Inquiry Notice Triggers OUTSA Limitations and “New Matter” Limits Derivative Software Registrations: Cincom Systems, Inc. v. LabWare, Inc.

Introduction

In Cincom Systems, Inc. v. LabWare, Inc., No. 24-3726 (6th Cir. Sept. 26, 2025) (not recommended for publication), the Sixth Circuit affirmed summary judgment for LabWare on two independent grounds: (1) Cincom’s Ohio Uniform Trade Secrets Act (OUTSA) claim was time-barred because inquiry notice arose in 2014, triggering the four-year limitations period; and (2) Cincom’s federal copyright claim failed because it could not prove copying of protectable elements registered under the asserted copyright, which covered only the “new matter” in a derivative software release and for which no deposit copy was available to enable the necessary comparison.

The dispute centers on VisualSmalltalk Enterprise (VSE), a Smalltalk development environment originally owned by ObjectShare, transferred in part to Seagull Software in 1999 with licensing rights leased back to ObjectShare, and then acquired by Cincom. LabWare, a long-time user of VSE under legacy shrinkwrap licenses, obtained a license to VSE’s virtual machine source code from Seagull in 2006—despite Cincom’s exclusive licensing rights—then modified and distributed that code within LabWare’s LIMS product line. Cincom sued in 2020 for trade-secret misappropriation and copyright infringement. The district court granted summary judgment for LabWare; the Sixth Circuit affirmed.

Two holdings in this opinion carry practical significance for technology companies and IP litigants: the standard for inquiry notice that starts OUTSA’s four-year clock, and the evidentiary and doctrinal requirements to prove infringement of registered derivative software versions.

Summary of the Opinion

OUTSA time bar: The court held Cincom had inquiry notice of potential misappropriation in 2014 based on public forum posts and internal emails indicating LabWare’s use of VSE and a former Cincom virtual-machine engineer’s move to LabWare to do “VM work.” Knowing that VSE’s VM source was not lawfully available to LabWare (absent reverse engineering or an illicit license from Seagull/Rocket, which had previously sold source behind Cincom’s back), a “fair and prudent” owner would have investigated then. Because Cincom waited until 2020 to sue, the claim was untimely under Ohio Rev. Code § 1333.66. Continuing misappropriation “constitutes a single claim,” so renewed suspicions in 2019 did not reset the limitations period.
Copyright failure of proof: Cincom alleged copying of VSE Version 3.1 while asserting only Registration TX 3-733-100 (1994) for Version 1.3, which by its terms covers “New Matter: rev. & supplemental text.” Under 17 U.S.C. § 103(b), a derivative registration protects only new material, not preexisting code from earlier versions. Cincom could not produce the deposit copy for the 1.3 registration or otherwise show which portions of Version 3.1 overlapped with the protected “new matter.” Without that, the court could not conduct substantial-similarity analysis as to protectable elements. Summary judgment for LabWare was therefore proper.

Analysis

Precedents Cited and How They Shaped the Decision

Summary-judgment standards came from Celotex Corp. v. Catrett, 477 U.S. 317 (1986), and Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986), emphasizing the movant’s burden and the nonmovant’s obligation to show more than a “scintilla” of evidence upon which a jury could reasonably find in its favor. The court viewed facts in the light most favorable to Cincom, Kraft v. United States, 991 F.2d 292 (6th Cir. 1993), and reviewed de novo, Gillis v. Miller, 845 F.3d 677 (6th Cir. 2017).

On OUTSA’s limitations period, the panel relied on:

Ohio Rev. Code § 1333.66 (four-year period from discovery or when discovery should have occurred with reasonable diligence; a continuing misappropriation constitutes a single claim).
Campfield v. Safelite Grp., Inc., 91 F.4th 401 (6th Cir. 2024), for the “fair and prudent person” inquiry-notice standard; distinguished because Campfield involved only a vague reference to “documents from a trash dumpster,” whereas Cincom had multiple, concrete indicators in 2014.
Adcor Indus., Inc. v. Bevcorp, LLC, 252 F. App’x 55 (6th Cir. 2007), recognizing that “possible misappropriation” and even “rumors” can trigger a duty to take affirmative investigative steps.
Metron Nutraceuticals, LLC v. Cook, No. 23-3596, 2024 WL 3877388 (6th Cir. Aug. 20, 2024), distinguished because that case involved different, discrete schemes and no obvious steps the plaintiff failed to take; here Cincom’s 2019 efforts showed what it reasonably could have done in 2014.
B&P Littleford, LLC v. Prescott Mach., LLC, Nos. 20-1449/1451, 2021 WL 3732313 (6th Cir. Aug. 24, 2021), also distinguished because the plaintiff there diligently pursued leads and was rebuffed; Cincom, by contrast, chose not to reach out to LabWare, the departing engineer, or Seagull/Rocket in 2014.
Kehoe Component Sales Inc. v. Best Lighting Prods., Inc., 796 F.3d 576 (6th Cir. 2015) (quoting Monolith Portland Midwest Co. v. Kaiser Aluminum & Chem. Corp., 407 F.2d 288 (9th Cir. 1969)) for the “single claim” concept: continuing misappropriation does not restart limitations with each use.

