ViaTech Technologies, Inc. v. Microsoft Corporation
Filing
62
MEMORANDUM OPINION. Signed by Judge Richard G. Andrews on 7/18/2019. (nms)
IN THE UNITED STATES DISTRJCT COURT
FOR THE DISTRJCT OF DELAWARE
VIATECH TECHNOLOGIES, INC.,
Plaintiff;
Civil Action No. 17-570-RGA
V.
MICROSOFT CORPORATION,
Defendant.
MEMORANDUM OPINION
John G. Day & Andrew C. Mayo, ASHBY & GEDDES, Wilmington, DE; Henry C. Bunsow,
Denise M. De Mory, Sushila Chanana, & Michael N. Zachary, BUNSOW DE MORY LLP,
Redwood City, CA, attorneys for Plaintiff.
Martina Tyreus Hufnal, FISH & RJCHARDSON, P.C., Wilmington, DE; Frank E. Scherkenbach,
Steven R. Katz, & Whitney Reichel, FISH & RJCHARDSON, P.C., Boston, MA, attorneys for
Defendant.
July
/K ,
2019
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Currently pending before the Court is Defendant' s Motion to Dismiss (D.I. 38) and
Plaintiffs Cross-Motion for Leave to File a Motion for Reconsideration (D.I. 47). The parties
have fully briefed the issues. (D.I. 39, 48, 51 , 53 , 57). For the following reasons, Defendant's
Motion is GRANTED-IN-PART and DENIED-IN-PART and Plaintiffs Cross-Motion is
DENIED.
I.
BACKGROUND
Plaintiff ViaTech Technologies, Inc. previously brought suit against Defendant Microsoft
Corporation accusing Windows and Office products of infringing "at least" claims 1-7, 13-15,
and 28-32 of the U. S. Patent No. 6,920,567 ("the ' 567 patent"). (No. 14-1226-RGA, D.I. 1)
("First Action"). On February 10, 2017, Defendant moved for summary judgment of noninfringement. (First Action, D.I. 218). On June 12, 2017, the Court granted Defendant's motion
and entered final judgment. (First Action, D.I. 330, 331). That judgment was affirmed by the
Federal Circuit on May 23 , 2018. ViaTech Tech. Inc. v. Microsoft Corp. , 733 F. App 'x 542
(2018).
On May 15, 2017, Plaintiff brought the current suit against Defendant accusing various
products of infringing claims 8-11 and 26-27 of the same patent as was asserted in the First
Action. (D.I. 1). Defendant moved to dismiss Plaintiff s First Amended Complaint under the
doctrine of claim preclusion. (D.I. 12). I granted that motion in part, holding that claim
preclusion barred Plaintiff from bringing new claims against Windows products for infringement
of the ' 567 patent. (D.I. 25 at 9). Plaintiff has now filed a Second Amended Complaint accusing
Microsoft's Play Ready Product Suite of direct and indirect infringement of the ' 567 patent and
1
adding new infringement claims' against Windows for purported infringement post-final
judgment of the First Action. (D.I. 37). Defendant has moved to dismiss the Second Amended
Complaint on the basis of claim preclusion, issue preclusion, or the Kessler Doctrine. (D.I. 38).
Plaintiff has cross-moved for leave to file a motion for reconsideration of the order dismissing
the First Amended Complaint. (D.I. 47).
II.
LEGAL STANDARD
A. Motion for Leave to File Motion for Reconsideration
The purpose of a motion for reconsideration is to "correct manifest errors of law or fact
or to present newly discovered evidence." Max 's Seafood Cafe v. Quinteros, 176 F.3d 669, 677
(3d Cir. 1999). "A proper Rule 59(e) motion ... must rely on one of three grounds: (1) an
intervening change in controlling law; (2) the availability of new evidence; or (3) the need to
correct a clear error of law or prevent manifest injustice." Lazaridis v. Wehmer, 591 F.3d 666,
669 (3d Cir. 2010).
