22-1979(L) N. Am. Photon Infotech, Ltd. v. ZoomInfo LLC

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER (REDACTED)

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 15th day of November, two thousand twenty-four.

PRESENT: SUSAN L. CARNEY, RICHARD J. SULLIVAN, EUNICE C. LEE, Circuit Judges. ___________________________________________________

NORTH AMERICA PHOTON INFOTECH LTD., a Mauritius private limited company,

Appellant-Cross-Appellee, v. Nos. 22-1979 (L), 22-2074 (XAP) ZOOMINFO LLC, f.k.a. Discoverorg, LLC,

Appellee-Cross-Appellant. * ___________________________________________

* The Clerk of Court is respectfully directed to amend the official case caption as set forth above. For Appellant-Cross-Appellee: MYRON MOSKOVITZ, Moskovitz Appellate Team, Piedmont, CA (Michael P. Pappas, Michael P. Pappas Law Firm, P.C., New York, NY, on the brief).

For Appellee-Cross-Appellant: OREN J. WARSHAVSKY (Carrie A. Longstaff, Megan A. Corrigan, on the brief), Baker & Hostetler LLP, New York, NY.

Appeal from a judgment of the United States District Court for the Southern

District of New York (John P. Cronan, Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the November 18, 2022 judgment of the

district court is AFFIRMED IN PART and VACATED IN PART.

North America Photon Infotech Ltd. (“Photon”) appeals the district court’s

grant of summary judgment as to liability in favor of ZoomInfo LLC (“ZoomInfo”)

on the parties’ breach-of-contract claims and counterclaims relating to an End User

License Agreement (“EULA”) that granted Photon twelve months of access to

ZoomInfo’s database of business information. ZoomInfo cross-appeals the

district court’s determination of the amount of damages after a bench trial. We

assume the parties’ familiarity with the underlying facts, procedural history, and

issues on appeal.

2 were triable issues of fact relating to damages on the counterclaim. The district

court subsequently held a bench trial on damages and issued a judgment in favor

of ZoomInfo in the amount of $94,500 – well below the damages figure requested

by ZoomInfo. Photon timely appealed the district court’s grant of summary

judgment on liability. ZoomInfo filed a cross-appeal challenging the district

court’s calculation of the damages award.

I. Summary Judgment Rulings

We review a district court’s grant of summary judgment de novo. Lucente

v. Int’l Bus. Machs. Corp.,

(2d Cir. 2002). Summary judgment is

appropriate only when, after “examin[ing] the evidence in the light most favorable

to, and draw[ing] all inferences in favor of, the non-movant,” “there is no genuine

issue as to any material fact” and “the moving party is entitled to a judgment as a

matter of law.”

(internal quotation marks omitted).

Under New York law, to make out a viable claim for breach of contract, a

plaintiff must prove (1) “the existence of a contract,” (2) “adequate performance of

the contract by [the plaintiff],” (3) “breach of the contract by [the defendant],” and

4 (4) “damages.” 1 24/7 Recs., Inc. v. Sony Music Ent., Inc.,

, 41–42 (2d Cir.

2005) (emphasis omitted). When construing a contract, we must first decide

whether it is ambiguous – that is, “whether the language of the contract and the

inferences to be drawn from it are susceptible to more than one reasonable

interpretation.” Seiden Assocs., Inc. v. ANC Holdings, Inc.,

(2d

Cir. 1992) (citation omitted). When the terms of a contract are unambiguous,

summary judgment may be granted so long as there are not genuine disputed

issues of material fact relevant to performance, breach, or damages. See

.

Where a contract’s language is ambiguous, its interpretation is generally “a

question of fact to be resolved by the factfinder,” although a court may

appropriately resolve the ambiguity if “extrinsic evidence creates no genuine issue

of material fact and permits interpretation of the agreement as a matter of law.”

Compagnie Financiere de CIC et de L'Union Europeenne v. Merrill Lynch, Pierce, Fenner

& Smith Inc.,

(2d Cir. 2000) (internal quotation marks omitted).

