The Medical College of Wisconsin Inc v. Attachmate Corporation
Filing
113
ORDER signed by Judge J P Stadtmueller on 2/19/16: granting 28 Defendant's Motion to Dismiss Plaintiff's Wisconsin Deceptive Trade Practices Act claim; granting in part and denying in part 41 Defendant's Motion for Partial Summ ary Judgment: granting in part with respect to liability under Section 1 of the End User License Agreements and denying in part with respect to liability under Section 4 of the End User License Agreements; and, denying 46 Plaintiff's Motion for Summary Judgment. See Order. (cc: all counsel) (nm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
THE MEDICAL COLLEGE OF
WISCONSIN INC.,
Plaintiff,
Case No. 15-CV-151-JPS
v.
ATTACHMATE CORPORATION,
ORDER
Defendant.
This case arises out of a software licensing dispute. (See generally
Docket #1). Plaintiff, The Medical College of Wisconsin, Inc. (“Medical
College”), filed its complaint on February 5, 2015, alleging that Defendant,
Attachmate Corporation (“Attachmate”), violated both the Wisconsin
Deceptive Trade Practices Act (Wis. Stat. Ann. § 100.18(1)) and the implied
covenant of good faith and fair dealing. (See Docket #1 ¶¶ 58-69). The
Medical College also sought declarations that it did not infringe Attachmate’s
software copyrights and did not breach the parties’ software licenses,
otherwise known as End User License Agreements (“EULA”). (Docket #1
¶¶ 32-42). Attachmate counterclaimed with breach of contract and copyright
infringement claims. (Docket #38 ¶¶ 35-50).
Currently before the Court are three motions: (1) Attachmate’s motion
to dismiss the Medical College’s Wisconsin Deceptive Trade Practices Act
(“WDTPA”) claim pursuant to Federal Rule of Civil Procedure 12(b)(6); (2)
Attachmate’s motion for partial summary judgment pursuant to Federal Rule
of Civil Procedure 56;1 and (3) the Medical College’s motion for summary
judgment, also brought pursuant to Federal Rule of Civil Procedure 56.2
(Docket #28, #41, #46).
For the reasons outlined below, the Court will: (1) grant Attachmate’s
motion to dismiss the WDTPA claim (Docket #28); (2) grant in part and deny
in part Attachmate’s motion for partial summary judgment (Docket #41); and
(3) deny the Medical College’s motion for summary judgment in its entirety
(Docket #46). Therefore, the live issues remaining after summary judgment
in this case are: (1) whether the Medical College breached its duty to
implement internal safeguards to prevent unauthorized copying,
distribution, or use of Reflection software under Section 4 of the EULA; (2)
the determination of an appropriate damage award for the Medical College’s
breach of Section 1 of the EULA; and (3) liability and damages with respect
to Attachmate’s copyright claim.
1
Specifically, Attachmate argues that it is entitled to summary judgment on
liability only with respect to its breach of contract claim. (Docket #41). Moreover,
it argues that there is no evidence to support the Medical College’s claims that
Attachmate: (1) breached the implied covenant of good faith and fair dealing; or (2)
violated the WDTPA, and thus the Medical College’s claims based on those two
legal theories should be dismissed on summary judgment as well. (Docket #41).
Attachmate does not move for summary judgment with respect to: (1) damages for
the alleged breach of contract; or (2) its copyright claim. (Docket #41).
2
The Medical College moves for summary judgment with respect to its
WDTPA and implied covenant of good faith and fair dealing claims along with
Attachmate’s breach of contract and copyright infringement claims. (Docket #46).
Page 2 of 45
1.
MOTION TO DISMISS3
1.1
Background
Attachmate asks this Court to dismiss the Medical College’s WDTPA
claim. (Docket #28). Before delving into the legal arguments underlying the
motion, the Court will first provide an overview of: (1) the parties; and (2) the
Medical College’s allegations with respect to this claim. The relevant facts for
the purpose of this portion of the Court’s Order will be taken from the
complaint. (See Docket #1); see also Rosenblum v. Travelbyus.com Ltd., 299 F.3d
657, 661 (7th Cir. 2002) (“As a general rule, on a Rule 12(b)(6) motion, the
court may consider only the plaintiff's complaint.”).
1.1.1
The Parties
The Medical College is a Wisconsin corporation existing under the
laws of the State of Wisconsin with its principal place of business located at
8701 Watertown Plank Road, Milwaukee, Wisconsin 53226. (Docket #1 ¶ 1).
It operates as a not-for-profit corporation dedicated to clinical care, research,
community engagement, and the education of physicians and scientists.
(Docket #1 ¶ 9).
Attachmate is a corporation existing under the laws of the State of
Washington, with its principal place of business located at 705 5th Avenue
South, Suite 1100, Seattle, Washington 98104. (Docket #1 ¶ 2). Attachmate is
the creator and licensor of a software line called “Reflection.” (Docket #1
¶ 12). The Reflection line of software comprises various products, including,
but not limited to: (1) Reflection for HP Version 10.0; (2) Reflection for IBM
3
Because of the different standards and bodies of fact applicable to the
pending motion to dismiss and motions for summary judgment, the Court will
address these motions separately.
Page 3 of 45
Version 10.0; (3) Reflection for UNIX and Open VMS Version 10.0; (4)
Reflection for UNIX and Open VMS 2014 Version R1; and (5) Reflection X
Versions 6.00 and 10.0. (Docket #1 ¶ 12). Generally, Reflection products allow
Windows-based devices to connect to non-Windows-based operating
systems. (Docket #1 ¶ 13). This is known as “terminal emulation” software.
(Docket #1 ¶ 13).
1.1.2
The Facts
Beginning in or about 2002, the Medical College began to purchase
certain Reflection software from Attachmate. (Docket #1 ¶ 12). Since that
time, the Medical College has purchased at least 764 licenses to different
versions of Reflection software from Attachmate. (Docket #1 ¶ 14).
The parties’ relationship continued at arms length until approximately
September of 2014. (Docket #1 ¶ 14). At that time, Attachmate requested the
Medical College to conduct an audit to determine whether there was any
discrepancy between the number of software licenses that the Medical
College owned and the number of licenses that the Medical College
deployed. (Docket #1 ¶¶ 15-17). The Medical College complied with that
audit in or about October of 2014. (Docket #1 ¶ 16).
Using the audit data, Attachmate sent the Medical College a table
which compared: (1) the number of “installations” of the various types and
versions of Reflection software found on the Medical College’s computers;
and (2) the number of licenses owned by the Medical College. (Docket #1
¶ 17). This table showed a number of discrepancies. (Docket #1 ¶ 17).
Specifically, Attachmate reported that while Reflection X was installed on
2,505 computers, the Medical College had purportedly only purchased 7
licenses for that particular software. (Docket #1 ¶ 18). In addition, the audit
Page 4 of 45
purportedly showed that two other programs—for Reflection for HP (version
10.0) and Reflection for IBM (version 10.0)—were installed but were not
licensed by the Medical College. (Docket #1 ¶ 19). Though the Medical
College owned 764 licenses for the Reflection line of software, 750 of those
licenses were allegedly not “installed.” (Docket #1 ¶ 20).
In total, based on the audit, Attachmate represented that the Medical
College had installed at least 2,500 Reflection4 programs that it had not
purchased. (Docket #1 ¶ 21). In order to bring the Medical College back into
compliance with the Reflection software license, Attachmate represented that
the Medical College needed to purchase $1,067,416.00 worth of additional
licenses—plus a 12% interest charge going back to the release dates of the
software—for a total of $2,604,495.04. (Docket #1 ¶ 26). Attachmate
demanded full payment within thirty (30) days. (Docket #1 ¶ 27).
The Medical College disagreed with Attachmate’s findings.
Specifically, the Medical College claimed that Attachmate failed to account
for the licenses that the Medical College already owned and actually used.
(Docket #1 ¶¶ 22-23). If Attachmate would have taken this information into
account, the Medical College claims that Attachmate would have found that
the Medical College used Reflection software consistent with the number of
licenses that it owned. (Docket #1 ¶ 24). Moreover, despite its own best
efforts, the Medical College asserts Attachmate refused to work
cooperatively to resolve any issues raised by the audit in a “fair and equitable
manner under the circumstances.” (Docket #1 ¶¶ 28, 31). At bottom, the
4
As outlined in the paragraph above, the specific Reflection products at
issue were Reflection for HP (version 10.0), Reflection for IBM (version 10.0), and
Reflection X (version 10.0). (Docket #1 ¶ 26).
Page 5 of 45
Medical College claims to be a victim of Attachmate’s “history of assuming
circumstances concerning an alleged over-deployment of its software
products so as to maximize its claim for license fees and interest from its
customers….” (Docket #1 ¶ 25). Further, the Medical College claims that
Attachmate’s business strategy was merely “an effort to unjustly reap a
windfall from [its] customers.” (Docket #1 ¶ 25).
1.2
Legal Standard
“A motion to dismiss pursuant to [Rule] 12(b)(6) challenges the
viability of a complaint by arguing that it fails to state a claim upon which
relief may be granted.” Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736
(7th Cir. 2014). “To survive a motion to dismiss under Rule 12(b)(6), a
plaintiff must state enough facts that, when accepted as true, ‘state a claim for
relief that is plausible on its face.’” Spierer v. Rossman, 798 F.3d 502, 510 (7th
Cir. 2015) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A
claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” McCauley v. City of Chicago, 671 F.3d 611, 615
(7th Cir. 2011) (citing Ashcroft v. Iqbal, 556 U.S. 662 (2009)). The Court must
“tak[e] all factual allegations as true and draw[] all reasonable inferences in
favor of the plaintiffs.” Pugh v. Tribune Co., 521 F.3d 686, 692 (7th Cir. 2008).
