GRANTED IN PART:  December 18, 2020
CBCA 5866
IMMIXTECHNOLOGY, INC. ON BEHALF OF SOFTWARE 
AG GOVERNMENT SOLUTIONS, INC.,
Appellant,
 
v.
DEPARTMENT OF THE INTERIOR,
Respondent.
Tenley A. Carp and Sara M. Lord of Arnall Golden Gregory, LLP, Washington,
DC, counsel for Appellant.
Murphy H. Peterson, Jr., Office of the Solicitor, Department of the Interior,
Herndon, VA; and Sam Q. Le, Office of General Counsel, Small Business
Administration, Washington, DC, counsel for Respondent.
Before Board Judges BEARDSLEY, HYATT, and ZISCHKAU.  
ZISCHKAU, Board Judge.
immixTechnology, Inc. (Immix), appellant, alleges that the Small Business
Administration (SBA) breached various software licensing terms in a contract
modification issued by the Department of the Interior (DOI), respondent, under a General
Services Administration (GSA) Federal Supply Schedule (FSS) contract, entitling
appellant to a damages award of approximately $14 million.  The DOI contracting officer
issued a final decision denying the claim.  Immix, on behalf of Software AG, the firm that
developed the software at issue here, has appealed the claim to the Board.  We conclude
that Immix is entitled to $1,024,184 in compensation resulting from the overdeployment
of Software AG’s webMethods software beyond the contract terms.


CBCA 5866 2
Background
This dispute concerns the terms of the January 28, 2014 contract modification GS-
35F-0265X (“Mod 1”) of a March 26, 2013 contract.  Mod 1 was for the purchase of new
licenses for webMethods software having virtualization capabilities to be used in
accordance with the SBA’s infrastructure improvement plan, called the “hardware
refresh.”  The SBA has an extended history of using prior versions of the webMethods
software under licenses purchased by SBA in 2003 and 2006.  One of the key issues in
the appeal is whether Mod 1 provided for licensing of the webMethods software
according to the number of server central processing units (CPUs) or by the number of
server processor cores. 
On April 1, 2003, Systems Research and Applications Corporation (“SRA”), a
separate contractor for the SBA, purchased directly from webMethods, Inc., on behalf of
the SBA, two perpetual licenses for “webMethods Integration Platform CPUs” for use in
the SBA’s production environment, and one license for its use in the development
environment.  A CPU, also called processor, is the component of a computer system that
performs the basic operations (such as processing data) of the system, that exchanges data
with the system’s memory or peripherals, and that manages the system’s other
components.  The contract contained an additional line item for the purchase of software
support.  Later that year, on September 16, 2003, webMethods entered into a Government
Reseller Agreement with Immix, making Immix a non-exclusive reseller of webMethods
software to government entities.  SRA assigned the 2003 webMethods software licenses
to the SBA on August 31, 2004.  
In 2006, the SBA issued a purchase order amending the 2003 agreement that
purchased an additional ten webMethods licenses for the production environment,
bringing the total number of licensed production platforms to twelve.  The SBA also
purchased an equivalent amount of licenses for use in three other software environments: 
development, testing/staging, and backup/disaster recovery.  The line item description for
the ten licensed CPUs states: “SOFTWARE, WEBMETHODS, INTEGRATION
PLATFORM (10 CPU).”  The licenses were priced at $85,390.43 each, and the total
contract price was $2,384,614.  The 2006 purchases also included line items for software
maintenance and support–not broken down by quantity–totaling $865,688.  Software AG
acquired webMethods in 2007.  From 2008 through 2010, SBA continued to procure from
Software AG annual maintenance and software support for the webMethods software.
In March 2011, Immix and the General Services Administration (GSA) entered
into a schedule contract, which included pricing for webMethods software licenses and
software support services.  The SBA ordered $452,696.80 in annual software support
services for its webMethods software directly from Software AG on April 30, 2012, and

