Fish & Richardson Secures Summary Judgments and Recovers Attorneys’ Fees in Copyright and Corporate Governance Dispute

Fish & Richardson secured an across-the-board victory on behalf of payroll and workforce solutions provider Proliant, Inc., and its chief executive officer Kevin Clayton in a complex copyright infringement and corporate governance dispute with MPAY, Inc. The Minnesota State Court’s two recent orders for summary judgment resolve the corporate governance dispute and follow on the heels of an earlier summary judgment victory in U.S. District Court relating to copyright infringement.

“We are thrilled to have achieved these important victories for Kevin Clayton and Proliant and we are immensely proud of the work our team did to secure the dual wins,” said Principal Corrin Drakulich, who is also the firm’s global head of litigation. “Although we knew that we had the facts on our side, we also knew that there was no room for error given the complexity of these cases and the decades-long business and litigation history between the parties. Our team is grateful for the opportunity to vindicate Mr. Clayton and the successful company he built from the ground up.”

In 2019, MPAY sued Proliant and Clayton in the U.S. District Court for the District of Minnesota and the Hennepin County (Minn.) District Court seeking more than $270 million in damages for alleged copyright infringement, trade secret misappropriation, and various state law claims relating to payroll processing software. MPAY claimed Proliant and Clayton had exceeded the bounds of the licensing agreements between the parties by improperly possessing, enhancing, and providing to other entities MPAY’s payroll processing source code, as well as contributing to the allegedly infringing sublicensing activities of Proliant’s co-defendants in the case. Proliant and Clayton maintained that its source code work was authorized by the license agreements and that the remaining allegations were meritless.

Proliant and Clayton engaged Fish in the summer of 2020 after a federal magistrate judge had ordered large-scale production of privileged documents and imposed sanctions against all of the defendants related to a privilege log dispute. The Fish team was led by Principals Corrin Drakulich, Michael Florey and Doug McCann and included Associates Excylyn Hardin-Smith and Meghan Thadani.

After oral arguments before the court on June 16, 2021, U.S. Senior District Judge Paul A. Magnuson issued an order fully granting Proliant and Clayton’s summary judgment motion and dismissing Proliant and Clayton from the case. In December 2022, the Fish team won its motion for attorneys’ fees under the Copyright Act. District of Minnesota Judge Eric C. Tostrud awarded Proliant over $823,000, the largest fee award of record for a copyright case in that district. The Court reasoned “Perhaps as a result of [MPAY’s] ‘bet the company’ damages demand, this litigation was exceedingly hard-fought, and the hours Proliant and Clayton’s attorneys billed are not out of proportion to the intensity of the litigation.”

In the companion case in Minnesota state court, MPAY alleged that Clayton and Proliant breached fiduciary duties arising from their role in a Limited Liability Company of which MPAY is a member. The case was scheduled to go to trial at the end of January; however, shortly before trial Judge James A. Moore granted Clayton and Proliant’s motion for summary judgment. Judge Moore found that Clayton, in his role as manager of the LLC, did not breach any fiduciary duties.