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Micro Focus (U.S.), Inc. v. Express Scripts, Inc.

United States District Court, D. Maryland

February 12, 2019

MICRO FOCUS (U.S.), INC., Plaintiff,
v.
EXPRESS SCRIPTS, INC., Defendant.

          MEMORANDUM OPINION

          PAULA XINIS, UNITED STATES DISTRICT JUDGE

         Pending before the Court in this contract action are cross-motions for summary judgment. ECF Nos. 174, 186. The parties appeared before the Court for a hearing on February 5, 2019. Based upon the parties' briefs, arguments, and the record evidence, the Court grants in part and denies in part both motions.

         I. Background

         This case stems from a software use dispute. Plaintiff Micro Focus (“Micro”) owns and licenses “terminal emulation” software, which permits users to access host systems from personal computing devices. ECF No. 174-1 at 5 (Ford Dep.). Micro licensed two terminal emulation products, Rumba and OnWeb Web-to-Host (collectively, “Rumba software”), [1] to Defendant Express Scripts (“Express”). Micro provides software to customers under a perpetual license, subject to agreed-upon terms. ECF No. 186-4 at 6-7 (Ford Dep.). Micro also offers technical support for a separate fee, generally paid each year as an annual maintenance renewal. Id.

         Express, a pharmacy benefits manager, licenses Rumba software that it uses to connect to the mainframe where it stores patient information, prescription history, and other data. ECF No. 174-2 at 6-10 (Mudhenk Dep.). Rumba offers a functionality “[s]imilar to a web browser, ” ECF No. 174-3 at 7 (Said Depo), in which an Express employee clicks a Rumba icon on his or her personal device to connect to the mainframe. ECF No. 174-2 at 11 (Mudhenk Dep.). The employee is then presented with a logon screen to access the data stored on the mainframe. ECF No. 174-3 at 10 (Said Dep.).

         To log on and interact with the mainframe, an Express employee also needs valid security credentials. Id. Because of the legally protected patient data stored on the mainframe, Express uses a security package called Resource Access Control Facility (“RACF”) to control access to the mainframe. ECF No. 186-2 at 4 (Mudhenk Dep.). Only a subset of Express employees are granted RACF usernames and passwords to access the mainframe. ECF No. 186-3 at 7 (Said Dep.) Without RACF credentials, an Express employee can launch Rumba software but cannot access mainframe data. ECF No. 174-3 at 11 (Said Dep.).[2]

         Since at least 2001, Express has used some version of Rumba software that it had first purchased from Micro's predecessor, NetManage. ECF No. 186-1 at 11 (Miller Dep.). Initially, Express used Rumba software only on individual desktop computers, or “thick client hardware, ” where the software is installed and used on the desktop itself. Id. at 4. In 2006, Express began transitioning to a “terminal server environment, ” in which “thick client” desktops were replaced with “thin client” hardware where the desktop is a “dumb device” connected via Express' network to a terminal server. Id. at 4, 14-15. With “thin clients” Rumba is installed on the server itself, and all processing takes place on the terminal server to which the desktop connects. Id. at 4-5. Express uses Citrix and Windows Terminal Services (collectively, “Citrix”)[3] as terminal servers which provide “a way to access applications remotely without having the software on the PC.” ECF No. 186-4 at 8 (Ford Dep.). Accordingly, Express began purchasing Rumba software for both thick and thin client deployments. ECF No. 186-6 at 15 (Miller Dep.). At the time of the dispute forming the basis of this case, Express owned perpetual licenses for up to 955 concurrent users of Rumba software, and 8, 975 perpetual non-concurrent use licenses. ECF Nos. 186-8 at 3, 186-10 at 2-3. A concurrent license permitted Express to install Rumba on a server for access by a designated number of users at any given time.

         In 2008, Micro purchased NetManage, thereby acquiring the relationship with Express. ECF No. 186-9 at 4 (Grant Dep.). In 2009, Micro began an “‘all you can eat' enterprise license” initiative for Rumba software where clients would not have to count the number of software installations as had been used in the industry under various types of licensing agreements. ECF No. 186-16 at 2. The program, internally named “Footprints” established a target pricing schedule of $205, 000 for the license and a $45, 000 maintenance fee the first year, followed by $45, 000 each following year. Id.

