Microsoft Corp. v. Computer Support Services

• Decision Date: 02 October 2000
• Docket Number: No. 3:00CV176-H.,3:00CV176-H.
• Citation: 123 F.Supp.2d 945
• Court: U.S. District Court — Western District of North Carolina
• Parties: MICROSOFT CORPORATION, A Washington corporation, Plaintiff, v. COMPUTER SUPPORT SERVICES OF CAROLINA, INC., a North Carolina corporation d.b.a. Computer Support Services; and Don Perera, an individual, Defendants.

123 F.Supp.2d 945

MICROSOFT CORPORATION, A Washington corporation, Plaintiff, v. COMPUTER SUPPORT SERVICES OF CAROLINA, INC., a North Carolina corporation d.b.a. Computer Support Services; and Don Perera, an individual, Defendants.

No. 3:00CV176-H.

United States District Court, W.D. North Carolina, Charlotte Division.

October 2, 2000.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Thomas E. Graham, Rebecca K. Gatehouse, Kilpatrick Stockton LLP, Charlotte, NC, for Plaintiff.

Edward T. Hinson, James, McElroy & Diehl, John P. Barringer, Morris, York, Williams, Surles & Brearley, John H. Capitano, Morris York Williams Surles & Barringer, Charlotte, NC, for Defendants.

MEMORANDUM AND ORDER

HORN, Chief United States Magistrate Judge.

THIS MATTER is before the Court on the "Plaintiff Microsoft Corporation's Motion to Dismiss ... [Defendants' counterclaims]" (document # 14), "Memorandum of Law in Support ..." (document # 15), "Plaintiff Microsoft Corporation's Motion to Strike ... [Defendants' Affirmative Defense]" (document # 16), and "Memorandum of Points and Authorities in Support ..." (document # 17), all filed August 9, 2000. Defendants' "... Memorandum of Law in Opposition ..." (document # 21) was filed September 7, 2000; and "Plaintiff's Reply Brief ..." (document # 25) was filed September 28, 2000.

The parties have consented to Magistrate Judge jurisdiction under 28 U.S.C. § 636(c), and the subject motions are now ripe for resolution. Having carefully considered the parties' arguments, the record, and the applicable authority, the Court will grant the Plaintiff's motions.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff Microsoft Corporation ("Microsoft") develops and markets computer software programs ("Microsoft software") recorded on magnetic diskettes and/or CDROMs for use on computers, including Microsoft Windows 95 ("Windows 95"), Microsoft Windows 98 ("Windows 98"), and Microsoft Office Pro 97 ("Office Pro 97"). Microsoft claims copyright, servicemark, and trademark rights in that software and accompanying users manuals, reference guides, and screen displays.

Defendant Computer Support Services of Carolina, Inc. ("CSS") is a North Carolina Corporation doing business in Charlotte, North Carolina. Defendant Don Perera ("Perera") is the principal shareholder of Computer Support Services of Carolina, Inc.

Microsoft alleges that on November 30, 1999, the Defendants sold counterfeit Office Pro 97 software to a private investigator, employed by Microsoft for that purpose. Thereafter, on December 28, 1999, Microsoft sent Defendants a cease and desist letter, directing Defendants to discontinue any unauthorized or otherwise illegal use of Microsoft's copyrighted works and marks.

Microsoft alleges that on March 13, 2000, the Defendants again sold counterfeit Office Pro 97 software to a private investigator, employed by Microsoft for that purpose.

The Defendants admit that the two sales were made but contend that they believed in good faith that the Microsoft products they sold were property licensed. CSS also filed counterclaims against Microsoft, alleging (1) violation of § 1 and § 2 of the Sherman Antitrust Act and North Carolina Antitrust Statutes and (2) "foreclosure of the market." It is these counterclaims and "copyright misuse affirmative defenses" in the Answers of both Defendants, which are the subject of the instant motions.

II. DISCUSSION OF CLAIMS

A. Standard of Review

"A motion to dismiss under [Fed. R.Civ.P. 12(b)(6)] tests the sufficiency of a complaint; importantly, it does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Republican Party of North Carolina v. Martin, 980 F.2d 943, 952 (4th Cir.), cert. denied, 510 U.S. 828, 114 S.Ct. 93, 126 L.Ed.2d 60 (1993), citing 5A C. Wright & A. Miller, Fed. Practice and Procedure § 1356 (1990).

"A motion to dismiss for failure to state a claim should not be granted unless it appears to a certainty that the plaintiff would be entitled to no relief under any state of facts which could be proved in support of [the subject] claim." McNair v. Lend Lease Trucks, Inc., 95 F.3d 325, 328 (4th Cir.1996) (en banc), citing Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d 324, 325 (4th Cir.1989); and Johnson v. Mueller, 415 F.2d 354, 355 (4th Cir.1969). Accord Republican Party of NC, 980 F.2d at 952 ("A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief") (internal citation omitted).

