Go Computer, Inc. v. Microsoft Corp.

• Decision Date: 29 June 2006
• Docket Number: No. MDL 00-1332.,Civil No. JFM-05-2413.,MDL 00-1332.
• Citation: 437 F.Supp.2d 497
• Parties: GO COMPUTER, INC., et al. v. MICROSOFT CORPORATION.
• Court: U.S. District Court — District of Maryland

437 F.Supp.2d 497

GO COMPUTER, INC., et al. v. MICROSOFT CORPORATION.

No. MDL 00-1332.

Civil No. JFM-05-2413.

United States District Court, D. Maryland.

June 29, 2006.

Steven F. Benz, Daniel Alan Loeffler, Michael K. Kellogg, Kellogg, Huber, Hansen, Todd, Evans and Figel PLLC, Washington, DC, Eugene Chatham Crew, Townsend and Townsend and Crew LLP, San Francisco, CA, for Go Computer, Inc.

Robert A Rosenfeld, Heller, Ehrman, White, Mcauliffe LLP, San Francisco, CA, G. Stewart Webb, Jr., Michael James Devinne, Randolph Stuart Sergent, Venable LLP, Baltimore, MD, for Microsoft Corporation.

OPINION

MOTZ, District Judge.

GO Computers, Inc. and Jerrold Kaplan (collectively "GO" or "New GO") have instituted this action against Microsoft Corporation for violation of federal antitrust laws.¹ The action was initially filed in the United States District Court for the Northern District of California and was transferred here by the Judicial Panel on Multidistrict Litigation. Microsoft has filed a motion to dismiss or for summary judgment on the ground that GO's claims are barred by limitations. GO opposes the motion on three grounds: (1) its claims did not accrue until April 2005 because Microsoft fraudulently concealed its wrongdoing; (2) the statute of limitations was tolled until all appeals in the action instituted by the United States against Microsoft in 1998 were finally resolved; and (3) Microsoft has been guilty of continuing antitrust violations that have injured Lucent Technologies, Inc. ("Lucent"), a successor to the original GO Corporation, in the current market.

Microsoft's motion will be treated as one for summary judgment and, as such, will be granted. However, as set forth in section IV of this Opinion, my ruling is without prejudice to GO instituting a new action asserting federal antitrust claims for injuries allegedly suffered by Lucent within the four years preceding the filing of any such new action.²

I.

In 1987, Plaintiff Jerrold Kaplan founded GO Corporation ("Old GO") to develop and market a computer and operating system based on the use of a pen-like stylus. First Amended Complaint ("FAC") ¶ 10. Old GO created a small personal computer similar to a notebook computer, and an operating system called "PenPoint" designed for use with these computers. Id. With the PenPoint operating system, a user could hold the computer in one hand and write on its flat screen directly. Id. Old GO then contacted major software developers, including Microsoft, to encourage them to write new applications designed to run with PenPoint. Id.

After learning about the PenPoint operating system, Microsoft allegedly embarked on the course of conduct at issue in this case. According to GO's first amended complaint, "Microsoft undertook to `kill' GO." FAC ¶ 12. Microsoft allegedly engaged in illegal conduct to discourage investors such as Intel from investing in Old GO, misappropriate the PenPoint technology, prevent Old GO from receiving releases of software designed to integrate Pen-Point with Microsoft's software products, and other anticompetitive conduct. Id. ¶¶ 13-22. Microsoft also allegedly used "incentives and threats" to prevent major computer manufacturers like Compaq, Fujitsu, and Toshiba from making pen computers using Old GO's technology, leaving them to use the technology Microsoft had misappropriated from Old GO instead. Id. ¶¶ 22-25. Finally, Microsoft allegedly used the same tactics to prevent similar companies from using Old GO's pen computer operating system, PenPoint. Id. ¶ 26.

After Microsoft's allegedly violative conduct took its toll, Old GO sold its assets to EO, Inc. ("EO") in January 1994 in a noncash merger for EO stock. Id. ¶ 28. EO continued Old GO's PenPoint development work for a short period after the merger, but abandoned the project in July 1994, allegedly because "Microsoft had by then substantially closed the [original equipment manufacturer COEM'A channel to any operating system competitor."³ Id. GO's complaint is unclear as to whether EO continued to exist after suspending PenPoint work in 1994, see FAC ¶ 28, but Microsoft's motion to dismiss states that "EO was shut down" at that time. Mot. to Dismiss at 3. GO states that EO was formally dissolved in 1997, at which time Lucent Technologies, Inc. ("Lucent") acquired EO and all of its assets. FAC ¶ 3.

In 2002, Kaplan was deposed in a separate private antitrust suit against Microsoft, at which time he alleges that he gained new information, "first learn[ing] of Microsoft's secret combination with companies as [sic] Intel, Compaq, and Toshiba to exclude GO from the PC operating system market." Opp'n at 6. Subsequently, Kaplan incorporated a second GO corporation, named "GO Computer, Inc." ("New GO"), and New GO acquired claims that had been transferred to Lucent as part of the 1997 asset sale by purchasing them from Lucent in April 2005. Id. at 7. New GO filed this suit on June 29,2005.

