertinent similar phrase from the prior works:

              PHRASE                                   REASON UNPROTECTABLE

                                          CHART 2

                 PHRASES IN PLAINTIFFS' MAILER ALSO PRESENT IN PRIOR WORKS

  PHRASE IN PLAINTIFFS' MAILER             PHRASING IN PRIOR WORK              DEFENDANTS'
                                                                                EXH. NOS.

Check at the top with addressee's    Exactly same                              54, 64, 68(b)
name

"Exclusive Invitation"               Exactly same                              54, 64, 68(b),
                                                                               68(d), 68(e)
  (same as above)                    "by invitation only"                      68(c)
"Dear Mr. Sample"                    "Mr. Sample"                              64
  (same as above)                    "Dear Mr. Sample"                         68(b), 68(c),
                                                                               68(d)
"You and your family have been       "You and your family have been selected   68(c)
selected from a group of preferred   to participate in a very prestigious
guests ... to participate in"        event"

PHRASE IN PLAINTIFFS' MAILER                       PHRASING IN PRIOR WORK            DEFENDANTS'
                                                                                      EXH. NOS.
  (same as above)                          "You and your family are cordially         68(f)
                                          invited to a very special event announced
                                          by invitation only"

  (same as above)                           "Mr. Sample, as a member of this           64
                                          select group of registered owners"

"As a result, you and your family         "by invitation only. There has been        68(c)
are invited to a very special sales       no public advertising"
event on [date]" ... "This event is
by invitation only and is not being
advertised to the public...." "this
SPECIAL PRIVATE SALES
EVENT that features exclusive
discounts for those who present
this invitation."

  (same as above)                           "This event is exclusive and will not      68(e)
                                          be open to the public"

  (same as above)                           "You and your family have been invited     68(d)
                                          to attend a special private invitation
                                          only sale.... This sale will not
                                          be open to the public"

"bring this invitation and present        "Simply present this invitation to the     68(b)
it to the hostess in the showroom"        hostess inside the showroom"

  (same as above)                           "Private offer with this invitation"       68(e)
                                          "Exclusive offer. You must present
                                          this invitation."

"sales event on [date] from 12:00         "This special sale is for six hours        68(b)
PM - 6:00 PM"                              only"

"Gilman Mitsubishi is out to reduce       "Giant Inventory Reduction Sale"           64, 68(b)
its inventory by more than a
million dollars"

  (same as above)                           "De Anza Chevrolet has a major             68(e)
                                          problem, De Anza Chevrolet has to
                                          pay a penalty of huge amounts of
                                          interest to the bank for their entire
                                          overstocked inventory ... Rather
                                          than paying the bank ... De Anza
                                          Chevrolet would like to pass the savings
                                          on to you"

"Finance representatives will be          "Special finance personnel will assist     68(d)
on hand to assist you"                    in immediate delivery of all purchases
                                          and leases on approved credit"

  (same as above)                           "Finance representatives will be           64
                                          present for this sale to assist with
                                          credit approval"

"To insure immediate results,             "So bring this invitation, your trade-in,  68(c)
please remember to bring this invitation  Title or payment book, all decision
... along with: Title, payment            makers"
book, all decision-makers,
current registration, your trade-in"

  (same as above)                           "Bring this invitation, your trade-in,     68(f)
                                          pink slip or payment book, all decision
                                          makers ... and come prepared
                                          to buy"

  (same as above)                           "So bring your title or payment            64
                                          book, registration, all decision makers,

PHRASE IN PLAINTIFFS' MAILER                    PHRASING IN PRIOR WORK                 DEFENDANTS'
                                                                                        EXH. NOS.
                                          and be prepared to purchase the
                                          model of your choice"

  (same as above)                           "Come prepared to buy! Bring all             68(b), 64
                                          decision makers

  (same as above)                           "Bring your trade-in" ... "P.S. Present      54
                                          this letter at the sales entrance"

"No phony gifts, no gimmicks, just       "There are no frills, no free gifts ...      54
great savings"                            just serious savings"

  (same as above)                           "This is an honest sale, no tricks or        68(e)
                                          gimmicks"

"Complementary valet parking"             "Free valet parking will be available        68(c)
                                          for your convenience"

