Case: 09-10726 Document: 00511265977 Page: 1 Date Filed: 10/18/2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 18, 2010
No. 09-10726 Lyle W. Cayce
Clerk
THE COMPLIANCE SOURCE, INC.; DIGITAL DOCS, INC.,
Plaintiffs-Cross Defendants–
Appellants-Cross Appellees
v.
GREENPOINT MORTGAGE FUNDING, INC.,
Defendant-Cross Plaintiff–
Appellee-Cross-Appellant
Appeal from the United States District Court
for the Northern District of Texas
Before JONES, Chief Judge, PRADO, Circuit Judge, and OZERDEN * , District
Judge.
PRADO, Circuit Judge:
The Compliance Source, Inc. and Digital Docs, Inc. (collectively,
“Plaintiffs”) appeal the district court’s grant of summary judgment in favor of
GreenPoint Mortgage Funding, Inc. (“GreenPoint”) on Plaintiffs’ claim that
GreenPoint breached a licensing agreement between the parties. Plaintiffs
licensed form-database technology to GreenPoint, and GreenPoint allowed its
*
District Judge of the Southern District of Mississippi, sitting by designation.
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attorneys, McGlinchey Stafford and Youngblood & Bendalin LLP (“MSYB”), to
access and use the technology to prepare loans for GreenPoint. Plaintiffs argue
that the district court erred when it found that GreenPoint’s provision of the
technology to MSYB did not violate the licensing agreement because MSYB’s use
of the technology was “on behalf of and for the benefit of” GreenPoint.
In addition, GreenPoint cross-appeals the district court’s grant of
summary judgment in favor of Plaintiffs on GreenPoint’s counterclaim that
Plaintiffs breached a settlement agreement between the parties by pursuing
claims other than the sole sublicensing claim left open by the settlement
agreement.
Because the licensing agreement expressly prohibited any use of the
licensed technology not explicitly permitted by the agreement itself, and because
the agreement did not explicitly permit the type of input access that GreenPoint
provided to MSYB, the district court erred by granting summary judgment to
GreenPoint on Plaintiffs’ claim for breach of the licensing agreement.
Accordingly, we reverse and remand to the district court for consideration of
GreenPoint’s waiver and statute-of-limitations defenses. On GreenPoint’s
counterclaim, however, we affirm the district court’s grant of summary judgment
to Plaintiffs, because all of the claims Plaintiffs pursued after the settlement
agreement were related to GreenPoint’s provision of the licensed technology to
MSYB.
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I. FACTUAL AND PROCEDURAL BACKGROUND
A. Factual Background
Compliance Source develops, licenses, and sells mortgage-financing forms
to residential lenders. Digital Docs develops, licenses, and supports computer
software that prepares residential-mortgage loan documents. Plaintiffs jointly
developed form-database technology that allows mortgagees to merge their own
transaction-specific information with Plaintiffs’ proprietary forms and prepare
customized disclosures, mortgage-loan calculations, and loan documents.1
In 2002, GreenPoint, a mortgage-financing company, signed a licensing
agreement with Plaintiffs to use the form-database technology to streamline its
loan-packaging process. Article III of the agreement granted the following
licenses to GreenPoint:
Section A. Grant of License for Use of Forms. In consideration
for [GreenPoint]’s payment of the fees referred to herein,
Compliance Source hereby grants to [GreenPoint], and [GreenPoint]
accepts, a non-exclusive, annually renewable license to use
Compliance Source’s proprietary electronic files containing
computer coded images of the Standard Forms, Modified Standard
Forms and Custom Forms developed by Compliance Source and
access to the Form Database described herein in strict accordance
with the various terms and conditions of this Agreement.
Compliance Source understands and agrees that [GreenPoint]’s
Originating Lenders will have access to use the Closing Documents
for loans which [GreenPoint] is purchasing and to Disclosure
Documents and Closing Documents for loans closing in the name of
[GreenPoint] through a customized link on [GreenPoint]’s website
and hereby consents to this arrangement between [GreenPoint] and
its Originating Lenders. Except as specifically provided in this
Agreement, [Plaintiffs] have not granted, and [GreenPoint] has not
1
The technology at issue in this case is a combination of two copyrighted technologies:
Compliance Source’s Form Database and Digital Docs’s Software Products.
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received, a license or any other right to copy, make, use, have made,
sell, support, or sub-license the Form Database, or any part thereof.
