Nixon v . Bosler, et a l . CV-00-424-M 07/13/01 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Dennis W . Nixon, d/b/a R & D Associates, Plaintiff

v. Civil N o . 00-424-M Opinion N o .

Charles W . Bosler, Jr., Services and Technology Group, Inc., and Risk Services & Technology, Inc., Defendants

O R D E R

Dennis Nixon, d/b/a R & D Associates, brings this suit

against Charles Bosler, Services and Technology Group, Inc.

(“STG”), and Risk Services & Technology, Inc. (“RST”), seeking

damages for defendants’ alleged copyright violations and breach

contract. Specifically, Nixon claims to have developed a

computer program known as “RiskTrak” and incorporated into its

code five libraries as to which he holds registered copyrights.

He says defendants unlawfully distributed the RiskTrak software

without paying him agreed-upon royalties and, later, after he

revoked an oral license to use his copyrighted works. Defendants deny any wrongdoing, claim to have paid Nixon all

royalties to which he is entitled, and have filed two

counterclaims. In their first counterclaim, defendants seek a

judicial declaration of ownership of the RiskTrak software, an

accounting of plaintiff’s revenues, if any, derived from the sale

or distribution of that software, and a declaration of the sums,

if any, to which they are entitled as royalty payments. In their

second counterclaim, defendants seek damages for Nixon’s alleged

breach of contract and/or breach of fiduciary duty. Pending

before the court is Nixon’s motion to dismiss defendants’

counterclaims. See Fed. R. Civ. P. 12(b)(6).

Standard of Review

A motion to dismiss under Fed. R. Civ. P. 12(b)(6) is one of

limited inquiry, focusing not on “whether a plaintiff will

ultimately prevail but whether the claimant is entitled to offer

evidence to support the claims.” Scheuer v . Rhodes,

(1974). In considering a motion to dismiss, the court

must accept as true the facts alleged in the complaint and

construe all reasonable inferences in favor of the non-moving

party. See Bessette v . Avco Financial Services, Inc.,

2 439, 443 (1st Cir. 2000), cert. denied,

(2001).

See also The Dartmouth Review v . Dartmouth College,

3 ,

15 (1st Cir. 1989). Dismissal is appropriate only if “it clearly

appears, according to the facts alleged, that the plaintiff

cannot recover on any viable theory.” Langadinos v . American

Airlines, Inc.,

8 , 69 (1st Cir. 2000).

Background

Defendants claim that prior to 1996, Charles Bosler

(president of STG) began developing the RiskTrak software. In

1996, defendants say STG employed Nixon for the purpose of

assisting Bosler in the development of the source code for

RiskTrak. The parties seem to agree that they entered into some

sort of contractual relationship, which included a licensing

agreement concerning copyrighted works owned by Nixon, but they

disagree as to the terms and duration of that agreement. It does

not appear that any aspect of that agreement was reduced to

writing.

Defendants claim that during much of his work on the

program, Nixon was “essentially taking dictation from Bosler.”

3 Answer and Counterclaims at para. 5 2 . Defendants also say that

Bosler contributed significantly to the creation of RiskTrak’s

source code and the refinement of “five development tools” that

Nixon used during the course of his work on RiskTrak (although it

is unclear, it appears that defendants are referring to what

Nixon calls his five copyrighted “libraries”).

The parties’ relationship terminated at some point in 1999.

As a result of that relationship, however, defendants claim to be

co-authors of the “five development tools purportedly owned” by

Nixon, as well as the RiskTrak program itself. Answer and

Counterclaims at para. 5 5 . At a minimum, say defendants, Nixon’s

oral agreement to allow defendants to use his copyrighted works

in the program in consideration for royalty payments of 10

percent of gross sales constituted an irrevocable, non-exclusive

license. They claim to have paid Nixon all sums due under that

licensing agreement and say that his efforts to unilaterally

terminate the agreement were unlawful. Defendants also claim

Nixon breached the terms of the parties’ agreement when he

refused to deliver the latest version of the program and

4 attempted to extract greater financial concessions from them as a

pre-condition to turning it over.

Finally, defendants say that Nixon, as their agent, breached

his fiduciary obligations to them when, after refusing to honor

his obligations under the parties’ contract, he sought to sell

the RiskTrak program directly to potential customers of

defendants.

In response, Nixon claims that he is the registered owner of

the five copyrighted libraries or development tools that have

been (apparently) incorporated into the RiskTrak program. He

also says the license he provided to defendants (authorizing them

to use those libraries and the code he developed for RiskTrak)

was revocable at will. And, since he claims to have revoked that

license, he says defendants cannot, as a matter of law, maintain

a claim for declaratory judgment and an accounting. As to

defendants’ breach of contract/fiduciary duty claim, Nixon says

he terminated his oral contract with defendants and, therefore,

cannot successfully be sued for breach of contract. His motion

5 to dismiss i s , however, silent as to defendants’ claim that he

breached certain fiduciary obligations owed to them.

