Superior Edge, Inc. v. Monsanto Co.

• Decision Date: 09 August 2013
• Docket Number: Civil No. 12–2672 (JRT/FLN).
• Parties: SUPERIOR EDGE, INC., Plaintiff, v. MONSANTO COMPANY and Site–Specific Technology Development Group, Inc., Defendants.
• Court: U.S. District Court — District of Minnesota

964 F.Supp.2d 1017

SUPERIOR EDGE, INC., Plaintiff,

v.MONSANTO COMPANY and Site–Specific Technology Development Group, Inc., Defendants.

Civil No. 12–2672 (JRT/FLN).

United States District Court,

D. Minnesota.

Aug. 9, 2013.

Walter Joseph Gates, III, Attorney at Law, Mankato, MN; and William G. Osborne, William G. Osborne, P.A., Orlando, FL, for plaintiff.

Jennifer S. Kingston and Robert F. Epperson, Jr., Dowd Bennett LLP, St. Louis, MO; and Lucas Clayton, Fabyanske, Westra, Hart & Thomson, PA, Minneapolis, MN, for defendants.

MEMORANDUM OPINION AND ORDER

JOHN R. TUNHEIM, District Judge.

This case arises out of a software development and license agreement between plaintiff Superior Edge, Inc. (“SEI”) and defendant Monsanto Company (“Monsanto”). Pursuant to the agreement, SEI was to develop software for Monsanto to assist in Monsanto's seed sales initiatives. Prior to entering into the agreement with SEI, Monsanto had entered into a separate agreement with defendant Site–Specific Technology Development Group, Inc. (“SST”) to help Monsanto achieve other facets of its seed sales initiatives.

After SEI and Monsanto began working together, conflict ensued regarding the parties' obligations under the agreement. As the relationship between Monsanto and SEI deteriorated, Monsanto and SST began developing software with the capabilities initially assigned to be created by SEI pursuant to the software development agreement. The current dispute centers generally around work performed by SEI for Monsanto for which it allegedly was not compensated, ownership of the software in question, whether SEI's software embodied the contracted for capabilities, whether the software was delivered on time, and whether Monsanto's expectations for and compensation of SEI's work were in accordance with the agreement.

SEI brings claims for breach of contract, fraud, conversion, deceptive trade practices, misappropriation of trade secrets, and tortious interference against Monsanto and SST. Monsanto and SST move to dismiss the claims against them (with the exception of the breach of contract claim alleged against Monsanto). SEI has also filed a motion for preliminary injunction, seeking to enjoin Monsanto from compelling arbitration. For the reasons explained below, the Court will grant Monsanto's motion to dismiss and grant in part and deny in part SST's motion to dismiss. The Court will also deny SEI's motion for preliminary injunction.

BACKGROUND

I. THE RELATIONSHIP BETWEEN THE PARTIES

SEI is a software development business that specializes in creating customized computer-based marketing and sales software to meet the needs of its clients' particular businesses. (Compl. ¶ 1, 7, Oct. 19, 2012, Docket No. 1.) Monsanto produces and sells commercial farm seed products. ( Id. ¶ 2.)

In 2008, Monsanto began to focus on developing a greater share of North America's seed market. ( Id. ¶ 9.) To achieve this objective, Monsanto met with SEI to discuss possible software development that could improve Monsanto's customer service techniques and increase its sales. ( Id. ¶¶ 9–11.) Monsanto indicated that the primary goal of SEI's work would be to enable Monsanto's sales force to make effective seed recommendations at the point of sale. ( Id. ¶ 14.) That is, Monsanto wanted software that could obtain, organize, and present information about individual farmers and farms, such as ownership, size, crops, equipment used, and finances, that would allow the Monsanto sales representative to customize his or her sales pitch to the demands of the particular farmer. ( Id. ¶ 13.)

SEI intended to accomplish Monsanto's objectives using an application known as SalesEdge Accelerator (“SalesEdge”). ( Id. ¶ 7.) SalesEdge is SEI's primary system for improving clients' sales and it “permits ... users to create personalized sales proposals—sometimes printed in binder or booklet form—using data from a wide range of sources with the data being tailored to the specific industry, seller and purchaser.” ( Id.) SEI licensed certain intellectual property from the Spangenberg Group in March 2009 that was essential to SEI's use of SalesEdge. ( Id. ¶ 7, Ex. A.) SEI's licensing agreement with the Spangenberg Group granted SEI “an irrevocable, non-exclusive, non-transferable license.” ( Id., Ex. A at 2.) Because SalesEdge was a key component of the software SEI proposed to develop for Monsanto, Monsanto was involved in the negotiations between SEI and the Spangenberg Group to acquire the necessary licensing. ( Id. ¶ 7.)

