Gsi Lumonics, Inc. v. Biodiscovery, Inc.

• Decision Date: 25 August 2000
• Docket Number: No. Civ.A. 99-12544-WGY.,Civ.A. 99-12544-WGY.
• Citation: 112 F.Supp.2d 99
• Parties: GSI LUMONICS, INC., a Canadian Corporation, Plaintiff, v. BIODISCOVERY, INC., a California corporation, and Soheil Shams, an individual, Defendants.
• Court: U.S. District Court — District of Massachusetts

Page 99

112 F.Supp.2d 99

GSI LUMONICS, INC., a Canadian Corporation, Plaintiff, v. BIODISCOVERY, INC., a California corporation, and Soheil Shams, an individual, Defendants.

No. Civ.A. 99-12544-WGY.

United States District Court, D. Massachusetts.

August 25, 2000.

Daniel J. Lyne, Sharon H. Patton, Hanify & King, P.C., Boston, MA, Kathleen E. Cross, Hanify & King, Boston, MA, for plaintiff.

Steven Brower, Ginsburg, Stephan, Oringher & Richman, Costa Mesa, CA, Joseph J. Laferrera, Lucash, Gesmer & Updegrove, LLP, Boston, MA, Keyvan Samini, Stephan, Oringer, Richman & Theodora, Costa Mesa, CA, for defendants.

MEMORANDUM

YOUNG, Chief Judge.

I. INTRODUCTION

This case involves a copyright dispute related to computer software between declaratory judgment plaintiff GSI Lumonics, Inc. ("GSLI"¹), a Canadian corporation, and defendants BioDiscovery, Inc. ("BioDiscovery"), a California corporation, and Soheil Shams ("Shams"), a resident of California. This Memorandum relates only to the Defendants' motion to dismiss Soheil Shams for lack of personal jurisdiction and his argument for dismissal based on the identity of the real party in interest, those issues having been taken under advisement at the oral hearing on February 16, 2000,² and having been ruled on by this Court by Order of March 6, 2000.

II. FACTUAL BACKGROUND

The following facts are derived from the First Amended Complaint, unless otherwise indicated. GLIB is a Canadian corporation whose Life Sciences Division has a principal place of business in Watertown, Massachusetts.³ GSLI designs and manufactures equipment for use in acquiring and analyzing human gene expression data from biological micro array slides. BioDiscovery, Inc., is a California corporation with a principal place of business in Los Angeles. In January 1998, GSLI and Shams (who at the time was allegedly conducting business under the name "BioDiscovery") entered into a Confidentiality Agreement (the "Confidentiality Agreement") pursuant to which GSLI was provided with a pre-release copy of ImaGene, a micro array software program, for GSLI's review in anticipation of entering a non-exclusive distribution agreement allowing GSLI to bundle ImaGene with its ScanArray scanners. GSLI did not receive the source code⁴ for the ImaGene software. In March 1998, GSLI and BioDiscovery entered into such an agreement (the "OEM/Remarketing Agreement"). By the terms of the OEM/Remarketing Agreement, GSLI was free to market other image processing software and data extraction software.

In the summer of 1998, GSLI claims that it decided to develop its own micro array analysis software due to customer dissatisfaction with ImaGene and other shortcomings of the ImaGene software. In August 1999, GSLI introduced its own micro array analysis software, called "QuantArray." Due to its apparent superiority to ImaGene, QuantArray has become the leading micro array software in the market.

On October 25, 1999, BioDiscovery's counsel served notice, via letter, upon GSLI that "BioDiscovery, Inc." deemed QuantArray to infringe upon BioDiscovery's registered copyright. Since that date, GSLI met with Shams and representatives of BioDiscovery and attempted to determine the specifics of the copyright infringement allegations. Apparently Shams and BioDiscovery have not been forthcoming with any specific theory behind their copyright concerns. In an attempt to preserve its reputation against what it believes are unfair and untrue accusations of copyright infringement, GSLI filed this suit seeking declaratory relief of non-infringement on December 10, 1999 (the "Massachusetts Action"). On December 20, 1999, Shams filed suit in the Central District of California (the "California Action") against GSLI for copyright infringement, breach of the Confidentiality Agreement, and related causes of action. See Def.Mem. at 6.

III. ANALYSIS

BioDiscovery and Shams have brought this Motion to Dismiss on the basis that the original defendant, BioDiscovery, is not the real party in interest, and that Shams, the real party in interest, filed his California action before he was amended into the Massachusetts Action by GSLI. Furthermore, Shams alleges that this Court lacks personal jurisdiction over him.⁵

A. Motion to Dismiss in Favor of the California Action

BioDiscovery and Shams allege in their motion that BioDiscovery is neither the actual nor beneficial owner of the copyright in suit, and that Shams is the true owner.⁶ See Def.Mot. at 1-2. GSLI does not now dispute the ownership of the copyright, but the circumstances explain GSLI's confusion as to ownership. These circumstances show that GSLI either was actively misled into believing that BioDiscovery was the owner of the copyright in suit, or at least had a reasonable basis for believing that BioDiscovery was the owner.

