Paysys Int'l, Inc. v. Atos Se

• Decision Date: 08 December 2016
• Docket Number: 14–cv–10105 (KBF)
• Citation: 226 F.Supp.3d 206
• Parties: PAYSYS INTERNATIONAL, INC., Plaintiff, v. ATOS SE, WORLDLINE SA, ATOS IT SERVICES LTD., Defendants. Atos Se, Worldline SA, Atos IT Services Ltd., Counterclaim Plaintiffs, v. PaySys International, Inc. and First Data Corporation, Counterclaim Defendants.
• Court: U.S. District Court — Southern District of New York

226 F.Supp.3d 206

PAYSYS INTERNATIONAL, INC., Plaintiff,

v.ATOS SE, WORLDLINE SA, ATOS IT SERVICES LTD., Defendants.

Atos Se, Worldline SA, Atos IT Services Ltd., Counterclaim Plaintiffs,

v.PaySys International, Inc. and First Data Corporation, Counterclaim Defendants.

14–cv–10105 (KBF)

United States District Court, S.D. New York.

Signed December 8, 2016

Robert D. Owen, Travis James Mock, Mary Elizabeth Martinez, Sutherland Asbill & Brennan LLP, James Hamilton Neale, Winslett Studnicky McCormick & Bomser, New York, NY, Benjamin C. Morgan, Peter C. Quittmeyer, Sutherland Asbill & Brennan LLP, Atlanta, GA, Jack Massey, Sutherland Asbill & Brennan LLP, Houston, TX, for Plaintiff/Counterclaim Defendants.

Leon Medzhibovsky, Francis W. Ryan, Matthew Nicholas Ganas, Melissa Anne Reinckens, Airina Lynn Rodrigues, Marc Evan Miller, DLA Piper US LLP, New York, NY, for Defendants/Counterclaim Plaintiffs.

OPINION & ORDER

KATHERINE B. FORREST, District Judge:

This is a copyright infringement dispute between PaySys International, Inc. ("PaySys") and defendants Atos Se, Worldline SA ("Worldline") and Atos IT Services Ltd. ("Atos IT") regarding CardPac, a computer program owned by PaySys. Now before the Court is defendants' motion for partial summary judgment. (ECF No. 201.) Defendants assert that PaySys's infringement claims under French, Thai, Belgian and Chinese law set forth in the Fourth, Fifth, Sixth and Seventh Causes of Action of the Second Verified Amended Complaint (the "SVAC", ECF No. 103) must be dismissed for two separate reasons: (1) because PaySys lacks valid copyright registrations, and (2) because PaySys is precluded from suing its licensees Atos Se and Atos IT for infringement.¹ (ECF No. 205 at 7–8.) While the first argument fails, the second succeeds.

The principal question regarding plaintiff's copyright registration is whether an invalid supplementary registration invalidates an initial registration; it does not. Thus, while the Court is persuaded that the supplementary registration is invalid, PaySys continues to hold valid registrations in the portions of the work ("CardPac") it initially registered. Nevertheless, PaySys's infringement claims based on these registrations must be dismissed because the allegedly infringing conduct is authorized by the license. Therefore, as further set forth below, defendants' motion is GRANTED.

I. FACTUAL BACKGROUND²

A. The Software Agreement

On October 31, 1988, PaySys's predecessor, Credit Card Software Inc. ("CCSI"), entered into a software acquisition agreement (the "Software Acquisition Agreement" or "October 1988 Agreement") with Sema Group SA ("Sema"). (Pl.'s Local R. 56.1 Stmt. of Undisputed Facts Opp. Trade Secrets Mot. ("Pl.'s Trade Secrets 56.1", ECF No. 213) ¶¶ 9–10; see also Declaration of Leon Medzhibovsky, dated June 20, 2016 ("Medzhibovksy Decl.", ECF No. 165) Ex. 1.)³ The Software Acquisition Agreement is governed by and construed in accordance with New York law. (Id. , Ex. 1 § 17(a).)

Pursuant to the Software Acquisition Agreement, CCSI licensed Sema certain rights in a computer program known as "CardPac".⁴ (Id. , Ex. 1 § 2.) These rights are delineated in Section 2 of the Agreement, entitled "Sale of Rights". (Id. ) For an initial period of ten years, Sema obtained an "exclusive, royalty-free right to use, and to grant Licenses to use" CardPac within a defined international territory. (Id. , Ex. 1 § 2(a); see also id. § 1(m) (defining "Territory").) The right to license the use of CardPac included the right to "market, supply, install and support the [CardPac] Products as SEMA in its sole discretion shall determine and to appoint Distributors to do the same." (Id. § 2(a).) The Software Acquisition Agreement defines "Distributor" as "a third party who pursuant to any agreement with SEMA has the further right to grant Licenses or sublicenses to use the [CardPac] Products." (Id. § 1(c).) It defines "License" as:

[A]ny license granted by SEMA (or any of its Licensees) to use the [CardPac] Products soley [sic] within the Territory. As such, any sublicense shall itself be deemed to be a License within the meaning of this definition.

(Id. § 1(g).)

After the initial ten-year period, Sema would have a "perpetual non-exclusive right" to:

incorporate all or any portion of the [CardPac] Products (including the ideas, concepts, structure, sequence, organization, look or feel contained therein) into program products developed, marketed, supplied, installed and/or supported by or for SEMA within the Territory.

(Id. § 2(b).)

