Media Rights Technologies, Inc v. Microsoft Corporation , 922 F.3d 1014 ( 2019 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MEDIA RIGHTS TECHNOLOGIES, No. 17-16509
INC.,
Plaintiff-Appellant, D.C. No.
3:17-cv-01925-SK
v.
MICROSOFT CORPORATION, OPINION
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of California
Sallie Kim, Magistrate Judge, Presiding
Argued and Submitted December 17, 2018
San Francisco, California
Filed May 2, 2019
Before: Ronald M. Gould and Marsha S. Berzon, Circuit
Judges, and Frederic Block, * District Judge.
Opinion by Judge Gould
*
The Honorable Frederic Block, United States District Judge for the
Eastern District of New York, sitting by designation.
2 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
SUMMARY **
Claim Preclusion / Copyright
The panel affirmed in part and reversed in part the
district court’s dismissal of claims of copyright
infringement, violation of the Digital Millennium Copyright
Act, and breach of contract.
Media Rights Technologies, Inc. (“MRT”) developed a
technology to protect electronic files from content piracy.
MRT claimed that Microsoft Corp. developed a similar
technology following exchanges between the parties and in
doing so used information learned from MRT. In 2013,
MRT brought a patent infringement suit against Microsoft.
Later, MRT filed this suit.
The panel held that claim preclusion would apply if the
patent infringement suit involved the same claim or cause of
action as the later suit, reached a final judgment on the
merits, and involved identical parties or privies. The parties
disagreed whether MRT could have raised its claims in the
prior patent infringement suit (on the theory they did not
accrue until after commencement of that action) and whether
the two suits involved the same claim or cause of action.
Affirming in part, the panel held that claim preclusion
barred MRT’s claims that had accrued at the time of its
patent infringement action: namely, copyright infringement
claims arising from the sale of Microsoft products before
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 3
MRT filed its patent infringement suit; the DCMA claim;
and the breach of contract claims. The panel concluded that
these claims all arose from the same events—Microsoft’s
alleged misappropriation of MRT’s software—as the prior
patent infringement claims and merely offered different
legal theories for why Microsoft’s alleged conduct was
wrongful. The panel held that the two suits involved the
same claims or causes of action.
Reversing in part, the panel held that claim preclusion
did not bar MRT from asserting copyright infringement
claims that accrued after it filed its patent-infringement suit:
namely, claims arising from the sale of Microsoft products
after MRT filed its patent infringement suit.
COUNSEL
Ian N. Feinberg (argued), Elizabeth Day, Marc Belloli, and
David Alberti, Feinberg Day Alberti & Thompson LLP,
Menlo Park, California, for Plaintiff-Appellant.
Jonathan J. Lamberson (argued) and Alana C. Mannigé, Fish
& Richardson P.C., Redwood City, California, for
Defendant-Appellee.
4 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
OPINION
GOULD, Circuit Judge:
This case requires that we apply longstanding principles
of claim preclusion to a contemporary set of facts. Plaintiff-
Appellant Media Rights Technologies, Inc. (“MRT”)
developed a technology in the early 2000s to protect
electronic files, such as music files, from content piracy.
MRT claims that Defendant-Appellee Microsoft
Corporation developed a similar technology following
exchanges between the parties and in doing so used
information learned from MRT. In 2013, MRT brought a
patent infringement suit against Microsoft. After a court in
a separate proceeding declared one of the patents at issue
invalid, MRT voluntarily dismissed that suit with prejudice.
But that dismissal did not end the dispute in which the
parties were embroiled. MRT then filed this suit against
Microsoft, asserting claims for copyright infringement,
violation of the Digital Millennium Copyright Act
(“DMCA”), and breach of contract. The key question before
us is whether MRT’s first suit for patent infringement
precludes this later suit for copyright infringement under the
doctrine of claim preclusion even though the current claims
have different elements.
We hold that claim preclusion bars the claims in this suit
that had accrued at the time of MRT’s patent-infringement
action: namely, (1) copyright infringement claims arising
from the sale of Microsoft products before MRT filed its
patent-infringement suit; (2) the DMCA claim; and (3) the
breach of contract claims. These claims all arise from the
same events—Microsoft’s alleged misappropriation of
MRT’s software—as the prior patent infringement claims.
They merely offer different legal theories for why
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 5
Microsoft’s alleged conduct was wrongful. We affirm the
district court’s dismissal of these claims.
However, we hold, under Howard v. City of Coos Bay,
871 F.3d 1032 (9th Cir. 2017), that claim preclusion does not
bar MRT from asserting copyright infringement claims that
accrued after it filed its patent-infringement suit: namely,
claims arising from the sale of Microsoft products after MRT
filed its patent-infringement suit. We reverse the district
court’s dismissal of these copyright infringement claims,
and remand for further proceedings.
I
A1
In the early 2000s, MRT’s cofounder, Hank Risan,
developed a technology that came to be known as the
Controlled Data Pathway (“CDP”). MRT claims that its
CDP technology was the first digital rights management
(“DRM”) technology to prevent various types of content
piracy, such as the piracy of music files. For the years
thereafter, MRT incorporated that technology into its X1
Recording Control software, BlueBeat SeCure Player,
BlueBeat SeCure Player for Windows Media Player, and
BlueBeat SeCure Player for Microsoft Vista (collectively,
the “MRT Software”). MRT holds several patents on its
CDP technology (the “CDP Patents”).
1
What follows are the well-pleaded facts from MRT’s complaint,
which we accept as true at the motion-to-dismiss stage. See Garity v.
APWU Nat’l Labor Org., 828 F.3d 848, 851 n.1 (9th Cir. 2016) (citing
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
6 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
To help identify any unlawful copying of the MRT
Software’s source code, 2 MRT inserted a piece of inert code
(the “Watermark”). The Watermark appears as follows:
if ( FindWindow((TCHAR *) 32770,
szProdName)
!= (HWND) 0)
{
/* indicate application found */
nRetVal = 1;
}
The Watermark is detectable in object code 3 compiled from
any source code containing the Watermark. In other words,
if a party copied the portion of the MRT Software’s source
code that contains the Watermark, MRT could detect such
copying by looking for the Watermark in the object code of
the other software. Thus, the Watermark served to reveal
copying.
