Asset Marketing Systems, Inc. v. Gagnon

542 F.3d 748, 88 U.S.P.Q. 2d (BNA) 1343, 2008 U.S. App. LEXIS 19179, 2008 WL 4138181
CourtCourt of Appeals for the Ninth Circuit
DecidedSeptember 9, 2008
Docket07-55217
StatusPublished
Cited by64 cases

This text of 542 F.3d 748 (Asset Marketing Systems, Inc. v. Gagnon) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Asset Marketing Systems, Inc. v. Gagnon, 542 F.3d 748, 88 U.S.P.Q. 2d (BNA) 1343, 2008 U.S. App. LEXIS 19179, 2008 WL 4138181 (9th Cir. 2008).

Opinion

MILAN D. SMITH, JR., Circuit Judge:

Kevin Gagnon, doing business as Mister Computer (Gagnon), appeals from a grant of summary judgment in favor of Asset Marketing Systems, Inc. (AMS). Gagnon contends that AMS infringed his copyright in six computer programs that he wrote for AMS by continuing to use and modify them without his consent, and that AMS misappropriated trade secrets contained in the programs’ source code. Gagnon also challenges the denial of his ex parte application for an order denying or continuing summary judgment. The district court concluded that Gagnon had granted AMS an unlimited, non-exclusive, implied license to use, modify, and retain the source code of the programs that defeated his copyright infringement and trade secret misappropriation claims. The district court also denied Gagnon’s ex parte application. We have jurisdiction under 28 U.S.C. § 1291, and we affirm the district court.

FACTUAL AND PROCEDURAL BACKGROUND

A. AMS and Gagnon’s Relationship

AMS is a field marketing organization offering sales and marketing support to insurance marketing entities. From May 1999 to September 2003, Gagnon was an at-will, independent contractor for AMS, hired to assist with its information technology needs. Subsequently, Gagnon was asked to develop custom software for AMS. AMS was Gagnon’s largest client, accounting for 98% of his business. Jay Akerstein, a partner at AMS who later became the Chief Operating Officer, was Gagnon’s primary contact. Over the course of their four-year relationship, AMS paid Gagnon over $2 million, $250,000 of which was for custom software development and computer classes. Gagnon developed six computer programs for AMS.

In May 2000, AMS and Gagnon entered a Technical Services Agreement (TSA), which was scheduled to expire on April 30, 2001. The TSA, printed on Mister Computer letterhead, set forth Gagnon’s fees and the services to be provided. The services included “Custom Application Programming — Consultant will provide Contractor with specific add-on products to enhance Contractor’s current in-house database application,” and mentioned nothing about a license. The TSA was not renewed, though the relationship continued.

AMS claims that on June 12, 2002, Gag-non signed a Vendor Nondisclosure Agreement (NDA). 1 The NDA would have given AMS ownership of all intellectual property developed for AMS by Gagnon. Gagnon claims that the document is a forgery and that his signature cannot be authenticated.

In June 2003, Gagnon proposed that AMS execute an Outside Vendor Agreement (OVA). The OVA included a Proprietary Rights clause providing:

Client agrees that all designs, plans, specifications, drawings, inventions, processes, and other information or items produced by Contractor while performing services under this agreement will be the property of Contractor and will be licensed 1 to Client on a non-exclusive *751 basis as will any copyrights, patents, or trademarks obtained by Contractor while performing services under this agreement. On request and at Contractor’s expense, Client agrees to help Contractor obtain patents and copyrights for any new developments. This includes providing data, plans, specifications, descriptions, documentation, and other information, as well as assisting Contractor in completing any required application or registration. Any source code or intellectual property will remain the property of Contractor. Trademarks, service marks, or any items identifying said Company shall remain the Company’s said property. Contractor will allow Company non exclusive, unlimited licensing of software developed for Company.

Akerstein declined to execute the OVA, but countered with a redlined version of the OVA, which substantially rewrote the Proprietary Rights clause to read:

Contractor agrees that all designs, plans, specifications, drawings, inventions, processes, and other information or items produced by Contractor while performing services under this agreement will be the sole property of Client. Any source code or intellectual property agreed to and documented as Contractor’s will remain the property of Contractor.

By the end of June 2003, AMS had decided to terminate Gagnon’s services. AMS extended an employment offer to Gagnon, but he declined to accept the offer. AMS and Gagnon then discussed an exit strategy, and by late July, the parties had set a target exit date of September 15, 2003.

In August 2003, Gagnon responded to Akerstein’s redlined OVA draft with a letter asserting that his “position has always been that Asset Marketing Systems shall be entitled to unlimited software licensing as long as my company had a business relationship with Asset Marketing Systems.” The parties never executed the OVA.

In a letter to AMS dated September 18, 2003, Gagnon demanded $1.75 million for AMS to have the right to continue to use the programs and $2 million for Gagnon’s agreement not to sell or disclose the programs to AMS’s competitors.

In a letter dated September 23, 2003, AMS terminated its relationship with Gag-non. According to AMS, a consultant identified numerous problems with Gag-non’s work. It also stated:

Recently, we had discussed employee and intellectual property issues which have yet to be resolved. Despite the foregoing, I learned that we did not have copies of the source code for the software we developed and that copies of our SalesLogix software and our entire database may be maintained by you and your agents offsite.

The letter then demanded:

In connection with that separation, you must immediately provide any and all copies of the source code for all software developed by and on behalf of Asset Marketing Systems immediately. You are not authorized to utilize that software which we believe is owned and all copyrights belong to Asset Marketing Systems. Furthermore, despite your claimed ownership in that copyright, we believe that Asset Marketing Systems’ trade secrets are embedded and utilized throughout that software which would preclude use by you as well.
We also demand that you return to us any copies of the SalesLogix software or Asset Marketing databases, programs or other materials that may have come into your possession during our relationship.

*752 Also on September 23, seven of Gag-non’s twelve employees resigned and were hired by AMS to provide directly to AMS the same services they previously provided to AMS through Gagnon. According to AMS, Gagnon’s former employees approached AMS for jobs, and AMS never solicited them. Gagnon disputes this. Each employee had signed an “Employee’s Work Agreement” with Gagnon. The agreement specified that the intellectual property arising out of or related to work performed for Gagnon was his property.

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542 F.3d 748, 88 U.S.P.Q. 2d (BNA) 1343, 2008 U.S. App. LEXIS 19179, 2008 WL 4138181, Counsel Stack Legal Research, https://law.counselstack.com/opinion/asset-marketing-systems-inc-v-gagnon-ca9-2008.