Autodesk, Inc. v. Alter et al

Filing 87

ORDER DENYING PLAINTIFF'S 52 MOTION FOR JUDGMENT ON THE PLEADINGS AND GRANTING AND DENYING VARIOUS SEALING MOTIONS by Judge William H. Orrick. The parties shall refile the documents previously filed under seal in accordance with this Order within ten days. (jmdS, COURT STAFF) (Filed on 5/9/2017)

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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 10 AUTODESK, INC., Plaintiff, United States District Court Northern District of California 11 12 13 14 Case No. 16-cv-04722-WHO v. JOSEPH ALTER, et al., Defendants. ORDER DENYING PLAINTIFF’S MOTION FOR JUDGMENT ON THE PLEADINGS AND GRANTING AND DENYING VARIOUS SEALING MOTIONS Re: Dkt. Nos. 52, 51, 59, 61, and 68 15 16 INTRODUCTION 17 Plaintiff Autodesk, Inc. brings this action against defendants Joseph Alter and Joseph 18 Alter, Inc. (collectively, “Alter”) for declaratory judgment of license and non-infringement of U.S. 19 Patent No. 6,720,962 (the “’962 Patent”), which Alter had previously licensed to The Walt Disney 20 Company (“Disney”), who licensed it to Autodesk. In turn, Alter asserts counterclaims against 21 Autodesk for declaratory judgment of no license or exhaustion, direct and indirect infringement, 22 and intentional and negligent interference with prospective economic advantage. Autodesk now 23 moves for judgment on the pleadings because: (1) it is licensed to the ’962 Patent pursuant to 24 Alter’s Settlement and License Agreement with Disney (“the ’962 License Agreement”), (2) 25 Alter’s rights to enforce the ’962 Patent are exhausted, and (3) Alter’s counterclaims are barred, 26 estopped, and foreclosed by the express terms of the ’962 License Agreement. However, the 27 record does not contain sufficient information for me to make such a ruling; it is missing, among 28 other things, the license agreement between Disney and Autodesk, the scope of which is in 1 dispute. Although the language in the ’962 License Agreement is broad, there needs to be more 2 factual development before I can determine as a matter of law that Autodesk is correct. I DENY 3 its motion for judgment on the pleadings. BACKGROUND1 4 5 I. FACTUAL BACKGROUND Autodesk is a Delaware corporation with its principal place of business in San Rafael, 6 7 California. Complaint (“Compl.”) (Dkt. No. 1) ¶ 4. It is a global industry-leader in digital design 8 technologies and develops “Maya” software, a program that enables film and design professionals 9 to “create lifelike images, realistic animations, extraordinary visual effects, and full-length feature 10 films.” Id. Joseph Alter is a resident of Westlake Village, California who invents and develops United States District Court Northern District of California 11 12 computer animation software. Id. ¶ 5; Counterclaim and Answer (“Countercl.”) (Dkt. No. 34) 13 ¶ 39. He is the sole inventor of, and owner of rights in, the ’962 Patent. Compl. ¶ 5. The ’962 14 Patent, entitled “Hair Generation and Other Natural Phenomena with Surface Derived Control 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 The parties dispute whether I can consider various documents that are extrinsic to the pleadings. I admit the ’962 License Agreement (Dkt. No. 52-3[redacted]; Dkt. No. 51-6[under seal]) under the incorporation by reference doctrine. Autodesk’s complaint expressly refers to and extensively relies on the ’962 License Agreement, see Compl. ¶¶ 14, 21, 27, 32, 34-36, as does Alter’s Counterclaim, see Countercl. ¶¶ 14, 32, 36, 48, 51, 66-89. I take judicial notice of Alter’s October 5, 2011 complaint against Disney (Dkt. No. 52-2), filed in Joseph Alter v. The Walt Disney Company, Case No. 11-cv-08277-PA (C.D. Cal. Oct. 5, 2011). It is a matter of public record. I decline to consider the eleven extraneous exhibits attached to Alter’s Declaration in support of its Opposition (see Alter Decl., Dkt. No. 63, Exs. 1-11), the undated screenshot of Autodesk’s website (see Bartlett Decl., Dkt. No. 62-1, Ex. A), excerpts from Autodesk’s 2016 Form 10-K (see id., Ex. B), and Autodesk’s “Licenses and Services Agreement” downloaded on March 22, 2017 (see id., Ex. C). None of these documents are referenced in the pleadings or the subject of judicial notice. I do not take judicial notice of Autodesk’s August 9, 2011 press release (Dkt. No. 52-1) regarding its agreement with Disney to license XGen. Although both parties’ pleadings acknowledge that in 2011, an XGen license agreement between Disney and Autodesk was “announced,” the parties do not refer to this document anywhere in the pleadings, and there appears to be disagreement as to what is covered by the XGen license agreement, which is not part of the record. While the fact of the 2011 announcement of the XGen license agreement may be undisputed, the contents of Autodesk’s press release regarding that agreement are nonetheless subject to reasonable dispute. 