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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF CALIFORNIA
`SAN JOSE DIVISION
`NO. C 08-00019 JW
`ORDER DENYING DEFENDANTS’
`MOTION FOR SUMMARY JUDGMENT
`
`Netbula, LLC, et al.,
`Plaintiffs,
`
` v.
`Chordiant Software, Inc., et al.,
`Defendants.
` /
`
`I. INTRODUCTION
`Dongxiao Yue (“Dr. Yue”) and Netbula, LLC (“Netbula”) (collectively, “Plaintiffs”) bring
`this action against Chordiant Software, Inc. (“Chordiant Inc.”), Steven R. Springsteel
`(“Springsteel”), and Derek P. Witte (“Witte”), (collectively, “Defendants”) alleging copyright
`infringement and vicarious copyright infringement. Plaintiffs allege that Defendants infringed
`Plaintiffs’ copyrights by reproducing copyrighted computer programs and incorporating that
`material into unauthorized derivative works.
`Presently before the Court is Defendants’ Motion for Summary Judgment.1 The Court
`conducted a hearing on April 6, 2009. Based on the papers submitted to date and oral argument, the
`Court DENIES Defendants’ Motion for Summary Judgment.
`
`1 (Defendants’ Notice of Motion, Motion and Memorandum of Points and Authorities in
`Support of Summary Judgment or Summary Adjudication, hereafter, “Motion,” Docket Item No.
`104.)
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`For the Northern District of California
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`United States District Court
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`II. BACKGROUND
`
`A.
`
`Undisputed Facts
`1.
`Plaintiffs’ Software
`In January 2000, Netbula owned the copyrights to several pieces of software (“the
`Software”) developed by Dr. Yue, Netbula’s founder and sole employee.2 Among other duties, Dr.
`Yue sold licenses to use the Software on behalf of Netbula. (Id.) The Software is a form of open
`network computing remote procedure recall (“ONC RPC”) created for use with Microsoft Windows
`32-bit operating systems. (Milionis Decl., Ex. 48 at 63.) The Software allows a program on one
`computer to execute a command remotely on a separate computer. (Motion at 4; Milionis Decl., Ex.
`30.) The Software has two parts: (1) a Software Development Kit (“SDK”) that consists of the
`software tools that allow licensed programmers to create applications using the ONC RPC standard,
`including a file called “rpcgen.exe”; and (2) “runtime software” that consists of files that must be
`installed to provide the remote call functionality to applications developed using the SDK. (Second
`Amended Complaint ¶ 16, Docket Item No. 91; Motion at 4.)
`2.
`Chordiant Inc.’s Use of Plaintiffs’ Software
`One of Chordiant Inc.’s products is the Chordiant Marketing Director (“CMD”), which is
`developed, in part, by using the Software.3 The pre-cursor product to CMD was originally
`developed by a separate company called Prime Response, Inc. (“Prime Response”), a Delaware
`Corporation. (Wilson Decl. ¶ 4, Ex. A.) Prime Response, Ltd. (“Prime Response UK”) was a
`United Kingdom subsidiary of Prime Response.4 In January 2000, Prime Response UK purchased
`from Plaintiff Netbula an SDK license for one software developer and a distribution license for 1000
`
`2 (Motion at 5; Declaration of Mary E. Milionis in Support of Defendants’ Motion for
`Summary Judgment, Ex. 11, hereafter, “Milionis Decl.,” Docket Item No. 105.)
`
`3 (Declaration of Oliver Wilson in Support of Defendants’ Motion for Summary Judgment
`¶¶ 3-4, hereafter, “Wilson Decl.,” Docket Item No. 106.)
`
`4 (Wilson Decl. ¶ 4; Declaration of Dongxiao Yue in Opposition to Defendants’ Motion for
`Summary Judgment, Ex. 24, hereafter, “Yue Decl.,” Docket Item No. 120.)
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`copies of the runtime component of the Software (“2000 Prime Response UK License”). (Milionis
`Decl., Ex. 11; Yue Decl., Ex. 3.)
