Simplexgrinnell v. Integrated Systems & Power, Inc.
| Decision Date | 31 March 2009 |
| Docket Number | No. 07 Civ. 2700(GEL).,07 Civ. 2700(GEL). |
| Citation | 642 F.Supp.2d 167 |
| Parties | SIMPLEXGRINNELL LP, Plaintiff, v. INTEGRATED SYSTEMS & POWER, INC., f/k/a Simplex of New York City, LLC, f/k/a/ New York City, LLC, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Richard M. Simes, Paul M. Lavelle, and Michael Kivort, Abbott, Simses & Kuchler, APCL, Houston, Texas and James K. Leader, Leader & Berkon LLP, New York, NY, for Plaintiff.
Kevin J. Nash, Finkel Goldstein Rosenbloom & Nas, LLP, New York, New York and Theodore C. Max, Sheppard, Mullin, Richter & Hampton, New York, NY, for Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiff SimplexGrinnell LP brings this action against defendant Integrated Systems & Power, Inc. ("ISPI"), asserting a variety of claims centering around the rights and obligations of the parties in conjunction with an earlier settlement agreement between them in an unrelated bankruptcy proceeding. Specifically, SimplexGrinnell brings claims for copyright infringement, misappropriation of trade secrets, unfair competition through false advertising, and breach of contract. ISPI in turn asserts a breach of contract counterclaim. The case was tried before the Court without a jury on November 10 and 12, 2009. This Opinion sets forth the Court's Findings of Fact and Conclusions of Law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. To the extent any Finding of Fact reflects a legal conclusion, it shall be to that extent deemed a Conclusion of Law, and vice versa. For the reasons stated below, the Court concludes that a limited injunction against ISPI is warranted to prevent further copyright infringement, misappropriation of trade secrets and unfair competition through false advertising practices, but not to the full extent requested by SimplexGrinnell.
1. Plaintiff SimplexGrinnell manufactures, sells and services commercial fire safety systems nationwide.
2. Defendant Integrated Systems & Power, Inc. ("ISPI") is also in the fire safety system business and operates in New York and New Jersey. It does not manufacture its own brand of fire systems but rather primarily provides a variety of service functions, such as general inspections, servicing, maintenance and repair. (Guarino Aff. ¶ 50.1)
3. Thus, SimplexGrinnell and ISPI compete for service customers in the New York and New Jersey markets. (Id. ¶ 7.) Oftentimes, the division of labor works such that a customer will contract with SimplexGrinnell to install a fire alarm system at a particular site, and will thereafter retain ISPI to service and maintain the system.
4. Prior to 2002, SimplexGrinnell and ISPI were allies with a close business relationship. Indeed, ISPI originated in 1987 as a local service company for SimplexGrinnell's predecessor, the Simplex Time Recorder Company. (Id. ¶¶ 3-4.) From that time until 2001, ISPI, through its wholly owned subsidiary—a company called Simplex of New York LLC—operated effectively as a branch office of SimplexGrinnell and served as plaintiff's agent and representative in the New York City area. (P. Proposed Findings at 1; Guarino Aff. ¶¶ 3-4.) In 2002, SimplexGrinnell Terminated ISPI's agency agreement. (Guarino Aff. ¶ 3; Ex. B.)
5. On September 26, 2002, ISPI (together with Simplex of New York City, LLC) filed for Chapter 11 bankruptcy protection. (Guarino Aff. ¶ 8; Ex. D ¶ A.) As part of its bankruptcy case, ISPI instituted an adversary proceeding against SimplexGrinnell alleging, among other things, breach of contract and various business torts. (Guarino Aff. ¶ 10; Ex. D ¶ B.)
6. On May 6, 2003, the bankruptcy court granted ISPI a preliminary injunction requiring SimplexGrinnell to provide ISPI with all parts and equipment necessary for servicing ISPI's then existing customer base, at a contractually agreed upon price of fifteen percent off list price, and to provide ISPI with various forms of technical support. (Ex. C at ISPI 0014-15.)
7. In early 2004, with the aid of a court-appointed mediator, the parties resolved their respective claims and entered into a stipulated settlement (the "Bankruptcy Stipulation"), which was ordered by the Bankruptcy Court on March 29, 2004. (Ex. D.)
8. That settlement required SimplexGrinnell to pay $1,100,000 to ISPI (Id. ¶ 2), and voided all prior agreements between the parties, "whether express or implied, based upon any written or oral agreements, statements or correspondence, course of conduct or otherwise" (id. ¶ 5), including the preliminary injunction issued by the Bankruptcy Court (id. ¶ 3).