"Complimentary food and refreshments      "Each guest will receive a valuable          68(e)
for the entire family"                    gift along with catered food and beverages"

  (same as above)                           "Free food and refreshments for the          64
                                          entire family"

"Official appraisers and buyers           "Used car buyers will be on hand to          68(b)
will be present to give you an immediate  ensure you get the fairest price for
appraisal on your car"                    your car"

  (same as above)                           "Licensed California used car appraisers     68(d)
                                          will be on hand to give yo
                                          top dollar for your used vehicle"

  (same as above)                           "De Anza Chevrolet has contracted            68(e)
                                          special used car buyers to buy all
                                          trade ins"

  (same as above)                           "Special used car appraisers will be         64
                                          on hand to create a bidding war on
                                          your trade in"

"Rock Bottom Prices"                      "Rock Bottom Prices"                         68(f)

"You could save thousands"                "You could save thousands"                   68(f)

"Don't miss this event! One Day           "This authorized reduction will be for       64
Only!"                                    one day only"

  (same as above)                           "one day only"                               68(c), 68(f)

"Over 150 pre-owned vehicles will         "Over 100 hand-picked, specially selected    64
be available during this sale"            used vehicles will be included
                                          in this sale"

  (same as above)                           "Over 150 new ... and pre-owned              68(c)
                                          vehicles

The Court concludes under the "`more discerning' ordinary observer" test, that no reasonable person comparing the identified phrasing in Plaintiffs' works with the comparable phrases in the specified prior works could find that the identified phrases in Plaintiffs' works are not copied.17 Plaintiffs' have failed to establish a genuine question of fact as to the absence of originality in the quoted phrases of the copyrighted works.18

Plaintiffs' Proof of Originality. — Plaintiffs offer no additional evidence of originality. In their Response, Plaintiffs do point out that, "most importantly, Mr. Ready has specifically testified that he did not copy any fragments from any preexisting materials." Plaintiffs' Response, at 17. This self-serving and unsupported personal assertion is strongly contradicted by the access Plaintiff Ready had to the earlier works through his employment history with Presidential and Premier, and by the obvious substantial similarity between the phrasing, structure, layout and concept between Plaintiffs' works and the prior works to which he had access. In any event, the intent of Plaintiffs is irrelevant. This comports with the general view of intent in copyright infringement cases. See Repp v. Webber, 132 F.3d 882, 889 (2d Cir.1997) (holding that "the fact that infringement is `subconscious' or `innocent' does not affect liability"); see also Pinkham v. Sara Lee, 983 F.2d 824, 829 (8th Cir.1992) (finding that "the defendant is liable even for `innocent' or `accidental' infringements"); Costello Publishing Co. v. Rotelle, 670 F.2d 1035, 1044 n. 13 (D.C.Cir.1981) ("Intent is not an element of ... copyright infringement.").

Conclusion of Copyright Invalidity Defense. — After eliminating all of the non-original phrases as well as the non-protectable elements quoted in the foregoing charts, there is not a scintilla of protectable originality in Plaintiffs' registered works. This is demonstrated visually in Appendix "A" to this Memorandum Opinion and Order, which is a reproduction of the text of one of Plaintiffs' copyrighted works showing the unprotectable elements in bold and the copied (non-original) portions highlighted in grey. When these elements all are removed, there is virtually nothing left in Plaintiffs' works to be validly protected by a copyright. See Appendix "B" (reflecting the words remaining in Plaintiffs' work after elimination of the all the unprotectable and non-original phrases).

In summary, the Court concludes that Defendants have overcome the presumption of originality reflected by Plaintiffs' copyright registration certificates. Thus, Defendants are entitled to summary judgment on Plaintiffs' copyright infringement claim, having demonstrated that Plaintiffs' copyrights are invalid as a matter of law.

C. Fraud on the Copyright Office

Defendants argue that Plaintiffs committed fraud on the United States Copyright Office when they registered their two copyrights in 1995. Under copyright law, "the knowing failure to advise the Copyright Office of [material] facts ... constitutes grounds for holding the registration invalid and incapable of supporting an infringement action." See Raquel, 196 F.3d at 177; see also Eckes v. Card Prices Update, 736 F.2d 859, 861-62 (2d Cir.1984) (finding that the knowing failure to "advise the Copyright Office of facts which might have occasioned a rejection of the application" enough to preclude infringement action).