On copyright, the court drew on:

Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340 (1991), and RJ Control Consultants, Inc. v. Multiject, LLC, 100 F.4th 659 (6th Cir. 2024), for the infringement elements: ownership of a valid copyright and copying of original constituent elements.
ECIMOS, LLC v. Carrier Corp., 971 F.3d 616 (6th Cir. 2020), and Lexmark Int’l, Inc. v. Static Control Components, Inc., 387 F.3d 522 (6th Cir. 2004), underscoring the need to compare accused and protected works to assess copying and the protectability of the material.
17 U.S.C. § 103(b), limiting derivative-work protection to new material contributed in the derivative and excluding preexisting content.
SimplexGrinnell LP v. Integrated Sys. & Power, Inc., 642 F. Supp. 2d 206 (S.D.N.Y. 2009), reflecting Copyright Office guidance that successive software registrations protect only the new content of each version.
Murray Hill Publ’ns, Inc. v. ABC Commc’ns, Inc., 264 F.3d 622 (6th Cir. 2001), abrogated on other grounds by Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154 (2010), and Gamma Audio & Video, Inc. v. Ean-Chea, 11 F.3d 1106 (1st Cir. 1993), both distinguished: those cases addressed the relationship between registered derivatives and unregistered originals. Cincom, by contrast, asserted a derivative registration while declining to assert earlier registrations and lacking proof that the accused copying targeted the derivative’s new matter.
Gardner v. Nike, Inc., 279 F.3d 774 (9th Cir. 2002), noted in a footnote to confirm that exclusive licensees typically have standing to sue, even if the registration is held by another party.

Legal Reasoning

1) Trade Secrets: Inquiry Notice and the Four-Year Clock

The court held that by 2014 Cincom knew enough to trigger a reasonable, diligent investigation:

A senior Cincom VM engineer (Valloud) publicly announced he was moving to LabWare to do “Smalltalk VM work.” A community repost specified “VSE,” and Cincom’s executive found internet references to LabWare’s use of VSE.
Cincom knew VSE’s VM source code was not available to customers—so VM development on VSE implied illicit reverse engineering or an unauthorized license from Seagull/Rocket.
Cincom had confronted Seagull before about unauthorized source-code sales; Seagull had admitted at least one improper sale and had not definitively ruled out others.

Despite these indicators, Cincom decided to “wait for proof” rather than take “affirmative steps” (e.g., contacting LabWare, the engineer, or Seagull/Rocket; seeking corroboration from community sources). Under Adcor, “possible misappropriation” and even “rumors” can suffice to trigger the duty to investigate; a plaintiff need not have “ironclad proof” before the statute starts to run.

The panel rejected Cincom’s reliance on Campfield, Metron, and B&P Littleford. Unlike Campfield, the 2014 indicators here were concrete and corroborated. Unlike Metron, there were not two distinct schemes—Cincom’s 2014 and 2019 suspicions addressed the same ongoing misappropriation, and the steps Cincom took swiftly in 2019 illustrate what it could reasonably have done in 2014. Unlike B&P Littleford, Cincom did not diligently pursue leads in 2014.

Finally, the court emphasized the “single claim” rule: continuing misappropriation is a single claim under § 1333.66; it does not reset the limitations period with each use or disclosure (citing Kehoe and Monolith). Because Cincom was on inquiry notice in 2014 and sued in 2020, the OUTSA claim was time-barred.

2) Copyright: Derivative Registration and Proof of Protectable Copying

Cincom alleged that LabWare copied Version 3.1 of VSE but asserted only the 1994 registration for Version 1.3 (TX 3-733-100), which expressly covered “New Matter: rev. & supplemental text.” Under § 103(b), protection extends only to new contributions in a derivative work, not to preexisting code from earlier versions (which were separately registered in 1984 and 1985 but not asserted by Cincom).

The court found two independent evidentiary gaps fatal:

No deposit copy or other reliable record of the protectable “new matter” in Version 1.3. Without it, the court could not conduct substantial-similarity analysis between the protected code and the accused code in Version 3.1, as ECIMOS and Lexmark require.
Cincom’s expert opined that 68% of Version 1.3 appears in Version 3.1, but this does not show that the copied material was the “new matter” protected by the 1.3 registration as opposed to preexisting code covered by earlier registrations. Because Cincom neither asserted the earlier registrations nor mapped the alleged copying to the 1.3 “new matter,” it failed the second Feist element.

