Nonexclusive Copyright Licensee Lacked Standing; Case Dismissed and Attorneys Fees Awarded

HyperQuest, Inc. v. N’Site Solutions, Inc. (Jan. 19, 2011, 7th Cir.) The Seventh Circuit affirms the trial court that held that a nonexclusive licensee lacked standing to lodge a lawsuit.

The case centered around custom software in the field of consumer automobile insurance that Unitrin Direct purchased from N’Site. In 2008, the plaintiff, HyperQuest, sued both N’Site and Unitrin Direct for copyright infringement alleging that the software Unitrin Direct purchased was a derivative work of the eDoc software; and for standing HyperQuest claimed to be an exclusive licensee from Safelite Group, Inc. of software called eDoc.

Following the chain of title to the eDoc software gets complicated. Quivox Systems granted N’Site Solutions, Inc. a non-exclusive license to certain copyrighted software that is used to process consumer automobile insurance claims. Quivox later fell on hard times and sold its assets to Safelite Group, Inc., which continues to own the copyright for the eDoc software. Eventually, Safelite granted rights in the eDoc program to HyperQuest; when it did so, the parties acknowledged the continued existence of the N’Site license and they agreed that Safelite itself would retain certain rights to use and develop the software.

This case had its origins in a dispute between N’Site and HyperQuest over the terms of these licenses. To make matters worse, at least from HyperQuest’s vantage point, N’Site sold the source code to its modified soft- ware to Unitrin Direct Insurance Company in 2006. HyperQuest filed suit on January 22, 2008, against both N’Site and Unitrin, asserting that each had infringed the copyrighted software. The district court concluded that HyperQuest held only a non-exclusive license and thus lacked statutory standing to sue and dismissed HyperQuest’s case with prejudice. Later, the court awarded attorneys’ fees and costs to N’Site and Unitrin in the amount of $134,958.42. HyperQuest has appealed, challenging both the conclusion that it was not an exclusive licensee (and thus, not entitled to assert a claim for copyright infringement) and the attorneys’ fee award. Unitrin cross-appealed from the district court’s decision to reduce the amount of the fees it had requested. The Seventh Circuit found no error and affirmed the lower court in its entirety.

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