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Micro Focus U.S. Inc. v. Insurance Services Office Inc.

United States District Court, D. Delaware

February 20, 2018

MICRO FOCUS U.S. INC., et al, Plaintiffs,
v.
INSURANCE SERVICES OFFICE INC., Defendant.

          MEMORANDUM ORDER

         Presently before the Court is Defendant's motion to strike Plaintiffs' Supplemental Response to Interrogatory No. 2. (D.I. 143). The matter has been fully briefed. (D.I. 144, 146, 152).[1] The Court heard oral argument on January 31, 2018. (D.I. 159). For the reasons that follow, Defendant's motion (D.I. 143) is denied.

         I. BACKGROUND

         On March 20, 2015, Plaintiffs filed this action against Defendant alleging breach of contract and copyright infringement. (D.I. 1). With the Court's permission, Plaintiffs filed a First Amended Complaint ("FAC") on October 9, 2015. (D.I. 24).

         The action arises from Defendant's alleged breach of the End User License Agreement ("EULA") governing Defendant's use of Plaintiffs' software products. (Id. ¶ 7). The FAC alleges that Defendant entered into a EULA defining the terms under which Defendant could use Plaintiffs' Net Express software in its Company Edit Packages ("CEP") software and ClaimSearch Israel database. (See Id. ¶¶ 30, 47, 55-56). It further alleges that Defendant breached the EULA by failing to purchase licenses to permit Defendant's customers to use Plaintiffs' software, which is "embedded in" Defendant's CEP and ClaimSearch Israel products. (M¶¶49, 55).

         Plaintiffs attached to the FAC a copy of the EULA, which they alleged governs the parties' relationship. (Id., Exh. C).[2] That EULA is designated as LIC-GEN-MF014 (the "MF14 EULA"). (Id.).

         Plaintiffs subsequently changed their contention in regard to which EULA governs. In particular, Plaintiffs' Rule 30(b)(6) witness testified on January 5, 2017 that LIC-GEN-MF001 (the "MF1 EULA") governs as to Defendant's CEP product. (D.I. 146 at 13; D.I. 144 at 9). Further, after the close of fact discovery, Plaintiffs discovered errors in their internal records, leading them to change their contention about which version of MF14 governs as to Defendant's ClaimSearch Israel database. (D.I. 146 at 14; see also D.I. 117).

         On April 25, 2017, Plaintiffs moved for leave to amend the FAC. (D.I. 93).[3] In their proposed Second Amended Complaint ("SAC"), Plaintiffs allege the G1 EULA governs Defendant's use of Plaintiffs' software in its CEP product. (D.I. 94, Exh. 1 at ¶ 36). The proposed SAC maintains that the MF14 EULA governs as to Defendant's ClaimSearch Israel product. (Id. at ¶ 41). Then, on June 13, 2017, Plaintiffs provided supplemental responses to Defendant's interrogatories, in which they disclosed that the MF13 EULA governs as to ClaimSearch Israel. (D.I. 146 at 15; D.I. 144 at 10). On June 27, 2017, 1 stayed the case and directed Defendant to file a motion to strike. Defendant now seeks to exclude the G1 and MF13 EULAs from the case. (See generally D.I. 144).

         II. LEGAL STANDARD

         Federal Rule of Civil Procedure 37(c)(1) provides that "[i]f a party fails to provide information ... as required by Rule 26(a) or (e), the party is not allowed to use that information . . . to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or harmless." To determine whether a failure to disclose is harmless, courts in the Third Circuit consider the so-called "Pennypack" factors, which include: (1) the prejudice or surprise to the party against whom the evidence is offered; (2) the possibility of curing the prejudice; (3) the potential disruption of an orderly and efficient trial; (4) the presence of bad faith or willfulness in failing to disclose the evidence; and (5) the importance of the information withheld. Konstantopoulos v. Westvaco Corp., 112 F.3d 710, 719 (3d Cir. 1997) (citing Meyers v. Pennypack Woods Home Ownership Ass 'n, 559 F.2d 894, 904-05 (3d Cir. 1977)).

         "[T]he exclusion of critical evidence is an extreme sanction, not normally to be imposed absent a showing of willful deception or flagrant disregard of a court order by the proponent of the evidence." Id. The determination of whether to exclude evidence is within the discretion of the Court. Ateliers de la Haute-Garonne v. Broetje Automation-USA Inc., 817 F.Supp.2d 394, 397 (D.Del. 2011).

         III. DISCUSSION

         In its motion, Defendant makes three primary arguments. First, Defendant argues that Plaintiffs' attempt to change the EULA governing the parties' relationship should be treated as a request to amend the complaint. (D.I. 144 at 14). Relatedly, it asserts Plaintiffs' attempt to amend its complaint is improper under Federal Rules of Civil Procedure 15 and 16. (Id. at 14, 18). Second, Defendant argues the Pennypack factors support excluding the G1 and MF13 EULAs from the case. (Id. at 26). Third, it argues Plaintiffs have spoliated evidence, which further supports excluding the EULAs. (Id. at 30).

         A. Amending the Complaint

         As to Defendant's first argument, I do not agree that Plaintiffs must amend their complaint. As an initial matter, Plaintiffs may not raise new legal claims, without amending their complaint, once fact discovery has begun. See, e.g., Cloaninger ex rel. Estate of Cloaninger v. McDevitt,555 F.3d 324, 336 (4th Cir. 2009). Here, however, I do not think Plaintiffs have raised new claims by introducing new EULAs because there are no substantial differences between the EULAs with respect to Plaintiffs' breach of contract theory. In particular, no material differences exist between the relevant license provisions and the provisions related to "restrictions on use, copying, deployment, and third-party access" in the MF14 and G1 EULAs. (See D.I. 146 at 20-21). Thus, Plaintiffs' breach of contract theory as to Defendant's use of Plaintiffs' software in its CEP product has not changed. Similarly, there are no material differences between the MF14 version 1, MF14 version 2, and MF13 EULAs with respect to the provisions relevant to Plaintiffs' breach of contract theory as to ...


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