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Air Express International v. Log-Net, Inc.

United States District Court, D. New Jersey

January 29, 2015

LOG-NET, INC., Defendant.


MICHAEL A. SHIPP, District Judge.

This matter comes before the Court upon Plaintiff Air Express International d/b/a DHL Global Forwarding Corporation's ("Plaintiff' or "DHL") motion for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. (ECF No. 122.) Defendant LOG-NET, Inc. ("Defendant" or "LOG-NET") filed opposition (ECF No. 130), and Plaintiff replied (ECF No. 135). The Court has carefully considered the parties' submissions and decided the matter without oral argument pursuant to Local Civil Rule 78.1. For the reasons stated below, and for other good cause shown, Plaintiffs motion for partial summary judgment is denied.

I. Background

This action arises from a commercial dispute between the parties. Defendant is the developer and licenser of computer software. (Def.'s Opp'n 2, ECF No. 130.) Plaintiff is in the business of shipping goods and materials and, for over fifteen years, used Defendant's software to process shipping transactions for its customers. (Pl.'s Moving Br. 1, ECF No. 122-2.)

On February 22, 2008, Plaintiff and Defendant entered into a three-year Master License and Subscription Agreement ("Agreement"), which was amended on February 26, 2011 ("Addendum"). (Def.'s Responses to Pl.'s Statement of Undisputed Material Facts ("SUMF") ¶ 1, ECF No. 130-1.[1]) The Agreement enabled Plaintiff to purchase licenses to use Defendant's software in its shipping business. ( Id. ¶ 3.)

Under the parties' Agreement, Plaintiff utilized Defendant's software through its own computer system, the "Authorized System." (Agreement § 1.3, ECF No. 122-5.) Under the Agreement, "Authorized Users" included both Plaintiff and "DHL Customers" - "DHL's authorized third-party end users of the Authorized System limited to parties using the application in the course of using or providing physical transportation, logistics and distribution services." ( Id. §§ 1.1, 1.2, 1.5.) Plaintiffs licenses from Defendant included "various components of [Defendant's] software, including (a) Multi-User Server licenses; (b) Client Seat licenses; (c) Documentation Module Multi-User Seat licenses; and (d) Electronic Data Interchange applications." ( Id. ¶ 9.) Multi-User Servers, the central application servers, contained "the server database and all of the actual Log-Net software." (SUMF ¶ 10.) Client Seats, internet browser connections, are installed on and connect to the Multi-User Servers to access and process transactions. (Agreement § 1.18; SUMP ¶ 13.) "To process shipping transactions, DHL was required under the... Agreement to have licenses for both the Multi-User Servers and Client Seats." ( Id. ¶ 14.)

Pursuant to the Agreement, Plaintiff agreed to pay Defendant "one-time license/installation fees, which were calculated based upon the type of license at issue." ( Id. ¶ 18.) Additionally, Plaintiff agreed to pay Defendant a yearly subscription fee. ( Id. ¶ 19.) "The payment of the Subscription Fees entitled [Plaintiff] to software upgrades and bug fixes to the software...." ( Id. ¶ 21.) "Both the license/installation fees and the Subscription Fees were paid on a per server, per Seat or per application basis." ( Id. ¶ 20.)

The Agreement defines "License(s)" as:

[a]ny personal, non-exclusive, non-transferable, non-assignable license or licenses for Customer's internal use only granted by Licensor to Customer to use the Software or Software Products under this Agreement, such licenses shall be granted on a perpetual basis in consideration of DHL paying a minimum of three years of subscription fees at no less than the licensed volume and costs outlines in Appendix E and C.

(Agreement § 1.9.) Under the heading "License, " the Agreement provides that Defendant grants and Plaintiff accepts "a limited, personal, nonexclusive, non-transferable, non-assignable Object Code license to use the Software and Software Products for DHL's Authorized System." ( Id. § 3.1.) The Agreement further states that "[a]ll Software and Software Products... are furnished to [Plaintiff] only under a personal, non-exclusive, non-transferable[, ] non-assignable Object Code license solely for DHL Customer's use and DHL's own internal use." ( Id. § 3.2.)

It is undisputed that Plaintiff "paid Subscription Fees for a minimum of three years for each license of [Defendant's] software that it purchased under the... Agreement." (SUMP ¶ 29.) At some point after the three-year period, Plaintiff stopped paying Subscription Fees on some of the licenses, and Plaintiff alleges that Defendant shut down its access to forty-five Client Seats. (Pl.'s Moving Br. 8.) In response, on March 21, 2012, Plaintiff filed this action asserting two claims against Defendant: (1) breach of contract; and (2) breach of the implied covenant of good faith and fair dealing. (ECF No. 1.) In its Amended Answer and Counterclaims, Defendant asserts seventeen counterclaims against Plaintiff, including breach of contract, breach of the implied covenant of good faith and fair dealing, copyright infringement, trademark infringement, and unfair competition. (ECF No. 112.)

On June 6, 2012, Plaintiff moved for a preliminary injunction, and on June 26, 2012, the Honorable Joel A. Pisano, U.S.D.J., after hearing oral argument on Plaintiffs application, granted the injunction. In support of his findings, Judge Pisano reasoned that "[a]Ithough there are arguments that go both ways, " "[P]laintiff has demonstrated to [his] satisfaction a likelihood of success on the merits." (June 26, 2012 Hearing Tr. 44:8-46:16, ECF No. 74.) Judge Pisano, therefore, entered a preliminary injunction enjoining and restraining Defendant, in part, from denying Plaintiff access to the licenses. (ECF No. 51.)

By Order dated June 16, 2014, the Court instructed the parties to move for summary judgment on "those claims or defenses as to which the issue of perpetual licenses' is dispositive." (ECF No. 118.) Plaintiff now moves for partial summary judgment as to" (1) the element of breach for its claims of breach of contract and of the implied covenant of good faith and fair ...

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