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NExTT Solutions, LLC v. XOS Techs., Inc.

United States District Court, D. Massachusetts

July 9, 2015

NExTT SOLUTIONS, LLC, Plaintiff,
v.
XOS TECHNOLOGIES, INC. d/b/a XOS DIGITAL, Defendant

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[Copyrighted Material Omitted]

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For NExTT SOLUTIONS, LLC, Plaintiff: Daniel W. Tarpey, Kevin T. Mocogni, LEAD ATTORNEYS, PRO HAC VICE, Tarpey Wix LLC, Chicago, IL; David G. Wix, PRO HAC VICE, Tarpey Wix LLC, Chicago, IL; Timothy M. Pomarole, Peabody & Arnold LLP, Boston, MA.

For XOS Technologies, Inc., doing business as XOS Digital, Defendant: David E. Lurie, LEAD ATTORNEY, Karen E. Friedman, Lurie, Lent & Friedman, LLP, Boston, MA.

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MEMORANDUM & ORDER

Nathaniel M. Gorton, United States District Judge.

This breach of contract action is brought by plaintiff NExTT Solutions, LLC (" NExTT" ) against defendant XOS Technologies, Inc. d/b/a XOS Digital (" XOS" ). In 2009, NExTT entered into a comprehensive licensing agreement with XOS's predecessor-in-interest, StratBridge, LLC (" StratBridge" ), whereby it granted StratBridge an exclusive license to use, market and sell its proprietary software for player scouting to teams in the National Football League (" NFL" ) in exchange for royalties. NExTT alleges that both StratBridge and XOS subsequently breached the agreement and, to the detriment of NExTT, XOS persists in withholding royalties owed.

Now pending before the Court is defendant's motion to dismiss all counts of the complaint. For the reasons that follow, the motion will be allowed, in part, and denied, in part.

I. Background

A. Parties

NExTT is an Indiana limited liability company with its principal place of business in South Bend, Indiana.[1] XOS is a Delaware corporation with its corporate headquarters in Wilmington, Massachusetts and Orlando, Florida. Both parties offer a variety of sports software to professional and collegiate leagues and organizations.

B. 2009 License Agreement between NExTT and Stratbridge

In 2009, NExTT's flagship product was a comprehensive software program sold to NFL teams to create both scouting reports on future opponents and to evaluate college players in anticipation of the annual NFL Draft (" the NFL Scouting Program" ). NExTT was approached by Stratbridge, the predecessor-in-interest of XOS, about obtaining an exclusive license from NExTT on its NFL Scouting Program. By that time, NExTT had licensing agreements for that program in place with eight NFL teams and was in the final stages of negotiating a license with a ninth team. Stratbridge, on the other hand, had

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only limited contracts with various NFL teams for its ticketing software services. Thus, according to NExTT, Stratbridge saw its NFL Scouting Program as an attractive business opportunity for expanding Stratbridge's connections within the lucrative NFL market.

In pitching its own experience, technological capabilities and sales and support staff to NExTT, Stratbridge purportedly represented that it would be able to convince between one and six new NFL teams per year to adopt the NFL Scouting Program over the next five years. Stratbridge also represented that the projected total revenue stream during that five-year time period would be between $5.9 million and $8.4 million.

On the basis of such representations, which NExTT now contends Stratbridge knew were false, NExTT agreed to enter into a multi-faceted license agreement for the NFL Scouting Program. In May, 2009, the parties executed the agreement, titled " Technology License and Assignment Agreement" (" the License Agreement" ).

The License Agreement granted Stratbridge the exclusive right to use the NFL Scouting Program, and all of its accompanying technology and intellectual property, for the purpose of developing, marketing and selling its " Royalty Bearing Products" (" RBPs" ). RBPs were defined as " any software product that incorporates, builds upon or extends" the NFL Scouting Program. In exchange for that exclusive license, Stratbridge agreed to remit bi-monthly to NExTT 18.5% of all product revenues (" the Revenue Share" ) it received for RBPs for a five-year period.[2]

Stratbridge committed to use " commercially reasonable efforts" to pursue agreements with NFL teams for RBPs for the first two years after May 29, 2009, i.e., the effective date of the License Agreement. Further, NExTT agreed to provide ongoing services through April, 2010 to ensure a smooth transition for both Stratbridge and the NFL teams under preexisting contracts. NExTT also assigned to Stratbridge all of its then current license agreements for the NFL Scouting Program.

Of importance to NExTT, Section 7(d) of the License Agreement established a " Minimum Revenue Share" . Regardless of the success of Stratbridge's efforts to increase the licensing of the NFL Scouting Program throughout the NFL, the parties agreed that

NExTT shall be entitled to receive a minimum amount of $2,000,000 in aggregate Revenue Share payments (the " Minimum Revenue Share" ) as compensation [for the exclusive license and ongoing assistance and training to Stratbridge].

If the Minimum Revenue Share was not received by NExTT by the end of the original five-year license period, the royalty term was to be automatically extended for an additional three-year period. Thus, the License Agreement called for a maximum term of eight years if the Minimum Revenue Share was not paid to NExTT before May 29, 2014. Moreover, Stratbridge had an incentive to ensure that the Minimum Revenue Share was remitted to NExTT within the original five-year term because, if it failed to do so, NExTT was entitled not only to the $2 million minimum but also to any additional Revenue Share above and beyond that amount that was generated from years five through eight.

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NExTT agreed that if it received at least the Minimum Revenue Share, it would assign its rights to the NFL Scouting Program and accompanying technology and intellectual property to Stratbridge permanently.

C. Contractual Breakdown

NExTT contends that while Stratbridge made some Revenue Share payments, it failed to do so in a timely manner or in the full amount owed. NExTT repeatedly communicated its disapproval of Stratbridge's performance to no avail.

In June, 2012, XOS acquired StratBridge's sports software and data management division in an Asset Purchase Agreement. As part of that agreement, XOS expressly assumed all of the obligations owed by Stratbridge to NExTT under the License Agreement and began utilizing the ...


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