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Applied Technology, Inc v. J.R. Clancy

May 12, 2011

APPLIED TECHNOLOGY, INC., PLAINTIFF,
v.
J.R. CLANCY, INC., DEFENDANT.



The opinion of the court was delivered by: Hon. Glenn T. Suddaby, United States District Judge

MEMORANDUM-DECISION and ORDER

Currently before the Court, in this breach-of-contract action filed by Applied Technology, Inc. ("Plaintiff") against J.R. Clancy, Inc. ("Defendant"), are (1) Defendant's motion for partial summary judgment on Plaintiff's First Cause of Action and a portion of Plaintiff's Second Cause of Action, and (2) Plaintiff's cross-motion for partial summary judgment on its First Cause of Action. (Dkt. Nos. 13, 15.) For the reasons set forth below, Defendant's motion for partial summary judgment on Plaintiff's First Cause of Action is denied; Plaintiff's cross-motion for partial summary judgment on its First Cause of Action is granted; and Defendant's motion for partial summary judgment on a portion of Plaintiff's Second Cause of Action is granted.

I. RELEVANT BACKGROUND

A. Plaintiff's Claims

Generally, Plaintiff's Complaint alleges that Defendant breached a licensing agreement ("Agreement") entered into between the parties on December 11, 2003, which permitted Defendant to manufacture and sell winches using technological information relating to Plaintiff's patented motorized winch for raising and lowering theater scenery (the "Winch"). (See generally Dkt. No. 1 [Plf.'s Compl.].)*fn1 More specifically, Plaintiff's Complaint alleges as follows.

Under the Agreement, Defendant agreed to pay Plaintiff a license fee of $20,000 per year for five years, with the first installment of $20,000 having been already paid, and subsequent installments due on September 1st of each year, commencing September 1, 2004, and continuing until September 1, 2007, unless the Final Agreement had earlier been terminated in accordance with its terms. (Id.) Defendant also agreed to pay Plaintiff a 5% royalty on the net sales price of each "winch" embodying Plaintiff's technology and sold by Defendant, with a $200 minimum per winch. (Id.) Defendant had the right to terminate the Agreement after the Third Contract Year (which ended on September 1, 2006), on sixty days written notice to Plaintiff. (Id.) On September 30, 2005, before the end of the Third Contract Year, Defendant purported to terminate the Agreement, asserting that no royalties were payable or would become payable in the future under the Agreement, because the PowerLift® product that it was selling to customers was not a "winch" within the meaning of the Agreement. (Id.) Because Defendant's effort to terminate the Agreement before the end of the Third Contract Year was ineffective, Defendant was required to make a license payment to Plaintiff in the amount of $20,000 on September 1, 2006. (Id.) In addition, Defendant is obligated under the Agreement to pay royalties on sales of its PowerLift® winches since October 2004. (Id.)

Based on these factual allegations, Plaintiff asserts two causes of action against Defendant: (1) a cause of action for breach of contract arising from Defendant's nonpayment of the Agreement's fourth annual $20,000 license fee allegedly due on September 1, 2006; and (2) a cause of action for breach of contract arising from Defendant's nonpayment of contractual royalties on sales of its PowerLift® winches allegedly due since October 2004. (Id.) Familiarity with the factual allegations in Plaintiff's Complaint supporting these two causes of action is assumed in this Decision and Order, which is intended primarily for review by the parties. (Id.)

B. Parties' Motions for Partial Summary Judgment

Generally, in support of its motion for partial summary judgment, Defendant argues as follows: (1) Plaintiff's First Cause of Action for breach of contract (arising from Defendant's nonpayment of the Agreement's fourth annual license fee allegedly due on September 1, 2006) should be dismissed as a matter of law because Defendant properly terminated the Agreement at the end of the Third Contract Year, which the Agreement unambiguously defined as August 31, 2006; and (2) Plaintiff's Second Cause of Action for breach of contract (arising from Defendant's nonpayment of contractual royalties on the sale of its PowerLift® winches allegedly due since October 2004) should be dismissed to the extent that it is premised on any sales occurring after Defendant terminated the Agreement, because that termination extinguished any contractual obligation of Defendant to pay future such royalties. (See generally Dkt. No. 13, Attach. 3 [Def.'s Memo. of Law].)

Generally, in opposition to Defendant's motion for partial summary judgment, and in support of its own cross-motion for partial summary judgment on its First Cause of Action, Plaintiff argues as follows: (1) not only should judgment not be entered in Defendant's favor on Plaintiff's First Cause of Action, but judgment should be entered in Plaintiff's favor on that cause of action because, as a matter of law, Defendant did not terminate the Agreement until after the end of the Third Contract Year, based on the admissible record evidence; and (2) judgment should not be entered in Defendant's favor on the relevant portion of Plaintiff's Second Cause of Action because, even if Defendant did terminate the Agreement after the end of the Third Contract Year, Plaintiff is entitled to contractual royalties thereafter due to Defendant's continued manufacturing and selling of PowerLift® winches embodying Plaintiff's patented technology, given that (a) any such use of the technology violated Section 6 of the Agreement (labeled "License fees and Royalties," which constituted the only basis for Defendant's right to use the technology at issue, and/or (b) the constituted manufacture and sale violated Section 10 of the Agreement (entitled, "Confidentiality / Non-Disclosure"), which survived the Agreement's termination. (See generally Dkt. No. 15, Attach. 3 [Plf.'s Opp. Memo. of Law].)*fn2

Generally, in its reply, Defendant argues as follows: (1) Plaintiff has failed to adduce admissible record evidence creating a genuine dispute of material fact regarding whether Defendant provided the requisite notice to terminate the Agreement in sufficient time for termination to occur at the instant the Third Contract Year ended; (2) after Defendant terminated the Agreement, Defendant's contractual duty to pay Plaintiff royalties for the future use of Plaintiff's patented technology evaporated; and (3) Plaintiff may not now hinge that contractual duty on Section 10 of the parties' Agreement given that (a) Plaintiff did not assert a claim for breach of Section 10 in its Complaint, and (b) the confidential information in question has been in the public domain since at least October 2004. (See generally Dkt. No. 17 [Def.'s Reply Memo. of Law].)

C. Undisputed Material Facts

Generally, the material facts giving rise to this action are undisputed by the parties. (Compare Dkt. No. 13, Attach. 4 [Def.'s Rule 7.1 Statement] with Dkt. No. 14 [Plf.'s Rule 7.1 Response and Rule 6.1 Counter-Statement].) In addition, most of the handful of factual disputes encountered by the parties may be avoided by a strict adherence to the undisputed record evidence. (Compare Dkt. No. 13, Attach. 4, ¶¶ 8, 12, 13 [Def.'s Rule 7.1 Statement] with Dkt. No. 14, ¶¶ 8, 12, 13 [Plf.'s Rule 7.1 Response and Rule 6.1 Counter-Statement].) More specifically, the undisputed material facts of this case are as follows.

On July 23, 2003, Defendant paid $20,000 to Plaintiff as its first annual license fee payment under the terms of an interim license agreement while the Agreement was being finalized by the parties. On December 11, 2003, the parties executed the Agreement, ...


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