To win a lawsuit for breach of contract, you typically have to prove three things:
- You need to prove that the contract existed;
- You need to prove that the contract was broken; and
- You need to prove that you suffered a material loss as a result of the broken contract.
Here are a couple of tips that might come in handy in suing for breach of contract. First, be sure you are suing the right person. If you sue an individual when you should be suing their corporation, your court case will be thrown out and you’ll have wasted a fair bit of time and money. Second, it often helps to bring expert testimony into the court case to help the judge determine whether a contract was breached. This transforms a “he said, she said” case into a viable breach of contract case.
As a final reminder, remember that for small amounts, you can sue in small claims court. This saves considerable legal expense and generally leads to fast conflict resolution.
See also…
Federal District Court Opinions (Court Case)
GILLANI CONSULTING v. DAEWOO HEAVY IND. AMER. CORP.,
(W.D.Wash. 12-7-2006) GILLANI CONSULTING INC., a Delaware
corporation, Plaintiff, v. DAEWOO HEAVY INDUSTRIES AMERICA
CORPORATION (now named DOOSAN INFRACORE AMERICA
CORPORATION), a New York Corporation, Defendant. CASE NO.
C05-0823-JCC. United States District Court, W.D.
Washington, At Seattle. December 7, 2006
FINDINGS OF FACT AND CONCLUSIONS OF LAW
JOHN COUGHENOUR, District Judge
I. INTRODUCTION
This matter comes before the Court on a three-day bench
trial. This case involves breach of contract and copyright
claims against Defendant Daewoo by Plaintiff Gillani.
Gillani is the successor in interest to intellectual
property which was originally owned by FourGen and licensed
to Daewoo. In its original Complaint, Gillani claimed that
Daewoo breached the License Agreement and infringed
Gillani’s copyright by using the relevant software on
non-designated computers, and allowing this software to be
used by a greater number of users than permitted under the
License Agreement. Prior to trial, Gillani abandoned the
user-count claim. Having heard all the evidence and
considered the entire record herein, Page 2 the Court
finds and rules as follows.
II. FINDINGS OF FACT
A. THE SOFTWARE AND THE EXECUTION OF THE WRITTEN CONTRACT
BETWEEN DAEWOO AND FOURGEN
The software in question will be referred to simply as
“the Software” for purposes of this Order. The Software
runs on top of an Informix database management system,
which in turn runs on top of the Unix operating system. It
includes both enterprise management applications such as
financial accounting, inventory, and purchasing
applications. (Pretrial Order 4, Plaintiff’s Alleged Facts
(Dkt. No. 30).) It also contains a computer-aided software
engineering (“CASE”) environment for producing customized
applications that adapt the Software to the customers’
specific business requirements. (Id.) The Software is
intended to be significantly customized to the needs of
each individual client. (Id.)
As testified by Steven Crouch ? the former employee
of Daewoo who was responsible for purchasing and
implementing the Software for many years ? Daewoo
was interested in the Software’s marketed ability to
improve the company’s product distribution management and
accounting capabilities.
On September 14, 1994, the parties entered into the
License Agreement (Pl.’s Ex. 1) and Amendment #1 (Pl.’s Ex.
2). On December 30, 1994, Daewoo executed and sent to
FourGen a “Statement of Product” to purchase additional
licenses to certain software modules. (Pl.’s Ex. 3.) These
documents comprise the entire written contract between the
parties concerning the licensing of the Software to Daewoo.
B. DAEWOO AND FOURGEN’S ORIGINAL WORKING RELATIONSHIP
In 1995, FourGen installed the Software at Daewoo’s New
Jersey Office.[fn1] Although the hardware was physically
located in New Jersey, it was primarily accessed over a
fractional T-1 line by employees working out of Daewoo’s
Cleveland office. As the Software was designed to be
highly Page 3 customized to Daewoo’s uses, both FourGen
and Daewoo spent a significant amount of time and money
modifying the base code and fixing the initial technical
bugs. For more than six months, commencing in the Fall of
1995, FourGen had its programmers at Daewoo’s Cleveland
office working on bugs and writing code. (Travel Invoices
(Def.’s Ex. 4).) From the Spring of 1995 through 1996,
FourGen produced approximately 2,600 bug patches for the
Software.
The parties had a mutual interest in making sure that the
code operated as designed. Daewoo clearly had an interest
in making sure that the programs it purchased ran its
business applications efficiently. FourGen had an incentive
not only to help out its newest customer and ensure
continued patronage from it, but also because the Daewoo
installation was only the second or third installation of
version 4.0 of the Software; accordingly, any improvements
to the Daewoo installation could be used as a model to help
improve future versions of the Software for other clients.