2 1 Volumes in Computer Graphics and Animation,” was filed on December 4, 2000, and issued to 2 him on April 13, 2004. Id.; Compl., Ex. A (’962 Patent) (Dkt. No. 1-1) at 2. The ’962 Patent 3 discloses and claims certain methods for creating simulated human and animal hair using 4 computer graphics and animation. Countercl. ¶ 55. Defendant Joseph Alter, Inc., Joseph Alter’s eponymous small business, is a California 6 corporation with its principal place of business in Westlake Village, California. Compl. ¶ 5. It 7 makes, markets, and sells “Shave and a Haircut” software, a computer graphics program for 8 simulating realistic animation of hair and fur that moves naturally. Id. ¶¶ 6, 12; Countercl. ¶ 45. 9 Shave and a Haircut is sold as an extension (or “plug-in”) to Autodesk’s Maya software. Compl. 10 ¶¶ 6, 12. The core technology underlying the Shave and a Haircut software is claimed in Alter’s 11 United States District Court Northern District of California 5 ’962 Patent. Countercl. ¶ 45. Joseph Alter, Inc. is listed as the assignee of rights in the ’962 12 Patent. Compl. ¶¶ 5, 13. Former counter-defendant Disney is a Delaware corporation with its principal place of 13 14 business in Burbank, California. Countercl. ¶ 41. Disney created “XGen” software, a procedural 15 geometry instancing tool used in computer generated animation, which is sold as a plug-in to 16 Autodesk’s Maya software. Id. ¶ 47. In developing XGen, Disney “incorporated features that 17 practice the [’962] Patent.” Compl., Ex. B (2016 Alter v. Disney Complaint) (Dkt. No. 1-2) ¶ 8. 18 Alter’s Shave and a Haircut software competes with Disney’s XGen software. Countercl. ¶¶ 49, 19 64, 79. 20 In August 2011, Autodesk announced that it had signed an agreement with Disney to 21 license and sell Disney’s XGen software as a plug-in to Maya. Compl. ¶ 14. On October 5, 2011, 22 Alter, proceeding pro se, filed an infringement action against Disney in the Central District of 23 California, alleging that Disney’s development and licensing of XGen to Autodesk infringed the 24 claims in the ’962 Patent. Id. ¶ 15; see Motion for Judgment on the Pleadings (“MJP”) (Dkt. No. 25 52[redacted]; Dkt. No. 51-4[under seal]), Ex. B (2011 Alter v. Disney Complaint) (Dkt. No. 52-2). 26 Alter and Disney resolved the litigation by entering into a Settlement and License Agreement 27 (“’962 License Agreement”), dated January 31, 2012, under which the parties stipulated to dismiss 28 with prejudice all claims and counterclaims asserted in the action. Compl. ¶ 5; see MJP, Ex. C 3 1 (’962 License Agreement) (Dkt. No. 52-3[redacted]; Dkt. No. 51-6[under seal]) at 2. Pursuant to 2 the ’962 License Agreement, in exchange for “a small settlement payment” Alter granted Disney a 3 perpetual license to the ’962 Patent, released all claims regarding Disney’s use of the ’962 Patent, 4 and covenanted not to sue Disney or its affiliates, customers, and other third parties in connection 5 with the ’962 Patent. Countercl. ¶ 48; see MJP, Ex. C §§ 2.1-2.3, 2.5. 6 II. PROCEDURAL HISTORY The procedural history of this case is somewhat complex. On July 22, 2016, one month 7 8 before Autodesk brought the instant action, Alter filed a complaint for monetary damages against 9 Disney in Superior Court of California, County of Los Angeles, which Disney removed to the Central District of California. Compl. ¶ 16; Reply to Countercl. (Dkt. No. 37) ¶ 53. The 11 United States District Court Northern District of California 10 complaint asserted four causes of action related to Disney’s alleged breach of the ’962 License 12 Agreement by licensing XGen to Autodesk: (1) breach of contract; (2) breach of the implied 13 covenant of good faith and fair dealing; (3) intentional interference with prospective economic 14 advantage; and (4) negligent interference with prospective economic advantage. See Compl., Ex. 15 B ¶¶ 13-29. The complaint alleged that after January 31, 2012, with Disney’s knowledge and 16 consent, “Autodesk developed and expanded upon the features of XGen and created essentially a 17 new product by the same name, which at its core is still infringing the [’962] Patent.” Id. ¶ 11. 