Daimler-Chrysler Services North America, LLC v. Summit National, Inc.

289 F. App'x 916
CourtCourt of Appeals for the Sixth Circuit
DecidedAugust 20, 2008
Docket07-1357
StatusUnpublished
Cited by20 cases

This text of 289 F. App'x 916 (Daimler-Chrysler Services North America, LLC v. Summit National, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Daimler-Chrysler Services North America, LLC v. Summit National, Inc., 289 F. App'x 916 (6th Cir. 2008).

Opinion

JULIA SMITH GIBBONS, Circuit Judge.

This case involves a number of claims by Summit National Inc. (“SNI”) against Da *918 imler Chrysler Services North America, LLC (“DCS”). The claims relate to a “perpetual” license agreement, which allowed for DCS’s use of SNI’s Automated Leasing Account System (“ALAS”) software. SNI argues that the district court erred by: (1) dismissing its claim for misappropriation of trade secrets; (2) dismissing its copyright infringement claim; (3) dismissing the remaining contract implied-in-law claim; (4) denying its motion in limine to strike expert testimony; and (5) denying its motion for attorneys’ fees. We affirm the district court’s judgment.

I.

Most of the relevant facts are not in dispute. SNI’s predecessor, Stockholder Systems, Inc. (“SSI”), was the original owner of ALAS software. During the 1980’s, SSI marketed ALAS through mass mailings, solicitations, and advertisements in trade journals. Ultimately ALAS customers included fifty-eight banks and financial institutions, two utilities, and ten other clients. SSI and its successors produced many versions of ALAS. The last recorded installation of ALAS occurred in April 1993.

In 1983, SSI entered into a Software Systems Agreement under which SSI granted DCS’s predecessor, Mercedes-Benz Credit Corporation (“MBCC”), a “perpetual license” to use ALAS at its Portland, Oregon facility at a cost of $40,000. MBCC and DCS used ALAS to track leasing contracts, leasing customers, and vehicles subject to lease in the United States and Canada. Under the terms of the Software Agreement, ALAS could only be used at DCS’s Portland facility to process data of DCS and its wholly owned subsidiaries. DCS could not use ALAS— characterized by the Software Agreement as a “trade secret” — at any other facility without notifying SSI and/or paying a license fee to SSI. The Software Agreement also included a non-disclosure provision requiring DCS to “take all reasonable steps to ensure” that ALAS would not be made available to any other person, firm, or corporation without SSI’s written consent. SSI retained the right to terminate the Software Agreement if DCS breached and failed to take appropriate corrective action within thirty days of receiving notice of such a breach.

SNI acquired the rights to ALAS in July 1998. Contrary to the Software Agreement, DCS employees and others working on behalf of DCS used ALAS at locations other than the Portland facility. Specifically, SNI provided evidence that: during late 1998 and 1999, three outside companies hired to work on ALAS gained access to its source code and downloaded it to facilities outside of Portland; in 2002 about 1400 DCS employees logged onto ALAS at non-Portland facilities; and in 2003, employees of an independent contractor hired to provide ALAS support and programming gained access to ALAS source code. DCS provided evidence suggesting that DCS and its contractors made significant changes to the ALAS system it used, causing it to no longer resemble the ALAS system licensed by SSI in 1983.

In May 2002, following notice to DCS and the thirty day cure period, SNI informed DCS that it was terminating the agreement and demanded that DCS cease using all licensed SNI products. DCS then initiated the present case by seeking a declaratory judgment that it was not in breach of the Software Agreement. SNI counterclaimed, seeking a declaratory judgment that DCS was in breach and injunctive relief prohibiting DCS from con *919 tinued use of ALAS. On May 20, 2008, after the parties had filed cross-motions for summary judgment, the district court issued an order denying DOS’s motion for summary judgment and granting in part SNI’s motion for partial summary judgment. The district court concluded, inter alia, that DCS had breached the Software Agreement by disclosing ALAS to third parties and that a genuine issue of material fact existed as to whether SNI suffered any damages as a result of this breach. The district court issued a permanent injunction requiring DCS to halt its use of ALAS software within 180 days. 1

In June of 2003, SNI amended its counterclaim to add counts of misappropriation of trade secrets and copyright infringement. In response, DCS filed a second motion for summary judgment, arguing that, inter alia, because SNI did not possess the 1983 ALAS source code, it could not establish copyright infringement, breach of contract, or trade secret misappropriation. In an April 8, 2004 order, the district court determined that genuine issues of material fact remained regarding these issues and denied DOS’s motion.

Following the April 2004 order, new evidence — now undisputed by the parties— came to light. First, it became clear that the 1983 version of ALAS source code (“ALAS 6.0”) did not contain copyright notice. Second, SNI acknowledged that it did not possess its own copy of the ALAS 6.0 source code. In addition, SNI withdrew its claim for pre-termination breach of contract damages relating to DOS’s disclosure of ALAS source code to third parties. Given these developments, the district court revisited SNI’s copyright, trade secret, and breach of contract claims.

In an April 2006 order, the district court: (1) dismissed SNI’s copyright infringement claim, concluding that ALAS 6.0 was publicly distributed in 1983 without the notice then required under the Copyright Act; (2) dismissed SNI’s trade secret claim, concluding that actual knowledge of the secret information was required, but absent; and (3) explained that SNI could still pursue “[ejquitable relief under a quantum meruit theory based on DOS’s continued use of ALAS after SNI terminated the Software Agreement.” 2 Therefore, only the “quantum meruit ” claim— as articulated by the district court — survived this order.

In an August 3, 2006 order, the district court explained that quantum meruit “measures recovery under a quasi-contract or contract implied in law.” It further explained that whereas “[i]n a typical quantum meruit case, the value of an object or service to a defendant will be roughly equal to its value to a plaintiff,” in this case, “ALAS was worth much more to DCS” than to SNI. But the district court rejected SNI’s argument that its damages should be based on an “‘unjust enrichment’ approach,” that would quantify the value of DOS’s post-termination use based upon the value of ALAS to DCS. Specifically, the district court explained that:

[T]he appropriate measure of SNI’s quantum meruit recovery here is based on the value of ALAS to SNI. In other *920 words ... how much money would a willing buyer have paid SNI for use of the ALAS source code at issue for eighteen months? ... Whatever the number is, it must not be based on the value of ALAS to DCS at the time of termination. Because DCS had so substantially integrated ALAS into its leasing system, its replacement costs provide a poor indicator of the market value of ALAS. In sum, to recover quantum meruit damages on a theory of contract implied in law, SNI must come forward with evidence of what it reasonably could have charged a willing buyer, in an open market, for eighteen months of the use of source code at issue.

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Bluebook (online)
289 F. App'x 916, Counsel Stack Legal Research, https://law.counselstack.com/opinion/daimler-chrysler-services-north-america-llc-v-summit-national-inc-ca6-2008.