United States District Court, E.D. Wisconsin
DECISION AND ORDER
WILLIAM E. DUFFIN U.S. MAGISTRATE JUDGE.
Medical Review Systems, Inc. develops and licenses medical
billing software, including software called
“ClearingMagic” (ECF No. 197, ¶¶ 2-3),
which enables medical providers to submit claims for payment
(ECF No. 197, ¶ 3). CompuClaim assists school districts
with getting claims submitted to state Medicaid agencies for
reimbursement. (ECF No. 197, ¶ 17.)
Congress passed the Health Insurance Portability and
Accountability Act (HIPAA). Pub.L. 104-191, 110 Stat. 1936;
(ECF No. 197, ¶ 5.) Relevant here is Title II of HIPAA
and its “Administrative Simplification”
provisions. (Id.); see also 42 U.S.C.
§ 1320d - 1320d-8. Pursuant to Title II, the American
National Standards Institute (ANSI) promulgated certain
uniform standards for the electronic representation of
certain transactions (including financial transactions)
within the healthcare industry. (ECF No. 197, ¶ 5.)
industry was given until approximately 2003 to become
compliant with the new requirements of HIPAA, including the
new ANSI standards that were being developed for the
electronic submission of claims for payment. (ECF No. 197,
¶ 6.) The advent of the requirement for ANSI claims
submission, and the complexity of the ANSI standards, created
a market and demand for translation software that would
enable users to take output in their current formats and
translate it into the new HIPAA required ANSI formats. (ECF
No. 197, ¶ 7.)
2005 and early 2006 Empire updated and modified its software
“to take into account the new formatting requirements
created by HIPAA and other programs.” (ECF No. 197,
¶ 8.) In 2006 Empire began to refer to the product as
ClearingMagic. (Id.) ClearingMagic is designed to
work with other Empire software products, including its
EligibilityMagic software, which it created in 2009 and which
makes electronic queries of insurance eligibility. (ECF No.
197, ¶ 9.)
CompuClaim approached Empire with its plan to create a
website that would enable school districts to submit claims
for payment to state Medicaid agencies. (ECF No. 197, ¶
11.) In July 2010 CompuClaim and Empire entered into a
Software License and Support Maintenance Agreement (hereafter
referred to as the License Agreement). (ECF No. 197, ¶
12.) The License Agreement covered at least the ClearingMagic
software; the parties dispute whether it covered other
software, including EligibilityMagic. (ECF No. 197, ¶
15.) Also in July 2010 the parties entered into an agreement
entitled “CompuClaim Web Portal Discovery
Proposal” whereby the parties agreed to explore what it
would take to develop the sort of website CompuClaim
envisioned. (ECF No. 197, ¶ 21.)
September 2010 CompuClaim and Empire entered into a
“Web Integration Agreement” (titled and hereafter
referred to as “Addendum B”). (ECF No. 197,
¶ 28.) In simplistic terms, under Addendum B Empire
agreed to create the source code (referred to here as the
CMWebSite source code) necessary for CompuClaim's website
(referred to here as MeduClaim). (ECF No. 197, ¶¶
28-29.) Addendum B also extended the term of the License
Agreement from three to five years. (ECF No. 197, ¶ 41.)
However, CompuClaim ceased paying under the License Agreement
after three years. (ECF No. 197, ¶ 158.)
assist in the creation of the CMWebSite source code Empire
hired Jeff Berg as an independent contractor. (ECF No. 191,
¶ 31.) Empire delivered the operable website to
CompuClaim in early 2011. (ECF No. 197, ¶ 62.)
between February and August 2011 Berg began working as an
independent contractor for CompuClaim. (ECF No. 191, ¶
37.) Although working for CompuClaim, Berg continued to work
out of Empire's offices until February 2012. (ECF No.
197, ¶ 74.) When Berg ceased to work at Empire's
offices an Empire employee, Scott Strommen, removed Empire
software from Berg's computer. (ECF No. 191, ¶¶
59-60.) However, Strommen did not remove the CMWebSite source
code from Berg's computer. (ECF No. 191, ¶ 60.)
Thus, Berg retained access to the CMWebSite source code and
could modify it. (ECF No. 191, ¶¶ 41-42.)
time MeduClaim was created it was for the ANSI 4010 format,
but in 2012 electronic claim submissions had to comply with a
new format, ANSI 5010. (ECF Nos. 191, ¶ 52; 197,
¶¶ 108-10.) Empire charged CompuClaim for work to
update the software to comply with the ANSI 5010 format (ECF
No. 191, ¶ 54) in accordance with a provision of the
License Agreement regarding providing custom programming.
(ECF No. 197, ¶ 111). CompuClaim paid for the work (ECF
No. 197, ¶ 123) but argues the update should have been
included under the License Agreement as “software
maintenance, ” which the License Agreement defines to
include “[c]hanges to the software which are necessary
as the result of changes in implementation guides published
by centers for Medicare and Medicaid, CMS.” (ECF No.