Defendants have demonstrated without meaningful contradiction that the overall concept behind and numerous elements of Plaintiffs' registered works are plainly copied from existing works by The Ritz Corporation and Presidential. Nevertheless, Plaintiffs failed to disclose in their registration application that there were preexisting mailers on which Plaintiffs' works were substantially based. In their applications, however, Plaintiffs falsely claimed authorship of the "entire text." Plaintiffs thus failed to inform the Copyright Office of crucially material facts. The existence of the prior works would have occasioned the rejection of Plaintiffs' applications. At best, Plaintiffs' works could be described as "derivative works."

The Court also finds Defendants have established without genuine contradiction that this was not an inadvertent error. At the time Ready created his mailers, he knew of the substantially similar works by the owners of The Ritz Corporation and Presidential. The Court finds that Ready's employment with Presidential and his access to the prior works of both The Ritz Corporation and Presidential leads inescapably to a finding that Ready knowingly failed to advise the Copyright Office of material facts.19 This constitutes inequitable conduct that invalidates Plaintiffs' copyrights.

C. Plaintiffs' State Court Claims

Unfair Competition Claim. — The Court also concludes that Plaintiffs' unfair competition claim fails as a matter of law. In their First Amended Complaint, Plaintiffs allege that Defendant Cantrell signed an agreement in which he "agreed not to disclose or use information designated as `Confidential Information' upon the termination of his relationship with Ready." Plaintiffs' First Amended Complaint, at 3, ¶ 8. Plaintiffs also allege that "when Cantrell left Ready he wrongfully misappropriated copies of the direct mail advertising letter/mailpiece [sic] which he wrongfully used in his own business constituted a breach of the relevant contract," and "Cantrell's wrongful misappropriation and unauthorized use of the copyrighted letter/mailpiece [sic] was an intentional breach of this duty owed to Ready." Plaintiffs' First Amended Complaint, at 4, ¶¶ 10, 11 (emphasis added). Plaintiffs' unfair competition claim thus explicitly is based on Cantrell's alleged misappropriation of trade secrets.

Despite these allegations, Plaintiffs attempt to argue that their unfair competition claim does not involve the misappropriation of trade secrets. See e.g., Plaintiffs' Sur-Reply, at 18. This argument, however, tortures the plain language of Plaintiffs' First Amended Complaint, and represents an impermissible attempt belatedly to amend Plaintiffs' pleadings long after discovery is closed. See Shanahan v. City of Chicago, 82 F.3d 776, 781 (7th Cir.1996) (finding that allegations in a response to a motion are not sufficient to amend the complaint).20

In any event, Plaintiffs' unfair competition claim is barred by the Texas statute of limitations. Claims of unfair competition through misappropriation of trade secrets and other unfair competition claims are subject to a two year statute of limitations. See TX.CIV.PRAC. & REMCODE § 16.003. Plaintiffs' unfair competition claim sounds in tort, whether the allegedly misused property was a trade secret or not. See United States Sporting Products, Inc. v. Johnny Stewart Game Calls, Inc., 865 S.W.2d 214, 218 (Tex.App.—Waco 1993, writ denied).21 "The doctrine of misappropriation is a branch of the tort of unfair competition which involves the appropriation and use by the defendant, in competition with the plaintiff, of a unique pecuniary interest created by the plaintiff through the expenditure of labor, skill and money. It is recognized under Texas law." Id. at 216 (citing Universal City Studios v. Kamar Industries, 217 U.S.P.Q. 1162, 1982 WL 1278 (S.D.Tex.1982) (citations omitted)). Thus, Plaintiffs' unfair competition claim is governed by Texas's two-year statute of limitations. See Daboub v. Gibbons, 42 F.3d 285, 290 (5th Cir.1995) ("The state law limitations period for some of the alleged causes of action, such as misappropriation, unfair competition, and conversion, is two years.") (citing TEX.CIV.PRAC. & REM.CODE § 16.003); see also Derrick Manufacturing Corp. v. Southwestern Wire Cloth, 934 F.Supp. 796, 806 (S.D.Tex. 1996) (finding that unfair competition claims are governed by a two year statute of limitations and noting that "the Court has discovered no cases in which the four year period was applied to an unfair competition claim").