The parties thus characterized their relationship as a
mutual partnership whereby both parties could benefit from
successful implementation. Correspondence between the
parties in 1995 went so far as to explore the prospect of
Daewoo taking on an equity position in FourGen as FourGen
explored opportunities for marketing its software
technology on a worldwide basis. (Jim Robb Letter (Pl.’s
Ex. 33.) During this process, Daewoo ? which
previously had no technical support staff ? began to
hire a number of coders who could customize the Software
and fix its technical glitches in-house. In addition,
Daewoo paid the travel expenses of FourGen staff who flew
out from Seattle to Daewoo’s Cleveland office to work on
the Software.
C. THE FIRST MOVE OF THE SOFTWARE
Near the end of 1996, Daewoo decided to move its servers
from its New Jersey office to its Cleveland office. During
this move, Daewoo decided to purchase a new server, an IBM
390 to run the Software which would operate on a newer
version of Unix. Daewoo contacted Steve Wells at FourGen
? FourGen’s project manager for the Daewoo
installation ? regarding moving the Software to the
new server to discuss what implications such an upgrade
would have on Daewoo’s use of the Page 4 Software. During
the negotiations that ensued, FourGen offered to give
Daewoo a new version of the Software, with the
understanding that it would be installed on the IBM 390
computer. FourGen did not charge Daewoo any money for this
new Software. As Mr. Crouch testified and as is reflected
in an internal email from Mr. Crouch to Daewoo employees,
FourGen representative Steve Wells orally agreed to provide
Daewoo with a second license for the Software that would
allow Daewoo to operate the Software on its new Cleveland
server. (August 17, 1996 Email from Steven Crouch (Pl.’s
Ex. 43).) FourGen did not charge additional fees for this
license, but agreed to the new configuration in exchange
for Daewoo providing FourGen access to Daewoo’s proprietary
“warranty, configuration, and material rejection
programming” code. (Id.)
In Cleveland, the Software was installed on two servers
that were to operate in concert. One server was used by
Daewoo employees who accessed the Software for various
business applications. This server was known as the
production environment. The other server was accessed only
by Daewoo programmers and FourGen programmers to make
changes and modifications to the Software. This was known
as the development environment. FourGen was specifically
aware of this configuration, which was beneficial for
Daewoo because it allowed for more efficient operation of
the Software.
D. DAEWOO AND FOURGEN LOSE CONTACT
As time went on, the Software had fewer and fewer
technical bugs. Daewoo had developed its own staff of
coders who could fix bugs with the Software. Fewer bug
patches were needed and those problems that did arise could
be fixed in-house. FourGen’s programmers had left Daewoo’s
Cleveland office, and Daewoo’s use of the Software had
stabilized. By the end of 1996, FourGen and Daewoo were no
longer in regular contact with each other.
In the Summer of 1998, Daewoo moved its headquarters to
Suwanee, Georgia. The move included the relocation of
Daewoo’s Information Systems Department, including the
computers on which the Software had been installed. Page 5
E. THE 1999 MEETING BETWEEN H.K. SYSTEMS AND DAEWOO
In October 1999, Daewoo attempted to contact FourGen to
discuss a second move of the Software to an upgraded
computer. In order to move the Software to the new
computer, Daewoo needed an updated version of the CASE
tools. Daewoo learned that FourGen had stopped operating
under its former name and instead was operating under the
name H.K. Systems. Mr. Crouch eventually identified and met
with H.K. Systems Sales Representative Randy Randolph to
discuss upgrading Daewoo’s Servers. (October 19, 1997 Fax
to Randy Randolph (Pl.’s Ex. 19).)
The meeting took place at Daewoo’s office in Suwanee,
Georgia in October of 1999. At this meeting, Mr. Randolph
apologized and informed Daewoo that H.K. Systems had moved
on to version 5 of the Software and did not support version
4, which was the version Daewoo was using at the time.
Further, he stated that there was no “migration path” to
the new version of the Software. In layperson’s terms, that
meant that there was no means to move the data from an
earlier version of the Software to the most recent version.