The existence of ambiguity in a contract is a question of law that we review de novo.

See Seiden Assocs., Inc.,

.

1 Section 12 of the EULA provides that the agreement “shall be construed in accordance with . . . the laws of the State of New York.” Suppl. App’x at 459. 5 A. Photon’s Breach-of-Contract Claim

Photon first argues that the district court erred in granting summary

judgment in favor of ZoomInfo on Photon’s claim that ZoomInfo breached the

EULA by knowingly providing data to Photon. Photon’s primary

argument is that section 5.1 of the EULA required ZoomInfo to provide Photon

with access to “Licensed Materials,” which in turn is defined as “all electronic

information as described in any Ordering Document executed between the

parties.” Suppl. App’x at 455, 457 (EULA §§ 1.2, 5.1). 2 Photon reasons that

because “Licensed Materials” under the EULA and the “Ordering Document” did

not reference , ZoomInfo materially breached the EULA by

the data downloaded by Photon. We disagree.

As the district court noted, neither section 5.1 nor the Ordering Document

precluded the datasets that Photon

downloaded. Nor did the EULA or Ordering Document bar ZoomInfo from

2 The Ordering Document, which reads like an order form, identifies the “dataset” and “user access” subscriptions that Photon purchased. Suppl. App’x at 318. It goes on to note that each subscription “will include access to the contract- and company-level information for companies and contacts within [the] selected Geographies, Company Sizes, and Departments that are profiled by [ZoomInfo] during the [EULA] Term,” and then provides a short description of different subscription options within those categories. Id. at 319. 6 taking steps to protect its own intellectual property. It is settled New York law

that “[e]ven where a contingency has been omitted” – here, the prohibition against

employing security measures like the – “we will not necessarily imply

a term since courts may not by construction add or excise terms, nor distort the

meaning of those used and thereby make a new contract for the parties under the

guise of interpreting the writing.” Reiss v. Fin. Performance Corp.,

(2001) (internal quotation marks omitted). Indeed, when applying New York

law, “[c]ourts should be ‘extremely reluctant’ . . . to imply a term that ‘the parties

have neglected to specifically include,’” and while courts may do so “if the contract

is ambiguous,” “an omission . . . does not automatically render a contract

ambiguous.” In re World Trade Ctr. Disaster Site Litig.,

, 122–23 (2d

Cir. 2014) (quoting Vt. Teddy Bear Co. v. 538 Madison Realty Co.,

(2004)). Thus, we conclude that the EULA was not ambiguous as to whether

ZoomInfo could its datasets merely because it contained

no express grant of permission regarding the security measure and that ZoomInfo

was not “prohibited from using the [ ] in the absence of explicit

contract language authorizing such use[].” Greenfield v. Philles Recs., Inc.,

(2002); see Donohue v. Hochul,

(2d Cir. 2022) 7 (acknowledging the “established principle of New York contract law that counsels

against inferring ambiguity from silence,” namely, that “[a] contract’s silence on

an issue does not create an ambiguity” and “an ambiguity never arises out of what

was not written at all, but only out of what was written so blindly and imperfectly

that its meaning is doubtful” (internal quotation marks omitted)).

For its part, Photon strains to portray the as “phony” or “fake”

data that fell outside the definition of “Licensed Materials.” E.g., Photon Br. at

30, 32. But even accepting Photon’s characterization, the EULA clearly

contemplated that the delivery of some inaccurate data alone was not sufficient to

constitute a breach of the parties’ agreement. Indeed, section 5.2 provided that

Photon was allowed to terminate the contract only if “more than 5% of” the data

supplied by ZoomInfo turned out to be inaccurate. Suppl. App’x at 457. Section

5.2 would be “render[ed] . . . meaningless” if providing any amount of inaccurate

data would result in a breach on the part of ZoomInfo, and we must, “if possible,”

