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Universal Instruments Corp. v. Micro System Engineering, Inc.

United States District Court, N.D. New York

February 24, 2017






         I. Introduction

         Plaintiff/consolidated defendant Universal Instruments Corporation commenced this action against defendant/consolidated plaintiff Micro System Engineering, Inc. (MSEI) and defendant Missouri Tooling and Automation (MTA) for copyright infringement, breach of contract, misappropriation of trade secrets, unfair competition, unjust enrichment, and promissory estoppel. (See generally 3d Am. Compl., Dkt. No. 103.[1]) MSEI commenced a separate action against Universal alleging breach of the duty of confidentiality, unfair competition, misappropriation of trade secrets, and “an injunction.” (See generally Compl., Dkt. No. 1, 3:13-cv-1144.) The two actions were consolidated, and the earlier-filed designated as the lead. (Dkt. No. 26.) Pending are MSEI and MTA's motions for judgment on the pleadings, to dismiss, to strike, and for summary judgment. (Dkt Nos. 80, 97, 107, 196.) Also pending is Universal's cross motion for partial summary judgment. (Dkt. No. 209.)

         II. Background

         A. Facts[2]

         MSEI manufactures and tests components used in pacemakers and defibrillators that are implanted into patients' chests. (Defs.' Statement of Material Facts (SMF) ¶ 1, Dkt. No. 200.) Universal develops automation platforms for companies, like MSEI, in the electronic manufacturing industry. (Pl.'s Supplemental (Supp.) SMF ¶ 1, Dkt. No. 213; 3d Am. Compl. ¶¶ 3-4.) MTA is a competitor of Universal and also designs machine automation and provides system upgrades, retrofits, and custom tooling. (3d Am. Compl. ¶¶ 12, 247; Dkt. No. 67 ¶¶ 12, 74.)

         MSEI owned machines that manually tested its products and wanted to upgrade this equipment to operate automatically. (Defs.' SMF ¶ 2.) MSEI planned to introduce the upgraded machines in phases to gradually create a fully automated system to be called the Test Handling System (THS). (Id. ¶¶ 8, 10.) In order to do so, MSEI initially developed an automation design in 2002. (Id. ¶ 3.) MSEI contends that this design contained intellectual property consisting of trade secrets, some of which were eventually implemented into the THS. (Id. ¶¶ 3, 4.) Universal, however, disputes that MSEI created any intellectual property. (Pl.'s SMF ¶ 3.)

         MSEI detailed its specifications for the THS and solicited bids to build the first phase of the project. (Defs.' SMF ¶¶ 8, 10; Pl.'s Supp. SMF ¶ 10.) Interested suppliers, including Universal, signed a Confidential Disclosure Agreement (CDA) and were provided access to MSEI's specifications. (Defs.' SMF ¶¶ 133-34; Dkt. No. 196, Attach. 39.) The CDA outlined Universal's obligations to keep the specifications confidential under section five of the agreement. (Dkt. No. 196, Attach. 39 § 5.) It also included a sunset provision which stated that Universal's “obligations under Section 5(a) stop at the end of the [p]rotection [p]eriod” and that the protection period ended on December 30, 2012. (Id. § 4(a), (d).)

         MSEI selected Universal to construct the first THS line (hereinafter “THS1A”). (Defs.' SMF ¶ 12.) MSEI and Universal memorialized their contract in an Equipment Purchase Agreement (EPA) in June 2007. (Id. ¶ 17; Pl.'s Supp. SMF ¶ 16; Dkt. No. 196, Attach. 7.)

         The EPA contained several provisions regarding intellectual property. (Dkt. No. 196, Attach. 7.) The EPA defined the term “Pre-Existing Intellectual Property” to mean “any trade secret . . . or protectable design that ha[d] already been conceived or developed by anyone other than MSEI before [Universal] render[ed] any services.” (Id. § 8.2(a).) If Universal incorporated Pre-Existing Intellectual Property in the THS1A, it “grant[ed] MSEI, MSEI's subcontractors, or suppliers, a non-exclusive . . . license” to use such property “for MSEI's internal use only.” (Id. § 8.2(d).) As also relevant, section 8.4 explained that Universal was not providing customized equipment for MSEI. (Id. § 8.4.) The section also contained a carve out provision permitting MSEI to keep previously created intellectual property and any property created using MSEI's intellectual property. (Id.) Specifically, the section provided that if Universal customized “equipment” for MSEI, MSEI owned the intellectual property created “during the course of th[e EPA]” that would be “customized for MSEI” where Universal “[wa]s given access to MSEI owned intellectual property to complete the customization.” (Id.)

         Universal had previously developed automated machines called the Polaris MP and Polaris Jr. robots. (Pl.'s Supp. SMF ¶¶ 3-5.) These robots contain software and source code developed by Universal's employees. (Id. ¶ 7, 9.) Universal contends that these robots were part of a standard platform it used in automation lines that it supplied to its customers. (Id. ¶¶ 1-2.) MSEI asserts that Universal does not have a standard platform and always customizes software and source code in the Polaris robots to meet a customer's needs. (Defs.' Supp. SMF ¶¶ 2, 9; Dkt. No. 217, Attach. 1; Defs.' SMF ¶ 28.)

