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B E C K E R , C i r cui tJudge . T hi s appea l byM i chae l H or an ar i s es outof a di s put e overa s ett l ementagr eement arr i ved ati n B ankrupt cyC our t . H or an w as a part yt o t he s ett l ementagr eement , w hi ch
r el at es t o s oftw ar e r i ght s . H or an fi r s tcl ai m s thatthe B ankrupt cyand D i s t r i ctC our t s err ed i n t hei rcons t ruct i on of the s et t l ementagr eement . H e mai nt ai ns thatther e w as a br eac h of3

t he unambi guous t erm s of the agr eement . H e furt hercl ai m s thatther e w as fr aud undert he
a g re e m e n t. T he cr i t i cal ques t i on i s w hetherH or an w as ent i t l ed t o cert ai n s oftw ar e r i ght s t hat he di d notr ece i ve. T he fa ct s and pr ocedur al hi s t oryar e extr emel ycompl i cat ed, butthey
ar e w el l know n t o t he part i es forw hom w e pr i nci pal l yw r i t e. H ence w e s etfor t h onl yt he b asic b ac k g rou n d fa cts an d li m ito u r discu ssion large lyto o u r r at i o deci dendi . H o ran is th e P lai n ti ff. T h e D ef en d an ts are W il li am D an ton , V ideo L o tt ery C ons ul t ant s , I nc. , and Pr ofes s i onal V i deo A s s oci at i on. I n t he 1980s , H or an i nvent ed a comput ers oftw ar e pr ogr am cal l ed “El i m i nat i on D r aw Poker . ” El i m i nat i on D r aw Poker o p era tes i n v ideo g am e c o n so le fo rm at an d all o w s p lay ers to e n g ag e in a co m p u teroper at ed pokert our nament . H or an copyr i ght ed the pr ogr am and obt ai ned a pa t entfort he game. L at er , E l i m i nat i on D r aw Poker , i t s pat ent , copyr i ght , rul es , des i gn, form at , s y s t em and r el at ed har dw ar e – t erm ed “the Softw ar e A s s et s ” bythe s ett l ementagr eementati s s ue – w er e as s i gned t o Pr ofes s i onal V i deo A s s oci at i on ( “PV A ”) . T hi s as s i gnm entt ook pl ace on oraboutA pr i l 27, 1985. H or an i ni t i al l yow ned PV A , though eventual l yH or an and D a n t o n d e v e l o p e d a n a m b i g u o u s b u s i n e s s r e l a t i o n s h i p i n v o l v i n g th e c o m p a n y. A ccor di ng t o t he D i s t r i ctC our t , i n 1993, St ephen H ol ni ker , Pr es i dentof A m u sem en t W o rl d , o b tai n ed the o p era ti n g so ftw are fo r E li m ination D raw P o k er. A m u sem en t W o rl d b eg an to m an u fa cture the g am e f o r P V A fo r de m o n str ati o n o n ly . In 1 9 9 5 , A m u se m e n t W o rld d e v e lo p e d n e tw o rk so f tw a re to m a k e th e g a m e o p e ra tio n a l.V L C w as ow ned byD ant on, butl i t t l e el s e i s expl ai ned bythe r ecor d. 1 4 D efa ul t i ng pur chas er s of PV A fi l ed forC hapt er11 bankrupt cyon J anuary6, 1995. A ppar ent l y , t her e w er e s ever al di s put es betw een D ant on and H or an r egar di ng the ow ner s hi p of PV A . T o r es ol ve gr ow i ng pr obl ems, a s ett l ementagr eementw as ent er ed on February27, 1997, betw een H or an, D ant on, V i deo Lot t eryC ons ul t ant s ( “V L C ”) , and PV A . T he t erm s of the s et t l ementagr eementar e ati s s ue i n t hi s appea l . A s s t at ed above ,

1 H or an cl ai m s t hatundert he agr eementhe i s ent i t l ed t o cert ai n s oftw ar e r i ght s thathe neverr ece i ved. I. T h e re lev a n t p o rtio n s o f th e se ttl e m e n t ag re e m e n t sta te: “El i m i nat i on D r aw Poker ” w as pat ent ed atPat entN o. 4, 648, 604 ( t he Pat ent ) . “El i m i nat i on D r aw Poker ” t ogetherw i t h t he Pat ent , r el at ed co p yri g h ts, rules, de sign , fo rm at, sy stem an d related h ard w are (th e S o ftw are A s s et s ) w er e as s i gned t o PV A , a D el aw ar e C orpor at i on.