18 Meanwhile, on August 17, 2016, Autodesk filed the instant action against Alter for 19 declaratory judgment of license and non-infringement of the ’962 Patent. Alter moved to dismiss 20 for lack of subject matter jurisdiction, or in the alternative, to stay the action pending resolution of 21 its earlier-filed action against Disney. Dkt. No. 14. Alter’s motion was denied on November 14, 22 2016. That same day, Alter voluntarily dismissed its action in the Central District. See Dkt. Nos. 23 31, 35. 24 On November 28, 2016, Alter filed an answer to Autodesk’s complaint and asserted 25 counterclaims for: (1) declaratory judgment of no license to, or exhaustion of, the ’962 Patent 26 against Disney and Autodesk; (2) infringement of the ’962 Patent against Autodesk; (3) indirect 27 infringement of the ’962 Patent against Disney; (4) breach of contract against Disney; (5) breach 28 of the implied covenant of good faith and fair dealing against Disney; (6) intentional interference 4 1 with prospective economic advantage against Autodesk and Disney; and (7) negligent interference 2 with prospective economic advantage against Autodesk and Disney. Countercl. ¶¶ 65-97. 3 Autodesk filed an answer to Alter’s counterclaims on December 19, 2016. Dkt. No. 37. 4 After Autodesk filed the motion for judgment on the pleadings, Disney moved to sever and 5 transfer Alter’s counterclaims against it to the Central District of California pursuant to the forum 6 selection clause contained in the ’962 License Agreement. Dkt. No. 60[redacted]; Dkt. No. 59- 7 4[under seal]. Alter opposed transfer; Autodesk did not take a position. Following an initial 8 review of the briefing, I ordered the parties to show cause why this entire action should not be 9 transferred to the Central District of California on the basis that the claims in this case are premised on the ’962 License Agreement, which was negotiated, drafted, executed, and performed 11 United States District Court Northern District of California 10 in the Central District by parties who are located in the Central District. Dkt. No. 77. Disney 12 responded that it had reached an agreement with Alter to dismiss Alter’s counterclaims against it 13 with prejudice (Dkt. No. 78); Alter, in light of its stipulation with Disney, requested that this case 14 be resolved in this District (Dkt. No. 80); and Autodesk similarly opposed transfer (Dkt. No. 79). 15 Pursuant to the stipulation between Alter and Disney, I dismissed counter-defendant Disney with 16 prejudice. Dkt. No. 82. 17 18 LEGAL STANDARD Under Federal Rule of Civil Procedure 12(c), “[a]fter the pleadings are closed—but early 19 enough not to delay trial—a party may move for judgment on the pleadings.” Fed. R. Civ. P. 20 12(c). Rule 7(a) provides that the only pleadings allowed are: “(1) a complaint; (2) an answer to a 21 complaint; (3) an answer to a counterclaim designated as a counterclaim; (4) an answer to a 22 crossclaim; (5) a third-party complaint; (6) an answer to a third-party complaint; and (7) if the 23 court orders one, a reply to an answer.” Fed. R. Civ. P. 7(a). “Judgment on the pleadings is 24 properly granted when, accepting all factual allegations in the complaint as true, there is no issue 25 of material fact in dispute, and the moving party is entitled to judgment as a matter of law.” 26 Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012) (internal quotation marks omitted). 27 When deciding such a motion, “the allegations of the non-moving party must be accepted as true, 28 5 1 while the allegations of the moving party which have been denied are assumed to be false.” Hal 2 Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1550 (9th Cir. 1989). A motion for judgment on the pleadings under Rule 12(c) utilizes the same standard as a 3 4 motion to dismiss for failure to state a claim under Rule 12(b)(6). Id. A party must allege facts to 5 state a claim for relief that is plausible on its face. See Ashcroft v. Iqbal, 556 U.S. 662, 677 6 (2009). A claim has “facial plausibility” when the party seeking relief “pleads factual content that 7 allows the court to draw the reasonable inference that the defendant is liable for the misconduct 8 alleged.” Id. Although the court must accept as true the well-pled facts in a complaint, conclusory 9 allegations of law and unwarranted inferences will not defeat an otherwise proper Rule 12(b)(6) or 10 12(c) motion. