Nixon v . Bosler, et a l . CV-00-424-M 07/13/01 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Dennis W . Nixon, d/b/a R & D Associates, Plaintiff
v. Civil N o . 00-424-M Opinion N o . 2001 DNH 125 Charles W . Bosler, Jr., Services and Technology Group, Inc., and Risk Services & Technology, Inc., Defendants
O R D E R
Dennis Nixon, d/b/a R & D Associates, brings this suit
against Charles Bosler, Services and Technology Group, Inc.
(“STG”), and Risk Services & Technology, Inc. (“RST”), seeking
damages for defendants’ alleged copyright violations and breach
contract. Specifically, Nixon claims to have developed a
computer program known as “RiskTrak” and incorporated into its
code five libraries as to which he holds registered copyrights.
He says defendants unlawfully distributed the RiskTrak software
without paying him agreed-upon royalties and, later, after he
revoked an oral license to use his copyrighted works. Defendants deny any wrongdoing, claim to have paid Nixon all
royalties to which he is entitled, and have filed two
counterclaims. In their first counterclaim, defendants seek a
judicial declaration of ownership of the RiskTrak software, an
accounting of plaintiff’s revenues, if any, derived from the sale
or distribution of that software, and a declaration of the sums,
if any, to which they are entitled as royalty payments. In their
second counterclaim, defendants seek damages for Nixon’s alleged
breach of contract and/or breach of fiduciary duty. Pending
before the court is Nixon’s motion to dismiss defendants’
counterclaims. See Fed. R. Civ. P. 12(b)(6).
Standard of Review
A motion to dismiss under Fed. R. Civ. P. 12(b)(6) is one of
limited inquiry, focusing not on “whether a plaintiff will
ultimately prevail but whether the claimant is entitled to offer
evidence to support the claims.” Scheuer v . Rhodes, 416 U.S.
232, 236 (1974). In considering a motion to dismiss, the court
must accept as true the facts alleged in the complaint and
construe all reasonable inferences in favor of the non-moving
party. See Bessette v . Avco Financial Services, Inc., 230 F.3d
2 439, 443 (1st Cir. 2000), cert. denied, 121 S.Ct. 2016 (2001).
See also The Dartmouth Review v . Dartmouth College, 889 F.2d 1 3 ,
15 (1st Cir. 1989). Dismissal is appropriate only if “it clearly
appears, according to the facts alleged, that the plaintiff
cannot recover on any viable theory.” Langadinos v . American
Airlines, Inc., 199 F.3d 6 8 , 69 (1st Cir. 2000).
Background
Defendants claim that prior to 1996, Charles Bosler
(president of STG) began developing the RiskTrak software. In
1996, defendants say STG employed Nixon for the purpose of
assisting Bosler in the development of the source code for
RiskTrak. The parties seem to agree that they entered into some
sort of contractual relationship, which included a licensing
agreement concerning copyrighted works owned by Nixon, but they
disagree as to the terms and duration of that agreement. It does
not appear that any aspect of that agreement was reduced to
writing.
Defendants claim that during much of his work on the
program, Nixon was “essentially taking dictation from Bosler.”
3 Answer and Counterclaims at para. 5 2 . Defendants also say that
Bosler contributed significantly to the creation of RiskTrak’s
source code and the refinement of “five development tools” that
Nixon used during the course of his work on RiskTrak (although it
is unclear, it appears that defendants are referring to what
Nixon calls his five copyrighted “libraries”).
The parties’ relationship terminated at some point in 1999.
As a result of that relationship, however, defendants claim to be
co-authors of the “five development tools purportedly owned” by
Nixon, as well as the RiskTrak program itself. Answer and
Counterclaims at para. 5 5 . At a minimum, say defendants, Nixon’s
oral agreement to allow defendants to use his copyrighted works
in the program in consideration for royalty payments of 10
percent of gross sales constituted an irrevocable, non-exclusive
license. They claim to have paid Nixon all sums due under that
licensing agreement and say that his efforts to unilaterally
terminate the agreement were unlawful. Defendants also claim
Nixon breached the terms of the parties’ agreement when he
refused to deliver the latest version of the program and
4 attempted to extract greater financial concessions from them as a
pre-condition to turning it over.
