Justia Contracts Opinion Summaries

A dispute arose between a South Korean electronics manufacturer and a group of Delaware-based patent holding entities after the manufacturer paid $12.8 million to license certain patents in order to protect itself and its customers from infringement claims. Despite this agreement, the patent holders later sued two of the manufacturer’s major automotive customers in Texas, alleging infringement based on those customers’ use of the manufacturer’s telematics units. The customers settled with the patent holders and then sought indemnification from the manufacturer for their legal expenses and settlement payments, as contemplated by supply agreements between the manufacturer and its customers.The manufacturer initiated a breach of contract action in the Delaware Superior Court, alleging that the patent holders’ Texas lawsuits violated the license agreement, which was intended to provide “patent peace” for both the manufacturer and its customers. The parties disputed whether the telematics units at issue were covered by the license or excluded as “Foundry Products.” The Superior Court ruled on summary judgment that the telematics units were covered and not excluded. The jury found for the manufacturer, awarding over $17 million in damages. The court then capped damages at $12.8 million per the contract but, after trial, further reduced the award to $4.9 million based on a new argument by the patent holders about which entity had received the license fee. The court also denied prejudgment interest and costs.On appeal, the Supreme Court of the State of Delaware affirmed the findings that the telematics units were covered by the license and that sufficient evidence supported the manufacturer’s damages and indemnification obligations. It reversed the post-trial reduction of damages to $4.9 million, finding that argument was raised too late and prejudiced the manufacturer, reinstating the $12.8 million cap. The court also reversed the denial of prejudgment interest and costs, remanding for their calculation and award. View "LG Electronics Inc. v. Invention Investment Fund I, L.P." on Justia Law

A company that designs and manufactures interactive technology products entered into reseller agreements with another company, granting the latter exclusive rights to sell its products in certain territories. Several years later, the manufacturer revoked the exclusivity, after which the reseller’s owner and his son developed a competing product. The manufacturer then terminated the reseller relationship. Subsequently, the reseller sued the manufacturer in South Carolina state court for various business torts and contract claims. The parties settled and executed a written agreement that broadly released and dismissed any and all claims and counterclaims that could have been brought in the litigation, including through a specific handwritten provision. Nevertheless, shortly after, the manufacturer initiated a federal lawsuit, alleging intellectual property violations related to the competing product.The state court dismissed the original action with prejudice, including all possible claims and counterclaims. In the federal action, the defendants argued that the settlement agreement and res judicata barred the new claims. The United States District Court for the District of South Carolina initially allowed certain claims to proceed, but after further evidence and reconsideration, it granted summary judgment for the defendants, finding the claims precluded by the settlement and the state court’s dismissal. A jury was then impaneled for trial on the defendants’ counterclaims.On appeal, the United States Court of Appeals for the Fourth Circuit affirmed the district court’s rulings. The Court of Appeals held that the manufacturer’s claims were barred by res judicata based on the settlement and state court order, as the language of the agreement and the parties’ intent encompassed the intellectual property claims. The appellate court also found no abuse of discretion in the district court’s evidentiary rulings, its reconsideration of summary judgment, or the conduct of the trial, and affirmed the judgment in full. View "Clear Touch Interactive, Inc. v. The Ockers Company" on Justia Law