In 2003, the recording and motion picture industries took
notice of MRT’s X1 Recording Control software and its
potential to prevent content piracy. The Recording Institute
of America and the Motion Picture Association of America
evaluated the software, and, after concluding that it
2
“Source code” is a “specialized alphanumeric language[]” written
by a human programmer; it is a set of commands. Sega Enters. Ltd. v.
Accolade, Inc., 977 F.2d 1510, 1514 n.2 (9th Cir. 1992), as amended
(Jan. 6, 1993).
3
“Object code” is code that has been “translated into computer
readable form” by an “assembler” or “compiler.” Sega Enters., 977 F.2d
at 1514 n.2. It is “the end product of the compilation of the source
program” and “is required for the program’s execution by a computer.”
Reiffin v. Microsoft Corp., 214 F.3d 1342, 1344 (Fed. Cir. 2000).
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 7
effectively prevented content piracy, recommended to
Microsoft that Microsoft implement the X1 Recording
Control software in its own products.
Shortly after, in August 2004, Microsoft’s Chief
Technology Officer contacted MRT concerning a potential
investment from Microsoft. MRT and Microsoft entered a
nondisclosure agreement (the “2004 NDA”) prohibiting
Microsoft from, among other things, reverse engineering
MRT technology shared under the agreement. MRT, in turn,
gave Microsoft information regarding its CDP technology, a
copy of MRT software containing the Watermark, and
information regarding the CDP Patents. Following
evaluation, Microsoft offered to invest $50 million in MRT
in return for a 51% stake in the company. MRT declined the
offer as too low. 4
One year later, in 2005, Microsoft began testing its
Protected Media Pathway (“PMP”) software. Like the MRT
Software, Microsoft’s PMP software is a DRM technology
designed to prevent content piracy. MRT alleges that
Microsoft had been trying for years to develop its own
effective DRM software, but had been unable to do so until
MRT provided Microsoft information concerning its CDP
technology. MRT contends that Microsoft used the
information it learned from MRT to create the PMP
4
The parties also crossed paths at other points over the years. In
2006, MRT demonstrated its BlueBeat SeCure Player for Windows
Media Player software to Microsoft and others members of the Digital
Media Association. Microsoft had access to the software’s object code
as a result. In May 2012, Microsoft considered acquiring the CDP
Patents from MRT. In connection with that transaction, MRT and
Microsoft entered into a confidentiality agreement, and MRT gave
Microsoft access to confidential and proprietary information. In the end,
Microsoft opted not to purchase the patents.
8 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
software. The PMP software allegedly “contains a copy
and/or derivative work of the MRT software,” as evidenced
by the presence of the Watermark.
In January 2007, Microsoft released the first commercial
version of the Vista operating system, which included
Microsoft’s PMP software. Since Vista, Microsoft has
incorporated its PMP software into other products.
B
On April 25, 2013, MRT filed its first suit against
Microsoft (“MRT I”). MRT claimed that Microsoft had built
its PMP software—which Microsoft included in Windows
Vista, Windows 7, Windows 8, Windows Media Center, and
Windows Media Player—using information that MRT had
shared with Microsoft. Based on those facts, MRT alleged
that the PMP software infringed four CDP Patents.
However, the district court stayed the case in January 2014,
when a district court in a separate action declared one of the
patents at issue invalid. See Media Rights Techs., Inc. v.
Capital One Fin. Corp., No. l:13-cv-476, 2013 WL 6506176(E.D. Va. Dec. 9, 2013).
While MRT I was stayed, MRT decided to investigate
whether Microsoft had copied the MRT Software’s source
code. MRT hired a technical expert to do so. In April 2014,
MRT’s technical expert identified the Watermark in
Windows XP Service Pack 3, Windows Vista, Windows 8,
Windows 10, Windows Media Player 11, Windows Media
Player 12, Windows Media Player SDK, Internet Explorer 8,
Internet Explorer 9, Internet Explorer 10, and Internet
Explorer 11. The expert identified Microsoft’s PMP
software as the source of the Watermark in each of these
products. Because MRT never provided Microsoft access to
the MRT Software’s source code, the expert concluded that
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 9
the Watermark was present as a result of Microsoft reverse
engineering that source code and copying it in Microsoft’s
PMP software.
On September 4, 2015, the Federal Circuit affirmed the
district court decision invalidating one of the CDP Patents at
issue in MRT I, holding that the claims in the patent were
indefinite. Media Rights Techs., Inc. v. Capital One Fin.
Corp., 800 F.3d 1366, 1375 (Fed. Cir. 2015). In April 2016,
MRT voluntarily dismissed MRT I with prejudice.
C
MRT filed this action (“MRT II”) one year later. MRT
claims that Microsoft’s PMP software “contains a copy of
and/or is a derivative work of” the MRT Software and thus
infringes MRT’s copyrights. MRT also alleges that
Microsoft violated the DMCA by circumventing measures
in the MRT Software meant to prevent reverse engineering
and copying. Finally, MRT claims that Microsoft violated
the 2004 NDA and MRT’s End User License Agreement
(“EULA”)—which Microsoft allegedly agreed to when it
used the MRT Software—by reverse engineering and
copying the MRT Software’s source code.
The district court dismissed MRT’s complaint on the
basis of claim preclusion. See Media Rights Techs. v.
Microsoft Corp., Case No. 17-cv-01925-SK, 2017 WL
4685702 (N.D. Cal. July 20, 2017). 5 It reasoned that MRT I
5
The district court used the terms “res judicata” and “claim
preclusion” interchangeably. Historically, courts have used the term “res
judicata” to mean “two different concepts.” Weaver Corp. v. Kiddle,
Inc., 701 F. Supp. 61, 63–64 (S.D.N.Y. 1988). Some have “use[d] it to
mean claim preclusion,” while others have used it “in a general sense, to
10 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
and MRT II arose from the same nucleus of facts, the suits
would share much of the same evidence, allowing MRT II to
proceed could impair rights established by MRT I, and both
MRT I and MRT II concerned intellectual property rights in
the MRT Software. Id. at 5–7. The district court entered
judgment for Microsoft.
II
MRT appeals the district court’s dismissal of its claims.
We review de novo whether claim preclusion bars MRT’s
claims in this action. Harris v. Cty. of Orange, 682 F.3d
1126, 1131 (9th Cir. 2012).
