Here it is in its entirety:
Minutes
08/16/2013 9:00 AM
- Prior to court Counsel was provided the following Tentative Ruling: This is a dispute involving certain intellectual property rights wherein TMM, Inc. ( TMMI ) and Digital Focus, Inc. ( DFI ) (collectively Plaintiffs ) are suing Lawrence Panik, Dimension, Inc., Digital Focus Media, Inc. ( DFMI ), Bruce Hoyt, Lyman Hurd, and John Elton (collectively Defendants ) for: (1) Conversion; (2) Defamation of Title; (3) Misappropriation of Trade Secrets; (4) Intentional Interference with Contract; (5) Intentional Interference with Contract; and (6) Unfair Competition. Plaintiffs seek declaratory relief from the Court finding that Plaintiffs hold all rights to the intellectual property rights at issue. Plaintiffs also request a permanent injunction enjoining Defendants from transferring, selling, licensing or conveying the said property rights. The intellectual property right at issue here is a license to use computer codes related to fractal compression technology for videos also known as the PVS/SGI Source Code (hereinafter the Source Code ). It is undisputed that the Source Code was originally owned by Iterated Systems, Inc. ( ISI ). According to Defendants, ISI granted the original license to DFI and the subsequent chain of assignment of the license looks like this: DFI (Plaintiff) -> DFMI (Defendant) -> Panik (Defendant) -> Dimension (Defendant) However, according to Plaintiffs, the chain of assignment looks like this: DFI (Plaintiff) -> TMMI (Plaintiff) Defendants allege that DFMI obtained the license for the Source Code from DFI on September 20, 2000 by way of a corporate asset purchase whereby all assets of DFI (a sub-chapter S Corp.) including the Source Code were transferred to DFMI a newly formed Corp. This was done so that one of the conditions in the license agreement (i.e. a stock issuance to ISI) could be completed. The officers of DFI became the officers of DFMI so that Thomas Simpson became the President of both companies. It was Simpson who executed an addendum to the license which transferred DFI license rights to DFMI and DFMI assumed the obligations under the license agreement. At the time, it was hoped that DFMI and TMMI would partner in development of new technology. That never happened and instead there followed a bevy of lawsuits including a shareholder derivative suit by DFMI s shareholders, a suit by DFMI against Simpson and a suit by DFMI against TMMI. When the dust settled DFMI began working on developing technology from the Source Code. This was very costly, and Defendant Panik loaned EFMI substantial amounts of money. The loan was secured by DFMI assets including DFMI s license to the Source Code. Panik eventually foreclosed on his collateral, acquiring all of the assets of DFMI. Panik then transferred the license rights to Defendant Dimension. On the other hand, TMMI argues that it obtained the license for the Source Code in 1993 directly from ISI via a license agreement. (Defendants contend that the 1993 license agreement between ISI and TMMI was replaced by a 1996 agreement which extinguished all prior agreements between the companies, and thereafter TMMI breached the 1996 agreement and lost its license in March of 1996.) Defendants also argue that TMMI did not ever have rights to the Source Code because the 1993 license agreement only granted TMMI the rights to its own derivative works and the Source Code was developed by ISI not TMMI. Plaintiffs dispute Defendants understanding of the 1996 agreement and that their rights from the 1993 agreement were not extinguished by the 1996 agreement because the 1996 agreement was unrelated to the 1993 agreement. (The Court notes that the 1996 agreement attached as an exhibit by Defendants to their motion, specifically states in not one, but two places, that it is the intent of the parties to terminate their 1993 Agreement , and any and all other agreements by or among them and to substitute the 1996 agreement.) They further argue that the Source Code which is the subject of this litigation is merely variation of the 1993 source code. Additionally, Plaintiff s maintain that DFI was acquired by TMMI on June 8, 2012 and that there is no evidence of any assignment or merger between DFI and DFMI. If there was no assignment or purchase of DFI s assets, then, Plaintiffs contend, when TMMI acquired DFI, it also acquired the license. (The Court notes that the Assignment and Second Addendum to the March 28, 2000 PVS/SGI Video License Agreement signed by DSI s President, Tom Simpson, on September 20, 2000, provides that DFI has assigned the Agreement to DFMI as mart of a merger in which DFMI acquired all of the asses of DFI.) Defendants seek dismissal or in the alternative, summary judgment. The motion to dismiss is based on Defendants belief that Plaintiffs claims are time-barred by the statute of limitations. Their summary judgment motion is based on matters outside the pleadings wherein they contend as a matter of