Gregory Parzych served as president of ZipBy USA, LLC, a parking technology company, after previously founding and selling a similar company, TCS. While employed by ZipBy, Parzych entered into several agreements restricting conflicts of interest and disclosure of confidential information. In 2020, Parzych learned that TCS might be for sale. He advised ZipBy’s owner against pursuing the acquisition, then secretly attempted to purchase TCS for himself via a shell company, using financial information he had obtained as a ZipBy executive. ZipBy discovered his actions, terminated his employment, and, along with affiliates, sued Parzych for breach of fiduciary duty, breach of contract, misappropriation of trade secrets, trademark infringement, and false designation.After a jury trial in the United States District Court for the District of Massachusetts, the jury found for ZipBy on all claims, awarding compensatory and exemplary damages. The district court later granted judgment as a matter of law for Parzych on the trade secret claims, striking the exemplary damages but upholding the other verdicts and damages. The court also entered a permanent injunction barring Parzych from acquiring TCS and awarded ZipBy a portion of its attorneys’ fees. Parzych appealed, contesting evidentiary rulings, denial of a trial continuance, and the fee award, while ZipBy cross-appealed the judgment on the trade secret claims.The United States Court of Appeals for the First Circuit affirmed the district court’s judgment. It held that the district court did not abuse its discretion in admitting ZipBy’s expert lost-profits testimony, excluding late-disclosed evidence, or denying a trial continuance due to counsel’s COVID-19 infection. The appellate court agreed with the district court’s judgment as a matter of law against ZipBy’s trade secret claims, finding insufficient evidence that Parzych’s actions constituted trade secret misappropriation. Finally, the fee award was affirmed as a reasonable enforcement of the IP Agreement’s fee-shifting provision. View "ZipBy USA LLC v. Parzych" on Justia Law

Fetch! Pet Care, Inc., a nationwide franchisor of pet-care services, alleged that a group of former franchisees coordinated to exit their franchise agreements and start competing businesses, allegedly misappropriating Fetch!’s branding, client lists, intellectual property, and trade secrets. The franchisees contended that the newer “2.0” franchise model imposed high fees, delivered poor support, and led to high attrition, while some “1.0” franchisees claimed they were forced out of the system unexpectedly, leaving them no choice but to start their own businesses. A franchisee association was formed, and many franchisees sent rescission notices and pursued arbitration. Fetch! responded by filing suit for breach of contract, trademark infringement, and misappropriation of trade secrets, and sought injunctive relief to prevent the franchisees from operating competing businesses or using its intellectual property.The United States District Court for the Eastern District of Michigan held evidentiary hearings and granted Fetch!’s motion for a temporary restraining order and preliminary injunction in part, ordering defendants to stop using Fetch!’s trademarks and cease communication with current Fetch! franchisees, but denied broader injunctive relief. The court reasoned that a full injunction could harm ongoing arbitration proceedings and found sufficient evidence to invoke the doctrine of unclean hands against Fetch!, based on allegedly deceptive conduct in selling franchises. Fetch! timely appealed the district court’s order.The United States Court of Appeals for the Sixth Circuit reviewed the district court’s application of the unclean hands doctrine for abuse of discretion and affirmed. The appellate court held that the district court acted within its discretion in denying broad injunctive relief based on Fetch!’s bad faith and deceptive marketing practices as an underlying cause of franchisee conduct. The court clarified standards for irreparable harm and affirmed the partial denial of preliminary injunction, relying on the doctrine of unclean hands rather than other defenses. View "Fetch! Pet Care, Inc. v. Atomic Pawz Inc." on Justia Law

The plaintiff, a New Hampshire-based corporation, acquired patents and software from a military contractor and sought to adapt the technology for consumer telecommunications. The defendant, a Finnish multinational, manufactures cellular base stations. In 2015, the parties began discussions about integrating the plaintiff’s software into the defendant’s products. By February 2017, negotiations focused on two main points: a fee for integration work and a lump sum for a perpetual software license. On June 6, 2017, the plaintiff alleges both parties orally agreed to a $3 million integration fee and a $20 million license fee. The defendant disputes whether such an oral agreement occurred. The plaintiff continued work based on this understanding. Later, the defendant offered a lower license fee in a draft written contract, which the plaintiff rejected. Eventually, the defendant canceled the project.After cancellation, the plaintiff sued the defendant in the United States District Court for the District of New Hampshire. Following a ten-day trial, the jury found in favor of the plaintiff on breach of contract and promissory estoppel, awarding $23 million in damages. The district court, considering the defendant’s statute-of-frauds defense, determined that the core issue was whether the perpetual license agreement could be performed within one year. The court found this, along with other issues, raised novel questions of New Hampshire law without binding precedent, and certified three questions to the Supreme Court of New Hampshire.The Supreme Court of New Hampshire reviewed the certified questions. It held that, under New Hampshire law, obligations imposed by a perpetual intellectual property license can be performed within one year, because, absent express language to the contrary, the licensor’s obligations are fulfilled upon granting the license. The court declined to answer the other two certified questions, as its answer to the first resolved the determinative legal issue. The case was remanded to the district court. View "Collision Commc'ns v. Nokia Solutions and Networks OY" on Justia Law

