Netbula, LLC v. Bindview Development Corp.

• Decision Date: 10 September 2007
• Docket Number: No. C06-00711 MJJ.,C06-00711 MJJ.
• Citation: 516 F.Supp.2d 1137
• Court: U.S. District Court — Northern District of California
• Parties: NETBULA, LLC, Plaintiff, v. BINDVIEW DEVELOPMENT CORPORATION et al., Defendant.

516 F.Supp.2d 1137

NETBULA, LLC, Plaintiff, v. BINDVIEW DEVELOPMENT CORPORATION et al., Defendant.

No. C06-00711 MJJ.

United States District Court, N.D. California.

September 10, 2007.

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Vonnah Brillet, The Law Office of Vonnah M. Brillet, San Leandro, CA, Gary Scott Fergus, Fergus, A Law Firm, San Francisco, CA, for Plaintiff.

Albert L. Sieber, David M. Lacy Kusters, Jedediah Wakefield, Laurence F. Pulgram, Liwen Arius Mah, Fenwick & West LLP, San Francsico, CA, Mary Elizabeth Milionis, Fenwick & West LLP, Mountain View, CA, for Defendant.

ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AS TO COPYRIGHT INFRINGEMENT; GRANTING DEFENDANT PULASKI'S, MOTION FOR SUMMARY JUDGMENT; GRANTING DEFENDANT BINDVIEW'S MOTION FOR SUMMARY JUDGMENT AS TO PLAINTIFF'S BREACH OF CONTRACT AND FRAUD CAUSES OF ACTION; AND DENYING PLAIN TIFF NEBULA'S CROSS-MOTION FOR SUMMARY JUDGMENT AS TO COPYRIGHT INFRINGEMENT

MARTIN J. JENKINS, District Judge.

INTRODUCTION

Before the Court are: (1) Defendants BindView Development Corporation ("BindView"), Symantec Corporation ("Symantec"), and Eric J. Pulaski's ("Pulaski")(collectively, "Defendants") Motion for Summary Judgment as to Copyright Infringement¹; (2) Defendant Pulaski's Motion for Summary Judgment as to Fraud and Copyright Infringement²; and (3) Defendant BindView Motion for Summary Judgment as to Breach of Contract and Fraud.³ Plaintiff Netbula, LLC ("Netbula") opposes each of Defendants' motions. Also before the Court is Plaintiff Netbula's Cross-Motion for Summary Judgment as to Copyright Infringement.⁴ Defendants oppose Plaintiff's cross-motion. For the following reasons, the Court:

(1) GRANTS Defendants' Motion for Summary Judgment as to Copyright Infringement;

(2) GRANTS Defendant Pulaski's Motion for Summary Judgment;

(3) GRANTS Defendant Bind View's Motion for Summary Judgment as to Plaintiff's Breach of Contract and Fraud Causes of Action; and

(4) DENIES Plaintiff Netbula's Cross-Motion for Summary Judgment as to Copyright Infringement.

FACTUAL BACKGROUND

The current action arises from a dispute concerning Defendants' use and distribution of certain computer software code belonging Plaintiff. Unless otherwise noted, the Court finds the following facts to be undisputed for purposes of the pending motions.

A. Overview of the Dispute

While conducting due diligence in connection with its acquisition of BindView, Symantec discovered software possibly belonging, to Netbula in a BindView software product called, by-Control for Internet Security ("bv-CIS"). (Joint Statement of Undisputed Fact ("JSUF") ¶ 16.) BindView had previously acquired Netect Corporation ("Netect"), whose sole product was HackerShield. (Id. at ¶¶ 11, 13.) After its acquisition of Netect, BindView continued to develop HackerShield and sold the product as by-CIS. (Id. at ¶ 16.) After the parties failed to informally resolve the matter, Plaintiff asserted claims for: (1) copyright infringement under 17 U.S.C. § 101 et seq. against all Defendants arising from Defendants alleged unauthorized copying of Plaintiffs software; (2) intentional fraud under California Civil Code Section 1709 against all Defendants arising from Defendants' act of providing a false and incomplete software usage reports, and for falsely promising to provide complete accurate software usage information; (3) breach of contract under .California law against Symantec and BindView arising from an alleged breach of an oral settlement agreement, and from BindView's failure to provide a complete software usage report as promised; and (4) statutory unfair competition under California Business and Professions Code § 17200 et seq. against all Defendants.

B. The Parties

Netbula was formed in July 1996. (JSUF at ¶ 1.) Mr. Dongxiao Yue ("Yue") is the owner and only employee of Netbula. (Id.) Netbula's ONC RPC and Power RPC software facilitates the use of "Remote Procedure Call" or "RPC" technology. (Id. at ¶ 2.) RPC allows a program on a local computer to execute a command on a remote computer over a network. (Id.) Yue developed Netbula ONC RPC and Netbula PowerRPC beginning in 1994. (Id.) Netbula offers software developer kit ("SDK") licenses for computer programmers who will use the SDK to develop applications and distribution licenses that give the licensee the right to distribute Netbula RPC supporting programs and components. (Id. at ¶ 4.) Throughout the history of Netbula, it only executed a few signed license agreements with its customers. (Id. at ¶ 5.) During the relevant time period of 1998-1999, Netbula's customers could purchase licenses for Netbula RPC SDK and distribution licenses by submitting requests over the internet, by fax, or by calling Yue. (Id.) Netbula would then deliver software to customers by floppy disk, e-mail or download. (Id.)