Section B. Grant of License for Use of Software. Digital Docs
hereby grants to [GreenPoint] and [GreenPoint] hereby accepts from
Digital Docs a non-transferable, non-exclusive license (the “Software
License”) to use the Software Products in a Production Environment
at the Customer Site Locations, all in strict accordance with the
various terms and conditions of this Agreement. Except as
specifically provided in this Agreement, Digital Docs has not
granted, and [GreenPoint] has not received, a license or any other
right to copy, make, use, have made, sell, support, or sub-license the
Software Products, or any part thereof. [GreenPoint] may only use
the Software Products for itself. [GreenPoint] may not sub-license
the Software Products to third parties.
In exchange, GreenPoint agreed to pay a transaction-based fee for each
mortgage it financed using the technology. Article III of the agreement also
expressly provided that the agreement did not convey or transfer any ownership
interest in the technology to GreenPoint:
Section E. No Ownership or Proprietary Interest Conveyed.
[GREENPOINT] HEREBY SPECIFICALLY ACKNOWLEDGES
AND THE PARTIES AGREE: (i) THAT NO PROVISIONS OF
THIS AGREEMENT SHALL BE CONSTRUED TO CONVEY OR
TRANSFER ANY OWNERSHIP OR PROPRIETARY INTEREST IN
ANY STANDARD FORMS, COMPUTER SOFTWARE OR
RELATED INTELLECTUAL PROPERTY WHICH IS OR MAY BE
SUBJECT TO THIS AGREEMENT, (ii) THAT ALL SUCH
OWNERSHIP AND PROPRIETARY INTEREST IS AND SHALL
REMAIN THE SOLE PROPERTY OF [PLAINTIFFS]; (iii) THAT
[GREENPOINT] WILL NOT ATTEMPT TO REVERSE COMPILE
OR REVERSE ENGINEER THE SOFTWARE PRODUCTS, FORM
D A T A B A S E O R D O C U M E N T E N G IN E ; A N D T H A T
[GREENPOINT] WILL TAKE ALL STEPS NECESSARY TO
PREVENT ANY THIRD PARTY WITH WHICH IT MAY DO
BUSINESS FROM TIME TO TIME FROM DOING THE ACTS
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PREVIOUSLY MENTIONED IN THIS PARAGRAPH OR FROM
OTHERWISE ACTING IN ANY WAY THAT IS INCONSISTENT
W ITH [GREENPOINT]’S OBLIGATIONS UNDER THIS
AGREEMENT.
The agreement restricted third-party access to and use of the licensed
technology in four other provisions outside of Article III:
1. Article IV, Section A(3): “The use of the Standard Forms does not
imply or grant permission to reproduce or alter them in any manner
not expressly stated in this Agreement.”
2. Article IV, Section A(4): “Except as permitted hereunder with
respect to Originating Lenders, [GreenPoint] will not use the
Standard Forms in competition with Compliance Source.”
3. Article XIII, Section A: “Neither party may resign, assign or pledge
its rights or delegate its duties under this Agreement without the
other party’s prior written consent . . . .”
4. Article XIII, Section J: “Except as expressly provided herein,
nothing in this Agreement is intended to confer any right, remedy,
obligation or liability upon any person or entity other than the
parties hereto and their respective successors and permitted
assigns.”
The agreement contained two provisions that expressly granted access to
the licensed technology to a party other than GreenPoint. First, Article III,
Section A granted “Originating Lenders” limited access to certain closing
documents and disclosures through a customized link on GreenPoint’s Web site
for loans purchased by GreenPoint or for loans closing in GreenPoint’s name.
Second, Article VI, Section A provided that Plaintiffs’ general counsel,
PeirsonPatterson, LLP, “in conjunction with local counsel where appropriate,”
would perform “preparation” or “review” services if necessary to comply with
various states’ laws that require licensed attorneys to prepare or review loan
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documents.2
GreenPoint installed the form-database technology on July 6, 2003. It
immediately granted MSYB access to the technology so that MSYB could
produce loan packages for GreenPoint loans. Soon after, Chris Peirson, one of
the principals of Plaintiffs, expressed her concerns to Charles Pignuolo, counsel
to Plaintiffs, about MSYB’s level of access to the technology. Later that month,
James Manion, GreenPoint’s then-general counsel,3 sent an e-mail to Peirson,
informing her that GreenPoint was paying $150 per loan to Akin Gump 4 to pull
the loan documents off of the form-database system, check the loan package to
the approval screens, and send the loan to closing. On August 15, Pignuolo sent
a letter to Peirson, which stated that it had come to his attention that one of
GreenPoint’s third-party vendors5 had direct access to the technology. Pignuolo
set up a meeting at GreenPoint to discuss the issue. At the meeting, which took
place on August 20, GreenPoint assured Plaintiffs that MSYB merely had view-
only access, which Plaintiffs found acceptable under the agreement.
