Eolas Technologies Incorporated v. Adobe Systems Incorporated et al

Filing 1297

MEMORANDUM OPINION ORDER granting in part and denying in part 790 Sealed Motion for Summary Judgment of Noninfringement; denying 870 Sealed Motion for Partial Summary Judgment of Noninfringement; granting in part and denying in part 876 Sealed Patent Motion for Summary Judgment of Noninfringement; granting 1149 Sealed Patent Motion to Exclude Expert Testimony. Signed by Judge Leonard Davis on 01/25/12. cc:attys 1-25-12 (mll, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
TYLER DIVISION

EOLAS TECHNOLOGIES
INCORPORATED,
Plaintiff,
vs.
ADOBE SYSTEMS, INC., et al.,
Defendants.

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CASE NO. 6:09-CV-446

MEMORANDUM OPINION AND ORDER
Before the Court are Defendant Go Daddy’s Motion for Summary Judgment of
Noninfringement Based on Its License Defense (Docket No. 790); Defendants’ Motion for
Summary Judgment of Noninfringement Based on Microsoft/Apple License Defense (Docket
No. 876); Defendant Adobe’s Motion for Partial Summary Judgment of Noninfringement Based
on Its License Defense (Docket No. 870); and Plaintiffs’ Daubert Motion to Exclude Expert
Testimony Construing the Microsoft and Apple Agreements (Docket No. 1149). After
consideration of the parties’ briefing and oral arguments, Go Daddy’s and Defendants’ motions
for summary judgment are GRANTED IN PART and DENIED IN PART; Adobe’s motion for
summary judgment is DENIED; and Plaintiffs’ motion to exclude is GRANTED.
BACKGROUND
In August 2007, Microsoft Corporation (“Microsoft”) and Eolas Technologies
Incorporated (“Eolas”) entered into a license agreement (“Microsoft License”) to resolve a patent
infringement dispute concerning U.S. Patent No. 5,838,906 (“the ‘906 patent”). The Microsoft
License includes a covenant not to sue that protects Microsoft’s “customers, developers,
manufacturers, distributors, resellers, wholesalers, retailers, [and] end-users” against allegations

of infringement regarding the ‘906 patent and its progeny. All remaining defendants1
(“Defendants”) in the instant suit assert that protections afforded by the Microsoft License
extend to their alleged infringement of the patents-in-suit, thus warranting a summary judgment
ruling of noninfringement.
Apple Inc. (“Apple”) was originally a party to the instant litigation; however, Eolas has
since settled its claims against Apple. This settlement resulted in a license agreement between
Eolas and Apple (“Apple License”) with terms similar to those in the Microsoft License. Several
defendants rely on the Apple License as part of their defense. The oral arguments and briefing
focused on the Microsoft License, with the understanding that its interpretation and scope would
also apply to the Apple License. Accordingly, the Court’s analysis will focus on the Microsoft
License.
Oracle Corporation (“Oracle”) was also a defendant in the instant litigation and has since
settled. This settlement resulted in a license agreement between Oracle and Eolas (“Oracle
License”), which is relied on by Adobe Systems Inc. (“Adobe”) as part of its defense. The terms
of the Oracle License are considerably different from those in the Microsoft License and are
addressed separately.
APPLICABLE LAW
The Court renders summary judgment when the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue of material fact and that the movant is entitled to judgment as a matter of law.
FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323–25 (1986); Ragas v. Tenn.
Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998).

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The remaining defendants include: Adobe Systems, Inc.; Amazon.com, Inc.; CDW Corp.; Citigroup Inc.; Google
Inc.; J.C. Penney Corporation, Inc.; Staples, Inc.; The Go Daddy Group, Inc; Yahoo! Inc.; and YouTube LLC.