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). United States District Court Northern District of California 11 “If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented 12 to and not excluded by the court, the motion must be treated as one for summary judgment under 13 Rule 56.” Fed. R. Civ. P. 12(d). However, a court may “consider certain materials—documents 14 attached to the complaint, documents incorporated by reference in the complaint, or matters of 15 judicial notice—without converting the motion to dismiss [or motion for judgment on the 16 pleadings] into a motion for summary judgment.” United States v. Ritchie, 342 F.3d 903, 908 (9th 17 Cir. 2003); see also Rice v. Ralph Foods, No. C 09-02650 SBA, 2010 WL 5017118, at *3 (N.D. 18 Cal. Dec. 3, 2010). DISCUSSION 19 20 21 I. RULE 12(C) MOTION FOR JUDGMENT ON THE PLEADINGS Autodesk moves for judgment on the pleadings against Alter on its claims for declaratory 22 judgment of non-infringement and license on the grounds that: (1) Autodesk is licensed and 23 released under the ’962 License Agreement; (2) Disney’s authorized sale of XGen to Autodesk 24 exhausted Alter’s rights to enforce the ’962 Patent; and (3) Alter’s counterclaims against Autodesk 25 (declaratory judgment of no license or exhaustion, infringement of the ‘962 Patent, and intentional 26 and negligent interference with prospective economic advantage) are barred and estopped as a 27 matter of law, and foreclosed by the express terms of the ’962 License Agreement. MJP at 4. 28 Alter responds that the ’962 License Agreement does not extend to Autodesk, the doctrine of 6 1 patent exhaustion is inapplicable, and there is no estoppel. Opposition to MJP (“Oppo.”) (Dkt. 2 No. 62[redacted]; Dkt. No. 61-4[under seal]) at 8-14. On this record, Autodesk has not 3 established that there is no issue of material fact in dispute. Declaration of License to the ’962 Patent 4 A. 5 Pursuant to the terms of the ’962 License Agreement, Alter granted Disney and its 6 Affiliates “a non-exclusive, irrevocable, perpetual, worldwide, fully paid-up, non-royalty bearing 7 license to make, have made, use, import, have imported on their behalf, sell, offer for sale, and to 8 otherwise commercially exploit and distribute any invention claimed, directly or indirectly, in the 9 [’962 Patent].” MJP, Ex. C § 2.1. In arguing their respective positions, both parties rely heavily 10 United States District Court Northern District of California 11 12 13 14 15 16 on Section 2.1 of the ’962 License Agreement, which provides in relevant part: The licenses granted in this Section 2.1 extend to (a) third parties to the extent necessary for such third parties to provide (i) services or perform work on behalf of Licensee and its Affiliates with respect to the Licensed Products and/or (ii) the third party’s products to the extent those products are incorporated or part of a Licensed Product; (b) direct or indirect customers or end-users of the Licensed Products to the extent necessary to implement or use the Licensed Products; or (c) to third parties to the extent such third parties have rights under the doctrine of exhaustion. . . . For the avoidance of doubt, this section 2.1 and the licenses granted hereunder shall not extend to any products or services of third parties beyond which is specified in this Section 2.1. Id. The ’962 License Agreement defines “Licensed Products” as “any products, services, 17 methods, apparatuses, or systems made, used, sold or otherwise distributed or performed by or for 18 Licensee [i.e., Disney] and its Affiliates (including all activities performed at Licensee or Affiliate 19 20 21 22 23 24 25 26 27 facilities).” Id. at § 1.3. Autodesk argues that Disney’s license to the ’962 Patent (granted pursuant to the ’962 License Agreement) “extends to Autodesk as a ‘third party’ whose ‘products are incorporated or part of a Licensed Product,’ i.e., XGen, as a ‘direct or indirect customer’ of XGen, and as a third party with ‘rights under the doctrine of exhaustion.’” MJP at 4-5. Alter argues that Autodesk is not licensed under the ’962 License Agreement and that the third party rights granted in Section 2.1 are inapplicable to Autodesk because: (1) Autodesk is not providing “services or perform[ing] work” for Disney as to a “Licensed Product”; (2) Maya (or any portion of Maya) is not a Disney “Licensed Product,” as “it is not sold or distributed by Disney,” but rather it is “made, sold, and 28 7 1 distributed by and for Autodesk”; (3) XGen is not Disney “Licensed Product,” as it “is not 2 something that can be purchased or licensed from Disney”; and (4) the doctrine of exhaustion is 3 inapplicable because Disney has not made an “authorized sale” of XGen to Autodesk. Oppo. at 4 10-13. 