Earthinfo, Inc. v. Hydrosphere Resource Consultants, Inc.

900 P.2d 113 (1995)

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Nature of the Case

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Facts

Between 1986 and 1988 P entered into several contracts with US West to develop products that employ CD-Rom technology. Under the contracts, P was to develop the technology and create the software that enables end users to access public information on the CD units. The contracts vested all rights of ownership, copyrights, and patents in the products to US West. P had an ongoing obligation to provide technical support to end users, and US West was to create users manuals and package and market the products. West was to pay P a fixed hourly fee as well as royalties. Payments were to be made on a quarterly basis. West assigned its interests in the contract to D on February 10, 1989. D agreed to pay West $60,432, and P and D entered into a separate agreement in which P agreed to honor West’s obligations under the contract. D honored the agreements until June 30, 1990. P then claimed that the sales of a new derivative product were subject to royalty payments. D claimed that the contracts did not address them and objected to the payments and eventually stopped all royalty payments. D continued to make fixed hourly development fee payments, and a total of $19,000 was paid after June 30^th. After negotiations, P informed D that it was rescinding the contracts. P filed its breach of contract action. The trial court ruled that D did not owe royalties but that D had breached when it unilaterally suspended royalty payments on the other products. In a subsequent hearing, both parties sought rescission of the contract and restitution as a remedy. The trial court found the breach substantial and that damages would be inadequate. The court then ordered D to return to P all tangible property developed under the Contracts and under equity also ordered D to return to P all property, promotional material and proprietary information related to the products. The court also ordered D to repay to P the net profits realized by D from June 30, 1990, until the date of the order totaling $265,204.91. The court also had P account to D for the $60,432. A judgment for P of $185,772.91 was entered. D appealed. The court of appeals affirmed; it was within the trial court’s discretion to consider the net profit in setting the amount of restitution.