Two months later, Plaintiffs received an e-mail from an MSYB employee
about a problem with printing a form. As a result, on October 2, Peirson sent an
e-mail to Manion asking for reassurances that GreenPoint’s representations at
the August 20 meeting about MSYB’s level of access to the technology were
correct. Manion responded that GreenPoint had represented itself truthfully at
2
GreenPoint never availed itself of PeirsonPatterson’s services.
3
Manion left GreenPoint and began working for Plaintiffs in December 2003.
4
Manion was referring to MSYB, which was formed by a group of former Akin Gump
attorneys.
5
Peirson later testified that the third-party vendor was MSYB.
6
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the meeting and that MSYB’s level of access to the technology had not changed
since then. Peirson responded the next day, emphasizing the importance of the
technology to Plaintiffs and stressing that allowing a third party to have access
to the technology could threaten Plaintiffs’ position in the market. Plaintiffs
apparently dropped the issue after this communication. In 2006, GreenPoint
terminated the license agreement.
B. Procedural Background
Plaintiffs filed this lawsuit on June 14, 2006. Initially, Plaintiffs brought
several claims against GreenPoint that were unrelated to GreenPoint’s provision
of the licensed technology to MSYB.6 On August 29, 2007, GreenPoint’s Rule
30(b)(6) representative, Kim Koreen, testified that GreenPoint had allowed
MSYB to enter data and print documents using the technology. The following
day, another GreenPoint Rule 30(b)(6) representative, Leslie Gibin, testified that
although she was not familiar with MSYB’s level of access to the technology, she
did not believe MSYB had access to change code. On November 14, MSYB’s Rule
30(b)(6) representative, Ronald Bendalin, testified that MSYB had input access
to the technology. Plaintiffs assert that this was the first time they had learned
of the extent of MSYB’s access to the technology, and they moved to file their
Third Amended Complaint, which alleged that GreenPoint had impermissibly
sublicensed the technology to MSYB and provided MSYB with unauthorized
access to the technology in violation of the licensing agreement.
While Plaintiffs’ motion to amend their complaint was pending, the parties
reached a partial settlement, whereby Plaintiffs agreed to release all of their
claims against GreenPoint except for the so-called “Sublicensing Claim.” The
6
None of those claims are at issue here.
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agreed stipulation of dismissal, filed pursuant to the settlement agreement,
defined the Sublicensing Claim by reference to certain portions of the pending
Third Amended Complaint: “paragraphs 52–55 thereof together with the
specifically related allegations in paragraphs 84–86, 87(k), and 88 (Count I),
Count VI (limited to breach of contract), and the associated requests for relief
to the extent recoverable at law or at equity in connection with unauthorized
sublicensing . . . .”
In its briefs, GreenPoint asserted that the settlement agreement left open
only a very narrow Sublicensing Claim involving GreenPoint’s unauthorized
transfer or sublicense of the technology to MSYB. At oral argument, however,
GreenPoint’s counsel conceded that the settlement agreement left open the
broader claim that GreenPoint had provided MSYB with unauthorized access
to the technology.
The district court dismissed the released claims, and the magistrate judge
assigned to the case granted the motion to amend the complaint, finding that
Plaintiffs’ failure to amend before the deadline to do so was excusable because
they had had no reason to suspect MSYB had anything more than view-only
access until after the deadline. Plaintiffs then filed their Third Amended
Complaint. In response, Greenpoint filed a counterclaim against Plaintiffs,
claiming that Plaintiffs had breached the settlement agreement by adding
claims to the Third Amended Complaint that had been already settled and
dismissed. Specifically, GreenPoint pointed to paragraphs 58(c), (d), and (e) of
the Third Amended Complaint.
Greenpoint moved for summary judgment on Plaintiffs’ claim for breach
of the licensing agreement and its counterclaim for breach of the settlement
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agreement.7 The district court granted summary judgment to GreenPoint on
Plaintiffs’ claim for breach of the licensing agreement, relying on Geoscan, Inc.
of Texas v. Geotrace Technologies, Inc., 226 F.3d 387 (5th Cir. 2000), and Hogan
Systems, Inc. v. Cybresource International, Inc., 158 F.3d 319 (5th Cir. 1998), for
the proposition that the use of licensed property by a third party solely on behalf
of and for the benefit of the licensee is not a transfer or sublicense of that
property. See Compliance Source, Inc. v. GreenPoint Mortg. Funding, Inc., No.
3:06-CV-1057-L, 2009 WL 1650021, at *5 (N.D. Tex. June 11, 2009). The district
court found that because MSYB had “used the [licensed technology] only on
behalf of GreenPoint,” GreenPoint was entitled to summary judgment. Id.
