Vehicle Market Research v. Mitchell International

This is a judicial estoppel case, which is controlled by two principles: our reluctance to impose the harsh remedy of judicial estoppel, and the failure by the party asserting judicial estoppel to bear its burden to point to clearly inconsistent statements in support of its arguments.

The case involves statements made by plaintiff Vehicle Market Research, Inc. (VMR) in a breach of contract case that were allegedly inconsistent with earlier statements by the sole owner and alter-ego of that company, John Tagliapietra, in his Chapter 7 bankruptcy proceeding. Specifically, VMR developed and owned certain intellectual property (referred to in the contract as “Materials and Intellectual Property”)—including a software system to calculate the value of a total loss of an automobile for the purposes of the automobile insurance industry (the “TLSS Product”) and certain “pre-existing software tools, utilities, concepts, techniques, text, research or development” used in the development of TLSS (the “Pre-Existing Materials”). (R. Vol. I at 261, ¶8.1.) When Mr. Tagliapietra filed for personal bankruptcy, he asserted that his shares in VMR were worth nothing. A few years later, as the bankruptcy was winding down, VMR sued Mitchell International, Inc. (Mitchell), the company to which it had exclusively licensed the Materials and Intellectual Property, seeking up to $4.5 million in damages for the alleged misappropriation of the Materials and Intellectual Property. The question before us is whether the statements by VMR and Mr. Tagliapietra in the litigation against Mitchell were so clearly contrary to the statements made by Mr. Tagliapietra in his bankruptcy proceeding that VMR should be judicially estopped from proceeding with its suit against Mitchell.

There is no doubt that when Mr. Tagliapietra filed his bankruptcy, he listed the value of VMR’s stock as 0.00. He did not amend that statement, except to approve the bankruptcy Trustee’s valuation of the shares at a value of “unknown” at some point in 2009, around the time that he was preparing to file his lawsuit (in the shoes of VMR) against Mitchell. As a result of Mr. Tagliapietra’s representations in the bankruptcy court, the Trustee and the bankruptcy court awarded Mr. Tagliapietra a discharge of his debts based in part on the assumption that his company was worthless.

Turning to the VMR litigation at hand against Mitchell, VMR alleged in the unverified complaint that it was entitled to up to $4.5 million on its contract with Mitchell authorizing Mitchell to use the Materials and Intellectual Property. In Mr. Tagliapietra’s 2011 deposition in the instant litigation, he acknowledged that the Pre-Existing Materials, the existence of which preceded the filing of his bankruptcy, were worth $4 million in 2009.

We review the doctrine of judicial estoppel with guidance telling us we should apply it sparingly and require a clearly inconsistent statement before invoking it. We conclude that neither VMR’s litigation claim for payments until they reach a cap of $4.5 million nor Mr. Tagliapietra’s deposition testimony in that lawsuit—that VMR was entitled to “up to” $4 million in royalties and that, in 2009, the Pre-Existing Materials were worth $4 million—is clearly inconsistent with his valuation of 0.00 for his VMR stock at the time of his bankruptcy petition in 2005, the date when the initial bankruptcy representations were made.

If there were grounds for judicial estoppel, it would have to be based on a duty by Mr. Tagliapietra to amend his bankruptcy pleadings to report a possible increased value for his VMR stock at least as of the time that VMR filed its suit against Mitchell in 2009. However, our precedent is not clear on whether a debtor has a continuing duty to amend his bankruptcy schedules when the estate’s assets change in value. Given our reluctance to invoke judicial estoppel, and keeping in mind that judicial estoppel is an affirmative defense that its proponent must prove, we conclude that in this case Mitchell has not met its burden of showing any clearly inconsistent statements that would warrant that relief. We therefore REVERSE the district court’s opinion as an abuse of discretion.

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U.S. Auto Parts Network (USAP) brought suit against Parts Geek, LLC and various individuals alleging, among other things, copyright infringement in certain e-commerce software. The district court granted summary judgment against USAP on its claim of copyright infringement because it concluded that USAP did not own the allegedly infringed copyright. Because there are genuine issues of material fact as to whether USAP owns a copyright in all or part of the software at issue, we reverse in part, vacate in part, and remand.


Single software licence shared 774,651 times

By Nicole Kobie

Posted on 6 Dec 2010 at 12:21

A single licence for Avast security software has been used by 774,651 people after it went viral on a file-sharing site, according to the company.

Avast noticed that a license for its paid-for security software, sold to a 14-user firm in Arizona, was being distributed online. Rather than shut down the piracy, the company decided to see how far the software would spread.

The Avast Pro licence showed up on file-sharing sites, and a year and a half later it had topped three-quarters of a million active users.

Full story.

Narendra on being a Wildcat, The Social Network and his suit against Facebook

By Katherine Zhu

In The Social Network, Divya Narendra is that other guy — in cahoots with the “Winklevi twins” and Harvard Connection. At Northwestern, though, Narendra is a Kellogg JD-MBA student.

