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Complex Systems, Inc. v. Abn Amro Bank N. v.

United States District Court, S.D. New York

May 9, 2014

ABN AMRO BANK N. V. Defendant.



The story of this dispute is relatively simple, despite the fact that it has been litigated for almost six years. In 2007, defendant ABN AMRO Bank N.V. ("ABN") sold some of its assets - including subsidiaries LaSalle Bank and ABN AMRO Information Technology Services Company, Inc. ("IT") - to Bank of America ("BAC") ("the LaSalle Transaction") for $21 billion.

IT was the licensee of a software application created and licensed by plaintiff Complex Systems, Inc. ("CSI") called BankTrade. By virtue of its corporate affiliation with ABN, ABN was entitled to use BankTrade through IT and in reliance on IT's license. Following the LaSalle Transaction, IT remained the licensee. ABN did not have a separate license and was not itself a licensee.

This did not stop ABN from using BankTrade, however. ABN has continued to use BankTrade uninterruptedly up until today. Perhaps ABN assumed that following its sale of IT it could easily obtain its own license from CSI; perhaps it assumed that somehow once IT no longer needed the license, IT could transfer it back; perhaps ABN just overlooked certain details in the throes of closing a quickly-negotiated $21 billion deal. Regardless, the evidence is clear that the moment the LaSalle Transaction closed, ABN no longer had a license to use BankTrade. The evidence is equally clear that during the intervening period, as it tried unsuccessfully to negotiate one for a low price, ABN knew it no longer had the license to BankTrade. Nonetheless, ABN hunkered down and continued apace, even after (and despite the fact that) CSI filed this infringement lawsuit in 2008. That alone might not be unexpected, but the decision not to develop a backup plan in the event it lost this lawsuit is.

After six years of uninterrupted infringement by ABN, CSI prevailed on liability. It now seeks injunctive relief to prevent certain and ongoing infringement.[1]

ABN resists. ABN argues that BankTrade is too important to its trade finance business to cease using it - it is deeply embedded as a component of a complicated technical platform used in 22 countries (called "GTP"). ABN argues that it has tried to negotiate a license but CSI has been commercially unreasonable and that this Court should therefore allow ABN to use BankTrade perpetually in exchange for a Court-imposed license - complete with financial and other terms.

Taken to its logical conclusion, this position may be reduced to the following propositions:

- If a software application is really quite useful and relied upon (the developer would undoubtedly hope for both), once licensed, a licensee has a de facto and de jure perpetual license;
- When a licensor acts in a commercially unreasonable manner in the context of a negotiation for renewal of a useful and relied upon software application, a licensee may simply cease negotiations, continue usage, and seek the Court's assistance in setting a license fee and the other terms, thus irrevocably shifting leverage in any licensing discussion; and
- If an infringer bets it can obtain a license for its preferred price and bets wrong, the burden of that bet falls on the licensor - not on the infringer.

The Court declines to accept these propositions.[2] CSI's motion for injunctive relief is GRANTED.


In 1997, ABN's subsidiary, IT, and CSI entered into an initial license agreement for BankTrade ("the License Agreement"). The License Agreement allowed IT to utilize BankTrade in connection with ABN's trade finance processing services in North America.[3] (Defendant's Opposition to Plaintiff's Motion for a Permanent Injunction, Pursuant to 17 U.S.C. § 502, and for the Destruction or Return of All Copies of BankTrade, Pursuant to 17 U.S.C. § 503(b) ("Def.'s Opp'n"), Nov. 29, 2013, ECF No. 349.) At all times thereafter, IT was the licensee of Banktrade. The License Agreement allowed corporate affiliates of IT to use BankTrade. (Declaration of Jeffrey I. Kaplan in Support of Complex System, Inc.'s Combined Memorandum in Opposition to ABN's Motion for Summary Judgment and In Support of CSI's Motion for Summary Judgment ("Kaplan 8/3/12 Decl."), Ex. A, Aug. 8, 2012, ECF No. 170.)

In 2000, ABN decided to consolidate its trade finance processing operations and to use BankTrade globally. (Def.'s Opp'n at 6.) Accordingly, in 2001 and again in 2002, CSI and IT entered into addenda to the License Agreement, for additional licensing fees. (Id.) The 2001 addendum expanded IT's rights by: (1) allowing IT to use BankTrade worldwide; (2) expanding IT's access to BankTrade source code; (3) providing additional modules within the system; and (4) allowing unlimited insourcing. (Def.'s Opp'n at 6; 3/14 Tr. 14-15.) Following the agreements, CSI and IT worked together to customize and integrate BankTrade into ABN's global trade finance processing platform (again, "GTP"). (Bostonian-Spratt Decl. ¶¶ 13-21.)