III
The related doctrines of claim and issue preclusion, by
“preclud[ing] parties from contesting matters that they have
had a full and fair opportunity to litigate,” “protect against
‘the expense and vexation attending multiple lawsuits,
conserv[e] judicial resources, and foste[r] reliance on
judicial action by minimizing the possibility of inconsistent
decisions.’” Taylor v. Sturgell, 553 U.S. 880, 892 (2008)
(alterations in original) (quoting Montana v. United States,
440 U.S. 147, 153–54 (1979)); see also Amadeo v. Principal
Mut. Life Ins. Co., 290 F.3d 1152, 1160 (9th Cir. 2002)
(“Preclusion doctrine is intended to promote judicial
efficiency and the finality of judgments by requiring that all
related claims be brought together or forfeited (claim
preclusion) and by prohibiting any party from litigating an
issue that has been fully litigated previously (issue
preclusion).”). Claim preclusion bars a party in successive
encompass both claim and issue preclusion.” Id. For clarity, we use the
more descriptive terms of claim and issue preclusion.
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 11
litigation from pursuing claims that “were raised or could
have been raised in [a] prior action.” Owens v. Kaiser
Found. Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001)
(quoting Western Radio Servs. Co. v. Glickman, 123 F.3d
1189, 1192 (9th Cir. 1997)); see also Tahoe-Sierra Pres.
Council, Inc. v. Tahoe Reg’l Planning Agency, 322 F.3d
1064, 1077–78 (9th Cir. 2003) (claim preclusion “bars
relitigation of all grounds of recovery that were asserted, or
could have been asserted, in a previous action. . . . It is
immaterial whether the claims asserted subsequent to the
judgment were actually pursued in the action that led to the
judgment; rather, the relevant inquiry is whether they could
have been brought” (quoting United States ex rel. Barajas v.
Northrop Corp., 147 F.3d 905, 909 (9th Cir. 1998)). “Issue
preclusion, in contrast, bars ‘successive litigation of an issue
of fact or law actually litigated and resolved in a valid court
determination essential to the prior judgment . . . .’” Taylor,
553 U.S. at 892 (quoting New Hampshire v. Maine, 532 U.S.
742, 748–49 (2001)); see also Af-Cap, Inc. v. Chevron
Overseas (Congo) Ltd., 475 F.3d 1080, 1086 (9th Cir. 2007).
This case involves claim preclusion. If MRT I
“(1) involved the same ‘claim’ or cause of action as
[MRT II], (2) reached a final judgment on the merits, and
(3) involved identical parties or privies,” then claim
preclusion bars MRT’s current claims. Mpoyo v. Litton
Electro-Optical Sys., 430 F.3d 985, 987 (9th Cir. 2005)
(quoting Sidhu v. Flecto Co., 279 F.3d 896, 900 (9th Cir.
2002)). 6 It is Microsoft’s burden to establish that preclusion
applies. Taylor, 553 U.S at 906–07.
6
Because the decision to be given preclusive effect was rendered by
a federal court exercising federal-question jurisdiction, federal common
law determines whether preclusion applies. Taylor, 553 U.S. at 891.
12 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
The parties do not dispute that MRT’s voluntary
dismissal of MRT I with prejudice is a final judgment on the
merits, nor do they dispute that both MRT and Microsoft
were and are parties to MRT I and MRT II. The parties
disagree (1) whether MRT could have raised its current
claims in MRT I (on the theory they did not accrue until after
commencement of that action) and (2) whether MRT I and
MRT II involve “the same ‘claim’ or cause of action” for
purposes of preclusion. Mpoyo, 430 F.3d at 987. We
address each issue in turn.
IV
MRT contends that claim preclusion does not bar any of
its current claims because each accrued after MRT filed the
operative complaint in MRT I. 7 The rule in this circuit, and
7
Microsoft contends that MRT forfeited this argument by not
raising it in the district court. We disagree. MRT raised a variation of
the argument it now presses, and the district court considered and
rejected that argument:
MRT also argues that the settlement and dismissal
with prejudice of the first action cannot bar claims
based on conduct that occurred after the settlement.
However, the conduct underlying this instant action
occurred before the first action was filed. Although
MRT alleges that it did not discover the alleged
copying of the Watermark until April 12, 2014, after
the first action was filed, this was more than two years
before the first action was dismissed on April 21,
2016. (Dkt. 1, ¶ 95; Dkt. 16, Ex. B.) Additionally,
based on the facts MRT alleged in the first action and
in this action, it is not clear why MRT did not
investigate, and, thus, actually discover, the alleged
copyright infringement earlier.
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 13
others, is that “claim preclusion does not apply to claims that
accrue after the filing of the operative complaint” in the first
suit. Howard, 871 F.3d at 1039–40 (collecting cases).
Although Howard did not explain or define “accrue”—
and the parties disputed its meaning at oral argument—we
read Howard to use “accrue” to mean to “come into
existence” or “arise.” Accrue, Black’s Law Dictionary (10th
ed. 2014). In other words, we read Howard to hold that
claim preclusion does not apply to claims that were not in
existence and could not have been sued upon—i.e., were not
legally cognizable—when the allegedly preclusive action
was initiated. See Howard, 871 F.3d at 1040 (“Howard’s
retaliation claims in this suit arose from events that occurred
after she filed her complaint in Howard I, and they are not
barred by claim preclusion.”). That reading is consistent
with our pre-Howard decisions. See, e.g., Frank v. United
Airlines, Inc., 216 F.3d 845, 851 (9th Cir. 2000) (“A claim
arising after the date of an earlier judgment is not barred,
even if it arises out of a continuing course of conduct that
provided the basis for the earlier claim.”). It is also
consistent with Supreme Court authority and authority from
our sister circuits. See Lawlor v. Nat’l Screen Serv. Corp.,
349 U.S. 322, 328 (1955) (a prior judgment “cannot be given
the effect of extinguishing claims which did not even then
exist and which could not possibly have been sued upon in
the previous case”); TechnoMarine SA v. Giftports, Inc.,
758 F.3d 493, 502 (2d Cir. 2014) (“TechnoMarine’s
trademark infringement claim is not barred by claim
preclusion because Giftports allegedly committed new
instances of trademark infringement after the settlement, so
that the present claim, to the extent based on the new acts of
Media Rights Techs. v. Microsoft Corp., Case No. 17-cv-01925-SK,
2017 WL 4685702, at *6 (N.D. Cal. July 20, 2017).
14 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
infringement, was not and could not have been litigated in
the earlier proceeding.”); Aspex Eyewear, Inc. v. Marchon
Eyewear, Inc., 672 F.3d 1335, 1342 (Fed. Cir. 2012) (“We
hold that res judicata does not bar Aspex’s lawsuit with
respect to accused products that were not in existence at the
time of the California Actions for the simple reason that res
judicata requires that in order for a particular claim to be
barred, it is necessary that the claim either was asserted, or
could have been asserted, in the prior action. If the claim did
not exist at the time of the earlier action, it could not have
been asserted in that action and is not barred by res
judicata.”); Stanton v. D.C. Court of Appeals, 127 F.3d 72,
78 (D.C. Cir. 1997) (“Federal law is clear that post-judgment
events give rise to new claims, so that claim preclusion is no
bar.” (emphasis omitted)); Alexander & Alexander, Inc. v.