On the counterclaim, the district court denied GreenPoint’s motion for
summary judgment and sua sponte awarded summary judgment to Plaintiffs.
The district court found that paragraph 58 of the Third Amended Complaint
contained prefatory language that limited the Sublicensing Claim to violations
of the licensing agreement “by and through Defendant’s provision of Plaintiffs’
IP to MS[BY].” Thus, the district court rejected GreenPoint’s argument that
paragraphs 58(c), (d), and (e) of the Third Amended Complaint resurrected
claims that had been released by the settlement agreement.
Plaintiffs appeal the grant of summary judgment on its claim for breach
of the licensing agreement, and GreenPoint cross-appeals the grant of summary
judgment on its counterclaim for breach of the settlement agreement.
7
Plaintiffs also moved for summary judgment on Greenpoint’s Rule 11 counterclaim,
which is not at issue on appeal.
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II. STANDARD OF REVIEW
We review an order granting summary judgment de novo, applying the
same standard as the district court. Jackson v. Cal-W. Packaging Corp., 602
F.3d 374, 377 (5th Cir. 2010). “We view the evidence in the light most favorable
to the non-moving party and avoid credibility determinations and weighing of
the evidence.” Id. (citation omitted). We will uphold a grant of summary
judgment where “the competent summary judgment evidence demonstrates that
there are no genuine issues of material fact and the moving party is entitled to
judgment as a matter of law.” Id. (citation omitted). “An issue of material fact
is genuine if a reasonable jury could return a verdict for the nonmovant.”
Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
III. ANALYSIS
A. Breach of the Licensing Agreement
Plaintiffs argue that the district court erred when it granted summary
judgment to GreenPoint on the claim for breach of the licensing agreement.
They contend that the licensing agreement expressly prohibited any use of the
licensed technology that was not explicitly authorized by the agreement itself,
and that nothing in the agreement explicitly authorized GreenPoint to give
MSYB input access to the technology. GreenPoint responds that MSYB was an
independent contractor or agent that could take only those actions with respect
to the licensed technology that GreenPoint could take itself, and that nothing in
the agreement prohibited such use when it was done exclusively for the benefit
of or on behalf of GreenPoint. GreenPoint also argues that the two provisions
of the agreement that expressly granted third-party access to “Originating
Lenders” and PeirsonPatterson contemplate the type of input access that
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GreenPoint granted to MSYB.8
Because this is a diversity case, we apply Texas substantive law.9 Beavers
v. Metro. Life Ins. Co., 566 F.3d 436, 439 (5th Cir. 2009). “If no state court
decisions control, we must make an ‘Erie guess’ as to how the Texas Supreme
Court would apply state law.” Id. (citation omitted).
“In construing a written contract, the primary concern of the court is to
ascertain the true intentions of the parties as expressed in the instrument.”
J.M. Davidson, Inc. v. Webster, 128 S.W. 3d 223, 229 (Tex. 2003) (citations
omitted). “To achieve this objective, we must examine and consider the entire
writing in an effort to harmonize and give effect to all provisions of the contract
so that none will be rendered meaningless.” Id. (citation omitted). “No single
provision taken alone will be given controlling effect; rather, all the provisions
must be considered with reference to the whole instrument.” Id. (citations
omitted).
Given these rules of construction, we disagree with the district court that
our decisions in Geoscan and Hogan Systems permit a court to look past the
actual language of a licensing agreement and absolve a licensee who grants
third-party access merely because that access is on behalf of, or inures to the
benefit of, the licensee. Neither case stands for such an expansive proposition.
8
GreenPoint also raises waiver and statute-of-limitations defenses to Plaintiffs’ claim.
The district court did not reach these defenses, and we decline to consider them for the first
time on appeal.
9
“Generally, licensing agreements, like other contracts, are interpreted under state
law.” Womack+Hampton Architects, L.L.C. v. Metric Holdings Ltd. P’ship, 102 F. App’x 374,
378 (5th Cir. 2004) (unpublished) (per curiam) (citing Fantastic Fakes, Inc. v. Pickwick Int’l,
Inc., 661 F.2d 479, 483 (5th Cir. Unit B 1981); Kennedy v. Nat’l Juvenile Det. Assoc., 187 F.3d
690, 694 (7th Cir. 1999)). We adopt Womack+Hampton’s reasoning and apply Texas law to the
licensing agreement in this case.
