Mediostream, Inc. v. Microsoft Corp.
2012 U.S. Dist. LEXIS 67963
N.D. Cal.2012Background
- MedioStream sued in ND Cal (2011) against Microsoft, Sony, Sonic, Taylor for Sherman Act, misappropriation, unfair competition, and conversion; claims largely stem from Sony/Microsoft/Sonic involvement with MedioStream’s VR/DVD technologies.
- MedioStream developed neoDVD standard (2000) and related video software; sought OEMs/distributors for distribution of its technology.
- Between 1999–2001 MedioStream discussed with Apple; after NDA, Apple evaluated but did not license; Apple allegedly shared software with Sonic under a codename without MedioStream’s knowledge.
- Sonic evaluated MedioStream’s tech (2000–2006), copied software/docs, and began talks with Microsoft; Sonic later developed similar PC media platform with Microsoft involvement (2001–2002).
- Microsoft and Sonic allegedly integrated Windows Media with Windows OS (2002 onward) and used OEM agreements to push Windows Media, allegedly foreclosing competing platforms.
- Texas Action (2007) alleged related misappropriation/patent claims; discovery in that action produced material suggesting patterns of conduct later relied on in the current suit; FAC filed 2011.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sherman Act claims—timeliness and pleading | MedioStream asserts ongoing exclusionary conduct and tying/monopolization pleadings. | Microsoft argues claims are time-barred and inadequately pleaded. | Claims barred by statute of limitations; leave to amend for a plausible overt act within period. |
| Product integration claim viability | Integration of Windows Media into Windows OS harms competition. | Monopolist design changes are generally permissible absent abuse; no anticompetitive effect shown. | Failure to state antitrust claim; granted with leave to amend. |
| Trade secrets misappropriation—Sonic, Taylor, Microsoft | Misappropriation occurred 2000–2006; ongoing use within limitations period. | Claims time-barred; some misappropriations alleged outside the period; fraudulent concealment not proven. | Sonic and Taylor claims time-barred; dismissal with leave to amend; Microsoft also barred with possibility to amend. |
| Preemption of conversion and unfair competition by CUTSA | Conversion/unfair competition based on misappropriated trade secrets are distinct from CUTSA. | CUTSA preempts claims based on misappropriation of trade secrets. | Conversion and Section 17200 claims preempted; dismissal with leave to amend for non-trade-secret basis. |
| Apple misappropriation claim—limitations and particularity | Apple allegedly disclosed 2001 trade secrets to Sonic. | Timeliness and specificity inadequate; NDA scope limited to MPEG2 bit-streams. | Statute of limitations not clearly triggered; failure to plead with sufficient particularity; leave to amend. |
Key Cases Cited
- Twombly, 550 U.S. 544 (U.S. (2007)) (plausibility standard for antitrust pleading)
- Iqbal, 129 S. Ct. 1937 (U.S. (2009)) (plausibility pleading standard applied to all claims)
- Pace Indus., Inc. v. Three Phoenix Co., 813 F.2d 234 (9th Cir. 1987) (start of statute of limitations; new acts required to restart accrual)
- Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321 (U.S. (1971)) (accrual of antitrust claims when an act injures business)
- Hennegan v. Pacifico Creative Service, Inc., 787 F.2d 1299 (9th Cir. 1986) (limitations accrual principles for ongoing antitrust injury)
- Forcier v. Microsoft Corp., 123 F. Supp. 2d 520 (N.D. Cal. 2000) (trade secret accrual unlike separate secret misappropriations)
- GlobeSpan, Inc. v. O’Neill, 151 F. Supp. 2d 1229 (C.D. Cal. 2001) (elements of CUTSA misappropriation claim; sufficiency of identification of trade secrets)