II.

An action to enforce the federal antitrust laws is barred unless it is commenced within a four-year period after its accrual. 15 U.S.C. § 15b. Generally, the four-year period begins when the injurious act is committed. Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321 338, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971); Charlotte Telecasters, Inc. v. Jefferson-Pilot Corp., 546 F.2d 570, 572 (4th Cir.1976) (same). However, what is known as the fraudulent concealment doctrine has developed in order to prevent a defendant from secreting its wrongdoing until any claim arising out of it would be time-barred, thereby protecting itself from suit. Super-market of Marlinton, Inc. v. Meadow Gold Dairies, Inc., 71 F.3d 119, 122 (4th Cir. 1995). Under that doctrine the limitations period for concealed fraud claims starts when the plaintiff discovers the fraud rather than when it is committed. Id. A plaintiff in an antitrust case must plead three elements to invoke the fraudulent concealment doctrine: "1) the party pleading the statute of limitations fraudulently concealed facts that are the basis of the plaintiff's claim, and 2) the plaintiff failed to discover those facts within the statutory period, despite 3) the exercise of due diligence." Id. (citing. Weinberger v. Retail Credit Co., 498 F.2d 552, 555 (4th Cir. 1974)).⁴

Factual disputes concerning the extent of a plaintiff's knowledge cannot be resolved on summary judgment. See, e.g., Morton's Market, Inc. v. Gustafson's Dairy, Inc., 198 F.3d 823, 832 (11th Cir. 1999). However, where the facts establishing its knowledge are not in genuine dispute, the accrual date of its cause of action is determinable as a matter of law. See, e.g., Brumbaugh v. Princeton Partners, 985 F.2d 157, 162 (4th Cir.1993); Pocahontas Supreme Coal Co. v. Bethlehem Steel Co., 828 F.2d 211, 218 (4th Cir. 1987); Brown v. Am. Broad. Co., 704 F.2d 1296, 1304 (4th Cir.1983).

In order to be put on inquiry notice, it is not necessary that a party have full knowledge of all the facts giving rise to his claim. Brumbaugh, 985 F.2d at 162 ("Inquiry notice is triggered by evidence of the possibility of fraud, not by complete exposure of the alleged scam.") (emphasis added). Although "[m]ere rumors are insufficient to establish notice," Hobson v. Wilson, 737 F.2d 1, 35 (D.C.Cir.1984), a party must initiate an inquiry if he is aware of "`red flags' signaling a cause of action," id. at 40.

Here, a declaration submitted by Kaplan in response to Microsoft's motion demonstrates there were many "red flags" of which Kaplan was aware. Further, the declaration establishes that, rather than being ignorant of grounds upon which it could have sued Microsoft, GO made business and strategic decisions not to pursue legal action. For example, it is undisputed that GO had notice of its trade secrets claim. After seeing a Microsoft presentation of Pen Windows, Kaplan states that as of March 1991, GO's concerns about potential misappropriation of GO technology "were sufficient ... that we contacted a law firm specializing in intellectual property issues," who suggested that GO "had a prima facie case for misuse of GO intellectual property." Kaplan Decl. ¶ 11. Kaplan states that for various reasons, including "PenPoint's momentum in the marketplace, and the potential cost and distraction of a legal battle", he recommended that GO not sue Microsoft at that time. Id. ¶ 13.

In addition, in his declaration Kaplan admits that he had suspicions about Microsoft's licensing practices and that these suspicions "played a role in [GO's] business planning." Id. ¶ 18. Although Kaplan goes on to aver that his suspicions "did not rise to the level of justifying an antitrust action," they were not speculative but based upon specific information. Kaplan signed a separate personal declaration in response to a Federal Trade Commission ("FTC") subpoena that explained that GO "had heard from one potential Windows licensee that Microsoft had proposed a per-processor license and suspected that another had an exclusive licensing agreement." Id. ¶ 19. Kaplan also acknowledges in his declaration that a book he wrote, that was completed in late 1994, implied that "Microsoft may have engaged in [questionable business tactics] in competing with GO." Id. ¶ 24.

GO attempts to blunt the effect of Kaplan's knowledge by arguing that it was reasonable for Kaplan to rely on Bill Gates's repeated representations that Microsoft had not engaged in untoward conduct. However, such representations do not themselves provide a valid basis for failing to conduct a reasonable inquiry into alleged wrongdoing. See Pocahontas, 828 F.2d at 218-19 (refusing to find fraudulent concealment "on no more than an alleged failure to own up to illegal conduct"); Bausch v. Philatelic Leasing, Ltd., No. 93-1685, 1994 WL 446758, at *5 (4th Cir. Aug.19, 1994) (agreeing with the trial court's assertion that "[w]hen the person acting on behalf of those under suspicion denies any problem, that denial does not...