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Autodesk, Inc. v. Alter

United States District Court, N.D. California

May 9, 2017

AUTODESK, INC., Plaintiff,
v.
JOSEPH ALTER, et al., Defendants.

          ORDER DENYING PLAINTIFF'S MOTION FOR JUDGMENT ON THE PLEADINGS AND GRANTING AND DENYING VARIOUS SEALING MOTIONS RE: DKT. NOS. 52, 51, 59, 61, AND 68

          WILLIAM H. ORRICK, UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         Plaintiff Autodesk, Inc. brings this action against defendants Joseph Alter and Joseph Alter, Inc. (collectively, “Alter”) for declaratory judgment of license and non-infringement of U.S. Patent No. 6, 720, 962 (the “'962 Patent”), which Alter had previously licensed to The Walt Disney Company (“Disney”), who licensed it to Autodesk. In turn, Alter asserts counterclaims against Autodesk for declaratory judgment of no license or exhaustion, direct and indirect infringement, and intentional and negligent interference with prospective economic advantage. Autodesk now moves for judgment on the pleadings because: (1) it is licensed to the '962 Patent pursuant to Alter's Settlement and License Agreement with Disney (“the '962 License Agreement”), (2) Alter's rights to enforce the '962 Patent are exhausted, and (3) Alter's counterclaims are barred, estopped, and foreclosed by the express terms of the '962 License Agreement. However, the record does not contain sufficient information for me to make such a ruling; it is missing, among other things, the license agreement between Disney and Autodesk, the scope of which is in dispute. Although the language in the '962 License Agreement is broad, there needs to be more factual development before I can determine as a matter of law that Autodesk is correct. I DENY its motion for judgment on the pleadings.

         BACKGROUND[1]

         I. FACTUAL BACKGROUND

         Autodesk is a Delaware corporation with its principal place of business in San Rafael, California. Complaint (“Compl.”) (Dkt. No. 1) ¶ 4. It is a global industry-leader in digital design technologies and develops “Maya” software, a program that enables film and design professionals to “create lifelike images, realistic animations, extraordinary visual effects, and full-length feature films.” Id.

         Joseph Alter is a resident of Westlake Village, California who invents and develops computer animation software. Id. ¶ 5; Counterclaim and Answer (“Countercl.”) (Dkt. No. 34) ¶ 39. He is the sole inventor of, and owner of rights in, the '962 Patent. Compl. ¶ 5. The '962 Patent, entitled “Hair Generation and Other Natural Phenomena with Surface Derived Control Volumes in Computer Graphics and Animation, ” was filed on December 4, 2000, and issued to him on April 13, 2004. Id.; Compl., Ex. A ('962 Patent) (Dkt. No. 1-1) at 2. The '962 Patent discloses and claims certain methods for creating simulated human and animal hair using computer graphics and animation. Countercl. ¶ 55.

         Defendant Joseph Alter, Inc., Joseph Alter's eponymous small business, is a California corporation with its principal place of business in Westlake Village, California. Compl. ¶ 5. It makes, markets, and sells “Shave and a Haircut” software, a computer graphics program for simulating realistic animation of hair and fur that moves naturally. Id. ¶¶ 6, 12; Countercl. ¶ 45. Shave and a Haircut is sold as an extension (or “plug-in”) to Autodesk's Maya software. Compl. ¶¶ 6, 12. The core technology underlying the Shave and a Haircut software is claimed in Alter's '962 Patent. Countercl. ¶ 45. Joseph Alter, Inc. is listed as the assignee of rights in the '962 Patent. Compl. ¶¶ 5, 13.

         Former counter-defendant Disney is a Delaware corporation with its principal place of business in Burbank, California. Countercl. ¶ 41. Disney created “XGen” software, a procedural geometry instancing tool used in computer generated animation, which is sold as a plug-in to Autodesk's Maya software. Id. ¶ 47. In developing XGen, Disney “incorporated features that practice the ['962] Patent.” Compl., Ex. B (2016 Alter v. Disney Complaint) (Dkt. No. 1-2) ¶ 8. Alter's Shave and a Haircut software competes with Disney's XGen software. Countercl. ¶¶ 49, 64, 79.