         While Universal was developing the THS1A, MSEI requested that Universal provide it with source codes upon delivery of the THS1A in order to provide long-term support for the THS system. (Pl.'s Supp. SMF ¶¶ 133-34.) Universal initially refused because it contended that the EPA did not require it to provide MSEI with access to its source codes. (Pl.'s Supp. SMF ¶¶ 132, 135.) However, Universal ultimately provided MSEI with the codes citing threats by MSEI to withhold payment for the project. (Id. ¶¶ 136-38.) MSEI contests that it threatened to withhold payment. (Defs.' Supp. SMF ¶ 136.) Rather, MSEI asserts that Universal had an obligation to provide the customized source codes, which it claims it owned according to the terms of the EPA. (Id.; Defs.' SMF ¶¶ 33-36, 48.) Universal delivered the THS1A line to MSEI with the source codes, which MSEI signed for in a Final Customer Acceptance letter (hereinafter “FCA letter”). (Dkt. No. 209, Attach. 27.)

         MSEI then requested bids for the THS1B and the THS2, the subsequent phases of the THS. (Pl.'s Supp. SMF ¶¶ 49-50.) Universal bid on these projects, but MSEI awarded the contracts to MTA, Universal's competitor. (Id. ¶¶ 49-50, 144.) Universal maintains that MSEI had already promised it would award Universal the contracts in exchange for a discounted quote for a separate project called the separate surface mount line (hereinafter “SMT”). (3d Am. Compl. ¶ 292.)

         In order to complete the THS1B and THS2, MSEI provided MTA with all of the source code from the THS1A. (Pl.'s Supp. SMF ¶ 29.) MTA then used the THS1A source code to build the THS2 and the source code from the THS2 to build the THS1B. (Id. ¶ 30; Defs.' Supp. SMF ¶ 32.) During the course of this litigation, MSEI requested bids to build the THS3, which Universal again bid on. (Pl.'s Supp. SMF ¶ 51.) MSEI awarded MTA the contract and MTA used source code from the THS2 to build the THS3. (Id. ¶ 31, 144; Defs.' Supp. ¶ 31.) The parties dispute whether the software and source codes that were used in the THS1B, THS2, and THS3 were identical to the software and source code created by Universal for the THS1A. (Pl.'s Supp. SMF ¶¶ 29-31; Defs.' Supp. SMF ¶¶ 29-31.) MSEI asserts that the source code is different because it modified the software in the THS1A before it provided it to MTA. (Defs.' Supp. SMF ¶ 78.) Universal acknowledges that MSEI modified the source code but contends the modification was minor. (Pl.'s Supp. SMF ¶ 103.)

         Universal has registered certificates with the United States Copyright Office for its server and station software from the THS1A. (Pl.'s Supp. SMF ¶¶ 68, 77.) Universal did not complete any of this copyrighted software until 2008 or 2009, and the registrations do not identify the works as derivative works. (Defs.' SMF ¶¶ 63-64.) Universal did not register the copyrights until after it filed this lawsuit, which were first registered in September 2014. (Id. ¶ 67; 3d Am. Compl., Attachs. 3-10.) MSEI had access to the copyrighted source code and software; however, the parties dispute whether MTA had access to the same copyrighted works. (Pl.'s Supp. SMF ¶ 78; Defs.' Supp. SMF ¶ 78.) Additionally, MSEI disputes the conclusion of Universal's experts Terry Wolfe and Richard Hooper who opine that the copyrighted material from the THS1A was copied or was “predominately line-by-line identical” in the subsequent lines and server. (Defs.' Supp. SMF ¶¶ 79-102.) MSEI's expert, Timothy Rickard, opines the source code was customized for MSEI and is substantially different from Universal's pre-existing code. (Defs.' SMF ¶ 15; Dkt. No. 208 ¶ 25, Item Nos. 6, 8, 10, 18, 20, 22.)

         B. Procedural History

         Universal commenced this action on July 15, 2013, alleging breach of contract, misappropriation of trade secrets, unfair competition, unjust enrichment, and promissory estoppel. (Compl., Dkt. No. 1.) MSEI commenced a separate action against Universal on September 13, 2013, alleging breach of the duty of confidentiality, unfair competition, misappropriation, and “injunction.” (Compl., Dkt. No. 1, 3:13-cv-1144.) The actions were then consolidated and as noted earlier, the instant action was designated as the lead action. (Dkt. No. 26.)

