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.


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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".


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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.

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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.

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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.


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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;


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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.












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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










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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








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