Microsoft Corporation v. Corel Corporation et al, No. 5:2015cv05836 - Document 222 (N.D. Cal. 2017)
Court Description: ORDER GRANTING 170 MICROSOFT'S MOTION FOR PARTIAL SUMMARY JUDGMENT. Signed by Judge Edward J. Davila on 12/11/2017. (ejdlc2S, COURT STAFF) (Filed on 12/19/2017)
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Microsoft Corporation v. Corel Corporation et al Doc. 222 Case 5:15-cv-05836-EJD Document 214 *SEALED* Filed 12/11/17 Page 1 of 10 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 SAN JOSE DIVISION United States District Court Northern District of California 11 MICROSOFT CORPORATION, 12 Case No. 5:15-cv-05836-EJD Plaintiff, 13 ORDER GRANTING MICROSOFT’S MOTION FOR PARTIAL SUMMARY JUDGMENT v. 14 COREL CORPORATION, et al., 15 Re: Dkt. No. 170 Defendants. 16 17 Plaintiff Microsoft Corporation moves for partial summary judgment on most of the 18 19 counterclaims and affirmative defenses raised by Defendants Corel Corporation and Corel Inc. 20 (together, “Corel”). Microsoft’s motion will be granted. 21 I. BACKGROUND Microsoft alleges that Corel infringed nine patents relating to graphical user interfaces in 22 23 software applications.1 Compl. ¶¶ 1–2, Dkt. No. 1. Corel concedes that the asserted patents are 24 valid and that it directly infringed every asserted claim, but it raises several affirmative defenses 25 26 27 28 1 For a more detailed summary of the factual and procedural background of this case, see this Court’s order on Corel’s motion for summary judgment, Dkt. No. 153. Case No.: 5:15-cv-05836-EJD ORDER GRANTING MICROSOFT’S MOTION FOR PARTIAL SUMMARY JUDGMENT 1 Dockets.Justia.com Case 5:15-cv-05836-EJD Document 214 *SEALED* Filed 12/11/17 Page 2 of 10 1 and counterclaims. Second. Am. Answer, Dkt. No. 121. Microsoft now moves for summary 2 judgment on all of Corel’s affirmative defenses and counterclaims (with the exception of Corel’s 3 seventh affirmative defense for failure to meet the requirements of 35 U.S.C. § 287). Pl.’s Mot. for 4 Summ. J. (“MSJ”), Dkt. No. 170. 5 II. LEGAL STANDARD “Summary judgment is proper where no genuine issue of material fact exists and the 6 7 moving party is entitled to judgment as a matter of law.” Samuels v. Holland American Line— 8 USA Inc., 656 F.3d 948, 952 (9th Cir. 2011) (citing Fed. R. Civ. P. 56(a)). The Court “must draw 9 all reasonable inferences in favor of the nonmoving party.” Id. “The central issue is ‘whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one- 11 United States District Court Northern District of California 10 sided that one party must prevail as a matter of law.’ ” Id. (quoting Anderson v. Liberty Lobby, 12 Inc., 477 U.S. 242, 251–52 (1986)). 13 III. DISCUSSION 14 Corel’s affirmative defenses and counterclaims fall into three groups:2 15 (A) those related to the ’980 patent;3 16 (B) those related to the “ribbon patents”;4 and 17 (C) Corel’s counterclaim XXIV, which asserts that this action is an “exceptional case” 18 under 35 U.S.C. § 285. ’980 Patent 19 A. 20 With respect to the ’980 patent, Corel asserts its first, fifth, sixth,5 fourteenth, and fifteenth 21 affirmative defenses and counterclaims XIV, XX, and XXIII. Dkt. No. 188-2. 22 23 24 25 26 27 28 2 In Exhibit 1 attached to its opposition brief, Corel provided a table listing its remaining affirmative defenses and counterclaims and indicating the asserted patents to which they apply. Dkt. No. 188-2. 3 U.S. Patent No. 5,510,980. 4 U.S. Patent Nos. 8,255,828; 7,703,036; D550,237; D554,140; D564,532; and D570,865. 5 As discussed below, Corel also asserts its fifth and sixth affirmative defenses with respect to the ribbon patents. Case No.: 5:15-cv-05836-EJD ORDER GRANTING MICROSOFT’S MOTION FOR PARTIAL SUMMARY JUDGMENT 2 Case 5:15-cv-05836-EJD Document 214 *SEALED* i. 1 Filed 12/11/17 Page 3 of 10 First Affirmative Defense (Failure to State a Claim) and Counterclaim XX (Antitrust) 2 Corel has withdrawn its first affirmative defense and counterclaim XX. Defs.’ Opp’n to 3 Pl.’s Mot. for Summ. J. (“Opp’n”) 3, Dkt. No. 188. Microsoft’s motion for summary judgment 4 will be granted as to that defense and that counterclaim. 5 ii. 6 Fourteenth Affirmative Defense (Express License) and Counterclaim XIV (Declaratory Judgment of Non-Infringement) Corel argues that it should prevail on its counterclaim XIV (for declaratory judgment of 7 non-infringement) because Microsoft and Corel had entered into a covenant not to sue.6 Id. 10–12. 8 According to Corel, the covenant provides that Microsoft cannot sue Corel for infringement of the 9 10 ’980 patent that occurred while the covenant was in effect. Id. Although several “termination events” could have retroactively terminated the covenant, Corel argues that no such event 11 United States District Court Northern District of California occurred. Id. Alternatively, Corel argues that it should prevail on its fourteenth affirmative defense 12 (for express license) because the covenant not to sue was an express license from Microsoft to 13 Corel to practice the ’980 patent. Id. at 14–19. 14 15 Corel’s arguments amount to an improper motion for reconsideration7 of this Court’s order denying Corel’s motion for partial summary judgment on the defense of express license. Dkt. No. 16 154. In that order, the Court found that the covenant not to sue explicitly states that it is not a 17 patent license. See id. at 5 (“The foregoing covenant does not constitute a patent license to Corel, 18 and except as explicitly set forth above, Microsoft does not, directly or by implication, estoppel or 19 20 otherwise, grant any other patent covenants or patent rights under this Agreement.”) (quoting the language of the covenant) (emphasis added). The Court agreed with Microsoft’s position that that 21 the covenant was a promise to delay suit, rather than a promise to never sue. Id. at 3. 22 Here, in its brief opposing Microsoft’s motion for summary judgment, Corel disagrees 23 24 25 26 27 28 6 The covenant not to sue is discussed in detail in the Court’s order denying Corel’s motion for partial summary judgment. Dkt. No. 154. 7 See Local Rule 7-9(b) (“A motion for leave to file a motion for reconsideration must be made in accordance with the requirements of Civil L.R. 7-9.”). Case No.: 5:15-cv-05836-EJD ORDER GRANTING MICROSOFT’S MOTION FOR PARTIAL SUMMARY JUDGMENT 3 Case 5:15-cv-05836-EJD Document 214 *SEALED* Filed 12/11/17 Page 4 of 10 1 with the Court’s analysis in its order denying Corel’s summary judgment motion. Opp’n 14–19. 2 Corel’s disagreement, however, does not warrant reconsideration of the Court’s decision. See Sch. 3 Dist. No. 1J, Multnomah Cty., Or. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993) 4 (“Reconsideration is appropriate if the district court (1) is presented with newly discovered 5 evidence, (2) committed clear error or the initial decision was manifestly unjust, or (3) if there is 6 an intervening change in controlling law.”); see also Local Rule 7-9(b). 7 Corel has not established a basis for reconsideration. It presents no new evidence; it does 8 not assert that the Court committed clear error or that its decision was manifestly unjust; and it 9 points to no intervening change in controlling law. As such, Microsoft’s motion for summary 10 judgment will be granted as to Corel’s fourteenth affirmative defense and counterclaim XIV. United States District Court Northern District of California 11 12 iii. Fifth Affirmative Defense (Waiver) and Sixth Affirmative Defense (Acquiescence) To prevail on its waiver defense, Corel must show that Microsoft “intentionally 13 relinquished its rights to enforce the rights it now asserts. Waiver of a known right must be 14 ‘manifested by some overt act indicating an intention to abandon that right.’ ” Oracle Am., Inc. v. 15 Google Inc., No. C 10-03561 WHA, 2012 WL 1965778, at *2 (N.D. Cal. May 31, 2012) (quoting 16 Micro Star v. Formgen, Inc., 154 F.3d 1107, 1114 (9th Cir. 1998)). 17 18 19 Similarly, to prevail on its acquiescence defense, Corel must show that Microsoft made “an affirmative grant of consent or permission” to Corel’s conduct that gave rise to an implied license to practice the ’980 patent. Oracle, 2012 WL 1965778, at *1; see also Wang Labs., Inc. v. 20 Mitsubishi Elecs., 103 F.3d 1571, 1581–82 (Fed. Cir. 1997). 21 22 23 24 Here, Corel argues that the covenant not to sue contained certain “retroactive termination” provisions. Opp’n 13. Under those provisions, if certain “termination events” occurred, Microsoft would be “authorized to retroactively unwind its covenant and sue Corel for any past infringing activity.” Id. One such termination event was a change in control of Corel Corporation. Id. Corel 25 argues that a change in control occurred when Vector Capital acquired Corel Corporation in 2003. 26 27 28 Case No.: 5:15-cv-05836-EJD ORDER GRANTING MICROSOFT’S MOTION FOR PARTIAL SUMMARY JUDGMENT 4 Case 5:15-cv-05836-EJD Document 214 *SEALED* Filed 12/11/17 Page 5 of 10 1 Id. This event triggered the retroactive termination provisions, which gave Microsoft the right to 2 sue for past infringing activity. Id. However, at the time, Microsoft chose not to sue. Id. at 13–14. 3 As a result, Corel argues, Microsoft consented or acquiesced to Corel’s infringement of the ’980 4 patent. Id. 5 Corel’s argument fails because Microsoft did not perform an “overt act” indicating its 6 intention to abandon its right to sue for infringement. See Oracle, 2012 WL 1965778, at *2. Nor 7 did Microsoft give “an affirmative grant of consent or permission” to Corel’s infringing conduct. 8 Id. at *1. As Microsoft points out, when the termination event occurred (i.e., when Vector 9 acquired Corel Corporation in 2003), Microsoft had no obligation “to acknowledge that the covenant had terminated, or to file suit against Corel immediately upon termination.” Pl.’s Reply 11 United States District Court Northern District of California 10 in Support of Mot. for Summ. J. (“Reply”) 6, Dkt. No. 196. Rather, the “covenant simply self- 12 terminated automatically.” Id. As discussed above, the covenant was a promise to delay suit for 13 past infringing activity, not a promise to never sue. When the termination event occurred, 14 Microsoft had two options: first, it could sue immediately; and second, it could sue at some later 15 time, either while the covenant was still in effect or after the covenant expired. Microsoft chose to 16 wait until the covenant was no longer in effect, at which point it decided to exercise its right under 17 the covenant to bring claims against Corel for past infringement. Microsoft’s decision did not 18 constitute abandonment of its right to sue, nor did it constitute consent to Corel’s infringing 19 activity. Rather, it was an appropriate exercise of its rights under the covenant. Microsoft is 20 therefore entitled to summary judgment on Corel’s fifth and sixth affirmative defenses. 21 22 23 iv. Fifteenth Affirmative Defense (Exhaustion) and Counterclaim XXIII (Exhaustion) Under the doctrine of patent exhaustion, “the initial authorized sale of a patented item 24 terminates all patent rights to that item.” Bowman v. Monsanto Co., 569 U.S. 278, 283 (2013) 25 (quoting Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625 (2008)). “[B]y 26 exhausting the patentee’s monopoly in that item, the sale confers on the purchaser, or any 27 28 Case No.: 5:15-cv-05836-EJD ORDER GRANTING MICROSOFT’S MOTION FOR PARTIAL SUMMARY JUDGMENT 5 Case 5:15-cv-05836-EJD Document 214 *SEALED* Filed 12/11/17 Page 6 of 10 1 subsequent owner, the right to use or sell the thing as he sees fit.” Id. (quoting United States v. 2 Univis Lens Co., 316 U.S. 241, 249–50 (1942)). 