The court distinguished Cincom’s reliance on Murray Hill and Gamma Audio. Those cases address when a registered derivative can support an action relating to an unregistered original (or vice versa). Here, the problem was different: Cincom asserted a derivative registration while failing to prove that the accused copying targeted that derivative’s protectable “new matter,” and it chose not to rely on the earlier, relevant registrations that might have covered the overlapping preexisting code.

Impact

A. Trade Secrets and the Duty to Investigate

The opinion reinforces that in the Sixth Circuit, the OUTSA clock can start running upon credible, public-facing clues—such as industry forum posts, known licensing constraints, and the movement of key employees—without “smoking-gun” proof. Owners who suspect misappropriation must take reasonable investigative steps promptly, including:

Contacting suspected actors (the competitor, the former employee) and relevant third parties (upstream licensors like Seagull/Rocket).
Conducting targeted OSINT searches (websites, repositories, manuals, conference decks) to seek corroboration.
Documenting decision-making, preserved evidence, and responses to inquiries.

The “single claim” rule is a powerful defense: if misappropriation begins outside the four-year window and the plaintiff was on inquiry notice then, subsequent uses usually do not reset the limitations period. Companies relying on legacy license structures and third-party ownership of source code should especially heed early warning signs.

Although this opinion is not recommended for publication, its synthesis of Sixth Circuit authority (Adcor, Kehoe, Campfield, Metron, B&P Littleford) is likely to be persuasive in future OUTSA and UTSA cases concerning inquiry notice and continuing misappropriation.

B. Software Copyright Enforcement Strategy

The decision underscores several practice points for software copyright plaintiffs:

Preserve and, where possible, obtain deposit copies for registered versions. Without the registered content, courts cannot perform substantial-similarity analysis as to protectable elements.
Understand derivative registrations: each version’s registration protects only the “new matter” in that version. If accused code overlaps older content, plaintiffs should consider asserting the earlier registrations too and trace the overlap to protectable code.
Experts must map allegedly copied code to the registrant’s protectable material for the asserted registration. Showing overlap between versions is insufficient if it does not isolate the registered derivative’s “new matter.”
Pleading matters: identify and, where strategic, assert all registrations plausibly implicated by the accused copying to avoid gaps in coverage.

This approach prevents “bootstrapping” later-version registrations to cover earlier-version code absent proof and pleading. The opinion harmonizes with § 103(b), ECIMOS, and Copyright Office practice for successive software releases.

Complex Concepts Simplified

Inquiry notice (trade secrets): The limitations period begins when a reasonable owner, in light of known facts, should investigate possible misappropriation. Actual proof is not required; credible clues and “rumors” can suffice to trigger a duty to investigate.
Continuing misappropriation as a “single claim”: Under OUTSA, ongoing use or disclosure stemming from an initial misappropriation is treated as one claim; the clock usually starts with the initial discovery (or when discovery should have occurred).
Derivative work and “new matter” (copyright): A derivative registration protects only the new material added in that version. Earlier content remains protected, if at all, by earlier registrations; a later registration does not automatically sweep in all prior code.
Deposit copy: The material deposited with the Copyright Office when registering a work. In litigation, the deposit (or equivalent reliable record of what was registered) allows courts to compare the protected content with the accused work.
Substantial similarity as to protectable elements: To prove copying, a plaintiff must show that the defendant copied original material that is actually protected by the asserted registration—not just any overlap.
Exclusive licensee standing: An exclusive licensee generally has standing to sue for infringement even if another entity owns the registration, but must still prove copying of protectable content under the asserted registration.

Conclusion

Cincom v. LabWare delivers two clear messages. First, trade-secret owners cannot wait for conclusive proof before investigating; credible public indicators, employee movements, and known licensing constraints may trigger inquiry notice and start OUTSA’s four-year clock. Once on inquiry notice, continuing misappropriation is a single claim and later suspicions will not restart the period. Second, software copyright plaintiffs must align proof with the registration asserted: derivative registrations protect only “new matter,” and courts need the registered content (e.g., deposit copies) to assess substantial similarity. Absent a mapping between accused code and the asserted registration’s protectable material, summary judgment is likely.

For IP holders in software ecosystems—especially those navigating complex chains of title, legacy shrinkwrap licenses, and third-party source ownership—the opinion is a cautionary roadmap: police rights promptly and diligently, curate and preserve registration deposits and version histories, and ensure that litigation theories match the scope of the registrations you assert.