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 source code Melhado had written. (Tr. 94–95).

Once the Alpha Micro source codes were created, Censor began using them in his training seminars. As with the 1975 source codes, DSI maintained possession of the Alpha Micro software, and over time made minor changes to fix “bugs” in the programs. When Censor ran a seminar using the programs DSI would provide the Alpha Microcomputers and would “load” the programs into the computers by inserting “floppy disks” containing the source codes into the machine. The disks allowed the games to be run a limited number of times. If the client wished to run additional games, DSI would have to be called to allow it to do so. DSI received compensation for the clients’ use of the programs on a per-use basis. (Tr. 41–43).

Melhado testified that DSI had customers for the Alpha Micro software other than Censor, including Chase Manhattan Bank. (Tr. 48). Censor was aware for some time before the dispute broke out with DSI that DSI was billing Chase directly for the use of the software (although it is not clear he would agree that Chase was DSI’s “customer”). PCI billed Chase separately for the “training components” of the seminars. (Dep. 395–97). There is no evidence in the record concerning Censor’s knowledge of and involvement with other customers that DSI billed directly.

The relationship between DSI and PCI began to deteriorate late in the summer of 1985. Melhado testified that he discovered at that time that Paris had been diverting company funds to himself and that PCI had been paying considerably more for the use of the Alpha Micro software than DSI actually received (the implication being that the additional funds were being paid directly to Paris). Paris was fired, and Melhado contacted Censor and demanded that PCI pay what he considered the “full price” for use of the software. (Tr. 45–46). According to Censor, this action was simply a unilateral attempt by DSI “to raise its prices to an unreasonable level.” (Dep. 257).

On February 3, 1986, Melhado wrote to Censor, “[a]s you well know, DSI is no longer prepared to accept the artificially low price for its proprietary software that PCI has been paying.” Melhado asserted that PCI was using its proprietary software under an “oral license terminable at will,” and “direct[ed] [PCI and Censor] … to stop using [by February 14, 1986] all DSI proprietary software, including, without limitation, the Project Management and Operations Management programs which run on Alpha Micro computers.” (Def.’s Ex. E). On February 12, 1986, Censor wrote back and asserted that the software belonged to PCI, not DSI.

Shortly thereafter, obviously in anticipation of litigation, DSI filed registration statements with the United States Copyright Office for the “Operations Management Simulation Source Code” (Pl’s Ex. 6) and the “Project Management Simulation/Game Source Code” (Pl’s Ex. 7). Both filings were accepted, effective February 24, 1986. The instant action was filed March 13, 1986.

II. Discussion

In this Circuit, a party moving for a preliminary injunction must show (a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief. E.g., Jackson Dairy, Inc. v. H.P. Hood & Sons, 596 F.2d 70, 72 (2d Cir.1979).