Universal Instruments Corporation v. Micro System Engineering, Inc. et al
SUMMARY ORDER - That MSEI and MTA's motions for judgment as a matter of law (Dkt. Nos. 391-93) are GRANTED. That the Clerk is directed to enter judgment in favor of MSEI and MTA. That the Clerk close this case. Signed by Senior Judge Gary L. Sharpe on 8/8/2017. (jel, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
MICRO SYSTEM ENGINEERING,
INC. et al.,
Plaintiff Universal Instruments Corporation commenced this action
against defendants Micro System Engineering, Inc. (MSEI) and Missouri
Tooling & Automation (MTA) alleging copyright infringement and New York
state law claims for the wrongful use of its source code. (See generally 3d
Am. Compl., Dkt. No. 103.) Specifically, Universal alleges MSEI wrongfully
provided the source code to MTA to make test handling systems (THS) for
the testing of MSEI products, namely, pacemakers and defibrillators. (Id.
¶¶ 7-8, 109, 152-57, 161-62.) After lengthy discovery and motion practice,
the case proceeded to a jury trial on the surviving claims. Breach of
contract, misappropriation of trade secrets, and copyright infringement
claims remained against MSEI. (Dkt. No. 228 at 37.) As against MTA,
unjust enrichment, unfair competition, misappropriation of trade secrets,
and copyright infringement claims remained. (Id.)
At trial, Universal rested after five days. Thereafter, MSEI and MTA
moved under Rule 50 of the Federal Rules of Civil Procedure for judgment
as a matter of law. (Dkt. Nos. 391-93.) The court reserved on the motions
and, following the close of defendants’ case, orally granted their motions.
This summary order supplements the court’s oral ruling.
In their motions, MSEI and MTA argue that they are entitled to
judgment as a matter of law for a host of reasons. (Dkt. Nos. 391-93.)
First, defendants assert that the state law claims against them are
preempted by the federal Copyright Act. (Dkt. No. 391 at 4-5; Dkt. No. 392
at 3-9.) Second, defendants contend that “there is no evidence to support”
the claims against them, including the Copyright Act. (Dkt. No. 391 at 511; Dkt. No. 392 at 9-12; Dkt. No. 393 at 1-4.) Finally, defendants maintain
that Universal’s claim for damages fails as a matter of law because: (a) the
governing contract, the Equipment Purchase Agreement (EPA), precludes
such recovery under its limited liability provision, (D-1 § 10); (b) damages
from the defendants’ lost profits, future lost profits, and labor savings are
speculative; and (c) statutory damages under the Copyright Act are
unavailable for works registered after the action commenced. (Dkt.
No. 391 at 11-13; Dkt. No. 392 at 12-13.) Universal opposes all of these
arguments. (Dkt. Nos. 394-95.)
The Rule 50 standard allows the court to grant judgment as a matter
of law “[i]f [a] party has been fully heard on an issue during a jury trial and
the court finds that a reasonable jury would not have a legally sufficient
evidentiary basis to find for th[at] party on that issue.” Fed. R. Civ. P.
Rule 50(a)(1). “Judgment as a matter of law may not properly be granted
under Rule 50 unless the evidence, viewed in the light most favorable to
the opposing party, is insufficient to permit a reasonable juror to find in [its]
favor.” Galderi-Ambrosini v. Nat’l Realty & Dev. Corp., 136 F.3d 276, 289
(2d Cir. 1998); see Stevens v. Rite Aid Corp., 851 F.3d 224, 228 (2d Cir.
The parties have had an ample opportunity to advance all of the
arguments they cared to address in connection with this motion. Aside
from arguments regarding the sufficiency of the evidence, all of the issues
have previously been raised and briefed in the parties’ pre-trial motions.