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Contract interpretation is a question of state law. Tex. Instruments, Inc. v. Tessera, Inc.,
231 F.3d 1325, 1329 (Fed. Cir. 2000). It is undisputed that Illinois law governs the Microsoft
License. “In construing a contract, the primary objective is to give effect to the intention of the
parties.” Thompson v. Gordon, 241 Ill. 2d 428, 441 (2011). “A contract is not rendered
ambiguous merely because the parties disagree on its meaning.” Cent. Ill. Light Co. v. Home Ins.
Co., 213 Ill. 2d 141, 153 (2004). “[W]hether a contract is ambiguous is a question of law.” Id. at
154.
It is undisputed that Texas law governs the Oracle License. Under Texas law,
“determining whether a contract is unambiguous and interpreting an unambiguous contract are
questions of law.” Cedyco Corp. v. PetroQuest Energy, LLC, 497 F.3d 485, 490 (5th Cir. 2007)
(citing Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996)). In construing a
contract the Court’s goal is to give effect to the parties’ intentions, and an unambiguous contract
will be enforced as written. Amigo Broad., LP v. Spanish Broad. Sys., Inc., 521 F.3d 472, 480
(5th Cir. 2008); Seagull Energy E&P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex.
2006). “To achieve this objective, ‘courts should examine and consider the entire writing in an
effort to harmonize and give effect to all of the provisions of the contract so that none will be
rendered meaningless.’” Amigo Broadcasting, 521 F.3d at 480 (quoting Coker v. Coker, 650
S.W.2d 391, 393 (Tex. 1983)); Seagull Energy E&P, 207 S.W.3d at 345.
ANALYSIS
The Microsoft License
“In Connection With”
The parties’ primary dispute regarding the Microsoft License centers around the scope of
the covenant not to sue, particularly as it applies to method claims. The covenant not to sue
reads:
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Notwithstanding any limitations expressed otherwise in this Agreement, Licensor
covenants not to sue any of Licensee’s or its Affiliates’ customers, developers,
manufacturers, distributors, resellers, wholesalers, retailers, or end-users of
Licensee Products under the Licensed Patents for their making, using, selling,
offering for sale, licensing, leasing, importing or otherwise disposing or
distributing Licensee Products or practicing any method in connection with their
making, using, selling, offering for sale, licensing, leasing, importing or otherwise
disposing or distributing Licensee Products.
Microsoft License § 2.4 (emphasis added). The crux of the parties’ disagreement regarding the
scope of the covenant not to sue pertains to the language “in connection with.”
Eolas reads the covenant to only protect against infringement where a Microsoft product
serves as a necessary part of the infringement. Eolas posits that, in the context of method claims,
the covenant protects an infringer when a Microsoft product is used to perform at least one step
of the claimed method.
Defendants, on the other hand, argue that the covenant should be read broadly to
encompass any alleged infringement that somehow involves or is related to the use of Microsoft
products. Thus, under Defendants’ interpretation, the covenant protects an infringer when an
infringing method is related to the use of a Microsoft product. However, the relationship with the
Microsoft product does not require that the product be used to satisfy a step of the claimed
method.
A simple example helps illuminate the parties’ proposed interpretations of the “in
connection with” language. Eolas accuses several defendants of infringing “server-side” method
claims, which involve the use of a network server that must communicate with a client
workstation. See U.S. Patent No. 7,599,985 Claims 20 & 40. For some defendants (“Akamai
Defendants”), Eolas identifies an Akamai server as the network server. Akamai servers provide
caching and mirroring services for websites and do not use Microsoft products to perform their

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functions.2 However, the Akamai Defendants host their websites on servers running IIS, a
Microsoft product for hosting websites. The IIS servers provide the content that the Akamai
servers cache and mirror. Figure 1 illustrates the relationship between the IIS server, Akamai
server, and client workstation.

