Tas Distributing Co., Inc. v. Cummins, Inc.

676 F. Supp. 2d 719, 2009 U.S. Dist. LEXIS 115403, 2009 WL 4922589
CourtDistrict Court, C.D. Illinois
DecidedDecember 10, 2009
DocketCase 07 CV 1141
StatusPublished

This text of 676 F. Supp. 2d 719 (Tas Distributing Co., Inc. v. Cummins, Inc.) is published on Counsel Stack Legal Research, covering District Court, C.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Tas Distributing Co., Inc. v. Cummins, Inc., 676 F. Supp. 2d 719, 2009 U.S. Dist. LEXIS 115403, 2009 WL 4922589 (C.D. Ill. 2009).

Opinion

ORDER & OPINION

JOE BILLY McDADE, District Judge.

This matter is before the Court on Cummins’ Motion for Partial Summary Judgment on Count II (Doc. 177). 1 TAS has *721 responded in opposition to the motion (Doc. 183), and Cummins has replied (Doc. 187). For the reasons that follow, the motion is GRANTED in part and DENIED in part.

BACKGROUND

The background facts involved in this case have been set out in numerous previous Orders; they are repeated here for purposes of completeness. TAS is an Illinois corporation that invents, develops, and licenses patented, proprietary technology which automatically turns vehicle engines and accessories off and on under certain circumstances. Cummins is an Indiana corporation that manufactures engines for use in trucks.

One of TAS’ technologies is the “Temp-A-Stop” system, which consists of computer code that automatically shuts down a vehicle’s engine and accessories when the vehicle is parked or idling for a preset period of time. TAS has also developed the “Temp-A-Start” system, which incorporates the Temp-A-Stop system and which, additionally, consists of computer code that automatically turns on a vehicle’s engine and accessories under certain conditions. Temp-A-Stop and Temp-A-Start both come in two different versions: an “ECM Product” (in which the system programming is contained in an electronic control module located in the vehicle’s engine) and a “Retrofit Product” (in which the system programming is not built into the vehicle’s electronic control module, but rather, can be added to the vehicle’s engine). The focus of Count II, and of the instant summary judgment motion, is the Retrofit Product.

In February 1997, TAS and Cummins entered into a series of agreements through which TAS granted Cummins a worldwide, perpetual license to incorporate in Cummins’ truck engines various technologies developed by TAS, including the Temp-A-Stop and Temp-A-Start systems. One of these agreements was an Intellectual Property License Agreement (“License Agreement”), which provided for royalty and payment terms governing Cummins’ use of the technology. Section 5 of the License Agreement is entitled “Royalties” and provides, in part, as follows:

From and after the Retrofit StandAlone Date, Licensee shall pay a royalty to Licensor for every Retrofit Product sold by Licensee, whether sold under the Cummins brand or some other name, at the rate of: one hundred dollars ($100) per unit sold by Licensee in the first year commencing with the Retrofit Stand-Alone Date; one hundred and twenty-five dollars ($125) per unit sold by Licensee in the second year commencing with the first anniversary of the Retrofit Stand-Alone Date; and one hundred dollars ($100) per unit sold by Licensee in each year thereafter, commencing with the successive anniversaries of the Retrofit Stand-Alone Date. Royalties shall be paid on a monthly basis, with the first month beginning on the Retrofit Stand-Alone Date, within thirty (30) days after the close of each month.

(Exh. A to Doc. 177, License Agreement § 5(a)). 2 Section 6 of the License Agreement is entitled “Licensee’s Minimum Payments Obligation” and provides, in part, as follows:

Licensee covenants and agrees that, if Licensee shall have any of the rights granted to Licensee in Sections 3 and 4 of this License Agreement with respect to any of the Subject Technology or

*722 Related Intellectual Property, Licensee shall make, for each of the five (5) years commencing with the later of July 1, 1997 or the Decision Date in the Pending TAS Action or though [sic] settlement with DDC (the “Royalty Commencement Date”), either: (i) actual royalty payments of at least a total of the minimum royalty payments to Licensor according to the schedule below; or, if Licensee does not generate sufficient sales to meet the minimum royalty payments, (ii) payments within 30 days after the close of each year in addition to actual royalty payments for a total of the minimum royalty payments according to the schedule below.

Schedule of Minimum Royalty Payments

Year 1 $100,000
Year 2 $300,000
Year 3 $200,000
Year 4 $200,000
Year 5 $200,000

(License Agreement § 6(a)). Section 6(c) of the License Agreement provides as follows:

To the extent that minimum royalty payments made by Licensee exceed actual royalties paid by Licensee in a given year, such payments above and beyond actual royalties shall be credited against Licensee’s future royalty obligations, provided that Licensee shall make the requisite yearly minimum payments specified in sections [sic] 6(a) of this Agreement.

(License Agreement § 6(c)).

After entering into the February 1997 agreements with TAS, Cummins created an “ICON Product,” which integrated the Temp-A-Start system (TAS’ engine stop/ start technology). Cummins then offered ICON for sale in retrofit and ECM versions. During the five-year period in which minimum royalty payments were required under the License Agreement (i.e. April 1, 1998 to March 31, 2003, according to the Fifth Amended Complaint), Cummins represented to TAS that it did not sell sufficient ICON products (or any products incorporating TAS technology) to exceed the amounts of the required minimum royalty payments. Accordingly, Cummins paid only the required $1 million in minimum royalties for sales made during the minimum-royalty period. It is undisputed that Cummins fulfilled its minimum royalty obligations under the License Agreement.

With respect to Cummins’ sales of ICON retrofit products (the subject of Count II), a portion of the parties’ dispute centers on royalties due from June 1, 2003 onward. 3 In a previous lawsuit (“TAS I ”) between these same parties, concerning the same contract, this Court rejected Cummins’ argument that its obligation to pay royalties under the License Agreement ended on March 31, 2003 at the termination of the minimum-royalty period. This Court, in interpreting Section 5 of the License Agreement, held that Cummins has a continuing, post-minimum-royalty-period obligation to make per-unit royalty payments under the License Agreement if it sells products embodying the licensed TAS technology. (Exh. B to *723 Doc. 177, 1/21/2005 Order in Case No. 03-1026, at p. 14). Therefore, Cummins is obligated to pay TAS a royalty of $100 per ICON retrofit unit (which incorporates the subject TAS technology) sold after March 31, 2003. In its motion for partial summary judgment as to liability on Count II, TAS asserted that Cummins last paid royalties for retrofit product sales occurring in April 2003 and May 2003 and that Cummins failed to pay royalties on retrofit product sales occurring from June 1, 2003 onward. (Doc. 35 at pp. 6-7).

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Bluebook (online)
676 F. Supp. 2d 719, 2009 U.S. Dist. LEXIS 115403, 2009 WL 4922589, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tas-distributing-co-inc-v-cummins-inc-ilcd-2009.