UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF WISCONSIN ____________________________________________________________ SYSTEM ENHANCEMENT ASSOCIATES, INC., Plaintiff, v. Case No. 88-C-447 PKWARE, INC. and PHILLIP W. KATZ, Defendants. ____________________________________________________________ VERIFIED COMPLAINT ____________________________________________________________ Plaintiff, System Enhancement Associates, Inc. ("SEA"), as and for a complaint alleges as follows: THE PARTIES - JURISDICTION AND VENUE 1. Plaintiff SYSTEM ENHANCEMENT ASSOCIATES, INC. hereinafter Plaintiff or SEA, is a corporation of the State of New Jersey having a place of business at 21 New Street, Wayne, NJ 07470. Plaintiff is engaged in the business of developing and licensing others to use computer programs and software. 2. Defendant PKWARE, INC. is a corporation of the State of Wisconsin. Upon information and belief, Defen- dants are engaged in the business of licensing others to use computer programs and software, and do business in the State of Wisconsin and in this District. Defendants maintain a place of business at 7032 Ardara Avenue, Glendale, WI 53209. 3. Defendant Phillip W. Katz ("Katz"), AKA Phil Katz, is an officer and a director of Defendant PKWARE. Defendant Katz resides in the State of Wisconsin and in this District. All acts by Defendant PKWARE complained of herein were made with full knowledge and under the specific direction and control of Defendant Katz. 4. This COMPLAINT sets forth causes of action for copyright infringement under 17 USC 101, et seq and trade- mark infringement and unfair competition under the Lanham Act, 15 USC 1051, et seq and under common law. - 1 - VERIFIED COMPLAINT - 2 - 5. This Court has original jurisdiction over the Copyright and Lanham Act claims pursuant to 28 USC 1338(a) and, with respect to the Lanham Act claims, additionally under 15 USC 1121, and over the other claims under the doctrine of pendant jurisdiction. This Court further has jurisdiction over the other claims pursuant to both 28 USC 1338(b), and because this civil action is between citizens of different States and the matter in controversy exceeds the sum or value of $10,000, 28 USC 1332(a)(1). 6. Venue is proper as to the Defendants pursuant to 28 USC 1391 generally and as to the copyright infringement causes of action pursuant to 28 USC 1400(a). 7. This Court has jurisdiction over the subject matter in controversy and the parties to this action. Venue is proper as to the Defendants, who reside or may be found in this District. COUNT I: COPYRIGHT INFRINGEMENT 8. Prior to October 1986, Plaintiff, who was then and ever since has been a citizen of the United States and the State of New Jersey, created and wrote an original work, namely a computer program, entitled "ARC File Archive Utility Version 5.20", and additionally, prior to April 1987, created and wrote a revised version of such work, entitled "ARC File Archive Utility Version 5.21" (hereinafter collectively referred to as the "ARC programs"). 9. Each of the ARC programs contains a large amount of material wholly original with Plaintiff and is copyrightable subject matter under the laws of the United States. 10. At all times relevant to this action, Plaintiff complied in all respects with the Copyright Act of 1976 and all other laws governing Copyright, and secured the exclusive rights and privileges in and to the Copyrights to the ARC programs. 11. Plaintiff has received from the Register of Copyrights Certificates of Registration, dated and identified as follows: a. February 16, 1988, TX2-242-311; and b. March 30, 1988, TX2-264-701 for, respectively, "ARC File Archive Utility Version 5.20" and "ARC File Archive Utility Version 5.21". - 2 - VERIFIED COMPLAINT - 3 - 12. At all times relevant to this action, Plaintiff has been and is the sole proprietor of all rights, title and interest in and to the Copyrights in the ARC programs. 13. Each copy of the copyrighted ARC programs published by Plaintiff and all copies made by Plaintiff or under its authority had associated therewith a restrictive license prohibiting copying any ARC programs for purposes of commercial exploitation. 