Opinion ID: 202130
Heading Depth: 3
Heading Rank: 2

Heading: Teragram's Appeal

Text: 47 Teragram appeals from the district court's entry of summary judgment in favor of ScreamingMedia as to the Entity Extraction Software. Teragram's theory on appeal is that ScreamingMedia was in prior material breach of contract on the Entity Extraction Software by failing to pay licensing and support fees for that software. 48 The record shows that the latest, Windows-compatible versions of the Entity Extraction Software were delivered to ScreamingMedia on January 21, 2002. Teragram states that it does not challenge the [district] court's conclusion that each new update of the Entity Extraction Software gave rise to a new 30 day warranty period. Nor does it challenge, on appeal, the use of the delivery date of the Windows, rather than the LINUX, versions of the software. Accordingly, there is no dispute that the letter Teragram received from ScreamingMedia on February 20, 2002 — thirty days after the delivery of the Windows-versions of the Entity Extraction Software — constituted a valid and timely notice of an alleged material failure of that software to perform as warranted and triggered Teragram's obligation to cure under Section 7. There is also no dispute that Teragram failed to make any efforts to correct [the] material failure, as required by the warranty. In fact, Teragram stipulated that the Entity Extraction Software did not `perform substantially in accordance with the Documentation' within the meaning of [Section] 7 of the Agreement, and that [a]fter February 20, 2002, Teragram did not provide any support services to ScreamingMedia in connection with the Entity Extraction software. The only conclusion a reasonable factfinder could draw on these facts is that ScreamingMedia was within its rights to terminate pursuant to Section 4. 11 49 Teragram attempts to ward off this result by arguing that ScreamingMedia breached first with respect to the Entity Extraction Software by failing to pay for it. It suggests that under the Agreement, payment was due 30 days following the Delivery Date of the software; that the term Delivery Date referred to the initial date of delivery of the software and not to the dates of delivery for any subsequent updates; and that by failing to pay, ScreamingMedia was in material breach as of January 10, 2002, thirty-one days after the first, LINUX-compatible versions of the Entity Extraction Software were delivered on December 10, 2001. Teragram says this failure to pay released it from having to perform under the Agreement. Neither a reasonable construction of the contract nor the record itself bears out this theory. 50 This dispute turns on what constitutes the Delivery Date of the software. The Agreement itself stated that the Delivery Date is the date such Teragram Product is delivered to Licensee. This means that the earliest date that payment for the Entity Extraction Software could have been due is February 20, 2002, thirty days after the latest versions of the Entity Extraction Software were delivered. Teragram has already conceded that, for purposes of the warranty, the delivery date of a given set of Teragram Software is the date on which the latest version(s) of that software is delivered to ScreamingMedia. We see no reason to construe delivery differently for the purpose of determining when payment was due. Moreover, Teragram did not send an invoice to ScreamingMedia for the products until ScreamingMedia requested it on December 18, 2001 — almost a month after when, according to Teragram's theory, payment for the Summarization Software would have been due. 12 Further, Teragram provided ScreamingMedia with two additional deliveries of the Entity Extraction Software after January 10, 2002, the date on which, according to Teragram's theory, ScreamingMedia would have been in breach. Finally, the record shows that Teragram did not at any point prior to February 20, 2002 communicate to ScreamingMedia its alleged understanding that ScreamingMedia was in breach for failure to pay; indeed, its e-mail correspondence as late as February 19, 2002 had been cordial. These facts are consistent only with our reading of the contract. 51 Because ScreamingMedia was not in prior material breach of the Agreement with respect to the Entity Extraction Software, Teragram was obligated to provide conforming software and support under the terms of Sections 6 and 7 of the Agreement. Having failed to do so, it is in material breach of the warranty and the Agreement, and no reasonable factfinder could conclude otherwise.