WD Encore Software, LLC v. The Software MacKiev Company
Judge William G. Young: ORDER entered. MEMORANDUM AND ORDER: "... Accordingly, this Court denies summary judgment on MacKiev's first counterclaim."(Gaudet, Jennifer)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
THE SOFTWARE MACKIEV COMPANY,
HOUGHTON MIFFLIN HARCOURT
PUBLISHING COMPANY and HMH IP
COMPANY UNLIMITED COMPANY,
HOUGHTON MIFFLIN HARCOURT
PUBLISHING COMPANY and HMH IP
COMPANY UNLIMITED COMPANY,
Cross-Claim Plaintiffs, )
THE SOFTWARE MACKIEV COMPANY,
Cross-Claim Defendant. )
WD ENCORE SOFTWARE, LLC,
August 3, 2017
MEMORANDUM & ORDER
In this action for trademark infringement and false
designation of origin under the Lanham Act, WD Encore Software,
LLC (“WD Encore”) sued The Software MacKiev Company (“MacKiev”)
for unauthorized use of trademarks relating to certain software
WD Encore moved for partial summary judgment on its
trademark infringement claim, as well as on MacKiev’s
counterclaim for quantum meruit.
After denying WD Encore’s
motion on its trademark infringement claim from the bench, this
Court now denies summary judgment as to MacKiev’s counterclaim
for quantum meruit.
WD Encore filed a complaint against MacKiev on September
18, 2015, in the Western District of New York, seeking
injunctive relief and damages for trademark infringement.
Compl. 1, ECF No. 1.
MacKiev moved to dismiss the complaint.
Notice of Mot., ECF No. 6.
The case was instead transferred to
the District of Massachusetts, ECF No. 14, where MacKiev renewed
its motion to dismiss, The Software MacKiev Company’s Renewed
Mot. Dismiss WD Encore Software, LLC’s Compl., ECF No. 25.
After a hearing on September 13, 2016, this Court denied
Electronic Clerk’s Notes, ECF No. 36.
The Amended Complaint includes three counts: federal
trademark infringement under 15 U.S.C. § 1114 (count I), false
designation of origin under 15 U.S.C. § 1125(a)(1)(A) (count
II), and unfair competition under New York law (count III).
Compl. ¶¶ 34-50.
In response, MacKiev asserted eight
affirmative defenses, and also filed counterclaims for: implied
contract/quantum meruit (count I), false designation of origin
under 15 U.S.C. § 1125(a)(1)(A) (count II), unfair competition
under Massachusetts law (count III), and violation of M.G.L. ch.
93A (count IV).
Def. Software MacKiev Co.’s Answer Am. Compl.,
Affirmative Defenses, and Countercls. (“Answer”), ECF No. 47.
WD Encore has now filed a motion for partial summary
judgment on: 1) liability on WD Encore’s trademark infringement
claim and 2) MacKiev’s counterclaim against WD Encore alleging
quantum meruit/implied contract.
LLC Partial Summ. J., ECF No. 71.
Mot. Pl. WD Encore Software,
The parties have briefed the
issues and submitted accompanying statements of fact.
Mem. Law Supp. Mot. Partial Summ. J. (“Pl.’s Mem.”), ECF No. 72;
Pl.’s Local Rule 56.1 Statement (“Pl.’s Facts”), ECF No. 73;
Def. Software MacKiev Co.’s Mem. Law Supp. Opp’n WD Encore
Software, LLC’s Mot. Partial Summ. J. (“Def.’s Opp’n”), ECF No.
83; Def. Software MacKiev Co.’s Resp. Pl.’s Local Rule 56.1
Statement (“Def.’s Resp. Facts”), ECF No. 84.
After a hearing,
the Court denied WD Encore’s motion as to the trademark
infringement claim, but took the quantum meruit claim under
Electronic Clerk’s Notes, ECF No. 92.
WD Encore is a New York limited liability company with its
principal place of business in Syracuse, New York.
¶ 1; Answer ¶ 1.
The company is a developer and wholesale and
retail distributor of software products.
Pl.’s Facts ¶ 1.
its formation in June 2014 to the present, WD Encore has been a
wholly-owned subsidiary of WYNIT Distribution, LLC (“WYNIT”).
WD Encore came about as part of an Asset Purchase Agreement
effective July 9, 2014 (“Asset Purchase Agreement”), between
WYNIT and certain of its subsidiaries, including WD Encore, as
buyers, and Speed Commerce, Inc. and certain of its
subsidiaries, including Encore Software, Inc. (“ESI” or
“Encore”1), as sellers.
Id. ¶ 2.
