C.D.S., Inc. v. Zetler

288 F. Supp. 3d 551
District Court, S.D. Illinois·Decided December 21, 2017·No. 16 Civ. 3199 (VM)·Published·Cited by 2 cases

Opinion

VICTOR MARRERO, United States District Judge.

Plaintiff C.D.S., Inc. ("C.D.S.") brought this action against defendants Bradley Zetler ("Zetler"), CDS, LLC, and Rapid Systems CC (collectively, "Rapid Systems"), seeking declaratory judgments that Rapid Systems's copyright and trademark registrations for the software "Agencypad" and its underlying computer code and database are void, and that C.D.S. is the sole owner of rights to trademark and copyright the software. (See"Complaint," Dkt. No. 1.) The Complaint also seeks monetary damages for various violations of state and federal law. (See id. )

Rapid Systems has asserted several direct and derivative counterclaims against C.D.S.; its CEO, Diane Treat; three directors of C.D.S., Jerome Viollon, Christelle Riot, and Christophe Racle; the majority shareholder of C.D.S., Jerome Marechaux ("Marechaux"); and CDS SARL, a French company majority-owned by Marechaux (collectively, the "Counterclaim Defendants"). (See"Second *554Amended Answer," Dkt. No. 139.) Two of the derivative counterclaims are brought by Zetler, as a C.D.S. shareholder, asserting ownership rights on behalf of C.D.S. over the software "CDS6" and seeking to remedy the uncompensated use of that software by CDS SARL. (See id. ¶¶ 289-99.)

Before the Court are several letters the parties submitted in anticipation of the upcoming trial regarding the scope of triable issues in this case. For the reasons discussed below, the Court orders that: (1) Rapid Systems is collaterally estopped from arguing that the ownership of the portions of a database relied upon by Agencypad is governed by contract; (2) Rapid Systems is not collaterally estopped from arguing that C.D.S., and not CDS SARL, owns the software CDS6; (3) Zetler has standing to bring derivative counter-claims on behalf of C.D.S. to enforce C.D.S.'s alleged ownership rights over CDS6; and (4) United States law applies to all copyright ownership and infringement questions related to the database underlying Agencypad.

I. BACKGROUND

Agencypad is a software used to assist members of the fashion industry manage their logistical needs, such as booking and scheduling assignments for fashion models. (See Complaint ¶ 65.) Throughout this litigation, C.D.S. has argued that it owns the rights to trademark Agencypad and to copyright its supporting computer code because the software was developed by C.D.S. employees within the scope of their employment and so constitutes a work-for-hire under 17 U.S.C. Section 201(b).1 See, e.g., C.D.S., Inc. v. Zetler, 198 F.Supp.3d 323, 340 (S.D.N.Y. 2016) (order denying C.D.S.'s motion for partial summary judgment regarding the ownership of Agencypad). Rapid Systems, on the other hand, has argued that Agencypad is an extension of its software Portfoliopad and that its copyrights for Portfoliopad and Agencypad are valid and enforceable. (See, e.g., First Amended Answer ¶ 237-48.)

There is no dispute that Rapid Systems owns Portfoliopad, but complicating this case is the fact that the functionality of both Agencypad and Portfoliopad depend on various tables stored in the same database (the "Database"). See C.D.S., Inc. v. Zetler, 254 F.Supp.3d 625, 631 (S.D.N.Y. 2017). For Agencypad to function properly, it requires access to certain portions of the Database (the "Agencypad Data"2 ), at least some of which were created before Agencypad existed. (See Dkt. No. 389 at 5 (letter by Counterclaim Defendants admitting that some of the Agencypad Data predated Agencypad).) Rapid Systems contends that the entire Database is part of Portfoliopad and so Rapid Systems owns the Database regardless of the ownership of Agencypad. See C.D.S., 254 F.Supp.3d at 631. On the other hand, the Counterclaim Defendants contend that Rapid Systems does not own the Agencypad Data. See id. The Counterclaim Defendants also argue that Rapid Systems's copyright registrations *555in the Agencypad Data are invalid because the Database is not original work that is copyrightable.

Related to this case is an action in France (the "French Action") brought by Rapid Systems against C.D.S. and CDS SARL for breaching a 2001 Exclusive Distributorship Agreement (the "EDA") by, among other things, bringing the instant case claiming ownership over Agencypad, which Rapid Systems alleged ownership over under the terms of the EDA. (See Dkt. No. 386, Ex. A.) In the French Action, the Commercial Court of Paris, 8th Chamber, found that Agencypad is not a "Contractual Product," meaning that its ownership is not governed by the EDA. (Id. at 8.) The Commercial Court also stated by way of background that CDS SARL "developed software, the latest version of which is called CDS6 ...." (Id. at 2.)

Rapid Systems appealed the decision of the Commercial Court of Paris, and the Appellate Court of Paris affirmed the finding that Agencypad is not a contractual product, and so its ownership should be determined under the law of intellectual property and not contract. (See Dkt. No. 386, Ex. B at 7.) The Appellate Court reasoned that "the mere fact" that Agencypad and Portfoliopad share the same Database does not entail that Agencypad is a contractual product along with Portfoliopad. (Id. at 8.) The Appellate Court concluded that instead of being an outgrowth of Portfoliopad, as Rapid Systems argued, "[i]t appears ... on the evidence before the court that the Agencypad software is an upgrade of CDS6 software owned by C.D.S. Inc." (Id. at 9.)

In response to the Appellate Court decision, Rapid Systems brought an application for a failure to adjudicate certain claims. (See Dkt. No. 386, Ex. C at 2.) Specifically, Rapid Systems claimed that the Appellate Court failed to adjudicate its claim that, under the terms of the EDA, Rapid Systems is the owner of the Agencypad Data. (See id. ) On Rapid Systems's application, the Appellate Court concluded:

[T]he database operating with Agencypad, in the 'Agencypad System,' does not moreover constitute a contractual product as set forth in the distribution agreement and cannot be considered as 'relating' to the software Portfoliopad nor as an 'evolution' of the software Portfoliopad. Further, it has not been demonstrated to this Court which company holds the ownership of this database, this question not having been raised before this Court, as it falls under the competency of other jurisdictions.

(Id. at 3.) The Appellate Court thus concluded that the ownership of the Agencypad Data was not governed by the EDA.

C.D.S.

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C.D.S., Inc. v. Zetler, 288 F. Supp. 3d 551 (S.D. Ill. 2017).

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