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E-Terra, LLC v. SARS Corp.

February 2, 2010

E-TERRA, LLC, AN ALASKA LIMITED LIABILITY COMPANY, PLAINTIFF AND COUNTER-DEFENDANT,
v.
SARS CORPORATION, A NEVADA CORPORATION, AND SECURE ASSET REPORTING SERVICES, INC., A NEVADA CORPORATION, DEFENDANTS AND COUNTER-CLAIMANTS.



The opinion of the court was delivered by: John W. Sedwick United States District Judge

ORDER AND OPINION [Re: Motions filed at dockets 59, 61, and 64]

I. MOTIONS PRESENTED

At docket 59, defendants and counter-claimants SARS Corporation ("SARS") and Secure Asset Reporting Service, Inc. ("Secure Nevada") (jointly "Defendants") move for an order precluding plaintiff E-TERRA, LLC ("Plaintiff") from introducing "testimony and evidence regarding Defendants' alleged modification of Plaintiff's software."*fn1 Plaintiff's response is at docket 68, and Defendants' reply is at docket 72.

Defendants' second motion in limine is found at docket 61. It asks the court to "preclude testimony and evidence regarding Defendants' alleged misappropriation of the 'source code' of Plaintiff's software."*fn2 Plaintiff responds at docket 68 with an errata at docket 69. Defendants reply at docket 74.

In a third motion in limine at docket 64, Defendants ask the court "to preclude evidence regarding Defendants' alleged possession and control of the Tracpoint software system and determine for the purposes of this litigation that as of June 11, 2009, possession, custody and control of Tracpoint software vested in The Clarence Group LLC."*fn3 Plaintiff opposes the motion at docket 73, and Defendants reply at docket 79.

All three motions are ripe for decision. Oral argument was not requested on any of them. Oral argument would not assist the court.

II. BACKGROUND

Plaintiff and an Alaska corporation named Secure Asset Reporting Service, Inc. ("Secure Alaska") entered into a software licensing agreement with an effective date in November 2001 ("Agreement") which, absent a breach, was of perpetual duration.*fn4 It appears that as a result of a corporate reorganization in August of 2007, SARS was assigned or succeeded to the rights and obligations of Secure Alaska as the licensee in the Agreement. It appears to the court that Secure Nevada is not a party, assignee or successor to a party to the Agreement.

To avoid confusion when discussing the rights and obligations established in the Agreement, the court will refer to the party which has the rights and obligations of the licensee in the Agreement as "Licensee." As consideration for the license, Licensee agreed to pay Plaintiff the sum of $200,000.*fn5 In the Agreement, Plaintiff granted Licensee an exclusive license to use certain software described in Exhibit A to the Agreement ("Software") in specific limited applications. The Agreement contemplated that Software would include all corrections, updates, enhancements, and new releases which might be developed by Plaintiff and delivered to Licensee, but expressly excluded the code underlying the Software: "The Software does not include source code in any form, and Licensee acknowledges that, except as may be expressly provided herein, Licensee has no right to receive any source code or unencrypted macro code for the Software."*fn6

The Agreement authorized Licensee to install the Software in object code form on certain computers and also authorized Licensee to keep one copy of the Software for back up and archival purposes.*fn7 However, the Agreement prohibited Licensee from modifying or creating a derivative work from the Software, transferring the Software to any third party, and attempting to discover or recreate the Proprietary Objects or source code of the Software.*fn8

The Agreement required Plaintiff to provide such updates, modifications and maintenance for the Software as Licensee might from time to time request*fn9 on the terms and at the rates charged to Plaintiff's third-party customers.*fn10 In the same section, § 2.1, which obligates Plaintiff to provide such Software support, the following provision appears:*fn11

The license granted hereunder shall automatically expand to grant Licensee the additional rights to modify, translate, reverse engineer, decompile, disassemble, create derivative works based on, and copy the Software without additional charge to Licensee if:

(I) E-Terra fails to provide such Maintenance Services on the terms and conditions as set forth above;

(ii) E-Terra is unable, despite E-Terra's commercially reasonable efforts, to provide the updates, modules, modifications, additions, or other services requested by Licensee, and such ...


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