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SUN MICROSYSTEMS, INC. v. MICROSOFT CORP.

January 25, 2000

SUN MICROSYSTEMS, INC., A DELAWARE CORPORATION, PLAINTIFF,
V.
MICROSOFT CORPORATION, A WASHINGTON CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Whyte, District Judge.

ORDER RE SUN'S MOTION TO REINSTATE NOVEMBER 17, 1998 PRELIMINARY INJUNCTION UNDER 17 U.S.C. § 502

Sun Microsystems, Inc.'s Motion to Reinstate November 17, 1998 Preliminary Injunction Under 17 U.S.C. § 502 was heard on October 15, 1999. The court has read the moving and responding papers and heard the oral argument of counsel. For the reasons set forth below, the court denies the motion.*fn1

I. BACKGROUND

A. NATURE OF MOTION

On November 17, 1998, the court granted preliminary injunctive relief to Sun Microsystems, Inc. ("Sun") restricting Microsoft Corporation's ("Microsoft") use and distribution of software products incorporating Sun's Java Technology pursuant to the terms of a Technology License and Distribution Agreement ("TLDA"). On August 23, 1999, the Ninth Circuit issued an order vacating the November 17, 1998 Preliminary Injunction Order and remanding the case for further proceedings. According to the Ninth Circuit, this court did not decide the preliminary contractual issue of whether the compatibility terms in the TLDA are license restrictions or separate covenants, the breach of which only support claims for breach of contract. See Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115, 1121-1122 (9th Cir. 1999). The Ninth Circuit concluded "that it is appropriate to give the district court the first opportunity [to decide the issue], especially given that the parties put almost no emphasis on the issue when they litigated the preliminary injunction before the district court." Id. at 1122-23.

Sun now moves to reinstate the November 17, 1998 Preliminary Injunction Order based on Microsoft's alleged copyright infringement. Accordingly, as the Ninth Circuit's opinion directs, this court must answer at least two questions before any order of reinstatement of the injunction based upon copyright infringement can be made. First, the court must decide whether the compatibility provisions set forth in the TLDA limit the scope of Microsoft's license or stand only as independent covenants. Second, if necessary, the court needs to consider whether issuance of the injunctive relief requested by Sun requires a finding of willful and intentional breach of the TLDA's compatibility provisions. Id.

B. THE COMPATIBILITY PROVISIONS OF THE TLDA

Sun and Microsoft entered into the TLDA in the early morning hours of March 12, 1996 after intense negotiation. Pursuant to the TLDA, Sun granted to Microsoft a non-exclusive development license "under the Intellectual Property Rights of SUN to make, access, use, copy, view, display, modify, adapt, and create Derivative Works of the Technology in Source Code form for the purposes of developing, compiling to binary form and supporting Products." TLDA § 2.1(a).*fn2 Sun also granted Microsoft a non-exclusive distribution license to "make, use, import, reproduce, license, rent, lease, offer to sell, sell or otherwise distribute to end users as part of a Product or an upgrade to a Product, the Technology and Derivative Works thereof in binary form." TLDA § 2.2(a)(iii).

The TLDA places compatibility requirements on Microsoft's commercially distributed implementations of the Java Technology. See TLDA § 2.6(a)(vi) ("Licensee agrees that any new version of a Product that Licensee makes commercially available to the public after the most recent Compatibility Date shall only include the corresponding Compatible Implementation (subject to Licensee's right to exclude the Supplemental Java Classes pursuant to Section 2.7); provided, that any version of a Product which, as of such Compatibility Date, is being beta tested by third parties, shall be exempt from such requirement."). The TLDA also places similar compatibility obligations on any Java compiler that Microsoft develops and distributes. See TLDA § 2.6(b)(iv) ("[A]ny new version of a Product that includes the Java Language compilation function that Licensee makes commercially available to the public after the most recent Compatibility Date shall include a mode which a Tool Customer may use to permit such Product to pass the Java Language Test Suite*fn3 that accompanied the Significant Upgrade.").

C. THE REMEDIES LIMITATIONS OF THE TLDA

Section 11.2 of the TLDA states, in relevant part:

b. Licensee agrees that if at any time during the Term an officer, director or General Manager of a product group of Licensee willfully and intentionally breaches a material provision of Section 2.6 of this Agreement and Licensee fails to cure such breach within a period of one (1) year after the date that SUN provides Licensee with notice thereof, SUN shall have the right to terminate this Agreement and terminate the license grants set forth in Section 2, except with respect to any Products, including any upgrades, versions or successors thereto, which are, as of the date of the termination, either (i) commercially available to the public, or (ii) being beta tested by third parties as of the date of termination or (iii) are made commercially available to the public within six (6) months after the date of termination (collectively, "Surviving Products"). Licensee's rights under Section 2 of this Agreement with respect to Surviving Products shall survive any expiration or termination of this Agreement.
d. Except as expressly stated in this Section 11.2 and in Section 12.6, the parties agree that in the event that either party breaches any material term of this Agreement, the non-breaching party shall deliver notice thereof to the breaching party and the breaching party shall have thirty (30) days from receiving such notice to cure such breach. If the breach continues after such 30-day period, the ...

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