Geoscan v. Geotrace Technologies, 99-20744

• Decision Date: 14 September 2000
• Docket Number: No. 99-20744,99-20744
• Citation: 226 F.3d 387
• Parties: (5th Cir. 2000) GEOSCAN, INC. OF TEXAS, Plaintiff-Appellant, v. GEOTRACE TECHNOLOGIES, INC., Defendant-Appellee
• Court: U.S. Court of Appeals — Fifth Circuit

Page 387

226 F.3d 387 (5th Cir. 2000)

GEOSCAN, INC. OF TEXAS, Plaintiff-Appellant, v. GEOTRACE TECHNOLOGIES, INC., Defendant-Appellee.

No. 99-20744

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

September 14, 2000

[Copyrighted Material Omitted]

Appeal from the United States District Court for the Southern District of Texas

Before WIENER and STEWART, Circuit Judges, and ROSENTHAL¹, District Judge.

CARL E. STEWART, Circuit Judge:

Geoscan, Inc. of Texas ("Scan") appeals the district court's grant of summary judgment in favor of Geotrace Technologies, Inc. ("Trace") on Scan's claims of breach of contract and copyright infringement. For the following reasons we affirm in part, and reverse in part.

FACTUAL AND PROCEDURAL BACKGROUND

This dispute arises from a licensing agreement entered into by Scan and Trace. Scan develops and sells software used in the oil and gas exploration industry for plotting seismic data computer files ("the Plotting Software"). The Plotting Software is made up of five software components: Master Plot Server ("MPS"), GeoBand, CGMband, CGMgen, and QNET Daemeon ("QNET"). Trace processes seismic data using its own software program, ANSER, which integrates Scan's plotting software and some third party software. At the beginning of this suit Trace had offices in Denver, Dallas, Midland, Houston, Argentina, and Bolivia. Trace formerly operated offices in Venezuela and Nigeria.

In 1991, Scan and Trace entered into a licensing agreement ("1991 agreement" or "1991 licensing agreement"). The 1991 agreement grants Trace a nontransferable, non-exclusive license to use Scan's MPS and GeoBand software on designated central processing units ("CPUS") at the facility locations set forth in Exhibit A of the agreement. The agreement stated that the products may be used by and on behalf of Trace only on the designated CPUS at the designated facilities set forth in Exhibit A, and that Trace was prohibited from making Scan's products available to third parties not covered by the agreement. Exhibit A of the agreement is blank and contains no listing of CPUS or locations. A purchase order dated September 23, 1991 shows that Trace purchased three MPS licenses at $15,000 each, for a total of $45,000. Later invoices show that these three MPS software packages were installed in Trace's Dallas, Midland, and Houston offices.

In November 1994, the parties entered into a negotiation to determine terms and pricing for Trace to purchase other licenses from Scan ("the Proposal"). The Proposal does not mention the 1991 agreement. In the Proposal, Scan agrees to sell the first MPS license for $15,000, the next MPS license for $12,000, and there is discounted pricing for each subsequent license purchased. The Proposal provides that the purchase price of each MPS license is credited toward the MPS corporate license. The price of an MPS corporate license is listed at $50,000. The Proposal states that a corporate license would allow Trace unlimited use of the MPS software. An invoice dated November 10, 1994 shows that Trace purchased one MPS license with Qnet for $15,000. The Proposal also lists prices for the purchase of a corporate license for use of the GeoBand libraries and the CGMband and CGMgen software components. The proposal states that a corporate license for the CGMband and CGMgen software may be purchased for $15,000. Later invoices demonstrate that Trace purchased site licenses for CGMgen and CGMband, one for the Houston office, one for the Denver office, and two for the Dallas office for $5,000 each.

In April 1998, Scan sent a demand letter to Trace stating that the MPS, GeoBand and Qnet software had been installed on 76 unauthorized computers, and demanding $1,140,000 in payment. In July1998, Scan filed suit against Trace in Texas state court alleging breach of contract, copyright infringement, and unfair trade practices. The suit was removed to federal court on authority of 28 U.S.C. 1338 and 1441(a). Both parties filed motions for summary judgment. The district court granted summary judgment in favor of Trace on all claims. The district court also found that the filing of the lawsuit in July 1998 acted as a termination of the contract between the parties and thus ordered Trace to cease using Scan's software within two months.