Finally, defendants say that Nixon, as their agent, breached
his fiduciary obligations to them when, after refusing to honor
his obligations under the parties’ contract, he sought to sell
the RiskTrak program directly to potential customers of
defendants.
In response, Nixon claims that he is the registered owner of
the five copyrighted libraries or development tools that have
been (apparently) incorporated into the RiskTrak program. He
also says the license he provided to defendants (authorizing them
to use those libraries and the code he developed for RiskTrak)
was revocable at will. And, since he claims to have revoked that
license, he says defendants cannot, as a matter of law, maintain
a claim for declaratory judgment and an accounting. As to
defendants’ breach of contract/fiduciary duty claim, Nixon says
he terminated his oral contract with defendants and, therefore,
cannot successfully be sued for breach of contract. His motion
5 to dismiss i s , however, silent as to defendants’ claim that he
breached certain fiduciary obligations owed to them.
Discussion
As noted above, the parties agree that they entered into an
oral contractual relationship governing the development, use, and
sale of the RiskTrak software. Parties can enter into oral, non-
exclusive licensing agreements. See Lulirama Ltd. v . Axcess
Broadcast Services, Inc., 128 F.3d 872, 879 (5th Cir. 1997);
I.A.E., Inc. v . Shaver, 74 F.3d 768, 775-76 (7th Cir. 1996).
Plainly, however, the parties disagree as to the term of that
agreement, the circumstances under which it might be terminated,
and a substantial number of its material provisions.
As to defendants’ first counterclaim, Nixon says they cannot
maintain a copyright infringement action against him with regard
to his own copyrighted libraries. That may be s o . However,
defendants maintain that because Bosler substantially assisted in
the modification and refinement of those libraries he and/or the
remaining defendants are “joint authors” of those substantially
re-worked libraries. That is to say, defendants appear to claim
6 that the libraries, in their current form, constitute a “joint
work,” as that term is defined in 17 U.S.C.
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Nixon v . Bosler, et a l . CV-00-424-M 07/13/01 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Dennis W . Nixon, d/b/a R & D Associates, Plaintiff
v. Civil N o . 00-424-M Opinion N o . 2001 DNH 125 Charles W . Bosler, Jr., Services and Technology Group, Inc., and Risk Services & Technology, Inc., Defendants
O R D E R
Dennis Nixon, d/b/a R & D Associates, brings this suit
against Charles Bosler, Services and Technology Group, Inc.
(“STG”), and Risk Services & Technology, Inc. (“RST”), seeking
damages for defendants’ alleged copyright violations and breach
contract. Specifically, Nixon claims to have developed a
computer program known as “RiskTrak” and incorporated into its
code five libraries as to which he holds registered copyrights.
He says defendants unlawfully distributed the RiskTrak software
without paying him agreed-upon royalties and, later, after he
revoked an oral license to use his copyrighted works. Defendants deny any wrongdoing, claim to have paid Nixon all
royalties to which he is entitled, and have filed two
counterclaims. In their first counterclaim, defendants seek a
judicial declaration of ownership of the RiskTrak software, an
accounting of plaintiff’s revenues, if any, derived from the sale
or distribution of that software, and a declaration of the sums,
if any, to which they are entitled as royalty payments. In their
second counterclaim, defendants seek damages for Nixon’s alleged
breach of contract and/or breach of fiduciary duty. Pending
before the court is Nixon’s motion to dismiss defendants’
counterclaims. See Fed. R. Civ. P. 12(b)(6).
Standard of Review
A motion to dismiss under Fed. R. Civ. P. 12(b)(6) is one of
limited inquiry, focusing not on “whether a plaintiff will
ultimately prevail but whether the claimant is entitled to offer
evidence to support the claims.” Scheuer v . Rhodes, 416 U.S.