1.3
Analysis
The Medical College claims that Attachmate violated the WDTPA by
“ma[king] untrue, deceptive, or misleading representations in an attempt to
sell additional [software] licenses.” (Docket #1 ¶ 67). Attachmate, however,
asks this Court to dismiss the Medical College’s WDTPA claim pursuant to
Rule 12(b)(6). (Docket #28). In support of its motion, Attachmate argues that
Page 6 of 45
the Medical College’s claims arise out of the parties’ pre-existing contractual
relationship; in other words, according to Attachmate, since the purported
misrepresentations were not made to “the public,” Attachmate cannot be
liable as a matter of law under the WDTPA.5 (Docket #29 at 1). The Medical
College opposes6 Attachmate’s motion by arguing that the representations
in question were made with respect to new offers to form new contracts. (See
Docket #11 at 10-13). Under this theory, even if the parties were bound by
contract with respect to their prior licensing agreements, the Medical College
was a member of “the public” for the purpose of the negotiations that
underlie the instant WDTPA claim. (Docket #11 at 10-13).
The WDTPA provides that:
No…corporation…with intent to sell…merchandise…to the
public for sale,…shall make, publish, disseminate, circulate, or
place before the public,…in this state, in a newspaper, magazine
or other publication, or in the form of a book, notice, handbill,
poster, bill, circular, pamphlet, letter, sign, placard, card, label,
or over any radio or television station, or in any other way
similar or dissimilar to the foregoing, an advertisement,
announcement, statement or representation of any kind…
which…is untrue, deceptive or misleading.
5
Attachmate also argues that the Medical College’s WDTPA claim is: (1)
inadequately pled under Rule 9(b) or, in the alternative, Rule 8(a); and (2) that the
Medical College did not properly allege that Attachmate induced the Medical
College to act or caused pecuniary harm. (Docket #29 at 1). The Court will not
address these pleading-related arguments because, as more fully described below,
even if the Medical College had properly pled its claims, it could not maintain a
WDTPA claim against Attachmate in light of the parties’ relationship.
6
This motion to dismiss was originally filed by Attachmate on May 1, 2015.
(Docket #6). However, in light of the parties’ joint request to mediate, the Court
denied that motion without prejudice. (Docket #22). After mediation was
unsuccessful, Attachmate re-filed its motion to dismiss. (Docket #29). Thereafter,
the Medical College renewed its response to the original motion. (See Docket #33).
Attachmate likewise renewed its reply. (See Docket #34).
Page 7 of 45
Wis. Stat. Ann. § 100.18(1) (emphasis added). In order to bring a claim
of fraudulent misrepresentation under Section 100.18(1), a plaintiff must
prove: (1) “that with the intent to induce an obligation, the defendant made
a representation to ‘the public’”; (2) “that the representation was untrue,
deceptive or misleading”; and (3) “that the representation caused the plaintiff
a pecuniary loss.” K & S Tool & Die Corp. v. Perfection Machinery Sales, Inc.,
2007 WI 70, ¶ 19, 301 Wis.2d 109, 121–122, 732 N.W.2d 792, 798 (emphasis
added). Attachmate’s motion challenges the Medical College’s ability to
satisfy the first element of its WDTPA claim as a matter of law. (See generally
Docket #29).
The WDTPA does not define the meaning of “the public.” Fricano v.
Bank of Am. NA, 2016 WI App 11, ¶ 28, —Wis. 2d—, —N.W. 2d—. Over the
years, however, Wisconsin courts have added interpretive gloss to this
statutory phrase, see State of Wisconsin v. Automatic Merch of Am., 64 Wis. 2d
659, 664, 221 N.W. 2d 683, 686 (1974), much of which has resulted in an
expansion of liability under the WDTPA. For example, “the public” need not
“mean a large audience, and a statement made to one person may constitute
a statement made to ‘the public’ under this statute.” Kailin v. Armstrong, 2002
WI App 70, ¶ 44, 252 Wis. 2d 676, 709, 643 N.W.2d 132, 149. Moreover,
actionable representations are “not limited to media advertising,” Automatic
Merchandisers of Am., Inc., 64 Wis. 2d at 663, and need not be made in the
context of advertisements at all, Bonn v. Haubrich, 123 Wis. 2d 168, 173, 366
N.W.2d 503, 505 (Ct. App. 1985) (holding that actionable conduct may also
be made to “the public” in the context of individual, oral sales promotions).
Page 8 of 45
Notwithstanding the broad applicability of Section 100.18, the
Wisconsin Supreme Court placed a limit on the reach of the WDTPA: “a
person remains a member of ‘the public’ until a ‘particular relationship’”
exists between the parties. Fricano v. Bank of Am. NA, 2016 WI App at ¶ 28
(citing K & S Tool & Die Corp., 301 Wis.2d 109, ¶ 27); see also State v. Automatic
Merchandisers of Am., Inc., 64 Wis. 2d 659, 664, 221 N.W.2d 683, 686 (1974)
(“The important factor is whether there is some particular relationship between
the parties.”) (emphasis added). “[A] plaintiff is no longer a member of ‘the
public’ for the purpose of Wis. Stat. § 100.18(1) once he or she has entered
into a contract to purchase the offered item.” K & S Tool & Die Corp., 2007 WI
70, ¶ 26. Courts applying the “particular relationship” test observe that rule
recognizes “that those who have long-term, established relationships are in
a better position than most to protect themselves in the context of that
relationship.” Uniek, Inc. v. Dollar General Corp., 474 F. Supp.2d 1034, 1039
(W.D. Wis. 2007). Moreover, “[s]tatements made by the seller after a person
has made a purchase or entered into a contract to purchase logically do not
cause the person to make the purchase or enter into the contract.” Kailin, 2002
WI App 70, ¶ 44 (emphasis added).
The contours of the “particular relationship” test are purposefully illdefined. K & S Tool & Die Corp., 301 Wis. 2d 109, ¶ 24-27 (“The use of ‘the
public,’ in the context of § 100.18(1)…d[oes] not lend itself to the formulation
of a bright-line test.”). Determining whether a person is a member of “the
public” is ultimately a case-specific inquiry that depends upon the “peculiar
facts and circumstances” of the parties’ relationship “and must be tested by
the statute in the light of such facts and circumstances.” Id. (internal citations
omitted). Thus, while the question of whether a particular plaintiff qualifies
Page 9 of 45
as the public is “not a pure issue of law,” Roundy's Supermarkets, Inc. v.
Nash-Finch Co., No. 08C0142, 2008 WL 5377907, at *3 (E.D. Wis. Dec. 23, 2008),
it can be decided by the Court where “the undisputed facts establish that the
plaintiff had a particular relationship with” the defendant, Bates v.
Wisconsin-Dep't of Workforce Dev., 636 F. Supp. 2d 797, 811 (W.D. Wis. 2009)
aff'd sub nom. Bates v. Wisconsin Dep't of Workforce Dev., 375 F. App’x 633 (7th
Cir. 2010). Compare Northcentral Tech. Coll. v. Doron Precision Sys., Inc., No.
13-CV-425-SLC, 2013 WL 5719459, at *3 (W.D. Wis. Oct. 21, 2013) (dismissing
the plaintiff’s claim because the complaint alleged that the parties were under
contract when the alleged representation was made) with United Concrete &
Const., Inc. v. Red-D-Mix Concrete, Inc., 2012 WI App 88, ¶ 16, 343 Wis. 2d 679,
819 N.W.2d 563 aff'd in part, rev'd in part on other grnds, 2013 WI 72, ¶ 16, 349
Wis. 2d 587, 836 N.W.2d 807 (finding that a dispute of fact about the parties’
status as contracting parties rendered the question appropriate for the jury).
On the one hand, where the parties to a WDTPA claim are already
bound by contract for the item in dispute, courts have found a “particular
relationship” to exist and preclude a Section 100.18 claim. See K & S Tool &
Die Corp., 2007 WI 70, ¶ 26; see e.g., Uniek, Inc., 474 F. Supp. 2d at 1040
(finding that defendant was entitled to summary judgment because after
thirteen years of business dealings and the execution of a “letter of
understanding” the parties had formed a “particular relationship”); Kailin,
252 Wis.2d 676, ¶ 44 (affirming a ruling that the plaintiffs were no longer
members of “the public” with respect to statements made after the parties
entered into a contract to purchase real estate). On the other hand, where the
parties are not bound by contract, WDTPA claims may survive. See, e.g.,
Fricano, 2016 WI App 11, ¶ 30 (declining to overturn a jury verdict that the
Page 10 of 45
parties were not in a “particular relationship” at the relevant time period
because there “was no contract at the time the Bank misrepresented its
knowledge of the condition of the property”). In this sense, a finding that the
plaintiff is (or is not) a member of the public depends both on: (1) timing (i.e.,
were the parties bound by contract when the defendant made the alleged
misrepresentation); and (2) the items offered for sale (i.e., were the parties
bound by contract for the goods/services at issue). See e.g., Fricano, 2016 WI
App 11, ¶ 30 (quoted above); MBS-Certified Pub. Accountants, LLC v.
Wisconsin Bell Inc., 2013 WI App 14, ¶ 19, 346 Wis. 2d 173, 189, 828 N.W.2d
575, 583 (reversing a decision to dismiss a WDTPA claim because “there was
no contract in place with any of the defendants for the billed services at issue;
indeed that is crux of this suit—that MBS and others were billed for services
for which they never contracted”) (emphasis added); Blanchar v. Lake Land
Builders, Inc., 2009 WI App 21, ¶ 19, 316 Wis. 2d 357, 763 N.W.2d 249
(concluding “as a matter of law, based on the undisputed facts, that [the
plaintiff] was still a member of ‘the public’ with respect to Lake Land at the
time of [the defendant’s] alleged misrepresentations”).
