21-1758-cv
`Nuance Communications, Inc. v. International Business Machines Corp.
`UNITED STATES COURT OF APPEALS
`FOR THE SECOND CIRCUIT
`SUMMARY ORDER
`RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
`SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
`FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
`CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
`EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
`“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON
`ANY PARTY NOT REPRESENTED BY COUNSEL.
`At a stated term of the United States Court of Appeals for the Second Circuit, held at the
`Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
`19th day of December, two thousand twenty-two.
`Present:
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`GERARD E. LYNCH,
`WILLIAM J. NARDINI,
`STEVEN J. MENASHI,
`Circuit Judges.
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`21-1758-cv
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`_____________________________________
`NUANCE COMMUNICATIONS, INC.,
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`Plaintiff-Appellant,
`v.
`INTERNATIONAL BUSINESS MACHINES
`CORPORATION,
`Defendant-Appellee.
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`_____________________________________
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`For Plaintiff-Appellant:
`GREGORY SILBERT, Weil, Gotshal & Manges LLP,
`New York, NY (David J. Lender, Adam B. Banks,
`Jessica L. Falk, Robert W. Taylor, Angelo G. Labate,
`Weil, Gotshal & Manges LLP, New York, NY,
`David Greenbaum, Nuance Communications, Inc.,
`Mahwah, NJ, on the brief)
`
`KEVIN S. REED (William B. Adams, on the brief),
`Quinn Emmanuel Urquhart & Sullivan, LLP, New
`York, NY
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`For Defendant-Appellee:
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`1
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`Appeal from a judgment of the United States District Court for the Southern District of
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`New York (Eduardo C. Robreno, Judge).
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`UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
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`DECREED that the judgment of the district court is AFFIRMED.
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`Plaintiff-Appellant Nuance Communications appeals from a final judgment of the United
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`States District Court for the Southern District of New York (Eduardo C. Robreno, Judge), entered
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`on June 21, 2021, following a bench trial.1 The district court found in favor of Defendant-Appellee
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`International Business Machines Corporation (“IBM”) after concluding that Nuance’s breach of
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`contract claim was barred by the running of a two-year limitations period in the parties’ September
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`2010 Software License Agreement (“SLA”). Nuance had alleged that IBM withheld “updates” to
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`the licensed artificial intelligence software technology DeepQA that Nuance was entitled to
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`receive under a provision of the SLA. Nuance specifically argued, among other things, that the
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`SLA entitled it to DeepQA updates developed anywhere in IBM, including as relevant here updates
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`developed by IBM subdivision the IBM Software Group (“IBM Software”), and not, as IBM
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`contended, solely updates developed by another subdivision, the IBM Research Group (“IBM
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`Research”). We assume the reader’s familiarity with the case.
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`Following a bench trial, this Court reviews a district court’s findings of fact for clear error
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`and its conclusions of law de novo. Citibank, N.A. v. Brigade Capital Mgmt., LP, 49 F.4th 42, 58
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`(2d Cir. 2022). “[W]here there are two permissible views of the evidence, the factfinder’s choice
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`between them cannot be clearly erroneous.” Hamilton Int’l Ltd. v. Vortic LLC, 13 F.4th 264, 271
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`1 Judge Robreno, of the United States District Court for the Eastern District of Pennsylvania, sat by
`designation.
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`2
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`(2d Cir. 2021) (citation omitted). This Court is “free to affirm on any ground that finds support in
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`the record, even if it was not the ground upon which the trial court relied.” Wells Fargo Advisors,
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`LLC v. Sappington, 884 F.3d 392, 396 n.2 (2d Cir. 2018) (citation omitted).
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`Nuance argues that the district court erred by concluding that its claim was time-barred
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`under the SLA. We disagree. Under New York law, there is a six-year statute of limitations period
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`for breach of contract suits, which can be shortened by contract to any reasonable period. N.Y.
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`C.P.L.R. §§ 201, 213(2); see Executive Plaza, LLC v. Peerless Ins. Co., 22 N.Y.3d 511, 518
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`(2014). Although a limitations period ordinarily begins running at the time the cause of action
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`accrues, “exceptionally clear” language in the contract that sets the start of the limitation clock at
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`another time will control. Fabozzi v. Lexington Ins. Co., 601 F.3d 88, 91 (2d Cir. 2010) (citing
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`Steen v. Niagara Fire Ins. Co., 89 N.Y. 315, 324 (1882)). Here, the SLA provides that “[n]either
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`party may bring an action arising out of this Agreement, regardless of form, more than two years
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`after the cause of action has accrued and the party obtained knowledge thereof.” Joint App’x 1242.
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`The parties agree that actual knowledge is the applicable requirement to start that two-year
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`limitation clock. In New York, the test for actual knowledge is subjective and may be satisfied by
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`circumstantial evidence. Hartford Accident & Indem. Co. v. Am. Express Co., 74 N.Y.2d 153, 162
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`(1989); Woloszynowski v. N.Y. Cent. R. Co., 254 N.Y. 206, 208–09 (1930).