`In January 2001, Defendant Chordiant purchased Prime Response through a reverse
`triangular merger. (Wilson Decl. ¶ 4, Ex. A, B.) In May 2001, Chordiant Inc. changed the name of
`Prime Response UK to Chordiant Software International Limited (“Chordiant International”). (Yue
`Decl., Ex. 24.) Chordiant International maintained its status as a separate United Kingdom
`corporation. (Id.) In 2004, Chordiant moved its operations concerning CMD to New Hampshire.
`(Wilson Decl. ¶ 4.)
`3.
`Chordiant’s 2004 Upgrade Purchase
`In February and March 2004, Chordiant Inc. solicited Netbula for an updated version of the
`Software after discovering that an upgraded version would resolve a problem Chordiant Inc. was
`experiencing with one of the Software’s runtime files. (Wilson Decl. ¶ 18; Milionis Decl., Ex. 7.)
`In April 2004, an office manager at Chordiant International sent a purchase order to Netbula for an
`SDK license and 1000 “client runtime licenses” to the upgraded version of the Software (“2004
`Chordiant Upgrade”). (Milionis Decl., Ex. 28.) Netbula then sent an invoice and CD with the
`upgraded version of the Software to Chordiant International in the United Kingdom, and emailed an
`upgraded copy of the SDK component of the software to an employee located in the United
`Kingdom at Chordiant International’s office. (Id.)
`4.
`2007 License Usage Reports
`In August 2007, Netbula began requesting “License Usage Reports” from Chordiant Inc.
`(See Milionis Decl., Ex. 37.) After months of back-and-forth communication between Netbula and
`Chordiant Inc., Chordiant Inc. sent Netbula a usage report in December 2007 stating that Chordiant
`Inc. had used 953 runtime “units.” (Id., Ex. 41.) On the same day that Chordiant Inc. provided its
`license usage report, Netbula informed Chordiant Inc. that Netbula believed Chordiant Inc. was
`infringing Netbula’s copyright. (Id., Ex. 42.)
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`B.
`
`Procedural Background
`On January 2, 2008, Plaintiffs filed this law suit alleging copyright infringement against
`Chordiant Inc. and vicarious copyright infringement against Defendants Springsteel and Witte. (See
`Docket Item No. 1.) On March 20, 2009, the Court dismissed Plaintiffs’ vicarious copyright
`infringement claims against Springsteel and Witte with leave to amend. (March 20, 2009 Order,
`Docket Item No. 121.) On April 6, 2009, Plaintiffs filed an Amended Complaint re-alleging
`copyright infringement by Chordiant Inc. and vicarious copyright infringement by Springsteel and
`Witte. (See Docket Item No. 130.)
`Presently before the Court is Defendants’ Motion for Summary Judgment.
`III. STANDARDS
`Summary judgment is proper “if the pleadings, depositions, answers to interrogatories, and
`admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any
`material fact and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P.
`56(c). The purpose of summary judgment “is to isolate and dispose of factually unsupported claims
`or defenses.” Celotex v. Catrett, 477 U.S. 317, 323-24 (1986).
`The moving party “always bears the initial responsibility of informing the district court of
`the basis for its motion . . . .” Id. at 323. “The judgment sought should be rendered if the pleadings,
`the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue
`as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ.
`P. 56(c). The non-moving party “may not reply merely on allegations or denials in its own pleading;
`rather, its response must–by affidavits or as otherwise provided in this rule–set out specific facts
`showing a genuine issue for trial.” Fed. R. Civ. P. 56(e).
`When evaluating a motion for summary judgment, the court views the evidence through the
`prism of the evidentiary standard of proof that would pertain at trial. Anderson v. Liberty Lobby
`Inc., 477 U.S. 242, 255 (1986). The court draws all reasonable inferences in favor of the non-
`moving party, including questions of credibility and of the weight that particular evidence is
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`accorded. See, e.g., Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 520 (1992). The court
`determines whether the non-moving party’s “specific facts,” coupled with disputed background or
`contextual facts, are such that a reasonable jury might return a verdict for the non-moving party.
