mason@polya.STANFORD.EDU (Tony Mason) (04/16/88)
Microsoft has filed their response to Apple's suit. HP has moved for (and
been granted) a 60 day extension to file a response in the suit (according to
Jill Liscom, a PR representative of HP.)
The text of Microsoft's response is at the end of this message. It is 18
pages, typed double-spaced. There were exhibits, which I haven't included.
I shall post the two letters referred to (Exhibits D & E.)
Tony Mason
Distributed Systems Group
Stanford University
mason@{pescadero,polya}.stanford.edu
-----
SHIDLER McBROOM GATES & LUCAS
David T. McDonald
Karl J. Quackenbush
3500 First Interstate Center
Seattle, Washington 98104
(206) 223-4600
SEED & BERRY
William O. Ferron, Jr.
6300 Columbia Center
Seattle, Washington 98104
(206) 622-4900
McCUTCHEN, DOYLE, BROWN & ENERSEN
John N. Hauser
Lynn Pasahow
Three Embarcadero Center
San Francisco, California 94111
(415) 393-2000
Attorneys for Defendant
Microsoft Corporation
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
APPLE COMPUTER, INC., a )
California corporation, )
) No. C 88 20149 RPA
Plaintiff, )
) DEFENDANT MICROSOFT'S
v. ) ANSWER, AFFIRMATIVE
) DEFENSES, AND
MICROSOFT CORPORATION, a ) COUNTERCLAIMS
Delaware corporation, and )
HEWLETT-PACKARD COMPANY, a )
California corporation, )
)
Defendants. )
-----------------------------)
Comes now defendant Microsoft Corporation ("Microsoft")
and answers the complaint of plaintiff Apple Computer, Inc.
("Apple") as follows, referring to the numbered paragraphs
of plaintiff's complaint:
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 1
ANSWER
1. Deny that Microsoft has infringed any Apple
copyright.
2. Admit that this court has jurisdiction over
Apple's copyright claims under federal copyright law. Deny
all other averments in Paragraph 2 of plaintiff's complaint.
3. Admit.
4. Admit that Apple's principal place of business is
Cupertino, California. Admit that Apple is engaged in the
business of designing, developing, and marketing computer
hardware and software products, including the Macintosh
computer. Admit that apple is a significant factor in
domestic and international personal computer systems
markets. Deny for lack of knowledge or information all
other averments in Paragraph 4 of plaintiff's complaint.
5. Admit.
6. Admit.
7. Admit and deny as stated above.
8. Admit that the Macintosh personal computer has
achieved commercial success and acceptance in the United
States and abroad. Deny all other averments in Paragraph 8
of plaintiff's complaint.
9. Admit that Macintosh computer programs listed in
(h)-(m) of Paragraph 10 of the complaint (hereinafter
referred to as the "Macintosh computer programs") generate
visual displays, including graphic images, on the
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 2
microcomputer screen. Deny that such displays are fanciful
or distinctive or a "hallmark of the Macintosh computer
system." Admit that Macintosh users may communicate with
the computer by use of a "mouse." Admit that Apple has
expended resources on the Macintosh computer programs. Deny
for lack of knowledge or information all other averments in
Paragraph 9 of plaintiff's complaint.
10. Admit that Apple received Certificates of
Registration for the referenced works in suit. Deny that
the visual displays, including graphic images, generated by
the Macintosh computer programs substantially consist of
material wholly original to Apple or are copyrightable
subject matter under the Copyright Act. Plaintiff's attempt
to define all works referred to in Paragraph 10 of its
complaint as "Macintosh audiovisual works" is an attempt by
Apple to cause confusion in this litigation and in the
microcomputer software industry in general. Six of the
referenced works are microcomputer programs, not audiovisual
works, and three of the referenced works are for the Lisa
computer system, not the Macintosh. Defendant hereby
objects to any attempt to define the sum of the works in
Paragraph 10 of plaintiff's complaint.
11. Admit that Apple has received the referenced
Certificates of Registration from the Register of
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 3
Copyrights. Deny all other averments in Paragraph 11 of
plaintiff's complaint.
12. Admit that Hewlett-Packard has developed a
computer program called "New Wave." Admit that New Wave may
be used in conjunction with a microcomputer program
distributed by Microsoft known as "Windows." Admit that
Hewlett-Packard has licensed Windows 2.03 from Microsoft.