5 Notwithstanding the substantive arguments, making a judgment based on the pleadings 6 would be premature. “Judgment on the pleadings is proper when the moving party clearly 7 establishes on the face of the pleadings that no material issue of fact remains to be resolved and 8 that it is entitled to judgment as a matter of law.” Hal Roach Studios, 896 F.2d at 1550. In this 9 case, construing the factual allegations in Alter’s Counterclaim as true, material facts remain in 10 United States District Court Northern District of California 11 dispute. As an initial matter, resolving the arguments raised by the parties requires information not 12 presently in the record. Autodesk asks me to find that it is a “third party” whose “products are 13 incorporated or part of a Licensed Product,” yet the XGen license agreement between Autodesk 14 and Disney is not a part of the record, nor are the contents of that agreement discussed in the 15 pleadings. MJP at 4-5. Moreover, Autodesk does not make this “third party” allegation in its 16 complaint. See generally Compl. 17 Alter’s arguments regarding the applicability of the ’962 License Agreement likewise 18 require further factual development. Alter argues that Maya is not a Disney “Licensed Product,” 19 because it is “not sold or distributed by Disney” but rather is “made, sold, and distributed by and 20 for Autodesk.” Oppo. at 10; see also Countercl. ¶ 36 (“when Autodesk makes and sells instances 21 of XGen to its Maya customers, it is making and selling an unlicensed Autodesk product, not a 22 Disney product”). Again, I cannot make any legal determination as to this point without knowing, 23 for example, the nature of the license relationship between Disney and Autodesk. The facts 24 surrounding the “sale” or “licensure” of XGen have not been included in any pleadings. Similarly, 25 I cannot determine whether “Autodesk is not a customer of Disney with respect to XGen in its 26 current form” under the ’962 License Agreement without reference to the XGen license agreement 27 between Disney and Autodesk, which is neither included in the pleadings nor in the record. See 28 Countercl. ¶ 70. Alter states as much in its Counterclaim; in responding to Autodesk’s allegation 8 1 that “Autodesk is a customer of Disney and/or end-user of XGen” (Compl. ¶ 33), Alter asserts that 2 it “does not understand in what respect Autodesk is a ‘customer . . . and/or end user . . .’ of XGen” 3 as it “is not aware of the legal relationship between Disney and Autodesk because, despite many 4 requests, neither Disney nor Autodesk has heretofore been willing to disclose any Disney- 5 Autodesk agreement relating to XGen.” Countercl. ¶ 37. Declaration of Non-Infringement of the ’962 Patent 6 B. 7 Autodesk’s declaratory judgment claim of non-infringement turns upon the same facts as 8 its claim for declaratory judgement of license. Alter alleges that Autodesk continues to directly 9 and indirectly infringe “one or more of the ’962 Patent’s claims by making and selling XGen as part of the Maya software suite and providing support and training for its users in the use of XGen 11 United States District Court Northern District of California 10 to animate hair, fur, and other large systems of geometry.” Countercl. ¶ 77. Autodesk alleges that 12 it does not directly or indirectly infringe the claims of the ’962 Patent because (1) “Maya cannot 13 be used to perform all steps of the method claims in the ’962 Patent,” and (2) “Disney’s authorized 14 sale of XGen under license from Alter exhausted Alter’s ability to enforce the ’962 patent against 15 purchasers and users of XGen, including Autodesk.” Compl. ¶¶ 26-27. Autodesk further asserts 16 that pursuant to the terms of the ’962 License Agreement, Alter “released all past, present, and 17 future claims of infringement, known or unknown, that in any way relate to or arise out of the 18 products of services used or distributed by or for ‘Licensee Releasees,’ which includes XGen and 19 Autodesk.” MJP at 5. 20 Autodesk’s claim that it does not directly or indirectly infringe the claims of the ’962 21 patent suffers from insufficient factual development; it turns largely upon the existence of an 22 “authorized sale of XGen under license” from Disney to Autodesk. The existence of such a 23 transaction is at the center of the dispute between the parties—Alter claims that there was not a 24 sale but rather a licensure, and that, as such, the exhaustion doctrine does not apply. Because the 25 parties dispute issues of fact material to this claim, judgment on the pleadings with respect to this 26 claim must be denied. See Chavez, 683 F.3d at 1108 (“Judgment on the pleadings is properly 27 granted when, accepting all factual allegations in the complaint as true, there is no issue of 28 material fact in dispute.”) (internal quotation marks omitted). 