SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 30, 2000
Dynacore Holdings Corporation
(formerly Datapoint Corporation)
(Exact name of registrant as specified in its charter)
Delaware 001-07636 74-1605174
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
8410 Datapoint Drive, San Antonio, Texas 78229-8500
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 210-593-7000
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Item 5.Other Events
On June 30, 2000, the United States District Court for the
Southern District of New York dismissed, without prejudice, for lack of
subject matter jurisdiction John A. Engstrom v. Futureshare.com LLC (99 Civ.
3824), the pending litigation concerning the ownership status of the
intellectual property underlying the Corebyte Networks(TM) product family of
software licensed on an exclusive basis to the Registrant in July 1999 from
Engstrom.
The Court cited the general principal under the Federal
Copyright Act that works are subject to copyright by the mere act of creation,
subject to the notable work for hire exception. The work for hire doctrine
provides that if an employee who creates a work within the scope of his or her
employment, such work is automatically owned by the employer. The Court
indicated that the parties did not dispute the chronology of events in this
action. The software was created in November 1997, one and one-half years
before futureshare.com LLC (the "LLC") was formed. Therefore, the Court
concluded that Engstrom could not have been an employee of the LLC at the time
of creation of the software and there is no good faith basis for the LLC to
allege that the software is within the scope of the work for hire doctrine.
Accordingly, the Court found that absent a transfer of rights Engstrom is the
sole owner of the software. The Court further indicated that whether a
transfer of exclusive rights in the software and/or the extent of any
transfer, otherwise within Engstrom's right, has been contractually modified
turns on the interpretation of the language of the operating agreement of the
LLC. As to this question, the Court indicated that it is purely an issue of
state law and does not implicate the Federal Copyright Act. Accordingly, the
Court dismissed this action without prejudice to the right to file a state
action. A copy of the decision is attached hereto as Exhibit 99.
Item 7. Financial Statements, for Pro Forma Financial Information and Exhibits
(c) Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
99 John A. Engstrom v. Futureshare.com LLC
(99 Civ. 3824)
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dynacore Holdings Corporation
(Registrant)
Date: July 26, 2000
By: /s/ Phillip P. Krumb
Phillip P. Krumb
Acting Chief Financial Officer
<PAGE>
Exhibit Index
(99) John A. Engstrom v. Futureshare.com LLC (99 Civ. 3824)
<PAGE>
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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JOHN A. ENGSTROM, :
99 Civ. 3824 (WHP)
Plaintiff, :
:
-against- ORDER
-----
:
FUTURESHARE.COM LLC,
:
Defendant.
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WILLIAM H. PAULEY III, District Judge:
Plaintiff John A. Engstrom ("Engstrom") filed this declaratory action
alleging federal copyright jurisdiction, 28 U.S.C. 1338(a), and seeking a
declaration of non-infringement. Discovery has been completed. Defendant
Futureshare.com LLC ("Futureshare") moves to dismiss the complaint for lack of
subject matter jurisdiction, pursuant to Federal Rule of Civil Procedure
12(b)(1). For the reasons set forth below, the motion is granted.
BACKGROUND
The following facts are uncontroverted. In November 1997, Engstrom authored
a computer program for "Internet based, messaging, communication, email and
calendaring."1 (Compl.P.P. 1, 9.) In March 1998, the Program was first
published. (See Czarnick Decl. Ex. D: Registration ApplicationP. 3; Copyright
Office Certificate of Registration, TX-4-981-928P. 3.) In May 1998, Engstrom,
Tina Varone and Stephen J. Czarnik entered into a partnership to form
Futurshare, which was later formed in July 1998. (See Czarnick Decl. Ex. C:
Operating Agmt. Art. II,ss.2.1) As part of his consideration, Engstrom agreed to
contribute "Internet software and any improvements thereto which consists of
email, scheduling and calendar programming." (See Czarnick Decl. Ex. C:
Operating Agmt. Sched. I.) On April 19, 1999, Engstrom agreed to sell the
Program to Datapoint Corporation ("Datapoint"). (Compl.P. 17.)
1 Hereinafter "the Program." Engstrom confusingly refers to the Program
in short form as "Source Code." However, the work protected under the Copyright
Act is a computer program, and not source or object codes, which are merely
forms of expression.