DISCUSSION

I.Standard of Review

A district court's grant of summary judgment is reviewed de novo. See Reliance Nat. Ins. Co. v. Estate of Tomlinson, 171 F.3d 1033, 1035 (5th Cir. 1999). Summary judgment is properly granted in favor of the moving party when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the record, taken as a whole, could not lead a rational trier of fact to find for the non-moving party, then there is no genuine issue for trial. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 597, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). We view the facts and the inferences to be drawn therefrom in the light most favorable to the nonmoving party. Scales v. Slater, 181 F.3d 703, 708 (5th Cir. 1999) (citing Hood v. Sears Roebuck & Co., 168 F.3d 231, 232 (5th Cir. 1999)).

II.Breach of Contract

Scan puts forth several arguments to support its claim that Trace breached the 1991 licensing agreement. First, Scan contends that the 1991 agreement only allowed MPS and GeoBand to be placed on designated CPUS and that Trace only purchased licenses for four CPUS, thus Trace violated the agreement by using the MPS software on multiple CPUS in each office, and by using the software in the Nigerian office, for which no license was purchased. Next, Scan claims that the 1991 agreement also covered the licensing of the CGMgen, CGMband, and Qnet software, that Trace purchased only three site licenses to use this software, and that Trace thus violated the agreement by using the software on more than 20 computers. Finally, Scan alleges that Trace violated the 1991 licensing agreement by distributing Scan software to third parties. We will address each of these arguments in turn.

A. Ambiguity

The determination of whether a contract is ambiguous is a question of law. See Burns v. Exxon Corp., 158 F.3d 36, 340 (5th Cir. 1998); Fireman's Fund Insurance Company v. Murchison, 937 F.2d 204, 206 (5th Cir. 1991) (citations omitted). A contract is ambiguous if it is reasonably subject to more than one meaning. Fireman's Fund, 937 F.2d at 206. If a contract is ambiguous, "summary judgment is inappropriate because the interpretation of a contract is a question of fact." Id. (citing Torn v. Braniff, Inc., 893 F.2d 763, 765 (5th Cir. 1990).

In the present case, the district court found that the 1991 licensing agreement was unambiguous², and that it allowed Trace to use Scan software on multiple central processing units at multiple locations. The 1991 licensing agreement states:

Geoscan grants to [Geotrace] a paid-up, nontransferable, non-exclusive license to use GEOSCAN'S MASTER PLOT SERVER RASTERIZER SOFTWARE implemented on various host central processing units ("CPUS")...and the GEOSCAN BANDED FILE GENERATION LIBRARY ("GEOBAND") but only on the designated CPUS ("designated CPUS") at the facility locations set forth in Exhibit A. Exhibit A will be amended as additional CPUS are licensed or as hardware is upgraded or replaced. (emphasis added).

Neither of the parties disputes that Exhibit A was not completed, in that there are no designated CPUS or designated facility locations listed on Exhibit A. Trace contends that because there were no designated CPUS listed on Exhibit A, we should construe the contract language against Scan as the drafter, and find that the 1991 agreement entitles Trace to use the Scan software on an unlimited number of CPUS and sites. Scan counters that although Exhibit A was never completed, Trace's purchase of individual MPS licenses after the 1991 agreement demonstrates that use of the Scan software was limited to the CPUS designated in the individual MPS licenses. We find that the interpretations of the 1991 agreement offered by Trace and Scan are both plausible. Thus, we hold that due to the incompleteness of Exhibit A, the 1991 licensing agreement is subject to more than one reasonable interpretation and is therefore ambiguous as to which designated CPUS or locations Trace could use the MPS and GeoBand software.³ Thus, due to the ambiguity of the contract in regards to the number of CPUS or locations on which the software could be used, summary judgment was inappropriately entered on Scan's MPS and GeoBand breach of contract claim.⁴

B. CGMgen, CGMband, and Qnet

Scan argues that the 1991 licensing agreement also applies to Trace's use of the CGMgen, CGMband, and Qnet software, and that the district court erred in granting summary judgment to Trace on Scan's breach of contract claims regarding these software components. The language of the 1991 licensing agreement states that it applies to the MPS software and the GeoBand software. Nowhere does the agreement state that it will apply to what Scan terms "derivative software," such as CGMband, CGMgen, and Qnet. The proposal submitted by Scan to Trace on November 8, 1994 states that Trace may purchase a corporate license for CGMgen and CGMband for $15,000. Subsequently, in 1995, Trace purchased one CGMgen and CGMband license for the Dallas office, one for the Houston office, and one for the Denver office at $5,000 each. This totaled $15,000. On the purchase order for the Denver license Trace wrote that it had now purchased the amount of CGMgen and CGMband software necessary for a corporate license. The 1994 proposal also states that the purchase of an MPS license and maintenance for Qnet entitled Trace to a Qnet server license at no charge. An invoice dated November 10, 1994 indicates that Trace purchased one...