CBCA 5866 3
did not use the FSS contract.  The support services were procured for the period May 1,
2012 through April 30, 2013.  No new licenses were purchased in 2012.
On March 26, 2013, DOI purchased from Immix, this time using the FSS contract,
the annual software support services needed by SBA for its webMethods products for a
base year from May 1, 2013, through April 30, 2014, and four option years.  Pricing
ranged from $475,000 in the base year, to $526,939.55 in option year 4.  Support services
are defined in the contract to include telephone, email, and web-based support, and
software maintenance and new version updates.
The DOI contract included line items for the software support across the four 
environments:  production [part number: PID], development [EPD-PID], testing/staging
[EPT-PID], and backup/disaster recovery [EPD-PID].  The contract also included line
items for additional support, adapters, and training, each with their own part numbers. 
While some of the line items referenced the part numbers of the underlying GSA schedule
contract, other line items were open market and did not correspond with items on the
schedule contract.  At the time of the 2013 purchase, SBA ran the webMethods software
on Oracle Sun Fire servers, all of which employed Ultra SPARC IIIi single processors. 
The software under the existing licenses was licensed per-processor, as the preceding
contracts were, because the existing SBA servers contained single processors.
In late 2012 and early 2013, the SBA began reviewing its technical hardware
infrastructure.  Expected upgrades to the infrastructure included changes from the current
single processors running webMethods to more up-to-date servers with multi-core
processors.  SBA reviewed its webMethods licensing in anticipation of the hardware
refresh and obtained input from Software AG as part of its licensing review.  SBA noted
that the current version of the webMethods software would “[come] to an end of
sustained support” on December 31, 2013, and that the base year of the webMethods
support services contract would end on April 30, 2014.  Additionally, the existing
webMethods software did not contain important new functionality such as
“virtualization,” which includes the ability for one server to run on multiple operating
systems on a single device.  The webMethods software version being used by SBA was
also not supported on the new servers that would be installed in its hardware upgrade.
In the latter half of 2013, SBA finalized its server upgrade plan and worked with
Software AG on the associated upgrades to webMethods licensing and support.  The new
servers would contain two processors, each processor with eight processor cores for a
total of 16 processor cores per server.  This was a significant change from the single core
processors SBA was previously using.  The prior contracts and licensing agreements did
not anticipate or differentiate between the older single core processor servers that SBA

CBCA 5866 4
was using and the multi-core architecture of the newer servers that SBA would be
acquiring as part of the hardware refresh.
Contemporaneous evidence from the planning process indicates that SBA and
Software AG intended to use a per-processor core software licensing structure for the
hardware/software upgrade.  An email from Aaron Mazzatenta (an account manager for
Software AG) to Steve Stine (SBA contracting officer representative) on October 23,
2013, included a chart of the intended software structure.  The chart provided the unit of
measure for the number of needed licenses as “Per Processor Core Type B.”  On
October 31, Sri Gopalakrishna of SRA, SBA’s third-party software contractor, who
assisted in the webMethods planning for the hardware refresh, sent an installation
schematic to various parties involved in the process, including Steve Stine and Aaron
Mazzatenta.  This schematic indicated the number of processor cores in each new T4-2
server that would have webMethods software licensed and installed, showing that the
webMethods installation and licensing was to be based on processor cores.  The
schematic shows licensed processor cores totaling twelve for the development
environment, ten for testing, twelve for production, and ten for disaster recovery.  Various
numbers of processor cores were associated with each T4-2 server to be acquired by SBA. 
Sri Gopalakrishna sent out an additional schematic on November 15, which showed an
architecture installation structure containing not only webMethods but also several other
non-webMethods applications and utilities that would be running on the T4-2 servers in
each of the environments.  On November 21, 2013, Sri Gopalakrishna again emailed
detailed configuration documents showing the intended per-processor core licensing and
installation schematic.
The parties planned for a direct contract between SBA and Software AG to
purchase the new webMethods licenses and software support.  On December 3, 2013,
Software AG submitted a proposal to SBA.  This proposal provided for licensing by
processor core across the production, test, development, and backup environments; using
virtual technology to run the software in a virtual environment as long as the licensee was
capable of restricting the total number of processor cores assigned to the virtual operating
system on which the software is installed; and including software support and
maintenance.  The proposal’s product description listed “Integration Platform Processors”
and an associated “JDBC Adapter” for each of the four different environments, with
“Processor Core Type B” processors, and a quantity of twelve.  Thus, the proposal based
its pricing on licensing by server processor cores, consistent with the earlier
communications between SBA and Software AG regarding the licensing and architecture
scheme for the hardware refresh.  The pricing was not individually listed for each of the
product description items, extended virtualization rights, or software support and
maintenance but instead was listed in totals for the entire licensing and software support

CBCA 5866 5
package for the base year and each option year.  The proposal also included a provision
called “Processor Cores” stating:
With regard to the Software licensed herein on a per Processor Core basis, a
Processor means a central processing unit or other integrated circuit that
executes the instructions provided by the Software through a specified
number of Cores and a Core means a collection of one or more processor
threads and a set of shared execution resources. (For clarity, a single-core
CPU is a Processor with one Core, a dual-core CPU is a Processor with two
Cores, etc.)
The proposal also stated that the licensed webMethods software would run on “Processor
Core Type B” servers and the “Solaris Ultra SPARC” operating systems.  The new
SPARC T4-2 servers, however, used type C cores according to Software AG’s
terminology.  On December 12, 2013, Sri Gopalakrishna emailed Kerry Vance (a
contractor working with SBA on this project) the earlier schematic detailing the
anticipated per-processor core licensing and usage structure by server and by
environment.
However, instead of contracting directly with Software AG based on the
December 3 proposal, SBA learned that its contracts over $150,000 needed to go through
the Department of the Interior.  Therefore, the SBA pursued a modification of the 2013
DOI support services task order under the federal supply schedule contract to facilitate
the new software licenses purchase.  Aaron Mazzatenta indicated that Software AG was
“fine doing a contract modification” instead of a direct purchase by SBA.  Another
proposal was prepared for this purpose, QUO-443962-P6K2Q2, dated December 27,
2013.  This December 27 proposal was ultimately incorporated into Mod 1.  Because this
proposal intended to use a contract modification as the contract vehicle for the
acquisition, the proposal used product descriptions from the underlying federal supply
schedule contract, which did not precisely match those found in the December 3 proposal. 
For example, the December 3 proposal referred to the production webMethods licenses
as: 
Product Description[:] Integration Platform Processors
Operating Environment[:] Production  
Type[:] Processor Core Type B
Quantity[:]12
The December 27 proposal listed the same license as:

CBCA 5866 6
Product Description[:] webMethods Integration Platform CPUs*
Platform Production CPU Includes:-webMethods Integration Server-
webMethods Broker** Trusted Product **
Qty[:] 12
Although the product descriptions in the December 27 proposal use the term “CPUs”
while the December 3 proposal uses the term “Processors,” those terms are generally
synonymous, and there is no evidence that the parties had negotiated a different licensing
or pricing structure for the December 27 proposal.  The product description differences
are attributable to the decision to use a modification of the existing schedule contract to
make the purchases.
The December 27 terms and conditions confirm the conclusion that the parties had
not changed their per-processor core licensing approach.  The December 27 proposal
contained an essentially identical processor core licensing clause to the one contained in
the December 3 proposal:
Processor Cores: With regard to the Proposal Software licensed on a per
Processor Core basis, a Processor means a central processing unit or other
integrated circuit that executes the Instructions provided by the Proposal
Software through a specified number of Cores and a Core means a
collection of one or more processor threads and a set of shared execution
resources.  (For clarity, a single-core CPU is a Processor with one Core, a
dual-core CPU is a Processor with two Cores, etc.)
Further, the proposal contained the clause on virtualization which provided:
Virtualization:  Licensee may use the Proposal Software on a
physical machine using virtual technology to run the Proposal
Software in a virtual environment, provided that the virtual
technology used by Licensee is capable of restricting the total
number of Processor Cores . . . assigned to the virtual operating
system on which the Proposal Software is installed and the total
number of Processor Cores so assigned does not exceed the total
number of Processor Cores licensed.  Under no circumstances shall
the Proposal Software be used (in a virtual environment or
otherwise) in excess of the total number of Processor Cores licensed. 
Licensee shall monitor daily peak usage of the Software . . . .
Licensee agrees that it will provide Software AG with quarterly
reports documenting daily peak usage that specifically highlight

CBCA 5866 7
Processor Core utilization for all Processor Cores to which the
Proposal Software is assigned.
Further, the December 27 quotation contains essentially identical pricing as the
December 3 proposal (there is a twelve dollar difference in the final option year). 
The proposal also included processor core type restrictions.  The pertinent
paragraph of the proposal provides:  “Processor Core Performance Types are used to
differentiate processor technologies with regard to their performance.  The Proposal
Software may be used only on licensed processor cores in their designated Processor Core
Performance Type, which designations are subject to change.”  The current processor
core performance type table was posted at a webpage listed in the proposal.  According to
the performance table at the end of the webpage link, SPARC T4 processors–those to be
used by SBA–had type C processor cores.  While the December 3 proposal had
specifically mentioned type B cores in the quotation, Aaron Mazzatenta, the Software AG
representative, knew that SBA intended to use the SPARC T4 type C processors in the
hardware refresh.  During testimony, Mr. Mazzatenta admitted that he was in a meeting
where T4-2 servers were discussed and that he had received an email that SBA was
intending to use T4-2 servers.
On January 28, 2014, DOI and Immix entered into Mod 1.  Mod 1 incorporated the 
December 27, 2013 proposal with all its terms and conditions.  Thus, Mod 1 included the
December 27 line items for the webMethods software, JDBC adapters, and software
support for each of the software items.  Each line item specified a quantity of twelve
units, but each item type and environment was priced independently.  Mod 1 maintained
the Base Year (5/1/2013-12/30/2014) software support for the prior webMethods licensed
software at $475,000, and changed the pricing of the underlying 2013 task order contract
option years to now include the new software licenses and the new software support as
follows: Option Year 1 (1/28/2014-12/30/2014) $474,000, Option Year 2 (12/31/2014-
12/30/2015) $474,000, Option Year 3 (12/31/2015-12/30/2016) $474,000, Option Year 4 
(12/31/2016-12/30/2017) $284,412.  The December 27 proposal lists as the “Base Year”
the 1/28/2014-12/31/2014 period while the Mod 1 cover pages continue to refer to that
period as Option Year 1.  The period 1/28/2014-12/31/2014 covers the line items for
purchasing the software licenses, and smaller line item amounts for software support
priced at about 17% of the license price, while the subsequent options years only contain
line items for software support.  Through this contract, SBA was able to meet its goal of
lowering its total costs.  The total value of the contract was $2,181,412, a $326,229.94
decrease from the underlying 2013 contract.
Other rights and obligations were also included in the underlying 2013 contract
and are relevant to Mod 1.  During performance, the contract required that SBA monitor