(Dkt. Nos. 305, 312, 318, 321, 328-29, 345, 349, 354, 364-66.) In addition
to the parties’ written submissions, the court entertained oral argument at
various points in time both at its pre-trial conference and during trial, all of
which it has carefully considered. (Dkt. No. 378 at 17-51, 55-57.)
After reviewing all the submissions, both written and oral, the court
concurs with defendants MSEI and MTA that no reasonable jury viewing
the evidence in the light most favorable to Universal could support any of
its claims. The dispositive issue underlying all of the claims is whether
MSEI was authorized, whether by ownership or by license, to use
Universal’s source code.
There is no doubt that Universal had intellectual property rights in its
source code. At the same time, there is no doubt that Universal provided
its source code to MSEI either pursuant to the license in EPA § 8.2(d), (D1 § 8.2(d)), or unconditionally as memorialized in the Final Customer
Acceptance letter (FCA), (D-2), which the court finds is expressly
incorporated into the EPA, (D-1 §§ 14, 16.1(e), 16.2).
To be sure, Universal’s own managers and engineers testified that
MSEI had a license to use Universal’s pre-existing intellectual property.
Jean Luc Pelissier, Universal’s Chief Executive Officer, Keith O’Leary,
Universal’s Chief Financial Officer, Bonnie Lundy, Universal’s manager of
intellectual property and contracts, Daryn Evans, Universal’s electrical and
software engineer who created the Polaris Junior platform, and Kevin Ford,
Universal’s technical manager who was involved in the creation of the
THS1A line for MSEI, all agree. Furthermore, the executed FCA expressly
Unovis [a division of Universal] agrees to provide the
THS server source code as is with the understanding
that MSEI assumes the risk of invalidating the
warranty in the event a change made by MSEI to the
source code causes damage to any of the THS line
Indeed, Francois Caudrillier, a former Universal project manager who
created and designed the THS1A line and negotiated the FCA for
Universal, testified that the only restriction on the source code when it was
provided to MSEI was that MSEI waived its warranty protection on the THS
if it made changes to the source code. In addition, Carlos Takahashi, who
executed the FCA for Universal, emailed Juergen Lindner, MSEI’s General
Manager, on the same day he signed the FCA and stated, “[a]ccording to
the teleconference with your teams and our own ones, it seems we are
ready to let you assume ownership of the line.” (D-211.) Viewing this
evidence in the light most favorable to Universal, no reasonable jury could
find that MSEI did not own or have a license to Universal’s source code.
The collapse of Universal’s case rests on its failure to offer evidence
that MSEI exceeded the scope of the license in section 8.2(d) of the EPA.
(D-1 § 8.2(d).) The license provides:
If [Universal] uses any Pre-Existing Intellectual
Property in connection with this Agreement,
[Universal] hereby grants MSEI, MSEI’s
subcontractors, or suppliers, a non-exclusive, royaltyfree, worldwide, perpetual license to, use, reproduce,
display, of the Pre-Existing Intellectual Property for
MSEI’s internal use only. (Id.)
Specifically, there is no reasonable view of the evidence that MSEI used
Universal’s source code for anything other than its internal use. First, there
is no evidence that MSEI provided the source code to anyone other than
MTA. Second, there is no evidence to suggest that MTA was anything
other than MSEI’s subcontractor or supplier. (D-15; D-141.) Additionally,
Universal has adduced no evidence that MTA used the source code in
anything other than MSEI’s THS lines. Finally, Universal has offered no
evidence that MTA had knowledge that MSEI was not authorized to use or
share the source code. Rather, all of the evidence is to the contrary.
The resolution of these issues are dispositive of all of the claims.
See Smith v. Barnesandnoble.com, 839 F.3d 163, 166-67 (2d Cir. 2016)
(explaining that, with respect to copyright infringement, “[w]here . . . the
existence of [a] license is undisputed, and the only contested issue is its
scope, the copyright owner bears the burden of proving that the
defendant’s conduct was unauthorized under the license”); Selective Ins.