3 Corel has not alleged any facts showing that Microsoft (or a Microsoft licensee) sold any 4 products accused of infringing the ’980 patent to Corel. See MSJ 9; Reply 4–5. Without evidence 5 of a sale, Corel’s affirmative defense of exhaustion and its counterclaim for exhaustion fail as a 6 matter of law. 7 Nonetheless, Corel argues that “Microsoft’s rights under the ’980 patent were exhausted 8 when the ’980 patent expired, because there was no past infringement according to the covenant 9 [not to sue].” Opp’n 12. Corel does not explain how the doctrine of patent exhaustion supports this reading of the covenant. To the extent Corel is arguing that Microsoft’s rights to sue for past 11 United States District Court Northern District of California 10 infringement terminated upon expiration of the covenant, Corel’s argument fails because, as 12 discussed above, this Court has previously held that Microsoft was free to sue for past 13 infringement of the ’980 patent upon expiration of the covenant. Corel has not established a basis 14 for reconsideration of that decision. Microsoft is therefore entitled to summary judgment on 15 Corel’s fifteenth affirmative defense and counterclaim XXIII. 16 B. 17 With respect to the ribbon patents, Corel asserts its fifth, sixth, eighth, ninth, and thirteenth 18 19 20 21 22 23 24 Ribbon Patents affirmative defenses. Dkt. No. 188-2. i. Fifth Affirmative Defense (Waiver), Sixth Affirmative Defense (Acquiescence), Ninth Affirmative Defense (Implied License), and Thirteenth Affirmative Defense (License under Microsoft’s UI Licensing Program) Corel bases these four affirmative defenses on “Microsoft’s conduct in licensing the Ribbon Patents generally in the market and specifically to Corel.” Opp’n 5. During the relevant period, Microsoft operated two licensing programs that allowed third- 25 party software developers to practice the ribbon patents. First, beginning in 2007, Microsoft 26 offered royalty-free licenses to third parties. Id. at 5–6. Under the 2007 program, software 27 28 Case No.: 5:15-cv-05836-EJD ORDER GRANTING MICROSOFT’S MOTION FOR PARTIAL SUMMARY JUDGMENT 6 Case 5:15-cv-05836-EJD Document 214 *SEALED* Filed 12/11/17 Page 7 of 10 1 developers could sign up for licenses through a publicly available web portal. Id. Certain types of 2 software were not eligible for the license, including products that competed directly with 3 Microsoft’s Office software. Id. at 6. 4 Corel was ineligible for a license under the 2007 program because its accused products 5 competed directly with Microsoft Office (with the exception of Corel’s CorelCAD software, as 6 discussed below). Corel argues that Microsoft cannot enforce this exclusion against Corel because 7 it cannot identify other licensees under the program, it cannot produce copies of licenses, it has no 8 evidence that it ever rejected a license, and it does not explain how it prevented other competitors 9 from obtaining licenses. Id. at 5–6 But, as Microsoft notes, those facts are irrelevant. Reply 9–10. They have no bearing on whether Corel itself had a license. Id. The evidence shows (and Corel 11 United States District Court Northern District of California 10 does not dispute) that Corel’s software did not meet the requirements of the 2007 licensing 12 program because it competed directly with Microsoft Office. Id. Corel therefore did not have a 13 license under the 2007 program. 