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`In Nuance’s view, the district court’s timeliness conclusion was error because the district
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`court: (a) wrongly applied a willful blindness standard to conclude that Nuance had actual
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`knowledge of IBM’s breach of the SLA, and (b) did not independently find that Nuance had actual
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`knowledge of IBM’s breach as a matter of fact without relying on willful blindness. Because we
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`reject the latter argument, we need not reach the former. Namely, we conclude that the district
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`court made an independent factual finding that Nuance had actual knowledge of a breach for more
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`3
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`than two years before filing suit, a finding that was not clearly erroneous.
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`As an initial matter, the district court stated that the limitations issue turned on actual
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`knowledge, specifically, “whether Nuance obtained actual knowledge prior to June 30, 2014, that
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`IBM was not providing it with DeepQA updates developed by IBM Software as required under
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`the agreement.”2 Special App’x 47–48. The district court concluded that actual knowledge could
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`be inferred from the evidence that, before June 30, 2014, Nuance knew two critical facts forming
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`IBM’s breach of the SLA: (1) that IBM Software was developing updates to its DeepQA
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`technology, and (2) that IBM was withholding code developed by IBM Software. Under Nuance’s
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`contemporaneous interpretation of the SLA (which the district court concluded was correct in
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`relevant part), those two findings alone constituted a reasonable factual finding that Nuance
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`actually knew that IBM was in breach of the SLA provision governing updates to DeepQA well
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`before the contractual limitations period.
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`The district court detailed at length the evidence supporting each of its underlying factual
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`findings of Nuance’s actual knowledge of IBM’s breach. First, the district court pointed to the
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`testimony of, and emails exchanged between, senior executives at both IBM and Nuance
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`demonstrating that Nuance knew that IBM Software was creating updates to DeepQA. For
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`example, the district court highlighted a 2012 email from Nuance’s former chief information
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`officer to its then-chief executive officer explaining that IBM had “done work on ‘vanilla’
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`productization of Watson, solely in . . . IBM [Software]. They took an image of the code and have
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`gone on their own.”3 Special App’x 49 (quoting Joint App’x 1084). Similarly, the district court
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`2 Because Nuance filed suit against IBM on June 30, 2016, the question is whether the limitations period
`began running more than two years prior to that date—i.e., before June 30, 2014.
`3 “Watson” is the name given by IBM to projects developing the DeepQA code. In 2011, IBM’s DeepQA,
`operating as a computer program named Watson, gained public attention when Watson appeared as a contestant on
`episodes of the trivia game show Jeopardy! and prevailed over former Jeopardy! champions.
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`4
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`relied on testimony indicating that Nuance was aware that IBM Software had done “‘software
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`hygiene or productization’ work”—“the kinds of work you might do to make sure that you can
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`apply it to a number of third-party kinds of customers.” Special App’x 49–50 (quoting Joint App’x
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`1437). Second, in support of its finding that Nuance knew IBM was withholding DeepQA code
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`developed by IBM Software, the district court relied on the testimony of both parties’ senior
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`executives as well as internal Nuance communications. For example, one internal memorandum
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`starkly showed that in 2013, Nuance understood both that IBM Software was “not allowing any
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`joint work with IBM Research to occur . . . to be absolutely sure that none of [IBM Software’s]
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`work [was] to be made available to Nuance,” and that this conduct flowed from IBM’s differing
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`interpretation of the SLA’s updates provision. Special App’x 52–53 (quoting Joint App’x 1108).
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`Likewise, deposition testimony established that Nuance was aware that it would receive “only
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`what’s from [R]esearch,” not “anything from [S]oftware,” and that “IBM had erected a virtual
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`firewall” for the purpose of preventing Nuance from “claiming [IBM Software]’s DeepQA
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`commercialization work.” Special App’x 51–53 (internal quotation marks omitted). Upon our
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`review of this evidence, and the evidence in the entire record, the district court’s finding of actual
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`knowledge does not amount to clear error. See Diesel Props S.r.l. v. Greystone Bus. Credit II LLC,
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`631 F.3d 42, 52 (2d Cir. 2011) (“The fact that there may have been evidence to support an inference
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`contrary to that drawn by the trial court does not mean that the findings are clearly erroneous.”).
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`Rather, it serves as a ground with support in the record on which we may affirm.4 Wells Fargo
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`4 We acknowledge that the district court goes on to apply a willful blindness standard to Nuance’s competing
`evidence that it had sought and received general reassurances that IBM was not in breach of the SLA, and that the
`district court separately concluded on that basis that the evidence still supported its conclusion that Nuance actually
`knew of IBM’s breach. Because we read the district court’s analysis to find Nuance’s actual knowledge of IBM’s
`breach as a matter of fact without reliance on the willful blindness doctrine, we express no view on the district court’s
`application of the doctrine as a means of determining actual knowledge, either as the doctrine is generally applied in
`New York or as the district court specifically applied it in this case.
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`5
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`Advisors, LLC, 884 F.3d at 396 n.2.
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`*
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`*
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`*
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`We have considered Nuance’s remaining arguments and find them unpersuasive.
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`Accordingly, the judgment of the district court is AFFIRMED.
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`FOR THE COURT:
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`Catherine O’Hagan Wolfe, Clerk
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`6
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