Itofca, Inc. v. MegaTrans Logistics

• Decision Date: 19 December 2000
• Docket Number: No. 99-4118,99-4118
• Citation: 235 F.3d 360
• Parties: (7th Cir. 2000) ITOFCA, Inc., Plaintiff-Appellant, v. MegaTrans Logistics, Inc., Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 360

235 F.3d 360 (7th Cir. 2000)

ITOFCA, Inc., Plaintiff-Appellant, v. MegaTrans Logistics, Inc., Defendant-Appellee.

No. 99-4118

In the United States Court of Appeals For the Seventh Circuit

Argued November 3, 2000

Decided December 19, 2000

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 99 C 2087--Ruben Castillo, Judge.

Before Flaum, Chief Judge, and Easterbrook and Williams, Circuit Judges.

Flaum, Chief Judge.

ITOFCA, Inc. ("ITOFCA") brought suit against MegaTrans Logistics, Inc. ("MegaTrans") alleging that MegaTrans' continual licensing of a computer software program constitutes an infringement on a copyright belonging to ITOFCA. MegaTrans counterclaimed, seeking termination of ITOFCA's copyright in the program along with a declaratory judgment that MegaTrans holds a non-exclusive copyright in the software. Additionally, MegaTrans asserted in its counterclaim that ITOFCA has violated the Lanham Act, 15 U.S.C. sec. 1125, by representing to MegaTrans customers that ITOFCA is the software copyright owner. The district court granted MegaTrans summary judgment after determining ITOFCA's copyright infringement claim to be barred by res judicata. In the same order, the court dismissed all of MegaTrans' counterclaims without prejudice. ITOFCA now appeals the grant of summary judgment. For the reasons stated herein, we find appellate jurisdiction wanting and therefore dismiss.

I. BACKGROUND

ITOFCA is a not-for-profit association that was created to assist its members in the procurement of transportation, shipping, and freight forwarding services. By 1986, ITOFCA had developed a comprehensive intermodal software computer program that assisted its members in tracking and scheduling their freight shipments. That same year, as part of an asset transfer agreement, ITOFCA transferred ownership of two copies of the software to ITOFCA Consolidators, Inc. ("ICI"), a wholly owned, for-profit corporate subsidiary of ITOFCA. According to ITOFCA, the transfer of software ownership did not include any transfer of the intellectual property rights in the software. From 1987 through 1991, ICI used and modified the software program.

In January of 1991, ICI was forced into bankruptcy. Since the bankruptcy proceedings required that ICI receive court approval for any asset transfer, the company filed a motion with the court requesting authorization to sell one of its copies of the software to a company named Amerifreight. Initially, ITOFCA objected to the sale, but after a hearing clarifying the scope of the sale, the company withdrew its challenge. Amerifreight and ICI subsequently executed an assignment of ICI's rights in the software, and ICI delivered to Amerifreight one of its copies of the software's source code on magnetic tape. In return, ICI received $25,000.

Shortly thereafter, Amerifreight transferred its rights received under the ICI assignment to MegaTrans, the defendant in this matter. MegaTrans slightly altered the software and began to market it under the name MegaLink. Between 1991 and 1998 MegaTrans licensed the MegaLink software to three customers, raising approximately $225,000 in revenue. ITOFCA, which had gone dormant for almost five years, reemerged, contacted MegaTrans, and asserted that it, ITOFCA, owned the copyright in the software program. The parties were unable to come to any agreement regarding the ownership of the intellectual property rights. Thereafter, in March of 1999, ITOFCA applied for and obtained a copyright registration for the comprehensive intermodal software program.

ITOFCA subsequently filed suit in the District Court for the Northern District of Illinois alleging copyright infringement on the part of MegaTrans. In addition to damages, ITOFCA sought to enjoin MegaTrans from further alleged acts of infringement and to have all copies of the software produced in violation of ITOFCA's rights impounded. MegaTrans counterclaimed. In direct opposition to ITOFCA's prayer for relief, MegaTrans sought a declaratory judgment that ITOFCA has no copyright in the software at issue, and that MegaTrans has been assigned on a non- exclusive basis all intellectual property rights in the software. Furthermore, MegaTrans sought to have ITOFCA's 1999 copyright registration voided. Finally, MegaTrans alleged that ITOFCA, by contacting certain actual and potential customers of MegaTrans and representing to them that ITOFCA holds the copyright to the software, has made misleading descriptions of facts likely to cause confusion, all in violation of 15 U.S.C. sec. 1125, the Lanham Act.

