Page 1188 F.3d 1005, 1999 Copr.L.Dec. P 27,950, 51 U.S.P.Q.2d 1853(Cite as: 188 F.3d 1005)United…

Page 1188 F.3d 1005, 1999 Copr.L.Dec. P 27,950, 51 U.S.P.Q.2d 1853(Cite as: 188 F.3d 1005)United States Court of Appeals,Eighth Circuit.Ron and Judy KIRK, doing business as Iowa Pedigree, Appellees,v.Gary HARTER, Appellant.No. 98-2281.Submitted Jan. 14, 1999.Decided Aug. 27, 1999.Rehearing and Rehearing En Banc Denied Oct. 13,1999.Operator of business brought action against developer of computer program used by business, alleging copyright infringement, misappropriation oftrade secrets, and tortious interference with business expectancies. The United States District Courtfor the Western District of Missouri, Ortrie D.Smith, J., entered judgment upon jury verdict foroperator, but set aside verdict for operator on tradesecrets claim. Developer appealed. The Court ofAppeals, Wollman, Chief Judge, held that: (1) developer was independent contractor and thus wasowner of copyright in computer program, and (2)developer did not tortiously interfere with operator’s business expectancies.Reversed and remanded.West Headnotes[1] Copyrights and Intellectual Property 9941(2)99 Copyrights and Intellectual Property99I Copyrights99I(D) Ownership99k41 Ownership99k41(2) k. Works Made for Hire.Most Cited CasesLabor and Employment 231H309231H Labor and Employment231HV Intellectual Property Rights and Duties231Hk308 Inventions, Discoveries, or Creations of Employees231Hk309 k. In General. Most CitedCasesUnder Copyright Act, an employer is the author of a copyrighted work when the item is considered a work made for hire. 17 U.S.C.A. §§ 101,201(b).[2] Copyrights and Intellectual Property 9941(2)99 Copyrights and Intellectual Property99I Copyrights99I(D) Ownership99k41 Ownership99k41(2) k. Works Made for Hire.Most Cited CasesLabor and Employment 231H309231H Labor and Employment231HV Intellectual Property Rights and Duties231Hk308 Inventions, Discoveries, or Creations of Employees231Hk309 k. In General. Most CitedCasesTo determine the employment status of an individual under the copyright statutes when there is nowritten employment agreement, court looks to thecommon-law rules of agency. 17 U.S.C.A. §§ 101,201(b).[3] Copyrights and Intellectual Property 9941(2)99 Copyrights and Intellectual Property99I Copyrights99I(D) Ownership99k41 Ownership99k41(2) k. Works Made for Hire.Most Cited Cases© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.Page 2188 F.3d 1005, 1999 Copr.L.Dec. P 27,950, 51 U.S.P.Q.2d 1853(Cite as: 188 F.3d 1005)Labor and Employment 231H309231H Labor and Employment231HV Intellectual Property Rights and Duties231Hk308 Inventions, Discoveries, or Creations of Employees231Hk309 k. In General. Most CitedCasesIn applying common-law test of agency to determine individual’s employment status under copyright statutes, court examines several factors, including hiring party’s right to control manner andmeans by which product is accomplished, althoughno single factor is determinative; other factors to betaken into account include skill required, source ofinstrumentalities and tools, location of the work,duration of relationship between parties, extent ofhired party’s discretion over when and how long towork, method of payment, hired party’s role in hiring and paying assistants, whether work is part ofhiring party’s regular business, whether hiring partyis in business, provision of employee benefits, andtax treatment of hired party. 17 U.S.C.A. §§ 101,201(b).[4] Copyrights and Intellectual Property 998899 Copyrights and Intellectual Property99I Copyrights99I(J) Infringement99I(J)2 Remedies99k72 Actions for Infringement99k88 k. Trial. Most Cited CasesWhether a given individual is an employee orindependent contractor, for purpose of establishingcopyright ownership, is a question of law, whichmust be decided by reviewing the particular facts ofeach case; in a court-tried case, the findings regarding each of the underlying common-law factors arereviewed under the clearly erroneous standard ofreview, with the ultimate question of employmentstatus being reviewed de novo. 17 U.S.C.A. §§ 101,201(b).