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Business court now covers IP disputes

A recent change to North Carolina law extended the reach of the state’s business court to cover intellectual property disputes, even if the cases don’t touch on questions of IP ownership, a Business Court judge has ruled.

Southeastern Automotive, an auto-parts distributor, had entered into an agreement with Genuine Parts, which does business in North Carolina as NAPA Auto Parts, under which Southeastern would convert its locations into NAPA stores. As part of the deal, Genuine took inventory at Southeastern’s facilities using two of its software platforms. Southeastern contends that the inventory could not be conducted as contracted for because of inadequacies in this software, and that as a result it was insufficiently compensated for its stock.

Southeastern sued Genuine of breach of contract and other claims. It filed an opposition brief opposing the designation of the case as a mandatory complex business case, but on Aug. 17 Judge James Gale overruled the opposition, finding that the designation was proper under an amendment to state law that took effect in 2014 which expanded the breadth of the state business court’s jurisdiction over cases involving disputes related to intellectual property.

Prior to 2014 amendment, the relevant corner of the court’s bailiwick covered only disputes involving “intellectual property law, including software licensing disputes.” But the legislature expanded that remit to include, among other things, the “use” of intellectual property, including computer software. Gale held that since the lawsuit concerned the use of software platforms, it should be designated as a complex business case under the amended statute.

“While the Court agrees that the Complaint does not raise issues that are governed by what might ordinarily be considered intellectual-property law, it also concludes that [the amended statute] is not so narrowly worded as to require that there be such an issue,” Gale wrote.

“The Court concludes that the [2014 amendment] expanded the scope of disputes within the statute’s purview to include a dispute that involves a material issue regarding the use or performance of intellectual property, including computer software and data, without requiring a dispute regarding ownership of the intellectual property or another dispute that may require application of principles of the body of law known as intellectual-property law,” Gale added.

Mike Kaeding and Ryan Ethridge of Alston & Bird in Durham represented Genuine Parts Company. Kaeding said that it’s relatively rare that the court issues guidance on the statutory grounds for Business Court jurisdiction, and that it was significant that Gale chose to discuss those issues at length in this opinion.

“I think the court makes clear here that the statute covers a broad range of IP cases and that the term IP is broadly defined in the amended language,” Kaeding said. “I think that’s a good thing. I think these are the types of cases that are well suited for the Business Court and its expertise over complex business litigation issues.”

Lonnie Player of Fayetteville and Matt Vaughn of Stevens Martin Vaughn & Tadych in Raleigh represented Southeastern Automotive. Player said that the court’s decision significantly expands the scope of the Business Court’s jurisdiction, and could even open up an avenue for consumer disputes, which are not currently considered complex business cases, that met the court’s monetary threshold.

“Quite frankly, we were surprised at Judge Gale’s interpretation of the statute because I have to believe that the legislature did not intend to expand the scope of the Business Court’s jurisdiction that far,” Player said. “Taking that analogy and stretching it, what would stop me from buying $5 million worth of laptop computers from Best Buy that all were found to have same software glitch, and bringing that case in the Business Court pursuant to that section?”

The eight-page decision is Southeastern Automotive, Inc. v. Genuine Parts Co. (Lawyers Weekly No. 020-058-16). The full text of the opinion is available online at

Follow David Donovan on Twitter @NCLWDonovan

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