Accusoft Corp. v. Quest Diagnostics, Inc.

Decision Date19 August 2015
Docket NumberCIVIL ACTION NO. 12-cv-40007-TSH
PartiesACCUSOFT CORPORATION, Plaintiff, v. QUEST DIAGNOSTICS, INC., and MEDPLUS, INC., Defendants.
CourtU.S. District Court — District of Massachusetts
REPORT AND RECOMMENDATION

(DOCKETS #412, #413, #417 and #425)

Hennessy, M.J.

This civil action arises from dueling claims of copyright infringement and breach of contract. Jurisdiction of this court is based on diversity of citizenship, federal question, and 28 U.S.C. § 1338(a), respecting copyright claims.

Plaintiff Accusoft Corporation has moved for summary judgment in its favor on its copyright and contract claims.1 (Dockets #417 and #425, respectively). Accusoft's claims stem from an allegation that the Defendants infringed and misused the "ImageGear License" - a construct created by Accusoft based on a 2001 ImageGear software license agreement with MedPlus, with subsequent 2003 and 2006 ImageGear deployment purchases by Defendants, MedPlus, Inc. Accusoft contends that the ImageGear License dictates how MedPlus could install, use and distribute ImageGear. On this underpinning, Accusoft claims that it learned in August 2010 that MedPlus had violated the terms of the ImageGear License, by among otherthings, distributing ImageGear by an unauthorized method, in failing to fully and accurately report the number of copies it had distributed, and in unilaterally transferring its right to use ImageGear to MedPlus's parent, Defendant Quest Diagnostics, Inc. Accusoft contends that in addition to judgment on its copyright and contract claims, that Accusoft should also be awarded judgment on MedPlus's counterclaim for declaration of non-breach.

Defendants have cross-moved for summary judgment on the copyright and contract claims (Dockets #412 and #413, respectively), asking this court to find that Accusoft waived its copyright claims by entering into licensing agreements with MedPlus. Defendants maintain that MedPlus's purchase of software in 2003 created a superseding agreement that licensed the Defendants' use and distribution of ImageGear. For that reason, the Defendants contend that this court should deny Accusoft's motion for summary judgment, and instead, award summary judgment to Defendants based on Accusoft's failure to support its claims.

By order of reference (Docket #482), and pursuant to 28 U.S.C. § 636(b)(1)(B), this matter was referred to me for a Report and Recommendation on the parties' motions for summary judgment. Plaintiff has moved for partial summary judgement in its favor on the following claims: Count I (Breach of Contract v. MedPlus); Count II (Copyright Infringement v. MedPlus), Count III (Copyright Infringement v. Quest), Count IV (Secondary Copyright Infringement v. Quest); Counterclaim VI (Declaration of Non-Infringement by Quest), Counterclaim VII (Declaration of Non-Infringement by MedPlus); and Counterclaim VIII (Declaration of Non-Breach of Contract by MedPlus). (Docket #189). Defendants have cross-moved for partial summary judgment on Counts I - IV of the amended complaint. Both parties filed opposition and reply memoranda and appeared before the court on July 13, 2015 and July 24, 2015 for oral argument. These matters are now ripe for adjudication.

For the reasons that follow, I recommend that that all four motions (Dockets # 412, #413, #417, and #425) be denied. Moreover, with respect to trial of this matter, and to the extent this assists the District Judge, I recommend that the Massachusetts Statute of Limitations, Mass. Gen Laws ch. 260, § 2, be applied to limit Accusoft's recovery for any breach that occurred, to six years before Accusoft filed its complaint.

I. BACKGROUND2

Plaintiff Accusoft is a Florida corporation in the business of creating, producing, selling, and distributing computer software that enhances imaging software solutions. (Docket #461, ¶1). In December 2008, Accusoft acquired the assets of a Delaware corporation named Accusoft Corporation ("Accusoft Delaware"), including certain rights to Accusoft Delaware's ownership of intellectual property in software known as ImageGear.3 (Docket #429-3).

ImageGear software has gone through many revisions since at least 1999, leading to multiple versions of the ImageGear product. (Docket #414, ¶ 2). For example, ImageGear has been released in versions 11, 12, 13, 14, and subsequent versions continuing through today. (Docket #523, ¶ 6). Accusoft Delaware obtained copyright registrations for "IMAGEGEAR 2001," "ImageGear Professional Edition v.13," "ImageGear Professional Edition v.14," and"ImageGear Professional Edition v.16." (Docket #414, ¶¶ 3, 7). Accusoft refers to "IMAGEGEAR 2001" as ImageGear Version 11. (Docket #447, ¶ 3).