14. After October 1986 and April 1987, Defendants, jointly and severally, infringed Plaintiff's Copyrights by publishing, placing on the market and commercially exploiting works entitled "PKARC FAST! Archive Create/Update Utility Version 3.5 04-27-87" and "PKXARC FAST! Archive Extract Utility Version 3.5 04-27-87" (the "infringing works") which were copied largely from Plaintiff's copyrighted works "ARC File Utility Version 5.20" and "ARC File Utility Version 5.21". 15. Continuously since about at least as early as April 27, 1987, Defendants have, to Plaintiff's irreparable damage, been publishing, licensing and selling, and otherwise making commercial exploitation of the infringing works, utilizing the same channels of commerce as Plaintiff, adver- tising in the same journals (one example of which is hereto attached as Plaintiff's Exhibit 10) and marketing such infringing works in the same manner as Plaintiff. 16. Defendants' infringing works were published and commercially exploited without license or authorization by Plaintiff. 17. True copies of Plaintiff's copyrighted works, and the respective Registrations therefor, are hereto attached as Plaintiff's Exhibits 1 through 4, respectively. 18. Copies of documentation for Defendants' infringing works are hereto attached as Plaintiff's Exhibits 5 and 6, respectively. On information and belief, Plaintiff's Exhibits 5 and 6 are true copies of works of Defendants published under the authority or license of Defendants, jointly and severally, for which Defendants bear responsi- bility. 19. Plaintiff, by its Attorney, notified Defendants that Defendants have infringed and are infringing Plaintiff's copyrights by a US Postal Service Certified Mail letter dated December 23, 1987. True copies of said notice letter and its Return Receipt are hereto attached as Plaintiff's Exhibits 7 and 8, respectively. - 3 - VERIFIED COMPLAINT - 4 - 20. Defendants, by their Attorneys, responded by letter, dated January 8, 1988, to Plaintiff's Attorney denying infringement. A true copy of Defendants' Attorneys' letter is attached hereto as Plaintiff's Exhibit 9. 21. At all times here relevant Defendants were aware of Plaintiff's copyrights in the ARC programs. 22. Notwithstanding knowledge of Plaintiff's copyrights and specific notice of infringement, Defendants have continued to infringe Plaintiff's copyrights. 23. Defendants did willfully and deliberately copy Plaintiff's ARC programs and infringe Plaintiff's copy- rights. COUNT II: VIOLATIONS OF THE LANHAM ACT 24. Plaintiff repeats and realleges the averments and allegations contained in numbered paragraphs hereinabove as though fully set forth here. 25. Plaintiff has extensively used and promoted intrastate and interstate commerce the trademark "ARC" in connection with computer programs and software. Exemplary uses of Plaintiff's ARC trademark is shown in Exhibits 1 and 3. Plaintiff has continuously used its ARC trademark on its goods shipped throughout the United States and the world. The ARC trademark has come to be recognized as identifying Plaintiff as the source of its products and symbolizes valuable goodwill belonging to Plaintiff. Such recognition and goodwill arose and accrued prior to the acts complained of herein. 26. Due the very high level of originality and quality of Plaintiff's File Archive Utility programs, and their distribution methods and marketing, Plaintiff and its ARC programs have become recognized as the "standard" in the personal computer industry. An example of such recognition is hereto attached as Plaintiff's Exhibit 11. 27. Plaintiff has expended significant time and money in promoting and advertising its File Archive Utility ARC programs, and the trademark ARC has become associated with Plaintiff as denoting the source or origin of high quality File Archive Utility programs. In the personal computer market and to the users of such computers, the mark ARC denotes Plaintiff as the source or origin of such programs. In this regard, an article from Dr. Dobbs Journal, March 1987, pp 26-28, 30 is hereto attached as Plaintiff's Exhibit 12. - 4 - VERIFIED COMPLAINT - 5 - 28. Defendants do not have, nor have ever had, any right or authorization to use Plaintiff's ARC trademark. 