As part of the transaction, WD
Encore acquired certain of ESI’s assets, including specific
licensing agreements between ESI and third parties.
The Asset Purchase Agreement provides for the purchase of
“substantially all of the assets used by the Sellers in
connection with” certain aspects of the sellers’ business,
including the “manufacture, development, license or distribution
The parties refer to the same entity as “ESI” and “Encore”
in their briefs. This memorandum uses “ESI” throughout.
. . . of software products developed by [ESI] or licensed from
Id. ¶ 3.
It also provides that the buyers
assume the liabilities specified in the “Assumed Liabilities”
section, which include all liabilities under the enumerated
“Assumed Contract,” as well as other liabilities relating to
taxes, trade payables, transferred employees, and other
The “Assumed Contracts” are set forth in
an Assignment and Assumption Agreement effective July 9, 2014
(“Assignment and Assumption Agreement”).
dissolved in March 2016.
Id. ¶ 6.
Id. ¶ 8.
MacKiev is a Nevada corporation with its principal place of
business in Boston, Massachusetts.
Am. Compl. ¶ 2; Answer ¶ 2.
MacKiev is the owner and operator of the website www.mackiev.com
and sells software products.
Pl.’s Facts ¶ 25.
The Channel License Agreement
On July 1, 2008, Riverdeep, Inc., HMH Consumer Company, and
ESI entered into a Channel License Agreement, which was amended
from time to time, with the latest amendment (Amendment No. 5)
dated July 2, 2013.
Id. ¶ 10.
Pursuant to the Assignment and
Assumption Agreement, WD Encore became a licensee under the
Channel License Agreement.
Houghton Mifflin Harcourt
Publishing Company (“HMH”) is the successor licensor to the
Channel Licensing Agreement.
HMH IP owns the federal trademark
registrations for a number of trademarks related to software
(the “Broderbund Marks”): “The Print Shop Essentials,” “The
Print Shop,” and “Mavis Beacon Teaches Typing!”
Id. ¶ 17.
Pursuant to section 3.1.1 of the Channel License Agreement,
WD Encore has an exclusive, irrevocable, perpetual,
sublicensable right and license to use the Broderbund Marks in
“Authorized Channels” in the “Territory.”
Id. ¶ 12.
Channel License Agreement defines the “Territory” as the United
States, Canada, and Mexico.
Id. ¶ 14.
Section 1.7 defines
“Authorized Channels” as “any and all channels of distribution
in the Territory other than the Schools Channel.”
Id. ¶ 15.
Section 1.98 defines the “Schools Channel” to mean “any and all
education-related markets, including without limitation: (a)
reseller networks to schools; (b) direct schools sales in the
pre-kindergarten through 12th grade market; and (c) after school
programs and learning centers, including delivery via schoolsbased or learning center-based web portals.”
Id. ¶ 16.
The License and Distribution Agreement
MacKiev is a party to a License and Distribution Agreement
with Riverdeep, Inc.
Id. ¶ 20.
HMH is the successor-in-
interest to Riverdeep under the License and Distribution
Id. ¶ 21.
Under the agreement, HMH gives MacKiev
the rights to use the Broderbund Marks in the Schools Channel,
defined as “any and all education related markets including
without limitation (i) reseller networks to schools and (ii)
direct school sales in the preK-12 grade market.”
Id. ¶¶ 22-24.
The Second Amendment to the License and Distribution
Agreement between MacKiev and Riverdeep, effective November 30,
2004, gave MacKiev the exclusive rights to create Mac OS X
versions of The Print Shop and Mavis Beacon Teaches Typing.
Def.’s Resp. Facts ¶¶ 2-3.
This right was extended through each
subsequent amendment, including the most recent Amendment No. 5,
effective September 30, 2011.
Id. ¶¶ 5-6.
negotiations of Amendment No. 5, MacKiev was selling Mavis
Beacon Teaches Typing in the Education Category of the Mac App
Store and had been doing so since the opening day of the new
store on January 6, 2011.
Id. ¶ 7.
Amendment No. 5 defines the
School Channel and states that “MacKiev continues to have rights
to all Channels worldwide except for those excluded in this
Amendment or elsewhere in this Agreement.”
Id. ¶ 10.
Therefore, under Amendment No. 5, MacKiev’s North America rights
would be limited to the Schools Channel, but it would retain its
rights to all channels outside North America.
2012 The Print Shop Update2
In January 2012, ESI approached MacKiev to discuss
collaborating on an update to The Print Shop software.
The following facts are taken from MacKiev’s responsive
statement of facts, to which WD Encore does not reply.