         Universal amended its complaint three times and included claims of copyright infringement. (Dkt. Nos. 63, 93, 103.) MSEI and MTA answered Universal's first amended complaint and counterclaimed for a declaratory judgment that MSEI and MTA either owned or had a license to the intellectual property used in the THS1A and sought specific performance of the EPA. (Dkt. No. 67.) In two currently pending motions, MSEI and MTA move for partial judgment on the pleadings against the first amended complaint and move to dismiss the entire second amended complaint. (Dkt. Nos. 80, 97.) Following Universal's third amended complaint, the parties stipulated that the motions for partial judgment on the pleadings and to dismiss would apply to Universal's third amended complaint. (Dkt. No. 106.) Also pending is MSEI and MTA's motion to strike portions of Universal's third amended complaint. (Dkt. No. 107.)

         Before the court resolved the above motions, MSEI and MTA moved for summary judgment. (Dkt. No. 176.) Following an in-court conference, the court denied that motion with leave to renew. (Minute Entry of Oct. 19, 2016.) Now pending is MSEI and MTA's renewed motion for summary judgment on Universal's third amended complaint and its complaint in the member case as well as Universal's cross motion for summary judgment on its complaint and MSEI and MTA's complaint in the member case. (Dkt. Nos. 196, 209.)

         III. Standards of Review

         “The standard for addressing a Rule 12(c) motion for judgment on the pleadings is the same as that for a Rule 12(b)(6) motion to dismiss for failure to state a claim.” Wright v. Monroe Cmty. Hosp., 493 F. App'x 233, 234 (2d Cir. 2012) (internal quotation marks and citation omitted). For a full discussion of the governing standard, the court refers the parties to its prior decision in Ellis v. Cohen & Slamowitz, LLP, 701 F.Supp.2d 215, 218 (N.D.N.Y. 2010), abrogated on other grounds by J.C. Christensen & Assocs., Inc., 786 F.3d 191 (2d Cir. 2015).

         Additionally, the standard of review pursuant to Fed.R.Civ.P. 56 is well established and will not be repeated here. For a full discussion of the standard, the court refers the parties to its decision in Wagner v. Swarts, 827 F.Supp.2d 85, 92 (N.D.N.Y. 2011), aff'd sub nom. Wagner v. Sprague, 489 F. App'x 500 (2d Cir. 2012).

         IV. Discussion

         The court first addresses MSEI and MTA's motion to strike portions of the third amended complaint. (Dkt. No. 107.) Next, it addresses arguments raised in MSEI and MTA's Rule 12(b)(6) and 12(c) motions that are not mooted by their subsequent motion for summary judgment. (Dkt. Nos. 80, 97.) Finally, the court addresses the parties' summary judgment motions. (Dkt. Nos. 196, 209.)

         A. Motion to Strike

         MSEI and MTA argue that the court should strike as redundant certain copyright registrations that are attached to Universal's third amended complaint. (Dkt. No. 107, Attach. 1 at 2-4, 8-10.) In their reply, MSEI and MTA also ask the court to strike certain copyright registrations that purportedly falsely list the year that Universal created its software. (Dkt. No. 119 at 1-2.) In addition, MSEI and MTA seek sanctions and attorney's fees against Universal. (Dkt. No. 107, Attach. 1 at 10-11.) In response, Universal asserts that duplicative registrations do not render a copyright invalid and that MSEI and MTA have not met their burden on this motion. (Dkt. No. 116 at 4-12.)

         In limited situations, a party may move the court to “strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). To prevail on a motion to strike, the movant must show, among other things, that allowing the challenged allegations to stand would result in prejudice to the moving party. See Roe v. City of New York, 151 F.Supp.2d 495, 510 (S.D.N.Y. 2001). Additionally, the movant must demonstrate that “the allegations have no bearing on the issues in the case.” Id. (internal quotation marks and citation omitted). Moreover, “it is settled that the motion will be denied, unless it can be shown that no evidence in support of the allegation would be admissible.” Lipsky v. Commonwealth United Corp., 551 F.3d 887, 893 (2d Cir. 1976). Thus, “courts should not tamper with the pleadings unless there is a strong reason for doing so.” Id.

         Here, MSEI and MTA have not shown that the duplicative registration certificates would be inadmissible. Rather, they assert that “[t]he [duplicative] registrations cannot be infringed because they are invalid, and so [they] are not admissible.” (Dkt. No. 119 at 3.) However, as Universal correctly notes, multiple registrations of the same work do not render a copyright invalid. See Iris Arc v. S.S. Sarna, Inc., 621 F.Supp. 916, 920-21 (E.D.N.Y. 1985). While Universal ultimately cannot recover on multiple claims of copyright infringement for the same work, see Sparaco v. Lawler, Matusky, Skelly Eng'rs LLP, 313 F.Supp.2d 247, 250 (S.D.N.Y. 2004) (“A plaintiff is not entitled to recover twice for the same injury”), this does not render the duplicative registrations inadmissible.

         MSEI and MTA also argue that the court should strike certain copyright registrations which purportedly contain false software creation dates. These registrations are clearly relevant to the issue of copyright infringement. Whether the creation dates are false is a matter for trial and is not a ground to strike a pleading.[3]See Roe, 151 F.Supp.2d at 510. Accordingly, MSEI and MTA's motion to ...

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