Cincom Systems, Inc. v. Novelis Corp.

• Decision Date: 25 September 2009
• Docket Number: No. 07-4142.,07-4142.
• Citation: 581 F.3d 431
• Parties: CINCOM SYSTEMS, INC., Plaintiff-Appellee, v. NOVELIS CORP., Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

581 F.3d 431

CINCOM SYSTEMS, INC., Plaintiff-Appellee, v. NOVELIS CORP., Defendant-Appellant.

No. 07-4142.

United States Court of Appeals, Sixth Circuit.

Argued: September 8, 2008.

Decided and Filed: September 25, 2009.

ARGUED:

Irene C. Keyse-Walker, Tucker, Ellis & West LLP, Cleveland, Ohio, for Appellant. Joseph Michael Callow, Jr., Keating, Muething & Klekamp, PLL, Cincinnati, Ohio, for Appellee.

ON BRIEF:

Irene C. Keyse-Walker, Henry E. Billingsley II, Karen E. Ross, Tucker, Ellis & West LLP, Cleveland, Ohio, for Appellant. Joseph Michael Callow, Jr., James Eugene Burke, Jennifer J. Morales, Keating, Muething & Klekamp, PLL, Cincinnati, Ohio, for Appellee.

Before: BOGGS, GIBBONS, and GRIFFIN, Circuit Judges.

OPINION

JULIA SMITH GIBBONS, Circuit Judge.

Novelis Corporation appeals from the order of the district court granting summary judgment to plaintiff Cincom Sysems, Inc. ("Cincom"), on its claim of copyright infringement. See 17 U.S.C. § 501. Novelis argues that the district court erred by concluding that a series of mergers Novelis underwent as part of an internal corporate restructuring resulted in a prohibited transfer of the software license Cincom had granted to a former Novelis subsidiary. Finding that our prior decision in PPG Industries, Inc. v. Guardian Industries Corp., 597 F.2d 1090 (6th Cir. 1979), governs Novelis's appeal, we agree with the district court that Novelis's actions led to an impermissible transfer of the software license and accordingly affirm its judgment.

I.

Cincom is an Ohio-based corporation that develops, licenses, and services software for its corporate customers. The rights to use two of Cincom's most popular software offerings form the basis of the current dispute. SUPRA© is a database management program that allows a corporation to manage millions of records. MANTIS© is a fourth-generation application development system, i.e., a computer language that allows a corporation's software professionals to develop computer programs that allow the corporation's operations to function more smoothly. Cincom is the sole owner of all rights to both the SUPRA© and MANTIS© software. Rather than sell the computer programs themselves, Cincom only sells licenses that allow its customers to use the two programs for an annual fee.

On July 5, 1989, Cincom agreed to license SUPRA© and MANTIS© to Alcan Rolled Products Division ("Alcan Ohio"), an Ohio-based corporation that would later become known as Novelis. The license Cincom issued listed "Alcan Rolled products [sic] Division" as the "Customer" and granted to Alcan Ohio "a non-exclusive and nontransferable license" to use Cincom's software. (License at 1.) The license agreement clarified that the two software programs "constitute proprietary and confidential information of Cincom and that the protection of this information is of the highest importance." (License at 2.) Consequently, Alcan Ohio could only place the software on designated computers that the parties specifically listed in a schedule attached to the license. (License at 1.) Alcan Ohio listed the designated computer as one located at its facility in Oswego, New York. The license agreement closed by noting that Ohio law would govern its terms and that Alcan Ohio could "not transfer its rights or obligations under this Agreement without the prior written approval of Cincom." (License at 3.)

Before the commencement of Alcan Ohio's internal reorganization, Alcan Ohio was a wholly-owned subsidiary of Alcan, Inc., a Canadian corporation. On May 15, 2003, Alcan Ohio created a separate corporation known as Alcan of Texas ("Alcan Texas"), organized under the laws of Texas. Alcan Texas, like Alcan Ohio, was also a wholly-owned subsidiary of the Canadian parent corporation Alcan, Inc. On July 30, 2003, Alcan Ohio merged into Alcan Texas, with Alcan Texas remaining as the surviving corporate entity. The next day, Alcan Texas simultaneously merged into itself and its three Texas subsidiaries. As a result, the former rolled products division of Alcan Ohio became a subsidiary of Alcan Texas known as Alcan Fabrication Corporation. In September 2003, Alcan Fabrication Corporation changed its name to Alcan Aluminum Corporation. A final name change occurred on January 1, 2005, when Alcan Aluminum Corporation changed its name to its current appellation, Novelis. Thus, as of January 2005, the software Alcan Ohio licensed from Cincom remained on the same computer in Oswego, New York, but in a plant now owned by an entity named Novelis. Alcan Ohio never sought or obtained Cincom's written approval to continue to use the SUPRA© and MANTIS© software before restructuring its rolled products division.