Local Rule 7.1.5 provides that motions for reargument "shall be filed within 14 days after
the Court issues its opinion or decision." "When an act may or must be done within a specified
time, the court may for good cause extend the time .. . on motion made after the time has expired
if the party failed to act because of excusable neglect." Fed. R. Civ. P. 6(b)(l)(B).
B. Motion to Dismiss
When reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6), the Court must accept the complaint's factual allegations as true. See Bell At!. Corp. v.
Twombly, 550 U.S. 544, 555-56 (2007). Rule 8(a) requires "a short and plain statement of the
1
Count II of the Second Amended Complaint reasserted claims 1-7, 13-15, and 28-31 of the ' 567 patent. (D.I. 37
106).
2
claim showing that the pleader is entitled to relief. " Id. at 555. The factual allegations do not
have to be detailed, but they must provide more than labels, conclusions, or a "formulaic
recitation" of the claim elements. Id. ("Factual allegations must be enough to raise a right to
relief above the speculative level ... on the assumption that all the allegations in the complaint
are true (even if doubtful in fact)."). Moreover, there must be sufficient factual matter to state a
facially plausible claim to relief. Ashcroft v. Iqbal, 556 U. S. 662, 678 (2009). The facial
plausibility standard is satisfied when the complaint' s factual content "allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged. " Id. ("Where a
complaint pleads facts that are merely consistent with a defendant' s liability, it stops short of the
line between possibility and plausibility of entitlement to relief." (internal quotation marks
omitted)).
C. Claim Preclusion
Claim preclusion requires : (1) a final judgment on the merits in a prior suit, (2) where
both suits involve the same parties or their privities, and (3) both suits are based on the same
cause of action. CoreStates Bank, NA. v. Huls Am., Inc., 176 F.3d 187, 194 (3d Cir. 1999).
In patent infringement cases, "a cause of action is defined by the transactional facts from
which it arises, and the extent of the factual overlap." Senju Pharm. Co. v. Apotex Inc., 746 F.3d
1344, 1348 (Fed. Cir. 2014). The relevant transactional facts are (1) whether both suits involve
the same patent, and (2) whether both suits involve accused products that are the same or
"essentially the same." Id. at 1349-50. In patent infringement cases, claim preclusion applies
even when the plaintiff chooses different patent claims in the second lawsuit. See Brain Life,
LLC v. Elekta, Inc., 746 F.3d 1045, 1053 (Fed. Cir. 2014) (applying, on summary judgment,
claim preclusion to method claims dismissed without prejudice in first suit). As to the second
3
fact, two products are "essentially the same" "where the differences between them are merely
'colorable' or 'unrelated to the limitations in the claim of the patent. "' Acumed LLC v. Stryker
Corp., 525 F.3d 1319, 1324 (Fed. Cir. 2008). Thus, claim preclusion bars accusing infringing
acts "that are accused in [a] first action or could have been made subject to that action." Brain
Life, 746 F.3d at 1054 (citing Aspex Eyewear Inc. v. Marchan Eyewear, Inc., 672 F.3d 1335,
1343 (Fed. Cir. 2012)); see also Allen v. McCurry, 449 U.S. 90, 94 (1980) ("Under [claim
preclusion] , a final judgment on the merits of an action precludes the parties . .. from relitigating
issues that were or could have been raised in that action."). However, post-judgment infringing
actions "do not involve the same ' claim' for claim-preclusion purposes, even if all of the conduct
is alleged to be unlawful for the same reason. " Asetek Danmark AIS v. CMI USA Inc., 852 F .3d
1352, 1365 (Fed. Cir. 2017); see also Mentor Graphics Corp. v. EVE-USA, Inc. , 851 F.3d 1275,
1299 (Fed. Cir. 2017).
Claim preclusion is an affirmative defense. It is not generally a basis for dismissal on a
Rule 12(b)(6) motion unless "apparent on the face of the complaint." Hoffman v. Nordic
Naturals, Inc. , 837 F.3d 272,280 (3d Cir. 2016). "If not apparent, the district court must either
deny the [motion] or convert it to a motion for summary judgment ... ." Id.