Here, there can be no question that the Medical College and
Attachmate were, at the time of the alleged misrepresentations, under
contract for the items in dispute—Reflection software. (Docket #1 ¶ 12, 14-23,
64). The Medical College admits that it owns 764 licenses for Attachmate’s
Reflection line of terminal emulation software. (Docket #1 ¶ 14). Importantly,
the alleged representations at the core of this WDTPA claim arose entirely
Page 11 of 45
out of the obligations created by those software licenses—contracts to which
the Medical College agreed to be bound.7 (Docket #1 ¶¶ 14-21).
The Medical College’s position—that Attachmate’s offers are now
being made with respect to new licenses for new software (Docket #11 at
11-13)—misconstrues the nature of the parties’ ongoing obligations to each
other and the claims at issue here. Cf. Hackel v. Nat’l Feeds, Inc., 986 F. Supp.
2d 963, 980 (W.D. Wis. 2013) (denying the defendant’s motion for summary
judgment with respect to the WDTPA claim because “[t]he parties were not
in a contractual relationship and Hackel was under no obligation to make
future purchases from National”). During the time in which the alleged
misrepresentations occurred, the Medical College was continuing to use
Attachmate’s software and was, therefore, continuing to operate as bound
under those software licenses. (Docket #1 ¶¶ 12, 14-23, 28). In addition,
whether or not the Medical College over-deployed Reflection—and was
therefore required to obtain additional licenses—turns on the language of the
parties’ pre-existing license agreements. (Docket #1 ¶¶ 23, 31, 64). Thus,
because the Medical College argues that, at all times relevant, it has acted
“consistent[ly] with the total number of license[s] [that it has] purchased,” the
Medical College’s WDTPA claim is inextricably governed by—and bound up
in—the same software licenses that it has been a party to with Attachmate for
approximately 14 years. (Docket #1 ¶¶ 12, 14, 64).
7
The Medical College states that it has purchased 764 licenses from
Attachmate. (Docket #1 ¶¶ 12, 14, 64). Nowhere in the complaint does the Medical
College allege that it was not bound by those licenses, and the Court has no
independent basis from which to infer otherwise.
Page 12 of 45
The Medical College attempts to circumvent this conclusion by
arguing that its relationship with Attachmate is analogous to the relationship
between the parties in: (1) MBS-Certified Pub. Accountants, LLC., 2013 WI App
14; (2) Blanchar, 2009 WI App 21; and (3) United Concrete & Const., Inc., 2012
WI App 88. (Docket #11 at 11-13). These cases, however, are factually
distinguishable.
Unlike the Medical College, the plaintiffs in each of the
aforementioned cases had not been under contract with the defendants for
the items, goods, and/or services in question at the time the alleged
misrepresentations were made. For example, in MBS the plaintiffs alleged
that certain telecommunications providers billed them for services that the
plaintiffs never authorized. MBS-Certified Pub. Accountants, LLC., 2013 WI
App 14, ¶ 6. Although the plaintiffs were already the defendants’ customers
when the purported charges began to accrue, the crux of that suit was that
“there was no contract in place with any of the defendants for the billed services
at issue.” Id. at ¶ 19 (emphasis added). Similarly, in Blanchar, the court held
the parties’ prior land contract did not, as a matter of law, take the plaintiffs
out of the realm of “the public” for the purpose of a separate and distinct home
construction project. Blanchar, 2009 WI App 21, ¶¶ 12-17 (explaining that
“[t]he alleged misrepresentations occurred before the parties entered into the
contract at issue, the construction contract”); see also United Concrete & Const.,
Inc., 2012 WI App 88, ¶ 16 (“A jury reasonably could find that a particular
relationship existed between United and Red–D–Mix because of their past
dealings; it just as reasonably could find that United was a member of ‘the
public’ when Red–D–Mix, through Clark, solicited United’s business anew”).
Page 13 of 45
Unlike the cases relied upon by the Medical College, the complaint
clearly states that the software representations at issue here arose out of the
parties’ pre-existing contractual obligations to each other. (Docket #1
¶¶ 12-24). Thus, unlike the defendants in MBS, Blanchar, and United Concrete,
Attachmate’s licensing representations were not made in the context of a new
offer for sale for new software licenses. In other words, Attachmate was not
“solicit[ing]” the Medical College’s “business anew.” United Concrete &
Const., Inc., 2012 WI App 88, ¶ 16. Instead, the complaint alleges that the
Medical College had maintained a business relationship with Attachmate
under the terms of over 764 licenses that the Medical College had purchased
since 2002. (Docket #1 ¶ 14). And, Attachmate’s purported “offers” were
made based on the software that the Medical College had allegedly already
installed and pursuant to previously purchased license agreements. (Docket
#1 ¶¶ 23, 26, 31). Thus, even though the Medical College had not yet paid for
the licenses in question, the Medical College’s purported obligation to do so
sprung directly from the pre-existing obligations it owed to Attachmate.
1.4
Conclusion
In looking at the “peculiar facts and circumstances” of this case, the
Court concludes that the Medical College was not a member of “the public”
for the purpose of its WDTPA claim. K & S Tool & Die Corp., 301 Wis.2d 109,
¶ 24. The Medical College and Attachmate have been parties to at least 764
licensing agreements for approximately 14 years. See also Uniek, Inc., 474
F. Supp. 2d at 1040; (Docket #1 ¶ 14). The “overall nature” of their agreement
is that of contracting parties; and as contracting parties, the Medical College’s
and Attachmate’s obligations are defined by the licenses associated with
Reflection software. See Blanchar, 2009 WI App 21, ¶ 15; (Docket #1 ¶¶ 12, 14,
Page 14 of 45
26). Ultimately, the representations in this case center on how the Medical
College has deployed Attachmate’s software and whether that manner of
deployment complies with the parties’ licensing agreements. (Docket #1
¶¶ 12-24, 64). Under this arrangement, the Medical College is not a member
of “the public,” and the Court will accordingly grant Attachmate’s motion to
dismiss the Medical College’s WDTPA claim. (Docket #28).8
2.
MOTIONS FOR SUMMARY JUDGMENT
The Court must next address the parties’ motions for summary
judgment pursuant to Federal Rule of Civil Procedure 56. (Docket #41, #46).
On the one hand, Attachmate moves the Court to grant partial summary
judgment in its favor with respect to liability on its breach of contract claim
against the Medical College.9 (Docket #41). In addition, Attachmate argues
that it is entitled to judgment as a matter of law with respect to the Medical
College’s claim for a violation of the implied covenant of good faith and fair
dealing. (Docket #41). On the other hand, the Medical College asks the Court
to grant summary judgment in its favor with respect to: (1) its claim for
breach of the implied covenant of good faith and fair dealing; (2)
Attachmate’s breach of contract claim; and (3) Attachmate’s copyright
infringement claim. (Docket #46). For the reasons described below, the Court
will grant Attachmate’s motion insofar as it relates to liability for a breach of
8
In light of this ruling, the Court need not address the parties’ summary
judgment arguments with respect to the WDTPA claim.
9
Attachmate states, in its opposition to the Medical College’s motion for
summary judgment, that it is likewise entitled to judgment as a matter of law with
respect to its copyright claim. (Docket #60 at 2). However, as Attachmate has not
moved for summary judgment on this claim, the Court will not grant Attachmate’s
request pursuant to Rule 56(c). See FED . R. CIV . P. 56(c) (requiring advance notice to
rule on summary judgment sua sponte).
Page 15 of 45
Section 1 of the parties’ software contract; but, the Court will deny
Attachmate’s motion insofar as it relates to liability for a breach of Section 4
of the parties’ software contract. (Docket #41). In addition, the Court will
deny the Medical College’s motion in its entirety. (Docket #46). For the sake
of clarity, the Court will set forth the relevant facts that are applicable to the
parties’ claims and then address the parties’ arguments on a claim-by-claim
basis.
2.1
Material Facts10
The Medical College is a Wisconsin not-for-profit corporation with its
principal place of business in Milwaukee, Wisconsin.11 (Docket #90, Ex. 2 ¶ 1).
It focuses on providing world-class clinical care, education, and research in
Wisconsin. (Docket #90, Ex. 2 ¶ 1).
10
Unless otherwise stated, the facts in this section will be taken from the
parties’ proposed findings of fact (Docket #40, #90, Ex. 2, #61, #111, Ex. 3) and/or
responses thereto (Docket #61, #111, Ex. 2, #102 Ex. 2, #75). Any disputes relative to
these facts will be noted. To be clear, the facts in this section will be devoted to
those material facts that are relevant to the decision herein. Cf. Civ. Local R.
56(b)(1)(C). This bears special mention because a substantial number of the Medical
College’s proposed facts embody legal arguments that are ill-disguised as “facts.”
(See e.g., Docket #90, Ex. 2 ¶¶ 36, 61, 80, 96-100, 104-105, 113-114, 118, 120-126). For
example, nearly the whole of the Medical College’s introduction to its analysis was
grafted into its proposed findings of fact. (Compare Docket #90, Ex. 1 at 13-14 with
Docket #90, Ex. 2 ¶¶ 96-100). Despite the Court’s frustration in this regard, it must
nonetheless sift and winnow its way through the parties’ filings in order to present
those facts which are both relevant and material to the issues presented. However, for
this reason, the Court will rely primarily on Attachmate’s proposed findings of fact
for the purpose of this section.
11
To the extent possible, the Court will attempt to avoid repeating the facts
outlined above. However, because there is a larger body of fact applicable to the
parties’ summary judgment motions, some overlap may necessarily occur.
Page 16 of 45
Attachmate is a Washington corporation with its principal place of
business in Seattle, Washington. (Docket #40 ¶ 4). In 2005, the company
merged with another Seattle-based software company called WRQ, Inc.