Two individuals who are heirs to the author of a 1983 magazine article about the United States Navy Fighter Weapons School, known as “Top Gun,” brought suit against a film studio. They alleged that a 2022 film, which is a sequel to an earlier movie inspired by the article, unlawfully copied their copyrighted work and breached a contractual obligation to credit the original author.After the 1983 article was published, the author assigned all rights to the studio in exchange for compensation and a promise that he would be credited in any movie “substantially based upon or adapted from” the article. The studio produced an initial film in 1986, which acknowledged the article. Decades later, the heirs terminated the copyright grant under 17 U.S.C. § 203(a)(3)—a statutory right for authors’ heirs. The studio released the sequel without crediting or compensating the heirs. The heirs filed claims for copyright infringement and breach of contract in the United States District Court for the Central District of California. The district court granted summary judgment for the studio, finding that the new film did not share substantial amounts of the article’s original expression and excluded the plaintiffs’ expert’s opinion for failing to filter out unprotectable elements.On appeal, the United States Court of Appeals for the Ninth Circuit affirmed the district court’s decision. The appellate court held that the sequel did not share substantial similarity in protectable expression with the article, as required for copyright infringement. It also found no original and protectable selection and arrangement of elements, and concluded that the district court properly excluded the plaintiffs’ expert and admitted the studio’s expert. The court further held that the studio did not breach the 1983 agreement, because the new film was not produced under the rights conferred by that agreement. The judgment for the studio was affirmed. View "YONAY V. PARAMOUNT PICTURES CORPORATION" on Justia Law

A dispute arose from the design and installation of cabinetry in a luxury home in Charleston, South Carolina. Design Gaps, Inc., owned by David and Eva Glover, had a longstanding business relationship with Shelter, LLC, a general contractor operated by Ryan and Jenny Butler. After being dissatisfied with Design Gaps’ performance, the homeowners, Dr. Jason and Kacie Highsmith, and Shelter terminated their contract with Design Gaps and hired Distinctive Design & Construction LLC, owned by Bryan and Wendy Reiss, to complete the work. The Highsmiths and Shelter initiated arbitration against Design Gaps, which led to the arbitrator ruling in favor of the homeowners and Shelter on their claims, and against Design Gaps on its counterclaims, including those for copyright infringement, tortious interference, and unfair trade practices.After the arbitration, Design Gaps sought to vacate the arbitration award in the United States District Court for the District of South Carolina, but the court instead confirmed the award. Concurrently, Design Gaps filed a separate federal lawsuit against several parties, including some who were not part of the arbitration. The defendants moved to dismiss, arguing that res judicata and collateral estoppel barred the new claims, or alternatively, that the claims failed on other grounds such as the statute of limitations and laches. The district court agreed, dismissing most claims based on preclusion or other legal bars, and granted summary judgment on the remaining claims.The United States Court of Appeals for the Fourth Circuit reviewed the district court’s decisions. The court held that res judicata and collateral estoppel applied to bar most of Design Gaps’ claims, even against parties not directly involved in the arbitration but in privity with those who were. For the remaining claims, the court found they were properly dismissed on grounds such as the statute of limitations, waiver, or laches. The Fourth Circuit affirmed the district court’s judgment in full. View "Design Gaps, Inc. v. Distinctive Design & Construction LLC" on Justia Law

