Contractor’s motion for summary judgment on its claim against the government for breach of a software licensing agreement is granted, where the government possessed more copies of the software than permitted by the plain language of the agreement and where the government could not establish—as part of an equitable estoppel defense—that the contractor had known about and acquiesced to the additional copies.
ABB Enterprise Software Inc. had a contract with the Navy to supply software and licenses for naval maintenance requirements. ABB’s predecessor had entered a licensing agreement with the Navy that only permitted use of one copy of software at one server at specified locations. At some point early in contract performance, however, two copies of the software were installed on ten aircraft carriers. ABB only discovered that extra copies were being used on the ten ships several years later. ABB demanded that the Navy stop using the extra copies, but the Navy claimed it was in compliance with the contract. ABB filed a complaint with ASBCA, alleging breach of contract. In response, the Navy asserted an affirmative defense of equitable estoppel. The parties both moved for summary judgment.
The Navy argued that the licensing agreement could only be understood in the context of the parties’ prior course of dealing, which permitted two copies of the software to be installed on aircraft carriers. The board, however, reasoned that it did not have to consider the parties’ course of dealing where the plain language of the contract was clear. Here, the licensing agreement explicitly stated that licenses provided to the Navy were only for the number of servers identified in an attached Licensing Matrix. The Matrix, in turn, only permitted use of the software at one server at each of several specified locations. The terms of the agreement did not include an exception for aircraft carriers, and the Navy had not shown that the parties had any other agreement that allowed for the use of two copies on aircraft carriers. The Navy breached the licensing agreement by continuing to use the unauthorized copies
Nevertheless, the Navy argued that because ABB’s predecessor had failed to protest the multiple installations on aircraft carriers, ABB was precluded from alleging breach under the doctrine of equitable estoppel. But the board found that equitable estoppel only applies when the party to be estopped knew the true facts but allowed the other party to continue to perform under a misapprehension. In this case, the board found, there was no evidence that ABB had known of the extra copies on the aircraft carriers. The Navy had not proven that ABB was silent while knowing that the software had been installed twice on aircraft carriers, nor that this silence somehow mislead the Navy into believing that ABB would not assert its contract rights in the future. The Navy’s equitable estoppel defense failed.
The board granted ABB’s motion for summary judgment and denied the Navy’s cross-motion.
ABB is represented by Jeanne A. Anderson and Jeffrey M. Young. The government is represented by Ronald J. Borro, Henry Karp, and Rachel J. Goldstein of the U.S. Department of the Navy.
