TIBCO Software Inc. v. Bank of America Corporation was a lawsuit filed in June 2014 in the United States District Court for the Northern District of California, in which TIBCO accused Bank of America Corporation, Bank of America, National Association and Merrill Lynch, Pierce, Fenner & Smith of copyright infringement and breach of contract over TIBCO integration software used after a three-year “Enterprise Term” ended in February 2013.[1] The defendants moved to compel arbitration. On 1 October 2014 Judge James Donato compelled arbitration and dismissed the case, and TIBCO’s appeal to the Ninth Circuit was dismissed with prejudice by stipulation in March 2015.[2][3][4]
Background
The facts below are TIBCO’s allegations in its complaint; no court decided them.
TIBCO and Bank of America, National Association, on behalf of itself and its affiliates, signed a Master Software License and Maintenance Agreement on or about 28 May 2004, later renamed the Master Software License, Customization and Services Agreement. A Second Addendum in October 2009 terminated Merrill Lynch’s pre-acquisition agreements and brought Merrill Lynch under the master agreement. A Third Addendum, signed on or about 27 February 2010, licensed various TIBCO products to the defendants for a three-year Enterprise Term, subject to restrictions on deployment and copying. The specific terms were confidential.[1]
During the term the defendants downloaded TIBCO software from TIBCO’s portal, including TIBCO Hawk, BusinessEvents Enterprise Edition, Rendezvous, Enterprise Message Service, ActiveSpaces Enterprise Edition, ActiveMatrix Service Bus and Service Grid, and adapters for SAP, PeopleSoft, Siebel, SWIFT, WebSphere MQ and other systems. The Enterprise Term expired on 26 February 2013.[1]
The master agreement required the defendants, within 60 days after the end of the Enterprise Term, to give TIBCO written notice of the Number of Units deployed in Production and Non-Production use. TIBCO described the purpose of this “Deployment Report” as giving it “an accurate snapshot” of the licensed copies the defendants had.[1]
The dispute
TIBCO alleged that:[1]
- Late and overstated deployment report. The Deployment Report was delivered on 15 October 2013, which TIBCO called almost six months late and after the first rollout of Merrill Lynch’s “Merrill Lynch One” integration project in September 2013, more than six months after the term ended. TIBCO alleged the report overstated the units in use at the end of the term so that the defendants could claim rights to copies for that project.
- Stockpiling and idle copies. The defendants declared copies on their servers as Production or Non-Production to stockpile them for future projects, and deployed bundled images that were not used to support the business (“TIBCO Idle Software”). TIBCO said the only permitted copies were for Production or Non-Production use.
- Pilots and potential users. The report declared Production licences for software deployed only in a pilot before the term expired, and for all potential users of some products even though not all of them used it.
- Server upgrades. Hardware upgrades that increased processing capacity for TIBCO software, and migration to servers with enhanced core capacity, made unauthorized copies and breached the master agreement.
- Copying after the term. New applications that interoperated with the TIBCO software created further unlicensed copies after the term.
TIBCO said it held registrations or had filed applications for the copyrights in the downloaded products, with effective dates between 6 and 16 June 2014, shortly before filing. It pleaded copyright infringement, breach of contract and specific performance, seeking a jury trial.[1]
Decision or outcome
The defendants moved to compel arbitration and to dismiss or stay the case, and the motion was heard by Judge Donato on 1 October 2014.[4] TIBCO’s notice of appeal describes the result as “the October 1, 2014 order compelling arbitration and dismissing the case”.[2] TIBCO then asked the court to correct the minute entry. In a text order on 7 October 2014 the court refused, stating that it “did not make any arbitrability rulings”, that any arguments about arbitrability had to be presented to the arbitrator, and that it would be “non-sensical” to limit the issues referred to the arbitrator to arbitrability alone.[4]
TIBCO appealed to the Ninth Circuit (No. 14-17172). On 6 March 2015 the Ninth Circuit dismissed the appeal with prejudice under the parties’ stipulation, with costs allocated under its terms.[3] No arbitral award or settlement terms appear in the court records reviewed, so the merits of TIBCO’s claims were never decided in court.
Significance for software licensing and SAM practice
- Enterprise terms end in a count. As in TIBCO v. GAIN Capital, the dispute turned on what the customer had deployed when an enterprise term ended, and on what TIBCO said could be counted: production and non-production use, but not idle, stockpiled or pilot copies.[1]
- Capacity as well as copies. TIBCO pleaded that moving the software to servers with more cores breached the agreement and created unauthorized copies, a capacity theory that appears in many processor and core licensing disputes.[1]
- Forum. The arbitration clause in the master agreement took the whole dispute, including the copyright claim and the question of arbitrability, out of court.[2][4]
Lessons learned
- Under an enterprise term, the end-of-term deployment report is the document both sides will fight over. TIBCO’s case was built on the timing and content of the defendants’ report.[1] File it on time, base it on discovery data, and keep the evidence behind each count.
- Decide before the term ends what counts as production, non-production or idle, because the vendor may say idle copies were never licensed. TIBCO alleged that idle, pilot and stockpiled copies were outside the licence.[1] Agree the definitions in writing if the contract is unclear.
- Hardware upgrades that add capacity can be alleged to create unlicensed copies even when the software count is unchanged. TIBCO pleaded the server upgrades as both breach and infringement.[1] Check the licence metric before refreshing hardware.
- An arbitration clause in the master agreement can move a copyright claim out of court, including the question of what is arbitrable. The court compelled arbitration and left arbitrability to the arbitrator.[2][4] Know the dispute resolution clause before an audit dispute escalates.