Discussion

As noted above, the parties agree that they entered into an

oral contractual relationship governing the development, use, and

sale of the RiskTrak software. Parties can enter into oral, non-

exclusive licensing agreements. See Lulirama Ltd. v . Axcess

Broadcast Services, Inc.,

(5th Cir. 1997);

I.A.E., Inc. v . Shaver,

(7th Cir. 1996).

Plainly, however, the parties disagree as to the term of that

agreement, the circumstances under which it might be terminated,

and a substantial number of its material provisions.

As to defendants’ first counterclaim, Nixon says they cannot

maintain a copyright infringement action against him with regard

to his own copyrighted libraries. That may be s o . However,

defendants maintain that because Bosler substantially assisted in

the modification and refinement of those libraries he and/or the

remaining defendants are “joint authors” of those substantially

re-worked libraries. That is to say, defendants appear to claim

6 that the libraries, in their current form, constitute a “joint

work,” as that term is defined in

(“A ‘joint

work’ is a work prepared by two or more authors with the

intention that their contributions be merged into inseparable or

interdependent parts of a unitary whole.”). As the Court of

Appeals for the Second Circuit has observed:

Joint authorship entitles the co-authors to equal undivided interests in the whole work - in other words, each joint author has the right to use or to license the work as he or she wishes, subject only to the obligation to account to the other joint owner for any profits that are made.

Thompson v . Larson,

(2d Cir. 1998).

Consequently, it would seem that if defendants are joint authors

of the RiskTrak program and/or the five libraries incorporated

into that program, Nixon was not entitled to “revoke” his

licensing agreement (at least with regard to those portions of

the agreement that related to works as to which defendants were

joint authors). As to those aspects of the program as to which

defendants are joint authors, it would appear that they did not

need any “license” from Nixon; their right to use such work flows

from their status as joint authors.

7 What defendants seek is a judicial declaration as to their

rights, if any, in the various components of RiskTrak and, if

appropriate, an accounting from Nixon. If they are, as they

claim, “joint authors” of that work, they are plainly entitled to

such relief. Thus, on the facts alleged by defendants, the court

cannot conclude that they have failed to state a viable,

cognizable claim for declaratory judgment as to the parties’

respective rights in and to the RiskTrak program, its source

code, and the integrated libraries. Nixon’s motion to dismiss

defendants’ first counterclaim i s , therefore, denied.

Nixon’s motion to dismiss defendants’ second counterclaim

must likewise be denied. If the court assumes, as it must, that

defendants’ allegations are true and Nixon was acting as an agent

of defendants when he “spoke with [potential customers of

defendants] in an attempt to sell product under his name and

obtain the opportunities for such sales for his own benefit,”

Answer and Counterclaims at para. 6 1 , they have adequately

alleged the essential elements of a viable claim for breach of

contract and/or breach of fiduciary duty. See, e.g., Reinhold v .

8 Mallery,

1 , 34 (1991) (discussing several of the duties

owed by an agent to his or her principal).

To be sure, Nixon claims that defendants have failed to

state a viable claim and, as a matter of law, cannot prevail on a

breach of contract/fiduciary duty claim. And, in support of that

position, he says:

[T]here can be no dispute that Plaintiff was at liberty to terminate [the] agreement with Defendants at any time. If he was free to terminate the agreement, he must also have been free to attempt to renegotiate its terms. . . . Accordingly, Plaintiff’s attempt to modify and his ultimate termination of the verbal agreement cannot constitute a breach of contract and Defendants’ Second Counterclaim must be dismissed.

Plaintiff’s motion to dismiss counterclaims at 4 . The court

disagrees. As noted above, defendants deny that Nixon was

authorized to terminate the agreement at any time. And i f , as

defendants’ allege, Nixon wrongfully terminated that agreement,

or wrongfully sought to extort concessions from defendants in an

effort to modify the terms of that contract, or wrongfully sought

to steal potential customers away from defendants during the

course of his agency relationship with them, defendants would

likely be entitled to damages.

9 Conclusion

For the foregoing reasons, plaintiff’s motion to dismiss

defendants’ counterclaims (document n o . 12) is denied.

SO ORDERED.

Steven J. McAuliffe United States District Judge

July 1 3 , 2001

cc: Kathleen C . Peahl, Esq. Arnold Rosenblatt, Esq.

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