Co. of Am. v. Cty. of Rensselaer, 26 N.Y.3d 649, 655 (2016)
(“Unambiguous provisions of a . . . contract must be given their plain and
ordinary meaning.” (internal quotation marks, citation, and alteration
omitted)). Universal failed to demonstrate that MSEI was not authorized to
use Universal’s source code and that it exceeded the scope of the license
in the EPA by providing the source code to MTA. Therefore, Universal
failed to show a breach of the EPA or misappropriation of the source code.
Setting aside Universal’s failure of proof, a variety of arguments have
been advanced by MSEI and MTA to support their Rule 50 motions, all of
which the court adopts.1 (Dkt. Nos. 391-93.) For instance, the court
Although the court need not trek into the availability of certain damages because
Universal failed to establish liability, it also agrees with defendants that the lost profit and
future lost profit damages which Universal seeks to recover are either precluded by the limited
liability provision of the EPA, (D-1 § 10), or are speculative. See My Play City, Inc. v. Conduit
Ltd. 589 F. App’x 559, 562 (2d Cir. 2014); On Davis v. The Gap Inc., 246 F.3d 152, 160 (2d
Cir. 2001). Simply put, Universal presented scant evidence on the causal nexus between the
alleged infringement, breach, or wrongful act and either MSEI or MTA’s profits or future profits,
and no reasonable jury could find in its favor.
Furthermore, the court concurs that Universal’s copyright infringement claim is barred
by the statute of limitations. See 17 U.S.C. § 507(b) (stating civil copyright actions must be
commenced within three years after the claim accrues); Gary Friedrich Enters., LLC v. Marvel
agrees that the Copyright Act preempts all of Universal’s state law claims
in this case. See Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d
296, 305-06 (2d Cir. 2004). That issue alone would substantially reduce
the scope of Universal’s claims, but, as the court has already explained,
the failure of proof is dispositive regardless of how some of the fringe
issues are resolved. Therefore, the Rule 50 motions are granted and the
Clerk is directed to enter judgment in favor of MSEI and MTA.
The court notes that, throughout this litigation, Universal has shifted
its theory of liability and, as recently as trial, has advanced theories which
contradict its operative pleading. (See generally 3d Am. Compl.) As a
result, Universal has made the court’s task overwhelmingly difficult and, as
highlighted by the outcome of this case, pursued costly litigation with no
return to date.
Characters, Inc., 716 F.3d 302, 316-17 (2d Cir. 2013) (explaining that a copyright infringement
claim accrues when “a reasonably diligent plaintiff would have been put on inquiry as to the
existence of a right.” (internal quotations and citations omitted)). There is no reasonable view
of the evidence that Universal did not know of MSEI’s ownership claim of the source code well
before July 15, 2010 (three years before Universal filed suit). (D-2; D-5; D-85; D-86; D-132; D179; P-400.)
For similar reasons, Universal’s misappropriation of trade secrets claim is also time
barred. See Synergetics USA, Inc. v. Alcon Labs., Inc., No. , 2009 WL 2016872, at *2
(S.D.N.Y. July 9, 2009) (noting a three year statute of limitations from the time a defendant
discloses a trade secret or first uses a plaintiff’s ideas (citing Andrew Greenberg v. Svane,
Inc., 36 A.D.3d 1094, 1098 (3d Dep’t 2007)). Again, it is undisputed that MSEI disclosed
Universal’s source code to MTA before July 15, 2010. (D-15; D-141.)
Accordingly, it is hereby
ORDERED that MSEI and MTA’s motions for judgment as a matter
of law (Dkt. Nos. 391-93) are GRANTED; and it is further
ORDERED that the Clerk is directed to enter judgment in favor of
MSEI and MTA; and it is further
ORDERED that the Clerk close this case; and it is further
ORDERED that the Clerk provide a copy of this Summary Order to
IT IS SO ORDERED.
August 8, 2017
Albany, New York
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