232, 236 (1974). In considering a motion to dismiss, the court
must accept as true the facts alleged in the complaint and
construe all reasonable inferences in favor of the non-moving
party. See Bessette v . Avco Financial Services, Inc., 230 F.3d
2 439, 443 (1st Cir. 2000), cert. denied, 121 S.Ct. 2016 (2001).
See also The Dartmouth Review v . Dartmouth College, 889 F.2d 1 3 ,
15 (1st Cir. 1989). Dismissal is appropriate only if “it clearly
appears, according to the facts alleged, that the plaintiff
cannot recover on any viable theory.” Langadinos v . American
Airlines, Inc., 199 F.3d 6 8 , 69 (1st Cir. 2000).
Background
Defendants claim that prior to 1996, Charles Bosler
(president of STG) began developing the RiskTrak software. In
1996, defendants say STG employed Nixon for the purpose of
assisting Bosler in the development of the source code for
RiskTrak. The parties seem to agree that they entered into some
sort of contractual relationship, which included a licensing
agreement concerning copyrighted works owned by Nixon, but they
disagree as to the terms and duration of that agreement. It does
not appear that any aspect of that agreement was reduced to
writing.
Defendants claim that during much of his work on the
program, Nixon was “essentially taking dictation from Bosler.”
3 Answer and Counterclaims at para. 5 2 . Defendants also say that
Bosler contributed significantly to the creation of RiskTrak’s
source code and the refinement of “five development tools” that
Nixon used during the course of his work on RiskTrak (although it
is unclear, it appears that defendants are referring to what
Nixon calls his five copyrighted “libraries”).
The parties’ relationship terminated at some point in 1999.
As a result of that relationship, however, defendants claim to be
co-authors of the “five development tools purportedly owned” by
Nixon, as well as the RiskTrak program itself. Answer and
Counterclaims at para. 5 5 . At a minimum, say defendants, Nixon’s
oral agreement to allow defendants to use his copyrighted works
in the program in consideration for royalty payments of 10
percent of gross sales constituted an irrevocable, non-exclusive
license. They claim to have paid Nixon all sums due under that
licensing agreement and say that his efforts to unilaterally
terminate the agreement were unlawful. Defendants also claim
Nixon breached the terms of the parties’ agreement when he
refused to deliver the latest version of the program and
4 attempted to extract greater financial concessions from them as a
pre-condition to turning it over.
Finally, defendants say that Nixon, as their agent, breached
his fiduciary obligations to them when, after refusing to honor
his obligations under the parties’ contract, he sought to sell
the RiskTrak program directly to potential customers of
defendants.
In response, Nixon claims that he is the registered owner of
the five copyrighted libraries or development tools that have
been (apparently) incorporated into the RiskTrak program. He
also says the license he provided to defendants (authorizing them
to use those libraries and the code he developed for RiskTrak)
was revocable at will. And, since he claims to have revoked that
license, he says defendants cannot, as a matter of law, maintain
a claim for declaratory judgment and an accounting. As to
defendants’ breach of contract/fiduciary duty claim, Nixon says
he terminated his oral contract with defendants and, therefore,
cannot successfully be sued for breach of contract. His motion
5 to dismiss i s , however, silent as to defendants’ claim that he
breached certain fiduciary obligations owed to them.
Discussion
As noted above, the parties agree that they entered into an
oral contractual relationship governing the development, use, and
sale of the RiskTrak software. Parties can enter into oral, non-
exclusive licensing agreements. See Lulirama Ltd. v . Axcess
Broadcast Services, Inc., 128 F.3d 872, 879 (5th Cir. 1997);
I.A.E., Inc. v . Shaver, 74 F.3d 768, 775-76 (7th Cir. 1996).
Plainly, however, the parties disagree as to the term of that
agreement, the circumstances under which it might be terminated,
and a substantial number of its material provisions.
