Considering claim preclusion doctrine, the U.S. Court of Appeals for the First Circuit affirmed a finding of preclusion in a subsequent suit against a different defendant. Airframe Sys., Inc. v. Raytheon Co., Case No. 09-1624 (1st Cir., Mar. 31, 2010) (Lynch, J.).

Airframe Systems sells software licenses. Aircraft Integration Systems (AIS) was one of its licensees. AIS, owned by Raytheon, sent a letter on Raytheon letterhead to a then-employed Airframe technician seeking support for a problem. The employee solved the problem by allegedly downloading source code onto an AIS computer without Airframe’s authorization.

L-3 Communications purchased AIS from Raytheon in 2002. In 2003, Airframe discovered that AIS possessed the code. Also in 2003, in an unrelated litigation against L-3, Airframe discovered the AIS letter to Raytheon.

Airframe sued L-3 and the former employee in the U.S. District Court for the Southern District of New York in 2005, alleging unauthorized possession of the code under the Copyright Act. By court invitation, Airframe later filed a letter seeking to amend its complaint to further allege unauthorized use. The court never decided that issue, but dismissed the complaint for failure to state a claim because the complaint did not allege actual use of the code. Airframe did not appeal either the decision or the court’s failure to decide whether to permit the filing of an amended complaint.

In 2007, Airframe sued those same parties and Raytheon in the U.S. District Court for the District of Massachusetts, newly alleging unauthorized use. That court dismissed the action under claim preclusion. Airframe appealed with respect to the Raytheon defendant.

The First Circuit upheld the decision because the New York and Massachusetts actions were sufficiently related and the parties were closely related. The court rebuffed Airframe’s assertion that the difference between its new unauthorized use claim and the unauthorized possession claim renders claim preclusion inappropriate. As viewed by the First Circuit, the question was whether the actions share a common nucleus of facts. The court held that they did because they arose from the same series of events in the same timeframe.

Second, citing modern claim preclusion doctrine, the court “flatly reject[ed]” Airframe’s assertion that Raytheon could not assert claim preclusion because Raytheon is not identical to L-3. Raytheon shares a close relationship with L-3 vis-à-vis their former and current ownership of AIS. The court noted that Airframe knew of Raytheon’s relationship to AIS at the time of the New York action, but nevertheless chose to sue only L-3 for infringement and was now left “to live with those choices.”

Practice Note: Carefully consider the corporate history of any alleged infringer when investigating possible defendants to litigation.