Plaintiff's attempt to define the product name "New Wave" to
include any and all visual displays, including graphic
images, generated by Windows 2.03 is an attempt to cause
confusion about the responsibilities of the various parties.
These programs are produced and marketed by separate and
distinct companies. Plaintiff should not be permitted to
distort the meanings of the product names or to assume by
definition that which it cannot prove. Defendant hereby
objects to any attempt to include any visual displays,
including graphic images, generated by Windows 2.03 in the
definition of New Wave. Microsoft denies that Windows 2.03
infringes any alleged copyright held by Apple. Microsoft
denies for lack of knowledge or information all other
averments in Paragraph 12 of plaintiff's complaint.
13. Deny that Windows 2.03 infringes any alleged
copyright or other legal right held by Apple. Deny for lack
of knowledge or information all other averments in
Paragraph 13 of plaintiff's complaint.
14. Admit that during the development of Windows 2.03
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 4
Microsoft had access to the visual displays, including
graphic images, generated by the Macintosh computer
programs. Deny all other averments in Paragraph 14 of
plaintiff's complaint.
15. Deny.
16. Admit and deny as stated above.
17. Admit that Microsoft has licensed its Windows 2.03
product to Hewlett-Packard. Deny all other averments in
Paragraph 17 of plaintiff's complaint.
18. Deny.
19. Admit and deny as stated above.
20. Deny.
21. Deny.
AFFIRMATIVE DEFENSES
1982 License Agreement
22. Microsoft was an early leader in the creative
design and development of computer programs for the Macintosh.
23. In January, 1982 (two years before the initial
commercial shipment of the Macintosh) Apple executed an
agreement with Microsoft under which Microsoft would develop
three computer programs for the Macintosh. A copy of this
agreement is attached hereto as Exhibit A. Under this
agreement Microsoft would retain full ownership of the
developed programs. The agreement contemplated Microsoft
would be, for a period of time, the exclusive distributor of
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 6
programs of this type for the Macintosh. The programs to be
developed included an electronic spreadsheet, an electronic
database, and a business graphics program. In January, 1984
Apple terminated this agreement but again acknowledged that
Microsoft completely and solely owned the programs it
developed pursuant to the 1982 agreement. A copy of the
Termination Agreement is attached hereto as Exhibit B.
Microsoft's ownership extends to the visual displays,
including graphic images, generated by these programs. The
three programs designed and developed by Microsoft under
this agreement were Microsoft Multiplan, Microsoft File, and
Microsoft Chart. Each of these programs became, and remains
today, a commercial success.
24. To the extent that any claim of the plaintiff
pertains to programs or visual displays, including graphic
images, developed by and owned by Microsoft as a result of
the 1982 License Agreement, such claim is without merit.
1985 Settlement Agreement
25. Microsoft has developed the Windows software
product to be the preferred graphic user interface on IBM PC
and IBM PC compatible personal computer systems
("IBM/compatibles"). The graphic user interface consists of
the visual displays, including graphic images, which appear
on a microcomputer screen to assist the user in operating
the microcomputer. The Windows software product makes
IBM/compatibles "user friendly." Microsoft has spent well
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 6
over one hundred thousand hours and millions of dollars
designing, developing, and marketing the Windows software
product.
26. In 1985, Apple made claims to Microsoft that the
visual displays, including graphic images, generated by
certain Microsoft software products, including Microsoft's
Windows product, infringed alleged copyrights or patents for
the displays generated by certain Macintosh and Lisa
programs. Apple also claimed that Microsoft had
misappropriated related trade secrets. Microsoft denied
that Apple had any proprietary or other protectable interest
in visual displays, including graphic images, generated by
such Macintosh and Lisa programs. Microsoft further denied
that any of its products infringed any alleged copyrights or
patents, or that it had misappropriated any alleged trade
secrets.
27. In order to permanently resolve the dispute,
Microsoft and Apple entered into an agreement on
November 22, 1985 ("1985 Settlement Agreement"). A copy of
the 1985 Settlement Agreement is attached hereto as
Exhibit C. Pursuant to the 1985 Settlement Agreement,
Microsoft has a worldwide, royalty-free, perpetual right to
use the visual displays, including graphic images, in
present and future Microsoft products. The 1985 Settlement
Agreement permits Microsoft to license the visual displays,
including graphic images, to and through third parties for
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 7
use in the third parties' software programs.