In considering a Rule 12(b)(6) motion, the complaint must be construed in the light most favorable to the nonmoving party, assuming factual allegations to be true. See, e.g., Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984); Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir.1993); Martin Marietta v. International Telecommunications Satellite, 991 F.2d 94, 97 (4th Cir.1992); and Revene v. Charles County Comm'rs, 882 F.2d 870, 872 (4th Cir.1989).

However, to survive a Rule 12(b)(6) challenge, claims under the Sherman Antitrust Act must include "allegations covering all the elements that comprise the theory for relief." United States v. Employing Plasterers Ass'n, 347 U.S. 186, 189, 74 S.Ct. 452, 98 L.Ed. 618 (1954). Accord Estate Contr. Co. v. Miller & Smith Holding Co., 14 F.3d 213, 220-21 (4th Cir.1994), quoting Municipal Utilities Bd. of Albertville v. Alabama Power Co., 934 F.2d 1493, 1501 (11th Cir.1991) ("A plaintiff must plead sufficient facts so that each element of the alleged antitrust violation can be identified"); and Nelligan v. Ford Motor Co., 262 F.2d 556, 559 (4th Cir.1959) ("[A] complaint which does not allege with reasonable definiteness facts from which the court may infer conduct in restraint of trade of the kind prohibited by the antitrust laws, and from which an inference of public injury may reasonably be extracted, cannot be sustained.")

Rule 12(f) of the Federal Rules of Civil Procedure provides that the "court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." See also Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (purpose of Rule 12(f) motion to strike is "to disclose more precisely the basis of both claim and defense and to define more narrowly the disputed facts and issues"); Buser v. Southern Food Service, Inc., 73 F.Supp.2d 556, 559 (M.D.N.C.1999); and Hartsell v. Duplex Products, Inc., 895 F.Supp. 100, 101 (W.D.N.C.1995).

"[A] motion to strike a defense is appropriately granted when the defense is clearly legally insufficient." Morrisroe v. Goldsboro Mill. Co., 884 F.Supp. 192, 194 (E.D.N.C.1994), quoting Federal Deposit Insurance Corp. v. British-American Corp., 744 F.Supp. 116, 117-18 (E.D.N.C.1990). The sufficiency of a defense depends on the facts supporting it that are alleged in the pleading. "When a court considers a motion to strike pursuant to Fed.R.Civ.P. 12(f), matters outside the pleading are not to be considered." First Financial Sav. Bank, Inc. v. American Bankers Ins. Co. of Florida, Inc., 783 F.Supp. 963, 966 (E.D.N.C.1991). Thus, a court should strike a defense as insufficient that is not properly supported by the facts alleged in the pleading.

Finally, courts have recognized judicial economy as a proper basis for striking insufficient defenses. See e.g., Clark v. Milam, 152 F.R.D. 66, 70 (1993) (court "should grant a motion to strike to avoid unnecessary time and money in litigating invalid, spurious issues.") Accord Resolution Trust Corp. v. Hecht, 818 F.Supp. 894, 900 (D.Md.1992) (defenses which "might confuse the issues in the case and would not, under the facts alleged, constitute a valid defense to the action can and should be deleted"), citing United States v. Fairchild Industries, Inc., 766 F.Supp. 405, 408 (D.Md.1991); Spell v. McDaniel, 591 F.Supp. 1090, 1112 (E.D.N.C.1984); and S.E.C. v. Gulf & Western Indus., Inc., 502 F.Supp. 343, 345 (D.D.C.1980).

Applying these principles, Defendants' allegations clearly fail to state a claim under § 1 or § 2 of the Sherman Antitrust Act. nor, as the Plaintiff argues, does either Defendant state facts sufficient to support a defense of abuse of copyright. Accordingly, the Plaintiff's motions to dismiss and to strike must and shall be granted.

B. Counterclaims for Violation of §§ 1 and 2 of the Sherman Antitrust Act

1. CSS Lacks "Antitrust Standing"

In essence, CSS asks this Court to retroactively declare its alleged theft of Microsoft's intellectual property as "appropriate relief" for Microsoft's alleged monopolistic practices. Although there may be some emotional appeal in the Defendants' argument, a kind of corporate version of the classic Robin Hood story, it lacks a sound legal basis.

The United States Supreme Court has long recognized that "Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 535, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983), quoting Hawaii v. Standard Oil Co., 405 U.S. 251, 263, n. 14, 92 S.Ct. 885, 31 L.Ed.2d 184, (1972). Thus, the Supreme Court developed the doctrine of "antitrust standing," which requires a putative claimant to demonstrate it is "a proper party to bring a private antitrust action." Associated General, 459 U.S. at 535 n. 31, 103 S.Ct. 897. Pursuant to this doctrine, to demonstrate it is "a proper party," the claimant must allege specific facts establishing injury to its business or property, which occurred by reason of the alleged antitrust violation. Id. at 537, 103 S.Ct. 897.¹

To determine whether a claimant has...