Intellivision v. Microsoft Corp..

• Decision Date: 23 March 2011
• Docket Number: No. 07 Civ. 4079(JGK).,07 Civ. 4079(JGK).
• Parties: INTELLIVISION, et al., Plaintiffs,v.MICROSOFT CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of New York

784 F.Supp.2d 356

INTELLIVISION, et al., Plaintiffs,

v.MICROSOFT CORPORATION, Defendant.

No. 07 Civ. 4079(JGK).

United States District Court, S.D. New York.

March 23, 2011.

Bruce D. Katz, Bruce D. Katz, Esq, New York, NY, for Plaintiffs.Steven Lyon Holley, Nuri George Frame, Michael Peter Geiser, Sullivan and Cromwell, LLP, New York, NY, for Defendant.

OPINION AND ORDER

JOHN G. KOELTL, District Judge.

The plaintiffs, Intellivision and its three principals, Bruce Adams, Paul Hoffman, and John Daniels, have asserted claims against the defendant, Microsoft Corp. (“Microsoft”), relating to a 2001 contract in which Microsoft obtained the rights to several patent applications. The plaintiffs allege that Microsoft made fraudulent or negligent misrepresentations that induced them to enter into the contract, and that Microsoft breached a fiduciary duty created by the contract. Microsoft moves for summary judgment, arguing principally (a) that the individual plaintiffs lack standing to sue; (b) that the misrepresentation-based claims are barred by the statute of limitations; and (c) that it did not owe a fiduciary duty to the plaintiffs. After the Court heard argument on the summary judgment motion, the plaintiffs moved to supplement the summary judgment record.

I.

The standard for granting summary judgment is well established. “The Court shall grant summary judgment if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Gallo v. Prudential Residential Servs. Ltd. P'ship, 22 F.3d 1219, 1223 (2d Cir.1994). “[T]he trial court's task at the summary judgment motion stage of the litigation is carefully limited to discerning whether there are genuine issues of material fact to be tried, not to deciding them. Its duty, in short, is confined at this point to issue-finding; it does not extend to issue-resolution.” Gallo, 22 F.3d at 1224. The moving party bears the initial burden of “informing the district court of the basis for its motion” and identifying the matter that “it believes demonstrate[s] the absence of a genuine issue of material fact.” Celotex, 477 U.S. at 323, 106 S.Ct. 2548. The substantive law governing the case will identify those facts that are material and “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); see also Robins v. NYC Bd. of Educ., No. 07 Civ. 3599, 2010 WL 2507047, at *1 (S.D.N.Y. June 21, 2010).

In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)); see also Gallo, 22 F.3d at 1223. Summary judgment is improper if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the non-moving party. See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir.1994). The non-moving party must produce evidence in the record and “may not rely simply on conclusory statements or on contentions that the affidavits supporting the motion are not credible.” Ying Jing Gan v. City of N.Y., 996 F.2d 522, 532 (2d Cir.1993); see also Scotto v. Almenas, 143 F.3d 105, 114–15 (2d Cir.1998) (collecting cases); Robins, 2010 WL 2507047, at *1.

II.

The facts of this case are fully set forth in Intellivision v. Microsoft Corp. (the “2008 Order”), No. 07 Civ. 4079, 2008 WL 3884382 (S.D.N.Y. Aug. 20, 2008). The following is a brief summary of the facts relevant to this motion, which the parties do not dispute except where noted.

Intellivision is an unincorporated joint venture formed by Bruce Adams, Paul Hoffman, and John Daniels (the “individual plaintiffs”) “for the purpose of creating, developing, patenting, commercializing and/or licensing interactive television and related technologies.” (Second Am. Compl. (“SAC”) ¶¶ 1, 6.) At various times, Intellivision maintained offices in New York and in Connecticut. ( Id. ¶ 1) The parties dispute Intellivision's place of domicile at times relevant to this case, with the plaintiffs claiming that it should be considered domiciled in New York and the defendant claiming that it should be considered domiciled in Connecticut. (Pls.' Mem. Opp'n Def.'s Mem. Summ. J. (“Pls.' Mem.”) 27–29; Def.'s Mem. Summ. Jud. (“Def.'s Mem.”) 2.)

