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Corepex Technologies, Inc. v. WH Administrators, Inc.

United States District Court, E.D. Virginia, Alexandria Division

October 19, 2017



          Leonie M. Brinkema United States District Judge

         Before the Court is defendant WH Administrators' ("WHA" or "defendant") Motion for Attorney's Fees [Dkt. No. 113], in which WHA asks the Court to award it $1, 382, 567.90 in attorney's fees and $171, 432.84 in costs. Plaintiff Corepex Technologies ("Corepex" or "plaintiff) argues that WHA is not entitled to attorney's fees, that the amount of WHA's fee request is unreasonable, and that the Copyright Act does not allow for the imposition of nontaxable costs. For the reasons that follow, defendant's motion will be DENIED.

         I. BACKGROUND

         In this civil action, Corepex alleged that after the parties' contractual relationship broke down, WHA committed copyright infringement by continuing to use two software programs, ETR and ETRC, that Corepex had developed for WHA. See Compl. [Dkt. No. 1] ¶¶ 16-19. WHA asserted a variety of defenses, including that it has a nonexclusive, implied license to continue using the software. Def. Sum. Judg. Mem. [Dkt. No. 65] 21-24.

         WHA is a company that helps employers administer their health insurance programs, including by tracking employee eligibility for benefits under the Patient Protection and Affordable Care Act. See Id. at 2; Pl. Sum. Judg. Opp. [Dkt. No. 100] 5; Turner Decl. [Dkt. No. 67] ¶ 2. As such, WHA maintains databases of employment and healthcare information for thousands of its customers' employees. See Def. Sum. Judg. Mem. 2; Pl. Sum. Judg. Opp. 5; Turner Decl. ¶2. Corepex is an information technology ("IT") company that provides a variety of software development, IT consulting, and related services to clients. See Def. Sum. Judg. Mem. 2-3; Pl. Sum. Judg. Opp. 5; Compl. Ex. 1 [Dkt. No. 1-1] (Interim Independent Contractor Agreement) 1.

         Corepex and WHA's relationship began in early 2015. Around that time, WHA's CEO, Brendan Turner ("Turner"), was worried that WHA's internal processes for managing customers' information were too slow to allow the business to grow in the way that he wanted. See Turner Decl. ¶ 5. Turner began reviewing various existing software products and meeting with providers to see if they would satisfy WHA's needs. See Id. In January 2015, WHA suffered a server malfunction that cut off access to its database. See Id. WHA's IT Director, Gilbert Veney, recommended hiring Corepex to restore the data and set up a new database. See Def. Sum. Judg. Mem. 5; Pl. Sum. Judg. Opp. 5; Turner Decl. ¶ 4. At some point while the parties were working together to restore WHA's data, they began discussing the type of software product that WHA was looking to acquire and had a variety of meetings to go over potential ideas.

         At some point in March, WHA decided to hire Corepex to develop the software programs it wanted and, on March 31, 2015, WHA and Corepex executed an Interim Independent Contractor Agreement ("Interim Agreement"), which is attached to the Complaint. See Compl. Ex. 1. Under the Interim Agreement, Corepex agreed to provide the following services to WHA: (1) "new software development support, " including "working with [WHA] to identify and document priorities"; (2) "existing software development support, " including "making changes to existing software, as well as establishing change controls and procedures for updating systems in place"; and (3) "operational and technical support for recurring data loads." Id. at 7. In return, WHA agreed to pay Corepex $150/hour, based on written invoices submitted monthly from Corepex to WHA. Id. As the name suggests, the Interim Agreement was meant to be a stand-in agreement while the parties negotiated a future "Definitive Agreement." Id. at 1. The Interim Agreement specifically deferred "intellectual property ownership and access" issues to the Definitive Agreement. Id. at 4.

         After executing the Interim Agreement, WHA and Corepex began working on the software development. A month after the Interim Agreement was signed, Corepex delivered a version of the ETR database to WHA for internal deployment. See Def. Sum. Judg. Mem. 10; Pl. Sum. Judg. Opp. 7; Williams Decl. [Dkt. No. 66] Ex. 4 (Corepex 30(b)(6) Deposition), at 263:2-:4. After the ETR database went live, the parties began working on a client-facing version of the software. In June 2016, the ETRC database was launched. See Def. Sum. Judg. Mem. 10; Pl. Sum. Judg. Opp. 7; Williams Decl. Ex. 4 (Corepex 30(b)(6) Deposition), at 263:5-:7.

         After the ETR and ETRC software had been delivered, WHA and Corepex had a billing dispute. As a result, on October 24, 2016, counsel retained by WHA sent a letter to Corepex informing Corepex that WHA believed it had materially breached the Interim Agreement. See Williams Decl. Ex. 43. Although the parties had been working under the Interim Agreement for over 18 months, no definitive agreement had been signed. Pursuant to the terms of the Interim Agreement, WHA gave Corepex 60 days to cure the alleged breach. See id Instead of curing the alleged breach, Corepex's counsel responded on November 14, 2016 by giving the Interim Agreement's required ten-day notice of termination, see Compl. Ex. 4. After sending this notice, Corepex obtained copyright registration for both the ETR and ETRC programs. See Id. Ex. 2 (registering ETR on November 16, 2016); id Ex. 3 (registering ETRC on the same day).

         On November 18, 2016, four days after Corepex sent notice of termination, WHA sued Corepex in state court, alleging fraud and breach of contract claims related to their billing dispute.[1] See Def. Sum. Judg. Mem. 15; Pl. Sum. Judg. Opp. 9; Sheil Decl. [Dkt. No. 68] Ex. 3. Corepex counterclaimed against WHA for breach of contract, claiming that WHA was required to pay Corepex under the outstanding invoices (the ones that WHA claimed were fraudulent). See Def. Sum. Judg. Mem. 15; Pl. Sum. Judg. Opp. 9; Sheil Decl. Ex. 4.

         On January 10, 2017, Corepex filed the current action, alleging two counts of copyright infringement based on WHA's continued use of the ETR (Count I) and ETRC (Count II) software programs and one count of vicarious infringement based on WHA's allowing its clients to use the ETRC software (Count III). On September 1, 2017, the Court denied summary judgment to plaintiff but granted it to defendant, finding that the undisputed facts established that WHA had at least an implied license to continue using the ETR and ETRC software. [Dkt. No. 107].


         A. Standard of Review

         In a copyright infringement action, "the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof." 17 U.S.C. § 505. As part of the costs, the court "may also award a reasonable attorney's fee to the prevailing party." Id. Under § 505, fees should not be awarded "as a matter of course"; instead, a district court must "make a more particularized, case-by-case assessment" in determining whether to exercise its equitable discretion and impose fees. Kirtsaeng v. John Wiley & Sons. Inc., 136 S.Ct. 1985 (2016) (internal quotation marks omitted). The Fourth Circuit has identified four factors a district court should consider in determining whether it is appropriate to award fees in a particular case: "(1) the motivation of the parties; (2) the objective reasonableness of the legal and factual positions advanced; (3) the need in particular circumstances to ...

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