As a re-seller of CCC products, ISI purchased and licensed those products from CCC and, in turn, sold and sublicensed those products to end-users in the Marketing Territory. ISI 12G Statement, P 4. According to ISI, "at all times, the end users were customers of ISI and had no direct relationship with CCC." ISI 12G Statement, P 4. It appears ISI does not and has not "paid a franchise fee or fee of any kind to be a reseller of CCC's products." Suppes Decl., P 4. Moreover, ISI conducts its business under its own name, rather than CCC's. Id., P 7. Neither CCC's name nor logo appears on ISI's stationary or business cards. Id. From 1985 through 1989, sales of CCC's products constituted 97 percent of ISI's total sales revenues. Kaminer Cert., P 80.
On 12 July 1984, CCC and ISI entered into an agreement (the "1984 Agreement") appointing ISI as the exclusive re-seller of certain CCC products, including Integrated Learning Systems, in the Marketing Territory. CCC 12G Statement, P 3; see 1984 Agreement, P 2.01 (attached as Exhibit H to Rosdeitcher Aff.). By its own terms, the 1984 Agreement was to expire on 31 July 1989. CCC 12G Statement, P 4; 1984 Agreement, P 13.01. Construction of the 1984 Agreement, as well as any legal relations which it created, was to be governed by California State law. CCC 12G Statement, P 4; 1984 Agreement, P 14.10. The 1984 Agreement contained no provision requiring renewal beyond the expiration date.
The 1984 Agreement required ISI to "use its best efforts to promote demand for and to re-sell CCC's products to the market within the Territory," to "maintain adequate facilities for such purposes"
and to "employ no less than four full-time sales representatives to accomplish this purpose." 1984 Agreement, P 6.01; ISI 12G Statement, PP 2, 5. Moreover, in order to qualify for certain discounts on CCC products, the 1984 Agreement required ISI to adhere to a sales quota for the Marketing Territory as a whole.
ISI 12G Statement, P 5; Suppes Decl., P 9; 1984 Agreement, PP 4.02-4.03.
In return, the 1984 Agreement granted certain software and hardware user licenses to ISI and authorized ISI "to use CCC's name, trademark and logo in its advertising, trade shows, public relations materials and manuals." 1984 Agreement, PP 3.01-3.03, 6.02. It was expressly provided that these licenses and rights terminated upon expiration of the 1984 Agreement. Id., PP 3.04, 6.02. Moreover, the 1984 Agreement expressly stated that "ISI shall not enjoy any rights in the CCC name, its trademarks or logo." Id., P 6.03; see also id., PP 11.01-11.02.
CCC asserts that, during the course of the 1984 Agreement, it met with ISI and "expressed concern with ISI's performance and ability to compete" in the Marketing Territory.
Moving Brief at 6; see also Suppes Decl., PP 8, 10. CCC perceived that ISI was concentrating its sales efforts in three states -- New York, New Jersey and Massachusetts -- and not adequately serving the seven other states and the District of Columbia (the "Eight States") within the Marketing Territory.
Moving Brief at 6; Suppes Decl., P 8; see also Letter, dated 14 January 1988, from CCC to ISI (discussing uneven marketing efforts of ISI) (attached as Exhibit D to Rosdeitcher Aff.); Letter, dated 24 June 1988, from CCC to ISI (same) (attached as Exhibit E To Rosdeitcher Aff.).
CCC states: "ISI was doing little or no business in . . . Connecticut, Delaware, the District of Columbia, Maine, Maryland, New Hampshire, Rhode Island and Vermont." Moving Brief at 6. For instance, it appears ISI made no sales in New Hampshire or Vermont from 1981 to 1989.
Moving Brief at 6; Deposition Transcript of Phyllis Kaminer ("Kaminer Dep. Tr."), dated 9 May 1989, 315-16 (attached as Exhibit B to Rosdeitcher Aff.). Over the same nine-year period, ISI made only two sales in Maine. Kaminer Dep. Tr. at 316.
Allegedly based upon ISI's performance, CCC determined that decreasing the area of the Marketing Territory was necessary. Suppes Decl., PP 8-14. According to CCC:
By neglecting parts of the Marketing Territory, ISI was irretrievably damaging CCC. Competition is strong in the Integrated Learning Systems business, and once a competitor's system is installed in a particular school district, the district is not likely to switch to CCC's system.
CCC's economic interests and its ability to effectively market its products [were] threatened by ISI's failure to market the disputed states. . . . There was no justification for CCC to continue to remain a passive observer while its competitors make inroads into the states ISI had largely ignored.