Media Rights Technologies, Inc v. Microsoft Corporation
922 F.3d 1014
| 9th Cir. | 2019Background
- MRT developed the Controlled Data Pathway (CDP) DRM technology and embedded a detectable "Watermark" in its software to reveal copying; it holds patents and copyrights on that software.
- MRT disclosed its technology and provided software to Microsoft under a 2004 NDA during investment discussions; Microsoft later developed Protected Media Path (PMP) DRM and released it in Windows/Vista and other products.
- MRT I (2013) was a patent-infringement suit against Microsoft; the case was stayed and ultimately dismissed with prejudice by MRT in 2016 after a related patent was invalidated in separate litigation.
- After investigating while MRT I was pending, MRT discovered the Watermark in various Microsoft products (discovery alleged in 2014) and then filed MRT II (2017) asserting copyright infringement, DMCA violations, and breach of contract/EULA claims based on the same underlying events.
- The district court dismissed MRT II on claim preclusion grounds; the Ninth Circuit reviewed whether claim preclusion barred (a) copyright claims that accrued before vs. after filing MRT I, (b) the DMCA claim, and (c) breach-of-contract claims.
- The Ninth Circuit affirmed preclusion for claims that had accrued by the time MRT I was filed (pre-filing copyright claims, DMCA, and breach claims) and reversed as to copyright claims accruing after MRT I was filed (post-filing sales).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether copyright claims that accrued after MRT I was filed are precluded | Post-filing infringement claims did not "accrue" until the later sales and thus could not have been sued in MRT I | Preclusion should bar later claims based on the same continuing course of conduct and prior knowledge | Not precluded: Howard rule — claims that arise after filing the prior suit are not barred (post-filing sales create new causes of action) |
| Whether copyright claims based on sales before MRT I are precluded | Those claims accrued only when MRT discovered the copying (allegedly 2014) so they were not ripe at MRT I filing | MRT could have discovered copying earlier (Watermark, timing, facts) so pre-filing claims were available in MRT I | Precluded: Court finds MRT could reasonably have discovered copying by MRT I filing date, so pre-filing copyright claims are barred by claim preclusion |
| Whether the DMCA claim is precluded | DMCA claim accrual mirrors copyright accrual and was not new post-filing | DMCA arises from the same nucleus of facts as MRT I and thus is precluded | Precluded: DMCA claim accrued before MRT I and shares the same transactional nucleus with MRT I |
| Whether breach-of-contract (NDA/EULA) claims are precluded | Contract claims arose upon later discovery and are distinct legal theories | Contract claims stem from the same alleged reverse-engineering and copying and thus were or could have been raised in MRT I | Precluded: Breach claims arise from same facts as patent suit and DMCA claim, so barred by claim preclusion |
Key Cases Cited
- Howard v. City of Coos Bay, 871 F.3d 1032 (9th Cir. 2017) (claims that arise after filing prior suit are not precluded)
- Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S. 663 (U.S. 2014) (separate-accrual rule: each act of infringement gives rise to a new claim)
- Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700 (9th Cir. 2004) (discovery rule for copyright accrual)
- Lawlor v. Nat’l Screen Serv. Corp., 349 U.S. 322 (U.S. 1955) (prior judgment cannot extinguish claims that did not then exist)
- Mpoyo v. Litton Electro-Optical Sys., 430 F.3d 985 (9th Cir. 2005) (elements for claim preclusion and the transactional nucleus test)
- Taylor v. Sturgell, 553 U.S. 880 (U.S. 2008) (purpose and scope of claim/issue preclusion)
- TechnoMarine SA v. Giftports, Inc., 758 F.3d 493 (2d Cir. 2014) (post-settlement acts can give rise to new, non-precluded claims)