International Business Machines Corporation v Mullen Technologies, Inc.
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Attorneys and Parties
Brief Summary
A contract dispute arising from agreements to develop lithium batteries for electric motor vehicles and to license an ingredient logo trademark.
The Supreme Court, Westchester County, granted International Business Machines Corporation (IBM) summary judgment on liability for breach of both the Joint Development and Technology License Agreement (JDA) and the Ingredient Logo Trademark License Agreement (TLA), and after an inquest awarded IBM $4,500,000 in principal damages.
The Appellate Division reversed the judgment insofar as it awarded relief on the JDA claim, denied summary judgment on liability for breach of the JDA, modified the underlying order accordingly, and remitted for further proceedings. It left intact the liability determination and $500,000 damages award for breach of the TLA.
IBM failed to make a prima facie showing that it performed its own obligations under the JDA and did not eliminate triable issues of fact on that element. A moving party cannot satisfy its summary judgment burden with proof first submitted in reply papers. By contrast, IBM established the TLA, Mullen's nonpayment, and damages equal to the agreed $500,000 royalty.
Background
In December 2017, IBM and Mullen Technologies, Inc. entered into a Joint Development and Technology License Agreement (JDA) and an Ingredient Logo Trademark License Agreement (TLA) in connection with lithium batteries for Mullen's electric vehicles. Under the JDA, Mullen was required to pay IBM $4 million within 10 business days as partial consideration for certain materials, and IBM was then to make specified background copyrightable materials and know-how available electronically. Under the TLA, Mullen was required to pay a $500,000 royalty within 10 business days for a worldwide nonexclusive license to use IBM's licensed mark. Mullen made neither payment, asserting that it had learned IBM's lithium air battery was about 10 years away from commercialization rather than the 2 years allegedly represented by IBM. IBM sued in May 2019 for, among other things, breach of the JDA and TLA.
Lower Court Decision
The Supreme Court granted IBM summary judgment on liability on the breach of contract causes of action under both the JDA and the TLA. After an inquest on damages, the court found IBM entitled to $4,500,000, and judgment was entered in IBM's favor for $5,617,191.58 including interest, costs, and disbursements.
Appellate Division Reversal
The Appellate Division held that IBM proved its entitlement to summary judgment on the TLA claim because the record showed the agreement, Mullen's failure to pay the $500,000 royalty, and resulting damages. But IBM did not establish entitlement to summary judgment on the JDA claim because it failed to eliminate triable issues of fact regarding its own performance under that agreement. The court therefore reversed the judgment, denied summary judgment on liability for breach of the JDA, modified the April 21, 2020 order, and remitted the matter to the Supreme Court, Westchester County, for further proceedings on the JDA claim and entry of an amended judgment. The court also denied IBM's motion to dismiss the appeal as academic.
Legal Significance
The decision reinforces core New York breach of contract summary judgment principles: a plaintiff must prove the contract, its own performance, the defendant's breach, and damages; failure to establish any required element defeats the motion regardless of the opponent's papers. It also emphasizes that a movant may not cure a deficient prima facie showing with evidence submitted for the first time in reply. On damages, the court confirmed that general contract damages may include the specific payment the breaching party promised to make, so long as the proof at inquest reasonably connects to the amount sought.
Even where nonpayment is undisputed, a plaintiff seeking summary judgment for breach of contract must affirmatively prove its own contractual performance in its opening papers; otherwise, the claim must proceed, while separately supported claims for fixed payment obligations may still be enforced.