As such, H.K. Systems was unable to provide Daewoo with any
help in moving the Software to a new computer. Mr. Randolph
did, however, offer to sell Daewoo an out-of-the-box copy of
the newest version of the Software. Use of this new version
would essentially entail throwing out the code that had
been highly customized to Daewoo’s uses at its significant
expense and starting from scratch.[fn2] During this 1999
meeting, there was no mention of a transfer fee or a
license fee in connection with the movement of the
Software, despite the fact that Daewoo made it known that
it was attempting to move the Software to new servers. Page
6
Believing that H.K. Systems could offer no assistance,
Daewoo scoured the country for other companies that could
assist it in a software move. Daewoo eventually found and
purchased the necessary CASE tools from Fourth Generation
Software Solutions (FGSS) located in Atlanta, Georgia. FGSS
was a wholly independent company from FourGen, that acted
as a value-added-reseller of FourGen CASE tools. Using the
CASE tools purchased from FGSS, Daewoo moved the Software
to upgraded computers in 2000, 2001, and 2004.
F. GILLANI’S SUCCESSION TO FOURGEN’S INTERESTS
In November 1997, FourGen changed its name to Endura
Software Corporation. In February, 2000, Endura Software
Corporation changed its name to H.K. Systems SCS, Inc. In
June, 2000, H.K. Systems SCS, Inc. changed its name to
Irista, Inc. (Pl.’s Ex. 45, (Copyright Recordations).) On
January 25, 2002, Gillani acquired all intellectual
property and contract rights in the Software from Irista,
Inc. pursuant to an “Assignment of Intellectual Property
Rights” and “Amendment 1 to the Asset Purchase Agreement,”
dated November 15, 2002. (Id.)
G. DAEWOO’S INTRODUCTION TO GILLANI
During March, 2004, two Gillani executives, Mark Feldman
and Syed Kamal[fn3] visited Daewoo’s offices in Suwanee.
Though Gillani pitched the meeting as a way to forge a new
business relationship, it quickly became apparent that a
major purpose of that meeting was to seek compensation for
what Gillani thought was a breach of the previous licensing
agreement between FourGen and Daewoo. After assessing
Daewoo’s use of the Software at the time of the meeting,
Mr. Syed conducted a PowerPoint presentation in which he
informed the Daewoo representatives that it would cost
$441,000 to bring the company back into compliance with the
original licensing agreement. (Gillani Presentation (Pl.’s
Ex. 5)). This figure represented back-pay for seven years
of being off of license and support. Daewoo objected to any
back-payments and the meeting ended without a new
relationship having been established. Page 7
Gillani then sent a letter on April 19, 2004, following up
on the presentation and suggesting both that Daewoo bring
its licensing agreement into compliance, and that it also
purchase the newest version of the Software. (April 24,
2004 Letter From Gillani to Daewoo (Pl.’s Ex. 10).) When
Daewoo did not respond to that letter, Gillani sent another
letter on May 28, 2004, demanding payment of $3,758,265.00
within fifteen days “to bring [Daewoo’s] current usage into
compliance with the license agreement” and threatening
legal action if the demand was not met. (May 28, 2004
Letter from Gillani to Daewoo (Pl.’s Ex. 11).) Tom Lattie,
Daewoo’s CFO, testified that, upon receipt of the May 28,
2004 letter from Gillani, he referred the matter to
counsel. In June of 2004, Daewoo transferred the Software
to its present server.
III. CONCLUSIONS OF LAW
A. BREACH OF CONTRACT CLAIM
An assignee cannot acquire any rights in excess of what
the assignor has the ability to transfer. Morse Elec. Prod.
Corp. v. Beneficial Indus. Loan Co., 579 P.2d 1341, 1342
(Wash. 1978). Because the assignment of intellectual
property originally owned by FourGen and now assigned to
Gillani is not in dispute, the main issue is what rights
Gillani’s predecessor in interest FourGen had under the
initial contract and whether those rights were later
waived.
Gillani claims that Daewoo violated its licensing agreement
in two ways. First, Gillani claims that Daewoo violated
the Agreement by transferring the Software to new servers
when Daewoo decided to upgrade its hardware. Second,
Gillani claims that Daewoo violated its agreement by
running the production and development portions of the
Software on different servers.
Daewoo responds that the License Agreement only requires
that the company have one copy of the Software running at
any one time. Daewoo argues that it was allowed to transfer
the Software to a new server, provided that it discontinued
the use of the Software on the old computer. It also argues
that it was allowed to run the production and development
portions of the Software on separate servers. Daewoo argues
in the alternative that, even if it did breach the
technical language of the License Page 8 Agreement,
FourGen and its successors in interest waived the right to
enforce certain provisions of the License Agreement.
Thus, it is important to first look at the initial contract
to see what its terms were as written, and then examine
whether FourGen or its successors waived any of its terms
after the execution of the written agreement.
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