D. Issue Preclusion
Issue preclusion requires: "(1) the identical issue was previously adjudicated; (2) the
issue was actually litigated; (3) the previous determination was necessary to the uudgment] ; and
(4) the party being precluded from relitigating the issue was fully represented in the prior
action." Jean Alexander Cosmetics, Inc. v. L 'Orea! USA, Inc., 458 F.3d 244, 249 (3d Cir. 2006).
"[A]lthough issue preclusion is an affirmative defense, it may be raised in a motion to dismiss
under[] Rule 12(b)(6)." M & M Stone Co. v. Pennsylvania, 388 F. App'x 156, 162 (3d Cir.
4
2010) (citing Connelly Found. v. Sch. Dist. of Haverford Twp., 461 F.2d 495,496 (3d Cir.
1972)).
E. Kessler Doctrine
The Kessler doctrine is "separate and distinct" from claim and issue preclusion. Brain
Life, LLC v. Elekta Inc. , 746 F.3d 1045, 1055 (Fed. Cir. 2014). It "fills the gap between these
preclusion doctrines, however, allowing an adjudged non-infringer to avoid repeated harassment
for continuing its business as usual post-final judgment in a patent action." Id. at 1056. It gives
the accused infringer "rights with respect to specific products that had been held to be
noninfringing, even when the specific acts of infringement would not be barred by claim
preclusion because they occurred post-final judgment." Id. at 1057. As the Federal Circuit held
in Brain Life,
The principle that, when an alleged infringer prevails in demonstrating
noninfringement, the specific accused device( s) acquires the "status" of a
noninfringing device vis-a-vis the asserted patent claims is an essential fact of a
patent infringement claim. The status of an infringer is derived from the status
imposed on the thing that is embraced by the asserted patent claims. And, when
the devices in the frrst and second suits are "essentially the same," the "new"
product(s) also acquires the status of a noninfringing device vis-a-vis the same
accusing party or its privies.
Id. Thus, where a second suit accuses the same or "essentially the same" product of infringing
acts post-final judgment in the frrst suit, the Kessler doctrine will prevent the suit.
III.
DISCUSSION
A. Plaintiff has not Shown Good Cause for Leave to File
Plaintiff cross-moves for leave to file a motion for reconsideration of my order
dismissing Plaintiff's First Amended Complaint. I issued that order on August 29, 2018. (D.I.
25). Plaintiff did not file its cross-motion for leave until February 1, 2019, five months after the
5
entry of my previous order. The Local Rules provide a short time window for filing motions for
reargument or reconsideration. While I have discretion to allow filings after the deadline set out
in the local rules, the party seeking leave must show good cause to do so.
Here, Plaintiff argues that there is good cause because its change of counsel delayed the
filing of the motion. (D.I. 48 at 8). Plaintiff's current counsel entered their appearances on
September 20, 2018, after the expiration of the relevant time period for filing a motion for
reconsideration. (D.I. 28). Plaintiff did not file the motion for leave to file for four months after
current counsel became counsel of record. Plaintiff argues that this delay was necessary because
its current counsel needed to review the files from the previous litigation before determining
whether a motion for reconsideration would be merited. (D.I. 48 at 9).
I disagree. Plaintiff has not demonstrated good cause. It is well-settled that change of
counsel is not enough to establish good cause to allow untimely filing of a motion for
reconsideration. See, e.g. , Fed. Election Comm 'n v. 0 'Donnell, 2017 WL 2200911 , at * 1 (D.
Del. May 19, 2017) ("[T]he need to hire new counsel [did not] establish any excusable neglect"
justifying the grant of an extension.). Plaintiff could have requested an extension oftime to file a
motion for reconsideration when new counsel entered their appearances. Additionally,
Plaintiff's counsel identified the possibility of moving for reconsideration as early as October 25,
2018. (D.I. 33 at 2 n.2). Moreover, on December 10, 2018, Plaintiff again identified an
intention to file a motion to reconsider (D.I. 49-1, Ex. E) but did not do so until a month after
filing the Second Amended Complaint. (D.I. 42, 43).2 Plaintiff was clearly aware that it
intended to ask the Court to reconsider the claim preclusion order. Plaintiff has not established
any justification for the delay that would meet the good cause standard to grant leave.