Van Impe, 787 F.2d 163, 166 (3d Cir. 1986) (“Res judicata
applies, however, only to claims arising prior to the entry of
judgment. It does not bar claims arising subsequent to the
entry of judgment and which did not then exist or could not
have been sued upon in the prior action.” (emphasis in
original)), as amended (May 20, 1986); 18 Charles Alan
Wright et al., Federal Practice & Procedure § 4409 (3d ed.
2018 update) (“A substantially single course of activity may
continue through the life of a first suit and beyond. The basic
claim-preclusion result is clear: a new claim or cause of
action is created as the conduct continues.”). 8
8
Although the language of some of these decisions could suggest
that claim preclusion should bar claims that arose after the filing of the
operative complaint in a prior action, but before the entry of judgment,
to be clear, the rule in this circuit, and others, is that “claim preclusion
does not apply to claims that accrue after the filing of the operative
complaint” in the first suit. Howard, 871 F.3d at 1039–40 (collecting
cases).
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 15
Thus, the question before us is whether MRT’s current
claims accrued—i.e., “c[a]me into existence” or “ar[o]se,”
Accrue, Black’s Law Dictionary (10th ed. 2014)—and could
have been sued upon before MRT filed MRT I. If any of
MRT’s claims had accrued in that sense, then so long as the
other requirements of claim preclusion are met, MRT is
barred from asserting those claims here. If any claims had
not accrued, claim preclusion does not apply. We discuss
MRT’s copyright infringement, DMCA, and breach of
contract claims in turn.
A
Copyright infringement claims must be “commenced
within three years after the claim accrued.” 17 U.S.C.
§ 507(b). Under the “discovery rule,” a copyright
infringement claim accrues—and the statute of limitations
begins to run—when a party discovers, or reasonably should
have discovered, the alleged infringement. Polar Bear
Prods., Inc. v. Timex Corp., 384 F.3d 700, 706 (9th Cir.
2004), as amended on denial of reh’g & reh’g en banc
(Oct. 25, 2004); see also Psihoyos v. John Wiley & Sons,
Inc., 748 F.3d 120, 124 (2d Cir. 2014); William A. Graham
Co. v. Haughey, 568 F.3d 425, 433–37 (3d Cir. 2009);
Gaiman v. McFarlane, 360 F.3d 644, 653 (7th Cir. 2004).
Under the discovery rule and Howard, claim preclusion
cannot apply to copyright infringement claims that MRT did
not know about, nor had reason to know about, when it filed
MRT I. See Howard, 871 F.3d at 1039–40.
In addition to the discovery rule, the “separate-accrual
rule” in copyright law provides that “when a defendant
commits successive violations [of the Copyright Act], the
statute of limitations runs separately from each violation.
Each time an infringing work is reproduced or distributed,
the infringer commits a new wrong. Each wrong gives rise
16 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
to a discrete ‘claim’ that ‘accrue[s]’ at the time the wrong
occurs.” Petrella v. Metro-Goldwyn-Mayer, Inc., 572 U.S.
663, 671 (2014) (footnotes omitted). For purposes of claim
preclusion, the separate-accrual rule means that a new cause
of action for copyright infringement accrued each time
Microsoft sold an allegedly infringing product.
1
MRT’s claim for copyright infringement alleges that
Microsoft “had distributed at least five billion
(5,000,000,000) copies” of allegedly infringing products as
of the filing of the complaint on April 6, 2017. Any sales
before April 25, 2013—the date MRT filed its complaint in
MRT I—gave rise to a cause of action for copyright
infringement if MRT knew, or reasonably should have
known, that Microsoft had copied the MRT Software and the
sales therefore constituted copyright infringement. Polar
Bear Prods., 384 F.3d at 706.
MRT alleges in its complaint that it did not discover
Microsoft’s alleged copying until April 12, 2014, after MRT
filed MRT I. Taking that allegation as true, see Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 556 (2007), MRT
nonetheless could reasonably have discovered Microsoft’s
alleged copying before filing MRT I. MRT alleges that it
had shared its copyrighted software with Microsoft in
August 2004. MRT further alleges that Microsoft had been
unable to develop effective DRM technology up to that
point. Despite its alleged struggles, Microsoft was able to
begin testing new DRM technology—the PMP software—
roughly one year later, in September 2005. Microsoft then
incorporated an effective version of the PMP software into
various of its products beginning in January 2007.
Microsoft’s PMP software contained the Watermark, which
MRT specifically meant to be detectable. When MRT filed
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 17
MRT I six years later, MRT claimed that Microsoft used
“information it learned from MRT, including information
relating to the Controlled Data Pathway technology,” to
design its PMP software.
Given (1) the temporal proximity between MRT’s and
Microsoft’s interactions and Microsoft’s development of its
first effective DRM technology; (2) MRT’s apparent belief
at the time it filed MRT I that Microsoft used information
learned from MRT to create software that did the same thing
as the MRT Software; and (3) MRT’s insertion of the
Watermark, which it specifically inserted to detect copying,
MRT was on notice—at least by the time it filed MRT I—
that Microsoft may have copied the MRT Software. MRT
could have investigated and detected the copying. 9
Because MRT could reasonably have discovered
Microsoft’s alleged copying before filing MRT I, copyright
infringement claims based on the sale of Microsoft products
before that filing had accrued and MRT could have pursued
them (if timely). See Polar Bear Prods., 384 F.3d at 706;
see also Pincay v. Andrews, 238 F.3d 1106, 1109–10 (9th
Cir. 2001) (“The plaintiff is deemed to have had constructive
knowledge if it had enough information to warrant an
investigation which, if reasonably diligent, would have led
to discovery of the [claim].” (citation omitted)). Those
claims (the “pre-filing copyright infringement claims”) are
precluded if the other requirements of claim preclusion are
9
MRT contends that “[d]etection of copying of the MRT Software
is extraordinarily difficult because Microsoft, like virtually every
software vendor, protects the source code for its products as a trade
secret.” This contention ignores that MRT discovered the alleged
copying when it finally looked at the object code (which is publicly
available) because the Watermark was designed to be detectable in
object code.
