Olcott Intern. v. Micro Data Base Systems

• Court: Indiana Appellate Court
• Writing for the Court: BARNES.
• Citation: Olcott Intern. v. Micro Data Base Systems, 793 N.E.2d 1063 (Ind. App. 2003)
• Decision Date: 19 August 2003
• Docket Number: No. 79A05-0211-CV-544.,79A05-0211-CV-544.
• Parties: OLCOTT INTERNATIONAL & CO., INC., Appellant-Cross-Appellee, v. MICRO DATA BASE SYSTEMS, INC., Appellee-Cross-Appellant.

793 N.E.2d 1063

OLCOTT INTERNATIONAL & CO., INC., Appellant-Cross-Appellee, v. MICRO DATA BASE SYSTEMS, INC., Appellee-Cross-Appellant.

No. 79A05-0211-CV-544.

Court of Appeals of Indiana.

August 19, 2003.

David Feinsilver, The Feinsilver Law Group, P.C., Millburn, NJ, Jacqueline Chosnek, Pearlman Chosnek & Hopson, P.C., Lafayette, IN, Attorney for Appellant.

William P. Kealey, Elizabeth B. Searle, Stuart & Branigin, LLP, Lafayette, IN, Attorney for Appellee.

OPINION

BARNES, Judge.

Case Summary

Olcott International ("Olcott") appeals the trial court's entry of judgment in favor of Micro Data Base Systems ("MDBS") in MDBS' breach of contract action. MDBS raises several cross-appeal issues. We affirm in part, reverse in part, and remand.

Issues

We consolidate and restate the issues before us, including MDBS' cross-appeal issues, as:

I. whether some or all of MDBS' breach of contract claims are barred by the applicable statute of limitations;

II. whether the trial court erred in calculating MDBS' damages;

III. whether the trial court erred in its calculation of pre- and post-judgment interest; and

IV. whether the trial court awarded an unreasonable amount of attorney fees to MDBS.¹

Facts

MDBS is a software company that develops database management modules, or components, that software application developers, such as Olcott, integrate into their own database programs for distribution to third parties. Olcott created a database management program for its clients for the purpose of tracking patents and trademarks that it called Olcott Intellectual Property Management System II ("OIPMS II"), which utilized MDBS modules. The MDBS modules at issue in this case are data management system modules ("DMS"), report and transaction logging modules ("RTL"), query and reporting system modules ("QRS"), interactive data manipulation language modules ("IDML"), and database restructuring system modules ("DBRS"). All of these modules were available in either single-user ("SU") or multi-user ("MU") versions, with the latter also referred to as a local area network ("LAN") version.

In 1984, MDBS and Olcott executed a software licensing agreement pursuant to which Olcott was granted permission to utilize MDBS version III software modules in its own software applications. This contract did not specify whether the license was for SU or MU versions of the modules. Olcott agreed to pay royalties to MDBS for each copy of each MDBS module included in an Olcott program distributed to third parties. To track Olcott's distributions and ensure that MDBS received its royalties, the contract required Olcott to pre-purchase "tokens" from MDBS, which were similar to postage stamps; these tokens were to be placed on each copy of Olcott software that it distributed to its customers, corresponding with the number and types of MDBS modules included in the program. For example, an Olcott program that included MDBS' DMS, QRS, RTL, IDML, and DBRS modules was supposed to have five tokens affixed to it, corresponding to each type of module, before it was distributed to Olcott's customer.² The 1984 contract provided as a remedy to MDBS in the event of Olcott's breach, "three times the then current license fee for the corresponding components involved, per occurrence of violation...." Appellee's App. p. 5. The contract also granted MDBS the right to inspect Olcott's records to monitor its compliance with the contract and obligated Olcott to maintain records of its software distributions for up to five years after the contract's termination.

In 1988, the parties executed a second contract that specifically referred to the MDBS III LAN system. This contract retained the token system for paying royalties. It was not as detailed as the 1984 contract as to Olcott's record-keeping requirements, but it still required Olcott to maintain and make records available for inspection and "to provide reasonable assistance to mdbs in enforcing mdbs' rights to the System." App. p. 1144. Additionally, the 1988 contract omitted the treble damages provision found in the 1984 contract.

Until 1995, MDBS had an affirmative business policy of not attempting to ascertain whether Olcott or any of its other licensees were in full compliance with their licensing contracts with MDBS, for fear of alienating the licensees. However, MDBS began then attempting to audit and inspect the records of its licensees. On November 11, 1996, MDBS made its first request for information from Olcott regarding its distribution of MDBS modules. For nearly three years, Olcott refused to provide any information to MDBS. Finally, on June 22, 1999, Olcott sent a fifty-pound box to MDBS that purportedly contained all of Olcott's records relating to MDBS.