law that Plaintiffs do not currently hold any intellectual property rights with regard to the PVS/SGI Source Code. Defendants argue that TMMI license to use the Source Code was cut off by an agreement between ISI and TMMI. Defendants seek to add ISI as an indispensible party if their case terminating motion is not granted. The Reply was not considered by the Court because it was filed on August 9, in violation of the Court s order confirming the stipulation of the parties that the Reply would be due on August 2, 2013. Nevada Rule of Civil Procedure 12(b)(5) states that a complaint may be dismissed for plaintiff s failure to state a claim upon which relief can be granted. A complaint should only be dismissed if it appears beyond a doubt that plaintiff could prove no set of facts, which, if true, would entitle him to relief. Buzz Stew, LLC v. City of N. Las Vegas, 124 Nev. 224, 228, 181 P.3d 670, 672 (2008). Trial courts are required to construe the pleadings liberally and accept all factual allegations in the complaint as true. Blackjack Bonding v. City of Las Vegas Mun. Court, 116 Nev. 1213, 1217, 14 P.3d 1275, 1278 (2000). Additionally, every reasonable inference should be drawn in the plaintiff's favor. Sanchez ex rel. Sanchez v. Wal-Mart Stores, Inc., 125 Nev. 818, 823, 221 P.3d 1276, 1280 (2009). If, in a 12(b)(5) motion to dismiss, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment. See NRCP 12(b). Here, both parties have presented matters outside the pleadings. Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. NRCP 56. In seeking summary judgment of adverse claims, the moving party bears the burden of producing evidence that negates an essential element of the other party s claim or showing that there is an absence of evidence to support the other party s claim. Cuzze v. Univ. and Community College System of Nevada, 123 Nev. 598, 172 P.2d 131 (2007). In Wood v. Safeway, 121 Nev. 724, 121 P.3d 1026 (2005), the court held that where a motion for summary judgment is made and properly supported, the non-moving party may not rest upon general allegations and conclusions, but must, by affidavit or otherwise, set forth specific facts demonstrating the existence of a genuine factual issue. In this case, Defendants have properly supported its motion for summary judgment.
- Here, Defendants argue that Plaintiffs Amended Complaint should be dismissed because all claims are time-barred. Statute of limitation periods are designed to provide a concrete time frame within which a plaintiff must file a claim and after which a defendant is afforded a level of security. See Petersen v. Ruen, 106 Nev. 271, 274, 792 P.2d 18, 19 (1990). Whether the statute of limitations has lapsed is a question of law only if the facts are uncontroverted. Day v. Zubel, 112 Nev. 972, 977, 922 P.2d 536, 539 (1996). Plaintiffs are suing Defendants under theories of: (1) Conversion; (2) Defamation of Title; (3) Misappropriation of Trade Secrets; (4) Intentional Interference with Contract; (5) Intentional Interference with Contract; and (6) Unfair Competition. Claims Four and Five arise out of different agreements. Conversion has a three year statute of limitations period. See NRS 11.190(3)(c). Defamation is two years. See NRS 11.190(4)(c). For misappropriation of trade secrets, a claim must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered. See NRS 600A.080. Intentional interference with business interests are subject to the three-year statute of limitations pursuant to NRS 11.190(3)(c). See Stalk v. Mushkin, 125 Nev. 21, 27, 199 P.3d 838, 842 (2009). Unfair competition has a three year limitations as it related to injuries to personal property. NRS 11.190(3)(c). Defendants Exhibit A6 indicates that on September 20, 2000 Plaintiff DFI and ISI signed an addendum to their PVS/SGI license agreement whereby both parties warrant that DFI had assigned the underlying license agreement to Defendant DFMI as part of a merger in which DFMI acquired all assets of DFI. The document was signed by the then President of DFI, Tom Simpson. The document titled PVS/SGI Video License Agreement appears clear and unambiguous. It states: (a) DFI has assigned the Agreement to DFMI as part of a merger in which DFMI acquired all the assets of DFI; and (b) DFMI has agreed in writing to assume all the obligations of DFI. (b) Such derivatives shall be provided to DFMI as mutually agreed but in any case prior to the termination of this [Section] Once received by DFMI, such derivatives will be included as part of the PVS/SGI Source Code. See Defendants Exhibit A6. Plaintiffs now argue, supported by an affidavit from Tom Simpson, that agreement addendum was a falsehood inserted to mislead potential investors in DFMI so that they would invest. The Court finds this admission of intent to commit securities fraud rather surprising. Nonetheless, it certainly demonstrates that Plaintiffs had actual knowledge of Defendants allegedly wrongful acquisition of the intellectual property as