18 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
met, Howard, 871 F.3d at 1039–40, a point we discuss below
in Section V.A.
2
By contrast, under the separate-accrual rule, any sales of
allegedly infringing Microsoft products after April 25, 2013,
gave rise to a cause of action (the “post-filing copyright
infringement claims”) as of the date of the sale—i.e., at some
point after April 25, 2013. See Petrella, 572 U.S. at 671.
Because those claims arose after MRT filed the operative
complaint in MRT I and MRT could not have sued on them
when it filed MRT I, they are not precluded here. See
Howard, 871 F.3d at 1039–40. The leading treatise on civil
procedure agrees: “Events that are related in origin and
nature may nonetheless involve such clear separations or
discontinuities as to create separate causes of action without
room for dispute. The easiest circumstances occur when the
second action draws on facts or seeks remedies that simply
could not have been asserted in the first action.” 18 Wright
et al., Federal Practice and Procedure § 4409 (footnotes
omitted).
Microsoft advances two main theories as to why the
post-filing copyright infringement claims should be
precluded. First, Microsoft—relying on Turtle Island
Restoration Network v. U.S. Department of State, 673 F.3d
914 (9th Cir. 2012)—contends that claim preclusion bars
such claims because “one cannot evade claim preclusion by
relying on events that occurred after judgment when the
plaintiff knew of nearly identical events that occurred before
judgment and did nothing.” Turtle Island is inapposite. We
held in Turtle Island that claim preclusion applied—despite
the plaintiff citing evidence in a successive suit that was
unavailable in the prior suit—because that evidence was
merely an “example” used to bolster claims that the plaintiff
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 19
raised in the first action. Id. at 918–19. Unlike here, where
the separate-accrual rule applies, the new events in Turtle
Island did not establish an independent cause of action. Cf.
Frank, 216 F.3d at 851 (“A claim arising after the date of an
earlier judgment is not barred, even if it arises out of a
continuing course of conduct that provided the basis for the
earlier claim.”).
Taken to its logical conclusion, Microsoft’s proposed
rule “violates basic claim preclusion principles.”
TechnoMarine, 758 F.3d at 503. Suppose that MRT had
asserted a claim for copyright infringement in MRT I,
contending (as it does here) that Microsoft copied the MRT
Software, after interactions between the parties, to create
Microsoft’s PMP software. Suppose further that MRT
sought damages based on sales of Microsoft products with
the PMP software, but that MRT either did not request
injunctive relief or the court did not grant it. Finally,
suppose that a jury found that Microsoft infringed one of
MRT’s copyrights and awarded MRT damages. Under
Microsoft’s logic, if Microsoft sold a product with the
infringing PMP software two years later and MRT then
brought an infringement action, claim preclusion would bar
that action because “nearly identical events” gave rise to the
two suits: Microsoft copied the MRT Software to create its
PMP software and then sold products containing that
software. “The earlier judgment against [Microsoft] . . .
would in effect immunize [Microsoft] against all suits
concerning infringements of the same [copyright] in a
similar way. This is not the law of claim preclusion.” Id.;
see also Smith v. Potter, 513 F.3d 781, 783 (7th Cir. 2008)
(“The filing of a suit does not entitle the defendant to
continue or repeat the unlawful conduct with immunity from
further suit.”).
20 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
Second, Microsoft contends that claim preclusion bars
the post-filing copyright infringement claims because MRT
sought prospective relief in MRT I (either an injunction or
ongoing royalties) and therefore brought “future-sold
products into” MRT I. The Supreme Court’s decision in
Lawlor forecloses that argument. 349 U.S. at 328–29 (claim
preclusion did not apply, notwithstanding “that the [first]
complaint sought, in addition to treble damages, injunctive
relief which, if granted, would have prevented the illegal acts
now complained of. A combination of facts constituting two
or more causes of action on the law side of a court does not
congeal into a single cause of action merely because
equitable relief is also sought.”); see also Marcel Fashions
Grp. Inc. v. Luck Brand Dungarees, Inc., 779 F.3d 102, 109–
10 (2d Cir. 2015) (declining to apply preclusion where a
party requested injunctive relief in an earlier suit);
TechnoMarine, 758 F.3d at 504 (declining to apply claim
preclusion where the plaintiff had unsuccessfully sought an
injunction in the prior action); Smith, 513 F.3d at 784 (“Nor
is the government right to argue that the plaintiff’s second
suit should be barred because she sought injunctive relief in
her first suit and had it been granted the additional
misconduct alleged in the second suit would have been
prevented.”).
We stress that our analysis does not mean that courts will
be forced to continually relitigate copyright infringement
claims. Issue preclusion “bars successive litigation of an
issue of fact or law”—such as copyright infringement—
“actually litigated and resolved in a valid court
determination essential to the prior judgment . . . .” Taylor,
553 U.S. at 892 (quotation omitted); see also 18 Wright et
al., Federal Practice and Procedure § 4409 (“[C]laim
preclusion often cannot apply in settings of continuing or
interrupted and renewed conduct, and that the result may be
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 21
burdensome repetitive litigation. To the extent that greater
protection is needed, it is better to rely on issue preclusion
than on efforts to draw into claim preclusion matters that
could not reasonably be advanced in the first litigation.”).
Here we do not deal with an issue that was decided, but
rather with claims that could have been brought.
B
MRT’s DMCA claim arises under Title 17 of the United
States Code and therefore is subject to the same statute of
limitations as MRT’s copyright infringement claims. See
17 U.S.C. §§ 507(b), 1201(a)(1)(A). The statute of
limitations began to run when MRT learned, or reasonably
should have learned, of Microsoft’s alleged violation of the
DMCA. See Kling v. Hallmark Cards, Inc., 225 F.3d 1030,
1038 (9th Cir. 2000) (Copyright Act statute of limitations
begins to run “when one has knowledge of a violation or is
chargeable with such knowledge” (quoting Roley v. New
World Pictures, Ltd., 19 F.3d 479, 481 (9th Cir. 1994))).