`T.W. Elec. Serv. v. Pac. Elec. Contractors, 809 F.2d 626, 631 (9th Cir. 1987). In such a case,
`summary judgment is inappropriate. Anderson, 477 U.S. at 248. However, where a rational trier of
`fact could not find for the non-moving party based on the record as a whole, there is no “genuine
`issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587 (1986).
`IV. DISCUSSION
`Defendants move for summary judgment on the ground that Chordiant Inc. has a license to
`use the Software pursuant to the 2000 Prime Response UK License and the 2004 Chordiant
`Upgrade. (Motion at 11-12.) In the alternative, Defendants move for summary judgment on the
`grounds that Chordiant Inc. obtained an implied license from Netbula to use the Software and that
`Plaintiffs are estopped from asserting copyright infringement because Chordiant Inc. justifiably
`relied on Plaintiffs’ conduct in using the Software. (Motion at 12-15.) The Court considers these
`issues in turn.
`A.
`Express License to Use the Software
`At issue is whether Defendant Chordiant Inc. had an express license to use Plaintiffs’
`Software. (Motion at 11-12.) Plaintiffs contend that the 2000 Prime Response UK License and the
`2004 Chordiant Upgrade were not licenses granted to Defendant Chordiant Inc., but rather licenses
`granted to Prime Response UK and Chordiant International, non-parties to this action. (Opposition
`for Summary Judgment at 9-10, hereafter, “Opposition,” Docket Item No. 119.)
`An express, nonexclusive, copyright license may be granted orally or in writing. Effects
`Assocs., Inc. v. Cohen, 908 F.2d 555, 558 (9th Cir. 1990). A federal court must look to state
`contract law to determine whether a copyright license has been granted. Foad Consulting Group,
`Inc. v. Azzalino, 270 F.3d 821, 826 (9th Cir. 2001). Under California law, a court must interpret a
`contract according to the parties’ intent. Waller v. Truck Ins. Exchange, Inc., 11 Cal. 4th 1, 18
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`(1995). Where the terms of the contract are unambiguous, a court must enforce the contract
`according to its plain meaning. Id. However, where the terms of the contract are ambiguous–i.e.,
`susceptible to more than one reasonable construction–extrinsic evidence must be introduced to
`determine the parties’ intent. Benach v. County of Los Angeles, 149 Cal. App. 4th 836, 847 (2007).
`Determining whether a contract is ambiguous is a question of law for which a court may look to
`extrinsic evidence to divine the parties’ intent. Id. However, where the interpretation of a contract
`turns on the credibility of conflicting extrinsic evidence, a question of fact exists that must be
`resolved by the trier of fact. Id.
`In this case, the parties do not dispute most of the circumstances surrounding the 2000 Prime
`Response UK License and the 2004 Chordiant Upgrade. Instead, the parties dispute the factual
`inferences that should be drawn from those circumstances. The parties present the following
`evidence:
`•
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`Plaintiff Netbula admitted in its 30(b)(6) deposition that it “granted to [Prime
`Response UK] [a] license” to the Software. (Milionis Decl., Ex. 46 at 105-106.)
`Netbula testified that its CD labels “usually contain a brief description of what the
`customer have [sic] purchased in terms of license grant.” (Id., Ex. 46 at 159-60.) The
`label of the CD containing the Software shipped to Prime Response UK states
`“Licensed to Prime Resposne [sic] UK, One Developer, 1000 mach runtime.” (Id.,
`Ex. 21.)
`In January 2001, Chordiant Inc. purchased Prime Response, the parent corporation of
`Prime Response UK and changed the name of Prime Response UK to Chordiant
`International, but maintained Chordiant International as a separate United Kingdom
`corporation. (Wilson Decl. ¶ 4, Exs. A, B; Yue Decl., Ex. 24.)
`On February 18, 2004, Toye Akande emailed Netbula stating, “We licensed your
`product to use in 2000. . . . Have you got an updated copy of the PowerRPC dll?”