far back as 2000. See In re Amerco Derivative Litig., 252 P.3d 681, 695 (Nev. 2011) (holding that a corporation can acquire knowledge or receive notice through its officers). There is additional evidence that Simpson and therefore Plaintiffs were on notice when DFMI sued Simpson for a copy of the PVS/SGI Source Code in 2000. That suit showed Defendants intent to assert an ownership interest in the disputed license. See Defendants Exhibit A10. Plaintiffs should have brought a claim within at most three years (two years for Defamation); by September 2003. Moreover, this knowledge was imputed onto Defendant TMMI because in 2012, TMMI acquired DFI. Accordingly, if the Court finds that DFI is barred by the statute of limitations, TMMI is likewise barred as DFI s successor in interest. TMMI only has a claim by virtue of its acquisition of DFI and should be statutorily precluded from bringing suit if DFI is precluded from doing the same. These facts appear incontrovertible and therefore the Court should rule as a matter of law that Plaintiffs claims are barred by the statute of limitations. The analysis does not end there. In some circumstances, the statute of limitations period may be tolled. Under Nevada law, criteria in determining whether statute of limitations should be equitably tolled include: (1) diligence of claimant; (2) claimant's knowledge of relevant facts; (3) claimant's reliance on authoritative statements that misled claimant about nature of claimant's rights; (4) any deception or false assurances on part of party against whom claim is made; (5) prejudice to defendant that would actually result from delay during time limitations period is tolled; and (6) any other equitable considerations appropriate in particular case. Wisenbaker v. Farwell, 2004, 341 F.Supp.2d 1160. Each factor will be addressed in turn. Regarding the diligence factor, Plaintiffs cannot be described as acting diligently where they waited thirteen years to challenge an agreement they were a party to. This weighs against tolling. As to the knowledge of relevant facts factor, Plaintiffs seem to argue that they only became aware of the relevant facts when Defendants were recently featured in a newspaper as developing the fractal compression technology and when Defendants were issued a Patent in 2013. The Court should find this unpersuasive because the facts show that Defendants maintained a public website where it was publicly known since at least 2003 that they were developing the fractal compression technology Plaintiffs purportedly believe was theirs. This also weighs against tolling. Regarding the reliance and misleading factor, there are no facts showing that Plaintiffs were misled in any way by Defendants. Defendants have consistently held out the disputed intellectual property as being theirs. This again weighs against tolling. Next, as to the deception factor, there is no evidence that false assurances were uttered or deception was employed by Defendants. This weighs against tolling. Regarding prejudice to the defendant consideration, Defendants would be extremely prejudiced in that they have apparently expended millions of dollars and many years on this project. This again weighs against tolling. Lastly, there appear to be no equitable considerations beyond the ones already addressed in the aforementioned factors. Therefore, for the foregoing reasons, the Court should find that the statute of limitations was not tolled. For the aforementioned reasons, the Court should GRANT Defendants motion for summary judgment on the basis that the action is barred by the statute of limitations. Granting summary judgment would then moot the motions of Defendants Hoyt, Hurn and Elton to Dismiss for Lack of Personal Jurisdiction. DEFENDANT'S MOTION TO DISMISS OR IN THE ALTERNATIVE MOTION FOR SUMMARY JUDGMENT Arguments by Counsel regarding whether there was wrong doing, whether there were different contracts and if the language had different subject matter, whether the original terms of the contract were in the addendums. COURT stated FINDINGS noting there was a potential statute of limitations issue and, ORDERED, Motion DENIED WITHOUT PREJUDICE to allow limited discovery to be conducted. DEFENDANTS BRUCE HOYT, LYMAN P. HURD, AND JOHN ELTON'S MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION AND FOR FAILURE TO STATE A CLAIM Arguments by Counsel regarding whether there were jurisdictional issues. COURT stated FINDINGS noting the Plaintiff had made a prima facie showing based on jurisdiction and this Motion is premature at this time and, ORDERED, Motion DENIED at this time. Following statements by Counsel, COURT FURTHER ORDERED, Discovery to be limited to the statute of limitations issue and whether the statute of limitations had run with a 90 day deadline to conduct Discovery. COURT NOTED any disputes would need to be addressed with the Discovery Commissioner. Mr. Krieger to prepare the Order and provide to opposing counsel prior to submission to the court.