Upon learning of the corporate changes Alcan Ohio underwent, Cincom filed suit on March 11, 2005, in the United States District Court for the Southern District of Ohio, alleging that Novelis's actions violated the license agreement Cincom entered with Alcan Ohio. Following discovery, the parties agreed upon stipulated facts and filed separate motions for summary judgment. The district court determined that Alcan Ohio's merger with Alcan Texas effected a transfer of the license under Ohio law. Cincom Sys., Inc. v. Novelis Corp., No. 1:05cv152, 2007 U.S. Dist. LEXIS 2721, at *19-20 (S.D.Ohio Jan. 12, 2007). Because Novelis had failed to distinguish our prior holding in PPG, the district court entered summary judgment as to liability for Cincom. Id. at *19-20. The district court certified its conclusion as involving a controlling question of law as to which substantial ground for disagreement existed so that the parties could seek an interlocutory appeal of the court's order. Id. at *20; see 28 U.S.C. § 1292(b). We denied Novelis's application for permission to appeal. In re Novelis Corp., No. 07-0302, slip op. at 2 (6th Cir. Apr. 20, 2007). The parties then agreed to an order stipulating the amount of damages Cincom had suffered as $459,530.00, equal to the amount of Cincom's initial licensing fee. The district court approved the order on August 2, 2007.¹ Novelis timely appealed the district court's final judgment.

II.

We review a district court's grant of a summary judgment motion de novo. Smith Wholesale Co. v. R.J. Reynolds Tobacco Co., 477 F.3d 854, 861 (6th Cir.2007). Summary judgment is appropriate where there are no genuine issues of material fact in dispute, and one party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). The moving party may meet its burden by "`showing' ... that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A trial is required only when "there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment is "an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy, and inexpensive determination of every action'" rather than a "disfavored procedural shortcut." Celotex, 477 U.S. at 327, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 1). Because both parties stipulated to the necessary facts and only issues of law remain, this case is especially suited for summary disposition.

Novelis argues on appeal that the district court erred in granting summary judgment to Cincom for two reasons. First, Novelis asserts that the district court misinterpreted our prior holding in PPG by failing to look at the individual contracting parties' intent as expressed in the licensing agreement. Novelis claims that while the agreement at issue in PPG showed a clear intent to prevent the license from coming into the possession of a competitor, Cincom's license demonstrates no concern with preventing internal corporate reorganizations. Second, Novelis claims that a change in Ohio substantive corporate law since our PPG decision, as demonstrated by state cases interpreting the new language, requires us to find that no transfer of the license occurred as a result of Alcan Ohio's merger with Alcan Texas. We will consider each argument Novelis advances in turn.

A.

In PPG, we addressed the question of "whether the surviving or resultant corporation in a statutory merger acquires patent license rights of the constituent corporations."² 597 F.2d at 1091. PPG involved two glass fabrication corporations that had developed a new industrial process for shaping glass for various commercial uses. Id. PPG granted a "non-exclusive, non-transferable" license to the Permaglass Corporation to use this new "gas hearth technology." Id. at 1091-92. The license further noted that the grant to Permaglass was "personal to PERMAGLASS and non-assignable except with the consent of PPG first obtained in writing." Id. at 1092. Despite this language, Permaglass merged with Guardian Industries, a corporation that manufactured windshields for automobiles. Id. Under the laws of Delaware and Ohio, which governed the merger, Permaglass's licenses would automatically transfer to and vest in the successor corporation, Guardian Industries. Id. at 1095-96. We concluded that in the context of intellectual property, a license is presumed to be non-assignable and nontransferable in the absence of "express provisions to the contrary." Id. at 1095. Because this was a mandate of federal law, Ohio law could not override this presumption. Id. at 1093. We therefore reversed the district court and ordered judgment entered in favor of PPG. Id. at 1097.

1.

We have had no occasion to consider our holding in PPG since its original issuance in 1979. Consequently, we take this opportunity to explain more fully the complex interaction of federal and state law that occurs when interpreting intellectual property licenses. Federal common law governs "questions with respect to the assignability of a...