GSL Lumonics v. BioDiscovery

Citation: GSL Lumonics, Inc. v. BioDiscovery, Inc., 112 F. Supp. 2d 99 (D. Mass. 2000).

Factual Background
In January 1998, the Life Sciences Division of GSL Lumonics (GSLI), located in Watertown, Massachusetts, entered into a “Confidentiality Agreement” with BioDiscovery, which was not yet in existence but was owned by co-defendant Sohiel Shams; this permitted GSLI to study a pre-release version of BioDiscovery's micro array software known as “ImaGene.” GSLI did not receive the ImaGene source code. Two months later, the parties (BioDiscovery now being an “Inc.”) entered an “OEM/Remarketing Agreement,” which permitted GSLI “to market other image processing software and data extraction software.”

In August 1999, after customer complaints, GSLI decided that the ImaGene program was not that good, and introduced its own micro array analysis software, “Quant-Array.” On October 25, 1999, BioDiscovery, Inc.'s counsel sent a letter to GSLI claiming that QuantArray infringed BioDiscovery's registered copyright. Meetings between GSLI, Shams and BioDiscovery representatives were fruitless, as GSLI tried to find out the basis of the alleged infringement.

On December 10, 1999, GSLI filed this declaratory judgment action; 10 days later, Shams sued GSLI in the Central District of California, alleging, inter alia, copyright infringement and breach of the Confidentiality Agreement.

Trial Court Proceedings
BioDiscovery and Shams then moved to dismiss the Massachusetts action on the ground that BioDiscovery, the original defendant, was not the real party in interest because Shams [copyright owner|owned the copyright]] and had filed his suit before being named a party to the Massachusetts action. This argument was unsuccessful because at no time during the negotiations was Shams' ownership of the copyright disclosed.

In fact, when the Confidentiality Agreement &mdash; which reserved all copyrights to BioDiscovery &mdash; was signed, BioDiscovery, Inc. did not exist; it was a “fictitious business name” used by Shams. The OEM/Marketing Agreement did not mention Shams, but did agree to hold GSLI harmless for all claims that the program infringed any copyright. And the software carried BioDiscovery's copyright notice. Nor did the lawyer's letter to GSLI alleging copyright infringement specifically claim infringement of a BioDiscovery copyright.

Shams argued “repeatedly” that since he is the owner, and filed first, the GSLI action should be dismissed. Not so, said Judge Young. Under Fed. R. Civ. P. 15(a), plaintiff, without court permission, may amend its complaint before a responsive pleading is filed, if it does so within 20 days after service of the initial pleading. GSLI added Shams as a party defendant 12 days after the initial complaint was filed &mdash; two days after Shams filed the California action. Applying Rule 15(c)(2), the Court held that the amendment related back to the original filing. Further, there was no prejudice to Shams, since “he was president of BioDiscovery and thus had immediate knowledge that he was the true party in interest in this action.”

The court then considered whether Shams could be brought into the case under Massachusetts' long-arm statute. He held that Shams had transacted business in Massachusetts, and that the warning letter from counsel and related communications also provided “adequate, reasonable grounds for personal jurisdiction,” citing Nova Biomedical Corp. v. Moller, 629 F.2d 190 (1st Cir. 1980).

However, after an exhaustive examination of the two agreements between GSLI and BioDiscovery, Judge Young concluded that the copyright infringement claim did not arise out of those agreements, and they could not support personal jurisdiction over Shams.

The court also noted:


 * “It is now clear to this Court that BioDiscovery is neither the owner nor the assignee of the copyright in suit…. Although BioDiscovery is likely to be joined in this action when Shams' claims of breach of the Confidentiality Agreement are raised, BioDiscovery's participation in the copyright suit is apparently superfluous. Logically BioDiscovery ought to be dismissed from the case.”