(Docket #1 ¶ 5). Attachmate was the surviving entity. (Docket #40 ¶ 5).
Within the software industry, Attachmate creates and licenses
terminal emulation products. (Docket #40 ¶ 6). As described above (see supra,
Part 1.1.1), terminal emulation software allows Windows-based devices to
connect to non-Windows-based operating systems. (Docket #1 ¶ 13).
One of the terminal emulation product lines originally developed by
WRQ, Inc., and continued by Attachmate after the 2005 merger, is called
Reflection. (Docket #40 ¶ 6). Within the Reflection software line, Attachmate
owns a number of different products, including, but not limited to: (1)
Reflection X; (2) Reflection for UNIX and Open VMS;12 (3) Reflection for IBM;
and (4) Reflection for HP. (Docket #40 ¶ 7). Each of these products also has
particular versions associated with it. (Docket #40 ¶ 8). Attachmate owns
copyrights with respect to each of these Reflection product lines. (Docket #61
¶¶ 137-145).
Since at least 1997, the Medical College has purchased licenses for
certain Reflection software products from Attachmate’s predecessor, WRQ,
Inc. (Docket #40 ¶ 9). Though the Medical College does not have precise
information concerning the software that it purchased and installed between
12
In certain places, the parties refer to this software program as “Reflection
for UNIX and OpenVMS 10,” and in other places they refer to this program merely
as “Reflection for OpenVMS 10.” (See Docket #102, Ex. 2 ¶¶ 16-23). Neither of the
parties argue that there is a difference between these two products. For consistency,
the Court will reference this program by what appears to be its complete name:
Reflection for UNIX and OpenVMS 10.
Page 17 of 45
1997 and 2003,13 the products at issue in this case correspond to the Reflection
Version 10 product line, which was created in 2002. (Docket #90, Ex. 2 ¶ 63;
Docket #61 ¶¶ 138, 140, 142, 144).
The Medical College claims to rely on Reflection software, specifically
the Reflection for UNIX and OpenVMS 10 program, for its billing and
collections work.14 (Docket #90, Ex. 2 ¶¶ 17, 21). At all times relevant to this
lawsuit, the Medical College had owned at least: (1) 620 licenses for
Reflection for UNIX and OpenVMS 10; and (2) 7 licenses for Reflection X 10.15
(Docket #40 ¶¶ 10-11). In addition, the Medical College purchased 14 licenses
for Reflection for UNIX and OpenVMS 2014, version R1, in 2013 and 2014.
13
This lack of information is due to the passage of time along with various
organizational changes made to the Medical College’s information services
department. (Docket #90, Ex. 2 ¶¶ 64-69).
14
Attachmate disputes the fact that the Medical College only “uses”
Reflection for UNIX and OpenVMS 10. (Docket #61 ¶ 21). Specifically, Attachmate
argues that the Medical College is also “using” Reflection X 10 because the Medical
College has also “installed” Reflection X 10. (Docket #61 ¶ 21). Attachmate’s
objection reflects a broader dispute about: (1) the proper interpretation of the
EULA; and (2) whether Reflection for UNIX and OpenVMS 10 is, in fact, a
component of Reflection X 10. (See Docket #102, Ex. 2 ¶¶ 36, 53, 87). These issues will
be discussed in more detail below. (See infra, Part 2.3.1.2).
15
The Medical College provides different amounts of the total number of
licenses purchased. In certain places, the Medical College states that, in total, it
purchased 764 licenses from WRQ, Inc., prior to Attachmate’s merger. (Docket #90,
Ex. 2 ¶ 16). Elsewhere, the Medical College states that it only owns 620 licenses for
Reflection for UNIX and Open VMS 10 and 7 licenses for Reflection X 10. (Docket
#90, Ex. 2 ¶ 16). Neither of the parties explain the difference between these figures.
Page 18 of 45
(Docket #90, Ex. 2 ¶ 22). The Medical College does not own any licenses for
Reflection for IBM or Reflection for HP.16 (Docket #40 ¶¶ 12-13).
The EULA associated with the Reflection line of software is at the
heart of this dispute. Attachmate claims that each of the software products
owned by the Medical College operates under a standard license agreement
that applies to all version 10.0 Reflection products, including Reflection X 10,
Reflection for UNIX and OpenVMS 10, Reflection for IBM 10, and Reflection
for HP 10.17 (Docket #40 ¶ 14). Attachmate further claims that the Medical
College accepted the terms of the Reflection 10 EULA when it installed the
Reflection products on Medical College’s computers and servers. (Docket #40
¶ 15; see also Docket #60 at 10 n.8) (describing the click-wrap contract). As will
be discussed further below (see infra, Part 2.3.1.2), the Medical College claims
that “Attachmate has provided no evidence that [it] accepted the terms of the
Reflection 10 [EULA].” (Docket #111, Ex. 2 ¶¶ 15, 18-21). The EULA states:
16
The Court notes that the parties’ proposed findings of fact reveal that they
have a number of disagreements as to the price point of Reflection software
programs. (See e.g., Docket #61 ¶¶ 18-20). However, as pricing information is
relevant only with respect to damages, the Court need not delve into the large body
of disputed facts on this topic.
17
The Medical College’s response to this fact states that the EULA fails to
“explicitly state to which products or versions it applies within the Reflection line
of products.” (Docket #111, Ex. 2 ¶ 14). However, the EULA is clearly titled “WRQ
Reflection,” which supports Attachmate’s position that the EULA was a standard
contract that applied to all Reflection products. (Docket #111, Ex. 2 ¶ 14). Putting
this dispute aside, the Medical College does not argue that the EULA is rendered
invalid by its failure to designate the specific versions to which it applies, and thus
the Court will not address this issue further.
Page 19 of 45
1. GRANT OF LICENSE. This EULA grants you the following
rights:
You may install, use, access, display, run, or otherwise interact with
(“Run”) one copy of the Software on a single computer or
workstation (“Computer”). You may also store or install a copy
of the Software on a storage device, such as a network
server(s), used only to allow your other Computers to Run the
Software over an internal network. You must acquire and
dedicate a license for each Computer on which the Software is Run.
The primary user of the Computer on which the Software Runs
may make a second copy for his or her exclusive use on a home
or portable Computer. If you deploy WRQ Software to an end
user by establishing a Roaming User Profile setting in
Windows NT or Windows 2000, you must acquire and dedicate
a license for each end user who will access the WRQ Software
under a Roaming User Profile (“Roaming User”). A Roaming
User who is licensed to use the Software may install and use
the Software on multiple desktops, so long as the Roaming
User uses only one copy of the Software at one time. You must
ensure that copies of the Software for use by Roaming Users on
desktops outside your control are destroyed when a Roaming
User’s right to use the Software is terminated.
…
4. SAFEGUARDS/AUDIT RIGHTS. You agree to
(i) implement internal safeguards to prevent any unauthorized
copying, distribution, or use of the Software;
(ii) provide WRQ with written certification of the number of
copies or concurrent usage of the Software on request, and
(iii) to allow WRQ to audit your premises and systems for
compliance with this EULA during regular business hours.
WRQ will pay for the cost of the audit unless the audit shows
a discrepancy which is five percent (5%) or more of the number
of copies of the Software Run over the licenses you have
acquired; in which event, you shall pay for the cost of the
audit.
Page 20 of 45
(Docket #90, Ex. 2 ¶ 102). The Reflection 10 EULA is governed by
Washington law. (Docket #40 ¶ 16).
In October of 2014, Attachmate demanded an audit to determine
whether the Medical College was complying with the Reflection licenses that
it owned.18 (Docket #40 ¶ 37; Docket #90, Ex. 2 ¶ 27). The Medical College
cooperated with that request, and ran Attachmate’s computer queries to
gather data regarding which computers and servers had Reflection software
installed.19 (Docket #40 ¶ 37; Docket #90, Ex. 2 ¶¶ 28, 30). The results of that
audit triggered the negotiations that eventually led to this law suit.
Using the audit data,20 Attachmate prepared a report summarizing its
findings. (Docket #90, Ex. 2 ¶ 33). The report showed that the Medical
College had installed Reflection X 10 on over 1,250 personal computers.
(Docket #111, Ex. 2 ¶ 39). In total, the audit report stated that Reflection X 10
18
The Medical College speculates that this audit came in response to failed
negotiation between the parties. (Docket #90, Ex. 1 at 5; Docket #90, Ex. 2 ¶¶ 22-26).
However, the motive for the audit is irrelevant to the arguments and issues
presented.
19
The Medical College proposes many facts dedicated to explaining the
nature of these “queries,” which it calls “scripts.” (Docket #61 ¶ 29-32). This
discussion is irrelevant to this Court’s breach of contract decision.
20
The Medical College disputes the results contained in Attachmate’s audit
by arguing that the audit was unreliable and presumed a certain interpretation of
the EULA, which is flawed. (Docket #111, Ex. 2 ¶ 39, Docket #90, Ex. 2 ¶¶ 38-40, 87).
These issues will be discussed in further detail below, at least insofar as they
pertain to contract liability. (See infra, Part 2.3.1.2). The Court notes that
immediately after the audit, and continuing today, Attachmate admitted that its
results may embody some inaccuracies. (Docket #61 ¶ 41). However, the Medical
College has not provided the information that Attachmate would need to
determine whether any double-counting of software had occurred. (Docket #111,
Ex. 2 ¶ 47). Thus, whether, and to what extent, this double-counting issue will
affect Attachmate’s recovery is ultimately a question related to damages.
Page 21 of 45
was over-deployed 2,498 times. (Docket #90, Ex. 2 ¶ 89). Besides Reflection
X 10, Attachmate also claimed to have found one copy of Reflection for IBM
10 and one copy of Reflection of HP 10 installed on the Medical College’s
computers. (Docket #111, Ex. 2 ¶¶ 41-42).