Resp. Facts ¶ 17.
After MacKiev signed a nondisclosure, ESI
provided a term sheet requesting that MacKiev build a new
version of The Print Shop 3.5 for both parties to sell, and
included terms on payment from sales revenue.
Id. ¶ 19.
MacKiev agreed to the terms by email on or around January 20,
By early February, MacKiev and ESI had both
confirmed that MacKiev had begun work on the project.
Id. ¶ 21.
Work continued throughout 2012, and on November 20, 2012,
MacKiev provided a Technical Brief for the finished Print Shop
product, indicating that the software would be ready to be
marketed ten days later.
Id. ¶¶ 33-34.
ESI then sent MacKiev a
cease and desist letter at the end of November.
Id. ¶ 35.
had previously published The Print Shop 3.5, which contained
elements of MacKiev’s work product in its design in September.
Id. ¶ 37.
MacKiev estimates that the value of the work provided
to ESI was “approximately $484,000.”
Id. ¶ 36.
Summary Judgment Standard
Summary judgment is appropriate where “there is no genuine
issue as to any material fact and . . . the moving party is
entitled to a judgment as a matter of law.”
Fed. R. Civ. P.
56(c); see Mulloy v. Acushnet Co., 460 F.3d 141, 145 (1st Cir.
“To succeed, the moving party must show that there is an
absence of evidence to support the nonmoving party’s position.”
Rogers v. Fair, 902 F.2d 140, 143 (1st Cir. 1990).
moving party satisfies its burden, the burden shifts to the nonmoving party to set forth specific facts showing that there is a
genuine, triable issue.
Celotex Corp. v. Catrett, 477 U.S. 317,
In reviewing motions for summary judgment, courts
must resolve all disputed facts and inferences in favor of the
See Seaboard Sur. Co. v. Town of Greenfield,
370 F.3d 215, 218-19 (1st Cir. 2004).
Quantum Meruit/Implied Contract
“The underlying basis for awarding quantum meruit damages
in a quasi-contract case is unjust enrichment of one party and
unjust detriment to the other party.”
Mass. 857, 859 (1985).
Salamon v. Terra, 394
In Massachusetts, a claim for quantum
meruit requires that: “(1) the plaintiff conferred a reasonable
benefit upon the defendants; (2) defendants accepted the
services with the reasonable expectation of compensating the
plaintiff; and (3) the plaintiff provided the services with the
reasonable expectation of receiving compensation.”
Smirnov, 751 F. Supp. 2d 304, 314 (D. Mass. 2010) (Stearns, J.)
The crux of MacKiev’s counterclaim is that
WD Encore benefited from an implied contract between MacKiev and
ESI, from which WD Encore acquired certain assets and
liabilities pursuant to the Asset Purchase Agreement.
MacKiev argues that its quantum meruit claim survives
summary judgment under two theories of successor liability.
begin, the parties do not dispute that the Asset Purchase
Agreement under which WD Encore purchased the assets of ESI is
governed by Delaware law, and therefore so too is the issue of
Delaware law provides that
when one company sells or otherwise transfers all of its
assets to another company, the buyer generally is not
responsible for the seller’s liabilities, including claims
arising out of the seller’s tortuous conduct. In limited
situations, where avoidance of liability would be unjust,
exceptions may apply to enable the transfer of liability to
the seller. These exceptions include: (1) the buyer’s
assumption of liability; (2) de facto merger or
consolidation; (3) mere continuation of the predecessor
under a different name; or (4) fraud.
Magnolia’s at Bethany, LLC v. Artesian Consulting Eng’rs, Inc.,
C.A. No. S11 C–04–013–ESB, 2011 WL 4826106, at *2 (Del. Super.
Ct. Sept. 19, 2011); see also Ross v. Desa Holdings Corp., C.A.
No. 05C-05-013 MMJ, 2008 WL 4899226, at *4 (Del. Super Ct. Sept.
WD Encore maintains that MacKiev’s claim fails as
matter of law because none of the above exceptions applies.
Pl.’s Mem. 16-17.
Under its first theory of successor liability, MacKiev
asserts that WD Encore assumed liability under ESI’s contract
Def.’s Opp’n 12.
MacKiev first points to the
fact that “pursuant to its rights under the Channel License
Agreement, [ESI] entered into the implied contract with MacKiev
for revisions to The Print Shop.”
MacKiev contends that by
entering into the Assignment and Assumption Agreement, WD Encore
either expressly or impliedly assumed ESI’s liabilities relating
to revisions to The Print Shop software.
correctly notes, however, that it only agreed to assume the
specified “Assumed Liabilities” set forth in Section 2.4 of the
Asset Purchase Agreement, which make no mention of any
liabilities to or contracts with MacKiev.