28. Microsoft has not admitted and does not admit that
Apple has any proprietary rights of any kind in the visual
displays, including graphic images, generated by Microsoft's
Windows 2.03, or any previous version. However, even if
Apple has any such rights, those rights were perpetually
granted to Microsoft by the 1985 Settlement Agreement.
29. In the 1985 Settlement Agreement, Apple waived any
copyright, patent, or trade secret claim, and any other
claim or right it may have had concerning Microsoft Windows
Version 1.0.
30. The 1985 Settlement Agreement provided for and
contemplated Microsoft's improvements to and release of
later versions of Windows, with improvements to the visual
displays, including graphic images. Microsoft granted to
Apple a worldwide, royalty-free, perpetual, nontransferable
right to use any new visual displays, including graphic
images, created by Microsoft in the Windows retail software
product during a period of five years from the date of the
1985 Settlement Agreement.
31. The visual displays, including graphic images,
generated by Windows 2.03 are virtually identical to those
generated by Windows 1.0. To the extent the visual
displays, including graphic images, generated by
Windows 2.03 are not identical to those generated by Windows
1.0, they are covered by the 1985 Settlement Agreement, are
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 9
not subject to copyright protection, or are not displays in
which Apple has a proprietary interest.
Waiver/Estoppel
32. Microsoft has not breached the 1985 Settlement
Agreement with Apple. Microsoft has not engaged in any
wrongful conduct which has damaged Apple or infringed its
copyrights.
33. Microsoft has designed, developed, and marketed
new versions of tis software products, including Windows,
which generate visual displays, including graphic images.
At all times since November, 1985 Apple has been aware that
Microsoft has released new versions of its Windows product,
including versions 1.01, 1.02, 1.03, 1.04, 2.01, and 2.03.
Microsft has licensed the new versions of Windows to third
parties and has asserted its rights to the visual displays,
including graphic images. Apple had knowledge of
Microsoft's activities. Before the commencement of this
action Apple never gave notice of its claim that the
Windows 2.03 software product exceeds the 1985 Settlement
Agreement or that it infringes Apple's alleged copyrights in
any way. In July, 1986 an Apple attorney wrote to Microsoft
asserting without explanation that the 1985 Settlement
Agreement was limited to Version 1.0 of Windows. A copy of
that letter is attached hereto as Exhibit D. Microsoft
responded by letter that Apple's position as stated in its
letter was confusing and, in any case, unsupported by the
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 9
clear language of the 1985 Settlement Agreement. A copy of
that letter is attached hereto as Exhibit E. Apple has
never responded to Exhibit E. Microsoft has relied to its
detriment on this acquiescence by Apple. This reliance by
Microsoft was known or reasonably should have been known to
Apple. By its inaction or acquiescence Apple has waived any
claims as to these products, and is estopped to assert any
alleged infringement by Microsoft products which have been
released to date.
Failure to State a Claim
for Contributory Infringement
34. New Wave does not infringe any Apple copyright.
Thus, Microsoft has not contributed to any alleged
infringement by Hewlett-Packard.
35. Windows 2.03 does not infringe any Apple
copyright. The content of the visual displays, including
graphic images, generated by New Wave was controlled
exclusively by Hewlett-Packard.
36. Windows 2.03 is a staple article of commerce with
substantial uses other than in connection with New Wave.
Thus, the fact that New Wave runs in conjunction with
Windows 2.03 does not give rise to a claim of contributory
copyright infringement.
Failure of Copyright Claim: Functionality
37. Features in which Apple has claimed copyright
protection are functional display methods ant techniques
which are barred from copyright protection under 17 U.S.C
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 10
Sec. 102(b). These methods fall within the exclusive domain o
the United States patent laws. Apple has not sought or
obtained patents for such methods and techniques, and is now
permanently barred from doing so.
Failure of Copyright Claim: Lack of Originality
38. Visual displays, including graphic images, in
which Apple has claimed copyright protection are not
original to Apple and thus are not copyrightable subject
matter under 17 U.S.C. Sec. 102(a).