When Attachmate sent the audit report to the Medical College on
December 3, 2014, it stated that the alleged “non-compliance” issue needed
to be resolved within 30 days. (Docket #90, Ex. 2 ¶ 41). Attachmate also
stated that, in order to come into compliance with the Reflection EULA, the
Medical College owed $2,604,495.04, which comprised both a licensing fee
and a 12% interest charge. (Docket #90, Ex. 2 ¶ 42).
Upon receiving this information, the Medical College was “shocked”
because it was operating under the assumption that it did not use Reflection
X 10 software. (Docket #90, Ex. 2 ¶¶ 44, 53). Rather, the Medical College
thought that the only program that its staff was using was Reflection for
UNIX and OpenVMS 10.21 (Docket #90, Ex. 2 ¶ 44). This is because Reflection
for UNIX and OpenVMS 10 was the terminal emulation software
that—according to the Medical College’s understanding—allowed certain
employees to access and operate a specific billing and collections program,
known as GE/IDX.22 (Docket #90, Ex. 2 ¶¶ 49, 56-57). In total, the number of
people who actually used GE/IDX, and thus Reflection for UNIX and
21
The Medical College admits that it has been confused at various times
during this litigation as to which software that it has “used” and/or “installed.”
(Docket #102, Ex. 2 ¶¶ 36, 79, 126).
22
GE/IDX is a non-Windows-based program that cannot operate without a
terminal emulation software like Reflection for UNIX and OpenVMS 10. (Docket
#90, Ex. 2 ¶¶ 51, 58).
Page 22 of 45
OpenVMS 10, was purportedly limited to 620 credentialed employees in the
billing and collection department.23 (Docket #90, Ex. 2 ¶¶ 50, 59).
In light of this information, the Medical College conducted an internal
inquiry into its deployment of Reflection software. (Docket #111, Ex. 2 ¶ 43).
That investigation also revealed that Reflection X 10 (or, according to the
Medical College, Reflection for UNIX and OpenVMS 10) had been installed
on over 1,280 personal computers. (Docket #111, Ex. 2 ¶ 44). Though the
Medical College confirmed that it found one copy of the Reflection for IBM
10 and one copy of Reflection for HP 10 installed on its computers, it was
unable to determine how that software was obtained. (Docket #111, Ex. 3
¶ 21).
Although the Medical College had changed the way in which it
manages its technology services many times since 1997 (Docket #90, Ex. 2
¶¶ 63-69), its internal investigation eventually recovered the installation file
to the Reflection software (Docket #90, Ex. 2 ¶ 70). Based on the configuration
of that installation file, the parties actively dispute how to characterize the
software in dispute.
According to the Medical College, the Reflection installation file,
which is titled “Reflection X,” purportedly includes both Reflection X 10 and
Reflection for UNIX and OpenVMS 10. (Docket #90, Ex. 2 ¶ 70). Moreover,
the installation kit apparently defaults to installing both programs, which is
described as a “complete” installation. (Docket #90, Ex. 2 ¶ 71; Docket #61
¶ 71). The Medical College argues that, because the Reflection software was
23
Attachmate argues that the number of GE/IDX users could have reached
as high as 1,792 when the Medical College outsourced its technology management
to a third-party vendor, known formerly as Tushaus Computer Services, LLC.
(Docket #61 ¶ 59).
Page 23 of 45
not clearly identified and/or did not require a license key for installation,
Reflection X 10 and/or Reflection for UNIX and OpenVMS 10 might have
been inadvertently installed together. (Docket #61 ¶ 81).24
For its part, Attachmate maintains that, even though Reflection X 10
and Reflection for UNIX and OpenVMS 10 are distinct products, Reflection
for UNIX and OpenVMS 10 is properly understood as a component of
Reflection X 10. (Docket #61 ¶ 88; Docket #102, Ex. 2 ¶¶ 21, 36, 53, 59, 72).
This is because Reflection X 10 allegedly contains three components: (1)
Windows X Server; (2) Reflection for UNIX and OpenVSM 10; and (3) FTP
Client. (Docket #61 ¶ 76). Thus, according to Attachmate, whether or not the
Medical College installed the “complete” Reflection X 10 product and/or just
the component—Reflection for UNIX and OpenVMS 10—is immaterial
because each and every installation is a Reflection X 10 installation. (Docket
#102, Ex. 2 ¶¶ 21, 53, 59, 72). Thus, the parties dispute whether Reflection for
UNIX and OpenVMS 10 can and/or should be understood as a component
of Reflection X 10. (See Docket #102, Ex. 2 ¶¶ 21, 36, 53, 72, 87-88, 126).
In January of 2015, Attachmate contacted the Medical College to
discuss the Reflection audit. (Docket #111, Ex. 2 ¶ 50). The Medical College
claims that, during the ensuing discussions, Attachmate was noncooperative, failed to provide requested information, and discouraged the
Medical College from continuing to investigate the matter.25 (Docket #90,
24
The installation program for Reflection X 10 allows the individual
installing the software to choose one of three options: (1) a typical installation
which installs the most common application features; (2) a custom installation in
which the individual selects what features to install; and (3) a complete installation
in which all application features are installed. (Docket #61 ¶ 74).
25
Attachmate disputes these facts. (Docket #102, Ex. 2 ¶¶ 45, 93).
Page 24 of 45
Ex. 2 ¶¶ 45, 93-94). In addition, the Medical College argues that it has since
determined that Attachmate’s audit, report, and subsequent negotiations
were wrongful because they: (1) misrepresented the Medical College’s use of
Reflection software; (2) were based on inflated and/or untrue license prices;
and (3) were purposefully conducted with a false sense of urgency in order
to extract a lucrative settlement,26 all of which Attachmate denies. (Docket
#81 ¶¶ 41-55). On February 5, 2015, the Medical College filed this suit.
(Docket #40 ¶ 52).
2.2
Legal Standard
When a party files a motion for summary judgment, it is their
“contention that the material facts are undisputed and the movant is entitled
to judgment as a matter of law.” Hotel 71 Mezz Lender LLC v. Nat. Ret. Fund,
778 F.3d 593, 601 (7th Cir. 2015) (citing Fed. R. Civ. P. 56(a)). “Material facts”
are those facts which “might affect the outcome of the suit,” and “summary
judgment will not lie if the dispute about a material fact is ‘genuine,’ that is,
if the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Thus, to have a genuine dispute about a material fact, a party opposing
summary judgment “must do more than simply show that there is some
metaphysical doubt as to the material facts,” Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 474 U.S. 574, 586 (1986); namely, the party in opposition
26
The Medical College proffers a number of proposed facts dedicated to
Attachmate’s business model. (Docket #90, Ex. 2 ¶¶ 13-15; 42). Without commenting
on the propriety of Attachmate’s profit model and employee compensation
methods, the Court finds any discussion of these facts irrelevant to the issues
presented.
Page 25 of 45
“must set forth specific facts showing that there is a genuine issue for trial.”
Fed. R. Civ. P. 56(e).
“Where…the movant is seeking summary judgment on a claim as to
which it bears the burden of proof, it must lay out the elements of the claim,
cite the facts it believes satisfies these elements, and demonstrate why the
record is so one-sided as to rule out the prospect of a finding in favor of the
non-movant on the claims.” Hotel 71 Mezz, 778 F.3d at 601. In analyzing
whether summary judgment should be granted, a court must draw all
reasonable inferences from the materials before it in favor of the non-moving
party. Id. When a court denies a motion for summary judgment, it “reflects
the court’s judgment that one or more material facts are disputed or that the
facts relied on by the motion do not entitle the movant to judgment as a
matter of law.” Id. at 602.
2.3
Analysis
Both parties have filed summary judgment motions. (Docket #41, 46).
On the one hand, the Medical College asks this Court to enter summary
judgment in its favor with respect to: (1) Attachmate’s breach of contract
claim; (2) Attachmate’s copyright infringement claim; and (3) its own claim
that Attachmate breached the implied covenant of good faith and fair
dealing. (Docket #46). On the other hand, Attachmate asks this Court to enter
partial summary judgment in its favor with respect to: (1) liability for its
breach of contract claim; and (2) the Medical College’s claim for breach of the
implied covenant of good faith and fair dealing. (Docket #41). The Court will
address the parties’ arguments on a claim-by-claim basis.
Page 26 of 45
2.3.1
Breach of Contract
The crux of this case is Attachmate’s breach of contract claim. The
Court will begin by addressing this claim first.
2.3.1.1 Washington Contract Law
The parties do not dispute that Washington contract law governs.
(Docket #111, Ex. 2 ¶ 16). Under Washington law, “[t]he elements of a breach
of contract claim are: (1) the existence of a valid contract, (2) breach of that
contract, and (3) damages resulting from the breach.” Karpenski v. Am. Gen.
Life Companies, LLC, 999 F. Supp. 2d 1235, 1250 (W.D. Wash. 2014). “When
interpreting a contract, [a court’s] primary objective is to discern the parties’
intent.” Wm. Dickson Co. v. Pierce Cty., 128 Wash. App. 488, 493, 116 P.3d 409,
412 (2005). “Unilateral or subjective purposes and intentions about the
meanings of what is written do not constitute evidence of the parties’
intentions.” Lynott v. Nat'l Union Fire Ins. Co., 123 Wash.2d 678, 684, 871 P.2d
146 (1994). Courts are to give undefined contract terms their “‘plain,
ordinary, and popular’” meaning. Kitsap County v. Allstate Ins. Co., 136
Wash.2d 567, 576, 964 P.2d 1173 (1998) (quoting Boeing Co. v. Aetna Cas. &
Sur. Co., 113 Wash. 2d 869, 877, 784 P.2d 507 (1990)).“Whether a contract is
ambiguous and the legal effect of a contract are, in general, questions of law.”