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Rather, Geoscan and Hogan Systems involved the interpretation of licensing
agreements that explicitly granted limited rights to licensees to provide general
third-party access. See Geoscan, 226 F.3d at 392 (quoting from and relying on
the language of the licensing agreement, which expressly allowed the use of the
licensed technology by third parties if such use was “by and on behalf of
Licensee” (emphasis in original)); Hogan Systems, 158 F.3d at 322 (quoting from
and relying on the language of the licensing agreement, which provided that the
licensee could not make the licensed software available to anyone “except . . . to
other persons during the period such other persons are on [Licensee’s] premises
for purposes specifically relating to [Licensee’s] authorized use of the licensed
program”).
The licensing agreement in this case is different. For one, the agreement
here contains no provision that generally permits GreenPoint to grant third-
party access, whether or not such access would be on behalf of or for the benefit
of GreenPoint, and GreenPoint has not pointed to any provision that gives it that
right. In fact, the agreement does exactly the opposite; it provides that it does
not grant to GreenPoint any right to “copy, make, use, have made, sell, support,
or sub-license” the licensed technology except as specifically provided. In
addition, the agreement expressly prohibits transfer or sublicense of the
technology; withholds from GreenPoint any ownership or proprietary interest in
the technology; and restricts GreenPoint’s ability to reproduce or alter the
technology, use the technology in competition with Plaintiffs, assign its duties
under the agreement to a third party, or confer any right under the agreement
upon a third party. Moreover, the agreement imposes upon GreenPoint the duty
to “take all steps necessary to prevent any third party with which it may do
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business from time to time from . . . acting in any way that is inconsistent with
GreenPoint’s obligations” under the agreement.
Because the licensing agreement in this case withholds rights not
expressly given, Geoscan and Hogan Systems are of limited relevance, and we
therefore decline to interpret the agreement to allow general third-party access
on behalf of or for the benefit of GreenPoint.
The two provisions that grant third-party access to “Originating Lenders”
(Article III, Section A) and PeirsonPatterson (Article IV, Section A) are
consistent with our interpretation of the agreement. First, both provisions
explicitly grant third-party access to specific parties, implying that as a general
rule, the agreement does not permit third-party access. Second, both grants of
access are limited in their scope: PeirsonPatterson’s access is confined to only the
preparation and review of loan packages in situations where state law requires
a licensed attorney’s services. Likewise, the Originating Lenders’ access is
restricted to certain closing documents and disclosure for GreenPoint loans
through a customized link on GreenPoint’s Web site. Neither provision grants
input access to either party. To read into the agreement a general right to grant
third-party access when such access would be on behalf of or for the benefit of
GreenPoint would be to render these specific and limited grants of access
superfluous.
The parties’ intent in drafting the licensing agreement is clear from the
face of the agreement. The evidence in the light most favorable to Plaintiffs
establishes that GreenPoint gave MSYB input access. Even though MSYB’s
access to and use of the licensed technology may have been on behalf or for the
benefit of GreenPoint, input access is not authorized by the agreement.
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B. Breach of the Settlement Agreement
GreenPoint argues that the district court erred by awarding summary
judgment to Plaintiffs on GreenPoint’s counterclaim. GreenPoint asserts that
Plaintiffs breached the settlement agreement by adding already settled claims
to the Third Amended Complaint. Plaintiffs respond that the allegations in the
Third Amended Complaint about which GreenPoint complains are “associated
requests for relief,” which were permitted by settlement agreement.
We affirm the district court’s grant of summary judgment. As the district
court correctly noted, paragraph 58 of the Third Amended Complaint limited the
Plaintiffs’ allegations to violations of the licensing agreement “by and through
Defendant’s provision of Plaintiffs’ IP to MS[BY].” None of the allegations in
paragraph 58 of the Third Amended, therefore, go beyond this limitation. At
oral argument, GreenPoint conceded that the settlement agreement left open the
claim that GreenPoint breached the licensing agreement by providing MSYB
with unauthorized access to the licensed technology. Accordingly, we see no
merit to GreenPoint’s argument that the Third Amended Complaint added
claims that were subject to the settlement agreement.
IV. CONCLUSION
According to the evidence upon summary judgment, GreenPoint allowed
MSYB to access and use the licensed technology in a manner that was not
permitted by the licensing agreement. Therefore, we reverse the district court’s
grant of summary judgment to GreenPoint on Plaintiffs’ claim for breach of the
licensing agreement, and we remand to the district court for consideration of
GreenPoint’s waiver and statute-of-limitations defenses.
Plaintiffs’ Third Amended Complaint did not raise any claims that were
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settled under the settlement agreement. Therefore, we affirm the district court’s
award of summary judgment to Plaintiffs on GreenPoint’s counterclaim for
breach of the settlement agreement.
AFFIRMED IN PART; REVERSED AND REMANDED IN PART.
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