[5] Copyrights and Intellectual Property 9941(2)99 Copyrights and Intellectual Property99I Copyrights99I(D) Ownership99k41 Ownership99k41(2) k. Works Made for Hire.Most Cited CasesLabor and Employment 231H309231H Labor and Employment231HV Intellectual Property Rights and Duties231Hk308 Inventions, Discoveries, or Creations of Employees231Hk309 k. In General. Most CitedCasesDeveloper of computer program for businesswas independent contractor, not employee ofbusiness, so developer was owner of copyright inprogram and was not liable for copyright infringement when he began to service users of programdirectly, rather than on behalf of business; althoughdeveloper travelled extensively with business owner and had his projects and hours directed by owner, business failed to provide employment benefitsor withhold any payroll taxes, and developer received payments on irregular basis, continued toconsult with other companies, and, at one point,hired a subcontractor. 17 U.S.C.A. §§ 101, 201(b).[6] Federal Courts 170B763.1170B Federal Courts170BVIII Courts of Appeals170BVIII(K) Scope, Standards, and Extent170BVIII(K)1 In General170Bk763 Extent of Review Dependent on Nature of Decision Appealed from170Bk763.1 k. In General. MostCited CasesCourt of Appeals will affirm jury’s finding oftortious interference with business expectancies if itis supported by substantial evidence.[7] Torts 379262© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.Page 3188 F.3d 1005, 1999 Copr.L.Dec. P 27,950, 51 U.S.P.Q.2d 1853(Cite as: 188 F.3d 1005)379 Torts379III Tortious Interference379III(B) Business or Contractual Relations379III(B)4 Evidence379k260 Weight and Sufficiency379k262 k. Business Relations orEconomic Advantage, in General. Most Cited Cases(Formerly 379k27)Liability for tortious interference with businessrelations may not be sustained based upon speculation, conjecture, or guesswork, and no fact essentialto submissibility can be inferred absent a substantial evidentiary basis.[8] Torts 379241379 Torts379III Tortious Interference379III(B) Business or Contractual Relations379III(B)2 Particular Cases379k241 k. Business Relations or Economic Advantage, in General. Most Cited Cases(Formerly 379k10(3))Developer of computer program for businessdid not tortiously interfere with business expectancies of business owner, by servicing users of program directly, rather than on behalf of business, inview of evidence that customers who chose to workwith developer directly were unhappy with servicesand prices of business, and that customers had solicited developer and had not been pursued by him.*1006 Thomas A. Sheehan, Kansas City, MO, argued (Joseph B. Bowman and Clinton G. Newton,on the brief), for Appellees.Kirk M. Hartung, Des Moines, IA, argued, for Appellant.FN1Before WOLLMANand FLOYD R. GIBSON,FN2Circuit Judges, and TUNHEIM,District Judge.FN1. Roger L. Wollman became ChiefJudge of the United States Court of Appeals for the Eighth Circuit on April 24,1999.FN2. The HONORABLE JOHN R. TUNHEIM, United States District Judge for theDistrict of Minnesota, sitting by designation.WOLLMAN, Chief Judge.In this copyright dispute, the district courtentered judgment on a jury verdict in favor of IowaPedigree. Because we find that Harter was an independent contractor, we reverse.I.Iowa Pedigree, a partnership owned by Ronand Judy Kirk, is in the business of assisting dogbreeders and brokers to comply with AmericanKennel Club (AKC) and United States Departmentof Agriculture (USDA) licensing and registrationrequirements. Iowa Pedigree sought to developcomputer software that would aid its customers inconforming to these regulations.In 1989, Ron Kirk learned from a kennel ownerthat Harter had written a computer program that allowed the owner to track information on the dogsbred and sold by the kennel. In May of 1989, Kirkasked Harter to develop a computer program forIowa Pedigree to assist dog brokers with AKC andUSDA regulations. Harter agreed and eventuallyhelped Iowa Pedigree develop the software.For the next six years, Harter