An unfair competition claim for misappropriation of trade secrets accrues and the limitations period commences when the trade secret allegedly misappropriated is actually used by the defendant. See Computer Associates International, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex.1996). Under Texas law, the "discovery rule," i.e., postponement of accrual of certain causes of action for purposes of the statute of limitations, does not apply to a claim of unfair competition based on misappropriation of trade secrets. Id. at 457. There is no reason that this same rule would not apply to other unfair competition claims when the plaintiff complains about a defendant's misuse of other proprietary information or the products of allegedly extensive work developed by the plaintiff.

Plaintiffs' unfair competition claim is time barred. Cantrell began to work at ACC in October 1995. Plaintiffs contend the tortious conduct occurred at or about that time. In fact, Plaintiffs complain about a mailpiece by Cantrell dated November 25, 1995. See Plaintiffs' Response, Exhibit H. Plaintiffs, however, did not file their complaint in this Court until February 11, 1998, well outside the applicable two year limitations period.

Breach of Contract Claim. — Plaintiffs also assert a breach of a contractual non-competition clause that appears in the parties' March 6th contract. See Plaintiffs' First Amended Complaint, ¶ 10. Defendants contend that Plaintiffs' contract claim is without merit because the March 6th contract explicitly was superceded by the subsequent May 1995 contract.

To the extent they were included in Plaintiffs' First Amended Complaint, Plaintiffs' breach of contract claim fails as a matter of law. In the March 6th contract, there were two distinct duties: one was not to disclose confidential information, and the other was a commitment not to compete with Ready Productions. The May 1995 contract altered Cantrell's employment relationship with Ready Productions, making him an independent contractor, rather than an employee.

Id. Plaintiffs do not deny the existence of this integration clause. The clause is valid and binding on the parties.

Under Texas law, an integration clause operates to memorialize the common law doctrine of merger. See Smith v. Smith, 794 S.W.2d 823, 828 (Tex.App.— Dallas 1990); accord GXG, Inc. v. Texacal Oil & Gas, 977 S.W.2d 403, 417 (Tex. App.—Corpus Christi 1998); Fish v. Tandy Corp. 948 S.W.2d 886, 899 (Tex.App.— Fort Worth 1997, writ denied). Under this contract merger doctrine, one contract may be extinguished through its absorption into a subsequent agreement between the parties. See Smith, 794 S.W.2d at 827. The key element in determining whether the prior contract is extinguished is the parties' intent as expressed in the relevant contracts. See id.

The language of the May 1995 contract expresses that Plaintiffs' and Cantrell's intention to supersede the March 6 contract entirely. While the parties now agree that the purpose of the May 1995 contract was to permit Cantrell to switch roles from an employee to an independent contractor, the parties elected to sign a written and fully integrated document. The May 1995 contract was drafted by Ready on behalf of both Plaintiffs. That agreement expressly included a broad integration clause that did not make any exceptions. Both contracts addressed the same general subject: Cantrell's employment with Ready Productions. The language of the May 1995 contract, the parties' later agreement, clearly intends to supersede the March 6th agreement altogether. Plaintiffs cannot now vary or contradict the integration clause with self-serving parol evidence.

Plaintiffs argue that the two contracts are separate and distinct agreements that cover different aspects of Cantrell's employment concurrently. Plaintiffs' argument contravenes the integration clause language. Lewis v. Adams, 979 S.W.2d 831, 836 (Tex.App.—Houston [14th] 1998, no writ). Plaintiffs are bound by their own agreement and it is they who must bear responsibility for their own failure to include new confidentiality or non-compete clauses or to incorporate by prior reference the contract as an exception to the clear merger clause in the May 1995 contract.22 Plaintiffs' breach of contract claim must be dismissed.

D. Defendants' Motion for Declaratory Judgment

Defendants' Motion for Declaratory Judgement contains three basic requests. First, Defendants request a declaration that "Defendants are owners or co-owners of the subject works." Defendants' Motion, at 3. Second, Defendants ask the Court to find that "Plaintiffs are not the owners of the subject works." Last, Defendants state that they "are entitled to an accounting from Plaintiffs for Plaintiffs' use of Defendants' copyrighted works." Id.

