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AT&T CORP. v. MICROSOFT CORPORATION

February 2, 2004.

AT&T CORP., Plaintiff, -against- MICROSOFT CORPORATION, Defendant


The opinion of the court was delivered by: WILLIAM PAULEY, District Judge

MEMORANDUM AND ORDER

Plaintiff AT&T Corp. ("AT&T") brings this patent infringement action against Microsoft Corporation ("Microsoft"), alleging that certain of Microsoft's products containing speech codecs*fn1 infringe its United States Reissue Patent No. 32,580 (the "580 patent"). Those accused products include, among others, Microsoft's NetMeeting video conferencing software, which is available in certain editions of Microsoft's Windows operating system. Microsoft denies infringement of the 580 patent and seeks dismissal of the complaint together with a declaratory judgment of noninfringment, invalidity and unenforceability of the 580 patent. See AT&T Corp. v. Microsoft Corp., 01 Civ. 4872 (WHP), 2003 WL 21459573 (S.D.N.Y. June 24, 2003). Familiarity with this Court's prior Memoranda and Orders is presumed.*fn2 Page 2

  Currently before this Court is AT&T's motion for partial summary judgment on Microsoft's affirmative defenses of equitable estoppel and implied license. For the reasons set forth below, AT&T's motion for partial summary judgment is granted.

  DISCUSSION

 I. Summary Judgment Standard

  Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); accord Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). The burden of demonstrating the absence of any genuine dispute as to a material fact rests with the moving party. See, e.g., Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); Page 3 Grady v. Affiliated Cent., Inc., 130 F.3d 553, 559 (2d Cir. 1997). The movant may meet this burden by demonstrating a lack of evidence to support the nonmovant's case on a material issue on which the nonmovant has the burden of proof. Celotex, 477 U.S. at 323.

  To defeat a summary judgment motion, the nonmoving party must do "more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Indeed, the nonmoving party must "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); accord Matsushita Elec., 475 U.S. at 587. In evaluating the record to determine whether there is a genuine issue as to any material fact, the "evidence of the nonmovant is to be believed and all justifiable inferences are to be drawn in his favor." Liberty Lobby, 477 U.S. at 255.

 II. Equitable Estoppel

  "Equitable estoppel may be imposed in a patent case when a patentee induces another party to believe that it will not sue that party for infringement." Forest Labs., Inc. v. Abbott Labs., 339 F.3d 1324, 1329 (Fed. Cir. 2003). To prove the affirmative defense of equitable estoppel, an alleged infringer must establish by a preponderance of the evidence that: (1) Page 4 "[t]he patentee, through misleading conduct*fn3, led the alleged infringer to reasonably infer that it did not intend to enforce its patent against the alleged infringer"; (2) "[t]he alleged infringer relie[d] on that conduct"; and (3) "[d]ue to its reliance, the alleged infringer will be materially prejudiced if the patentee is allowed to proceed with its infringement claim." A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1028, 1046 (Fed. Cir. 1992) (en bane); accord Ecolab, Inc. v. Envirochem, Inc., 264 F.3d 1358, 1371 (Fed. Cir. 2001); Hemstreet v. Computer Entry Svs. Corp., 972 F.2d 1290, 1294 (Fed. Cir. 1992).

  Even assuming arquendo that AT&T engaged in a course of misleading conduct which reasonably gave rise to an inference that it was not going to enforce the 580 patent against Microsoft, summary judgment is appropriate because Microsoft did not have knowledge of AT&T's 580 patent at the time it incorporated the accused codecs into its software. See AT&T Corp. v. Microsoft Corp., 290 F. Supp.2d 409 (S.D.N.Y. 2003) (holding that AT&T notified Microsoft of its possible infringement in April 1999, long after the infringing codecs were incorporated into Microsoft's allegedly infringing software); MS Page 5 Opp. at 22; Transcript of Oral Argument, dated December 22, 2003 ("Tr.") at 86. It is axiomatic that to assert equitable estoppel, the alleged infringer must have been aware of the patent at issue when it undertook its infringing activities. See, e.g., Auckerman, 960 F.2d at 1042; Winbond Elecs. Corp. v. I.T.C., 262 F.3d 1363, 1374 (Fed. Cir. 2001). Indeed, the Federal Circuit has held that "[i]t is clear . . . that [to assert] equitable estoppel the alleged infringer cannot be unaware — as is possible under laches — of the patentee and/or its patent." Auckerman, 960 F.2d at 1042. Microsoft concedes that it cannot establish knowledge of AT&T's 580 patent at the time it incorporated the accused codec into its software. (Tr. at 86 ("I will state for the record, Microsoft did not know of the `580 patent until it received a letter from AT&T in April of 1999."); MS Opp. at 22 ("Should . . . the Court determine that knowledge of the patent is a threshold requirement for estoppel, AT&T's motion should be granted . . . because it is undisputed that Microsoft lacked knowledge of the 580 patent before April 1999.").)

  Specifically, Blake Irving, Microsoft's corporate designee responsible for development of its NetMeeting software, disclaimed knowledge of AT&T's 580 patent at the time of the alleged infringement:

  Q: Besides the agreement with Intel was there anything else that gave Microsoft the belief that it wouldn't have any patent exposure from shipping NetMeeting? Page 6

  A: No, not to my ...


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