9 C. 1 Estoppel Autodesk argues that claim preclusion bars Alter from “reasserting the same fully-resolved 2 patent infringement claim for making, using, selling, and/or distributing XGen as a plug-in to 3 4 5 6 Autodesk’s Maya software product” that Alter asserted against Disney in the 2011 infringement action. MJP at 13. Alter contends that claim preclusion does not apply because “the infringing functionality of Maya was first introduced . . . in 2013, after the Alter-Disney settlement in 2012.” Oppo. at 15 (emphasis in original).2 7 8 “Claim preclusion prevents the relitigation of claims previously tried and decided,” and “bars the subsequent application of all defenses that could have been asserted in a previous action 9 between the same parties on the same cause of action, even if such contentions were not raised.” 10 Littlejohn v. United States, 321 F.3d 915, 919-20 (9th Cir. 2003) (internal citations omitted). United States District Court Northern District of California 11 12 Claim preclusion “applies when there is (1) an identity of claims; (2) a final judgment on the merits; and (3) identity or privity between the parties.” Stewart v. U.S. Bancorp, Cell 13 Therapeutics, Inc. v. Lash Grp., Inc., 586 F.3d 1204, 1212 (9th Cir. 2009). An analysis of whether 14 successive lawsuits involve an “identity of claims,” or the “same cause of action” “is unnecessary, 15 however, when a ground of recovery or defense could not have been asserted in the prior action. 16 Littlejohn, 321 F.3d at 920. In such cases, the defense or ground of recovery falls outside the 17 scope of claim preclusion.” Id. Here, Alter could not have raised the counterclaims it asserts 18 against Autodesk in this action in its prior suit against Disney (to which Autodesk was not a 19 party), as the counterclaims here are based on the ultimate conclusion of, and arise from conduct 20 occurring after, that suit. 21 22 In Alter’s 2011 infringement suit against Disney, Alter alleged that “Defendant [Disney] has infringed and continues to infringe one or more claims in the ’962 patent by making use of 23 said systems as a key part of their production pipeline on a number of films, as has as well a 24 recently advertised licensing deal involving one of said systems (XGen) to Autodesk, Inc[.] for 25 26 2 27 28 Alter also argues that issue preclusion does not bar its claims. Issue preclusion, which Autodesk does not argue applies here, “bars the relitigation of issues actually adjudicated in previous litigation between the same parties.” Clark v. Bear Stearns & Co., 966 F.2d 1318, 1320 (9th Cir. 1992). 10 commercial sale and distribution as part of their Maya product worldwide in direct competition 2 with Plaintiff [Alter].” MJP, Ex. B ¶ 20. In the instant action, Alter alleges that “Autodesk has 3 infringed, and continues to infringe, directly and indirectly, one or more of the ’962 Patent’s 4 claims by making and selling XGen as part of the Maya software suite.” Countercl. ¶ 77 5 (emphasis added). The basis for Alter’s counterclaims here is that Autodesk’s post-’962 License 6 Agreement development and expansion of XGen has essentially “converted XGen to an Autodesk 7 product” and is not authorized under the ’962 License Agreement and infringes the claims of the 8 ’962 Patent. Countercl. ¶¶ 49, 86. As Alter points out, “the Autodesk product at issue [i.e., the 9 upgraded version of XGen] was not released until after the Alter-Disney litigation concluded.” 10 Oppo. at 14; see also Compl., Ex. B ¶ 11 (“On or about August 8, 2013, Autodesk released an 11 United States District Court Northern District of California 1 upgraded version of XGen.”). Thus, Autodesk’s claim preclusion argument fails because Alter’s 12 claims here are based on alleged infringing activity arising after the January 31, 2012 resolution of 13 the 2011 litigation (i.e., the effective date of the ’962 License Agreement). See e.g., Frank v. 14 United Airlines, Inc., 216 F.3d 845, 851 (9th Cir. 2000) (“A claim arising after the date of an 15 earlier judgment is not barred, even if it arises out of a continuing course of conduct that provided 16 the basis for the earlier claim.”). Because Alter could not assert its counterclaims against 17 Autodesk during Alter’s 2011 litigation against Disney, claim preclusion does not apply. 