14 Second, in 2009, Microsoft revised its licensing system to allow all developers to use the 15 ribbon interface, including developers of products that competed with Microsoft Office. Opp. 6. 16 To qualify for the license, third parties were required to use Microsoft's Windows 7 Ribbon APIs. 17 Reply 10. 18 Corel did not have a license under the 2009 program. Microsoft points out—and Corel 19 does not dispute—that Corel did not use the Windows 7 Ribbon APIs. Id. Instead, Corel 20 implemented its own “homegrown, infringing ribbon” that imperfectly copied the functionality of 21 Microsoft’s patented interface. Id. Corel’s software was thus ineligible for a license under the 22 2009 program. 23 However, Corel argues that it did have a license because, in 2009, Microsoft began 24 encouraging Corel to use Microsoft’s ribbon interface in its products. Opp’n 7. For instance, in 25 2010, Microsoft sent an email to Corel’s general counsel that stated: 26 27 28 Microsoft would like to see Corel evaluate the Microsoft Windows Case No.: 5:15-cv-05836-EJD ORDER GRANTING MICROSOFT’S MOTION FOR PARTIAL SUMMARY JUDGMENT 7 Case 5:15-cv-05836-EJD Document 214 *SEALED* Filed 12/11/17 Page 8 of 10 Ribbon Framework and where it would fit in your future product plans. We’d also like to have an introduction to the vendor whom you are licensing Home Office from so that we can have a similar conversation with them. 1 2 3 Id. According to Corel, “the evidence shows that Microsoft was not concerned about competition 4 and wanted Corel, along with the rest of the world, to use the Ribbon in [Corel’s software].” Id. at 5 8. 6 The evidence does show, as Corel argues, that Microsoft wanted to encourage third-party developers to adopt its ribbon interface in their software. But Microsoft sought adoption on its 8 own terms. One key term was that developers were required to use Microsoft’s official Windows 7 9 Ribbon APIs when implementing the ribbon. Rather than comply with this requirement, however, 10 Corel decided to implement its own “homegrown” version of the ribbon functionality. Reply 10. 11 United States District Court Northern District of California 7 The undisputed facts show that Microsoft invited Corel to participate in the 2009 licensing 12 program. But the facts do not support Corel’s position that Microsoft invited Corel to participate 13 in the licensing program without obeying its terms. 14 Finally, Corel argues that its CorelCAD software was eligible for a license because 15 CorelCAD did not compete with Microsoft Office. Opp’n 9. Microsoft concedes that CorelCAD 16 was not a competing product. Reply 9. However, CorelCAD was not released until 2011. Id. By 17 then, the 2009 licensing program had replaced the 2007 program. Under the 2009 program— 18 unlike the 2007 program—Microsoft allowed competing products to license the ribbon interface, 19 but it required those products to use the Windows 7 Ribbon APIs. Opp’n 6; Reply 10. CorelCAD 20 did not do so. Reply 10. As such, CorelCAD—like Corel’s other infringing software—did not 21 have a license under the 2009 licensing program. And it did not have a license under the 2007 22 program because, when CorelCAD was released, the 2007 program was no longer available. 23 24 25 26 27 28 Since Corel did not have a license to practice the ribbon patents, Microsoft is entitled to summary judgment on Corel’s fifth, sixth, ninth, and thirteenth affirmative defenses. ii. Eighth Affirmative Defense (License Agreement and/or Exhaustion) As discussed above, the patent exhaustion doctrine provides that “the initial authorized sale Case No.: 5:15-cv-05836-EJD ORDER GRANTING MICROSOFT’S MOTION FOR PARTIAL SUMMARY JUDGMENT 8 Case 5:15-cv-05836-EJD Document 214 *SEALED* Filed 12/11/17 Page 9 of 10 1 of a patented item terminates all patent rights to that item.” Bowman, 569 U.S. at 283 (quoting 2 Quanta, 553 U.S. at 625). 