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September 12, 2005.

DO IT BEST CORP., Plaintiff,
PASSPORT SOFTWARE, INC., Defendant. PASSPORT SOFTWARE, INC., Counter-Plaintiff, v. DO IT BEST CORP., Counter-Defendant.

The opinion of the court was delivered by: REBECCA PALLMEYER, District Judge


Counter-Plaintiff Passport Software, Inc. ("Passport"), claims that Plaintiff/Counter-Defendant Do It Best Corp. ("DIB") is in breach of a software licensing agreement between the parties and has committed other wrongful acts, including infringement of Passport's copyrights in the licensed software. Last year the court dismissed Passport's fraud claim but denied DIB's motion to dismiss Passport's Lanham Act claim and claim of tortious interference with contractual relations. Do It Best Corp. v. Passport Software, Inc. No. 01 C 7674, 2004 WL 1660814 (N.D. Ill. July 23, 2004) ("Do It Best I"). Several months later, the court granted DIB's motion for summary judgment on Passport's civil conspiracy claim and granted summary judgment on one aspect of Passport's breach of contract claim. The court denied DIB's motion for summary judgment on Passport's trade secret misappropriation claims and denied both parties' motions for summary judgment on the copyright infringement claim. The court's opinion also addressed Passport's damages theories, sustaining DIB's objections to some of those theories. See Do It Best Corp. v. Passport Software, Inc., No. 01 C 7674, 2005 WL 743083 (N.D. Ill. March 31, 2005) ("Do It Best II"). Now before the court are DIB's motion for summary judgment on Passport's claim of tortious interference with contractual relations and the parties' cross-motions for summary judgment on Passport's Lanham Act claim. In addition, Passport seeks reconsideration of the court's earlier summary judgment rulings. For the reasons set forth below, the motions are granted in part and denied in part.


  The facts are described in some detail in the court's earlier opinion and will be summarized here only as necessary for context. In January 1989, the parties to this case entered into a licensing arrangement pursuant to which Passport furnished to DIB software that Passport itself had obtained through a license with RealWorld Corporation, and then modified and enhanced for use by DIB. (Dealer License for RealWorld Software, Passport Exhibit I.) Under the terms of its license, DIB, a hardware cooperative, was entitled to provide copies of the licensed software to DIB's member stores. As described in the court's earlier opinion, the licensing agreement between DIB and Passport expired by its terms in 1994. It was subject to renewal, and though the parties failed to take the formal steps required by the agreement for renewal, there is evidence that they continued operating under the terms of the original agreement at least until 1999.

  In August 2000, Karla Wygant of DIB asked Muriel Miller of Passport to sell to DIB unlimited rights to the software. (Muriel Miller Dep., DIB Exhibit 13, at 146-47.) Passport notes that a consultant for DIB, aware that DIB used both the RealWorld original software and the modifications and enhancements furnished by Passport, recommended that DIB contact Great Plains Corp.*fn1 and PSI at the same time, as Great Plains would "have the leverage to push Passport to sell the rights." (Grady e-mail message, 9/18/00, Passport Exhibit RR, at 2.) When DIB approached Passport, Passport (which had earlier lost another customer to Great Plains) attempted to obtain Great Plains' agreement not to interfere in any sale of the software from Passport to DIB. (Saley Dep., Passport Exhibit SSS at 23-24, 29-33.) Ellen Saley did write a letter to Muriel (Spencer) Miller of Passport, assuring her that "Great Plains hereby agrees that it's [sic] employees, agents, attorneys, directors or officers, past and present, will not interfere or intervene with your customer directly or indirectly regarding [the licensing arrangement between Passport and Do It Best]." (Undated letter, Passport Exhibit EEE.)*fn2 Ms. Saley prepared a draft sublicense agreement between Passport and DIB, setting the price for the RealWorld software component of the license fee at $200,000.00. (Id.; draft Sublicense Agreement, Passport Exhibit JJJ.) Muriel Miller of Passport testified that Passport's President, John Miller, planned to offer an unlimited license in the enhanced software to DIB for $4.8 million, but Ms. Miller herself mistakenly conveyed a proposed price of $1.8 figure to DIB. (M. Miller Dep., Passport Exhibit EEEE, at 166-67.) Presumably unwilling to pay such a substantial premium for the software enhancements, DIB sought Passport's assistance in determining which portions of the code were products of Passport's programming; Passport asserts that, in the course of providing that assistance, Passport personnel discovered for the first time that DIB was using Passport's source code in a module it had falsely claimed to have independently authored. John Miller, Passport's president, advised DIB's general counsel on October 2, 2000, of his belief that DIB's use of Passport's code required the payment of additional royalties. (10/2/00 Miller letter, Passport Exhibit LLL.)