Brown v. Hereford, 163 Wash. App. 1015, 2011 WL 3688969, *3 (2011).
Ambiguity exists in a contract where two or more reasonable interpretations
are possible. Wm. Dickson Co., 128 Wash. App. at 493. “But a contract is not
ambiguous simply because the parties suggest opposing meanings.” Id.
Page 27 of 45
2.3.1.2 Breach of Contract Analysis27
Attachmate argues that the Medical College has breached the
Reflection 10 EULA28—which governs the Reflection X 10, Reflection for
UNIX and OpenVMS 10, Reflection for IBM 10, and Reflection for HP 10
programs—in two respects. (Docket #42 at 9-11). First, Attachmate claims
that the Medical College breached the EULA by installing certain Reflection
programs contrary to that which is allegedly permitted by Section 1 of the
agreement. (Docket #42 at 9-11). Second, Attachmate argues that the Medical
College failed to “implement internal safeguards to prevent unauthorized
copying, distribution, or use” of Reflection X 10, which is purportedly
required by Section 4 of the EULA (Docket #42 at 9-11).
27
The parties do not dispute the validity of the EULA. Moreover, in light of
the large number of disputed facts regarding damages, the Court’s analysis will
focus exclusively on the question of breach.
28
The Court will hereinafter reference the Reflection 10 EULA as “the
EULA” or “Reflection 10 EULA” interchangeably.
Page 28 of 45
The Medical College rejects Attachmate’s arguments.29 (See generally
Docket #90, Ex. 1). First, the Medical College argues that regardless of how
many times it may have installed Reflection software, the Medical College’s
actions did not breach the Reflection 10 EULA because the contract creates
only a user-based obligation. (See Docket #90, Ex. 1 at 13-21) (“Section 1 of the
EULA instructs the licensee to determine how many licenses will be needed
based upon how the ‘users’ will actually use the software.”) (emphasis
added). Under this theory, the Medical College argues that it does not breach
the EULA because its use of Reflection is in line with the amount of
Reflection licenses that it owns. (Docket #90, Ex. 1 at 17-20). Second, the
Medical College argues that its GE/IDX safeguards prevented unauthorized
copying, distribution, or use of Reflection software. (Docket #90, Ex. 1 at
17-18).
29
The Medical College argues (by implication) in its responses to
Attachmate’s proposed findings of fact that it might not have accepted the terms of
the EULA.(See Docket #111, Ex. 2 ¶ 15) (“Attachmate has produced no evidence that
the College accepted the terms of the Reflection 10 SLA….”). The Court will not
address this issue for two reasons. First, the Medical College’s briefs do not argue
that the contract claim fails on the basis of the Medical College’s purported failure
to accept the contract. Any argument not raised in the Medical College’s brief is
waived. See Havoco of Am., Ltd. v. Sumitomo Corp. of Am., 971 F.2d 1332, 1336 (7th Cir.
1992). Second, Attachmate represents that the Reflection 10 EULA is a “click
through” agreement, i.e., the licensee must click through and accept its terms before
installation. (Docket #60 at 10 n.8); see also Specht v. Netscape Comms. Corp., 306 F.3d
17, 22 (2d Cir. 2002) (explaining that a click-wrap agreement “presents the user with
a message on his or her computer screen, requiring that the user manifest his or her
assent to the terms of the…agreement by clicking on an icon. The product cannot
be obtained or used unless and until the icon is clicked.”). And, click-through
agreements are valid forms of contracting. See, e.g., F.T.C. v. Cleverlink Trading Ltd.,
No. 05-CV-2889, 2006 WL 3106448, at *6 (N.D. Ill. Oct. 26, 2006) (“The fact that the
acceptance may have come electronically in the form of a click in a box is
analytically meaningless, as all the cases have held.”) (citing Register.com, Inc. v.
Verio, Inc., 356 F.3d 393, 403 (2nd Cir. 2004)).
Page 29 of 45
The Court agrees that the Medical College is liable to Attachmate
under Section 1 of the EULA based on the number of Reflection installations
that the Medical College found on its computers. The Court will, accordingly,
grant Attachmate’s motion for partial summary judgment with respect to this
theory of breach. However, because a dispute of fact exists with respect to
whether the Medical College implemented sufficient internal safeguards
under Section 4 of the EULA, that theory of breach must proceed to trial.
The Reflection 10 EULA imposes various obligations on licensees.
First, Section 1 prescribes the scope of permissible conduct under the license.
(Docket #90, Ex. 2 ¶ 102). This Section begins by broadly defining the term
“run.” (Docket #90, Ex. 2 ¶ 102). Specifically, the agreement states that, “[t]his
EULA grants you the following rights: You may install, use, access, display,
run, or otherwise interact with (‘Run’) one copy of the Software on a single
computer or workstation (‘Computer’).” (Docket #90, Ex. 2 ¶ 102) (emphasis
added). Further, the EULA provides that a licensee “may store or install a
copy of the Software on a storage device, such as a network server(s), used
only to allow your other Computers to Run the Software over an internal
network.” (Docket #90, Ex. 2 ¶ 102). However, in any case, the licensee “must
acquire and dedicate a license for each Computer on which the Software is
Run,” where “run” is defined to mean “install, use, access, display, run, or
otherwise interact with” the Software. (Docket #90, Ex. 2 ¶ 102) (emphasis
added).
Thus, putting the EULA’s language together, it is clear that a licensee
must purchase a license for each “Computer” in which the Reflection
software is either installed, used, accessed, displayed, run, or otherwise
interacted with by the licensee. (Docket #90, Ex. 2 ¶ 102). This meaning
Page 30 of 45
comports with the plain and ordinary terms of the contract, particularly in
light of the disjunctive “or” employed within the definition of “run.” See
CONJUNCTIVE/DISJUNCTIVE CANON, BLACK'S LAW DICTIONARY (10th ed.
2014) (“[O]r joins a disjunctive list to create alternatives.”); see also Kitsap
County, 136 Wash.2d at 576 (explaining that ordinary terms must be given
their plain meaning).
With this interpretation in mind, the Court concludes that the Medical
College has breached Section 1 of the Reflection EULA. This conclusion is
based on the simple comparison of how many licenses the Medical College
has purchased with the number of times the Medical College has “run” the
Reflection software, as that term is defined in the EULA. On the one hand,
the Medical College owns: (1) 620 licenses for Reflection for UNIX and
OpenVMS 10; (2) 7 licenses for Refection X 10; (3) no licenses for Reflection
for HP 10; and (4) no licenses for Reflection for IBM 10. (Docket #111, Ex. 2
¶¶ 10-13). On the other hand, Attachmate’s audit revealed that: (1) Reflection
X 10 was over-deployed 2,498 times on the Medical College’s computers; (2)
Reflection for IBM 10 was installed on one computer; and (3) Reflection for
HP 10 was installed on one computer. (Docket #111, Ex. 2 ¶¶ 39-42). Though
the Medical College disputes the validity of the audit, the Medical College’s
own investigation found at least 1,280 installations of Reflection for UNIX
and OpenVMS 10 or Reflection X 10, depending on the characterizations of
those products. (Docket #111, Ex. 2 ¶ 44). Thus, the Medical College
undisputedly “ran” Reflection software, of at least three varieties, in excess
of that for which they owned valid licenses.
Page 31 of 45
As referenced above, the parties actively dispute how to characterize
Reflection X 10, i.e., whether or not Reflection for UNIX and OpenVMS 10 is
a component of Reflection X 10 or a stand alone product. (See supra, Part 2.1).
That dispute, however, is irrelevant to the Court’s breach analysis. On the
one hand, if, as the Medical College proposes, these programs are distinct
products, the Medical College is required to “acquire and dedicate” a license
for: (1) each installation of Reflection for UNIX and OpenVMS 10; (2) each
installation of Reflection X 10; and (3) each “Computer” that uses, accesses,
displays, or runs Reflection for UNIX and OpenVMS 10 and/or Reflection X
10. (See Docket #90, Ex. 2 ¶ 102). On the other hand, if Reflection for UNIX
and OpenVMS 10 is a component of a Reflection X 10, then the 620 licenses
that the Medical College already owns for that product may be used to offset
the number of deficient licenses.30 In either case, however, the Medical
30
To be clear, the Court expresses no opinion as to whose investigation,
Attachmate’s or the Medical College’s, is correct with respect to the total number
of installations of Reflection X 10 and/or Reflection for UNIX and OpenVMS 10.
Page 32 of 45
College has undisputedly installed at least 660 Reflection programs for which
they have no license.31
The Medical College, in a futile search for ambiguity, argues that it
“operate[s] within the spirit and the letter” of the parties’ agreement because
the EULA creates a user-based obligation. (Docket #90, Ex. 1 at 2, 17-20). In
other words, the Medical College argues that Attachmate “is trying to rewrite the” EULA by failing to account for how the Medical College actually
uses Reflection software. (Docket #90, Ex. 1 at 1, 13-14, 17-20) (arguing that
the Medical College did not breach the EULA “because it: (1) purchased a
license for each user who used Reflection for [UNIX] and OpenVSM v. 10 to
access and use GE/IDX; [and] (2) did not use Reflection X v. 10”) (emphasis
added).
The Medical College’s user-based interpretation is unreasonable and
flawed for two reasons. First, the argument defies a plain and natural reading
of the EULA’s text, which ties the obligation of “acquir[ing] and dedicat[ing]”
31
The Court derives this figure from the following equation:
1,280 - 620 - 7 = 658 + 2 = 660.
The 1,280 figure represents the minimum number of Reflection X 10 and/or
Reflection for UNIX and OpenVMS 10 installations found by the Medical College.
