Expediters Intern. v. Direct Line Cargo Management

• Decision Date: 13 February 1998
• Docket Number: Civ. No. 93-5450 (JAP).
• Citation: 995 F.Supp. 468
• Parties: EXPEDITERS INTERNATIONAL of WASHINGTON, INC., a Washington Corporation, Plaintiff, v. DIRECT LINE CARGO MANAGEMENT SERVICES, INC., Defendant.
• Court: U.S. District Court — District of New Jersey

995 F.Supp. 468

EXPEDITERS INTERNATIONAL of WASHINGTON, INC., a Washington Corporation, Plaintiff, v. DIRECT LINE CARGO MANAGEMENT SERVICES, INC., Defendant.

Civ. No. 93-5450 (JAP).

United States District Court, D. New Jersey.

February 13, 1998.

COPYRIGHT MATERIAL OMITTED

Brian Frederick Amery, Bressler, Amery & Ross, Florham Park, NJ, for Expeditors International of Washington, Inc.

Roy Henry Wepner, Lerner, David, Littenberg, Krumholz & Mentlik, Westfield, NJ, for Direct Line Cargo Management Services, Inc.

David H. Pikus, Bressler, Amery & Ross, Morristown, NJ, for Expeditors International of Washington, Inc., Wei Jhih Chang.

Arnold B. Dompieri, Lerner, David, Littenberg, Krumholz & Mentlik, Westfield, NJ, for Marihill, Ltd.

OPINION

PISANO, United States Magistrate Judge.

INTRODUCTION

This matter comes before the Court upon the motions of defendant Direct Line Cargo Management Services, Inc. for summary judgment on plaintiff Expediters International of Washington, Inc.'s copyright infringement, trade secret misappropriation, and breach of contract claims, pursuant to Rule 56 of the Federal Rules of Civil Procedure.¹ The parties have submitted briefs, and oral argument was heard on January 5, 1998. For the following reasons, the defendant's motions for summary judgment are denied.

FACTUAL SUMMARY

This matter involves the alleged wrongful use of a computer software program. Plaintiff Expediters International ("EI") claims that a Taiwan company, Direct Line Cargo Management Services, Inc. ("CMS-Taiwan"), became affiliated with it and assigned to it the rights of an allegedly copyrighted software program. Prior to EI's affiliation with CMS-Taiwan, CMS-Taiwan was associated with the New Jersey defendant, Direct Line Cargo Management Services, Inc., ("DLCMS-USA"), and a group of affiliated Asian companies. During its association with the defendant, CMS-Taiwan issued a license to the defendant and its affiliates which permitted the companies to make limited use of the software. When CMS-Taiwan became associated with the plaintiff, however, this license expired. This lawsuit arises from the defendant's, and its affiliates,' alleged wrongful use of the software subsequent to the expiration of the license.

BACKGROUND

Plaintiff EI is a large international freight forwarding company that engages in the business of ocean consolidation services. See Countercl. ¶ 1. The plaintiff became affiliated with CMS-Taiwan on September 15, 1993. See Complaint ¶ 6. As part of this affiliation, EI claims it acquired all rights to computer programs known as freight consolidation software (the "Software"), which CMS-Taiwan had previously developed and registered with the United States Copyright Office. See Pikus Decl. at Ex. O; Complaint ¶ 8. The Software enables consolidation companies to provide timely tracking and billing information about ocean freight shipments. See Yunker Aff. ¶ 8.

Defendent DLCMS-USA is a New Jersey firm that was "part of a group of companies interrelated through various contractual obligations and stock ownership which offered ... ocean cargo consolidation services." Countercl. ¶ 4. The companies were affiliated "to provide the sales and marketing services in the United States, and ... to provide the warehouse and documentation services in various Asian countries." 12/23/93 McKenzie Decl. ¶ 1. According to Mr. George McKenzie ("McKenzie"), the President of DLCMS-USA, "the idea behind the formation of the companies in 1983 was to use the emerging technology of personal computers and telecommunications in Ocean Cargo consolidation services ..." 12/23/93 McKenzie Decl. ¶ 7.²

The defendant's pleadings characterize this group of companies, including a number of affiliated agents based in Singapore, Taiwan, Thailand, and other Far Eastern countries, as a "single business entity." Countercl. ¶ 5. A separate Hong Kong Holding Company, Marihill Ltd. ("Marihill"), is a principal of these Asian companies. See 12/23/93 McKenzie Decl. ¶ 2, 4, and 5. Yorkmate Ltd. ("Yorkmate") is the majority shareholder of Marihill and defendant. See id. McKenzie owns 38% of the stock of DLCMS-USA, and 30% of the Yorkmate shares. See id. Ex. D. In his Declaration, McKenzie describes the relationships, profit distribution, commission, and billing practices that existed between DLCMS-USA and the Asian companies.³ See 12/23/93 McKenzie Decl. ¶ 2. Mutual agency agreements existed among these companies, whereby the Asian affiliates agreed to provide staff, facilities and customer information to the defendants for freight consolidation. See id. Ex. A.