  Four days later, on October 6, 2000, DIB officials approached Great Plains itself through a broker and, on November 30, 2000, agreed to license the RealWorld software directly from Great Plains for just $150,000.00. Passport characterizes this agreement between Great Plains and DIB as a violation of Great Plains' own agreement "not to interfere in [sic] with the sale of unlimited licensing rights to DIB." (Passport's Memorandum in Opposition to DIB's Motion for Summary Judgment on Passport's Tortious Interference Claim, at 7.) DIB asserts that neither DIB, Great Plains, nor the broker ever "concealed" their negotiations from Passport, but Passport points out that on October 2, 2000, Ellen Saley of Great Plains assured John Miller that DIB would not purchase the RealWorld original code from Great Plains because that code would be useless to DIB without the enhancements that had been furnished by Passport. (Saley e-mail message, Passport Exhibit NNN.) Passport notes, further, that on November 14, 2000, a DIB vice president wrote a message to DIB's president and its general counsel, noting that Passport had contacted her about software rights, but that she intended to delay responding until after the deal between DIB and Great Plains had been finalized. (11/14/00 Williams message, Passport Exhibit GGGG.) A week later, DIB's attorney, Thomas Burroughs, advised Gary Schafer of Great Plains that John Miller had "promised/threatened to call me first thing this morning." (11/21/00 Burroughs e-mail message, Passport Exhibit HHHH.) In a letter to John Miller in late November, Schafer repudiated the non-interference letter, pointing out that "the commitment you received was not from me or a representative of Great Plains that is authorized to commit the company in any direction." (Undated e-mail message from Gary Schafer, Passport Exhibit OOO.)*fn3

  DIB contends, as well, that there is no evidence that either DIB or its broker was aware of any agreement between Great Plains and Passport that purportedly restricted Great Plains' right to negotiate directly with DIB. It is clear, however, that both DIB and Great Plains recognized that their deal might generate a lawsuit: on November 14, DIB's general counsel, Thomas Burroughs, contacted Schafer to request that the agreement between DIB and Great Plains require Great Plains to "cooperate" with DIB in any litigation brought by Passport. (11/14/00 Burroughs e-mail, Passport Exhibit IIII.) The November 30, 2000 agreement between DIB and Great Plains did require Great Plains to cooperate in good faith in any litigation that might arise between Passport and DIB related to the use of the software or to the Great Plains/DIB relationship. (Great Plains/DIB Source Code License Agreement, DIB Exhibit 2, ¶ 9(b).)

  As the court explained in its earlier opinion, DIB never used the source code it purchased from Great Plains. Karla Wygant, DIB's manager of retail data processing, testified that she compared the RealWorld software with the Passport source code DIB had been using, and placed the RealWorld software in a file cabinet. DIB continued using the software furnished by Passport, with the enhancements that Passport and DIB had made to the Great Plains product. (Wygant Dep., Passport Exhibit L, at 23-25.) Nevertheless, in February 2001, DIB advised Passport it would no longer provide a royalty report reflecting its sublicensing of software because "we are no longer buying product from you." (2/8/02 Gibson e-mail message, 2/8/02, Passport Exhibit PPP.) Passport responded with a certified letter declaring DIB in default under the 1989 license agreement, a letter that Burroughs forwarded to Schafer of Great Plains. (2/15/01 Burroughs letter, Passport Exhibit Q.) At Burroughs' request, Schafer later furnished copies of the Great Plains/Passport agreements for Burroughs' review. (3/29/01 messages, Passport Exhibits JJJJ, KKKK.)