Failure of Copyright Claim: Scene A Faire
29. Visual displays, including graphic images, in
which Apple has claimed copyrights are common and ordinary
treatment of unprotectable ideas, and thus are not
susceptible to copyright protection under the "Scenes A
Faire" doctrine of Copyright Law.
Failure of Copyright Claim: Absence of
Substantial Similarity
40. There is no substantial similarity of protectable
expression between Microsoft's Windows 2.03 software product
and the works in suit.
Preemption
41. Apple's claim of unfair competition based on
alleged copying of visual displays, including graphic
images, generated by Macintosh and Lisa computer programs
is preempted by 17 U.S.C. Sec. 301 and thus Apple fails to state a
claim for which relief can be granted.
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 11
Counterclaims
42. Microsoft realleges and incorporates by reference
paragraphs 22 through 41 as set out above.
43. Microsoft is a Delaware corporation with its
principal place of business in the State of Washington.
44. Upon information and belief, Apple is a California
corporation with its principal place of business in the
Northern District of California.
45. This court has jurisdiction over Microsoft's
counterclaims under 28 U.S.C. Sec. 1332 and Sec. 2201 and the
doctrine of pendent jurisdiction. The amount in controversy
exceeds $10,000 exclusive of fees and costs.
FIRST COUNTERCLAIM
Breach of Contract
46. Microsoft realleges Paragraphs 22 through 45 and
incorporates same herein.
47. The 1985 Settlement Agreement gives Microsoft a
worldwide, perpetual, royalty-free right to the visual
displays, including graphic images, in which Apple has
claimed a proprietary interest. The 1985 Settlement
Agreement also gives Microsoft the worldwide, perpetual,
royalty free right to license visual displays, including
graphic images, to and through third parties for use in
software products developed and marketed by those third
parties. Microsoft has fulfilled all of its obligations to
Apple under the 1985 Settlement Agreement.
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 12
48. A material consideration of the 1985 Settlement
Agreement was that Apple would abide by the settlement
between the parties in good faith and do nothing to diminish
or destroy the value of the worldwide, perpetual, royalty-
free right which Microsoft has in the visual displays,
including graphic images, which are the subject of the 1985
Settlement Agreement.
49. In violation of its duty of good faith and fair
dealing, Apple made no attempt to advise Microsoft of any
alleged claims as to Windows 2.03 or to take any steps to
mitigate collateral damage to Microsoft. Apple not only
filed suit but, in conscious disregard of the collateral
effect on Microsoft's business, launched an aggressive
campaign of seeking, stimulating, and influencing press
coverage of its claims that Microsoft had defects in its
title to one of its strategic products. This press campaign
far exceeded the boundaries of any privilege Apple has to
bring its dispute to court.
50. In publicly repudiating the 1985 Settlement
Agreement, and wrongfully claiming Windows 2.03 infringes
its claimed copyrights, Apple has breached its duty of good
faith and fair dealing.
51. Apple's actions in publicly repudiating the
settlement and disparaging Microsoft's rights, and in
publicizing the filing and contents of its complaint even
before the complaint was served on Microsoft, constitute a
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 14
material breach of the 1985 Settlement Agreement. As a
proximate result of this material breach, Microsoft has been
damaged.
SECOND COUNTERCLAIM
Tortious Interference With Contract
52. Microsoft realleges Paragraphs 22 through 51 and
incorporates same herein.
53. The actions of Apple complained of herein,
including its campaign to publish and widely distribute its
false allegations concerning Microsoft's Windows 2.03
product, have interfered with existing contracts between
Microsoft and its customers. Apple knew, or in the exercise
of reasonable care should have known, that its actions would
have this effect and acted in conscious disregard of the
effect on Microsoft. As a proximate result of this tortious
interference, Microsoft has been damaged.
THIRD COUNTERCLAIM
Intentional Interference with
Prospective Business Advantage
54. Microsoft realleges Paragraphs 22 through 53 and
incorporate same herein.
55. Apple's public repudiation of the settlement and
Apple's non-privileged public averments that Microsoft's
title to Windows 2.03 is defective, were made with the
intent to damage Microsoft's prospective business relations.
Apple knew, or in the exercise of reasonable care should
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 15
have known, that its actions would damage Microsoft's
prospective business and contractual relations with its
customers and acted in conscious disregard of this effect.