2
The motions at D.I. 42 and 43 were later withdrawn. (D.I. 45).
6
Additionally, the motion does not set out a change in the relevant law or establish a
misapprehension of fact. To the extent that Plaintiff asserts that the Second Amended Complaint
solely accuses PlayReady technology in Count I and not the previously accused Windows
products (D.I. 48 at 5), I do not believe that assertion requires me to revisit my previous order.
B. Motion to Dismiss
a. Count I - Play Ready Technology
Defendant asserts that Count I of Plaintiffs Second Amended Complaint should be
dismissed with prejudice under claim preclusion, issue preclusion, or the Kessler Doctrine. (D.I.
39 at 9).
1. Claim Preclusion
As to claim preclusion, the parties do not dispute that there has been a final judgment on
the merits in a prior suit and that both suits involve the same parties. (D.I. 48 at 3-4). Thus, the
only remaining question to determine whether claim preclusion applies is whether both suits are
based on the same cause of action. Under Federal Circuit precedent, to determine whether both
suits are based on the same cause of action, courts should ask whether the infringement
contentions in both suits are (1 ) under the same patent and (2) accuse products that are the same
or essentially the same. As my previous order explained,
Plaintiff accused Windows alone of directly infringing the ' 567 patent in the First
Action. . . . Given that Plaintiff previously asserted that Windows infringed the
' 567 patent, Plaintiff cannot once again accuse Windows of infringing the ' 567
patent, but argue that other items, like media, are necessary for infringement.
Likewise, Plaintiff cannot repeatedly assert its patent against different parts of
Windows in separate suits, even if one accused part is on the left-hand side of
Windows and the other is on the right-hand side, so to speak. The accused product
in the Second Action is the same or "essentially the same" as Windows, the accused
product in the First Action. Therefore, the cause of action in the Second Action is
same as the cause of action in the First Action, as to direct infringement.
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ViaTech Tech. , Inc. v. Microsoft Corp. , 2018 WL 4126522, at *3 (D. Del. Aug. 29, 2018).
However, construing the Second Amended Complaint in the light most favorable to the Plaintiff,
I do not understand Plaintiff to continue to accuse Windows products (at least with regards to
PlayReady technology), but rather independent PlayReady technology, including the PlayReady
Product Suite. On the face of the Second Amended Complaint, the now Accused Products
relating to PlayReady appear to be separate technology from the previously accused Windows
products. (D.I.
37,r,r 19-27).
Thus, to the extent that Defendant alleges that the PlayReady
technology or Product Suite as used in non-Windows technology or sold separately by Microsoft
is "essentially the same" as the accused Windows products in the first action, that cannot be
determined on the face of the Complaint. As I determined in my previous order, that is an issue
more appropriately addressed on motion for summary judgment.
2. Issue Preclusion
Defendant argues that Count I is precluded because Plaintiff raises the same issue of
infringement as in the First Action; Plaintiff has "asserted the same patent (the '567 Patent)
against the same products (Windows 10 and earlier)." (D.I. 39 at 17). Plaintiff argues that issue
preclusion is not appropriate because the PlayReady claims in Count I are not the same issue that
was adjudicated or litigated in the First Action. (D.I. 48 at 14).
I agree with Plaintiff. As stated above, construing the Second Amended Complaint in the
light most favorable to Plaintiff, Count I accuses independent PlayReady technology, not
Windows products. Thus, issue preclusion is not appropriate because the identical issue was not
previously adjudicated.