         In January 2010, Rocket Software, one of Micro's competitors, offered Express a similar terminal emulation software package as an “enterprise license” that covered both thick and thin client hardware and had no limitations on the number of users who could access the software. ECF No. 186 at 12. See also ECF No. 186-24 at 3 (Stavropoulos Decl.) (describing “enterprise license” as an “‘all you can eat option' allowing deployment to an unlimited number of users.”). Express' contract for technical support on its existing Rumba software licenses was due for renewal at the end of May 2010, ECF No. 186-10 at 2, and Express' Director of National Field Services, Peter Miller, informed Micro about the discussion with Rocket Software and offered to hear Micro's counter offer. ECF No. 186-6 at 11 (Miller Dep.).

         On May 12, 2010, Richard Ford at Micro emailed Miller, acknowledging the “extremely aggressive offer” from Rocket. Ford wrote that “Micro Focus is please[d] to offer Express Scripts an enterprise license that will help Express Script[s] achieve its financial goals with zero risk.” ECF No. 174-17 at 2. Ford offered Express “[u]p to but not to exceed 10, 000 Rumba and/or Onweb Web to Host site license for the benefit of Express Scripts users, ” for $250, 000, to include the first year of support, with $45, 000 for support each of the two following years. Id. Ford concluded the email by noting that it had taken him longer to come up with Micro's offer, because “it took a bit more discussion with our senior management.” Id.

         Indeed, before Ford could extend a formal quote, he needed approval. ECF No. 186-27. Ford's supervisor David Vano emailed his supervisor, Michael Steinmetz, and Archie Roboostoff, Project Manager for Rumba, with the subject line “Footprints Approval, ” asking them to bless the offer made to Miller. Id. While some at Micro resisted the idea of “cannibalizing” the existing customer base with an offer intended to encourage obtaining new business, the ultimate consensus was to extend promotional pricing to Express. Id. The next day, Ford faxed the Product Order to Miller. The Product Order specified that “[e]xcept as otherwise specified above or agreed in writing by [Express and Micro], Micro Focus End User License Agreement . . . terms shall apply to this Product Order.” ECF No. 186-28 at 3. The Product Order described the product as “RUMBA Enterprise v. 8.3.0 for x86 running Win XP, Vista, Windows 7, Server 2003, Server 2008 for 10000 Authorized User License.” Id. (emphasis added). Express responded with a purchase order that repeated the same product language. ECF No. 186-29. Micro also internally recorded the Express order to be the “same structure as Citi Rumba Enterprise Deal, ” an enterprise license as part of the Footprint program, and designed to keep the competition, “Bluezone of [sic] the acct.” ECF No. 186-30.

         In connection with this Product Order, Micro submitted a questionnaire to Express in which Express IT personnel noted that the software purchase was for “10, 000 desktop.” ECF No. 186-54. Additionally, email exchanges between Micro and Express IT personnel reflect contemporaneous discussions about managing the number of users to stay within the terms of the contract. ECF No. 186-55.

         On June 10, 2010, Micro emailed the Rumba software in various zip files for installation. ECF No. 174-20. The record is not clear specifically where this Rumba purchase was installed, if at all. ECF No. 174-18.[4] The email also included an End User License Agreement (EULA) which Express was required to click through before installation of the software. ECF No. 174-5 at 6.

         The EULA specifically identified the licensing arrangement for Rumba and provided several different licensing options. ECF 174-23 at 7. However, the EULA made no reference to the “authorized user” license noted in the Product Order. Id. Rather, the EULA articulated seven license models, two of which appear pertinent to this case: (1) a “workstation license, ” which permitted the licensee to “install and use one copy of the licensed Software on a standalone workstation” and prohibited the installation of the software on a server that allowed use to more than one individual, and (2) a “concurrent user license, ” which permitted the licensee to install and use the license “for use by the maximum number of Concurrent Users . . . for whom Licensee has paid the applicable license fee.” Id. The EULA “concurrent user” license also restricted the total number of users to “the number of Concurrent Users expressly authorized by Licensor in the Product Order.”[5] Id. This contract was in place for three years.