. . . 1. G R A N T O F E XC LU SI V E R I G H TS T O SO FT W A R E A SSET S; I N T E R N E T . a . P V A , w ith th e jo in d e r o f D a n to n , h e re b yg ra n ts a n d c o n v e y s to H or an, al l excl us i ve di s t r i but i on and al l ot herr el at ed r i ght s i n and t o t he S o f tw a re A s s e ts , i ncludi ngany an d a l lup grad es, up da t es, m od i f i cati on s, the nam e and/

ornew ver

s i ons i n [se v era l exc lusive loca ti o n s]. H o ran ’s excl us i ve di s t r i but i on r i ght s ar i s i ng outof the gr antof r i ght s t o H or an by PV A of the Softw ar e A s s et s as s etfor t h her ei n i ncl ude, butar e notl i m i t ed t o: anypr ocee ds of s al es , advert i s i ng, s pons or s hi p and/ orm anufa ctur i ng w hi ch ar i s es orr es ul t s fr om the s al e, di s t r i but i on, demonstr at i on or d u p lic a tio n o f

th e S o f tw a re A s s e ts b yH o ra n in th e E x c lu s iv e L o c a tio n s .

. . .5

6 . W AR RA NT Y O F O W NE RSH I P. Da n t o n a n d P VA wa r r a n t s th a tP VA has excl us i ve ow ner s hi p of the Softw ar e A s s et s and, s ubj ectt o appr oval of th e B a n k ru p tcy C o u rt a s s e t f o rth h e re in , h a s th e a u th o ritya n d p o w e r to tr an sfe r, co n v ey , assig n , sell , o r gra n t th e e x clus ive righ ts t o the S o ftw are A ss e ts a s s e t f

o rth h e re in to H o ra n . D a n to n a n d P V A a c k n o w led g e s th a t th is i s a mat er i al r epr es ent at i on of PV A and D ant on and H or an i s r el y i ng on s uch r epr es ent at i ons and w arr antyi n connec t i on w i t h t he Set t l ement A g re e m e n t. (e m p h a s is a d d e d .) T he agr eementw as ent er ed des pi t e an obj ect i on bySt ephen H ol ni ker . A s s t at ed above, H ol ni ker ’ s company , A m us ementW or l d, devel oped s oftw ar e forE l i m i nat i on D raw P o k er. H o lnike r w as a fra id tha t th e a g ree m en t at tem p ted to co n v eyh is co m p an y ’s s oftw ar e t o H or an. H ol ni ker ’ s obj ect i on t o t he s ett l ementagr eementw as deni ed. H e then appea l ed the B ankrupt cyC our t ’ s or derappr ovi ng the s et t l ement , butl at erw i t hdr ew t he
a p p e a l. A c c o rd in g to H o ln ik e r, b o th D a n to n a n d H o ra n sta ted th a t th e yh a d n o in ter e st in hi s s oftw ar e. M or eover , a pr e- t r i al or der , i ncl udi ng fac t s s t i pul at ed byal l part i es , s t at es th a t H o ra n “ a t all tim e s k n e w th a t h e h im se lf w a s n o t en tit led to a n yo w n e rsh ip rig h ts to th e ‘s o f tw a re p ro g ra m ’ o w n e d b yA m u s e m e n t W o rl d , In c .” O n t he bas i s of the agr eement , H or an now appea r s t o cl ai m r i ght s i n: (1 ) T h e n e w “ v e rsio n ” o f so f tw a re c re a ted b yH o ln ik e r a n d A m u se m e n t w o rld ; ( 2) Soft w ar e ut i l i zed i n 38 m achi nes thatV L C pur chas ed fr om H ol ni kerand A m u se m e n t W o rld in 1 9 9 6 ; ( 3) Soft w ar e deve l oped byD on Pi er ce f orFor tune Ent ert ai nm entC orpor at i on (“ F E C ” ).6 II. A gai ns tt hi s backgr ound, w e conc l ude the fol l ow i ng: Fi r s t , H or an has no r i ght s t o t he H ol ni kers oftw ar e. W e agr ee w i t h t he B ankrupt cy and D i s t r i ctC our t s t hatt her e i s no ambi gui t yi n t he agr eements uch as m i ghtgi ve H or an t he r i ght s t o upgr ades , updat es , m odi fi cat i ons , names, ornew ver s i ons ( “upgr ades , et c. ”)
n o t p o ss e ss e d o r o w n e d b yP V A , b u t o n lyb yH o ln ik e r. In ste a d , P V A w a s o n lyre q u ire d to conveyr i ght s t o t hatw hi ch i tdevel oped oracqui r ed. E ven i f the s ett l ementagr eement w er e ambi guous , extr i ns i c evi dence es t abl i s hes thati tw as notthe i nt entof the part i es for PV A t o conveyt o H or an anyand al l upgr ades , et c. thatexi s t ed anyw here . Forexampl e, th e p re -tria l o rd e r c ited a b o v e sta tes th a t H o ra n k n e w th a t h e w a s n o t en tit led to rig h ts in th e H o ln ik e r so f