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On May 25, 1999, Engstrom filed this action seeking a
declaration that his "use of the [Program] does not infringe on any of
Futureshare's rights; (b) Futureshare is not entitled to any copyright
concerning the [Program]; and (c) Futureshare's use of the [Program] in any
manner other than as a licensee . . ., represents copyright infringement under
common law." In addition, plaintiff alleges state law claims of conversion and
tortious interference with contract. (Compl. P. 2B.) Since Congress expressly
abolished common law copyright in 1978, see 17 U.S.C. ss. 301, this Court
dismisses plaintiff's frivolous common law claim..
DISCUSSION
Plaintiff claims that he authored the Program, and merely granted
Futureshare a non-exclusive license to use it. Thus, plaintiff has the right to
transfer the Program to Datapoint. (Compl.P.P. 9, 13.) Defendant alleges as a
counterclaim that it owns the Program because: (1) Futureshare registered the
Program with the Copyright Office; (2) Engstrom transferred the Program to
Futureshare; and (3) the Program is a work-for-hire because Engstrom was
allegedly an employee of Futureshare. (AnswerP. 45.) Defendant claims that this
dispute involves "the Ownership of intellectual property not as yet copyrighted"
and therefore does not state a federal cause of action. (Def. Br. At 2.) Under
the Copyright Act, 17 U.S.C.ss.101 et. seg., copyright vests automatically and
initially in the "author" of the work. see 17 U.S.C.ss.201 (a). Contrary
to defendant's confused motion, works are not "copyrighted" after they are
created; rather, they are subject to copyright by the mere act of creation.
For purposes of the Copyright Act, The source and object codes versions of a
computer program are treated as a single work. SEE Compendium II of Copyright
Office Practices ss. 321.03.
<PAGE>
In most cases, it is the individual creator who is the author
of the work, and therefore the initial owner of all rights. The Copyright Act
provides one notable exception to this general principle, namely, work-for-hire.
See 17 U.S.C. ss. 201(b). Under Section 201(b), the work of an employee created
within the scope of his or her employment is automatically owned by the
employer. Here, the parties do not dispute that the Program was created in
November 1997, one and a half years before Futureshare came into being.
Accordingly, Engstrom could not have been an employee of Futureshare at the time
of creation. Given the uncontroverted chronology of events, there was not good
faith basis for defendant to allege that the Program is a work-for-hire.
Defendant's claim that it owns the work because it registered
the work is also without merit. Merely registering a work does not invest the
registrant with ownership rights. The Copyright Office does not make factual
inquiries into statements made by applicants. In this case, the undisputed
chronology concerning the date of the Program's creation establishes that
Futureshare cannot be the author or owner of the work pursuant to the
work-for-hire doctrine, since at the time the work was created, Futureshare did
not exist.
As a result, absent a transfer of rights, Engstrom is the sole
owner of the Program. Whether there was a transfer of exclusive rights in the
Program, and/or the extent of such transfer, turns on an interpretation of the
language of the operating agreement. That question is purely an issue of state
law. As such, this action differs from a dispute concerning compliance with the
requisite formalities set forth in the Copyright Act, see 17 U.S.C. ss.ss.
201(d) and 204(a), which would concern federal law. Moreover, plaintiff's sale
of the Program to Datapoint does not implicate the Copyright Act, since a
purported sale of ownership does not violate any of the enumerated rights in 17
U.S.C. ss. 106.
<PAGE>
This Court has not had occasion to consider the substance of the state law
claims. Defendant's federal claim (concerning work-for-hire and registration) is
dismissed. There is no diversity jurisdiction. Accordingly, this Court declines
to exercise its discretion to retain jurisdiction over plaintiff's state law
claims. See 28 U.S.C.ss.1367 ( c); Itar-Tass Russian News Agency v. Russian
Kurier, Inc., 140 F.3d 442, 447 (2d Cir. 1998). The parties' state law claims
are dismissed without prejudice to their rights to pursue them in state court.
CONCLUSION
For the foregoing reasons, this action is dismissed.
Dated: June 30, 2000
New York, New York
SO ORDERED:
By: /s/ William H. Pauley III
WILLIAM H. PAULEY III
U.S.D.J.
Copies mailed to:
Lawrence Rader, Esq.
225 Broadway
Suite 400
New York, Ny 10007
Attorneys for Plaintiff
Bruce S. Bandes, Esq.
629 Route 112
Suite 7
Patchogue, NY 11772
Attorneys for Defendant