18 II. ADMINISTRATIVE MOTIONS TO FILE UNDER SEAL 19 Courts have long recognized a “general right to inspect and copy public records and 20 documents, including judicial records and documents.” Nixon v. Warner Commc’s Inc., 435 U.S. 21 589, 597 (1978). A party seeking to seal judicial records attached to a dispositive motion must 22 “articulate[ ] compelling reasons supported by specific factual findings that outweigh the general 23 history of access and the public policies favoring disclosure.” Kamakana v. City & Cty. of 24 Honolulu, 447 F.3d 1172, 1178-79 (9th Cir. 2006) (alteration in original) (internal quotation marks 25 and citations omitted). Examples of compelling reasons include when court records are used for 26 “improper purposes,” such as “to gratify private spite, promote public scandal, circulate libelous 27 statements, or release trade secrets.” Id. at 1179 (citing Nixon, 435 U.S. at 598). Similarly, 28 “sources of business information that might harm a litigant’s competitive standing” may also 11 1 constitute a compelling reason to seal, see Nixon, 435 U.S. at 598, as may a company’s 2 confidential profit, cost, and pricing information that if publically disclosed could put the company 3 at a competitive disadvantage, see Apple Inc. v. Samsung Elecs. Co., 727 F.3d 1214, 1225 (Fed. 4 Cir. 2013). The court must balance the competing interests of the public’s right of inspection 5 against litigants’ need for confidentiality, and “if the court decides to seal certain judicial records, 6 it must base its decision on a compelling reason and articulate the factual basis for its ruling, 7 without relying on hypothesis or conjecture.” Kamakana, 447 F.3d at 1179. 8 Parties seeking to seal judicial records in this District must additionally comply with Civil 9 Local Rule 79-5, which requires that sealing requests be “narrowly tailored to seek sealing only of sealable material.” Civil L. R. 79-5(b). Where the submitting party seeks to file under seal a 11 United States District Court Northern District of California 10 document designated as confidential by another party, the designating party bears the burden of 12 articulating compelling reasons for sealing. Id. 79-5(e). Here, Autodesk seeks to file under seal the ’962 License Agreement, attached as Exhibit C 13 14 (Dkt. No. 51-6[under seal]) to the Krause Declaration in support of Autodesk’s motion for 15 judgment on the pleadings, and portions of its Motion (Dkt. No. 51-4[under seal]) and Reply (Dkt. 16 No. 68-4[under seal]) which contain quotations from Exhibit C.3 See Autodesk’s Admin. Mots. 17 (Dkt. Nos. 51, 68). According to Autodesk’s declaration in support of sealing, Exhibit C was 18 designated by Alter and Disney as “highly confidential outside counsel only” pursuant to the 19 parties’ Protective Order (Dkt. No. 39), and the Court previously granted Alter’s motion to seal 20 portions of that document submitted in support of Alter’s motion to dismiss. Krause Decl. ISO 21 Autodesk’s Admin. Mot. (Dkt. No. 51-1) ¶ 2. Alter and Disney also filed declarations in support 22 of Autodesk’s administrative motion to seal. See Alter Decl. ISO Autodesk’s Admin. Mot. (Dkt. 23 No. 54); Phillips Decl. ISO Autodesk’s Admin. Mot. (Dkt. No. 57). 24 25 26 27 28 3 Disney also moved to file under seal the ’962 License Agreement, attached as Exhibit B (Dkt. No. 59-9[under seal]) to the Phillips Declaration in support of Disney’s motion to sever and transfer, and portions of its Motion (Dkt. No. 59-4[under seal]) that quote from the agreement. See Disney’s Admin. Mot. to Seal (Dkt. No. 59). Because Disney is no longer a party to this action, its administrative motion to file under seal is DENIED as moot. 12 1 Alter seeks to file under seal portions of its Opposition (Dkt. No. 61-4[under seal]) that 2 quote from Exhibit C, as well as Exhibits 4, 8, and 9 (Dkt. Nos. 61-5, 61-6, 61-7 [all under seal]) 3 attached to Alter’s declaration submitted in support of its Opposition. See Alter’s Admin. Mot. to 4 Seal Oppo. (Dkt. No. 61). Autodesk filed a declaration in support of sealing Exhibits 9 and 8, see 5 Krause Decl. ISO Alter’s Admin. Mot. to Seal Oppo. (Dkt. No. 64-1), and Disney filed a 6 declaration in support of sealing the unredacted version of Alter’s Opposition and Exhibit 4, see 7 Phillips Decl. ISO Alter’s Admin. Mot. to Seal Oppo. (Dkt. No. 65). 