29. Defendants have prominently used and are using marks confusingly similar to Plaintiff's ARC trademark, to wit, PKARC and PKXARC. The infringing marks are shown as used by Defendant in Plaintiff's Exhibits 5, 6 and 13. 30. Defendants have used and continue to use the marks PKARC and PKXARC in connection with goods functionally identical to Plaintiff's, in commerce and in the same channels of trade as Plaintiff's ARC programs. Defendants use such marks on, and in connection with publishing, distributing, advertising and marketing throughout the United States, and in this district, File Archive Utility programs. 31. Defendants unauthorized use of PKARC and PKXARC is likely to cause confusion, or to cause mistake or to deceive prospective acquirers of such goods into believing that the products of Defendants originated with or under the sponsorship or license of Plaintiff. 32. Defendants, by improper use of Plaintiff's trademark ARC, have falsely described or represented the Defendants' PKARC and PKXARC programs as the goods of Plaintiff and have, by causing such products to enter into commerce, created a tendency for such false description or representation to be understood as having an origin or sponsorship or license of Plaintiff, thereby diverting income from Plaintiff to Defendants. Plaintiff has been, is being and is likely to be damaged by the use by Defendants of the aforesaid false description or representation. 33. Defendant acts are in violation of Section 43(a) of the Lanham Act, 15 USC 1125(a). 34. At all times relevant hereto, Defendants were aware of Plaintiff's use of the ARC trademark. 35. Upon information and belief, Defendants adopted the PKARC and PKXARC marks to portray to potential consumers a relationship between Defendant's products and Plaintiff's products. 36. Upon information and belief, all Defendant's acts complained of herein were done with the intent to cause confusion among customers as to an affiliation between Defendants and Plaintiff and to capitalize improperly on the goodwill accruing to Plaintiff. - 5 - VERIFIED COMPLAINT - 6 - COUNT III: TRADEMARK INFRINGEMENT; UNFAIR COMPETITION 37. Plaintiff repeats and realleges the averments and allegations contained in the numbered paragraphs herein above as though fully set forth here. 38. Defendants are, by the acts complained of herein, infringing on Plaintiff's trademark rights, and engaging in unfair trade practices and unfair competition, all in violation of the common law of the State of Wisconsin. COUNT IV: COPYRIGHT INFRINGEMENT AND UNFAIR COMPETITION 39. Plaintiff repeats and realleges the averments and allegations contained in numbered paragraphs hereinabove as though fully set forth here. 40. Defendants have, in addition to the acts as alleged above, substantially copied and plagiarized the entire appearance and user interface and screens which result when a computer user interacts with or uses Plaintiff's ARC programs and the manner in which the Plaintiff's ARC programs interface with and interact with the computer user, with the specific intent to create a belief with the consumer of a relationship between Defendants' products and Plaintiff's products. (A copy of Defendants' advertising, PKWARE, INC. advertisement, PC TECH JOURNAL, October 1987, p 220, is hereto attached as Plaintiff's Exhibit 14.) 41. Defendants' acts as heretofore alleged constitute infringement of Plaintiff's Copyrights and unfair trade practices and unfair competition to the irreparable damage of Plaintiff. 