Figure 1
Eolas contends that the communication between the Akamai server and client workstation
constitutes infringement that is not protected by the covenant not to sue because a Microsoft
product is not used to perform a step of the accused method. The Akamai Defendants argue that
this is a protected scenario because the Akamai servers obtain their content from the IIS server;
thus, the accused method is operating “in connection with” a Microsoft product.
The covenant not to sue specifically relates to infringement of Eolas’s patents. The
language of the covenant indicates that it is triggered when Microsoft products are used for
infringing activities. The covenant contains two clauses that provide meaningful limitations
regarding when the use of Microsoft products in infringing activities triggers the covenant. The
first clause relates to infringement of apparatus claims: “Licensor covenants not to
sue . . . customers . . . under the Licensed Patents for their making, using, selling, offering for
sale, licensing, leasing, importing or otherwise disposing or distributing Licensee Products . . . .”

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This assertion regarding an Akamai server’s use of Microsoft products is true to the extent that this issue has not
been raised or contested.

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Microsoft License § 2.4. The second clause relates to infringement of method-based claims:
“Licensor covenants not to sue . . . customers . . . under the Licensed Patents for . . . practicing
any method in connection with their making, using, selling, offering for sale, licensing, leasing,
importing or otherwise disposing or distributing Licensee Products.” Id.
This reading of the agreement gives meaning to both clauses within the context of the
agreement. Defendants’ proposed reading of “in connection with” introduces an ambiguity into
the agreement because it is unclear what level of connection to the infringing activity is required
before the covenant not to sue is triggered. Accordingly, Defendants’ reading of the “in
connection with” language is too broad and invites ambiguity into an otherwise clear license
agreement. After considering the entire agreement and its context, the Court finds that the “in
connection with” language requires that a Microsoft product be implicated in performing at least
one step of a claimed method before the covenant is triggered.
Testing Websites and Third-party Users
Defendants argue that the covenant not to sue precludes Eolas’s direct infringement
allegations concerning employees who test Defendants’ websites. Eolas responds that it is
merely accusing employees of direct infringement for using non-Microsoft browsers to view
Defendants’ websites. Eolas further asserts that Defendants can test their website under the
license so long as they use a Microsoft browser for that purpose.
Eolas’s position fails to recognize that website testing is an important component of the
process for hosting a website. As discussed above, the covenant not to sue protects Microsoft
customers from allegations of infringement that directly implicate the use of a Microsoft product.
Eolas has admitted that it would violate the covenant not to sue if Eolas alleged infringement
against websites that were hosted via IIS. Here, several defendants have websites hosted via the
Microsoft product IIS. An important step in hosting a successful website is ensuring that the site
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works properly across all popular web browsers, including both Microsoft and non-Microsoft
browsers. Eolas’s expert recognized the importance of testing software and websites: “Testing is
a critical part of the software development process. . . . This is also true of web pages coded
using HTML. The need for testing before publishing a web page is essentially the same as the
need for testing before releasing a traditional computer program such as a spreadsheet . . . .
Docket No. 790 Attach. 8, at 60. Thus, hosting a website necessarily encompasses testing that the
website is viewable with common web browsers. Accordingly, website testers are licensed
Microsoft customers so long as the website is hosted via a Microsoft product such as IIS.
Defendants also argue that hosting a website encompasses the ability for users to browse
that website. In essence, Defendants argue that these users, by browsing a website hosted via IIS,
are Microsoft customers. Alternatively, Defendants argue that a license to host a website via IIS
necessarily implies a license for users to view that website with infringing technology. These
arguments broaden the license and covenant not to sue beyond their intended bounds. Unlike
testing, which was an integral part of the website hosting process, having users browse your site,
while often desirable, is not an integral part of hosting that website.
In conclusion, the license and covenant not to sue in the Microsoft License precludes
Eolas from alleging infringement against employees who are testing Defendants’ websites hosted
by Microsoft web server software. In essence, if Eolas is unable to allege claims directly against
a defendant for their website hosting, they cannot allege claims against employees for testing that
website. However, this protection does not extend to third-party users that are viewing such
websites. Accordingly, Defendant Go Daddy’s Motion for Summary Judgment of
Noninfringement Based on Its License Defense (Docket No. 790) and Defendants’ Motion for