MRT’s DMCA claim alleges that Microsoft copied the
MRT Software by circumventing measures in the MRT
Software designed to prevent copying. Because MRT’s
DMCA claim is predicated on the same events as MRT’s
pre-filing copyright infringement claims—Microsoft’s
alleged copying of the MRT Software—we hold, for the
reasons given in Section IV.A, that MRT’s DMCA claim
accrued before MRT filed MRT I. Unlike MRT’s copyright
claims, there is no parallel separate-accrual rule that applies
to MRT’s DMCA claim. MRT’s DMCA claim is therefore
entirely precluded if the other requirements of claim
preclusion are met, Howard, 871 F.3d at 1039–40, a point
we discuss below in Section V.B.
22 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
C
California law determines when MRT’s breach of
contract claims accrued. See United Mine Workers v. Gibbs,
383 U.S. 715, 726 (1966) (a federal court when exercising
supplemental jurisdiction over a state law claim applies state
law in the same manner it would if sitting in diversity); Nw.
Airlines, Inc. v. Camacho, 296 F.3d 787, 789 n.1 (9th Cir.
2002) (federal courts exercising diversity jurisdiction apply
the statute of limitations of the forum jurisdiction). Under
California law, a cause of action sounding in contract does
not accrue “until the plaintiff discovers, or has reason to
discover, the cause of action.” Wind Dancer Prod. Grp. v.
Walt Disney Pictures, 10 Cal. App. 5th 56, 73 (2017)
(quoting Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797,
807 (2005)).
MRT’s breach of contract claims allege that Microsoft
breached anti-reverse-engineering provisions in the 2004
NDA and MRT’s EULA when it allegedly copied the MRT
Software. Because MRT’s breach of contract claims are
predicated on the same events as its pre-filing copyright
infringement and DMCA claims, we hold again, for the
reasons given in Section IV.A, that MRT’s breach of
contract claims accrued before MRT filed MRT I. MRT’s
breach of contract claims are precluded if the other
requirements of claim preclusion are met, Howard, 871 F.3d
at 1039–40, a point we discuss below in Section V.C.
V
Having concluded that MRT’s post-filing copyright
infringement claims are not precluded, we turn now to
address the second point of contention between the parties:
whether the pre-filing copyright infringement, DMCA, and
breach of contract claims involve “the same ‘claim’ or cause
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 23
of action” as the patent infringement claims in MRT I.
Mpoyo, 430 F.3d at 987 (quoting Sidhu, 279 F.3d at 900).
We consider “(1) whether the two suits arise out of the same
transactional nucleus of facts; (2) whether rights or interests
established in the prior judgment would be destroyed or
impaired by prosecution of the second action; (3) whether
the two suits involve infringement of the same right; and
(4) whether substantially the same evidence is presented in
the two actions.” Id. at 987 (citing Chao v. A-One Med.
Servs., Inc., 346 F.3d 908, 921 (9th Cir. 2003)). We do not
apply these criteria “mechanistically.” Id. 10
A
We first hold that claim preclusion bars MRT’s pre-filing
copyright infringement claims.
With respect to the common-nucleus criterion, we use a
“transaction test to determine whether . . . two suits share a
common nucleus of operative fact.” Mpoyo, 430 F.3d at 987
(citing Int’l Union of Operating Eng’rs-Empl’rs Constr.
Indus. Pension, Welfare & Training Tr. Funds v. Karr,
994 F.2d 1426, 1429–30 (9th Cir. 1993)). “Whether two
events are part of the same transaction or series depends on
whether they are related to the same set of facts and whether
they could conveniently be tried together.” Id. (quoting
Western Sys., Inc. v. Ulloa, 958 F.2d 864, 871 (9th Cir.
10
MRT cites Hells Canyon Preservation Council v. U.S. Forest
Service, 403 F.3d 683, 686 n.2 (9th Cir. 2005), for the proposition that
claim preclusion cannot apply to claims that were not but “could have
been brought in a prior proceeding.” MRT is incorrect. In Hells Canyon
we emphasized that claim preclusion does not apply to any and all
“cause[s] of action that could have been joined in the original action”; it
applies to claims and legal theories “arising out of the same transactional
nucleus of facts.” Id.24 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
1992)); see also Restatement (Second) of Judgments § 24
(1982) (“What factual grouping constitutes a ‘transaction’,
and what groupings constitute a ‘series’, are to be
determined pragmatically, giving weight to such
considerations as whether the facts are related in time, space,
origin, or motivation, whether they form a convenient trial
unit, and whether their treatment as a unit conforms to the
parties’ expectations or business understanding or usage.”).
We are most concerned with the facts or events from
which the alleged harms arose. See, e.g., United States v.
Liquidators of Eur. Fed. Credit Bank, 630 F.3d 1139, 1151
(9th Cir. 2011) (common nucleus of facts between civil and
criminal forfeiture actions because both arose from
“Defendant’s criminal conduct”); Mpoyo, 430 F.3d at 987(common nucleus of facts between Title VII, FLSA, and
FMLA claims because those “claims ar[o]se from Litton’s
conduct while Mpoyo was an employee and specifically
from the events leading to his termination . . . . Furthermore,
the Title VII, FLSA and FMLA claims form a convenient
trial unit that discloses a cohesive narrative of an employee-
employer relationship and a controversial termination.”);
Owens, 244 F.3d at 714 (common nucleus of facts between
breach of contract and Title VII claims because they were
“predicated on racial discrimination and allege the same
circumstances regarding Appellants’ terminations”); see
also 18 Wright et al., Federal Practice and Procedure
§ 4407 (“Matters with a common historic origin ordinarily
form a convenient package for joint litigation.”);
Restatement (Second) of Judgments § 24 cmt. b (“Among
the factors relevant to a determination whether the facts are
so woven together as to constitute a single claim are their
relatedness in time, space, origin, or motivation, and
whether, taken together, they form a convenient unit for trial
purposes.”). “If the harm[s] arose at the same time, then
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 25
there was no reason why the plaintiff could not have brought
[both] claim[s] in the first action. The plaintiff simply could
have added a claim to the complaint.” Howard, 871 F.3d at
1039 (quoting Liquidators of Eur. Fed. Credit Bank,
630 F.3d at 1151). In contrast, “[i]f the harm[s] arose from
different facts,” then a party is not obligated to bring both
claims on pain of preclusion. Id. 11
The common-nucleus criterion favors preclusion here.