         In 2013, when the contract was up for renewal, internal correspondence between Express IT employees suggested that they understood the 2010 contract to be for 10, 000 workstation licenses as opposed to concurrent user licenses. Express noted that in renewing the contract with Micro, it may “need to change some of the Rumba licenses to include Citrix.” ECF No. 174-29 at 2. Contemporaneous internal documentation also reflects that Express employees understood that the “10, 000 authorized user” license to be for “desktop” installation, which is consistent with Micro's understanding that the term “authorized user” meant the same as “workstation” license. Id. at 9. Additional internal email communication reflects Express' concern that it needed to “limit the access” of Rumba to “users that actually use /need the applications, ” as well as to “track how many people need licensing for these applications.” ECF No. 189-10 at 3. Ultimately, Express noted in September of 2013 that “We are technically out of compliance with our current licensing model of giving everyone or [sic] Level 1 Citrix access for Rumba.” ECF No. 189-11 at 2.

         In 2015, Micro began a “software license verification” audit of Express' software installations. ECF No. 174-34 at 4. During this audit, Express reported to Micro that all 35, 236 users were able to access Rumba software via Citrix, but only 4, 932 of those users had credentials to access the mainframe. ECF No. 174-35 at 2. Micro thereafter informed Express that because it considered a user to be any Express employee who could access the software, and the agreement provided for up to 10, 000 such users, Express far exceeded the number of authorized Rumba deployments. ECF No. 174-44 at 2-3.

         On April 1, 2016, Micro filed suit against Express, asserting claims of copyright infringement (Count I), breach of contract (Count II), and unjust enrichment (Count III). ECF No. 1. Express counterclaimed. ECF Nos. 33, 71. Micro moved to dismiss Counts II to V of Express' Amended Counterclaims. ECF No. 74. At a motions hearing held on November 6, 2017, the Court granted Micro's motion to dismiss Counterclaim Counts II (promissory estoppel) and IV (fraudulent inducement) and denied the motion for Counts III (intentional misrepresentation) and V (negligent misrepresentation). ECF No. 111. Express then withdrew Count III, leaving Count I (breach of the covenant of good faith and fair dealing) and Count V (negligent misrepresentation) as the amended counterclaims. ECF No. 145.

         After the close of discovery, Micro moved for summary judgment on the remaining counterclaims and each of Express' twenty-six affirmative defenses. ECF No. 171. Express filed a cross-motion for summary judgment in its favor as to all claims brought by Micro. ECF No. 185. The Court now turns to these motions.

         II. Standard of Review

         Summary judgment is appropriate when the Court, construing all evidence and drawing all reasonable inferences in the light most favorable to the non-moving party, finds no genuine dispute exists as to any material fact, thereby entitling the movant to judgment as a matter of law. Fed.R.Civ.P. 56(a); see In re Family Dollar FLSA Litig., 637 F.3d 508, 512 (4th Cir. 2011). Summary judgment must be granted “against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “In responding to a proper motion for summary judgment, ” the opposing party “must present evidence of specific facts from which the finder of fact could reasonably find for him or her.” Venugopal v. Shire Labs., 334 F.Supp.2d 835, 840 (D. Md. 2004), aff'd sub nom. Venugopal v. Shire Labs., Inc., 134 Fed.Appx. 627 (4th Cir. 2005) (citing Anderson v. Liberty Lobby, 477 U.S. 242, 252 (1986); Celotex, 477 U.S. at 322-23)). Genuine disputes of material fact are not created “through mere speculation or the building of one inference upon another.” Othentec Ltd. v. Phelan, 526 F.3d 135, 140 (4th Cir. 2008) (quoting Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985)). Where a party's statement of a fact is “blatantly contradicted by the record, so that no reasonable jury could believe it, ” the Court credits the record. Scott v. Harris, 550 U.S. 372, 380 (2007).

         When considering cross-motions for summary judgment, “the court must review each motion separately on its own merits to determine whether either of the parties deserves judgment as a matter of law.” Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (citation and internal punctuation omitted). “[T]he facts relevant to each must be viewed in the light most favorable to the non-movant.” Mellen v. Bunting, 327 F.3d 355, 363 (4th Cir. 2003).

         III. ...


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