Actuate Canada Corporation v. Symcor Services Inc. is a 2016 decision of the Court of Appeal for Ontario in a dispute between the owners of the Xenos d2e document software and their licensee, Symcor, Canada’s largest financial processing outsourcing provider. The vendor alleged that Symcor had exceeded its licence by running the software on more servers than licensed, on operating systems other than IBM’s AIX, and with databases other than IBM’s Content Manager OnDemand (CMOD). The courts held that the licence was enterprise-wide and contained no per-server limit, but that the AIX and CMOD restrictions were part of the licence, so that use outside them was a breach of contract and copyright infringement. The Court of Appeal sent Symcor’s estoppel defence on the AIX restriction to trial together with the limitation defence and damages.[1]
The software was developed by Xenos. Xenos IP Partnership’s copyright and its interest in the action were transferred to Actuate Corporation, and the Canadian sub-licensing company became Actuate Canada Corporation through amalgamations in 2010.[1] OpenText completed its acquisition of Actuate on 16 January 2015.[2]
Background
The d2e Software converts bills and statements from print formats into electronic formats for storage and online retrieval. In 2001 IBM marketed it together with its CMOD database software to large customers such as Symcor.[1]
On 29 June 2001 Symcor and Xenos signed a Licence, Services and Support Agreement (LSSA), together with Product Schedule No. 1 for two non-production licences. Product Schedule No. 2, signed in September 2001, added one production licence. The key terms were:[1]
| Term | Wording described by the court |
|---|---|
| Grant (s 2.1) | A non-exclusive, non-transferable, perpetual licence to use the Software at the “Location(s)”, extending to wholly owned subsidiaries |
| Locations | Any site the customer owns, occupies or controls |
| Permitted use (s 2.3) | To process data of “Bureau Clients” and for internal operations |
| Schedule A | Use “on an enterprise wide basis by Customer without restriction on the number of copies but only in association with” CMOD or an IBM successor product |
| Product Schedules | Each component listed with a quantity and a “Hardware Platform” column reading “AIX” |
| Product Schedule No. 2 | Use in Symcor’s existing non-CMOD “file server environment” for nine months |
In 2003 Symcor licensed a Print Generator component, but there was no evidence that it paid the C$224,000 quoted to remove the CMOD restriction. In 2007 Symcor asked about its licences. Xenos confirmed one production and two non-production licences, all “on AIX”, and quoted C$167,200 for a production licence on Linux or Solaris, which Symcor did not buy. In 2011 Symcor asked again whether its use on Windows and without CMOD was covered. Xenos investigated, concluded that Symcor was using the software in production on more than one server, on non-AIX servers and with another database, and sued in February 2012.[1]
The dispute
Symcor admitted using the software on multiple servers and on non-AIX operating systems, and acknowledged using it with non-CMOD databases. It argued that the LSSA did not limit the number of servers or the operating system, that the CMOD restriction had been removed in 2003, and that Xenos was estopped because its employees had supported the software in all of Symcor’s applications from 2004 to 2011. It also pleaded limitation for activity before 25 January 2010.[1]
On Xenos’s motion for summary judgment on liability, the motion judge held that there was no server restriction, but that use outside AIX and CMOD breached the LSSA and infringed copyright. He rejected the estoppel defence, left limitation to the damages trial, and fixed Xenos’s costs at C$280,000, with payment deferred until the outcome of the damages trial because of Symcor’s undisclosed settlement offer. Xenos appealed on the server issue and costs. Symcor cross-appealed on the AIX restriction and estoppel, but not on the CMOD finding.[1]
Decision or outcome
No per-server limit
The Court of Appeal upheld the finding that the licences were not limited to one server each. The LSSA allowed use at any customer location, for any entity Symcor served, and “on an enterprise wide basis … without restriction on the number of copies”. None of the schedules mentioned servers, except the temporary permission for the “file server environment”. Xenos’s main argument, that buying two test licences only made sense if licences were per server, was “too thin a reed” in the motion judge’s words, because there was no evidence of how servers were used or why two test licences were bought. The fact that some of IBM’s products in the related IBM agreement were licensed per server suggested, if anything, that a per-server basis would have been stated expressly.[1]
The AIX restriction
The court rejected Symcor’s argument that “AIX” in the “Hardware Platform” column merely described what the software ran on. Under the LSSA, the Product Schedules define the software to be licensed, so the platform entry limited the scope of use. Both sides’ witnesses agreed that the software was platform-dependent and that different versions existed for different operating systems. An admitted error in the schedules, which listed a Windows desktop tool as AIX, did not change this. A clause charging extra support fees for a “Disabling Event”, including use other than with the specified hardware, supported the restriction rather than authorising other use. The 2007 confirmation that the licences were “on AIX” was confirmatory evidence.[1]
Estoppel sent to trial
The motion judge had rejected estoppel because only technical support staff knew of the Windows use, and they had no knowledge of licence terms or authority over licensing. The Court of Appeal found that he had overlooked evidence that account managers, who according to Xenos’s own witnesses would have known Symcor’s licensed usage, were told in 2005 and 2007 that Symcor used the software on Windows. A non-waiver clause is a factor but not necessarily a bar to estoppel. The estoppel defence on the AIX restriction was therefore sent to trial with the limitation defence and damages, and the costs order was set aside and remitted.[1]
The Court of Appeal decision is the latest stage found in the public record reviewed. No later judgment on estoppel, limitation or damages was found in the sources reviewed.
Significance for software licensing and SAM practice
- Metrics must be written down. A vendor could not turn a count of licences into a per-server metric when the agreement granted enterprise-wide use and never mentioned servers.[1]
- Order schedules carry restrictions. Columns in an order form, such as platform, can define the licensed software and so limit its use.[1]
- Platform migrations are licence events. Moving from AIX to Windows was outside the licence even though the software was the same product.[1]
- Support records cut both ways. Evidence that the vendor’s account managers knew of the Windows use was enough to send estoppel to trial, while the customer’s own 2007 inquiry produced a written confirmation of the AIX limit.[1]
Current OpenText licence terms are described in OpenText licensing.
Lessons learned
- A licence count does not imply a per-server metric. The court held that “one production licence” did not limit use to one server under an enterprise-wide grant.[1]
- Platform and database entries can be restrictions. The “Hardware Platform: AIX” entry and the CMOD condition limited the licence, and use outside them infringed copyright.[1]
- Vendor knowledge of out-of-scope use may support estoppel. The court treated account managers’ knowledge as material, despite a non-waiver clause.[1]
- Entitlement confirmations become evidence. The vendor’s 2007 confirmation that the licences were “on AIX” was used to confirm the reading of the contract.[1]