9. Although the parties agreed to terminate their prior business relationship, the agreement provided ISPI with certain rights above other competitors with respect to ISPI's customer base existing as of the time of the Stipulation. Specifically, paragraph nine of the Bankruptcy Stipulation requires SimplexGrinnell to "sell service parts (currently identified by SimplexGrinnell with a six-digit product identification number), including `patches' and `fixes' to [ISPI] for the Existing Customer Base at list price and on a `cash on delivery' basis." (Id. ¶ 9.) "Service parts" are not further defined by the Stipulation (nor are the terms `patches' or `fixes'), but the Stipulation requires SimplexGrinnell to provide ISPI with a price list for service parts. (Id. ¶ 11.)
10. The "Existing Customer Base" referred to in paragraph nine is set forth in a separate document and includes the names and addresses of over 200 sites at which ISPI operated as of February 1, 2004 ("ISPI Customer List"). (Ex. E; see also Ex. D ¶ 8.)
11. The Bankruptcy Stipulation also requires SimplexGrinnell to provide ISPI with technical support in the form of technicians from SimplexGrinnell's "Avenel, New Jersey office, at ordinary time and material rates, on a `net 30' basis; provided, however, that `technical support' shall not include '800 number' or `online access' or access to any other proprietary information or networks of SimplexGrinnell." (Ex. D ¶ 10.)
12. The Bankruptcy Stipulation provides for the applicability of New York law (id. ¶ 20), and further provides that "the prevailing party shall be entitled to recover its reasonable attorneys' fees and costs ... incurred in connection with any action or proceeding arising out of or related to the enforcement of this Settlement Agreement ..." (id. ¶ 18).
13. Two of the fire alarm systems manufactured by SimplexGrinnell, called the 4100 and 4100U systems, lie at the heart of this dispute. In particular, this dispute largely centers on whether the software used to program and configure those systems—"the Programmers"—are covered by the requirement of paragraph nine of the Bankruptcy Stipulation of SimplexGrinnell to sell ISPI "service parts ... including `patches' and `fixes.'"
14. Understanding of the fundamentals of these systems comes primarily from the testimony of Andrew Capowski, SimplexGrinnell's current Director of Research and Development who has been with the company for over ten years (Capowski Aff. at 1), Charles LoRocco, a service technician for ISPI (LoRocco Aff. ¶ 1), and ISPI's expert witness, computer science Professor Benjamin Goldberg (Goldberg Rpt. ¶ 1), all of whom the Court found to be credible witnesses.
15. The 4100U is the successor to the 4100 system (Capowski Trial Tr. 45); the "U" in the 4100U stands for "upgrade." (Capowski Dep. 6.) Both of these systems are comprised of "networks of `points' (smoke detectors, notification devices, etc.) and control panels .... contain[ing] CPUs (central processing units) running Simplex software [("panel software")] for controlling interaction with the points and other components of the fire alarm system." (Goldberg Rpt. ¶ 9.) In addition to the panel software, each system also has associated programming software—i.e., the 4100 Programmer and the 4100U Programmer—which is "used to configure [the] control panel once the fire alarm system has been installed in a building." (Id. ¶ 10; see also Capowski Trial Tr. 20.) The Programmer's basic function is to configure the corresponding "control panel for a particular installation of the fire alarm system in a building" (Goldberg Rpt. ¶ 11), and to ensure that the control panel knows the system's configuration so that it can properly operate its hardware (Capowski Aff. § 3.4(2)).
16. Although the 4100U Programmer has several additional features and capabilities compared with the 4100 Programmer (see id. § 2.2), the Programmers are functionally equivalent in the most basic sense in that the 4100 Programmer is used to configure a 4100 panel just as the 4100U Programmer configures a 4100U panel. (Capowski Trial Tr. 19.) However, the Programmers are not interchangeable: 4100 panels must be programmed with the 4100 Programmer and 4100U panels likewise must be programmed with the 4100U Programmer. (See id.)
17. The Programmer software can run either through a laptop computer or it can be run through an on-site network computer, called a graphic command center ("GCC"). (LoRocco Trial Tr. 77; Capowski Aff. at 2.) In either manner, to access and run the programmer software, a software key—also known as a "dongle"2— must be attached to the computer. (Capowksi Aff. at 2.) Without a dongle, the Programmer will not run. (Capowski Trial Tr. 22.)
18. Each time the Programmer is used, ...
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