CBCA 5866 8
the software usage and provide quarterly reports, but SBA did not send any reports. 
Conversely, the contractor was entitled to request usage information.  The 2013 contract
provided that if the licensee breached its obligations under the scope of use clause, and
the breach was uncured for an unreasonable period of time, the parties would “work to
true-up the account per this Agreement.”
Over the course of 2014, after the effective date of Mod 1, SBA began installing
the webMethods software and adapters on the new T4-2 servers.  Although Mr. Vance,
the project manager running the installation, had been privy to the earlier communications
that had planned on a per-processor core installation, SBA failed to install the
webMethods software according to the number of licensed processor cores.  As a result,
SBA and its contractor SRA installed webMethods onto the eight new T4-2 servers
without restricting the installation to individual cores within the servers.  By the end of
the installation process, SBA had installed webMethods software onto 128 different
processor cores (8 servers with 16 cores per server), spread across the four different
environments.  We find that SBA was only licensed to run webMethods on 48 cores, that
is, four environments times 12 cores per environment.  The production servers became
live in September 2014.  
Two years after the software deployment, on November 15, 2016, Software AG
contacted government representatives for a meeting regarding webMethods upgrades and
the future of the relationship.  During the meeting which was held on November 30, 2016,
Mr. Vance, who was no longer a contractor but an SBA employee, viewed a PowerPoint
presentation by Software AG which described SBA’s per-processor core licensing
structure.  Mr. Vance, who understood the installation of the software, recognized that
this was not how SBA had deployed webMethods.  After internally confirming the extent
of the installation and contacting DOI contracting personnel, Immix was informed by the
agency of the possible over-deployment.  In December 2016, SBA determined that it had
installed and was running webMethods on 128 different cores, well beyond the 48 cores
for which it was licensed.  The eight servers supported all four software environments: 
“Production” (two servers), “Disaster Recovery” (two servers), “Test” (one server);
“Development” (one server); and “Staging” (two servers).  The “staging” environment
identified by SBA served a similar function as a “test” environment.
Because of the extent of the installation of the webMethods software without
limiting the number of processor cores per server with the webMethods installed on it, the
contracting officer indicated that SBA would not be exercising option year 4 of the
agreement.  Option Year 3 was instead extended for a period of 2.5 months until
March 15, 2017.  In early 2017, SBA began trying to limit the deployment of the
webMethods software to the compliance limits found in Mod 1.  The agency claims that
the cores in the testing, staging, training, and development environments were limited to

CBCA 5866 9
eight cores each on January 23, 2017, and that the cores in the production and disaster
recovery environments were restricted to eight cores each by March 1, 2017.  The earliest
screenshot of the software restriction is dated July 3, 2017.
Discussion
Severin
As a preliminary issue, SBA argues that Immix’s claim is barred through
application of the Severin doctrine.  “[T]he Severin doctrine, first articulated in Severin v.
United States, 99 Ct.Cl. 435 (1943), cert. denied, 322 U.S. 733, 64 S.Ct. 1045, 88 L.Ed.
1567 (1944), holds that a prime contractor cannot recover on behalf of a subcontractor
unless the prime contractor has reimbursed the subcontractor or is liable to make such
reimbursement.”  United States v. Johnson Controls, Inc., 713 F.2d 1541, 1552 at n.8
(Fed. Cir. 1983).  “The Severin doctrine can only bar the prime contractor's pass-through
suit against the government if the government first asserts at trial, and then proves, that
the prime contractor is not liable to the subcontractor for the costs in suit.”  E.R. Mitchell
Constr. Co. v. Danzig, 175 F.3d 1369, 1371 (Fed. Cir. 1999) (citing George Hyman
Constr. Co. v. United States, 30 Fed.Cl. 170, 177 (1993), aff’d, 39 F.3d 1197 (Fed.
Cir.1994)). 
SBA’s allegation is based on a clause within Immix and Software AG’s
contractual agreement:  “Neither party shall be liable to the other party for consequential,
punitive, incidental or special damages, including but not limited to lost profits, even if
such party has been apprised of the likelihood of such damages coming.”  Respondent’s
Post-Hearing Brief at 11 (citing Exhibit 67 at DOI-11979).  SBA has not made any
significant evidentiary showing besides this clause.  This clause comprehends collateral
liabilities incidental to the contractual agreement rather than discharging liability for
contractual disputes.  Even lost profits, a theory of damages advanced by Immix in this
case, are direct damages if a natural result of the breach.  See Ramsey v. United States,
101 F. Supp. 353, 357 (Ct. Cl. 1951); Tractebel Energy Mktg., Inc. v. AEP Power Mktg.,
Inc., 487 F.3d 89, 109 (2d Cir. 2007).  SBA has not proven that Immix would not be
liable to Software AG for damages arising under a breach of the contract.  Thus, the
Severin doctrine is inapplicable here.