8 9 Alter and Disney, as the designating parties, must demonstrate a compelling reason for sealing. See Civil L. R. 79-5(e). The fact that portions of the ’962 License Agreement were previously ordered sealed by the Court does not relieve the parties of articulating a compelling 11 United States District Court Northern District of California 10 reason for sealing at this time. See Kamakana, 447 F.3d at 1179 (“The ‘compelling reasons’ 12 standard is invoked even if the dispositive motion, or its attachments, were previously filed under 13 seal or protective order.”). Disney argues that disclosing the contents of the ’962 License 14 Agreement “would harm [Disney’s] commercial standing because it gives parties in future 15 negotiations with [Disney] access to secret information about comparative settlement pricing and 16 terms.” Phillips Decl. ISO Autodesk’s Admin. Mot. ¶ 8. Alter asserts that the ’962 License 17 Agreement should be sealed (along with portions of the parties’ briefs discussing the agreement) 18 because it is “competitively sensitive” and “contains financial terms of settlement and other 19 license terms which Alter and Disney maintain confidential.” Alter Decl. ISO Autodesk’s Admin. 20 Mot. ¶¶ 2, 3. Alter also argues that the unredacted version of its Opposition should remain sealed 21 because it “discloses the financial terms of settlement and other sensitive information pertaining to 22 the provisions [in the] license agreement.” Alter Decl. ISO Alter’s Admin. Mot. to Seal Oppo. 23 (Dkt. No. 61-1) ¶ 2. 24 While I agree that the settlement amount Disney paid Alter should remain confidential, I 25 find that the parties have failed to meet their burden of setting forth a compelling reason to seal the 26 remaining provisions of the ’962 License Agreement. The express terms of the ’962 License 27 Agreement are directly relevant to the merits of this case; the parties’ claims cannot be resolved 28 without reference to those terms. See Ctr. for Auto Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 13 1 1102 (9th Cir.) (holding that a “strong presumption of public access” applies to motions and their 2 attachments that are “more than tangentially related to the merits of the case”). This conclusion is 3 further supported by the fact that counsel for Autodesk—without objection from Alter’s counsel— 4 quoted extensively from the ’962 License Agreement in open court during the April 26, 2017 5 hearing. The parties have also failed to “narrowly tailor” their sealing requests “to seek sealing 6 only of sealable material.” Civil L. R. 79-5(b). The parties seek to redact all but the introductory 7 paragraph and signature blocks of the ’962 License Agreement, and all portions of their briefs 8 quoting from the agreement, without explaining, for example, why the forum selection clause 9 should remain under seal when the parties have cited to that provision extensively without seeking 10 United States District Court Northern District of California 11 redaction of those discussions. Accordingly, Autodesk’s administrative motion to file under seal (Dkt. No. 51) is granted 12 to the limited extent that Section 3.1 of the ’962 License Agreement, which discusses the 13 settlement payment amount and terms, may be redacted. Autodesk’s administrative motion to file 14 under seal portions of its Reply (Dkt. No. 68) is denied. Alter’s administrative motion to file 15 under seal (Dkt. No. 61) is granted only with respect to the portion of its Opposition which 16 identifies the settlement amount. Alter’s request to seal three exhibits submitted in support of its 17 Opposition to Autodesk’s Rule 12(c) motion is terminated as moot; because I did not consider or 18 rely on those documents in ruling on Autodesk’s motion for judgment on the pleadings, they may 19 remain under seal at this time. 20 CONCLUSION 21 Autodesk’s motion for judgment on the pleadings is DENIED. The parties’ administrative 22 motions to file under seal are GRANTED to the limited extent that Section 3.1 of the ’962 License 23 Agreement, which discusses the settlement payment and terms, may be redacted, as may the 24 portion of Alter’s Opposition referencing that amount. The parties shall refile the documents 25 previously filed under seal in accordance with this Order within ten days of the date below. 26 27 28 14 1 This Order disposes of Docket Nos. 51, 52, 59, 61, and 68. 2 IT IS SO ORDERED. 3 Dated: May 9, 2017 4 5 William H. Orrick United States District Judge 6 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15

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