In MRT I, MRT alleged that it “had detailed discussions with
Microsoft about its technology” in 2004 and made its
“technology available to Microsoft for review and analysis.”
MRT alleged that “Microsoft used the information it learned
from MRT, including information relating to the Controlled
Data Pathway technology, to build what Microsoft refers to
as the ‘Protected Media Path’ technology and architecture,”
which Microsoft then incorporated into various products.
MRT concluded that Microsoft products with the PMP
software infringed four CDP Patents.
Here, MRT alleges that, sometime in 2003 or 2004,
“Microsoft learned that MRT was looking for investors and
became interested in acquiring a majority interest in MRT in
order to get control over the X1RC software so that it would
have an effective Digital Rights Management system that
would protect against Content Piracy and streamripping in
particular.” In connection with a possible investment, MRT
11
Our discussion to this point disposes of MRT’s contention that
what matters “is whether or not the ‘evidentiary facts underlying the
claim’ are the same, not whether certain historical facts in the case are
the same.” MRT relies on Harris v. Jacobs, 621 F.2d 341, 344 (9th Cir.
1980), for that proposition, but Harris did not make the distinction MRT
now draws. Nor do our other decisions draw a distinction between
“evidentiary facts” and “historical facts.” What matters is the sequence
of events from which the claims arose.
26 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
gave information concerning its CDP technology to
Microsoft, including the CDP Patents, and provided
Microsoft access to MRT technology. The parties also
entered an NDA prohibiting, among other things, reverse-
engineering. Microsoft began testing its PMP software in
September 2005. That software allegedly “contains a copy
and/or derivative work of the MRT software,” as evidenced
by the presence of the Watermark. Because MRT never
provided Microsoft access to the source code for its
software, MRT alleges that Microsoft must have reverse
engineered the MRT Software’s source code. Microsoft
incorporated its PMP software into various products over the
years. MRT concludes that Microsoft products with the
PMP software infringe MRT’s copyrights.
Comparing the two complaints, although the legal
theories differ and the complaint here is more detailed, the
factual basis for MRT’s patent infringement claims in MRT
I and its pre-filing copyright infringement claims here is the
same: after discussions between MRT and Microsoft in
2004, Microsoft wrongfully took what it learned from MRT
and created its PMP software. Microsoft then incorporated
that software into various products, giving rise to claims of
patent and copyright infringement. That the two actions
“relate to the same set of facts” favors preclusion. Mpoyo,
430 F.3d at 987.
Moreover, MRT’s patent infringement and copyright
infringement claims “form a convenient trial unit that
discloses a cohesive narrative” of how Microsoft allegedly
misappropriated MRT’s technology. Mpoyo, 430 F.3d
at 987. Indeed, patent infringement and copyright
infringement claims are often tried together, including in
large, complex cases. See, e.g., Oracle Am., Inc. v. Google
Inc., 750 F.3d 1339, 1347–48 (Fed. Cir. 2014); Bowers v.
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 27
Baystate Techs., Inc., 320 F.3d 1317, 1320–22 (Fed. Cir.
2003). But see, e.g., Conceivex, Inc. v. Rinovum Women’s
Health, Inc., No. 16-11810, 2017 WL 3484499, at *6–8
(E.D. Mich. Aug. 15, 2017). That the two suits “could
conveniently be tried together” likewise favors preclusion.
Mpoyo, 430 F.3d at 987.
As we have explained in prior decisions, the common-
nucleus criterion is the “most important” of the criteria we
consider. Harris, 682 F.3d at 1132; see also Sidney v. Zah,
718 F.2d 1453, 1459 (9th Cir. 1983) (explaining that whether
claims “arise out of the same transactional nucleus of facts
[is] the criteria most stressed in our decisions” (quotation
omitted)). We have repeatedly found it to be outcome
determinative. See, e.g., Liquidators of Eur. Fed. Credit
Bank, 630 F.3d at 1151–53 (applying claim preclusion based
on the common-nucleus criterion only); Mpoyo, 430 F.3d
at 988 (“While examination of the latter three criteria does
not yield a clear outcome, Mpoyo I and Mpoyo II clearly
share a common nucleus of operative fact under the first
criterion. The first criterion controls and assures the two
suits involve the same claim or cause of action.”); Owens,
244 F.3d at 714 (applying claim preclusion without
considering criteria other than the common-nucleus
criterion); In re Imperial Corp. of Am., 92 F.3d 1503, 1508–
09 (9th Cir. 1996) (same); C.D. Anderson & Co. v. Lemos,
832 F.2d 1097, 1100 (9th Cir. 1987) (same). 12
12
We are not alone in this regard. A number of our sister circuits
analyze whether two claims are the “same cause of action” for purposes
of claim preclusion using analyses similar to our common-nucleus
criterion and without considering the other criteria we consider. See,
e.g., City of Eudora, Kan. v. Rural Water Dist. No. 4, Douglas Cty., Kan.,
875 F.3d 1030, 1035 (10th Cir. 2017); Duckett v. Fuller, 819 F.3d 740,
744 (4th Cir. 2016); Oreck Direct, LLC v. Dyson, Inc., 560 F.3d 398,
28 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
We find the common-nucleus criterion to be outcome
determinative here as well. For that reason, we do not
consider the other criteria, with one exception. We reject
MRT’s categorical contention that patent and copyright suits
cannot “involve infringement of the same right,” Mpoyo,
430 F.3d at 987 (quoting Sidhu, 279 F.3d at 900), because
patents and copyrights protect “distinct rights that give rise
to distinct claims.”
MRT’s CDP Patents provide it the right, among other
rights, to determine who, if anyone, can use and sell its
patented methods—i.e., its CDP technology. 35 U.S.C.
§ 154(a)(1). MRT sought to protect that right in MRT I.
One way to implement MRT’s patented methods, as
MRT has done and Microsoft has allegedly done, is through
software. The MRT Software at issue here is an allegedly
expressive implementation of MRT’s CDP technology.
Because the MRT Software is allegedly expressive, it is
allegedly copyrightable. 17 U.S.C. § 102(a). MRT’s
copyrights, in turn, provide MRT the exclusive right to
reproduce, prepare derivative works of, and distribute copies
of the MRT Software. 17 U.S.C. § 106.