1. Basis for Confusion

At the time GSLI and Shams entered into the Confidentiality Agreement on January 30, 1998, BioDiscovery was not yet in existence but Shams was personally and individually using the name "BioDiscovery" as a "fictitious business name." Def. Mot. at 3. At no point during negotiations did "BioDiscovery" reveal that the contract really involved intellectual property belonging to Shams. See Pl.Opp. at 9. "BioDiscovery" is the name that appears on the Confidentiality Agreement. See Shams Decl.Ex. B. The Confidentiality Agreement states, "BioDiscovery claims and reserves all rights and benefits afforded under federal and international copyright law in all software programs and documentation included in the materials as copyrighted works." Id. This Confidentiality Agreement was not signed by Shams, but rather was signed by Nick Maverick, BioDiscovery's Director of Sales and Marketing. See id.

Furthermore, the subsequent OEM/Remarketing Agreement uses the incorporated "BioDiscovery, Inc." name as the party to be bound by the agreement. See Shams Decl.Ex. C. Shams negotiated that Agreement, but the language of the Agreement purports to grant a license from "BioDiscovery, Inc." to GSLI (then named "General Scanning, Inc."). Shams is not mentioned in the OEM/Remarketing Agreement. The OEM/Remarketing Agreement says that BioDiscovery holds GSLI harmless from any claims that the computer program to be distributed infringes any "patent, trademark, [or] copyright." Id. at ¶ 14.1. Additionally, the shrink-wrap license covering each copy of ImaGene to be distributed clearly specifies "BioDiscovery, Inc." as the sole licensor. See Dowd Aff.Ex. 6. The ImaGene user manual stated on the lower-left hand corner, "Copyright (c) 1998, BioDiscovery, Inc." Id. Ex. 7. Additionally, screen pictures of the ImaGene software contained in the user manual clearly show a copyright notice, "Copyright BioDiscovery 1997, 1998." Id.

The October 1999 letter accusing GSLI of copyright infringement states, "It is the position of BioDiscovery that ... your organization engaged in intentional and illegal copying ... in contravention of BioDiscovery's registered copyright and written agreements between the parties." Lyne Aff.Ex. A at 2. As before, the existence of Shams' interest in the copyright was absent from the communication.

It is quite clear to this Court that GSLI's failure to include Shams as a defendant in its original Complaint stems from a pervasive pattern of BioDiscovery's appearance as being the owner and party-in-interest of the copyright at issue, even prior to its own incorporation.⁷ Whether or not this concealment of the ownership interest was intentional, GSLI's intent to sue the copyright holder of ImaGene for a declaratory judgment is evident and it should not be prejudiced by its reliance on the defendants' ongoing, pervasive representations of ownership.

2. Status of BioDiscovery

It is now clear to this Court that BioDiscovery is neither the owner nor the assignee of the copyright in suit. Thus, argue the defendants, in a direct copyright infringement suit, BioDiscovery would have no standing to sue GSLI. Likewise, a declaratory judgment action against BioDiscovery fails for want of an "actual case or controversy." See Starter Corp. v. Converse, Inc., 84 F.3d 592, 595 (2d Cir.1996). In copyright law, an action for infringement is brought by the legal or beneficial owner of the copyright at issue. See 17 U.S.C. § 501(b). GSLI has not argued in its brief that there is any reason to keep BioDiscovery in the case. Although BioDiscovery is likely to be joined in this action when Shams' claims of a breach of the Confidentiality Agreement are raised,⁸ BioDiscovery's participation in the copyright suit is apparently superfluous. Logically, BioDiscovery ought be dismissed from the case.

3. Status of Shams

Shams argues repeatedly throughout his motion papers that he is entitled to dismissal because he filed his infringement action in California first, in advance of GSLI's suit against him here. The theory behind that argument, of course, is that GSLI failed to sue him — GSLI mistakenly sued BioDiscovery instead. Because the suit against BioDiscovery failed to establish an actual case or controversy, GSLI's suit was moot and cannot be said to have been filed before Shams' California Action.

Shams' conclusion is incorrect. By virtue of Fed.R.Civ.P. 15(a), a plaintiff is entitled as matter of right to amend its complaint without permission of the court if it does so before a responsive pleading has been served or within twenty days after the service of the pleading to be amended. GSLI amended its complaint to add Shams under this provision and did so twelve days after its initial filing. There was no responsive pleading from BioDiscovery prior to that amendment.

When a new defendant is added to the litigation through the vehicle of Rule 15(a), a question arises about whether that amendment "relates back" to the date of the filing of the original complaint or whether the date of the amendment applies. Although this issue normally concerns a determination relating to a...