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3. Kessler Doctrine
Defendant argues that the Kessler Doctrine precludes Count I because it accuses the same
products (Windows) as the First Action under the same patent (the ' 567 patent) as the First
Action. (D.I. 39 at 16). As stated above, it is not clear from the face of the Second Amended
Complaint that Plaintiff accuses the same or essentially the same product as the previously
accused Windows products. Therefore, application of the Kessler Doctrine to Count I at this
early stage is inappropriate.
Thus, I will deny Defendant's motion as to Count I.
b. Count II - Post-Judgment Infringement by Windows Products
Defendant asserts that Count II of Plaintiffs Second Amended Complaint should be
dismissed with prejudice because the First Action precludes it, either under the doctrine of claim
preclusion, issue preclusion, or the Kessler doctrine. (D.I. 39 at 18).
1. Claim Preclusion
As discussed above, claim preclusion requires : (1) a final judgment on the merits in a
prior suit, (2) where both suits involve the same parties or their privities, and (3) both suits are
based on the same cause of action. CoreStates Bank, 176 F.3d at 194. Neither party disputes
that the first two elements of claim preclusion are satisfied. Thus, to determine whether claim
preclusion applies to Plaintiffs claims of direct and indirect infringement by the accused
Windows products after the previous judgment was entered, I must determine whether the First
Action and this suit are based upon the same cause of action. Claim preclusion solely bars
accusing infringing acts "that are accused in [a] first action or could have been made subject to
that action." Brain Lif 746 F.3d at 1054. Because claims for infringement after the judgment
e,
in ViaTech I was entered could not have been brought in the First Action, they are inherently a
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different cause of action, and claim preclusion does not apply. See, e.g. , Asetek Danmark, 852
F.3d at 1365.
2. Issue Preclusion
Defendant argues that if Plaintiffs post-judgment infringement claims against previously
accused Windows products are not barred by claim preclusion, they are barred by issue
preclusion. (D.I. 39 at 16). The parties dispute whether the identical issue was previously
adjudicated and whether it was actually litigated. (D.I. 48 at 18-19). Plaintiff also argues that
because it accuses only the post-installation version of the Windows products, issue preclusion
does not apply. (Id) . More specifically, Plaintiff argues that the issue of whether the postinstallation version of Windows infringes was not actually litigated, citing to both the summary
judgment opinion in the First Action and the Federal Circuit's affirmance of that opinion. (D.I.
48 at 18-19).
I agree with Plaintiff. "Issue preclusion [] applies only to issues actually litigated in the
prior action, not issues that could have been litigated." Orexo AB v. Actavis Elizabeth LLC, 371
F. Supp. 3d 175, 183 (D. Del. 2019); see also Brain Life, 746 F.3d at 1055 (finding method
claims asserted in prior action were not "fully, fairly, and actually litigated"); Voter Verified, Inc.
v. Election Sys. & Software LLC, 887 F.3d 1376, 1383 (Fed. Cir. 2018) (holding that issue of
validity was not "actually litigated" where Defendant did not respond to arguments against
invalidity counterclaim). My summary judgment opinion in the First Action determined that
Plaintiff did not litigate the issue of whether a post-installation form of Windows infringes.
ViaTech Tech. Inc. v. Microsoft Corp. , 2017 WL 2538570, at *3 n.5 (D. Del. June 12, 2017).
The Federal Circuit, when considering the appeal of the First Action, agreed that Plaintiff "never
articulated a clear argument that post-installation Windows is a file" and determined that the
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issue was not "properly presented to the district court" and therefore was "waived on appeal. "
ViaTech, 733 F. App'x at 551-52. Thus, the issue of whether post-installation Windows software
infringes the ' 567 patent was not "actually litigated" and the requirements for issue preclusion
have not been met.
