Background
Metro Bank PLC hired Arkeyo LLC in 2010 to develop software for coin-counting machines in its retail branches. After that software became outdated and vulnerable to security threats, Metro retained Saggezza UK, a subsidiary of Chicago-based Saggezza, Inc., to develop a replacement. Metro sent an Arkeyo touchscreen computer to Saggezza, Inc.’s Chicago office as a reference, but Saggezza personnel could not log into it and did not use it to develop the new software.
Arkeyo sued Saggezza, Inc.—but not Saggezza UK—alleging direct and contributory copyright infringement, trade-secret misappropriation, tortious interference, and conversion. The district court entered summary judgment for Saggezza, Inc., denied Arkeyo’s requests for spoliation sanctions and reconsideration, and awarded Saggezza attorney’s fees. Arkeyo appealed each ruling.
The Court’s Holding
The Seventh Circuit affirmed summary judgment on the merits. Arkeyo presented no evidence that Saggezza copied protectable source code; even Arkeyo’s expert identified no shared code, and superficial similarities between the programs did not support a reasonable inference of copying given their fundamental differences. The trade-secret claim also failed because Arkeyo had made its source code publicly downloadable without password protection, while the claimed software features were either readily observable or described only generic areas of coin-counting technology.
The court further held that Saggezza’s effort to win Metro’s business amounted to legitimate competition, not tortious interference, because Arkeyo established no independently wrongful conduct or improper motive. Conversion failed because Metro owned the touchscreen computer and Arkeyo made no pre-suit demand for it. The court also upheld the denial of spoliation sanctions and reconsideration because Arkeyo relied on unsupported speculation and rehashed arguments rather than producing material new evidence.
Finally, the court affirmed the attorney-fee award under the Copyright Act, applying the circuit’s strong presumption favoring fees for prevailing copyright defendants and finding Arkeyo’s copyright claims objectively baseless. Because that ground supported the award, the court did not decide whether fees were also proper under the Defend Trade Secrets Act’s bad-faith provision.
Key Takeaways
- A software-copyright plaintiff must produce evidence that protected expression was actually copied; superficial functional similarities may be insufficient when the programs are fundamentally different.
- Source code left publicly downloadable without password protection, and features readily observable by users, generally cannot qualify as trade secrets.
- Legitimate competition does not become tortious interference absent wrongful means or evidence that the defendant acted solely from spite or ill will.
- Spoliation sanctions require evidence that the allegedly destroyed material existed and was destroyed with the requisite intent, not conjecture alone.
Why It Matters
The decision illustrates the evidentiary specificity required in disputes over replacement software. A plaintiff cannot reach trial merely by identifying similar features or asserting that an alternate, incriminating version of source code must have existed; it must identify protected material, concrete secrets, or actual evidence of destruction.
The ruling also underscores the financial risk of pursuing objectively baseless copyright claims in the Seventh Circuit, where prevailing defendants benefit from a strong presumption in favor of attorney’s fees.