CBCA 5866 10
Entitlement
Immix alleges entitlement to damages for the webMethods installations that
exceeded the 48 licenses purchased in Mod 1 and the value of upgrading all licensing
from type B to type C processors.  SBA alleges inter alia that it did not overdeploy
because Mod 1 licensed webMethods on a per CPU basis, and SBA had already obtained
webMethods 9.0.1 under the prior maintenance and support plan.  For the reasons
discussed below, we conclude that SBA overdeployed webMethods onto 80 unlicensed
core processors but that Software AG is not entitled to recover for webMethods being
installed on type C processor cores.
Immix’s entitlement to compensation depends upon the interpretation of Mod 1. 
Contract interpretation begins with the terms of the contract itself.  Foley Co. v. United
States, 11 F.3d 1032, 1034 (Fed. Cir. 1993).  “The primary objective of contract
interpretation is to determine the intent of the parties at the time an agreement is created.”
Noaa Maryland, LLC, CBCA 5269, 19-1 BCA ¶ 37,458 (quoting Belle Isle Investment
Co. v. General Services Administration, CBCA 4734, 16-1 BCA ¶ 36,416) (citation
omitted); see also Firestone Tire & Rubber Co. v. United States, 444 F.2d 547, 551 (Ct.
Cl. 1971).  The Federal Circuit has held that extrinsic evidence should not be used to
interpret a contract unless there is an ambiguity in the contract language.  City of Tacoma,
Dep’t of Pub. Utilities v. United States, 31 F.3d 1130, 1134 (Fed. Cir. 1994).  A contract
provision is not ambiguous merely because the parties disagree on the meaning.  Metric
Constructors, Inc. v. Nat’l Aeronautics & Space Admin., 169 F.3d 747, 751 (Fed. Cir.
1999).  Both interpretations must be reasonable.  Premier Office Complex of Parma, LLC
v. United States, 916 F.3d 1006, 1011 (Fed. Cir. 2019) (citing Metric Constructors, 169
F.3d at 751 (Fed. Cir. 1999)) (citation omitted).  
Mod 1, when considered in its totality, provides for licensing of the webMethods
software on a per processor core basis, not on a per CPU basis.  Although the term CPU is
referenced in the product descriptions of the software in the December 27 proposal
incorporated into Mod 1, those product descriptions are taken from the FSS contract and
were used to facilitate a modification of the 2013 contract to purchase the new licenses. 
The terms and conditions of Mod 1 point clearly to licensing on a per processor core
basis.  The incorporated proposal states that “[u]nder no circumstances shall the Proposal
Software be used (in a virtual environment or otherwise) in excess of the total number of
Processor Cores licensed.”  The modification also states that virtual software–a main
feature of this procurement–must be restricted to the number of processor cores licensed. 
None of the clauses in Mod 1 suggest that the software is being licenced on a per-CPU
basis.  The Federal Circuit has held that contracts should be “considered as a whole and
interpreted so as to harmonize and give reasonable meaning to all of its parts.” NVT
Technologies, Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir. 2004) (citing McAbee

CBCA 5866 11
Constr., Inc. v. United States, 97 F.3d 1431, 1434–35 (Fed. Cir. 1996)).  When applying
this standard to Mod 1, the terms of the agreement are clear.  The per processor core
licensing clauses are new to Mod 1 and show the parties’ intent to license the new
software by processor core, entirely consistent with the parties’ plan for licensing the new
software in connection with SBA’s hardware refresh.  The technical discussions
uniformly indicate the parties’ intention to license webMethods on a per processor core
basis.  The installation schematics circulated by Sri Gopalakrishna between the SBA
contracting office and SBA’s third party contractors indicated that the software
installation was going to be restricted to a subset of the processor cores of each server. 
This same structure was reflected in the December 3 proposal.  The December 27
proposal does not indicate any change from the per processor core licensing approach,
and the pricing of the December 27 proposal as incorporated into Mod 1 mirrors the
pricing agreed upon in the December 3 proposal.  Steve Stine, the contracting officer’s
representative involved with the licensing negotiations, knew that the new licensing
scheme would be by processor cores, not by CPU.
Based on the per-processor core licensing structure of the agreement, SBA
overdeployed webMethods software onto the T4-2 servers.  Under Mod 1, SBA paid for
twelve licenses of webMethods for each of the four environments, for a total of
forty-eight licensed processor cores.  The record demonstrates that SBA had been running
the webMethods software on an additional twenty processor cores in each environment,
for a total of eighty additional processor cores.  The evidence thus shows that SBA had
been running webMethods software on 128 cores (forty-eight licensed processor cores
plus eighty unlicensed processor cores) until SBA applied restrictions in 2017 to limit the
deployment of webMethods to the forty-eight licenses paid for in Mod 1.  Although
Immix argues SBA overdeployed on an additional 52 processor cores, we do not agree. 
Four of the cores belonged to a personal work laptop used by Sri Gopalakrishna,
discussed earlier, and were included in the Mod 1 pricing.  Immix argues that another 48
processor cores had webMethods running in the development and testing environments,
but we are not convinced of that from the record.
Immix’s claim also includes damages for SBA’s over-deployment of JDBC
adapters which are associated with the webMethods software.  JDBC adapters have been
a part of webMethods software purchases from the beginning.  The 2003 software license
agreement for webMethods software includes a line item for a JDBC adapter, but the
pricing is included in a lump sum total.  Adapters are also included in the 2006 purchase
order, where the pricing for the adapters is similarly included in the total price, rather than
individually priced (though none of the line items contain individual prices).  JDBC
adapters are present in individual quantities in the 2013-14 GSA schedule pricing list, as
well as in Mod 1, the December 27 proposal, and the December 3 proposal.  In Mod 1
and the December 2013 proposals, the JDBC adapters are consistently licensed and used