As a proximate result of this intentional interference by
Apple, Microsoft has been damaged.
FOURTH COUNTERCLAIM
Disparagement of Property/Slander of Title
56. Microsoft realleges Paragraphs 22 through 55 and
incorporates same herein.
57. Apple has published false statements concerning
Microsoft's title to and ownership of its Windows 2.03
product. Those statements were not privileged, and Apple
knew, or in the exercise of reasonable care should have
known, that these statements would be relied upon by third
persons and would result in pecuniary loss to Microsoft. In
making these statements, Apple acted in conscious disregard
of the effect on Microsoft. As a proximate result of this
slander of Microsoft's title to Windows 2.03, Microsoft has
suffered pecuniary loss.
FIFTH COUNTERCLAIM
Unfair Business Practices
58. Microsoft realleges Paragraphs 22 through 57 and
incorporates same herein.
59. The actions of Apple complained of herein were
undertaken with the intent of wrongfully inhibiting
Microsoft's actual and potential customers from developing
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 15
applications for use with Windows and distributing
Microsoft's Windows products. Further, Apple has undertaken
these actions with the intent of wrongfully inhibiting the
development by Microsoft and others of software products
which compete with Apple products.
60. These actions of Apple constitute unfair methods
of competition and unfair or deceptive acts in the conduct
of trade or commerce in violation of Cal. Civ. Code Sec. 17200
et seq. As a result of these unfair or deceptive acts by
Apple, Microsoft has been damaged.
SIXTH COUNTERCLAIM
Declaratory Judgment
61. Microsoft realleges Paragraphs 22 through 60 and
incorporates same herein.
62. Microsoft's right to the visual displays,
including graphic images, was acknowledged by Apple in the
1985 Settlement Agreement. Apple now denies that the 1985
Settlement Agreement extends to the visual displays,
including graphic images, generated by Windows 2.03.
63. A justiciable case and controversy exists between
the parties concerning the meaning of the 1985 Settlement
Agreement and the propriety of Microsoft's conduct under the
1985 Settlement Agreement. This court should determine this
issue by way of declaratory judgment pursuant to 28 U.S.C.
Sec. 2201.
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 16
PRAYER FOR RELIEF
WHEREFORE, Microsoft prays that this court grant the
following relief:
1. Dismiss plaintiff's Complaint with prejudice.
2. Enter a judgment against Apple for damages in an
amount to be proven at trial caused by Apple's breach of its
duty of good faith and fair dealing.
3. Enter an order requiring Apple to specifically
perform its obligations under the 1985 Settlement Agreement.
4. Enter a judgment against Apple for the damages in
an amount to be proven at trial caused by Apple's tortious
interference with Microsoft's contractual relations.
5. Enter a judgment against Apple for the damages in
an amount to be proven at trial caused by Apple's intentional
interference with Microsoft's prospective business advantage.
6. Enter a judgment against Apple for damages in an
amount to be proven at trial cause by Apple's slander of
Microsoft's title to its Windows 2.03 product.
7. Enter a judgment against Apple for damages in an
amount to be proven at trial for Apple's violation of Cal.
Civ. Code Sec. 17200.
8. Enter an order on declaratory judgment that:
(a) Windows 2.03 does not infringe any alleged
copyright or patent held by Apple.
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 18
(b) Microsoft has not contributed to any
copyright infringement by Hewlett-Packard.
(c) Apple's rights, if any, in the visual
displays, including graphic images, generated by Microsoft's
Windows 2.03 were licensed by Apple to Microsoft pursuant to
the 1985 Settlement Agreement.
(d) Microsoft can use any of the visual displays,
including graphic images, covered by the 1985 Settlement
Agreement in any present or future Microsoft products,
including any present or future version of Windows.
9. Enter judgment against Apple for punitive damages.
10. Award Microsoft its reasonable costs and
attorneys' fees in defending this action and prosecuting its
counterclaims.
11. Award such other relief as may be just and
equitable under the circumstances.
DATED this _____ day of April, 1988.
SHIDLER McBROOM GATES & McCUTCHEN, DOYLE, BROWN &
LUCAS ENERSEN
SEED & BERRY By___________________________
John Hauser
DEFENDANT MICROSOFT'S ANSWER,
AFFIRMATIVE DEFENSES AND COUNTERCLAIMS - 18