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ITyX Solutions AG v. Kodak Alaris, Inc.

United States District Court, D. Massachusetts

June 19, 2019

ITYX SOLUTIONS AG, Plaintiff,
v.
KODAK ALARIS, INC., Defendant; Counterclaim Plaintiff,
v.
ITYX SOLUTIONS AG; ITYX SYSTEMWICKLUNG OHG; ITYX TECHNOLOGY GMBH; SÜLEYMAN ARAYAN; and HEIKO GROFTSCHIK, Counterclaim Defendants.

          MEMORANDUM AND ORDER DENYING MOTION FOR JUDGMENT AS A MATTER OF LAW OR NEW TRIAL AND/OR AMENDMENT TO EQUITABLE CLAIM ORDER AND MARCH 1 JUDGMENT

          ALLISON D. BURROUGHS U.S. DISTRICT JUDGE.

         Plaintiff ITyX Solutions AG (“ITyX Solutions”) and Defendant Kodak Alaris, Inc. (“KAI”) entered into a strategic partnership to develop and market “intelligent document recognition” software products. After the relationship soured and a commercial dispute arose between them, ITyX Solutions filed this lawsuit against Kodak for breach of contract, declaratory judgment, and injunctive relief. [ECF No. 1 (“Complaint”)]. KAI in turn brought counterclaims for breach of contract, breach (and aiding and abetting the breach) of a fiduciary duty, tortious interference with contractual and business relations, and declaratory judgment against ITyX Solutions as well as the related parties ITyX Systemwicklung OHG (“ITyX OHG”), ITyX Technology GMBH (“ITyX Technology”), ITyX Solutions's CEO Süleyman Arayan, and ITyX Solutions's co-founder Heiko Groftschik (collectively with ITyX Solutions, “ITyX”). [ECF No. 122 (“Counterclaims”)]. From November 5 through November 26, 2018, the parties presented their cases to an eleven-member jury, which returned a verdict in favor of ITyX and awarded $7, 466, 045 to ITyX Solutions. [ECF No. 323]. On March 1, 2019, the Court issued findings on the parties' equitable claims and entered a final judgment in the amount of $9, 211, 699.20. [ECF Nos. 348, 350].

         Now pending before the Court is KAI's motion for judgment as a matter of law pursuant to Federal Rule of Civil Procedure 50, a new trial or remittitur pursuant to Rule 59, or to amend the Court's March 1, 2019 equitable claim order pursuant to Rule 52. [ECF No. 366]. For the reasons explained herein, the motion is DENIED.

         I. FACTS AND CONCLUSIONS OF LAW

         KAI argues that the Court should amend its March 1, 2019 findings pursuant to Rule 52(b), which provides, “On a party's motion filed no later than 28 days after the entry of judgment, the court may amend its findings-or make additional findings-and may amend the judgment accordingly. The motion may accompany a motion for a new trial under Rule 59.” Fed.R.Civ.P. 52(b). “Rule 52(b) is intended to reduce the frequency of appellate remands by permitting the correction of errors in the district court[.]” 9C Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure, § 2582 (3d ed. 2019). Rule 52(b) does not provide a party an opportunity to relitigate a point, but rather to “raise questions of substance by seeking reconsideration of material findings of fact or conclusions of law to prevent a manifest injustice or reflect newly discovered evidence.” Id. The rule gives district courts “considerable discretion . . . subject to circumstances developed in the case law.” Feliciano-Hernandez v. Pereira-Castillo, 663 F.3d 527, 536 (1st Cir. 2011). KAI has not demonstrated any error in the Court's March 1, 2019 findings of facts or conclusions of law. The Court therefore denies KAI's motion to amend the March 1 order pursuant to Rule 52(b). For ease of reference, the Court restates its findings of fact and conclusions of law here. See ITyX Sols., AG v. Kodak Alaris Inc., No. 16-cv-10250-ADB, 2019 WL 1005497 (D. Mass. Mar. 1, 2019).