CBCA 5866 12
in the same quantity as their associated webMethods software.  The overdeployment of
webMethods software in this case, therefore, also reflects a corresponding
overdeployment of the JDBC adapters. 
SBA argues that prior perpetual licenses from the 2003 and 2006 webMethods
agreements carry over to their current usage.  In other words, because SBA had perpetual
webMethods licenses from prior contracts, SBA argues that the current Mod 1 licensed
quantities of webMethods software should be viewed cumulatively with those earlier
licenses.  This argument is inconsistent with the actions of the parties and the context of
the webMethods licensing rights.  Perpetual licenses for a particular software product do
not necessarily grant unlimited technical support or updates from the owner or
manufacturer.  See Software AG, Inc. v. Consist Software Solutions, Inc., No. 08 Civ.
389(CM)(FM), 2008 WL 563449, at *7 (SDNY Feb. 21, 2008).  Perpetual licenses are
subject to and limited by the terms of the contract in which they were assigned.  See
Software Design, Inc., ASBCA 23616, 82-2 BCA ¶ 16,073 at 79,742 (“The Perpetual
License clause must be read in the light of other provisions which contemplated updating
of the software.”).  Disputes related to perpetual licenses rely on traditional principles of
contract interpretation.  See Geoscan, Inc. of Texas v. Geotrace Technologies, Inc., 226
F.3d 387 (5th Cir. 2000) (reversing summary judgment for alleged breach of contract
where terms surrounding specific CPU usage for software licenses were deemed
ambiguous); Software Design, Inc., 88-1 BCA ¶ 20,487 at 103,637 (holding summary
judgment inappropriate where perpetual license and modifications “seemingly conflict”
with contract terms, including expiration term and use restriction terms).
SBA’s argument for cumulative perpetual licenses contradicts a fundamental
purpose of Mod 1:  the procurement of new licenses on a per processor core basis for new
webMethods software that had virtualization capabilities.  A parallel for the limitation of
perpetual licenses is found in typical computer software purchases:
[A] familiar example of a perpetual license is the license offered for the
Microsoft Windows operating system prior to Windows 10: one might
purchase a license for Windows 98 or Windows 7 and continue to use that
version of Windows long after its developer, Microsoft, has moved on to
development of a later version of Windows. 
PTC Inc., B-416863, 2019 CPD ¶ 48 (Dec. 20, 2018) (internal citations omitted).  While
SBA might be entitled to continued use of existing licenses under prior agreements, SBA
is not necessarily entitled to continued support, the newest software versions, or increased
functionality (virtualization)–just as a perpetual license for Windows 95 does not entitle a
user to the benefits associated with a Windows 10 licencing agreement.  Id.