The License Agreement and addenda provided that IT was the licensee; while the agreement was non-transferable, it could be assigned to IT's subsidiaries, affiliates, or any direct or indirect parent or any subsidiary or affiliate of such parent. (6/21/13 Opinion & Order at 4.) The License Agreement provided the following scope of use:

The License granted under this Agreement authorizes the Licensee to use a required number of copies of the System in machine readable form to service all North American (i.e. Canada, United States, Mexico) entities as listed below, as permitted by the License Agreement, by the Licensor, in any location. The copies shall be used solely for processing Licensee internal banking work of any parent, subsidiary or affiliated entity, direct or indirect, of Licensee, and not for any other purpose of entity. A direct or indirect parent, subsidiary or affiliate of Licens[ee] shall be defined as any entity which is at least 80% owned by ABN-AMRO Bank N.V. and/or ABN-AMRO North America.... No right to print or copy, in whole or in part, the System is granted hereby except as hereinafter expressly provided.

(Id.) The 2001 Addendum added a term, "Extended Use of the System, " that provided:

The license to the use the System granted to Licensee under the License Agreement is hereby extended to include: 1) the right to use the System to process work for unrelated business and corporate entities without restriction; and 2) the right to use the System globally without geographic restriction. Such extended use may referred to herein as "Insourcing."

(Kaplan 8/3/12 Decl., Ex. B.)

In October 2007, ABN was the target of a hostile bid; it responded by, inter alia, quickly negotiating and closing its own deal: selling a number of assets, including its subsidiaries IT and LaSalle Bank, to BAC (again, "the LaSalle Transaction").[4] (Def.'s Opp'n at 7.) At the time of the sale, LaSalle Bank and other ABN entities actively used BankTrade in their businesses. The License Agreement provided for such usage by corporate affiliates. Prior to the closing of the LaSalle Transaction, IT did not assign the License Agreement to ABN. (See id. at 2-3.) With the closing of the LaSalle Transaction, the License Agreement went with IT to BAC. As of the closing, ABN was no longer an affiliate (or parent) of IT; it no longer had a right to use BankTrade derivatively based on the licensing rights of IT. Nevertheless, ABN continued using BankTrade post-merger and ABN concedes it continues to actively use BankTrade today. (Pl.'s Mem. at 3.)[5]

There is no credible question that ABN knew it did not have a license to use BankTrade following the LaSalle Transaction and that it continued to use the software despite this inconvenient fact. A copy of the purchase and sale agreement between BAC and ABN clearly provides that BAC (rather than ABN) will be guaranteed the license. (Kaplan 8/3/12 Decl., Ex. D;[6] 4/7 Tr. 6.)

ABN understood it lacked requisite rights. An undated chart listing license agreements for various software applications shows that both ABN and LaSalle Bank would use BankTrade. (Kaplan 8/3/12 Decl., Ex. V.) The chart indicates that LaSalle Bank (including IT) is the "signing entity" for the BankTrade license. (Id.) Put in blunt terms, IT was the licensee.

On February 29, 2008, Tom Trujillo of BAC wrote to CSI that the BankTrade license "remains with the contracting LaSalle entity [e.g., IT] (which entity is among those bought by Bank of America)." (Id. at 9 (quoting Kaplan 8/3/12 Decl., Ex. F).)

A March 2008 ABN internal email states, "As you all know, BAC still owns the BankTrade software. BAC has stated they will not be off version 6.2 until October [2008] nor will we look for BAC to assign this contract to [ABN] until such time later this year. [ABN] employees or contractors should not be manipulating the software/source code. It should be managed by BAC or its contractors only at this point in time." (Id, at 10 (quoting Kaplan 8/3/12 Decl., Ex. L).)

On March 3, 2008, Sheldon Goldfarb, an attorney with RBS (which acquired ABN), wrote to CSI that "[ABN] is not a party to the License Agreement." (Id. (quoting Kaplan 8/3/12 Decl., Ex. H).)

On April 11, 2008, Holly Lussier of RBS wrote to Warren Browne at CSI: "I would like to thank you and the other members for meeting with us yesterday. Pursuant to that discussion, we confirmed with you that BAC as successor in interest to [IT] is currently the licensee under the License Agreement, all addenda thereto, and the subsequent [agreement. We] would like to assign the Agreements back to ABN." (Id. at 11 (quoting Kaplan 8/3/12 Decl., Ex.G).)

An internal ABN document dated June 18, 2008 states: "[CSI] sent a notice to ABN [] stating that ABN was in breach of contract. ABN is working [j] with BAC to put forward our position, which states that within the TSA there is an implicit license to ABN. Once BAC agrees with ABN's position, ABN can approach [CSI]. The issue with [CSI] will not be resolved by 7/1/08.... [W]e need to go forward regardless." (Kaplan 8/3/12 Decl., Ex. X (emphasis added).)

