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Micro Focus, Inc. v. Genesys Software Systems, Inc.

United States District Court, D. Massachusetts

April 3, 2015

MICRO FOCUS (US), INC. and MICRO FOCUS IP DEVELOPMENT LIMITED, Plaintiffs,
v.
GENESYS SOFTWARE SYSTEMS, INC., Defendant.

MEMORANDUM & ORDER

NATHANIEL M. GORTON, District Judge.

This case arises from an alleged breach of a software license agreement by defendant Genesys Software Systems, Inc. ("Genesys"), a company that develops payroll and human resources management software. Plaintiffs Micro Focus (US), Inc. and Micro Focus IP Development Limited (jointly "Micro Focus") allege that Genesys breached the End User License Agreement ("the EULA") governing the use of their proprietary software program Net Express.

Pending before the Court is defendant's motion to dismiss. For the reasons that follow, the motion will be denied.

I. Background

A. The End User License Agreement

Micro Focus is the author and owner of Net Express, a software program consisting of a collection of tools for editing, compiling and debugging computer applications written in the programming language COBOL. According to the plaintiffs, Net Express translates source code written in COBOL into an "executable" stand-alone software application embedded with Micro Focus software code.

Users of Net Express must purchase both a "development license" to create and develop an application as well as a "deployment license" to permit the deployment of the Net Express software that has been incorporated into an application. The "named user license" is a type of development license that permits one person specifically identified by the licensee to use Net Express.

As part of the installation process, all licensees of Net Express must accept the terms of the EULA which prohibits thirdparty use of the software program. A licensee agrees to use Net Express "solely for its own internal use and benefit, " subject to certain narrow exceptions. Specifically, a licensee agrees that it will not 1) use the software for outsourcing or hosting other data processing services to third parties, 2) use or permit any third party to use a software application program created with Net Express without a valid deployment license or 3) assign, sell or otherwise transfer the software to any third party.

The EULA also requires a licensee to purchase support services for all licensed copies of Net Express if such service is purchased for any copy of the program. Accordingly, either all licenses of Net Express must be covered by Micro Focus support services or none of them is permitted to be covered.

B. Alleged Breach by Genesys

Between July, 2000 and March, 2011, Genesys acquired licenses from Micro Focus for the use of Net Express to run its software application "Genesys Payroll." For example, in January, 2003, defendant purchased a "named user license" for version 3.1.00 SP1 of Net Express. Although defendant has had more than one Micro Focus development license installed and in use, it maintained only one of its licenses on support services. Genesys has also purchased a deployment license but that license is not installed or in use and support services for that license has not been renewed since April, 2001.

In March, 2011, Genesys updated and installed a single user license for Net Express version 5.1.04. As part of the installation process, defendant accepted the terms of the EULA which governed that version of Net Express as well as all prior versions.

Plaintiffs assert that Genesys violated the EULA in the following ways: 1) by hosting Genesys Payroll on one or more servers that defendant makes accessible to its customers over the internet, thereby allowing third parties to access the application without installing the software on their own computers or paying Micro Focus license fees associated with such installation; 2) by impermissibly deploying Net Express through "user-acceptance testing" whereby defendant tests the performance of Genesys Payroll in an environment that simulates that of the customer; and 3) by maintaining support services for only one of its Net Express ...


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