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Summary Judgment of Noninfringement Based on Microsoft/Apple License Defense (Docket
No. 876) are GRANTED IN PART and DENIED IN PART.
Plaintiff’s Motion to Exclude
Eolas has filed a motion to exclude expert testimony construing the Microsoft and Apple
Licenses. This opinion has set forth guidance on how these licenses shall be interpreted. Expert
testimony that contradicts the Court’s interpretation of the Microsoft and Apple Licenses will not
be permitted. Accordingly, Plaintiffs’ Daubert Motion to Exclude Expert Testimony Construing
the Microsoft and Apple Agreements (Docket No. 1149) is GRANTED.
The Oracle License
The Oracle License provides Oracle a right and license “under all claims of the Eolas
Patents . . . [to] make, have made, import and use past, current and future Oracle Products.”
Oracle License § 5(a). Additionally, Oracle has a “right to sublicense distributors, resellers,
OEMs other intermediaries and customers of Oracle Products solely to the extent necessary for
the use, support and distribution of such Oracle Products (it being understood that sublicensing
rights shall not apply to Program Materials) . . . .” Id. (emphasis added). Oracle products include
“any past, current or future hardware, software or services sold, licensed or otherwise distributed
by or for a Licensee, but excluding any products or portions thereof that are Program Materials.”
Id. § 1(h). Program Materials include software “that either constitute[s] hypermedia content or
can be used to create, receive, display, or interact with hypermedia content from a distributed
network environment” or “that can be used to generate, embed, serve or otherwise distribute
hypermedia content.” Id. § 1(b), (m), (n). Finally, the preamble of the Oracle License states:
[Oracle] and Eolas have agreed to enter into this Agreement to provide a
conditional license and covenant not to sue Licensee to insulate Licensee from
suit by Eolas for infringement under the Eolas Patents . . . while preserving the
right and ability of Eolas to pursue claims for infringement of downstream

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acquires of Oracle products and services without such claims being limited,
exhausted or otherwise affected by this Agreement . . . .
Id. at 2 (emphasis added).
Adobe asserts the Oracle License as a defense to infringement because “Sun hardware
has been used to respond to every single client request for the Products-at-issue during the
damages period.” Docket No. 870, at 1. Eolas responds that its infringement allegations against
Adobe are based on Adobe’s use of software that serves hypermedia content and for inducing
others to infringe by displaying hypermedia content. See Docket No. 993, at 1. The Oracle
License explicitly reserves a right for Eolas to accuse downstream users of Oracle products and
services. Additionally, the sublicensing rights provided to Oracle for its customers do not extend
to Program Materials, which include software for serving and displaying hypermedia content.
Because Eolas’s allegations of infringement against Adobe relate to the use of software for
serving and displaying hypermedia content, the protection afforded by the Oracle License does
not extend to Adobe’s use of Oracle hardware for serving hypermedia content. Accordingly,
Adobe’s motion for summary judgment is DENIED.
CONCLUSION
For the reasons stated herein, the Court ORDERS that Defendant Go Daddy’s Motion for
Summary Judgment of Noninfringement Based on Its License Defense (Docket No. 790) and
Defendants’ Motion for Summary Judgment of Noninfringement Based on Microsoft/Apple
License Defense (Docket No. 876) are GRANTED IN PART and DENEID IN PART. The
Court further ORDERS that Defendant Adobe’s Motion for Partial Summary Judgment of
Noninfringement Based on Its License Defense (Docket No. 870) is DENIED, and Plaintiffs’
Daubert Motion to Exclude Expert Testimony Construing the Microsoft and Apple Agreements
(Docket No. 1149) is GRANTED.

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So ORDERED and SIGNED this 25th day of January, 2012.

__________________________________
LEONARD DAVIS
UNITED STATES DISTRICT JUDGE

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