         In August 2011, Autodesk announced that it had signed an agreement with Disney to license and sell Disney's XGen software as a plug-in to Maya. Compl. ¶ 14. On October 5, 2011, Alter, proceeding pro se, filed an infringement action against Disney in the Central District of California, alleging that Disney's development and licensing of XGen to Autodesk infringed the claims in the '962 Patent. Id. ¶ 15; see Motion for Judgment on the Pleadings (“MJP”) (Dkt. No. 52[redacted]; Dkt. No. 51-4[under seal]), Ex. B (2011 Alter v. Disney Complaint) (Dkt. No. 52-2). Alter and Disney resolved the litigation by entering into a Settlement and License Agreement (“'962 License Agreement”), dated January 31, 2012, under which the parties stipulated to dismiss with prejudice all claims and counterclaims asserted in the action. Compl. ¶ 5; see MJP, Ex. C ('962 License Agreement) (Dkt. No. 52-3[redacted]; Dkt. No. 51-6[under seal]) at 2. Pursuant to the '962 License Agreement, in exchange for “a small settlement payment” Alter granted Disney a perpetual license to the '962 Patent, released all claims regarding Disney's use of the '962 Patent, and covenanted not to sue Disney or its affiliates, customers, and other third parties in connection with the '962 Patent. Countercl. ¶ 48; see MJP, Ex. C §§ 2.1-2.3, 2.5.

         II. PROCEDURAL HISTORY

         The procedural history of this case is somewhat complex. On July 22, 2016, one month before Autodesk brought the instant action, Alter filed a complaint for monetary damages against Disney in Superior Court of California, County of Los Angeles, which Disney removed to the Central District of California. Compl. ¶ 16; Reply to Countercl. (Dkt. No. 37) ¶ 53. The complaint asserted four causes of action related to Disney's alleged breach of the '962 License Agreement by licensing XGen to Autodesk: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) intentional interference with prospective economic advantage; and (4) negligent interference with prospective economic advantage. See Compl., Ex. B ¶¶ 13-29. The complaint alleged that after January 31, 2012, with Disney's knowledge and consent, “Autodesk developed and expanded upon the features of XGen and created essentially a new product by the same name, which at its core is still infringing the ['962] Patent.” Id. ¶ 11.

         Meanwhile, on August 17, 2016, Autodesk filed the instant action against Alter for declaratory judgment of license and non-infringement of the '962 Patent. Alter moved to dismiss for lack of subject matter jurisdiction, or in the alternative, to stay the action pending resolution of its earlier-filed action against Disney. Dkt. No. 14. Alter's motion was denied on November 14, 2016. That same day, Alter voluntarily dismissed its action in the Central District. See Dkt. Nos. 31, 35.

         On November 28, 2016, Alter filed an answer to Autodesk's complaint and asserted counterclaims for: (1) declaratory judgment of no license to, or exhaustion of, the '962 Patent against Disney and Autodesk; (2) infringement of the '962 Patent against Autodesk; (3) indirect infringement of the '962 Patent against Disney; (4) breach of contract against Disney; (5) breach of the implied covenant of good faith and fair dealing against Disney; (6) intentional interference with prospective economic advantage against Autodesk and Disney; and (7) negligent interference with prospective economic advantage against Autodesk and Disney. Countercl. ¶¶ 65-97. Autodesk filed an answer to Alter's counterclaims on December 19, 2016. Dkt. No. 37.

         After Autodesk filed the motion for judgment on the pleadings, Disney moved to sever and transfer Alter's counterclaims against it to the Central District of California pursuant to the forum selection clause contained in the '962 License Agreement. Dkt. No. 60[redacted]; Dkt. No. 59-4[under seal]. Alter opposed transfer; Autodesk did not take a position. Following an initial review of the briefing, I ordered the parties to show cause why this entire action should not be transferred to the Central District of California on the basis that the claims in this case are premised on the '962 License Agreement, which was negotiated, drafted, executed, and performed in the Central District by parties who are located in the Central District. Dkt. No. 77. Disney responded that it had reached an agreement with Alter to dismiss Alter's counterclaims against it with prejudice (Dkt. No. 78); Alter, in light of its stipulation with Disney, requested that this case be resolved in this District (Dkt. No. 80); and Autodesk similarly opposed transfer (Dkt. No. 79). Pursuant to the stipulation between Alter and Disney, I dismissed counter-defendant Disney with prejudice. Dkt. No. 82.

         LEGAL STANDARD

         Under Federal Rule of Civil Procedure 12(c), “[a]fter the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). Rule 7(a) provides that the only pleadings allowed are: “(1) a complaint; (2) an answer to a complaint; (3) an answer to a counterclaim designated as a counterclaim; (4) an answer to a crossclaim; (5) a third-party complaint; (6) an answer to a third-party complaint; and (7) if the court orders one, a reply to an answer.” Fed.R.Civ.P. 7(a). “Judgment on the pleadings is properly granted when, accepting all factual allegations in the complaint as true, there is no issue of material fact in dispute, and the moving party is entitled to judgment as a matter of law.” Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012) (internal quotation marks omitted). When deciding such a motion, “the ...


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