The MRT copyrights at issue, then, are protecting a right
that was at issue in MRT I: MRT’s exclusive right to use and
sell a particular implementation of its CDP technology. In
other words, MRT I concerned whether Microsoft was
improperly using and selling MRT’s patented processes, its
CDP technology. This case concerns whether Microsoft is
401–02 (5th Cir. 2009); Pike v. Freeman, 266 F.3d 78, 90–91 (2d Cir.
2001) (Sotomayor, J.); Doe v. Allied-Signal, Inc., 985 F.2d 908, 913 (7th
Cir. 1993).
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 29
improperly using a particular, allegedly expressive,
implementation of those processes. Because this action
concerns a right that was already at issue in MRT I,
preclusion is favored. 13
We also reject MRT’s contention that we will create an
inter-circuit and intra-circuit split by applying claim
preclusion here. This is not so.
In Superior Industries, LLC v. Thor Global Enterprises
Ltd., a divided panel of the Federal Circuit—applying Eighth
Circuit law—held that a prior suit concerning trademark
infringement did not preclude a subsequent suit concerning
patent infringement. 700 F.3d 1287, 1293–95 (Fed. Cir.
2012). It reasoned that the two suits arose from “clearly
separate transactions.” Id. at 1293. “Superior’s trademark
claims arose from Thor’s use of the FB mark in
advertising—not from actual sales or offers for sale of the
Thor Undercarriage Technology in the United States,” while
“Superior’s patent infringement claim arises from sales,
offers to sell, or importation of goods that allegedly infringe
the ‘101 Patent—not from the advertising or use of the FB
mark at issue in the 2009 Trademark Action.” Id. at 1294.
Here, in contrast, MRT’s pre-filing copyright infringement
claims arise from the same transaction as its patent
infringement claims: Microsoft’s alleged misappropriation
13
Of course, one issue that may be present in a patent suit that is not
in a copyright suit is the validity of a patent. However, this difference
does not mean that patent and copyright suits necessarily involve
different “rights” for preclusion purposes. That is because patent
invalidity is an affirmative defense that must be proven by the party
asserting invalidity. See 35 U.S.C. § 282(a); Commil USA, LLC v. Cisco
Sys., Inc., 135 S. Ct. 1920, 1929 (2015). It therefore does not define the
claims that a claimant brought or could have brought, which is the focus
of the preclusion inquiry.
30 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
of MRT’s CDP technology. Superior Industries is
inapposite.
In Harris v. Jacobs, an Oregon-state prisoner brought
suit in federal court alleging that Oregon denied him
constitutionally adequate medical care—in violation of the
Eighth Amendment—and that the state denied him a state-
law right to obtain nonprison medical care at his own
expense, in violation of the Due Process Clause of the
Fourteenth Amendment. 621 F.2d 341, 342 (9th Cir. 1980)
(per curiam). While his federal suit was pending, the
plaintiff also sought a writ of habeas corpus in state court,
asserting his Eighth Amendment claim. Id. The state court
held that the prison provided constitutionally adequate
medical care and denied plaintiff’s petition. Id. We held
that claim preclusion barred the plaintiff’s Eighth
Amendment claim but not his Fourteenth Amendment claim
in his federal suit. Id. at 342–44. We reasoned that the
claims arose from different facts: the Eighth Amendment
claim derived from medical care actually provided to the
plaintiff while the Fourteenth Amendment claim derived
from the state’s separate decision not to allow the plaintiff to
obtain nonprison care. Id. Here, in contrast, the same events
gave rise to MRT’s patent infringement and pre-filing
copyright infringement claims.
In Hells Canyon Preservation Council v. U.S. Forest
Service, the first suit alleged that the Forest Service violated
the National Environment Policy Act by deciding to relocate
a vehicular trail without first filing an environmental impact
statement. 403 F.3d 683, 690 (9th Cir. 2005). That is, the
first suit arose from events that predated the Forest Service
moving the trail. The second suit arose “out of [the
plaintiff’s] assertion that parts of the trail” remained in a
prohibited area “after the relocation.” Id. at 690–91.
MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT 31
Because the two suits arose from temporally distinct
transactions, we held that claim preclusion did not apply. Id.But here, again, the patent infringement and pre-filing
copyright infringement claims arise out of the same
transaction: Microsoft allegedly misappropriated MRT’s
CDP technology, giving rise to claims of patent and
copyright infringement. This case is distinct from Hells
Canyon, just as it is from Superior Industries and Harris.
Our holding that claim preclusion bars the pre-filing
copyright infringement claims creates neither an inter-circuit
nor an intra-circuit split.
Finally, we note that we do not hold that copyright
infringement and patent infringement claims will always be
preclusive as to one another. Courts must analyze each case
on the particular facts to determine if claim preclusion
applies.
B
Turning to MRT’s DMCA claim, that claim alleges that
Microsoft circumvented measures in the MRT Software
designed to protect it from unlawful copying, violating
17 U.S.C. § 1201(a)(1)(A), when it reverse engineered and
copied the MRT Software. We hold that claim preclusion
bars MRT’s DMCA claim because the patent infringement
claims in MRT I and the DMCA claim “share a common
nucleus of operative fact.” Mpoyo, 430 F.3d at 987. 14 Both
allege that Microsoft used information gleaned from MRT
to create its PMP software. The DMCA claim specifies that
14
As before, we need not, and do not, consider the other criteria.
See, e.g., Liquidators of Eur. Fed. Credit Bank, 630 F.3d at 1151–53;
Mpoyo, 430 F.3d at 988; Owens, 244 F.3d at 714.
32 MEDIA RIGHTS TECHNOLOGIES V. MICROSOFT
Microsoft did so by reverse engineering the MRT Software’s
source code, in violation of the DMCA.
C
Finally, we hold that claim preclusion also bars MRT’s
breach of contract claims. Those claims allege that
Microsoft breached anti-reverse-engineering provisions in
the 2004 NDA and MRT’s EULA when it reverse
engineered and copied the MRT Software. Because those
claims are based on the same facts as MRT’s DMCA claim,
which we hold is precluded, we likewise hold that MRT’s
breach of contract claims are precluded.
VI
In summary, we hold that MRT’s pre-filing copyright
infringement, DMCA, and breach of contract claims are
precluded, but MRT’s post-filing copyright infringement
claims are not. We accordingly AFFIRM in part and
REVERSE and REMAND in part the district court’s
decision dismissing all of MRT’s claims.
Each side shall bear its own costs on appeal.