An August 2008 contract between ABN and RBS, BAC, and BAC Services Company, Inc., formerly IT, sets forth an agreement between ABN and BAC whereby BAC "transfers" BankTrade to ABN and in exchange, ABN agrees to indemnify and hold harmless BAC should CSI bring any claim against it. ( Id., Ex. FF; Supplemental Declaration of Jeffrey I. Kaplan ("Kaplan Decl."), Ex. B, Oct. 25, 2013, ECF No. 316.) No provision in the License Agreement allows for such a transfer between unaffiliated companies. The August 2008 agreement indicates that BAC agrees to cooperate with ABN in litigation, to not communicate with CSI, and to not assert any ownership rights over the License Agreement. (Id.) BAC further agrees to cooperate with ABN during litigation and to recognize ABN as the owner of the License Agreement. (Id.)[7] Of course, this purported transfer proves liability: it would have been unnecessary if ABN had had any then-existing rights to BankTrade.

An (undated) internal document contains an entry dated March 31, 2009 that states: "CSI is expected to require a significant amount in fees for this assignment... The lawyers from BAC and RBS both agree... that BAC can't assign the contract without consent from CSI." (Kaplan 8/3/12 Decl., Ex. X (emphasis added); see also 6/21/13 Opinion & Order at 11.)

Despite all of this, ABN concedes it has not seriously begun the necessary work to transition off of BankTrade. (See, 3/14 Tr. 167-68.) At the evidentiary hearing on this motion, when asked why ABN has not stopped using BankTrade, Dermot Canavan, currently the Regional Trade Product Head for Europe, the Middle East, and Africa for RBS (formerly, ABN), stated:

It's not something we are willing to do. We have a set of processes that work now and to replace all those processes through putting a new system in place is a huge amount of work, it's a major undertaking. It doesn't give us any extra commercial advantage. We can't give anything to our clients tomorrow if we do put the new system in. And it's a huge distraction. We would need to find a lot of people to put the new systems in, to embed the new systems, take out the old systems, across 22 countries. It's a huge task.

(3/14 Tr. 167-68.)


On August 25, 2008, CSI filed this lawsuit. (ECF No. 1.) In its original Complaint, CSI sought, among other relief, a permanent injunction. (See Compl. 76, Aug. 25, 2008, ECF No. 1.) On December 29, 2008, CSI filed an amended Complaint. (ECF No. 16.) That amended Complaint also contained a request for the entry of a permanent injunction. (Am. Compl. ¶¶ 55, 66, 72, 79, A, Dec. 29, 2008, ECF No. 16.) On May 4, 2009, ABN filed its Answer. (ECF No. 27.) The relief CSI is seeking has never been in doubt.

On June 30, 2012, ABN filed a motion for summary judgment, contending that ABN retained ownership over the BankTrade license post-LaSalle Transaction. (ECF No. 159.) On August 8, 2012, CSI filed a cross-motion for summary judgment, arguing that IT failed to assign the license pre-LaSalle Transaction and thus, ABN no longer had the right to operate BankTrade. (ECF No. 170.)[8]

On December 5, 2012, this matter was reassigned to the undersigned, and on March 20, 2013, the Court denied ABN's motion for summary judgment and granted CSI's cross-motion for summary judgment. (ECF No. 184.) On June 21, 2013, the Court issued a corrected Opinion & Order. (ECF No. 257.) The Court determined that while ABN had the ability pre-closing to assign its BankTrade license without cost or penalty, it did not do so; it could not retroactively accomplish such assignment post-closing without the agreement of CSI. (6/21/13 Order at 2.) No such agreement had been reached between the parties and the Court determined that ABN's ongoing use of BankTrade was therefore unlicensed. (Id.)

On April 18, 2013, CSI filed a motion for summary judgment as to ABN's remaining defenses. (ECF No. 202.) Thereafter, and of particular relevance here, on November 1, 2013, ABN filed a motion in limine to exclude evidence of indirect profits. (ECF No. 327.) In contrast to ABN's current argument that BankTrade is a core, irreplaceable component of GTP, ABN downplayed its significance in connection with this motion, arguing that BankTrade is simply a back-office software application. (See Defendant's Memorandum of Law in Support of its Motion in Limine on Damages under Section 504(b) of the Copyright Act ("Def.'s MIL Mem.") at 3, Nov. 1, 2013, ECF No. 328.) ABN contended BankTrade was while necessary - insignificant, replaceable, and a non-factor in ABN's profits. ABN explained: "While ABN uses BankTrade to process letters of credit and guarantees, ABN also uses electricity, ...

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