Pl.’s Mem. 17.
In support, MacKiev cites a number of cases applying
These cases, however, are inapposite.
they simply restate the principle articulated in Magnolia’s and
Ross: that there are four exceptions to the general rule that a
purchaser of assets does not assume liabilities.
cases applies one of the specific exceptions.
Each of these
See Mason v.
Network of Wilmington, Inc., No. Civ.A. 19434-NC, 2005 WL
1653954, at *5 (Del. Ch. July 1, 2005) (rejecting successor
liability theory because of “significant separation” between old
and new businesses); Corporate Prop. Assocs. 8, L.P. v. Amersig
Graphics, Inc., Civ. A. No. 13241, 1994 WL 148269, at *4-5 (Del.
Ch. Mar. 31, 1994) (applying Pennsylvania law and finding de
facto merger theory of successor liability adequately plead);
AJZN, Inc. v. Yu, No. 13–149 GMS, 2015 WL 331937, at *15-16 (D.
Del. Jan. 26, 2015) (allegations sufficient to assert successor
liability under a continuation theory).
statement that “WD Encore should not be allowed to reap the
benefits of the Channel Licensing Agreement, including MacKiev’s
work on The Print Shop, without also being held to have
expressly, or at least impliedly, assumed the burdens that
derive from those alleged rights,” Def.’s Opp’n 13, fails to
show how any of the four specific exceptions applies.
MacKiev’s second theory of successor liability is framed
under the fraud exception,3 but sounds in the “continuation”
WD Encore argues that it is not a mere continuation
of ESI because “[t]he ‘primary elements’ of being the same legal
entity have been said to include the common identity of the
officers, directors, or stockholders of the predecessor and
successor corporations, and the existence of only one
corporation at the completion of the transfer.”
Estate, LLC v. Echo/RT Holdings, LLC, C.A. No. 7994–VCN, 2013 WL
6916277, at *5 (Del. Ch. Dec. 31, 2013).
It is undisputed that
Although WD Encore argues that “MacKiev does not allege
any fraud with WD Encore’s purchase of ESI’s assets,” Pl.’s Mem.
18, MacKiev specifically noted that because at the time of the
filing of its answer and counterclaims, WD Encore had not
supplied the Channel License Agreement or Assignment and
Assumption Agreement on which its claims were based, MacKiev
“reserve[d] its right upon HMH’s appearance, review of HMH’s
responsive pleading, and review of the Agreements and discovery
concerning them to assert additional counterclaims against WD
Encore and cross-claims against HMH, including, without
limitation, breach of contract, fraud, and/or civil conspiracy,
depending on what is revealed that WD Encore and HMH have
heretofore concealed.” Answer 1 n.1.
WD Encore and ESI have not had common directors or shareholders,
Pl.’s Facts ¶¶ 7-8, but the case law also contemplates common
MacKiev asserts that a number of key ESI employees
subsequently worked at WD Encore immediately after the
acquisition, including the VP of Business Development,
President, Director of R&D, In-house Counsel, and Quality
Def.’s Opp’n 14; Def.’s Resp. Facts ¶ 39.
MacKiev adds that WD Encore is located in Minneapolis, where ESI
was based, and all internal correspondence WD Encore produced in
this litigation were ESI documents.
Def.’s Resp. Facts ¶¶ 40-
Viewing the facts in the light most favorable to MacKiev,
there are genuine issues of material fact concerning whether
MacKiev can recover in quantum meruit for its work on The Print
Shop software under a successor liability theory.4
MacKiev also advances a third party beneficiary theory,
arguing that “an action for unjust enrichment may be sustained
when a third person benefits from a contract between two other
parties.” Southboro Med. Grp. v. Nelson, No. 002090A, 2001 WL
293089, at *1 (Mass. Super Ct. Feb. 26, 2001) (citing Taylor
Woodrow Blitman Constr. Corp. v. Southfield Gardens Co., 534 F.
Supp. 340, 347 (D. Mass. 1982)). The rule in Taylor, however,
specifically applies to unjust enrichment claims, and it is
unclear whether a third party quantum meruit claim is available
under Massachusetts law. Because MacKiev has provided no case
law supporting such a theory, and this Court has found that
there are sufficient issues of fact to withstand summary
judgment on a successor liability theory, the Court declines to
address the availability of recovery under a third party theory.
Accordingly, this Court denies summary judgment on
MacKiev’s first counterclaim.
/s/ William G. Young
WILLIAM G. YOUNG
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