(Docket #111, Ex. 2 ¶ 44. The 620 figure represents the number of licenses that the
Medical College owns for Reflection for UNIX and OpenVMS 10. (Docket #111, Ex.
2 ¶ 10). And, the 7 figure represents the number of licenses that the Medical College
owns for Reflection X 10. (Docket #111, Ex. 2 ¶ 11). The final addition of 2
corresponds to the Reflection for HP 10 and Reflection for IBM 10 installations.
(Docket #111, Ex. 2 ¶¶ 41-42). The Court’s calculation assumes, in a light most
favorable to the Medical College, that all of the Medical College’s Reflection X 10
licenses and its Reflection for UNIX and OpenVMS 10 licenses may be used to offset
its license shortfall, which is, of course a determination that will be made at trial.
However, this calculation underscores the Court’s conclusion that—under the
Court’s interpretation of the EULA—the undisputed facts show that the Medical
College is “running” more Reflection software than that which it is has license to.
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licenses to how the licensee “runs” the software. (Docket #90, Ex. 2 ¶ 102)
(defining “run” expansively to include installation). Second, the Medical
College’s interpretation over-reads the language in the EULA’s “roaming
user” provision without having shown that its employees meet the
requirements of that type of “user.”32 (Docket #90, Ex. 1 at 18; see also Docket
#90, Ex. 2 ¶ 102) (explaining that the “roaming user” provision only applies
to those users who “establish[] a Roaming User Profile setting in Windows
NT or Windows 2000.”) The Medical College presents no evidence to show
that it has established roaming user profiles so as to justify its license shortfall
provision.33
32
The “roaming user” provision of Section 1 provides:
If you deploy WRQ Software to an end user by establishing a Roaming
User Profile setting in Windows NT or Windows 2000, you must acquire
and dedicate a license for each end user who will access the WRQ
Software under a Roaming User Profile (“Roaming User”). A
Roaming User who is licensed to use the Software may install and
use the Software on multiple desktops, so long as the Roaming User
uses only one copy of the Software at one time. You must ensure
that copies of the Software for use by Roaming Users on desktops
outside your control are destroyed when a Roaming User’s right to
use the Software is terminated.
(Docket #90, Ex. 2 ¶ 102) (emphasis added).
33
The Medical College also presents no argument that the “primary user”
provision in the EULA is somehow applicable to its breach. (See Docket #90, Ex. 2
¶ 102) (“The primary user of the Computer on which the Software Runs may make
a second copy for his or her exclusive use on a home or portable Computer.”) (emphasis
added).
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The Medical College’s argument that it did not “use” Reflection X 10
because that program is allegedly incompatible with the GE/IDX billing
software is also rendered irrelevant by the Court’s interpretation of the
EULA. That the Medical College does not “use” the software in question is
of no moment because the EULA obligates the Medical College to “acquire
and dedicate” a license for, among other things, each installation of
Reflection, regardless of whether the Medical College “uses” the software or
not. The Court simply cannot rewrite an unambiguous contract to
accommodate the Medical College’s “use” of Reflection. Cf. Lynott v. Nat'l
Union Fire Ins. Co., 123 Wash.2d at 684 (reasoning that “[u]nilateral or
subjective purposes and intentions” do not govern interpretation of an
unambiguous contract).
The Medical College’s final attack on Attachmate’s breach of contract
claim is directed towards Attachmate’s entitlement to damages. (Docket #90,
Ex. 1 at 22-25). Under the Medical College’s theory, Attachmate cannot
recover because: (1) the only remedy for the breach of the EULA is
termination; (2) Attachmate cannot prove actual damages because it “does
not track sales of Reflection software by product or version”; and (3) the
Medical College would not have entered into the agreement had it been
apprised of its need to purchase a license for each installation of the software.
(Docket #90, Ex. 1 at 22-24).
These arguments are unavailing. Though, as the Medical College
contends, “[c]ontract damages are ordinarily based on the injured party’s
expectation interest and are intended to give the injured party the benefit of
its bargain,” Panorama Vill. Homeowners Ass'n v. Golden Rule Roofing, Inc., 102
Wash. App. 422, 427, 10 P.3d 417, 421 (2000), the undisputed facts
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demonstrate that the Medical College has not complied with its license
obligations. Thus, Attachmate is entitled to the lost license fees that it
suffered as a natural result of that breach. See Educ. Logistics, Inc. v. Laidlaw
Transit, Inc., 583 F. Appx. 624, 625 (9th Cir. 2014) (finding that the plaintiff
was entitled to lost license fees as actual damages under license agreement),
cert. denied, 135 S. Ct. 1493 (2015). Moreover, although the parties dispute the
propriety of Attachmate’s license prices for the products in question, it will
be for the jury to determine whether these purported fees are reasonable and
appropriate given the facts of this case. (Cf. Docket #61 ¶ 117-118; Docket
#102, Ex. 1 ¶ 44. Finally, the Medical College’s one-sentence reference to the
RESTATEMENT (SECOND )
OF
CONTRACTS § 211(3) is unpersuasive and
unsupported. (Docket #90, Ex. 1 at 24 n.11). The Medical College has put
forth no evidence to suggest why Attachmate would have had reason to
doubt the Medical College’s assent to its license terms. Even if there are free
or low cost alternatives to Attachmate’s terminal emulation software, the
Medical College fails to explain why, in light of that fact, it continued to
purchase Attachmate’s software in 2014. The Court simply has no basis from
which to infer that Attachmate and the Medical College, two sophisticated
entities, had anything but their eyes wide open when entering into their
license agreements.
Secondly, Attachmate also argues that the Medical College breached
Section 4 of the Reflection 10 EULA by failing to “implement internal
safeguards to prevent any unauthorized copying, distribution, or use of”
Reflection software. (Docket #42 at 9). The Medical College responds that it
did implement internal safeguards for Reflection 10 by virtue of the fact that:
(1) GE/IDX was not compatible with Reflection X; (2) only credentialed
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GE/IDX users could use Reflection for UNIX and OpenVMS 10; and (3) the
location and administrator rights protecting the Reflection installation file
were sufficient to prevent against unauthorized copying, distribution, or use
of the software. (Docket #90, Ex. 1 at 20-21; Docket #111, Ex. 1 at 24-25).
The Medical College’s first two arguments are unpersuasive and,
unsurprisingly, focused on “use” rather than “copying and distribution,”
which are equally the subject of Section 4 of the EULA. First, the Medical
College fails to explain how the purported inability of GE/IDX to work with
Reflection X 10 affects its responsibility to prevent unauthorized “copying or
distribution” of the software. Likewise, the fact that Medical College
employees had credentials to operate GE/IDX does not act to prevent
“copying or distribution” of the Reflection software, which Section 4 is
designed to protect.
However, the fact that the Medical College: (1) stored the Reflection
installation file in a location of which most people were unaware; and (2)
prevented unfettered installation of the programs by certain “administrator
rights,” does create a dispute of fact. (Docket #111, Ex. 1 at 25). Based on this
information, the Court simply cannot determine the extent to which
employees could “install” the Reflection program onto employees’
computers. (Docket #111, Ex. 2 ¶ 29). Moreover, the Court remains unclear
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how these administrator rights specifically affected “copying, distribution,
or use.” This issue must, therefore, be resolved at trial.34
2.3.1.3 Conclusion
In sum, the Court concludes that, pursuant to Section 1 of the EULA,
the Medical College was required to “acquire and dedicate a license for each
Computer on which the [Reflection] Software [ha]s [been] Run,” where “run”
means to “install, use, access, display, run, or otherwise interact with…one
copy of the Software on a single computer or workstation (‘Computer’).”
(Docket #90, Ex. 2 ¶ 102). The clear import of this language is that, barring
any roaming user policy or personal user exception, the Medical College was
required to purchase a license for each installation of Reflection software.
Thus, because the Medical College installed more Reflection software than
which it had license to, the Medical College has breached Section 1 of the
Reflection 10 EULA, and the appropriate damage award for that claim must
be determined at trial.
On the other hand, the Court cannot decide whether the Medical
College breached Section 4 of the Reflection 10 EULA by failing to implement
internal safeguards to prevent unauthorized copying, distribution, or use of
34
Finally, the Medical College argues, in its opposition to Attachmate’s
motion for partial summary judgment, that the statute of limitations bars any
breach of contract that it committed with respect to the Reflection for HP 10 and
Reflection for IBM 10. (Docket #111, Ex. 1 at 28). A statute of limitations defense is
an affirmative defense, which the Medical College failed to raise in its answer.
(Docket #38). The Medical College has raised this issue too late, and, in any case,
has failed to meet its burden to prove that defense. See Dep't of Revenue v. Puget
Sound Power & Light Co., 103 Wash.2d 501, 504–05, 694 P.2d 7 (1985) (holding that
a party who fails to assert a statute of limitations affirmative defense in its answer
or amended answer waives that defense unless it is central to the litigation); (see also
Docket #111, Ex. 3 ¶¶ 91-92) (explaining that the Medical College does not know
how or when it installed these two programs).
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Reflection software. Thus, liability and damages for that claim must also be
resolved at trial.
2.3.2
Copyright Infringement
“To establish copyright infringement, one must prove two elements:
(1) ownership of a valid copyright, and (2) copying of constituent elements
of the work that are original.” JCW Investments, Inc. v. Novelty, Inc., 482 F.3d
910, 914 (7th Cir. 2007) (internal citations omitted).
The parties do not dispute that Attachmate owns valid copyrights to
its Reflection 10 software. (Docket #61 ¶¶ 139, 141, 143, 145). The Medical
College argues, however, that, in light of its status as a non-exclusive
licensee, it is entitled to summary judgment with respect to Attachmate’s
copyright claim. (Docket #46) (citing Graham v. James, 144 F.3d 229, 236 (2d
Cir. 1998)) (“A copyright owner who grants a nonexclusive license to use his
copyrighted material waives his right to sue the licensee for copyright
infringement.”) (internal citations omitted). Attachmate argues that this
argument fails because: (1) from a procedural stand point, the Medical
College failed to raise this affirmative defense in its answer; and (2) from a
substantive perspective, the Medical College exceeded the scope of its nonexclusive licenses. (Docket #60 at 19).
