Customer Loses Benefit of a Covenant Not to Sue Because of Third-Party Technology Modifications

Posted on February 8, 2007 by R. David Donoghue

Civix-DDI, LLC v. National Assoc. of Realtors, No. 05 C 6869, 2007 WL 178318 (N.D. Ill. Jan. 22, 2007) (St. Eve, J.).

Judge St. Eve granted defendant Hotels.com summary judgment that certain of its alleged activities are protected by plaintiff Civix's covenant-not-to-sue with Hotels.com covenant-provider MapQuest and denied summary judgment as to activities that might be covered by Civix's similar covenant-not-to-sue with Hotels.com content-provider Navteq.  Another opinion on a similar issue with defendant Yahoo in the case is discussed in this post.  The Court held that both covenants prevented suits against the licensee's customers or end users with respect to or relating to the licensee's technology.  But in the case of the Navteq agreement, there was an issue of fact as to whether a third party in the stream of commerce between Navteq and Hotels.com added independent value to Hotels.com thereby giving Hotels.com more than the Navteq technology and kept Hotels.com from benefiting from the covenant-not-to-sue.  In the case of the MapQuest technology, there was no such third party in the stream of commerce and, therefore, no question that Hotels.com was protected by MapQuest's covenant-not-to-sue.

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Parties Need to Explain All of Their Summary Judgment Arguments And Respond to Counterarguments

Posted on December 14, 2006 by R. David Donoghue

Civix-DDI, LLC v. National Assoc. of Realtors, No. 05 C 6869, 2006 WL 3210504 (N.D. Ill. Nov. 6, 2006) (St. Eve, J.).

Judge St. Eve denied defendant Yahoo! Inc.'s ("Yahoo") summary judgment motion which argued that plaintiff Civix-DDI's ("Civix") patent infringement claims were barred by Civix's covenant not to sue in its settlement agreement (the "Settlement Agreement") with third party Navteq, a provider of relevant navigation data to Yahoo.  The Court held that Yahoo was a third party beneficiary of the Settlement Agreement because Yahoo purchased the data at issue from Navteq and that the Settlement Agreement protected such third parties from suit.  But the Court found an issue of material fact as to whether each of Yahoo's accused activities "relate in any way" to the Navteq technology and information, as required by the covenant not to sue. 

Practice Tip:  Make sure to both make all of your arguments and respond to each of your opponent's arguments.  In this opinion, the Court repeatedly noted that neither party offered sufficient arguments to allow for a definitive ruling regarding the scope of the covenant not to compete.  For example, the Court stated:

Civix and Yahoo! offer insufficient arguments to support their respective positions and they do not rebut each other's arguments as to whether the scope of "with respect to or in any way relating" is a "function" within a "service" or an entire "service."

It is much harder for a court to rule in your favor if you do not explain (and support) why it should.

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