MEDIOSTREAM, INC. v. Microsoft Corp.
2010 U.S. Dist. LEXIS 115338
E.D. Tex.2010Background
- MedioStream sued Nero's subsidiary for patent infringement; Nero asserted counterclaims including breach of contract, fraud, misappropriation, copyright infringement, and inequitable conduct.
- Nero amended to include multiple counterclaims; MedioStream moved to dismiss several of Nero's counterclaims under Rule 12(b)(6).
- The SEA embedded Nero's API with a 21-day evaluation window; Nero alleges MedioStream breached by misuse, secrecy, and failure to destroy/return the API.
- California law, including discovery rules, governs accrual for the SEA breach; the SEA terminated around July 7, 2001.
- The court analyzes limitations on a per-claim basis, adopting discovery-rule considerations for some claims while applying accrual for others.
- The court grants in part and denies in part MedioStream’s motion, granting dismissal of the SEA breach claim regarding destruction/return of the API, and denying dismissal of the remaining counterclaims (fraudulent inducement, misappropriation, copyright, DMCA, and inequitable conduct).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| SEA breach accrual and time bar | MedioStream: API destruction/return breach accrued July 2001. | Nero: some breaches concealed; discovery rule may apply. | One SEA breach time-barred; others not time-barred. |
| Fraudulent inducement sufficiency | MedioStream: not pled with Rule 9(b) specificity, barred by limitations, preempted. | Nero: pled with specificity; discovery rule may apply; not preempted. | Rule 9(b) adequately pled; limitations not established; not preempted. |
| Trade secret misappropriation sufficiency | MedioStream: UTSA preemption and lack of identified trade secret. | Nero: UTSA, discovery rule, and § 2019.210 satisfied. | UTSA misappropriation adequately pled; discovery rule may apply; § 2019.210 not fatal. |
| Eighth/Ninth claims (License and GNU) viability | MedioStream: choice-of-law issues; pleading sufficiency under Rule 8. | Nero: California may apply; allegations make plausible contract claims. | Eighth and Ninth counterclaims plausibly pled under applicable contract law. |
Key Cases Cited
- Ashcroft v. Iqbal, 129 S. Ct. 1937 (U.S. 2009) (plausibility standard for pleading)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (facial plausibility required in pleadings)
- La Porte Constr. Co. v. Bayshore Nat'l Bank, 805 F.2d 1254 (5th Cir.1986) (affirmative defenses on face of pleading may dismiss)
- Perez-Encinas v. AmerUs Life Ins. Co., 468 F. Supp. 2d 1127 (N.D. Cal. 2006) (accrual rule for breach of contract distinguished from discovery rule)
- Callaway Golf Co. v. Dunlop Slazenger Grp. Am., Inc., 318 F. Supp. 2d 216 (D. Del. 2004) (UTSA preemption for misappropriation claims)
- Silicon Image, Inc. v. Analogix Semiconductor, Inc., No. C-07-0635-JCS (N.D. Cal. 2007) (UTSA preemption analysis)
- Digital Envoy, Inc. v. Google, Inc., 370 F. Supp. 2d 1025 (N.D. Cal. 2005) (UTSA and preemption discussion)
- Intermedics, Inc. v. Ventritex, Inc., 822 F. Supp. 634 (N.D. Cal. 1993) (discovery rule timing for accrual)
- Weatherly v. Universal Music Publishing Group, 23 Cal. Rptr. 3d 157 (Cal. Ct. App. 2004) (discovery rule for misappropriation injuries)
- EPIS, Inc. v. Fid. & Guar. Life Ins. Co., 156 F. Supp. 2d 1116 (N.D. Cal. 2001) (California contract pleading standards)