“avoid[]” “adopting [such] an interpretation that would render any individual

provision superfluous.” Int’l Multifoods Corp. v. Com. Union Ins. Co.,

,

8 86 (2d Cir. 2002) (internal quotation marks omitted). 3

Photon next contends that the district court erred in rejecting its argument

that ZoomInfo breached the implied covenant of good faith and fair dealing by

intentionally the data supplied to Photon. Under

the covenant of good faith and fair dealing, “neither party shall do anything which

will have the effect of destroying or injuring the right of the other party to receive

the fruits of the contract.” Sec. Plans, Inc. v. CUNA Mut. Ins. Soc.,

(2d Cir. 2014) (quoting Moran v. Erk,

(2008)). At the same

time, the implied covenant “does not extend so far as to undermine a party’s

general right to act on its own interests in a way that may incidentally lessen the

other party’s” expected benefit under the contract. M/A-COM Sec. Corp. v. Galesi,

(2d Cir. 1990) (internal quotation marks omitted).

Here, it is undisputed that ZoomInfo used the to enforce the

EULA’s termination and unauthorized-use provisions. See Sec. Plans, Inc.,

(observing that, where a party has “a genuine and colorable business

3 Even by Photon’s count, constituted only 0.39% of the total data it exported from ZoomInfo, so section 5.2 itself does not provide an independent basis for Photon’s breach- of-contract claim. See Photon App’x at 294. 9 justification,” its actions “will not have violated the implied covenant”). In

essence, ZoomInfo

– to monitor whether Photon and third parties were improperly

using its data. Photon does not meaningfully explain or cite to admissible

evidence as to how the use of this security measure, which accounted for a tiny

percentage of the data exported by Photon from ZoomInfo, caused it harm or

otherwise interfered with its ability to receive the benefits of the EULA. We

therefore see no error in the district court’s grant of summary judgment in favor

of ZoomInfo on Photon’s breach-of-contract claims.

B. ZoomInfo’s Breach-of-Contract Counterclaim

Photon next argues that the district court erred in finding, at summary

judgment, that Photon breached the EULA by (1) failing to destroy ZoomInfo’s

data after the contract termination date, (2) continuing to use the data, and (3)

providing ZoomInfo’s data to a third party, Packyge. Again, we disagree.

Section 7.2 of the EULA provided that “[u]pon expiration or termination of

this [a]greement, [Photon] agrees to destroy any and all copies of Licensed 10 Materials and any information it has obtained from the Licensed Materials,

whether in hard copy or electronic form.” Suppl. App’x at 458. Accordingly,

Photon could access ZoomInfo’s data for one year until May 11, 2018, and could

download data until April 11, 2018, i.e., thirty days prior to the termination date of

the contract. While the parties negotiated a potential renewal of the contract,

ZoomInfo temporarily extended Photon’s download privileges until early May

2018 and its data access until May 16, 2018. But based on the undisputed

evidence, , Photon continued

to use ZoomInfo data until August 13, 2020. In fact, Photon has never denied that

it was using ZoomInfo’s service well beyond the May 2018 deadline.

Instead, Photon primarily responds that, under section 6.4 of the EULA, it

needed to use only “commercially reasonable efforts” when carrying out its

obligation under section 7.2 to destroy and cease using the Licensed Materials after

the agreement’s termination date. Photon Br. at 41, 43–44; see Suppl. App’x at

458. But it is clear from its face that section 6.4, which was titled “Protection from

Unauthorized Use,” pertained to Photon’s obligation to safeguard ZoomInfo’s

data from use by others – not Photon’s own obligation to destroy or stop using

ZoomInfo’s data after the termination date. See Suppl. App’x at 458. Indeed, 11 nothing in section 7.2 referenced commercially reasonable or good-faith efforts.

We therefore reject Photon’s attempt to insert into the contract a term for which

the parties never bargained. See L. Debenture Tr. Co. of N.Y. v. Maverick Tube Corp.,

(2d Cir. 2010).