Computer Sciences Corporation (CSC), an American technology services provider, licensed two insurance software platforms, Vantage and CyberLife, to Transamerica, an insurance company. Tata Consultancy Services (TCS), a technology consulting firm, was later engaged by Transamerica as a third-party consultant to maintain CSC’s platforms. CSC and Transamerica signed a Third-Party Addendum allowing TCS access to CSC’s software “solely for the benefit” of Transamerica. During this period, TCS sought to develop its own insurance platform, BaNCS, and won a $2.6 billion contract to transition Transamerica’s business to BaNCS. Evidence arose that TCS used CSC’s confidential information, including source code and technical manuals, for its BaNCS development, prompting CSC to allege trade secret misappropriation when a CSC employee discovered TCS sharing proprietary materials internally.CSC sued TCS in the United States District Court for the Northern District of Texas under the Defend Trade Secrets Act (DTSA). After an eight-day trial with an advisory jury, the jury found in favor of CSC, recommending substantial damages. The district court found TCS liable, awarding CSC $56 million in compensatory damages (based on unjust enrichment), $112 million in exemplary damages, and imposing a permanent injunction barring TCS’s use of CSC’s trade secrets and BaNCS versions developed with misappropriated material.On appeal, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s findings that TCS’s use was unauthorized under the relevant contracts and that TCS had the requisite mens rea, including willful and malicious misappropriation. The Fifth Circuit also affirmed the damages awards and the exemplary damages ratio. However, the court vacated the injunction in part, remanding for the district court to revise it: the injunction’s prohibition on TCS’s future use of BaNCS material developed post-misappropriation was found duplicative of the damages, and the definition of parties bound by the injunction was ordered to be clarified in line with Federal Rule of Civil Procedure 65(d)(2). View "Computer Sciences v. Tata Consultancy" on Justia Law

A company developed a specialized vehicle-mounted stairway, with design work primarily performed by the founder’s son, who was promised equity in the business but never received it due to the majority owner’s repeated refusals. The son, with his father’s assistance, eventually obtained a patent for the design, which he used as leverage to seek compensation. Negotiations between the parties failed, leading to the father’s removal as company president and the company filing suit against both the father and son. The company alleged breach of fiduciary duty, misappropriation of trade secrets, business conspiracy, unjust enrichment, fraud, and breach of contract, while the son counterclaimed for patent infringement.The United States District Court for the Eastern District of Virginia granted summary judgment to the father and son on all claims except a breach of contract claim against the father and the son’s patent counterclaim. The court found most claims time-barred or unsupported by evidence, and later, the company voluntarily dismissed its remaining claim. The son’s patent was invalidated by a jury. The district court also awarded attorneys’ fees and costs to the father as the prevailing party under the company’s operating agreement.The United States Court of Appeals for the Fourth Circuit reviewed the case de novo and affirmed the district court’s rulings. The appellate court held that the company’s claims were either time-barred under the applicable statutes of limitations or failed on the merits, as there was no evidence the son benefited from the patent or that he had signed a non-disclosure agreement. The court also affirmed the award of attorneys’ fees and costs to the father, finding no error in the district court’s application of Delaware law or its determination of the prevailing party. View "Mission Integrated Technologies, LLC v. Clemente" on Justia Law

A former congressman created personalized videos for paying customers through the Cameo platform. A late-night television host, using fictitious names, requested and purchased several of these videos. The host then broadcast some of the videos on his show as part of a recurring segment that mocked the congressman by highlighting his willingness to say unusual things for money. The congressman claimed that this use of his videos infringed his copyrights and also violated state law through breach of contract and fraudulent inducement.The United States District Court for the Southern District of New York reviewed the case and dismissed the complaint. The court found that the copyright claims were barred by the fair use doctrine, reasoning that the television host’s use was transformative and did not harm the market for the original videos. The court also held that the state law claims were either preempted by the Copyright Act or failed to state a claim under applicable state law. Specifically, the court determined that the congressman was not a party to the relevant contract, failed to allege the essential terms of any implied contract, and did not plead any actual out-of-pocket loss for the fraudulent inducement claim.The United States Court of Appeals for the Second Circuit affirmed the District Court’s judgment. The appellate court agreed that the copyright claims were barred by the fair use doctrine, emphasizing the transformative nature of the use and the lack of market harm. The court also concluded that the state law claims failed to state a claim for relief, either because the congressman was not a party to the contract, did not allege an implied contract, or failed to allege actual damages. The judgment of the District Court was affirmed in full. View "Santos v. Kimmel" on Justia Law