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Haddley v. Next Chapter Technology, Inc.

United States District Court, D. Minnesota

February 28, 2019

Neil Leonard Haddley, Plaintiff,
Next Chapter Technology, Inc., a corporation; Vaughn Mulcrone, an individual; dataBridge, LLC, a limited liability company; County of Becker, Minnesota; County of Clay, Minnesota; County of Dodge, Minnesota; County of Isanti, Minnesota; County of Otter Tail, Minnesota; County of Mower, Minnesota; County of Steele, Minnesota; and County of Waseca, Minnesota, Defendants.

          Alexander Farrell, Esq., Hellmuth & Johnson PLLC, counsel for Plaintiff Neil Leonard Haddley.

          Bruce H. Little, Esq., Autumn Gear, Esq., and Heidi J.K. Fessler, Esq., Barnes & Thornburg LLP, counsel for Defendants.




         This matter is before the Court on Defendants Next Chapter Technology, Inc.'s (“NCT”), Vaughn Mulcrone's, and dataBridge LLC's[1] Second Motion for Partial Summary Judgment (Doc. No. 177) and a Motion for Partial Summary Judgment (Doc. No. 182) brought by Plaintiff Neil Leonard Haddley (“Plaintiff” or “Haddley”). For the reasons set forth below, the Court grants Defendants' motion and denies Plaintiff's motion.


         The facts of this case were thoroughly set forth in a prior order denying Defendants' prior motion for summary judgment dated September 26, 2018 (the “September Order”). (Doc. No. 197.) Many of the previously recited facts are relevant to the present motions. The Court will summarize and supplement the facts as necessary.

         Haddley is the creator and copyright holder of Scanning Enabler, a software program that allows users to scan paper documents into electronic form. (Doc. No. 69 (Consolidated Amended Complaint (“CAC”)) ¶¶ 33, 35.) Scanning Enabler contains two main components: the Server Software and the ActiveX Control.[2] Scanning Enabler resides on and is used at the server; workstations can connect to the server and access the software via ActiveX controllers. In order to download Scanning Enabler, one must use a valid license key. (Id. ¶ 42.)

         NCT licenses CaseWorks, an electronic document management system (“EDMS”), to Minnesota counties. CaseWorks includes a scanning feature. In 2009, NCT entered into a re-seller arrangement for Scanning Enabler with Haddley's company, Dark Blue Duck Solutions, LLC (“DBD”). In 2011, Haddley began working for NCT, first as a consultant and later as Chief Technical Officer (“CTO”). In 2012 and 2013, the scanning software component used in CaseWorks was Scanning Enabler, which was licensed from DBD.[3]

         Scanning Enabler was installed on servers in Clay and Steele Counties. Clay County shared a server environment with Becker, Otter Tail, and Isanti Counties. Steele County shared a server environment with Waseca, Mower, and Dodge Counties. Defendants claim that the Scanning Enabler licenses were unrestricted single-server licenses designated for installation on production servers hosted at both Clay and Steele Counties and allowing for other counties in the shared environments to download the software. Defendants also assert that Haddley authorized and personally participated in the sharing and use of Scanning Enabler by County Defendants in the above server environments. Haddley, however, disputes that he knew of and acquiesced to the unrestricted use of Scanning Enabler on the shared server environments. Haddley also asserts that he issued two licenses each to Clay and Steele Counties, through NCT as Haddley's reseller, and that the licenses did not permit Clay and Steele Counties to allow other counties to download the software.

         NCT terminated Haddley in October 2013 and asserts that it learned that Haddley was attempting to enter the market to compete with NCT. NCT submits that, in response, it developed its own scanning module based on software development kits (“SDKs”) that it purchased from Atalasoft, a commercial vendor, and commissioned dataBridge LLC to complete the development of the scanning module. In the spring of 2014, NCT introduced its scanning module, NCT SCAN, into new releases of CaseWorks. In November of 2014, NCT disabled Scanning Enabler in existing installations and replaced it with NCT SCAN.

         In this action, Plaintiff brings three claims: (1) copyright infringement against NCT, Mulcrone, and County Defendants for exceeding the licenses Haddley sold by permitting the eight County Defendants, instead of just Steele and Clay Counties, to use the Scanning Enabler at the Clay and Steele County servers; (2) copyright infringement against NCT, Mulcrone, and dataBridge LLC for creating an infringing derivative work based on the Scanning Enabler; and (3) a claim under the Digital Millennium Copyright Act (“DMCA”), 17 U.S.C. § 1201(a)(1)(A) and § 1202(b)(1), against NCT, Mulcrone, and the County Defendants. NCT asserts the following counterclaims: (1) breach of employment agreement; (2) breach of duty of loyalty; and (3) unfair competition.

         Haddley now moves for partial summary judgment in his favor on Counts I and III, as well as on NCT and Mulcrone's counterclaims. Defendants also move for partial summary judgment in their favor on Count II of Haddley's CAC.


         I. Legal Standard

         Summary judgment is appropriate if the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Courts must view the evidence, and the inferences that may be reasonably drawn from the evidence, in the light most favorable to the nonmoving party. Weitz Co., LLC v. Lloyd's of London, 574 F.3d 885, 892 (8th Cir. 2009). However, “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed ‘to secure the just, speedy and inexpensive determination of every action.'” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed.R.Civ.P. 1).

         The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Enter. Bank v. Magna Bank, 92 F.3d 743, 747 (8th Cir. 1996). The nonmoving party must demonstrate the existence of specific facts in the record that create a genuine issue for trial. Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995). A party opposing a properly supported motion for summary judgment “may not rest upon mere allegation or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986).

         II. Plaintiff's Motion

         A. Count I (Copyright Infringement)

         In Count I, Haddley asserts that Defendants (NCT, Mulcrone, and County Defendants) infringed his copyright in the Scanning Enabler software by distributing and making copies of Scanning Enabler software available to unlicensed parties who then downloaded the software.[4]

         Defendants previously moved for summary judgment on these claims, arguing that, as a matter of law, they were licensed to use the Scanning Enabler software. In the September Order, the Court explained that numerous fact disputes exist as to the following issues: who held the licenses of the Scanning Enabler software-NCT or Clay and Steele Counties; which particular software agreement(s) governed; and whether the relevant licenses were unrestricted such that they allowed multiple counties to share the Scanning Enabler software. The Court also concluded, on Defendants' motion, that fact issues preclude summary judgment on the issue of implied ...

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