worked on a variety of projects for Iowa Pedigree. He developedseveral computer programs, maintained the computers at Iowa Pedigree, and serviced the softwareof Iowa Pedigree’s clients. In 1996, several customers terminated their relationship with Iowa Pedigreeand began receiving services directly from Harter.Iowa Pedigree *1007 then sued Harter for copyrightinfringement, misappropriation of trade secrets, andtortious interference with business expectancies.The jury found that Harter was liable for copyright infringement. In addition, the jury found thatHarter had misappropriated Iowa Pedigree’s trade© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.Page 4188 F.3d 1005, 1999 Copr.L.Dec. P 27,950, 51 U.S.P.Q.2d 1853(Cite as: 188 F.3d 1005)secrets in violation of Iowa law and that he had tortiously interfered with the business expectanciesbetween Iowa Pedigree and its customers. In addition to awarding compensatory damages, the juryawarded punitive damages in the amount of$50,000.00. The district court entered judgmentagainst Harter, but set aside the verdict in favor ofIowa Pedigree on the claim of misappropriation oftrade secrets.II.[1] The central issue in this appeal is whetherIowa Pedigree is the sole owner of the copyrights tothe computer programs. The Copyright Actprovides that an employer is the author when anitem is considered a work made for hire. See Community for Creative Non-Violence v. Reid, 490 U.S.730, 743-44, 109 S.Ct. 2166, 2174-75, 104 L.Ed.2d811 (1989); 17 U.S.C. § 201(b). See also 17 U.S.C.§ 101 (defining work made for hire as a work prepared by an employee within the scope of his or heremployment); MacLean Assoc., Inc. v. Wm. M.Mercer-Meidinger-Hansen, Inc., 952 F.2d 769,775-76 (3rd Cir.1991) (explaining work made forhire doctrine). Whether the computer programs inthis case are works made for hire turns on thenature of the employment relationship betweenIowa Pedigree and Harter. See, e.g., Siebersma v.Vande Berg, 64 F.3d 448, 449 (8th Cir.1995)(explaining the significance of employment statusin a copyright ownership case involving a computerprogrammer).ities and tools; the location of the work; the duration of the relationship between the parties;whether the hiring party has the right to assignadditional projects to the hired party; the extentof the hired party’s discretion over when and howlong to work; the method of payment; the hiredparty’s role in hiring and paying assistants;whether the work is part of the regular businessof the hiring party; whether the hiring party is inbusiness; the provision of employee benefits; andthe tax treatment of the hired party.Id. at 751-52, 109 S.Ct. 2166 (citations omitted). No single factor is determinative of employment status. See id. at 752, 109 S.Ct. 2166.[2][3] To determine the employment status ofan individual under the copyright statutes whenthere is no written employment agreement, we lookto the common law rules of agency. See Reid, 490U.S. at 750-51, 109 S.Ct. at 2178. In applying thecommon law test, we examine several factors to determine employment status, including the hiringparty’s right to control the manner and means bywhich the product is accomplished. See id. at 751,109 S.Ct. at 2178-79. Other factors to be taken intoaccount include[4][5] [W]hether a given individual is an employee or independent contractor is a question oflaw, which must be decided by reviewing the particular facts of each case. Berger Transfer & Storage v. Central States, 85 F.3d 1374, 1377 (8thCir.1996) (quoting Short v. Central States, Southeast & Southwest Areas Pension Fund, 729 F.2d567, 571 (8th Cir.1984)). See also Alford v. UnitedStates, 116 F.3d 334, 336 (8th Cir.1997); Birchemv. Knights of Columbus, 116 F.3d 310, 312 (8thCir.1997). In a court-tried case, the findings regarding each of the underlying common-law factors arereviewed under the clearly erroneous standard ofreview, with the ultimate question of employmentstatus being reviewed de novo. Berger Transfer &Storage v. Central States, 85 F.3d at 1377-78(citing Dole v. Snell, 875 F.2d 802, 805 (10thCir.1989)). In the