Atlantis Information Technology, Gmbh v. Ca, Inc.

485 F. Supp. 2d 224, 2007 U.S. Dist. LEXIS 31276, 2007 WL 1238716
CourtDistrict Court, E.D. New York
DecidedApril 30, 2007
Docket06-cv-3921 (ADS)(WDW)
StatusPublished
Cited by17 cases

This text of 485 F. Supp. 2d 224 (Atlantis Information Technology, Gmbh v. Ca, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Atlantis Information Technology, Gmbh v. Ca, Inc., 485 F. Supp. 2d 224, 2007 U.S. Dist. LEXIS 31276, 2007 WL 1238716 (E.D.N.Y. 2007).

Opinion

MEMORANDUM OF DECISION AND ORDER

SPATT, District Judge.

On August 14, 2006, Atlantis Information Technology, GmbH (the “Plaintiff’ or “Atlantis”) filed a complaint, and on August 21, 2006, filed an amended complaint against CA, Inc. (the “Defendant” or “CA”). The Plaintiff alleges that the Defendant breached a contract; violated the implied covenant of good faith and fair dealing; breached its fiduciary duty; fraudulently concealed information; infringed on the Plaintiffs copyright; and was unjustly enriched.

Currently pending before the Court is a motion by the Defendant, under Federal Rule of Civil Procedure (“Fed. R. Civ.P.”) 12(b)(6), to dismiss all claims in the amended complaint except count one, the breach of contract claim.

I. BACKGROUND

The following facts are taken from the Plaintiffs amended complaint. The Plaintiff, a German corporation, develops, licenses and maintains software products such as the E/NAT product. The E/NAT product provides an interface between a CA product, “Endevor,” and two other products produced by Atlantis, “NATURAL” and “PREDICT.” Atlantis owns copyrights and trademarks for the E/NAT product. The Defendant, a Delaware corporation with its principal place of business in New York, licenses software, such *228 as the E/NAT product, from the Plaintiff and distributes the software to its customers. The Defendant is one of the world’s largest providers of management software.

On February 28, 1997, Atlantis and CA entered into a written software license agreement (the “Agreement”), pursuant to which Atlantis agreed to license the E/NAT product to CA. Pursuant to the Agreement, CA is permitted to market, distribute and sublicense the E/NAT product throughout the world. CA agreed to pay license and maintenance fees (collectively “Royalties”) to Atlantis. Specifically, pursuant to the Agreement, CA is required to pay Atlantis 40% of the licensing revenues it receives and 50% of the maintenance fees it receives. The Agreement further provides that when CA sells or licenses the E/NAT product together with its own software, “bundling” the software, CA will pay Atlantis royalties based on a pro rata amount attributable to the E/NAT product. In addition, pursuant to the Agreement, CA may provide the E/NAT product to customers on a “test” installation basis for 120 days without paying Royalties to Atlantis. After the expiration of the 120 day “test” period, CA must identify the customer and pay Royalties to Atlantis.

Pursuant to the Agreement, CA is further required to provide Atlantis with quarterly revenue reports (the “Reports”) detailing its E/NAT product licensing activities. The Plaintiff claims that it trusts and relies on CA to provide accurate and truthful Reports because the licensing information is solely in CA’s possession and control. The Defendant is required to maintain accurate records of its licensing activities and, pursuant to the Agreement, Atlantis may audit CA’s records. If an audit reveals that CA understated its obligations to Atlantis by more than 10%, the Agreement requires CA to pay the costs of the audit. Atlantis contends that it “placed a special trust and confidence in CA throughout their relationship.” Atlantis also claims that it entrusts the E/NAT products to CA, and that, as a result of Atlantis’ trust, CA owes Atlantis a fiduciary duty to accurately disclose licensing activities and pay Royalties.

According to the amended complaint, throughout the parties’ relationship, they have had various disputes regarding the Agreement. As a result, the parties entered amendments to the Agreement (the “amendments”) on various occasions. After a dispute regarding whether CA should pay Royalties on “shelf licenses,” the parties executed a letter amendment pursuant to which CA agreed to pay an annual royalty of $100,000 relating to “shelf licenses.” Thereafter, the parties again amended the Agreement, redefining the Royalty formula and requiring CA to report the lengths of licensing terms and the types of machines for which the E/NAT product was licensed. Specifically, pursuant to these amendments, CA is required to pay an initial license fee of 34% of the list price, and subsequent to the initial license period, 50% of the aggregate maintenance renewal revenues.

Atlantis contends that CA failed to pay Royalties in compliance with the Agreement. Atlantis claims that in January 2004, it discovered that CA had submitted various false Reports, concealing customers and thereby, avoiding paying Royalties. CA further failed to completely report licensing activities for some customers. Following negotiations, in December 2004, the parties entered into a settlement agreement (the “Settlement”) and a third amendment to the Agreement. Pursuant to the Settlement, CA agreed to pay Atlantis a sum of money and, pursuant to the third amendment to the Agreement, CA was again required to *229 pay license and maintenance fees of 34% of the list price regardless of the subli-cense fees it receives.

The Plaintiff alleges that on January 15, 2005, CA issued a Report which failed to provide the information required by the Agreement and amendments. The Plaintiff contends that, despite its requests that CA comply, CA continued to provide Reports that failed to comply with the parties’ contractual obligations. Further, the Plaintiff alleges that the post-Settlement Reports revealed numerous unreported and underreported customers for which CA had failed to pay Royalties. As a result of the alleged discrepancies in the Reports, Atlantis demanded an audit of CA’s licensing activities. The audit revealed numerous problems with the Royalty payments and various violations of the Agreement, the Settlement and amendments.

Atlantis alleges that CA breached the Agreement, the Settlement and the amendments by failing to provide accurate Reports; report all test installations; and pay appropriate Royalties. Atlantis further contends that the Agreement contains an implied covenant of good faith and fair dealing and that CA also breached this covenant by concealing information that should have been provided pursuant to the Agreement; failing to pay Royalties; and providing false Reports. In addition, Atlantis claims that CA breached a fiduciary duty that arose from the parties’ history of dealings; CA’s superior knowledge of licensing activities; and Atlantis’ entrusting of its product to CA. Atlantis claims that this fiduciary duty was breached by CA’s failure to provide accurate Reports; disclose licensing activities; and pay Royalties. The Plaintiff further contends that CA fraudulently concealed customers and committed fraud by providing false and misleading Reports. Further, Atlantis claims that CA is infringing on its copyright by distributing the E/NAT product without paying Royalties. Also, CA is being unjustly enriched by failing to pay proper Royalties on E/NAT products that are sold “bundled” to CA’s own products. It is undisputed that the Agreement and contracts are still in effect and have not been terminated or rescinded. The Agreement and amendments are attached to the amended complaint.

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Bluebook (online)
485 F. Supp. 2d 224, 2007 U.S. Dist. LEXIS 31276, 2007 WL 1238716, Counsel Stack Legal Research, https://law.counselstack.com/opinion/atlantis-information-technology-gmbh-v-ca-inc-nyed-2007.