         ITyX is a German software company that created an intelligent document recognition (“IDR”) software suite. IDR software products interpret documents, extract text-based content from them, and organize that content for the user. ITyX Solutions' software suite uses an ITyX Solutions-created platform to carry out IDR processes. In 2011, ITyX Solutions and Eastman Kodak Company (“EKC”) began discussing a potential business relationship and, on January 18, 2012, entered into a contract titled the “Master Agreement, ” which is governed by New York law. The day after executing the Master Agreement, EKC filed for bankruptcy. One and a half years later, in September 2013, KAI stepped into the shoes of EKC as the counterparty to the Master Agreement.[1]

         Pursuant to the Master Agreement, the parties entered into an arrangement whereby ITyX Solutions licensed certain software to KAI, and KAI integrated that software into a Kodak-branded product. The Master Agreement refers to the Kodak-branded product, which was eventually marketed under the name “Info Insight, ” as the “Kodak Product” or the “Kodak IDR Product.” Section 1.2 of the Master Agreement defines the “Kodak Product” as:

the product, product family, and components of products, more particularly described as the Kodak IDR Product, that Kodak intends to distribute to [end users] and will include or incorporate the Licensed Software but only as described in Appendix A Exhibit 1 . . . (but not any Licensed Software described in [Appendix A Exhibit 2]) supplied by [ITyX Solutions] and as developed pursuant to this Agreement.

         The technical and functional features of the “Licensed Software” are described in more detail in Appendix A to the Master Agreement.

         Under Section 3.1 of the Master Agreement, KAI agreed to “solely distribute the Kodak Product” and to “not develop a product functionally equivalent to the Kodak Product” while the Master Agreement was in effect. The Master Agreement also contained exceptions to KAI's exclusivity obligations. In relevant part, under Section 3.2(iii) (the “Exit Provision”), KAI, “in its sole good faith business judgment, ” was permitted to “decide to abandon the IDR business represented by the Kodak Product.” If the Exit Provision was triggered, KAI agreed not to sell a “new Kodak-IDR product” that was not supplied by ITyX Solutions for a period of two years after leaving the IDR business.

         In addition, Section 2.0 of the Master Agreement provided that it had an initial term of five years, which commenced on January 18, 2012, and would “automatically renew on its anniversary date for successive two-year periods . . . thereafter unless otherwise terminated as provided [in the Master Agreement].” Pursuant to Section 4.1 of the Master Agreement, either party was entitled to terminate the Master Agreement for cause “after a material breach by the other Party” by giving written notice to the defaulting Party that “specif[ied] the default in reasonable detail, ” unless “the defaulting Party cure[d] the default within 30 days after receipt of the [default notice] or, if such default [could not] be cured within such time, the defaulting Party [did] not promptly start diligently and continuously in good faith to cure the default.”

         Section 29.0 of the Master Agreement provides that ITyX Solutions “shall act as an independent contractor and nothing herein shall be construed to make [ITyX Solutions] or any of its employees, officers, directors or representatives, the agent employee or servant of Kodak.” ITyX Solutions introduced evidence at trial demonstrating that, by entering into the Master Agreement, the parties did not intend or agree to form a partnership or joint venture.

         Further, under Section 8.1 of the Master Agreement, the parties anticipated that ITyX Solutions would “provide additional services as stated in one or more Statements of Work, ” such as training or “other services in connection with further software development.” Between March 20, 2012 and December 17, 2014, the parties entered into fourteen Statements of Work. On August 20, 2015, ITyX Solutions and KAI entered into the PS Transfer Pricing Agreement (“PS Agreement”), with an effective date of June 1, 2015. ITyX Solutions and KAI agreed to an amendment to the PS Agreement (“PS Amendment, ” collectively with the PS Agreement, the “PS Agreements”), which was signed by KAI on September 11, 2015 and by ITyX Solutions on October 9, 2015. The PS Agreements further defined the relationship between the parties, establishing that KAI would focus solely on marketing and sales, and ITyX Solutions would provide the technology to deliver and support the product.

         In June 2014, KAI's parent company, Kodak Alaris Holdings (“KAH”) entered into an Investment Framework Agreement (“IFA”) with ITyX OHG, ITyX Technology, and Mr. Arayan, the ITyX Solutions CEO, to acquire 25.1% of ITyX Technology. Neither ITyX Solutions nor KAI is a party to the IFA. The IFA provided that, in exchange for acquiring 25.1% of ITyX Technology, KAH would make a series of direct investments with ITyX Technology totaling €12.6 million over the course of sixteen months. In the event that KAH defaulted on its payment obligations under the IFA for more than thirty days, ITyX OHG and ITyX Technology could exercise a ...


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