191, ¶ 53.) CompuClaim's customers began to
experience problems with the software in January 2012, which
CompuClaim attributes to problems in the ANSI 5010 update.
(ECF No. 191, ¶ 55.)
leaving Empire, Berg and a CompuClaim employee began to
develop a replacement version of the website-related
software, which CompuClaim launched in August 2012. (ECF No.
197, ¶¶ 77-78.) This replacement version was
developed using the CMWebSite source code as a starting
point. (ECF No. 197, ¶ 81.) CompuClaim admits that it
never stopped using the CMWebSite source code but contends
that it owns that code. (ECF No. 197, ¶¶ 82, 85,
filed this action on November 13, 2013, alleging that
CompuClaim breached the License Agreement in a number of
ways, including by not paying license fees after July 2013.
(ECF No. 1.) Empire also sought a declaration that CompuClaim
had breached its obligations under the License Agreement and
has a continuing obligation to perform until the end of the
agreement. (Id.) CompuClaim filed a number of
counterclaims. (ECF No. 7.) It also sought declaratory
relief, requesting that the court declare that Empire had
materially breached its obligations under the parties'
various agreements and that the agreements were terminated
and CompuClaim was relieved of its obligations under them.
August 17, 2015, Empire applied for and subsequently received
a copyright registration regarding the CMWebSite source code.
(ECF No. 197, ¶ 68.) It then amended its complaint to
add claims for copyright infringement and for violation of
the Digital Millennium Copyright Act (DMCA). (ECF No. 60.)
Because the five-year term of the license agreement had
expired, Empire's amended complaint conceded that its
request for declaratory relief was now moot. (Id.)
In response, CompuClaim added more counterclaims. (ECF No.
November 30, 2017, both parties moved for summary judgment.
(ECF Nos. 162, 165.) Empire seeks summary judgment on its
claims against CompuClaim as follows:
- CompuClaim infringed Empire copyright in the CMWebSite
source code; and
- The length of the License Agreement is five (rather than
three) years. Empire also sought summary judgment on all of
CompuClaim's counterclaims (except for the tortious
interference claim) on the ground that they are barred by a
release previously provided it by CompuClaim. It also sought
dismissal of several of the counterclaims on other grounds.
CompuClaim sought summary judgment on all three of
Empire's remaining claims.
6, 2018, the parties filed a Joint Notice of Settlement of
Counterclaims. (ECF No. 213.) The notice states that the
settlement is of CompuClaim's counterclaims only and that
Empire's claims against CompuClaim remain pending.
CompuClaim's counterclaims were formally dismissed by way
of stipulation filed on June 18, 2018. (ECF No. 214.)
on the parties' motions is complete. All parties have
consented to have this court enter final judgment. (ECF No.
SUMMARY JUDGMENT STANDARD
court shall grant summary judgment if the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). “Factual disputes are
‘material' only when they ‘might affect the
outcome of the suit under the governing law'” and
“‘genuine' only ‘if the evidence is
such that a reasonable jury could return a verdict for the
[nonmovant].'” Oest v. Ill. Dep't of
Corr., 240 F.3d 605, 610 (7th Cir. 2001) (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)). “The burden on the moving party may be
discharged by demonstrating ‘that there is an absence
of evidence to support the nonmoving party's
case.'” Id. (quoting Celotex Corp. v.
Catrett, 477 U.S. 317, 325 (1986)). “The
controlling question is whether a reasonable trier of fact
could find in favor of the non-moving party on the evidence
submitted in support of and [in] opposition to the motion for
summary judgment.” White v. City of Chi., 829
F.3d 837, 841 (7th Cir. 2016).
Digital Millennium Copyright Act
DMCA prohibits the unauthorized removal or alteration of any
“copyright management information … knowing, or
… having reasonable grounds to know, that it will
induce, enable, facilitate, or conceal an infringement of any
right under [Title 17 of the United States Code].” 17
U.S.C. § 1202(b)(1).
[T]he term “copyright management information”
means any of the following information conveyed in connection
with copies or phonorecords of a work or performances or
displays of a work, including in digital form, except that
such term does not include any personally identifying
information about a user of a work or of a copy, phonorecord,
performance, or display of a work:
(1) The title and other information identifying the work,
including the information set forth on a notice of copyright.
(2) The name of, and other identifying information about, the
author of a work.
(3) The name of, and other identifying information about, the
copyright owner of the work, including the information set
forth in a notice of copyright.
(4) With the exception of public performances of works by
radio and television broadcast stations, the name of, and
other identifying information about, a performer whose
performance is fixed in a work other than an audiovisual
(5) With the exception of public performances of works by
radio and television broadcast stations, in the case of an
audiovisual work, the name of, and other identifying
information about, a writer, performer, or director who is
credited in the audiovisual work.
(6) Terms and conditions for use of the work.
(7) Identifying numbers or symbols referring to such
information or links to such information.
(8) Such other information as the Register of Copyrights may
prescribe by regulation, except that the Register of
Copyrights may not require the provision of any information