Defendants' Ownership Interest in Presidential and The Ritz Corporation Materials. — Defendants have presented evidence that demonstrates that they have an ownership interest in the Presidential and The Ritz Corporation materials. There is no dispute that Bone and Kennedy owned interest in the intellectual property that was created at The Ritz Corporation or Presidential when they assigned their interests to Cantrell. Defendants obtained "Quitclaim Assignments" from Bone and Kennedy transferring their interests in this property to Defendants. See, e.g., Plaintiffs' Sur-Reply, at 17. A "quitclaim" transfer, by definition, is "a formal release of one's claim or right." BLACK'S LAW DICTIONARY, at 1262 (7th ed.1999). Plaintiffs submit no evidence or argument suggesting that this quitclaim transfer was invalid. Defendants therefore received a quitclaim title in 100% of whatever Kennedy's interest in the Presidential materials and 40% of Bone's interest.

In response, Plaintiffs do not contest these matters. Rather, Plaintiffs contend that the quitclaim assignments that Cantrell obtained from various now-defunct automotive direct mail companies are not conclusive, and that Cantrell only received the intellectual property to the extent that Bone and Kennedy owned it. See Plaintiffs' Sur-Reply, at 17. Plaintiffs further contend that these third parties did not offer a warranty deed and may have lacked "confidence in the validity of their ownership of the copyrights." Id. Plaintiffs deduce from this vague assertion that the "ownership of these pieces of intellectual property is a question of fact for the jury to decide." Id.23

The Court concludes that Defendants' Motion for Declaratory Judgment should be granted in part and denied in part. Certain legal conclusions can be drawn. First, Plaintiffs have no ownership interest in either the Ritz or Presidential materials, and do not contend otherwise. See supra, at 5 (noting that Ready disclaims any ownership interest in both the Ritx and Presidential materials). Furthermore, it is clear that Plaintiffs lack standing to enforce the rights of any third party owners of such works. See authorities cited supra at 21, note 11. Second, Defendants possess valid quitclaim assignments from both Bone and Kennedy. Therefore, the Court concludes that Defendants are the rightful owners of 100% of Kennedy's intellectual property interest and 40% of Bone's intellectual property interest. However, the Court cannot define with precision the exact contours of Bone and Kennedy's interests vis-a-vis Silbert's property interest in these materials on the existing and legal record. It is uncontroverted that Silbert retained no stock ownership in either The Ritz Corporation or Presidential. It is also clear that Silbert renounced his officer status in Presidential. The Court, cannot rule on any other potential theories of ownership that Silbert may assert, or decide any issues relating to Bone and Kennedy's potential copyright interests at the time of the quitclaim assignments to Cantrell. Defendants have failed to adequately present factual and legal authorities justifying summary judgment on these issues.

Defendants' Entitlement to an Accounting.— The Court concludes that Defendants are not entitled to an accounting. It is undisputed that Plaintiffs have no ownership interest in The Ritz Corporation and Presidential materials. Thus, an "accounting" as that term is defined under copyright law, would be improper.24

V. CONCLUSION

For the reasons discussed above, the Court concludes that Defendants' Motion for Summary and Declaratory Judgment [Doc. # 31] should be GRANTED in part and DENIED in part. It is therefore

ORDERED that Defendants' Motion for Summary Judgment [Doc. # 31] is GRANTED. Plaintiffs' copyright, unfair competition and contractual claims are dismissed with prejudice. It is further

ORDERED that Defendants' Motion for a Declaratory Judgment [Doc. # 31] is GRANTED in part and DENIED in part. It is GRANTED to the extent described above. Defendants' Motion for a Declaratory Judgment is DENIED to the extent that Defendants request declarations concerning the ownership interests of third parties and an accounting from Plaintiff. It is further

ORDERED that both parties appear before the Court on January 14, 2000 at 4:00 p.m. for a pretrial conference on Defendants' remaining counterclaims, to the extent a trial is necessary. The parties shall submit a joint pre-trial order on or before January 13, 2000, in the form prescribed by this Court's Procedures. It is finally

ORDERED Plaintiffs shall send a copy of this Memorandum Opinion to all parties and to each presiding judge in all cases filed by Plaintiffs related to this suit.

A separate order will issue dismissing the related cases pending before the undersigned involving Plaintiffs' claims of contributory infringement.

APPENDIX "A"

APPENDIX "B"