Source: http://indianacourts.us/blogs/caseclips/2009/05/22/conwell-v-gray-loon/
Timestamp: 2013-05-21 16:48:09
Document Index: 248337247

Matched Legal Cases: ['§ 503', '§ 102', '§ 10', '§ 10', '§ 5', '§ 5']

Conwell v. Gray Loon Outdoor Marketing Group, Inc., No. 82S04-0806-CV-309, ___ N.E.2d ___ (Ind., May 19, 2009)
Case ClipsPublished by the Indiana Judicial Center	Conwell v. Gray Loon Outdoor Marketing Group, Inc., No. 82S04-0806-CV-309, ___ N.E.2d ___ (Ind., May 19, 2009)
May 22, 2009 | Volume 36 Issue 17 | Filed Under: Civil | Tagged: R. Shepard, Supreme, T. Boehm SHEPARD, C.J.
As the Internet becomes a ubiquitous presence in American commerce, the nation’s courts work to find satisfactory legal frameworks for resolving the disputes that inevitably arise. In this suit between a business enterprise and the marketing firm that created and hosted its website, we conclude that the Uniform Commercial Code does not apply and that the web design firm may collect for its work under principles of common law contract. As for a counter-claim alleging conversion of the intellectual product, we conclude that copyright law supports ownership by the designer. We affirm the trial court’s judgment for the marketing firm.
A website created under arrangements calling for the designer to fashion, program, and host its operation on the designer’s server is neither tangible nor moveable in the conventional sense. To be sure, one can copy a website using tangible, movable objects such as hard drives, cables, and disks. These objects are in themselves just as certainly goods, but it does not necessarily follow that the information they contain classifies as goods as well. The arrangement between [Piece of America, or POA, the client] and Gray Loon [the website designer] contemplated a custom design for a single customer and an ongoing hosting relationship. As such, conventional “predominant thrust” doctrine suggests that the U.C.C. did not apply.
To be valid and enforceable, a contract must be reasonably definite and certain. Wenning v. Calhoun, 827 N.E.2d 627 (Ind. Ct. App. 2005); See Wolvos v. Meyer, 668 N.E.2d 671, 675-76 (Ind. 1996). All that is required to render a contract enforceable is reasonable certainty in the terms and conditions of the promises made, including by whom and to whom; absolute certainty in all terms is not required. Only essential terms need be included to render a contract enforceable. Illiana Surgery & Med. Ctr., LLC. v. STG Funding, Inc., 824 N.E.2d 388 (Ind. Ct. App. 2005). Thus, where any essential element is omitted from a contract, or is left obscure or undefined, so as to leave the intention of the parties uncertain as to any substantial term of the contract, the contract may not be specifically enforced. Johnson v. Sprague, 614 N.E.2d 585 (Ind. Ct. App. 1980). A court will not find that a contract is so uncertain as to preclude specific enforcement where a reasonable and logical interpretation will render the contract valid. See Donavan v. Ivy Knoll Apartments P’ship, 537 N.E.2d 47 (Ind. Ct. App. 1989).
Piece of America contests on several grounds the trial court’s finding that it had a contract with Gray Loon. First, it states: “There was no evidence of any writing executed by any party which would have modified the contract by increasing the scope of work.” (Reply Br. at 3.) It cites as analogous Kern v. City of Lawrenceburg, 625 N.E.2d 1326 (Ind. Ct. App. 1993), in which the Court of Appeals required a subcontractor to obtain a written change order to receive payment for water hauling services that were not included in the subcontract and precluded recovery for water hauling services on quantum meruit theory because the express contract covered the subject matter. An essential difference between this case and Kern is that Kern’s contract explicitly called for a change order in writing. Here, such a requirement did not exist. The only formal agreement between these parties was the 2003 document under which both parties performed. We see the 2004 request for changes to the completed website as a new transaction rather than an “expansion of scope.” Second, POA asserts that Gray Loon “has not demonstrated there was any oral or written agreement on a price for the modifications it alleges were requested, consequently, [Gray Loon's] claim for making those changes must fail.” (Reply Br. at 4.)
The evidence in the record concerning whether the parties regarded price as essential, such as it is, favors the trial court’s judgment. Piece of America asked Gray Loon for the changes it made and did not inquire into how much it would cost. The only evidence submitted regarding the reasonableness of the price consists of the invoice itself and POA’s acceptance of the price through Dennis Conwell after receiving the invoice. There is no evidence that Gray Loon participated in any unconscionable effort to “strong-arm” POA into paying an unreasonable fee. In light of all that, the trial court was right to enforce the agreement even though Gray Loon had not provided a cost estimate.
Piece of America appeals the trial court’s denial of its counterclaim, which alleged that Gray Loon converted its property by failing to make a backup copy of the original version of the website, for which it made payment. . . .