As to defendants’ first counterclaim, Nixon says they cannot
maintain a copyright infringement action against him with regard
to his own copyrighted libraries. That may be s o . However,
defendants maintain that because Bosler substantially assisted in
the modification and refinement of those libraries he and/or the
remaining defendants are “joint authors” of those substantially
re-worked libraries. That is to say, defendants appear to claim
6 that the libraries, in their current form, constitute a “joint
work,” as that term is defined in 17 U.S.C. § 101 (“A ‘joint
work’ is a work prepared by two or more authors with the
intention that their contributions be merged into inseparable or
interdependent parts of a unitary whole.”). As the Court of
Appeals for the Second Circuit has observed:
Joint authorship entitles the co-authors to equal undivided interests in the whole work - in other words, each joint author has the right to use or to license the work as he or she wishes, subject only to the obligation to account to the other joint owner for any profits that are made.
Thompson v . Larson, 147 F.3d 195, 199 (2d Cir. 1998).
Consequently, it would seem that if defendants are joint authors
of the RiskTrak program and/or the five libraries incorporated
into that program, Nixon was not entitled to “revoke” his
licensing agreement (at least with regard to those portions of
the agreement that related to works as to which defendants were
joint authors). As to those aspects of the program as to which
defendants are joint authors, it would appear that they did not
need any “license” from Nixon; their right to use such work flows
from their status as joint authors.
7 What defendants seek is a judicial declaration as to their
rights, if any, in the various components of RiskTrak and, if
appropriate, an accounting from Nixon. If they are, as they
claim, “joint authors” of that work, they are plainly entitled to
such relief. Thus, on the facts alleged by defendants, the court
cannot conclude that they have failed to state a viable,
cognizable claim for declaratory judgment as to the parties’
respective rights in and to the RiskTrak program, its source
code, and the integrated libraries. Nixon’s motion to dismiss
defendants’ first counterclaim i s , therefore, denied.
Nixon’s motion to dismiss defendants’ second counterclaim
must likewise be denied. If the court assumes, as it must, that
defendants’ allegations are true and Nixon was acting as an agent
of defendants when he “spoke with [potential customers of
defendants] in an attempt to sell product under his name and
obtain the opportunities for such sales for his own benefit,”
Answer and Counterclaims at para. 6 1 , they have adequately
alleged the essential elements of a viable claim for breach of
contract and/or breach of fiduciary duty. See, e.g., Reinhold v .
8 Mallery, 135 N.H. 3 1 , 34 (1991) (discussing several of the duties
owed by an agent to his or her principal).
To be sure, Nixon claims that defendants have failed to
state a viable claim and, as a matter of law, cannot prevail on a
breach of contract/fiduciary duty claim. And, in support of that
position, he says:
[T]here can be no dispute that Plaintiff was at liberty to terminate [the] agreement with Defendants at any time. If he was free to terminate the agreement, he must also have been free to attempt to renegotiate its terms. . . . Accordingly, Plaintiff’s attempt to modify and his ultimate termination of the verbal agreement cannot constitute a breach of contract and Defendants’ Second Counterclaim must be dismissed.
Plaintiff’s motion to dismiss counterclaims at 4 . The court
disagrees. As noted above, defendants deny that Nixon was
authorized to terminate the agreement at any time. And i f , as
defendants’ allege, Nixon wrongfully terminated that agreement,
or wrongfully sought to extort concessions from defendants in an
effort to modify the terms of that contract, or wrongfully sought
to steal potential customers away from defendants during the
course of his agency relationship with them, defendants would
likely be entitled to damages.
9 Conclusion
For the foregoing reasons, plaintiff’s motion to dismiss
defendants’ counterclaims (document n o . 12) is denied.
SO ORDERED.
Steven J. McAuliffe United States District Judge
July 1 3 , 2001
cc: Kathleen C . Peahl, Esq. Arnold Rosenblatt, Esq.