Netect was incorporated in July 1996 under the laws of Israel. (Id. at ¶ 7.) Netect developed a software product called HackerShield, which was Netect's only product. (Id. at ¶ 11.) In July 1998, Netect purchased one user development license for Netbula ONC RPC SDK and one distribution license for Netbula's runtime library. (Id. at ¶ 7.) The parties have been unable to locate or produce an actual written copy of the 1998 Netect license agreement. (Id.) In addition, Yue has no recollection of the event of Netect's acquisition of licenses. (Id. at ¶ 6.) Likewise, Defendants have no documentation of the event of Netect's acquisition of licenses. (Id.)

BindView is a Texas corporation founded by Mr. Eric J. Pulaski ("Pulaski") in May 1990. (Id. at ¶ 12.) In March 1999, BindView acquired Netect by a share purchase, purchasing all outstanding equity interests in Netect with BindView Common Stock. (Id. at ¶ 13.) The Share Purchase Agreement specified that it "will be governed by the laws of the State of Texas without regard to conflicts of laws principles." (Id.) BindView continued to develop and sell Netect's HackerShield after its acquisition of Netect, and sold the product as bv-CIS. (Id. at ¶ 15.)

In September of 2005, Symantec was conducting due diligence in connection with Symantec's acquisition of BindView and discovered software possibly belonging to Netbula in bv-CIS. (Id. at ¶ 16.) BindView could not locate a Netbula license agreement in its records. (Id. at ¶ 17.) Accordingly, on September 28, 2005, Mr. David Gayler ("Gayler") of BindView sent an email to Netbula regarding the purchase of the necessary licenses, if any, with a subject line "need to purchase ASAP". (Id.) As set out more fully below, between September and November 2005 the parties continued to communicate regarding the scope of the 1998 Netect license, however were unable to reach an agreement on the terms of the 1998 Netect license. (Id. at ¶¶ 19-53.)

C. The Parties' Subsequent Licensing Communications

The parties' subsequent licensing communications are largely contested. However, a chronological summary of the undisputed communications is as follows.

On September 29, 2005, Yue responded to Gayler's e-mail by providing a copy of what Yue identified as Netbula's then-current license agreement template. (Id. at ¶ 18.) Gayler asked Yue to check and see if he had any records under a company named Netect. (Id. at ¶ 19,) Yue informed Gayler that, "I found it in our customer database. It was purchased in July 1998. One limited client distribution license for Windows NT/95 and one ONC RPC developer license for NT/95. But I couldn't find other details." (Id. at ¶ 20.)

On October 2, 2005, Symantec and BindView signed a merger agreement, and BindView also provided Symantec with a disclosure letter. (Id. at ¶ 20; Brillet Decl. Ex. B, BV00691.) Subsequently, Yue began demanding software royalty reports from BindView regarding its use of Netbula's software. On October 3, 2005, Yue sent an e-mail to Gayler stating that he noticed Symantec was acquiring BindView and asked for a royalty report "on the Netbula RPC usage ASAP." (Id. at ¶ 22.) On October 10, 2005, Yue sent a letter to Pulaski, asking BindView to provide a royalty report by October 29, 2005 containing the following information: (1) date of deployment; (2) platform type; (3) Netbula RPC runtime usage type; and (4) the number of machines onto which Netbula RPC runtime component was copied. (Id. at ¶ 24.)⁵ Yue then sent another letter on October 13, 2005 to Pulaski stating "we have the following concerns with royalty reports," listing several concerns, including "[w]hether a sale was made for multiple or even unlimited licenses." (Id. at ¶ 26.) Yue wrote that "Netbula RPC license are counted by the number of machines" and asked BindView to provide additional information. (Id.)

On or about October 15, 2005, Mr. Jeff Margolis ("Margolis"), Senior Vice President of BindView, telephoned Yue and informed Yue that BindView would provide a report before the October 29, 2005 deadline set by Netbula. (Id. at ¶ 27.) On October 18, 2005, Yue sent Margolis another e-mail stating that Yue presumed that the relevant BindView product at issue was "by-Control." (Id.) ⁶

On October 25, 2005, Margolis of BindView sent an e-mail to Yue containing the following software usage chart:

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

(Id. at ¶ 30.) BindView advised Plaintiff that it would need approximately 680 additional licenses to accommodate any overrun beyond the 1,000 Plaintiff believed were originally purchased, and that BindView would be willing to simply buy another thousand-pack. (Id.) On the same day, Yue sent an e-mail to Margolis objecting that the chart that had been sent did not reflect "site licenses." (Id. at ¶ 31.) Yue threatened to file a lawsuit against BindView unless Netbula received the requested information by October 29, 2005. (Id.) Yue further indicated that Symantec should be notified about the situation, since it was acquiring BindView's intellectual property. (Id.)

On the...