  Just six months later, in a May 14, 2001 letter, Great Plains terminated its license agreement with Passport. Schafer's letter announcing the termination cited, as reasons, Passport's failure to meet certain sales and marketing goals (goals Passport claims are not contained in the Great Plains/Passport agreement), Passport's failure to continue marketing Great Plains' products, and Passport's improper use of Great Plains' trademarks. (5/14/01 Schafer Letter, Passport Exhibit LLLL.) In an e-mail exchange the following day, Schafer advised Burroughs that the termination was "based upon poor performance and issues outside of the Do It Best Relationship." Thomas Burroughs, responded that Great Plains' termination of the Passport license might generate a "change of heart" on Passport's part concerning its disputes with DIB. (E-mail messages, Passport Exhibit MMMM.) At his deposition, Schafer testified that he did not recall discussing Passport's termination with anybody from DIB (Schafer Dep., DIB Exhibit 5, at 37-41), and that he did not show the termination letter to Mr. Burroughs before sending it. (Id. at 100.)

  DIB notes that John Miller testified that the written agreements by which Passport obtained the original (unenhanced) software from RealWorld, Great Plain's predecessor, expired by their terms no later than 1991. (J. Miller Dep., DIB Exhibit 35, at 102-106.) RealWorld declined to renew the written license agreement with Passport but, according to John Miller, RealWorld representative Robert Johnson "said that we should continue to service the dealers that we had already licensed, but that we could not license any new dealers. . . . because of a change in ownership. . . ." (Id. at 102.) Passport points out, however, that the July 1988 Master Value Added Distributor Agreement between Passport and RealWorld contemplated automatic renewal for additional one-year periods in return for a $100,000 annual fee. (MVAD, Passport Exhibit H, ¶ 13.1(a). In addition, in March 1998, Passport and RealWorld executed an addendum extending the term of an agreement referred to as the Master Value Added Distributor Agreement through March 2010, subject to further renewal. (Master Distributor Agreement, Passport Exhibit G, Addendum.) (The court is uncertain why this addendum to the Master Distributor Agreement refers to the Master Value Added Distributor Agreement; nor has Passport explained why Mr. Miller, who signed the Addendum in March 1998, apparently had no recollection of that document when he testified at his March 25, 2003 deposition. No mention is made here by either party of Passport's apparent obligation to pay $100,000.00 per year for its continued license rights.)

  Until about November 2000, software provided by DIB to its member stores included a Passport copyright notice on a "splash screen."*fn4 At some point after entering into its agreement with Great Plains, DIB repackaged the software it had been providing to its member stores by removing PSI's name and copyright notice from the splash screen and replacing Passport's name and copyright notice with the name "CS2000," which DIB used for its computer system. (Wygant Dep., Passport Exhibit M, at 82-83; Wygant Dep., Passport Exhibit L, at 46-47; Wygant Dep., Passport Exhibit U, at 199-200.) Jeffrey Wilson of DIB acknowledged that "the CS 2000, as it is used today in [DIB's] member stores, does . . . still include some or all of the software which was delivered by Passport to [DIB.]" (Wilson Dep., Passport Exhibit M, at 6-7.)


  I. Tortious Interference Claim

  In Count XII of its Third Amended Counterclaims, Passport asserts that DIB interfered with Passport's contractual relationship with Great Plains Software, Inc., the successor to the corporation from which Passport licensed software that it later enhanced and licensed to DIB. Passport alleges that DIB knew of its agreement with Great Plains and, in March 2001, induced Great Plains to terminate that agreement. (Third Amended Counterclaims, ¶¶ 39, 43.) As damages, Passport claims "the loss of the sale of the unlimited license rights to DIB, the loss of its business relationship with Great Plains" and ...

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