On August 2, 1999, MDBS sued Olcott for breach of contract and for an accounting. It was eventually ascertained and agreed to by both parties that Olcott distributed at least forty-five copies of its OIPMS II system containing MDBS modules between 1984 and 1995, some as SU versions and others as MU versions; there was a dispute as to whether Olcott distributed software containing MDBS modules to Westinghouse in 1988, with whom Olcott worked but who also had its own direct licensing agreement with MDBS. MDBS sought to collect damages for breach of contract for every time Olcott distributed a MDBS module without physically affixing a corresponding token to the OIPMS II software product delivered to Olcott's customers. It alleged a total principal damages amount of $438,850, consisting of forty-six tokenless IDML SU and DBRS SU distributions, thirty-five tokenless QRS SU distributions, thirty-six tokenless RTL SU distributions, thirty-seven tokenless DMS SU distributions, ten tokenless DBRS MU distributions, and nine tokenless distributions each of DMS MU, RTL MU, QRS MU, and IDML MU. MDBS applied the module prices in effect for 1995 for all of the distributions, and multiplied the price times three for the SU distributions in accordance with the 1984 contract.

As its first line of defense, Olcott argued that MDBS' breach of contract claims were barred by the statute of limitations or by the doctrine of laches. Olcott's motion for summary judgment on this basis was denied. Alternatively, Olcott calculated MDBS' damages very differently, arriving at a total sum of $14,550. It admitted that it failed to physically affix MDBS tokens to every copy of OIPMS II software it distributed, as required by the parties' contracts. However, it claimed to be entitled to credit for tokens that it had purchased or otherwise received from MDBS, but which were not physically affixed to outgoing software programs. Olcott also claimed that the QRS and IDML modules were not essential to the OIPMS II program and that it therefore owed no royalties for those modules; that the DBRS module was not present in the software at all; that the proper method of calculating the royalties Olcott owed was the module price at the time a particular distribution occurred, not the much-inflated price in 1995;³ and that the treble damages clause in the 1984 contract was unenforceable.

A bench trial was first held on January 16-18, 2002. Unfortunately, the judge who presided over that trial died shortly thereafter, before entering judgment. Olcott moved for and was granted a mistrial, and a second bench trial was held on June 19-21, 2002. On August 21, 2002, the trial court entered judgment, with accompanying findings and conclusions, in favor of MDBS in the principal amount of $83,295. It again rejected Olcott's statute of limitations defense. It also found that thirty-four SU OIPMS II sales occurred between 1984 and 1992, two SU OIPMS II sales occurred in 1995, and ten MU OIPMS II sales (including the sale to Westinghouse) occurred between 1988 and 1990. It required Olcott to pay royalties for every tokenless distribution of a MDBS module, regardless of whether Olcott had actually paid for or otherwise received a token but merely failed to affix it. It also enforced the treble damages provision with respect to the SU distributions and found that Olcott was required to pay for the QRS and IDML modules. It also found, however, that the OIPMS II program did not contain the DBRS module, and in calculating damages it applied the price for each module in effect on the date each improper distribution occurred, not the 1995 price list for every distribution. The trial court awarded pre-judgment interest to MDBS, but only dating from the filing of the lawsuit in 1999. Finally, it awarded attorney fees and costs to MDBS in the full amount it requested, $159,567.14. The trial court's award of post-judgment interest only expressly applied to the damages award, not the attorney fees award. Olcott now appeals, and MDBS cross-appeals.

Analysis

The trial court here entered findings of fact and conclusions thereon sua sponte. In such a case, we apply the following two-tier standard of review: whether the evidence supports the findings, and whether the findings support the judgment. Learman v. Auto Owners Ins. Co., 769 N.E.2d 1171, 1174 (Ind.Ct.App. 2002), trans. denied. Findings and conclusions will be set aside only if they are clearly erroneous, that is, when the record contains no facts or inferences supporting them. Id. "A judgment is clearly erroneous when a review of the record leaves us with a firm conviction that a mistake has been made." Id. We consider only the evidence favorable to the judgment and all reasonable inferences flowing therefrom, and we will neither reweigh the evidence nor assess witness credibility. Klotz v. Klotz, 747 N.E.2d 1187, 1190 (Ind.Ct.App. 2001). Sua sponte findings control only as to the issues they cover, and a general judgment standard of review controls as to the issues upon which there are no findings. Learman, 769 N.E.2d at 1174. A general judgment will be affirmed if it can be sustained on any legal theory supported by the evidence. Id.

I. Statut...