First, the Court finds that the Medical College’s declaratory judgment
claim of non-infringement placed Attachmate on sufficient notice that the
Medical College would be defending any copyright claim with its licenses.
(See Docket #1 ¶ 33) (explaining that “[a]ny claims for copyright infringement
brought by Attachmate are barred, as [the Medical College] is licenced to use
the works…at issue”); Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286,
Page 39 of 45
1294 (7th Cir. 1989) (“Affirmative defenses will be stricken only when they
are insufficient on the face of the pleadings.”).
Second, the Court concludes that an award of summary judgment to
the Medical College on this copyright claim would be inappropriate in light
of the Court’s holding that the Medical College breached Section 1 of the
Reflection 10 license agreement. See I.A.E., Inc. v. Shaver, 74 F.3d 768, 775 (7th
Cir. 1996) (A “licensee violates the copyright by exceeding the scope of this
license”); S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1087 (9th Cir. 1989) (“A
licensee infringes the owner's copyright if its use exceeds the scope of its
license.”).
Thus, the question of whether the Medical College infringed
Attachmate’s copyrights, and what damages Attachmate may be entitled to
in light of a potential infringement, must be resolved at trial.35
2.3.2
Implied Covenant of Good Faith and Fair Dealing
The Medical Colleges claims that Attachmate violated the implied
covenant of good faith and fair dealing by “misrepresent[ing] the EULA in
an effort to coerce” the purchase of additional licenses “or face expensive
litigation.” (Docket #90, Ex. 1 at 29). Moreover, the Medical College argues
that Attachmate did not have authority to demand that the Medical College
purchase additional licenses, much less within a 30-day time frame at the
price quoted by Attachmate. (Docket #90, Ex. 1 at 29; Docket #102, Ex. 1 at
14). In this sense, the Medical College argues that Attachmate’s “extreme
35
The Medical College argues that Attachmate cannot prove statutory or
actual damages with respect to its copyright infringement claim. (Docket #102, Ex. 1
at 13-14). However, as discussed above, there are multiple disputes of fact as it
relates to actual damages and, as such, the Court finds that the resolution of these
damages arguments is more appropriately left for trial.
Page 40 of 45
position based on an inherently unreasonable interpretation of the EULA”
frustrated the purchase of the license agreement. (Docket #90, Ex. 1 at 29).
Attachmate responds that the Medical College’s claim is vague and
amorphous and cannot stand as a matter of law. (Docket #42 at 11-12).
Specifically, Attachmate argues that the Medical College’s claim is not
associated with any contractual obligation imposed by the EULA and instead
attempts to punish Attachmate for identifying a breach and negotiating its
resolution. (Docket #42 at 11-12). Moreover, Attachmate claims that the
Medical College has suffered no damage as a result of the alleged breach of
the implied covenant. (Docket #60 at 21).
The Court concludes that the Medical College’s claim does not tie
Attachmate’s conduct to any contractual duty set forth in the EULA and,
therefore, the Medical College’s free-floating good faith claim must fail as a
matter of law.
Under Washington law, the implied covenant of good faith and fair
dealing applies to all contracts. See Badgett v. Sec. State Bank, 116 Wash. 2d
563, 569, 807 P.2d 356, 360 (1991). Moreover, this duty “arises when one party
has discretionary authority to determine a future contract term.” Rekhter v.
State, Dep't of Soc. & Health Servs., 180 Wash. 2d 102, 112, 323 P.3d 1036, 1041
(2014). In essence, this doctrine ensures that parties “cooperate with each
other so that each may obtain the full benefit of performance.” Badgett, 116
Wash. 2d at 569.
However, “[t]he implied covenant of good faith and fair dealing
cannot add or contradict express contract terms and does not impose a
free-floating obligation of good faith on the parties.” Hard 2 Find Accessories,
Inc. v. Amazon.com, Inc., 58 F. Supp. 3d 1166, 1173 (W.D. Wash. 2014). Instead
Page 41 of 45
of “inject[ing] substantive terms into the parties’ contract,” the duty “requires
only that the parties perform in good faith the obligations imposed by their
agreement.” See Badgett, 116 Wash. 2d at 569; Johnson v. Yousoofian, 84
Wash.App. 755, 762, 930 P.2d 921 (1996) (“The implied duty of good faith is
derivative, in that it applies to the performance of specific contract
obligations. If there is no contractual duty, there is nothing that must be
performed in good faith.”) (internal citations omitted). In this sense, the
implied covenant is not “a free-floating duty of good faith unattached to the
underlying legal document.“ Badgett, 116 Wash. 2d at 570.
The Medical College’s theory of breach relates to the manner in which
Attachmate conducted license negotiations following the Reflection software
audit. (Docket #90, Ex. 1 at 30). The problem with the Medical College’s
claim, however, is that the license agreements between the parties do not
contain any terms related to how license prices are to be determined and/or
how the parties are obligated to resolve compliance disputes. Unlike Rekhter,
where the plaintiffs’ contracts explicitly gave the defendants discretion to
determine future payment terms, the Medical College does not point the
Court to a specific contractual obligation that Attachmate failed to perform
in good faith. Rekhter, 180 Wash. 2d at 113 (2014) (explaining that the
defendant “ha[d] a specific contractual obligation to determine and pay
providers for hours authorized in the service plans”); see also Fagerstrom v.
Amazon.com, Inc., No. 15-CV-96-BAS-DHB, 2015 WL 6393948, at *3 (S.D. Cal.
Oct. 21, 2015) (finding, under Washington law, that a contract provision
which stated that the defendant “reserve[d] the right to make changes to our
site, policies, Service Terms, and these Conditions of Use at any time” was
discretionary); McDermott v. Avaya, Inc., No. C13-6050 BHS, 2015 WL
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1650291, at *6 (W.D. Wash. Apr. 14, 2015) (“It is undisputed that Avaya
reserved the right to amend commissions ‘solely at its discretion.’”); Goodyear
Tire & Rubber Co. v. Whiteman Tire, Inc., 86 Wash. App. 732, 741, 935 P.2d 628,
633 (1997) (“[T]he contract provision reserving Goodyear’s right to sell in
Whiteman’s trade area is not stated by reference to a certain context. It is
unconditional, and, does not call for the exercise of discretion and the
consequent implied covenant to exercise that discretion in good faith.”). The
Court cannot read discretion into a contract term that does not exist. Cf.
Badgett, 116 Wash.2d at 570 (“As a matter of law, there cannot be a breach of
the duty of good faith when a party simply stands on its rights to require
performance of a contract according to its terms.”). Without any underlying
obligation—discretionary or otherwise—from which to base its allegations,
the Medical College simply cannot proceed as a matter of law on an implied
covenant of good faith and fair dealing claim.
2.4
Conclusion
The undisputed facts reveal that the Medical College has breached
Section 1 of the Reflection 10 EULA by installing excessive copies for that
software without having licenses to do so. These installations constitute a
breach of contract, for which damages will be determined at trial. In light of
this conclusion, both liability and damages for Attachmate’s copyright claim
must likewise be resolved by a jury. However, the Court cannot say as a
matter of law that the Medical College breached Section 4 of the EULA and,
thus, the parties must resolve both liability and damages for that claim at
trial as well. Due to the fact that the Medical College’s implied covenant of
good faith and fair dealing claim is not tied to a contractual duty imposed on
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Attachmate by the parties’ license agreements, that claim fails as a matter of
law.
3.
CONCLUSION
To conclude, the Court will grant Attachmate’s motion to dismiss the
Medical College’s WDTPA claim (Docket #28) because the Medical College
has a “particular relationship” with Attachmate in light of the parties’
licensing agreements for Reflection software. See Wis. Stat. Ann. § 100.18.
Moreover, the Court will grant Attachmate’s motion for partial summary
judgment as follows: (1) resolving liability on its claim for contract liability
under Section 1 of the EULA in its favor; and (2) dismissing the Medical
College’s claim for a breach of the implied covenant of good faith and fair
dealing. (Docket #41). The Court will not, however, grant Attachmate’s
motion for partial summary judgment with respect to liability under Section
4 of the EULA. (Docket #41). Finally, because this Court concludes that the
Medical College breached Section 1 of the Reflection 10 license agreements,
the Court will deny the Medical College’s motion for summary judgment
with respect to Attachmate’s copyright claim. (Docket #46).
This leaves open the following issues for resolution at trial: (1)
whether the Medical College breached its duty to implement internal
safeguards to prevent unauthorized copying, distribution, or use of
Reflection software under Section 4 of the EULA (and the damages flowing
therefrom); (2) the determination of an appropriate damage award for the
Medical College’s breach of Section 1 of the EULA; and (3) liability and
damages with respect to Attachmate’s copyright claim.
Accordingly,
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IT IS ORDERED that Attachmate’s motion to dismiss the Medical
College’s WDTPA claim (Docket #28) be the same is hereby GRANTED;
IT IS FURTHER ORDERED that Attachmate’s motion for partial
summary judgment (Docket #41) be the same is hereby GRANTED in part
with respect to liability under Section 1 of the EULA and DENIED in part
with respect to liability under Section 4 of the EULA; and
IT IS FURTHER ORDERED that the Medical College’s motion for
summary judgment (Docket #46) be the same is hereby DENIED.
Dated at Milwaukee, Wisconsin, this 19th day of February, 2016.
BY THE COURT:
J.P. Stadtmueller
U.S. District Judge
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