Finally, it is beyond dispute that Photon breached section 4.2 of the EULA,

which prohibited the disclosure of the Licensed Materials to third parties, by

sharing ZoomInfo’s data with Packyge. As Photon conceded at summary

judgment, between January and March 2018, Packyge employees

.

For all these reasons, we conclude that the district court did not err in

granting summary judgment on liability in favor of ZoomInfo on its breach-of-

contract counterclaim.

II. Damages for Photon’s Breach of the EULA

“[W]ith respect to the district court’s determination of damages, we review

the legal question of the applicable damages measurement de novo” and “[t]he

[factual] question of the amount of recoverable damages . . . for clear error.”

Bessemer Tr. Co. v. Branin,

(2d Cir. 2010) (internal quotation marks 12 omitted). Under the clear error standard, “[w]e will not upset a factual finding

unless we are left with the definite and firm conviction that a mistake has been

committed.”

(internal quotation marks omitted).

Here, the district court first determined that per year “best

reflect[ed]” the “value” of ZoomInfo’s “services[,]” ZoomInfo Sp. App’x at 37,

based on evidence of ZoomInfo’s general contracting and renewal practices, which

included the use of promotional discounts off its standard list prices; the parties’

contract-renewal negotiations; and the average price paid by ZoomInfo clients at

the time. The district court then adjusted this figure downward by ten percent –

to per annum – to account for the fact that ZoomInfo did not update its

data during the period of Photon’s unauthorized use. See

at 37–38. The court

prorated this annual value of ZoomInfo’s subscription to per month, id. at

38, and then multiplied that monthly value by twenty-one to reflect its finding that

Photon and Packyge used ZoomInfo’s data without authorization for nineteen and

two months, respectively, id. at 40. Consequently, the district court awarded

ZoomInfo damages in the amount of $94,500. Id.

On appeal, ZoomInfo first argues that the district court should have

awarded damages based on its standard subscription list price, i.e., $106,500 per 13 year, instead of a discounted per year. We are not persuaded.

ZoomInfo contends that the district court erroneously deviated from its “expected

contract damages (its standard list price) and instead determined a separate

market value” for the data at the time of breach. ZoomInfo Br. at 56. But

ZoomInfo does not meaningfully explain why expectation damages in an amount

equal to its standard list price are the appropriate measure of damages here – when

Photon paid under the EULA for the year of ZoomInfo’s services, and

there was no EULA in place after its termination in May 2018. See Latham Land I,

LLC v. TGI Friday's, Inc.,

, 151–52 (2012) (explaining expectation

damages as measured “by what it would take to put the non-breaching party in

the same position that it would be in had the breaching party performed as

promised under the contract”). 4

Instead of accepting ZoomInfo’s listed subscription price, the district court

calculated a fair “market value” for the unauthorized use of the data, ZoomInfo

Sp. App’x at 35, 39 – in effect, the “reasonable license fee” that ZoomInfo itself

4 We note that ZoomInfo asserted an unjust enrichment claim only in the alternative; the district court dismissed it at summary judgment without prejudice, and ZoomInfo does not challenge that ruling on appeal. 14 requested in its amended counterclaim complaint. Photon App’x at 117.

ZoomInfo’s own authority supports that approach, see, e.g., Med. Coll. of Wis. Inc.

v. Attachmate Corp., No. 15-cv-151 (JPS),

, at *16 (E.D. Wis. Feb. 19,

2016), as do our factually analogous precedents on the misuse or misappropriation

of intellectual property, which recognize a hypothetical reasonable license fee as

an appropriate measure of damages, see, e.g., On Davis v. The Gap, Inc.,

(2d Cir. 2001) (approving, in the copyright infringement context, a

measure of damages as “the reasonable license fee on which a willing buyer and a

willing seller would have agreed for the use taken by the infringer”); Vt.

Microsystems, Inc. v. Autodesk, Inc.,

, 151 (2d Cir. 1996) (describing a

“reasonable royalty award,” in a trade secret case, as “what the parties would have

agreed to as a fair licensing price at the time that the misappropriation occurred”

“had they bargained in good faith”).