tw a re . In sh o rt, th e B a n k ru p tcy an d D istric t C o u rts d id n o t er r in th e ir cons t ruct i on of the s et t l ementagr eementas i tr el at es t o t he H ol ni kers oftw ar e. A c c o rd in g ly , w e a f

f irm o n th is p o in t. S e c o n d , t h e c l a i m o f

f r a u d u n d e rth e a g r e e m e n ti s t o t a l l yw i t h o u tf o u n d a t i o n . We a f f irm o n th is p o in t as w e ll. T hi r d and fi nal l y , how ever , w e w i l l r emand H or an’ s cl ai m thatD efe ndant s fai l ed t o conveyt he r i ght s i n s oftw ar e cr eat ed bys oftw ar e deve l operD on Pi er ce. I n D ece m ber of 1999, Pi er ce c r eat ed a s oftw ar e pac kage t o run E l i m i nat i on D r aw Pokeron a per s onal c o m p u ter f

o r F E C . F E C is a p p a re n tlyP V A ’s s u c c e ss o r in in ter e st a n d D a n to n a p p e a rs to hav e been i nv olved w i t h b oth com pan i es.7

H o ra n c o n ten d s th a t P ier c e c re a ted a “ n e w v e rsio n ” o f th e so f tw a re a n d th a t, t her efor e, H or an i s ent i t l ed t o cert ai n r i ght s . Pi er ce t es t i fi ed thatthe s oftw ar e w as not oper at i onal . A ddi t i onal l y , a r egul at or yfi r m thatt es t s and appr oves gami ng devi ces found Pi er ce’ s ver s i on of El i m i nat i on D r aw Pokert o be i noper abl e. O n t he otherhand, Pi er ce al s o t es t i fi ed thatt he s oftw ar e w as 99. 9 per centcompl et e and onl yneede d har dw ar e t o be pl ugged i n t o oper at e. A ccor di ng t o Pi er ce, thatw oul d t ake onl ya “c oupl e day s . ” Pi er ce s t at ed thata demonstr at i on ver s i on of the s oftw ar e had be en compl et ed and that

“ [ e ]v e ryth in g w o rk e d .” T he D i s t r i ctC our tfound thatbeca us e the s oftw ar e w as notoper at i onal , i tw as not a “ne w ver s i on” of the Softw ar e A s s et s . T her efor e, i tr eas oned, ther e w as no br eac h of the s et t l ementagr eement . H ow ever , t he fi ndi ngs on t hi s poi ntbeg the ques t i on w hether s om ethi ng t hati s “i noper abl e” c ount s as an upgr ade, updat e, m odi fi cat i on, ornew ver s i on if it is 9 9 .9 p e rc e n t c o m p le te a n d ju s t n e e d s to b e “ h o o k [ e d ] . . . u p .” W e w ill , the re f

o re , v a c a te a n d re m a n d o n th is p o in t so th a t th e D istric t C o u rt, w hi ch maychoos e t o r emand t o t he B ankrupt cyC our t , m aydet erm i ne the fa ct s r el evant t o t h e P i e r c e p r o d u c t . T h e s e f a c t s i n c l u d e th e p r o d u c t ’ s e f f e c t i v e n e s s ; i t s v a l u e t o P VA, FE C , and H or an; and w hetheri tcan be cons i der ed an upgr ade, et c. Fort he for egoi ng r eas ons , w e w i l l aff i r m i n par tand vac at e i n partand r emand for fur t herpr ocee di ngs i n acc or dance w i t h t hi s opi ni on.