`(Milionis Decl., Ex. 7 at 7.) The signature line of Akande’s email stated “Toye
`Akande, Engineering Department, Chordiant Software, Inc.” (Id.) After a series of
`emails discussing technical issues with the Software, Netbula emailed Akande, asking
`“When were the licenses purchased? What was the invoice number for the license
`purchase? Was your company under another name? somehow [sic] I could not find
`Chordiant in our customer database.” (Id. at 2.) Akande responded by stating “I
`might have mentioned that the invoice would have been raised under the previous
`company name of Prime Response Ltd. We are based in 2 goat Wharf, Brentford,
`Middlesex, UK, TW8 0BA.” (Id.)
`On April 2, 2004, a purchase order from “Chordiant Software Intl Ltd” was submitted
`to Netbula, requesting “1000 client runtime licenses . . . standard
`support/maintenance contract . . . upgrade to the current version of the SDK.”
`
`•
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`(Milionis Decl., Ex. 24 at 2.) On April 27, 2004, Netbula sent an invoice for “1000
`ONC RPC WIN32 Client runtime upgrade (NT/2K/XP/Server 2003) Standard
`support/maintenance contract (back 2000-2004), ONC RPC Win32 SDK Upgrade.”
`(Id., Ex. 24 at 1.) The invoice lists the “Customer” as “Chordiant Software Intl Ltd, 2
`Goat Wharf, Brentford, UK.” (Id.) Netbula mailed a disk to Chordiant International
`stating “Licensee Chordiant Software Developer 1000 Runtime (s1030).” (Id., Ex.
`26.)
`The evidence indicates that Netbula granted two licenses. First, the 2000 license
`unambiguously granted a license to Prime Response UK. Although Defendants contend that
`Chordiant Inc. possesses a license as the parent corporation to Prime Response UK’s successor
`company, Chordiant International, the evidence shows that Chordiant Inc. and Chordiant
`International have always remained separate entities and there is no evidence indicating that a valid
`transfer of Prime Response UK’s license was ever made to Chordiant Inc. Thus, the Court finds
`Chordiant Inc. does not possess a license to the Software pursuant to the 2000 Prime Response UK
`license.
`With respect to the 2004 Chordiant Upgrade, the CD sent to Chordiant International lists
`“Chordiant Software” as the licensee, but does not identify whether Chordiant Software
`International Limited, a United Kingdom corporation, or Chordiant Software, Inc., a Delaware
`corporation, is the intended licensee. The extrinsic evidence regarding the negotiations to the
`license does not resolve the ambiguity. A reasonable jury could find that the communications
`between Netbula and Chordiant Inc. evidence an intent to grant Defendant Chordiant Inc. a license
`to the upgraded version of the Software because of the identification of Chordiant Software, Inc. in
`the signature line of Toye Akande’s email. However, a reasonable jury could also find that Netbula
`intended to grant a license to Chordiant International based on Akande’s representation that his
`company was the successor to the Prime Response UK license and the fact that the invoice and
`purchase order were sent to and received from Chordiant International in the United Kingdom.
`Neither party submits evidence showing whether Chordiant International or Defendant Chordiant
`paid for the 2004 license. Thus, the Court finds a genuine issue of material fact exists as to whether
`Chordiant Inc. has an express license to the 2004 Chordiant Upgrade.
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`In response to the conflicting evidence, Defendants contend that summary judgment is still
`appropriate because, in light of the fact that some license was granted by Netbula to some Chordiant
`entity, Plaintiffs bear the burden on summary judgment of showing that the scope of those licenses
`did not include Chordiant Inc. (Motion at 11.) According to Defendants, Plaintiffs have not met
`this burden because “the undisputed evidence reflects no agreement to exclude Chordiant as a
`licensee.” (Defendants’ Reply Memorandum in Support of Chordiant’s Motion for Summary
`Judgment at 2, hereafter, “Reply,” Docket Item No. 125.)