42. Defendants' acts, as alleged herein and above, have been willful and deliberate intending to harm and damage Plaintiff and its business. WHEREFORE PLAINTIFF DEMANDS JUDGMENT AS FOLLOWS: (1) Enjoining Defendants, jointly and severally, and any of their agents, servants or any in active concert or participation with any of them, temporarily during the pendency of this action and thereafter permanently from infringing Plaintiff's copyrights in any manner, and from publishing, licensing, selling, distributing or marketing or otherwise disposing of any copies of Defendants' works PKARC and PKXARC; and from infringing in any manner Plaintiff's trademark ARC; - 6 - VERIFIED COMPLAINT - 7 - (2) Ordering the Defendants, jointly and severally, to pay Plaintiff such damages as Plaintiff has sustained in consequence of Defendants' acts of infringement of Plaintiff's copyrights, trademark and the unfair trade practices and unfair competition and to account for: (a) all gains, profits and advantages derived by Defendants and each of them by said trade practices and unfair competition; and (b) all gains, profits and advantages derived by Defendants and each of them by infringement of Plaintiff's copyrights or such damages as to the Court shall appear proper within the provisions of the Copyright Act of 1976, but not less than the statutory minimums therein provided; and (c) all gains, profits and advantages derived by Defendants and each of them by infringement of Plaintiff's trademark or such damages as to the Court shall appear proper within the provisions of the Lanham Act; (3) Trebling Plaintiff's damages and awarding any statutory damages at the highest level allowed; (4) Ordering Defendants to deliver up to be impounded during the pendency of this action all copies of said works entitled PKARC and PKXARC in the possession or control of Defendants or either of them or any of their employees, agents, servants, distributors or licensees and to deliver up for destruction all copies of any infringing work, as well as all computer media, diskettes, documentation and any means for making such infringing copies; (5) Awarding Plaintiff the costs of this action and reasonable attorneys' fees against Defendant; (6) For such other and further relief as is just. - 7 - VERIFIED COMPLAINT - 8 - PLAINTIFF'S VERIFICATION: Thom L. Henderson understanding that willful false statements and the like so made are punishable by fine or imprisonment, or both, under Section 1001 of Title 18 of the United States Code, declares and affirms: That he is President of Plaintiff corporation and is authorized to execute this instrument on behalf of said corporation; that he has read and understands the matters alleged in the Plaintiff's Complaint; and That the facts and statements set forth in said Complaint are, to the best of his knowledge, true; and all statements made on information and belief are believed to be true. Verified and Dated the 2___ day of April, 1988. _____________________________ Thom L. Henderson Attorneys for Plaintiff SYSTEM ENHANCEMENT ASSOCIATES, INC. FOLEY & LARDNER By: ______________________________ Michael A. Lechter, Esq. 777 E. Wisconsin Avenue Milwaukee, WI 53202 (414) 289-3599 THOMAS M. MARSHALL, ESQ. Powder Mill Village 89 Patriots Road Morris Plains, NJ 07950 (201) 993-5779 - 8 - VERIFIED COMPLAINT - 9 - INDEX TO PLAINTIFF' EXHIBITS HERETO ATTACHED Complaint Plaintiff's Description Paragraph Exhibit Reference Number Para. 17, 25 1 "ARC File Archive Utility Version 5.20" Para. 17 2 Copyright Registration Certificate dated February 16, 1988; TX2-242-311 Para. 17, 25 3 "ARC File Archive Utility Version 5.21" Para. 17 4 Copyright Registration Certificate dated March 30, 1988; TX2-264-701 Para. 18, 29 5 "PKARC FAST! Archive Create/Update Utility Version 3.5 04-27-87", documentation Para. 18, 29 6 "PKXARC FAST! Archive Extract Utility Version 3.5 04-27-87", documentation Para. 19 7 Notice Letter of December 23, 1987 addressed to "Phil Katz, PKWARE, INC." Para. 19 8 US Postal; Service Return Receipt, dated December 28, 1987, signed by "H. Katz" Para. 20 9 Attorney Harry Lensky's response letter dated January 8, 1988 Para. 15 10 Advertisements of Plaintiff and Defendants appearing on the same page in PC TECH JOURNAL, April 1988, p 184 Para. 26 11 Reprint of Review Article, PC WEEK March 4, 1986 Para. 27 12 Dr. Dobbs Journal Article "ARC Wars", March 1987, pp 26-28, 30 Para. 29 13 Defendants PKWARE, INC. and Phillip W. Katz Letter postmarked April 19, 1988, and its attachments Para. 40 14 Defendant PKWARE, INC. advertisement in PC TECH JOURNAL, October 1987, p 220 - 9 -