The Software Acquisition Agreement also conferred certain rights on any "Affiliate" of the parties, defined as "any corporation or other business entity which controls, is controlled by or is under common control with a party to this Agreement." (Pl.'s Trade Secrets 56.1 ¶ 21; Medzhibovsky Decl., Ex. 1 § 1(a).) The Agreement provides that "an Affiliate of SEMA may exercise and enjoy any and all of the benefits or rights conferred upon SEMA under this Agreement and, provided, further, than [sic] SEMA may assign all or any portion of this Agreement to any such Affiliate." (Medzhibovsky Decl., Ex. 1 § 17(b).) It additionally states that "[t]o the extent an Affiliate of either party exercises any rights or privileges under this Agreement, such Affiliate shall be deemed to be a party to this Agreement and shall be bound by all the terms and conditions hereof." (Id. § 17(m).)

The Software Acquisition Agreement was amended by letter agreement dated December 28, 1988, an amendment dated February 19, 1990 and a memorandum agreement dated October 24, 1990. (Medzhibovsky Decl., Ex. 3 at 1.) The Software Acquisition Agreement and its various amendments are known collectively as the "Software Agreement". (Id. )

Following a dispute regarding various rights and obligations under the Software Agreement, PaySys, Sema Group SA and Sema's parent entered into a Confidential Settlement Agreement on April 27, 2001 in which they confirmed and ratified the terms of the Software Agreement and agreed to certain additional amendments. (Id. ) One recital clause at the outset of the Confidential Settlement Agreement states, "[T]he parties wish to clarify and amend the Software Agreement in certain respects in order to minimize the possibility of future disputes". (Id. at ATOS007747.)

Section 5(b) of the Confidential Settlement Agreement states, in relevant part:

PaySys hereby confirms and ratifies ... all licenses or other authorizations to Use the [CardPac] Products or derivatives thereof (including without limitation CardLink) granted by Sema or its Affiliates to third parties on or before the date of this Agreement[.]

(Id. § 5(b).)

Section 5(d) states, in relevant part:

PaySys acknowledges and agrees that the perpetual, non-exclusive rights granted to Sema under Paragraph 2(b) of the Software Acquisition Agreement include, without limitation, the rights to ... grant licenses to Use all or a portion of the Products ... or derivatives thereof ... within the Territory[.]

(Id. § 5(d).)

Section 5(i) provides, in relevant part:

Sema acknowledges and agrees that PaySys shall have no further obligations to provide maintenance, support, enhancements, development or other services or software to Sema or its licensees, distributors or third parties who use, sell, license or distribute the [CardPac] Products or derivatives thereof.

(Id. § 5(i).)

Defendants Atos IT and Atos Se are undisputed licensees of the Software Agreement. When the Software Acquisition Agreement was signed, the signatory Sema Group SA was a subsidiary of Sema Group PLC. (Pl.'s Trade Secrets 56.1 ¶¶ 10–11.) Through a series of name changes, Sema Group PLC became known as Sema Ltd., and later, Atos IT, one of the three defendants in this action. (Id. ¶ 16.) Atos IT is a wholly owned subsidiary of Atos Se, another of the three defendants in this action. (Id. ¶¶ 12, 14–16.) The third defendant in this matter, Wordline, is the successor to Atos Origin, an entity that acquired Sema Ltd. in 2004. (Id. ¶¶ 14–15.) As explained below, Worldline is an "Affiliate" of Sema Group SA.

B. PaySys's Initial CardPac Registrations

CardPac is a software program originally licensed by a predecessor of PaySys to Sema Group SA, an entity affiliated with defendants. (See id. ¶¶ 9–10; see also Medzhibovksy Decl., Ex. 1.) CardPac consists of millions of lines of code organized into eight modules or application systems; each application itself consists of thousands component files. (Pl.'s Local R. 56.1 Stmt. of Undisputed Facts Opp. Intellectual Prop. Mot. ("Pl.'s 56.1", ECF No. 221) ¶¶ 18-19; Declaration of Larry Phillips, dated August 23, 2016 ("Phillips Decl.", ECF No. 219) ¶ 5; Declaration of Ivan Zatkovich, dated August 10, 2016⁵ ("Zatkovich Decl.", ECF No. 204) ¶ 7 n.1.) Each component file performs a discrete, specific function. (Zatkovich Decl. ¶ 9.)

On November 17, 2014—five weeks before commencing this litigation—PaySys registered copyrights in the following eight CardPac-related works (collectively, the "Initial CardPac Registrations" or "Initial Registrations"): CardPac—OLA 606:OAS100 (Reg. No. TXu 1-913-381); CardPac—SSC140:SSU900 (Reg. No. TXu 1-913-382); CardPac—CSM700:KSD200 (Reg. No. TXu 1-913-410); CardPac—OLC 400:OCD200 (Reg. No. TXu 1-913-412); CardPac—APS400:APD200 (Reg. No. TXu 1-913-414); CardPac—IMP420:CCSUT1 (Reg. No. TXu 1-913-415); CardPac—ITS700:ITD120 (Reg. No. TXu 1–913–416) and CardPac—CPS612:CPD110 (Reg. No. TXu 1–913–417). (Pl.'s 56.1 ¶ 1; Zatkovich Decl., Exs. 1–8.) The titles of the works covered by the Initial Registrations all follow the naming convention "[Software Package]—[Module] [Version]:[Component File]" (Zatkovich Decl. ¶ 7; see also Pl.'s 56.1 ¶ 13), and refer to specific component files (Zatkovich Decl. ¶ 7; see also Pl.'s 56.1 ¶ 9).

In support of each of the Initial Registrations, PaySys submitted to the Copyright Office deposit copies of all or some portion of the source code for the eight component files. (Pl.'s 56.1 ¶ 9; ...