CBCA 5866 13
In a related position, SBA also argues that Software AG had already sent SBA
product keys in September 2013, well before Mod 1 was signed, for the webMethods
version (9.0.1) that was used throughout the overdeployment and that SBA was therefore
entitled to use this webMethods version under the 2013 contract.  When the parties were
planning the hardware refresh, SBA was running software version 7.1.2.  Version 9.0.1
was the licensed version used on the virtual SBA servers after the contract was signed in
January 2014.  Use of webMethods version 9.0.1 on the new T4-2 servers began after
Mod 1 was executed notwithstanding the date of delivery of the product keys.
Finally, Immix argues that it is entitled to license fees for software installed onto
all four cores of the Windows laptop of the lead webMethods developer for SBA.  Again,
we turn to the December 3, 2013 proposal.  The proposal contained a single Windows
license for the use of webMethods in each of the four different environments.  The
Windows user line items were not limited by processor core type, instead indicating a
license for “Unlimited Users.”  According to this proposal, the software running on the
lead webMethods developer’s SBA computer was an anticipated aspect of the contract
and was priced into the total contract price, which was already fixed as of the December 3
proposal.  SBA is not liable for the Windows licensing.
Processor Core Types
Immix argues that it is entitled to damages related to an upgrade in the processor
core “type” licensing that SBA was using.  Excluding the Windows environment that was
running webMethods, Immix claims that SBA was running webMethods on type C
processor cores when SBA was only licensed to run the software on type B processor
cores.  Immix argues for additional damages associated with upgrading the licensing in all
webMethods server environments to type C pricing.
Although the proposals and Mod 1 indicate that the software was licensed
according to the processor core performance, the processor core performance types were a
creation of Software AG rather than an industry standard.  Additionally, while the
performance types were based on general processor performance, Immix did not indicate
specific performance type criterion that would give SBA notice that their servers were
subject to a higher pricing designation.  This designation, found in a chart referenced by a
webpage address listed in the proposal, was further subject to change at Software AG’s
discretion.  We find that Software AG understood that the SBA was obtaining T4-2
servers that had type C processors and thus the parties intended that the proposals
provided the type of licensing needed by SBA to run the new webMethods software on
the new servers.  Immix has not established entitlement to damages for the core type
upgrade.  Mod 1 contains no characterization of the type of processor core licensed under
the agreement.  A contracting party’s “unexpressed, subjective belief is insufficient to

CBCA 5866 14
bind the opposing party.”  Western States Const. Co. v. United States, 26 Cl. Ct. 818, 825-
26 (1992).
Quantum
To fully understand Immix’s damage calculation, this panel directed both parties to 
address the calculation of damages in this case with a supplemental filing.  Immix’s total
claim in this case exceeded $14 million, many times the full value of Mod 1 with all
option years exercised.  Even after removing the additional quantum calculation for
processor core type upgrades, the damages calculation still exceeds reasonable pricing
under the contract.  For example, the Mod 1 pricing per-processor core of the production
webMethods environment was $17,160.15, yet appellant argues that it should be
reimbursed $93,094.64 per processor core (the GSA schedule rate) for the corresponding
overdeployment.  The GSA schedule rate is the maximum that a contractor can charge an
agency for products/services on a schedule contract, but agencies are permitted to
negotiate lower rates.  In this case, SBA and DOI did just that, negotiating a lower value
for Mod 1.  See Bluebonnet Sav. Bank, F.S.B. v. United States, 266 F.3d 1348, 1357 (Fed.
Cir. 2001) (“It is not the duty of courts to second-guess the terms of a bargained-for
exchange.”) (citing Aero Spacelines v. United States, 530 F.2d 324, 354 (Ct. Cl. 1976)). 
“The non-breaching party should not be placed in a better position through the award of
expectancy damages than if there had been no breach.”  Cuyahoga Metro. Hous. Auth. v.
United States, 65 Fed. Cl. 534, 543 (2005).  In our view, the GSA schedule pricing is not
a reasonable measure of the value of the licenses here.
In support of its argument for the higher FSS contract rate, Immix argues that
Mod 1 was not a purchase of new licenses but rather a purchase of upgraded licenses, and
thus the overdeployment instances are “new” licenses.  We do not agree.  The
December 3 and December 27 proposals, as well as Mod 1 which incorporates the
December 27 proposal, make no mention that the Mod 1 licenses are anything but new
licenses with new license terms.  Mod 1 effected a purchase of new software licenses to
replace the older, soon-to-be unsupported licenses.  SBA’s prior licenses were coming to
the end of sustained support in 2014, and SBA was pursuing licenses that would match
with the functionality of its new servers in the hardware refresh.  This difference is clearly
shown in the text of Mod 1, in the new virtualization rights SBA was obtaining in its
licenses and subject to the per processor core limitations specified in Mod 1.
To determine the appropriate compensation due Immix for the overdeployment, we
first look to the terms of the contract.  The 2013 contract merely states that the parties will
“true up” any breaches of the scope of use.  This language does not equate to a “fair and
reasonable attempt[] to fix just compensation for anticipated loss.”  Northern Mgmt.