`A copyright owner who grants a nonexclusive license waives his right to sue for copyright
`infringement, unless the owner can show that the license is limited in scope and the licensee has
`acted outside the scope of the license. Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115,
`1121-22 (9th Cir. 1999). “[W]here the existence of a license agreement is not in dispute, and the
`scope of the license is the only issue, the copyright owner bears the burden of proving that the
`copying was unauthorized.” Netbula, LLC v. Bindview Dev. Corp., 516 F. Supp. 2d 1137, 1150
`(N.D. Cal. 2007).
`In this case, the scope of the license is not the only disputed issue. While the parties agree
`that some license was granted by Plaintiff Netbula, there are genuine issues of material fact as to
`whether a license was granted to Defendant Chordiant Inc. Thus, the law does not place the burden
`on Plaintiffs to show that Chordiant Inc. acted outside the scope of a license.
`Accordingly, the Court DENIES Defendants’ Motion for Summary Judgment based on the
`existence of an express license to Chordiant Inc. to use Plaintiffs’ Software.
`B.
`Implied License to Use the Software
`At issue is whether Defendant Chordiant Inc. had an implied license to use Plaintiffs’
`Software. (Motion at 12-14.) Plaintiffs contend that Chordiant Inc. does not have an implied license
`because Netbula treated Chordiant as a licensee based only on its belief that Chordiant Inc. was
`actually Chordiant International. (Opposition at 14-16.)
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`A copyright owner may grant a nonexclusive license expressly or impliedly through conduct.
`Asset Marketing Systems, Inc. v. Gagnon, 542 F.3d 748, 754 (9th Cir. 2008). An implied license is
`granted when “(1) a person (the licensee) requests the creation of a work, (2) the creator (the
`licensor) makes that particular work and delivers it to the licensee who requested it, and (3) the
`licensor intends that the licensee-requestor copy and distribute his work.” Id. Some courts have
`held that an implied license can exist even where the copyright owner does not create a custom work
`for the putative licensee. See Field v. Google Inc., 412 F. Supp. 2d 1106, 1116 (D. Nev. 2006);
`Keane Dealer Servs., Inc. v. Harts, 968 F. Supp. 944, 947 (S.D.N.Y. 1997). In all cases, the relevant
`inquiry is “the licensor’s objective intent at the time of the creation and delivery of the software as
`manifested by the parties’ conduct.” Asset Marketing Systems, 542 F.3d at 756 (citing Effects
`Assoc., Inc. v. Cohen, 908 F.2d 555, 559 n.6 (9th Cir. 1990)). Whether the licensor intended to
`grant an implied license “is a question of fact that must be left to the jury.” Intelligraphics, Inc. v.
`Marvell Semiconductor, Inc., No. C 07-2499 JCS, 2008 WL 3200212, at *6 (N.D. Cal. Aug. 6,
`2008).
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`In this case, the parties’ dispute centers on whether Netbula’s conduct exhibited an objective
`intent to allow Chordiant Inc. to use the Software. In addition to the evidence regarding the issuance
`of the 2000 Prime Response UK License and the 2004 Chordiant Upgrade discussed above,
`Defendants provide emails from April 2007 and October 2007 discussing some Chordiant entity’s
`use of the Software and identifying Chordiant employees as employees of “Chordiant Software,
`Inc.” in the signature line at the bottom of their emails. (See Milionis Decl., Exs. 34-35, 41.)
`Defendants also provide the following emails:
`•
`A June 2004 email from Toye Akande stating “We have now installed the latest
`version of the Netbula ONC-ROC [sic] kit.” (Milionis Decl., Ex. 32.) The signature
`line to Akande’s email stated “Toye Akande, Chordiant Software, Inc., Brentford,
`Middlesex, United Kingdom.” (Id.) Netbula responded by stating “We will get back
`to you on this ASAP.” (Id.)
`An August 2005 marketing email from Netbula to Oliver Wilson, a Chordiant
`employee located in New Hampshire, which addressed Wilson as a “Netbula ONC
`RPC and PowerRPC user.” (Milionis Decl., Ex. 33.)