While it was still associated with these companies, Countercl. ¶ 5, CMS-Taiwan used the defendant as its agent in the United States. Complaint ¶ 12. At that time, CMS-Taiwan permitted the defendant to use its Software for the limited purposes described in a license agreement dated June 29, 1993 (the "License Agreement"). This agreement permitted the Asian companies to receive origin data entry Software programs, while DLCMS-USA received the destination Software programs via electronic mail. Yunker Aff. ¶ 7; 8/20/97 McKenzie Decl. ¶ 3. In this manner, a customer's goods in Asia were consolidated with other freight and loaded on a vessel destined for the United States. Yunker Aff. ¶ 8. The relevant information was then accessed through the Software, transferred onto documents,⁴ and transmitted to the defendant and the customer-recipient in New Jersey. Id. As such, DLCMS-USA could use the Software to report the receipt of the goods at destination with other relevant data and to bill the customer for the total service, remitting a share of the proceeds to Asia. Id.

The License Agreement between CMS-Taiwan and DLCMS-USA provides that:

The owner of the copyright of all [CMS-Taiwan] programs has authorized its use at DLCMS-USA office [sic] for the purpose of providing assistance to nominated [CMS-Taiwan] customers in the U.S. for the system application and first aid system problem identifications. Any other use of these programs, including any copying and/or reproduction of any of the material in it, any of the program logic in it, any part of the user menu with it, is an infringement of copyright and may result in civil liability or criminal prosecution as provided by law.

The owner of the copyright of all CMS-Taiwan programs has authorized and only authorizes its use at DLCMS-USA office [sic] for the programs CMS-Taiwan provides to DLCMS-USA management and staffs should have no access and must have no access to any of the programs CMS-Taiwan made and provided to any other CMS offices or agents offices in Asia unless otherwise specified and authorized in writing by CMS-Taiwan in advance.

The owner of the copy right [sic] of all CMS-Taiwan programs is Direct Line Cargo Management Services, Inc., a Taiwan company....

Yunker Aff.Ex. B.

In addition to the June 29, 1993 Agreement between the defendant and CMS-Taiwan, the Asian companies entered into confidentiality agreements with CMS-Taiwan, which limited their use of the Software.⁵ These agreements provide:

All programs and user manual are for [the Asian affiliate's] individual office to use which should be kept in good condition as confidential documents and to be within your own individual office only. No user manual and/or programs to be copied and/or to be shared with any person/party/company out side [sic] of your own office ... All report printout from the program are also part of the confidential documents and should only be sent to CMSNJ, CHB, and consignee offices ...

The objective of this request is to keep the integrity of the information under CMSTWN programs and to prevent any competition to know what we have been [sic] done and what is going to be. As you all [sic] aware of the situation of today that automation is the key part of the function behind a consolidation program and all CMS competitions [sic] are trying hard in all method [sic] to find out what we have today.

12/14/91 Confidentiality Agreements, Pikus Decl.Ex. M. CMS-Taiwan and the Asian companies exchanged related messages by telefax:

[A]ll programs from CMSTWN ... are required to be kept as confidential documents and papers which include the user menu and all the correspondences from CMSTWN. There is no reason that any of those programs and documents would be released to any person outside of your office. Please notice the copyright of all those programs are owned by CMSTWN which as [sic] specified very clearly on the front screen of every program.

7/6/93 telefax, 10/31/97 Libowsky Decl.Ex. A; 12/14/91, 7/6/93, and 7/7/93 telefaxes, Pikus Decl.Ex. M.

When CMS-Taiwan became affiliated with the plaintiff, it continued its relationship with the group of companies until the termination agreement took effect on September 15, 1993. See Complaint ¶¶ 12, 14. At this time, the plaintiff offered the defendant the opportunity to join in its venture with CMS-Taiwan. However, the defendant "declin[ed] to join any affiliation between plaintiff and CMS-Taiwan." Defendant's Answer to Complaint ¶ 14. The parties subsequently agreed to a sixty day transition agreement, (the "Transition Agreement"), extending from September 15, 1993 until November 15, 1993, during which time the plaintiff and CMS-Taiwan permitted the defendant to use the Software for specific customers.⁶ See 12/28/93 McKenzie Deposition, Libowsky Decl.Ex. D; Yunker Aff. ¶ 9.

On December 13, 1993, plaintiff filed this action alleging that the defendant, in conjunction with its Asian affiliates, continued to use the Software for freight consolidation billing and reporting purposes, despite the expiration of the License Agreement and the transition period. When it filed its Complaint, plaintiff simultaneously filed a motion for a preliminary injunction and for a temporary restraining order. On December 22, 1993, Judge Sarokin entered an Order temporarily restraining defendant from using the Software for...