Seven years ago, Narendra conceived the idea for social network ConnectU with his roommates at Harvard. In 2004, the ConnectU trio — Narendra, Cameron Winklevoss and Tyler Winklevoss — sued Facebook founder Mark Zuckerberg, claiming he stole their idea and their source code. They settled in 2008 for a reported $65 million. The dispute flared up again in May 2010, as Narendra and the Winklevosses leveled allegations of securities fraud against Facebook. And the feud goes on.

We reached Narendra by email last week and chatted with him about his portrayal in The Social Network, his time at Northwestern so far and his dreams of becoming a rock star.

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Vernor v. Autodesk, Inc.

Timothy Vernor purchased several used copies of Autodesk, Inc.’s AutoCAD Release 14 software (“Release 14”) from one of Autodesk’s direct customers, and he resold the Release 14 copies on eBay. Vernor brought this declaratory judgment action against Autodesk to establish that these resales did not infringe Autodesk’s copyright. The district court issued the requested declaratory judgment, holding that Vernor’s sales were lawful because of two of the Copyright Act’s affirmative defenses that apply to owners of copies of copyrighted works, the first sale doctrine and the essential step defense.

Autodesk distributes Release 14 pursuant to a limited license agreement in which it reserves title to the software copies and imposes significant use and transfer restrictions on its customers. We determine that Autodesk’s direct customers are licensees of their copies of the software rather than owners, which has two ramifications. Because Vernor did not purchase the Release 14 copies from an owner, he may not invoke the first sale doctrine, and he also may not assert an essential step defense on behalf of his customers. For these reasons, we vacate the district court’s grant of summary judgment to Vernor and remand for further proceedings.

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R.C. Olmstead, Inc. v. CU Interface, LLC

R.C. Olmstead appeals the district court’s grant of summary judgment to defendants in this copyright and trade secret infringement case brought by one provider of credit union software against the developer of a competing credit union software. Olmstead challenges several of the district court’s discovery rulings, which Olmstead argues unfairly inhibited its ability to prove its claims. Among other things, the district court rejected plaintiff’s inadequate expert report under F.R.C.P. 26, and refused to draw adverse inferences based on a third party’s destruction of evidence. The district court granted summary judgment for defendant CUI after determining that Olmstead had failed to raise a genuine issue of material fact as to whether CUI created its software by copying Olmstead’s software, and that Olmstead’s end use product was not a trade secret. Because the district court did not abuse its discretion with respect to its subsidiary rulings, and because Olmstead did not create a genuine issue of material fact with respect to either the copyright claim or the trade secret claim, the district court properly granted summary judgment.

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JustMed, Inc. v. Byce

At the heart of this case is a dispute over whether a small technology start-up company owns the source code developed for its product. Its informal employment practices raise questions as to whether defendant-appellant Michael Byce was an employee when he developed the source code. After a bench trial, the district court entered judgment and ordered a permanent injunction against Byce, in favor of plaintiff appellee JustMed, Inc., Byce’s former employer. Among other things, the district court found that JustMed owns the software program used on its digital audio larynx device under the work-for-hire doctrine of the Federal Copyright Act, because Byce wrote the source code for the company as an employee, not as an independent contractor. The district court also found that Byce misappropriated the software under the Idaho Trade Secrets Act. Byce appeals both rulings. We have jurisdiction under 28 U.S.C. § 1291, and we affirm in part and reverse in part.

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Riviera Distribs., Inc. v. Jones

Riviera came to the wrong forum. Agreements such as the one between Riviera and Midwest are designed to reduce the price tag of decision-making. By filing another suit, Riviera forced Midwest to bear the very expenses that the parties had agreed to avoid. The party responsible for creating excessive legal costs must bear them itself in the end.

This conclusion makes it unnecessary to discuss the parties’ other disputes, such as whether by filing a second suit Riviera entitled Midwest to an award under 28 U.S.C. §1927.

The judgment is reversed, and the case is remanded for an award of reasonable attorneys’ fees to Midwest under 17 U.S.C. §505. The award should include the legal fees that Midwest has incurred to vindicate its rights on appeal.

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Piracy Is Big Business

ESA estimates that the video game industry loses $3 billion from piracy annually—not including piracy over the Internet. Todd Hollenshead of id Software assesses the situation

Hollenshead laid out that, in no uncertain terms, piracy is a serious problem for the PC industry. Why should we care? ESA estimates that the video game industry loses three billion dollars from piracy annually and that doesn't even reflect piracy over the Internet. Scott Miller of 3D Realms estimates that as much of 50% of PC game sales are lost to piracy. It affects the development cycle too. For example, when the Half Life code was leaked at Valve, and many people were playing the game and passing judgment without paying for it, those sorts of things can really affect team morale.

Current methods of combating piracy outlined by Hollenshead included physical protection, online "guerrilla" warfare (against nefarious groups that run warez sites), the legal system that comes into play with the DMC, infringement lawsuits, the FBI and customs. Education through the ESA and other organizations is key in getting the word out about the problems piracy causes for the industry as well. It's important, because some of the gains from game piracy are even used to fund criminals and terrorist groups, said Hollenshead.

Full story.