`
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`In contrast, Dr. Yue provides his declaration, which states that “[o]n October 1, 2007, when I
`was trying to find the mailing address of Chordiant Software, Inc.’s CEO, I started to realize that
`[Chordiant Inc.] was probably a different company from the UK company Prime Response Ltd
`which had changed its name to Chordiant Software Intl Ltd.” (Yue Decl. ¶ 73.) Dr. Yue further
`explains that “[a]fter spending so much time inquiring and investigating the situation [with
`Chordiant Inc.], I concluded (1) [Chordiant Inc.] was not Chordiant Software International Ltd or
`Prime Response Ltd; [and] (2) [Chordiant Inc.] did not have any Netbula license . . . .” (Id. ¶ 81.)
`Based on the evidence showing that Netbula sent the Software to Chordiant International in
`the United Kingdom and Dr. Yue’s declaration explaining that he did not realize Chordiant Inc. was
`a separate entity from Chordiant International, a reasonable jury could find that Netbula did not
`intend to grant Chordiant Inc. an implied license to the Software. Moreover, Defendants’ evidence
`would not preclude a reasonable jury from finding that Netbula reasonably believed it was dealing
`with an existing licensee. Thus, the Court finds that genuine issues of material fact remain as to
`whether Chordiant Inc. possessed an implied license to use Plaintiffs’ Software.
`Accordingly, the Court DENIES Defendants’ Motion for Summary Judgment on the ground
`that Chordiant Inc. possessed an implied license.5
`C.
`Equitable Estoppel Against Plaintiffs
`In the absence of an express or implied license, Defendants contend that summary judgment
`is appropriate on the ground that Plaintiffs are equitably estopped from asserting copyright
`infringement. (Motion at 14-15.)
`In the copyright context, there are four conjunctive elements to an equitable estoppel
`defense: (1) the plaintiff must know the facts of the defendant’s infringing conduct; (2) the plaintiff
`must intend that his conduct be acted on or must so act that the defendant has a right to believe that
`it is so intended; (3) the defendant must be ignorant of the true facts; and (4) the defendant must
`
`5 In light of the Court’s finding that genuine issues of material fact exist regarding the
`existence of an express or implied license to Chordiant Inc., the Court need not address the parties’
`contentions as to whether Chordiant Inc.’s use of the Software was beyond the scope of any license.
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`detrimentally rely on the plaintiff’s conduct. Hadady Corp. v. Dean Witter Reynolds, Inc., 739 F.
`Supp. 1392, 1399 (C.D. Cal. 1990); see also 4 Nimmer on Copyright § 13.07 (2008).
`Here, based on the evidence discussed above, triable issues exist regarding the first two
`elements of Defendants’ estoppel defense. First, there is a genuine issue of material fact as to
`whether Netbula knew that Chordiant Inc. was using the Software and whether Netbula intended to
`license the Software only to Prime Response UK and its successor corporation Chordiant
`International. Second, there is a genuine issue of material fact as to whether Chordiant Inc. had the
`right to believe that Netbula intended for Chordiant Inc. to rely on its conduct.
`Accordingly, the Court DENIES Defendants’ Motion for Summary Judgment on the ground
`of equitable estoppel.
`
`V. CONCLUSION
`The Court DENIES Defendants’ Motion for Summary Judgment.
`
`Dated: July 9, 2009
`
`
`JAMES WARE
`United States District Judge
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`Case5:08-cv-00019-JW Document142 Filed07/09/09 Page12 of 12
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`THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN DELIVERED TO:
`Albert L. Sieber asieber@fenwick.com
`Antonio Luis Cortes corteslaw@comcast.net
`Jedediah Wakefield jwakefield@fenwick.com
`Laurence F. Pulgram lpulgram@fenwick.com
`Liwen Arius Mah lmah@fenwick.com
`Mary Elizabeth Milionis Mmilionis@Fenwick.com
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`Dated: July 9, 2009
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`Richard W. Wieking, Clerk
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`By: /s/ JW Chambers
`Elizabeth Garcia
`Courtroom Deputy
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`For the Northern District of California
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`United States District Court