3. Kessler Doctrine
As Plaintiff has not demonstrated that either claim preclusion or issue preclusion applies,
I now consider the application of the Kessler Doctrine. I determine that the Kessler Doctrine
requires dismissal of Count II of Plaintiffs Second Amended Complaint. Count II accuses "the
Software Protection Platform (SPP) and Office Software Protection Platform (OSPP) when used
to protect Windows or Office" of infringement. (D.I. 37
~
65). These products were accused in
the previous suit. (First Action, D .I. 1 ~~ 10-11 ). In both suits, the products are alleged to
infringe claims 1-7, 13-15 and 28-32 of the ' 567 patent. (D.I. 37
~
65); ViaTech , 2017 WL
2538570, at *3-4 (evaluating infringement contentions using Windows and SPP as the
representative product). Where an accused infringer has succeeded in obtaining a judgment that
a specific product is non-infringing, it should be able to continue its business as usual post-final
judgment without repeated harassment by the patentee. Brain Life, 746 F.3d at 1056. Thus, the
Kessler Doctrine applies to claims of post-final judgment infringing acts where the accused
products are the same or essentially the same products as were previously accused and deemed
non-infringing.
Plaintiff accuses the same products in this case as it did in the First Action.3 Plaintiff
argues, however, that the Kessler Doctrine does not extend to the "different version" accused
Compare D.l. 37 ,r 41 , 48 (accusin g Windows Vista, Windows 7, Windows 8, Windows 8.1 , Windows 10, Office
2010, Office 2013 , and Office 365) with First Action , D.I . 229 at I (accusing Windows Vista, Windows 7, Windows
8, Windows 8.1, Windows I 0, Office 2010, Office 2013 , Office 2016, and Office 365).
3
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here, "post-installation Windows," rather than the previously accused "pre-installation" version.
(D.I. 48 at 19). I understand Plaintiff to argue that the application of the Kessler Doctrine is
limited to cases where "the accused aspects of the products" have been the same in both cases.
(Id.) .
I disagree. The Kessler Doctrine examines whether products have been given the status
of a non-infringing device with regard to the asserted claims of a patent. Brain Life, 746 F.3d at
1057. Brain Life is instructional here. There, Brain Life ' s predecessor-in-interest asserted all the
claims of a single patent against the defendant, but ultimately abandoned the method claims
before trial. Id. at 1058. The Federal Circuit determined that "by virtue of gaining a final
judgment of noninfringement in the first suit-where all of the claims were or could have been
asserted against Elekta- the accused devices acquired a status as noninfringing devices, and
Brain Life is barred from asserting that they infringe the same patent claims a second time." Id.
Here, the SPP and OSPP software in Windows and Office products was determined not
to infringe the asserted claims of the '567 patent in the First Action. The judgment in the First
Action determined that the accused Windows and Office products were non-infringing products
as to the exact same patent claims that Plaintiff now asserts. (First Action, D.I. 329, 330,331).
That Plaintiff now tries to frame its infringement allegations as directed to a "different aspect" of
the same product is of no moment. Plaintiff could have brought its post-installation theory in the
previous case, and in fact attempted to do so. See, e.g. , ViaTech , 733 F. App'x at 551 -52;
ViaTech, 2017 WL 2538570, at *3 n.5. This falls squarely within the Kessler Doctrine.
Neither do I agree with Plaintiffs argument that the Kessler Doctrine is limited to barring
suits against customers. The Federal Circuit has made clear that the Kessler Doctrine was born
out of the manufacturer's right to be free from harassment and has only recently extended the
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doctrine to be available to customers as a defense in litigation. See SpeedTrack, Inc. v.
OfficeDepot, Inc., 791 F.3d 1317, 1327 (Fed. Cir. 2015); Brain Life, 746 F.3d at 1058 (applying
Kessler Doctrine to prevent suit against successor-in-interest manufacturer).
Therefore, the Kessler Doctrine applies on the face of the Second Amended Complaint to
bar the allegations of infringement in Count II. Thus, I will grant Defendant' s motion as to
Count II.
IV.
CONCLUSION
For the foregoing reasons, Plaintiffs Cross-Motion for Leave to File a Motion for
Reconsideration is DENIED and Defendant' s Motion to Dismiss Plaintiffs Second Amended
Complaint is DENIED at to Count I and GRANTED as to Count II.
An accompanying order will be entered.
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