In the end, then, ZoomInfo’s argument boils down to a disagreement with

the district court’s factual determination of a reasonable license fee. But as the

district court found, and ZoomInfo does not meaningfully dispute, “

” given its offering of promotional

discounts. ZoomInfo Sp. App’x at 37. And in the months before and after the 15 EULA’s expiration, when the parties were negotiating a renewal, ZoomInfo had

pitched annual prices ranging from to . Importantly, as the

district court found, was “in line with” both “the average price point

clients [were] . . . paying” at the time according to ZoomInfo and the

. Id. at 36–37 (quoting Suppl. App’x at 512). We therefore find no

clear error in the district court’s findings that ZoomInfo’s listed annual price of

$106,500 was not the appropriate measure of damages in this case.

We agree with ZoomInfo, however, that the district court erred in

calculating damages on a per-month basis instead of a per-year basis. As a matter

of common sense, an award for lost subscription or license fees contemplates the

value of (or fee for) the services provided or licensed over a designated period of

time. Contrary to the district court’s finding, the record did contain evidence that

ZoomInfo’s subscription agreements were offered on no less than annual terms,

particularly in relation to Photon. Specifically, Photon’s agreement with

ZoomInfo was for a term of 12 months, and evidence submitted at trial indicated

that ZoomInfo, in its contract renewal discussions with Photon, offered extension

terms of 12, 24, 36, and 48 months, with corresponding annual prices for each 16 option. 5 The fact that ZoomInfo agreed to give Photon a one-week unpaid

extension on its access to ZoomInfo’s data – in the midst of contract renewal

discussions that contemplated terms at different yearly increments – does not

support an award of damages on a monthly basis. Indeed, neither the district

court’s decision below nor the parties on appeal point to any evidence suggesting

that ZoomInfo ever offered their services for any term other than annual ones.

Accordingly, we conclude that ZoomInfo is entitled to damages on annual terms,

for the yearly periods in which Photon (and Packyge) misused ZoomInfo’s data in

violation of the EULA.

This conclusion resolves, in large part, ZoomInfo’s final argument that the

district court erred by awarding damages only for the months that Photon and

Packyge actively used its data. With respect to damages that ZoomInfo seeks for

5 In support of its conclusion to award damages on a pro rata monthly basis, the district court, citing the direct testimony of ZoomInfo’s Senior Director of Revenue Operations Samantha Montgomery, noted that ZoomInfo had “at one point offered a twenty-six month renewal” to Photon. ZoomInfo Sp. App’x at 42. Indeed, Montgomery’s testimony, which cited and summarized an April 12, 2018 email sent by one of ZoomInfo’s managers to employees at Photon, notes a “24- or 26- month renewal” option. Suppl. App’x at 430. The April 12, 2018 email itself, however, clearly sets out a “24 or 36 Month Renewal” option with an accompanying annual rate. Id. at 475 (emphasis added). In other words, the reference in Montgomery’s testimony to an offered twenty-six month renewal term, which ZoomInfo repeats in its brief on appeal, appears to be a typo. The fact that ZoomInfo’s offer included a three-year term further supports awarding damages on an annual basis. 17 additional periods during which it contends Photon and Packyge possessed,

rather than used, its data, we see no error in the district court’s conclusions. In

effect, the district court determined that there was an insufficient record as to

Photon and Packyge’s continued possession, and ZoomInfo was not entitled to

any factual finding in its favor or adverse inference against Photon or Packyge

under Federal Rule of Civil Procedure 37 – rulings that ZoomInfo does not

meaningfully challenge on appeal. See Norton v. Sam’s Club,

(2d

Cir. 1998) (“Issues not sufficiently argued in the briefs are considered [forfeited]

and normally will not be addressed on appeal.”).

* * *

We have considered the parties’ remaining arguments and find them to be

without merit. Accordingly, we AFFIRM the judgment as it pertains to liability,

and VACATE the judgment solely as to the amount of damages, and REMAND

for further proceedings consistent with this decision.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court

18