present case, however, the question of Harter’s employment status was submitted tothe jury. Because the evidence was *1008 largelyundisputed, we need not dwell on the degree of deference that should be shown to the jury’s findingsregarding the Reid factors, for we conclude that theevidence compels a determination that Harter wasin fact an independent contractor and not an employee, with the result that he was the owner of thecomputer program and thus not liable for copyrightinfringement.the skill required; the source of the instrumental-Throughout Harter’s relationship with Iowa© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.Page 5188 F.3d 1005, 1999 Copr.L.Dec. P 27,950, 51 U.S.P.Q.2d 1853(Cite as: 188 F.3d 1005)Pedigree, his pay was reported to the Internal Revenue Service by Iowa Pedigree on form 1099 aspayment to an independent contractor. Harter reported the pay as self-employed income. Iowa Pedigreedid not withhold any portion of Harter’s pay for income taxes, nor did it withhold social securitytaxes. Harter received no medical, retirement, orvacation benefits while working for Iowa Pedigree.Iowa Pedigree’s failure to provide employment benefits or withhold any payroll taxes is probativeevidence of Harter’s status as an independent contractor, as every case since Reid that has appliedthe test has found the hired party to be an independent contractor where the hiring party failed to extend benefits or pay social security taxes. Aymes v.Bonelli, 980 F.2d 857, 863 (2d Cir.1992); see alsoBirchem, 116 F.3d at 313 (stating that financial relationship, including tax treatment, is highly probative of employment status).Moreover, Harter received payments on an irregular basis. For example, in August of 1991, hewas paid on the 12th, 17th, and 19th, whereas hedid not receive any payment from December 19,1989, to July 11, 1990. Harter did not use a timeclock or submit the number of hours he worked toIowa Pedigree, except in the form of an invoice.This absence of regular, periodic payments is an indicia of independent contractor status. SeeMacLean, 952 F.2d at 777.In addition, throughout his six-year relationship with Iowa Pedigree, Harter continued to engage in computer consulting with other companies,a factor suggesting that he was an independent contractor. See Berger Transfer, 85 F.3d at 1380(stating truck owner-operators driving for multiplecompanies was key in finding that they were independent contractors); Aymes, 980 F.2d at 862(finding computer programmer highly skilled);MacLean, 952 F.2d at 777 (same).In 1992, Harter hired a second programmer,Dennis Blazek, to work on a particular project.Harter’s 1992 tax return shows that payments madeto Blazek were reported as subcontractor expenses,a fact indicative of Harter’s status as an independentcontractor. See Reid, 490 U.S. at 751-52, 109 S.Ct.at 2179 (hiring and paying assistants is relevant todetermining employment status).Conversely, some factors support a finding thatHarter was an employee of Iowa Pedigree. Hartertraveled extensively with Ron Kirk throughout thesix-year period. The two visited clients of IowaPedigree to de-bug their computer systems.Harter attended several trade shows with Kirk,where he wore an Iowa Pedigree uniform andworked in the Iowa Pedigree booth, where hewould answer questions regarding the servicesprovided by Iowa Pedigree. On these trips, IowaPedigree paid for Harter’ s expenses. Each of thesefacts favors a finding that Harter was an employee.See Aymes, 980 F.2d at 863 (stating that right of thehiring party to assign projects is strong evidence ofemployee status, although assignment of additionalduties is not necessarily inconsistent with an independent contractor relationship).Although Ron Kirk had no computer skills, hedirected the projects through his knowledge of theAKC and USDA compliance requirements. In addition, he directed the hours and days that Harterwould work, a fact that suggests an employer-employee relationship. See Reid, 490 U.S. at 752, 109S.Ct. at 2179 (fact that hiring organization directedsculptor’s work favored finding hiring