434 F.Supp.2d 437 (E.D.Tex. 2006), 6 06-CV-142, z4 Technologies, Inc. v. Microsoft Corp.

Docket Nº:6 06-CV-142
Citation:434 F.Supp.2d 437
Party Name:z4 Technologies, Inc. v. Microsoft Corp.
Case Date:June 14, 2006
Court:United States District Courts, 5th Circuit, Eastern District of Texas
 
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Page 437

434 F.Supp.2d 437 (E.D.Tex. 2006)

z4 TECHNOLOGIES, INC., Plaintiff

v.

MICROSOFT CORPORATION, and Autodesk, Inc., Defendants.

No. 6:06-CV-142.

United States District Court, E.D. Texas, Tyler Division.

June 14, 2006

Page 438

Elton Joe Kendall, Provost Umphrey, Dallas, TX, Thomas John Ward, Jr., Law Office of T. John Ward Jr., PC, Longview, TX, Ernie L. Brooks, Frank A. Angileri, John S. Leroy, John E. Nemazi, Robert C.J. Tuttle, Thomas A. Lewry, Brooks & Kushman PC, Southfield, MI, for Plaintiff.

Isabella Fu, Katherine Ford Horvath, Microsoft Corporation, Redmond, WA, John Marcus Bustamante, Fish & Richardson, Austin, TX, John A. Dragseth, Fish & Richardson, Minneapolis, MN, John E. Gartman, Matthew C. Bernstein, Seth M. Sproul, Fish & Richardson, San Diego, CA, Jennifer Parker Ainsworth, Wilson, Sheehy, Knowles, Robertson & Cornelius PC, Allen Franklin Gardner, Michael Edwin Jones, Cindy Marie Allen, Potter Minton PC, Tyler, TX, for Defendants.

MEMORANDUM OPINION AND ORDER

DAVIS, District Judge.

Before the Court is Plaintiff z4 Technologies, Inc.'s ("z4") Motion and Brief for Entry of Permanent Injunction (Docket No. 333). For the reasons discussed below, z4's motion is DENIED.

BACKGROUND

z4 brought suit against Microsoft Corporation ("Microsoft") and Autodesk ("Autodesk"), Inc. alleging infringement of U.S. Patent Nos. 6,044,471 ("the '471 patent") and 6,785,825 ("the '825 patent"). The patents disclose methods for limiting the unauthorized use of computer software, referred to as product activation. The case was tried to a jury on April 10 through April 19, 2006. At trial, z4 asserted one claim of the '471 patent and two claims of the '825 patent. The jury found that Microsoft and Autodesk infringed all three claims and that Microsoft's infringement was willful. The jury also found that neither Microsoft nor Autodesk proved by clear and convincing evidence that any of the listed claims of the patents in the lawsuit were invalid. The jury awarded

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$115 million in damages against Microsoft and $18 million against Autodesk.

Specifically, the jury found that Microsoft's Office and Windows software products infringed the asserted claims of the two patents-in-suit. z4 asks the Court to enjoin Microsoft from making, using, selling, offering for sale, and/or importing its current software products that use product activation, i.e. Windows XP products since 2001 and Office products since 2000. z4's motion proposes that the Court order Microsoft to deactivate the servers that control product activation for Microsoft's infringing products and to re-design its Windows and Office software products to eliminate the infringing technology. Microsoft will release the next generation of its Windows and Office software--Windows Vista (2007) and Office (2007)--in January of 2007, and both products plan to eliminate the infringing product activation technology.

APPLICABLE LAW

When considering whether to award permanent injunctive relief to a prevailing plaintiff in a patent infringement dispute, courts should apply the traditional four-factor test used by courts of equity. See eBay, Inc. v. MercExchange, LLC, --- U.S. ----, ----, 126 S.Ct. 1837, 1839, 164 L.Ed.2d 641 (2006). The prevailing plaintiff must demonstrate: "(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction." Id. The Court held "the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards." Id. at 1841.

ANALYSIS

Irreparable Harm Suffered by z4

z4 contends that a finding of infringement and validity raises a rebuttable presumption of irreparable harm. z4 argues this presumption applies to the irreparable harm element of the test laid out by the Supreme Court in eBay for two reasons. First, z4 argues that the presumption arises because the Supreme Court cited Amoco Production Co. v. Village of Gambell, Alaska, 480 U.S. 531, 542, 107 S.Ct. 1396, 94 L.Ed.2d 542 (1987) in its eBay decision. z4 suggests that the Supreme Court's citing of Amoco Production is significant because in that case the Supreme Court indicated that the standard for a preliminary injunction is essentially the same as that for a permanent injunction. z4 then concludes that because the Federal Circuit has held that a strong showing of infringement and validity raises a presumption of irreparable harm in the context of a preliminary injunction, such a presumption must apply to permanent injunctions.

Next, z4 contends that the Supreme Court's comparison of patent injunctions to copyright injunctions in the eBay decision supports the application of a presumption of irreparable harm. z4 first concludes that the Federal Circuit derived its presumption of irreparable harm in preliminary injunction cases from the copyright law based on language from a footnote in Smith International Inc. v. Hughes Tool Co., that states, "this is the rule in copyright cases." See 718 F.2d 1573, 1581 n. 7 (Fed.Cir.1983). z4 then contends that this mention of copyright law by the Federal...

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