ImageGear is a software development toolkit that allows software developers to implement discrete imaging functionality into a software product. (Docket #461, ¶ 3). Accusoft licenses ImageGear for both "Development" and for "Distribution." (Id., ¶ 5). Accusoft's usual practice was to first license a software development kit to its customers for development of the customer's product or application. (Id., ¶ 6). If incorporation was successful, the customer would then seek permission from Accusoft to distribute ImageGear in the product or application, to third parties. (Id., ¶ 7).

Defendant MedPlus, Inc., is a developer and integrator of clinical connectivity and data management solutions. (Docket #414, ¶ 8). Defendant Quest Diagnostics, Inc., provides diagnostic testing information services and diagnostic solutions. (Id., ¶ 9). On or about November 1, 2001, Quest acquired control of MedPlus and continues to own and control MedPlus as a wholly owned subsidiary of Quest Diagnostics. (Docket #182, ¶ 11). MedPlus developed several software products called ChartMaxx, eMaxx and OptiMaxx. (Docket #414, ¶ 23). ChartMaxx is a software product that allows end-users (typically hospitals) to store electronic medical records of patients so that those records can be accessed and used by hospital personnel. (Id., ¶ 24). eMaxx is an application service provider ("ASP") that allows end-users to electronically order laboratory tests from a Quest laboratory, and then to receive those test results from the laboratory in electronic form. (Id., ¶ 26). OptiMaxx has similar functionality to ChartMaxx and allows patient medical records to be stored electronically. (Id., ¶ 25). In March 2008, the six MedPlus employees who maintained the OptiMaxx program for MedPlus, becameQuest employees and continued to perform the same duties regarding OptiMaxx that they had performed as MedPlus employees for Quest. (Docket #461, ¶ 14).

A. MedPlus Purchases of ImageGear

On November 26, 2001, Accusoft and MedPlus entered into a software licensing agreement covering the use of ImageGear Version 11 into ChartMaxx and eMaxx. (Docket #182-1; #414, ¶ 27). Among other things, the non-exclusive, non-transferable license agreement gave MedPlus the right to incorporate ImageGear Version 11 into ChartMaxx and eMaxx products through two software development kits ("SDKs"), as well as to distribute 4,500 "Concurrent User" licenses. (Id.). Pursuant to the agreement, MedPlus paid Accusoft $90,000. (Id., ¶ 28). MedPlus included ImageGear Version 11 into ChartMaxx versions 3.2, 3.3, and 3.31. (Docket #414, ¶¶ 35-37). Accusoft contends this is the "master" agreement governing all of MedPlus's future uses of ImageGear (Docket #426, p.5); Defendants allege that the 2001 Agreement is limited to the terms outlined therein, and that the parties reached a subsequent, superseding agreement in 2003 (Docket #498, ¶ 1).

In November 2003, MedPlus ordered 5,000 licenses of ImageGear Version 13 from Accusoft. (Docket #182-2, p.2). The "Product" identified on the Order Form was "ImageGear v13." (Docket #182-2). MedPlus paid the $50,000 set forth on the Order Form. (Docket #414, ¶ 61). Defendants contend that the purchase was part of a new software license agreement that expanded both the development and distribution methods from those outlined in the 2001 Agreement (Docket #414-1, ¶¶ 54-55); Accusoft contends this was merely a purchase of software licenses, subject to the terms of the 2001 Agreement. (Docket #471, ¶ 52).

Starting in 2005, MedPlus began incorporating ImageGear Version 14 into OptiMaxx. (Docket #461, ¶ 13). On or about December 7, 2006, Accusoft generated an Order Form for5,000 "ImageGear Professional v14 runtime licenses. ImageGear Functionality, on any platform, for Concurrent User deployment seats." Id. The Order Form reflected the price of $47,500. Accusoft's Order Form called for authorized signatures by Accusoft and "Customer," including the title and printed name of the signatories. Id. Accusoft's Order Form is signed for Accusoft by David Breitbart Frischling, whose title is Vice President and General Counsel, and for "Customer," MedPlus, by "Candace Levine, Vice President Finance/Controller." Id. The Order Form provides in relevant part:

The signature below indicates the Customer's acceptance of ... (2) the terms and conditions of the Software License Agreement located in the "Help" dialog box that accompanies the product.

Id. The Order Form appears attached at Exhibit C to the Amended Complaint. (Docket #182-3). Following the Order Form at Exhibit C, is a printed Software License Agreement. (Id.). Accusoft alleges in the amended complaint that the documents comprising Exhibit C are "a true and correct copy of documentation" relating to the 2006 purchase of 5,000 additional distribution licenses. (Docket #182, ¶ 17). The Software License Agreement included with Exhibit C is undated, unsigned and wholly lacking in indicia that it is the Software License Agreement referenced in the Order Form. (Docket #182-3). It does expressly cross-reference an Order Form as identifying the product, quantity, fees and term of the Agreement, see e.g., Exhibit C, Software License Agreement, Article 1, Section 1.12; however, it does not expressly identify the December 7, 2006 Order...

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