On November 19, 1999, the district court granted summary judgment to MegaTrans. The court found that ITOFCA had been a party to the bankruptcy sale, which it determined to be a judicially authorized final adjudication of the ownership rights. According to the district court, during those proceedings "the Bankruptcy Court, correctly or incorrectly, purported to sell a non-exclusive right to the computer program 'free and clear of all liens, claims and encumbrances.'" ITOFCA, Inc. v. MegaTrans Logistics, Inc., No. 99 C 2087, 1999 WL 1068479, at *3 (N.D. Ill. Nov. 19, 1999). Therefore, the court held that by withdrawing its objection, ITOFCA acquiesced in the sale such that res judicata barred ITOFCA's present attempt to litigate copyright ownership. In entering judgment against ITOFCA, the court noted that it was "mindful that this order may not result in the end of litigation because of MegaTrans' counterclaims." Id. at *4 n.3. However, because it felt that "some of these claims may now be moot," the court "decided to dismiss the counterclaims without prejudice to their refiling in an appropriate amended fashion." Id. In doing so, the court urged the parties to consider settlement of any issues that remained.

ITOFCA appealed to this Court. Recognizing that the district court's decision may not have constituted a final appealable judgement within 28 U.S.C. sec. 1291, on December 10, 1999, we ordered ITOFCA to file a memorandum stating why this appeal should not be dismissed for lack of jurisdiction. On January 24, 2000, we ordered that the appeal should proceed to briefing, and that the issue of appellate jurisdiction be considered along with the merits.

II. DISCUSSION

Both parties to this litigation maintain that 28 U.S.C. sec. 1291 confers jurisdiction upon this Court to hear the present appeal. That Section provides that "courts of appeal . . . shall have jurisdiction of appeals from all final decisions of the district courts of the United States." 28 U.S.C. sec. 1291. However, simply because the litigants agree that a judicial determination is a final decision (and thus appealable under Section 1291), does not make it so. See Union Oil Co. of Cal. v. John Brown E & C, 121 F.3d 305, 309 (7th Cir. 1997). "It is our threshold and independent obligation to make that determination even though both parties agreeably considered the order final and appealable." Horwitz v. Alloy Automotive Co., 957 F.2d 1431, 1435 (7th Cir. 1992).

Whether a decision is final for purposes of sec. 1291 generally depends on whether the decision by the district court "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Coopers & Lybrand v. Livesay, 437 U.S. 463, 467 (1978) (internal quotation omitted). ITOFCA argues that the district court's decision, by granting summary judgment to MegaTrans and dismissing all of MegaTrans' counterclaims, has in effect ended the litigation on the merits, thus allowing appellate review of the summary judgment decision. Had MegaTrans never filed counterclaims, such that this suit only involved ITOFCA's claim which the district court decided in summary judgment, our jurisdiction under sec. 1291 would be undeniable. However, the filing of counterclaims against ITOFCA by MegaTrans calls into question whether there has been a final judgment for sec. 1291 purposes. This is because "[a]n order dismissing a complaint, but not ending the case, is not a final decision and therefore may not be appealed." Albiero v. City of Kankakee, 122 F.3d 417, 418 (7th Cir. 1997).

ITOFCA suggests that the district court's decision dismissing MegaTrans' counterclaims makes this case procedurally indistinguishable from the hypothetical situation in which no counterclaims are ever filed. We disagree. Were MegaTrans' counterclaims dismissed with prejudice, such that there was no possibility of their reemergence, ITOFCA would be correct, and we would proceed to the merits. However, the district court unequivocally stated that it "has decided to dismiss the counterclaims without prejudice to their refiling in an appropriate amended fashion." ITOFCA, No. 99 C 2087, 1999 WL 1068479, at *4. Though earlier cases from this Circuit may not have uniformly held so, we do find that this "form of dismissal does not terminate the litigation in the district court in any realistic sense and so is not a final decision within the meaning of 28 U.S.C. sec. 1291, which authorizes the appeal of such decisions." JTC Petroleum Co. v. Piasa Motor Fuels, Inc., 190 F.3d 775, 776 (7th Cir. 1999); see also Union Oil, 121 F.3d at 309-11; Horwitz, 957 F.2d at 1435-36. To understand why, we need not look beyond the rationale behind the district court's decision and the ramifications of that decision.

In order to create a final judgment under sec. 1291 and make the order granting summary judgment appealable, the district court had to dispose of all the issues it did not decide in its order. Yet, it would be disingenuous to suggest that by dismissing the claims without prejudice, the district court did dispose of all those issues. Given the district court's order, MegaTrans was free to refile its counterclaims at any point from the moment they were dismissed. Theoretically, the company could have refiled the claims on November 20, the day after the order...