Intellivision's “core inventions” related to what is known as “digital video recording” (“DVR”) or “personal video recording” (“PVR”), technology that, among other things, allows viewers to pause, record, and rewind live television. (SAC ¶ 7.) These inventions were disclosed in no fewer than 18 patent applications (the “Patent Applications”). ( Id. ¶¶ 11–13.) In their motion papers, the parties dispute who owned the Patent Applications and the underlying intellectual property at the time that they were transferred to Microsoft; the plaintiffs argue that the individual plaintiffs owned them, while the defendants argue that Intellivision owned them. (Pls.' Mem. 23–25; Def.'s Rep. Mem. Summ. Jud. (“Def.'s Rep. Mem.”) 2–4.)

In 1999, the parties began discussing Intellivision's intellectual property. (SAC ¶ 16.) These discussions culminated in a written agreement (the “Agreement”) signed in January 2001. ( Id. ¶ 33.) The Agreement states that it is between Microsoft and Daniels, Adams, and Hoffman, “the three (3) foregoing individuals doing business as Intellivision in a joint venture having its principal place of business [in] Seymour, Connecticut.” (Frame Decl. Ex. 11 (the “Agreement”) at 1.) The contract referred to “the parties John J. Daniels, Bruce L. Adams, Paul R. Hoffman, and their joint venture d.b.a. Intellivision ..., both individually and collectively [as] ITV.” ( Id.) Under the contract, ITV assigned to Microsoft, among other things, “all of its right, title and interest in and to” the Patent Applications, the inventions disclosed therein, and any resulting patents. ( Id. at 2.) In return, Microsoft paid ITV one million dollars, and was to pay it $850,000 upon the issuance of a patent “based upon any of the Patent Applications” and “having an enforceable patent claim consisting of the language ... set forth in Attachment C” of the Agreement. ( Id. at 3.) ITV covenanted “to provide its best efforts assisting and cooperating with [Microsoft], to the extent permitted by law, in any action involving the Patent Applications,” while Microsoft covenanted to “provide to ITV in a timely manner copies of all papers sent to or by the Patent Office in the Patent Application” until the payment of the $850,000. ( Id. at 2–3.) The Agreement was signed by each of the three individual plaintiffs both in their individual capacities and for Intellivision. ( Id. at 8.) It also included three attachments, one of which assigned the Patent Applications and one of which, Attachment C, laid out the language associated with the $850,000 payment. ( Id. at Attachments A–C.)

The plaintiffs allege that they entered into the contract only after Microsoft represented that it “had not already developed, was not developing, and had no present intention of developing a product embodying Intellivision's core technologies.” (SAC ¶ 38.) According to the Second Amended Complaint, “[t]his was an important consideration to Intellivision and was the main factor that persuaded Intellivision to enter an Agreement with Microsoft that did not require royalty payments based on the sale of products incorporating Intellivision's technology.” ( Id.) These representations were allegedly false because Microsoft was then developing and soon launched a product called Ultimate TV, which “incorporate[d] the core technologies embodied in Intellivision's patent applications.” ( Id. ¶ 39.)

The plaintiffs learned about Ultimate TV “within a month or two” of executing the Agreement. (Frame Aff. Ex. 2 (“Hoffman Dep.”) at 182.) In 2002, they “confronted Microsoft attorneys about Microsoft's misrepresentations.” ( Id. ¶ 42.) Intellivision “contemplated rescission and/or reformation” of the Agreement at this time, but did not do so upon Microsoft's representations that Ultimate TV “had been discontinued and was a tremendous financial loss to Microsoft” and that Intellivision “would be better off financially if it awaited allowance by the Patent Office of the patent claim” set forth in Attachment C to the Agreement, which would trigger the $850,000 payment. ( Id. ¶¶ 43, 45.)

The plaintiffs allege that Microsoft withheld additional facts at this time, failing to disclose “that it had already developed and/or was in the process of developing a software version of its Ultimate TV product that would be incorporated into its Windows Operating System.” ( Id. ¶ 46.) They also allege that Microsoft “misrepresented facts concerning prosecution of the patent application” referenced in Attachment C, misleading the plaintiffs about the status of that application and eventually making “a unilateral decision to abandon its efforts to pursue allowance of the claim” and not to pay Intellivision the $850,000 that it would owe if the claim were allowed. ( Id. ¶¶ 47–48, 53–56.)

III.

Intellivision sued Microsoft in New York state court on January 12, 2007, and the suit was then removed to this Court on the basis of diversity of citizenship jurisdiction. In response to a motion to dismiss, Intellivision filed the First Amended Complaint (“FAC”). The defendant then filed a second motion to dismiss. In the 2008 Order, the Court granted that motion in part, finding that Intellivision's...