Prior to entering into a relationship with SEI, Monsanto had contracted with SST, another software development company that specializes in business development and sales software with applications for the agricultural industry. ( Id. ¶ 3.) SEI was aware of Monsanto's relationship with SST. ( Id., Ex. B at 45.)

II. THE AGREEMENT

On August 7, 2009, Monsanto and SEI executed a Software Development and License Agreement (“the Agreement”) with an effective date of March 1, 2009. ( Id. ¶ 21, Ex. B.) The Agreement stated that “Monsanto desires to engage SEI to tailor and/or customize SEI's SalesEdge Accelerator software, develop new capabilities and provide services for the purpose of enhancing Monsanto's sales execution.” ( Id., Ex. B at 11.) The Agreement contained a Development Plan

which include[d] initial requirements, specifications, features and functionalities of the Monsanto Premium Products,¹ a general overview and timetable for development and implementation of the SEI Technology, schedules for deliverables, test protocols and procedures, development objectives, and assumptions regarding ongoing contributions and research activities.

( Id., Ex. B at 19.) The Development Plan, attached as Exhibit A to the Agreement, set forth in great detail the objectives of Monsanto's relationship with SEI and the parties' obligations. ( Id., Ex. B at 42–49.)

In particular, the Development Plan defined the deliverables—the proposed features and functionality of the Monsanto Premium Product—that SEI was responsible for developing. ( Id., Ex. B at 44–49.) For example, one deliverable required SEI's software to “provide the ability to segment [Monsanto's] grower market against a defined set of indexes,” which would “provide[ ] Monsanto with the capability of identifying and scoring prospective purchasers of Monsanto products.” ( Id., Ex. B at 44.) For each deliverable, the Development Plan set forth the timeline for SEI to meet different milestones and also provided the metrics for measuring the adequacy of the deliverable. ( Id., Ex. B at 44–49.) Of relevance to the instant motions, SEI agreed to deliver “Grower Solutions” that would enable the sales person to generate a form that combined product and service recommendations, prepared quotes for those products and services, and “[p]roduce[d] a highly professional, branded document tailored for a customer/prospect.” ( Id., Ex. B at 44.)

The Agreement allowed for the potential modification of the Development Plan during the Development Period by a Development Management Team, comprised of three Monsanto and three SEI representatives, stating:

From time to time during the Development Period,² the Development Management Team shall review the Development Plan then in effect, and may make changes to the Development Plan as reasonably necessary to ensure that development objectives are appropriate and are achievable within the desired timeframes, or to incorporate any amendment to the development objectives that is proposed by Monsanto or SEI and approved [by the Development Management Team.]

( Id., Ex. B at 19–20.) The Agreement provided that the Development Management Team would meet at least quarterly and could alter the Development Plan only by unanimous vote. ( Id., Ex. B at 20–21.) The Development Plan was intended to be managed through an “agile methodology.” ( Id., Ex. B at 42.) Under the agile methodology, although the requirements of SEI's work were defined within the Development Plan it was “understood that they are general in nature. As the project moves through its various phases it is understood that a variety of factors will impact the project. The Agile methodology puts a process in place to adjust and adapt to these factors.... With the Agile approach priorities and deliverables are refined and adjusted as discoveries are made during the project.” ( Id.)

Pursuant to the Agreement, SEI granted certain rights to Monsanto with respect to SalesEdge and related intellectual property. ( Id., Ex. B at 11.) Specifically, SEI granted Monsanto an exclusive license for all software developed and improved by SEI with applications to, among other areas, Monsanto's seed production recommendations. ( Id., Ex. B at 15, 21–22.) Additionally, the Agreement provided that “[r]egardless of inventorship, any Intellectual Property associated with the Monsanto Premium Products ... that is developed under this Agreement will be assigned to Monsanto.... SEI will be entitled to receive a limited, royalty-free license to use the Intellectual Property associated with the Monsanto Premium Products.” ( Id., Ex. B at 25.)

The Agreement provided for three types of compensation: exclusivity payments, development fees, and user fees. ( Id. ¶¶ 23–25, 27–29.) Monsanto agreed to pay SEI an exclusivity fee of approximately $1 million per year until September 1, 2012, in consideration for the exclusive licenses granted by SEI. ( Id., Ex. B at 23–24.) The development fees were “[i]n consideration of SEI's services under the Development Plan,” whereby Monsanto agreed “to pay SEI for time and material costs incurred during the Development Period.” ( Id., Ex. B at 24.) The Agreement called for Monsanto to pay SEI an initial $500,000 development fee upon the execution of the Agreement and an additional $500,000 on September 15, 2009. ( Id.) After Monsanto had paid the first $1 million in development fees, the Agreement provided that “SEI shall submit...