3 According to Corel, Microsoft’s right to sue for infringement of the ribbon patents was 4 exhausted as a result of a series of licensing transactions. Opp’n 3. First, in 2007, Microsoft 5 licensed the ribbon patents to a U.S. company called Codejock Software. Id. 6 7 8 Corel Home Office is one of the products that Microsoft 9 10 United States District Court Northern District of California 11 12 accuses of infringing the ribbon patents. See, e.g., Compl. ¶ 61. Corel argues that, as a result of these transactions, Microsoft’s rights were exhausted because .” Opp’n 4. 13 14 However, Corel has failed to provide evidence to support its argument. As Microsoft notes, 15 Corel has offered no “evidence that the toolkit provided by Codejock to Corel in fact embodied the 16 asserted Ribbon patents.” Reply 7. As the party opposing summary judgment on its exhaustion 17 defense, Corel “must present actual evidence” that the Codejock toolkit “substantially embodies” 18 the ribbon patents. Reply 8 (quoting Quanta, 553 U.S. at 638 and Crown Operations Int’l, Ltd. v. 19 Solutia Inc., 289 F.3d 1367, 1375 (Fed. Cir. 2002)). The undisputed facts show that Corel has not 20 provided any evidence of the contents of the Codejock toolkit. See, e.g., Reply Separate Statement 21 ¶¶ 29–31, Dkt. No. 196-1. Without evidence on the record, the Court cannot evaluate whether the 22 transactions Corel identifies resulted in exhaustion of Microsoft’s rights. As such, Microsoft is 23 entitled to summary judgment on Corel’s eighth affirmative defense. 24 C. 25 “The Patent Act’s fee-shifting provision authorizes district courts to award attorney’s fees 26 27 28 Counterclaim XXIV—Exceptional Case under § 285 to prevailing parties in ‘exceptional cases.’ “ Octane Fitness, LLC v. ICON Health & Fitness, Inc., Case No.: 5:15-cv-05836-EJD ORDER GRANTING MICROSOFT’S MOTION FOR PARTIAL SUMMARY JUDGMENT 9 Case 5:15-cv-05836-EJD Document 214 *SEALED* Filed 12/11/17 Page 10 of 10 1 134 S. Ct. 1749, 1751 (2014) (quoting 35 U.S.C. § 285). “[T]o be a prevailing party, one must 2 ‘receive at least some relief on the merits’ which ‘alters the legal relationships of the parties.’ ” 3 Former Employees of Motorola Ceramic Prods. v. United States, 336 F.3d 1360, 1364 (Fed. Cir. 4 2003) (quoting Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 5 532 U.S. 598, 603 (2001)) (citations and alterations omitted). As discussed above, Corel has conceded validity and infringement. In addition, in this 6 7 order, the Court grants summary judgment to Microsoft on all but one8 of Corel’s affirmative 8 defenses and counterclaims. As such, Corel cannot be the “prevailing party,” and Microsoft is 9 entitled to summary judgment on Corel’s counterclaim under 35 U.S.C. § 285. ’415 and ’501 Patents D. 11 United States District Court Northern District of California 10 In its opposition brief, Corel clarified that its defenses and counterclaims do not apply to 12 the ’415 and ’501 patents. Opp’n 3 n.2. 13 IV. CONCLUSION Microsoft’s motion for partial summary judgment is GRANTED. 14 15 IT IS SO ORDERED. 16 17 Dated: December 11, 2017 ______________________________________ EDWARD J. DAVILA United States District Judge 18 19 20 21 22 23 24 25 26 27 28 8 Microsoft has not moved for summary judgment on Corel’s seventh affirmative defense under 35 U.S.C. § 287. That defense is related to the damages period for Corel’s infringement. It is not related to Corel’s liability. See MSJ 2 n.2. Even if Corel prevails on its seventh affirmative defense, it cannot be the “prevailing party” under § 287. Case No.: 5:15-cv-05836-EJD ORDER GRANTING MICROSOFT’S MOTION FOR PARTIAL SUMMARY JUDGMENT 10
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