CBCA 5866 15
Servs., Inc. v. Department of Agriculture, CBCA 1009, 2009 WL 2762523 (citing Priebe
& Sons, Inc. v. United States, 332 U.S. 407, 411 (1947)).
The determination of quantum thus must be measured by the evidence presented in
the record.  Relatively few cases have addressed contract damages of software over-
deployment.  Our predecessor board addressed an issue of damages in software
overdeployment in Data Enterprises of the Northwest v. General Services Administration,
GSBCA 15607, 04-1 BCA ¶ 32,539.  “Determining the amount of damages to award is
not an exact science, and the methodology of assessing and computing damages is
committed to the sound discretion of [the] court.”  Energy Northwest v. United States,
641 F.3d 1300, 1309-310 (Fed. Cir. 2011).  The appellant must meet its burden to provide
sufficient evidence to allow us to make a “fair and reasonable approximation.”  Universal
Development Corp. v. General Services Administration, GSBCA No. 11252-R, 93-2 BCA
¶ 25,845 (quoting Dawco Construction, Inc. v. United States, 930 F.2d 872, 880 (Fed.
Cir. 1991)).  If an appellant can prove the probability of damages, “uncertainty as to the
amount will not preclude recovery.”  Ace-Federal Reporters, Inc. v. Barram, 226 F.3d
1329, 1333 (Fed. Cir. 2000) (quotation omitted).  When contract damages are to
reimburse a promisee for a breach by the promisor, the goal is to put the injured party in
as good of a position as that party would have been in if performance had been rendered
as promised.  24 Samuel Williston & Richard A. Lord, Williston on Contracts § 64:1 (4th
ed. 2020); see also 11 Joseph M. Perillo & Helen Hadjiyannakis Bender, Corbin on
Contracts § 55.3 (2020).
Immix argues that expectancy damages, calculated based on webMethods’ market
value, is the correct measure of damages in this case.  In order to determine the fair
market value, Immix applies a “hypothetical license” test.  “To calculate the ‘market
value’ of the injury to the plaintiff based on a hypothetical-license theory, we look to ‘the
amount a willing buyer would have been reasonably required to pay a willing seller at the
time of the infringement for the actual use made by [the infringer] of the plaintiff's
work.’”  Oracle Corp. v. SAP AG, 765 F.3d 1081, 1087 (9th Cir. 2014) (citing Wall Data
Inc. v. L.A. Cnty. Sheriff’s Dep’t, 447 F.3d 769, 786 (9th Cir. 2006) (internal quotation
marks omitted)); see also Gaylord v. United States, 678 F.3d 1339, 1343 (Fed. Cir. 2012)
(“When, as in this case, the plaintiff cannot show ‘lost sales, lost opportunities to license,
or diminution in the value of the copyright,’ many circuits award actual damages based on
the ‘fair market value of a license covering the defendant’s use.’”).
SBA argues that because its use of the software as a percentage of total processor
utilization was so low, it gained no benefit by having the software installed on 128 cores
versus the 48 licensed cores that it paid for under Mod 1.  SBA further contends that the
Mod 1 prices for the licenses are a more reasonable measure of damages for
overdeployment than the pricing found in the FSS contract claimed by Immix.  

CBCA 5866 16
Immix and Software AG have not persuaded us with record evidence that the
schedule contract prices they are claiming in fact represent fair market valuations.  We
believe the Mod 1 license prices are a reasonable measure of the pricing the parties would
have agreed upon had the parties included the additional use of the software in Mod 1. 
The licenses were negotiated by the parties and the pricing in Mod 1 was current pricing
and reflected the collective valuation placed on the software by the contracting parties
given Software AG’s pricing goals, SBA’s needs, the parties’ agreement on a cost savings
for SBA, market conditions, and the history of the parties’ dealings.
Mod 1 addresses the two types of pricing:  the pricing of the webMethods licenses
and the pricing for the accompanying software support services for webMethods.  We
determine that based on the Mod 1 pricing of the software licenses for the
overdeployment by 20 additional cores for each of the four environments, appellant is
entitled to recover $674,184.  This amount is based on the contracted individual rates for
each webMethods license for each of the four environments (including the JDBC adapter
licenses), multiplied by the twenty instances of overdeployment for each environment. 
We cannot conclude from the record that the SBA derived no benefit from the
overdeployment of the software, and even if SBA had, the practical administration of
software license damages and the policy considerations in copyright-related breaches
favor the remuneration of the injured party.  See Oracle Corp., 765 F.3d at 1088 (“In our
view, as between leaving the victim of the illegal taking with nothing, and charging the
illegal taker with the reasonable cost of what he took, the latter, at least in some
circumstances, is the preferable solution.”) (quoting On Davis v. The Gap, Inc., 246 F.3d
152, 166 (2d Cir. 2001)).
Appellant is also entitled to additional software support costs in the amount of
$350,000.  This amount is calculated based on the individual support costs for the
webMethods environments and JDBC adapters for 2014, multiplied by the twenty
instances of overdeployment in each of the four environments, accrued over the
approximate three year period of the overdeployment.  Although appellant claims a far
higher software support rate, we find the “base year” pricing at about 17% of the license
prices reflects a reasonable annual support services rate as a percentage of the value of the
licenses.
We have considered the other contentions of the parties and determine that they do
not change our findings and conclusions above.

CBCA 5866 17
Decision
We grant the appellant’s claim in part in the total amount of $1,024,184 plus
applicable interest.
  Jonathan D. Zischkau    
JONATHAN D. ZISCHKAU
Board Judge
We concur: 
    Erica S. Beardsley           Catherine B. Hyatt        
ERICA S. BEARDSLEY CATHERINE B. HYATT
Board Judge Board Judge