What POA had was a nonexclusive license. Piece of America, the licensee, requested the creation of a website. Gray Loon, the creator/licensor, made and “delivered” the work to the licensee. As a nonexclusive licensee, POA never had ownership of the site under copyright law. POA purchased a non-exclusive license, which we might read as granting it rights to use the site as its own. This conclusion makes short work of POA’s conversion claim. Because the website actually did not belong to POA, it cannot bring a claim for conversion. Furthermore, even if POA had owned the website, Gray Loon did not commit conversion. It performed the work – including hosting the site – at POA’s request. When POA did not pay, Gray Loon discontinued its hosting service and refused to hand over a copy of the site. Because this contingency was not addressed by the proposal, the common law of contract applies, not conversion. POA elected to pursue its counterclaim only on the latter grounds.
Piece of America’s failure to pay the seventy-five dollar per month hosting fees alone could justify Gray Loon’s taking down the site from the Internet. If it had paid all other fees, there might be a dispute as to whether Gray Loon had breached its license agreement by refusing to transfer the files to POA, but POA’s failure to pay the June 2004 invoice coupled with the fact it did not request the files from Gray Loon persuades us that Gray Loon is not at fault either for withholding the files or taking the site offline.
The trial court having found for Gray Loon on its claim and on POA’s counter-claim, we affirm.
I agree with the majority’s analysis and conclusions on the record in this case. I write separately to explain why I agree that Piece of America (POA) is not entitled to relief for what amounts to a destruction of the website it had paid Gray Loon to construct.
I agree with the majority’s conclusion that the first phase of the website was completed and paid for and the second phase constituted a separate transaction. The issue is whether Gray Loon had the right to dismantle the site when POA did not pay for the second phase. As the majority explains, when the first phase of the website was completed and paid for, POA did not acquire title to the site but did obtain a nonexclusive license to the code defining the site. A nonexclusive license is a “personal contractual privilege that does not create a property interest.” Uniform Computer Information Transactions Act § 503 cmt. 3a (Supp. 2008). “A nonexclusive license has been described as nothing more than a promise not to sue. It does not convey property rights in the information to the licensee.” Id. § 102 cmt. 41; see also 3 Melville B. Nimmer and David Nimmer, Nimmer on Copyright § 10.01[C][5] n.73.1 (2008) (noting that a license is, “in legal contemplation, merely an agreement not to sue the licensee for infringement”). Without a property interest in the website, POA cannot sustain a common law conversion claim and is thus entitled to no relief on its action as pleaded.
A licensee is not without a remedy, however. A nonexclusive license is an implied-in-fact contract, I.A.E., Inc. v. Shaver, 74 F.3d 768, 776 (7th Cir. 1996); Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 559 n.7 (9th Cir. 1990), and it becomes “irrevocable if supported by consideration.” 3 Nimmer, supra, § 10.02[B][5]; see also Lulirama Ltd., Inc. v. Axcess Broad. Servs., Inc., 128 F.3d 872, 882 (5th Cir. 1997) (“A nonexclusive license may be irrevocable if supported by consideration.”). Moreover, “[c]ourts regularly invoke the principle that a copyright licensor shall not do anything which would interfere with the licensee’s right to enjoy the fruits of the license.’” 1 Paul Goldstein, Goldstein on Copyright, § 5.3.4.1b (3d ed. 2005) (quoting Viacom Intl., Inc. v. Tandem Prods., Inc., 368 F. Supp. 1264, 1274 (S.D.N.Y. 1974), aff’d, 526 F.2d 593 (2d Cir. 1975)). “A grantor’s breach of its obligations under a copyright contract will entitle the grantee to recover damages, to obtain injunctive relief and, if the breach is material, to rescind the contract.” Id. § 5.3.5. There is no dispute in this case that the agreed price of the first version of the website was paid in full. POA therefore acquired an irrevocable license in the website which Gray Loon dishonored when it performed its destructive updates.
Gray Loon may have been justified in taking the site offline after POA failed to pay its hosting fees. But POA, by neglecting to pay the hosting fees, did not forfeit its license to the original website code and content. The majority observes that POA did not request a copy of the first phase website files. This does not relieve Gray Loon of its responsibility to preserve the initial version of the website that had been licensed to POA. After the companies fell out, POA retained its right to access those files under its nonexclusive license. Gray Loon was the sole custodian of the licensed code and elected to alter the site without preserving phase one before it reached a definitive agreement as to price or scope of work for phase two. As I see it, under these circumstances Gray Loon created the problem that the licensed code no longer existed. It therefore had no right to seize both phases as collateral for its unpaid work on the second phase.
Whether POA had any damages from Gray Loon’s breach is a matter of speculation on this record. POA elected to pursue only a conversion theory, presumably in hopes of treble damages and attorney fees in this dispute over an amount that surely is dwarfed by the cost of this litigation. Similarly, when Gray Loon sued for its fees, POA did not assert breach of its license as either an affirmative defense or set-off. I therefore concur in the result reached by the majority.