organizationcontrolled the project); Short, 729 F.2d at 574(stating that a worker’s ability to determine whenand how long he would work *1009 favored findingthat he was an independent contractor).Although Harter did some work at home, healso spent a significant amount of time in the IowaPedigree offices. The six-year duration of the relationship, and Iowa Pedigree’s furnishing of equipment also favor finding an employment relationship. See N.L.R.B. v. United Ins. Co. of America,390 U.S. 254, 259, 88 S.Ct. 988, 19 L.Ed.2d 1083(1968) (finding permanent relationship favoredstatus as employee); Aymes, 980 F.2d at 864(stating that work done at company office supports© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.Page 6188 F.3d 1005, 1999 Copr.L.Dec. P 27,950, 51 U.S.P.Q.2d 1853(Cite as: 188 F.3d 1005)employee status, but had negligible weight whencomputer programmer needed access to hiringparty’s computer hardware).On balance, we conclude that the factors whichmight support a conclusion that an employer-employee relationship existed are insufficient to overcome the evidence that Harter was an independentcontractor. Iowa Pedigree did not treat Harter as anemployee for tax purposes and did not pay him traditional employee benefits. Furthermore, Harterwas highly skilled, continued to consult with othercompanies, and on at least one occasion unilaterallyhired a subcontractor. We find the Second Circuit’sreasoning in Aymes persuasive, and we thereforeconclude that Harter was an independent contractor.See Aymes, 980 F.2d at 862-64 (finding that theskill, tax treatment, and employee benefit factorscompelled a finding that a computer programmerwas an independent contractor). Thus, as owner ofthe computer programs he designed for Iowa Pedigree, Harter cannot be held liable for copyright infringement.Cir.1986). Liability for tortious interference withbusiness relations may not be sustained basedupon speculation, conjecture, or guesswork, andno fact essential to submissibility can be inferredabsent a substantial evidentiary basis. Mueller v.Abdnor, 972 F.2d 931, 938 (8th Cir.1992).[8] We conclude that there is insufficient evidence to support a finding that Harter tortiously interfered with Iowa Pedigree’s business expectancies. The owners of the former customers testifiedthat they were unhappy with the continually risingprices at Iowa Pedigree, that they were uncomfortable with Iowa Pedigree because they believed thatRon Kirk was divulging information regarding theirbusinesses, and that they were unhappy with themanner in which Kirk demanded payment for services. In addition, the former customers testifiedthey had solicited Harter and that he had not pursued them. Accordingly, the judgment entered onthis claim must be set aside.The jury was instructed that to find for IowaPedigree on its claim for tortious interference, eachof the following elements must have been shown bythe weight of the evidence:Because Harter was an independent contractorand thus not liable for copyright infringement, andbecause the claim of tortious interference with business relations is not supported by the evidence, nobasis remains for affirming the award of punitivedamages. Accordingly, it is set aside.First, plaintiffs had contracts or business expectancies with customers which were terminatedby the customers,The judgment is reversed, and the case is remanded to the district court for entry of judgmentdismissing the complaint.Second, defendant caused the customers to terminate their relationships with plaintiffs, andC.A.8 (Mo.),1999.Kirk v. Harter188 F.3d 1005, 1999 Copr.L.Dec. P 27,950, 51U.S.P.Q.2d 1853Third, defendant did so intentionally andwithout justification or excuse, andEND OF DOCUMENTFourth, plaintiffs were thereby damaged.Jury Instruction No. 30.[6][7] We will affirm the jury’s finding of tortious interference if it is supported by substantialevidence. See Central Telecommunications, Inc. v.TCI Cablevision, Inc., 800 F.2d 711, 732 (8th© 2012 Thomson Reuters. No Claim to Orig. US Gov. Works.

 

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