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TAS Distributing Company, Inc. v. Cummins

March 31, 2009

TAS DISTRIBUTING COMPANY, INC., PLAINTIFF,
v.
CUMMINS, INC. DEFENDANT.



The opinion of the court was delivered by: Joe Billy Mcdade United States District Judge

ORDER

Before the Court are the Motion for Partial Summary Judgment as to Count I filed by Plaintiff, TAS Distributing Company, Inc. (hereinafter "TAS"), on November 13, 2007 [Doc. 36] and the Cross Motion for Summary Judgment filed by Defendant, Cummins, Inc. (hereinafter "Cummins"), on December 21, 2007 [Doc. 54]. For the reasons that follow, TAS' Motion on Count 1 is DENIED and Cummins' Motion on Count 1 is DENIED.

INTRODUCTION

The present Motions seem to center on some errant computer programming that TAS created, that is located in hardware contained in the engine compartments of two types of diesel truck engines produced by Cummins. TAS and Cummins entered into various contracts in 1997 and 1998 whereby Cummins obtained a license to use technology created by TAS that would automatically turn off and on engines and various electronic accessories, like lights, in diesel trucks thereby saving battery power. In exchange for use of the technology, Cummins agreed to pay TAS a royalty for every TAS technology based system that was either incorporated in its engines or that was produced as a stand-alone unit that could be attached to an engine. In general, the contracts called for a minimum royalty for the first five years of the contract, which totaled $1 million, and a per unit royalty for every unit sold thereafter.

In a previous lawsuit filed with this Court,*fn1 TAS alleged that Cummins was not using reasonable efforts to market and sell its technology, in violation of the agreements. In a related vein, Cummins sought a declaration that it owed only minimum royalties for the first five years and owed no royalties thereafter. This Court found, in part, that TAS did not present evidence of any damages that resulted from Cummins' alleged failure to use reasonable efforts to sell and market its product. However, this Court did find that Cummins owed royalty payments beyond March 31, 2003, the last date that it owed minimum royalties, as provided by the contracts.

In the present lawsuit, the Third Amended Complaint alleges three breach of contract claims and one accounting claim. The present Motions only concern Count 1. In Count 1, TAS alleges that Cummins owes more royalties on the Original ECM or one box product than it has paid pursuant to the contracts. Specifically, TAS alleges that Cummins has sold more units than it has represented to TAS: from April 1, 1998 to March 31, 2003, Cummins owes more royalties than the minimum royalties that it has already paid; and, from March 31, 2003 to the present, Cummins owes additional royalties for units incorporated into its engines. TAS seeks payment of the royalties and 5% interest from the date that the royalties were due (which was monthly).

BACKGROUND*fn2

On February 22, 1997, TAS and Cummins entered into an Intellectual Property License Agreement (hereinafter "License Agreement"), which gave Cummins a worldwide, perpetual license to use specified TAS technology, subject to certain rights reserved by TAS. The parties also signed a Master Agreement that, as relevant to this lawsuit, defined various terms. Finally, the parties executed a "First Amendment" to the License Agreement that made Cummins' license non-exclusive (among other things).

The parties alternatively refer to the relevant technology as "Temp-AStart/Temp-A-Stop," "Original ECM Product," "One-Box Product," and "Temp-AStart/One-Box Product," and "Stand-alone Temp-A-Stop Product." As briefly noted above, the technology, regardless of the name, generally functions by automatically turning off and on the engine after it has been idling for a certain period of time and which turns on and off electronic accessories after the engine has been shut down

The technology at issue in the present Motions is contained in an engine's Electronic Control Module*fn3 (ECM).*fn4

The First Amendment provides, in relevant part:

Subject to the reservations, retentions and limitations set forth in Section 19 of the Maser Agreement and in this Section 3 of the License Agreement, Licensor grants to Licensee as 'co-exclusive worldwide license' . . . to the Subject Technology and Related Intellectual Property . . . to make, have made, use and sell the 'TempA-Start/One Box Product' . . . solely on Cummins branded engines that are either manufactured or sold by Cummins or any of its 50% or more owned subsidiaries . . . .

'Temp-A-Start/One Box Product' shall mean any system based on the Subject Technology which includes programming based upon the Subject Technology in the engine or vehicle electronic control module ('ECM'). (First Amendment ¶ A(3)(a)).*fn5

As relates to Count 1, the actual item that Cummins was granted a license to make and sell is the "Temp-A-Start/One Box Product" (hereinafter "one box product") as defined by the First Amendment.

While none of the agreements define the term "system," the term "Subject Technology" is defined in the Master Agreement as:

Any and all technology owned or licensed by TAS relating to the TEMP-A-START and TEMP-A-STOP systems, or any component or subassembly thereof, except the Excluded Technology, including without limitation: (i) patents . . . (ii) design, development, and manufacturing information . . . (iii) testing information . . . (iv) computer or other apparatus programs relating to design, development, or manufacturing . . . (v) any form of information related to applications of the above-described technology, ...


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