District Court Holds That Alleged Violation of Patent Exhaustion Doctrine Does Not Support Federal Question Jurisdiction

U.S. District Judge Der-Yeghiayan in the Northern District of Illinois dismissed a suit alleging that patentee "violated" patent exhaustion doctrine by collecting royalties from the manufacturer as well as purchaser of patented disk drives. The Court held that the exhaustion doctrine operates as a defense to a claim of infringement, but does not support a claim for declaratory judgment or federal question jurisdiction. ExcelStor Technology, Inc. v. Papst Licensing GMBH & Co. KG, No. 07 C 2467 (N.D.Ill., October 24, 2007)

In January, 2004, ExcelStor Technology entered into a licensing agreement (ExcelStor Agreement) with Papst Licensing GMBH & Co. KG which entitled ExcelStor to make and sell hard disk drives (HDDs) covered by a Papst patent in consideration for the payment of royalties to Papst. When ExcelStor entered into the agreement, it was unaware that Papst had already entered into another licensing agreement with Hitachi (Hitachi Agreement), which required Hitachi to cover the payment of royalties for the manufacture of the same HDDs that were the subject of the ExcelStor Agreement. The Court reported that neither ExcelStor nor Hitachi were allegedly aware of the terms of the other party's agreement, each of which included a confidentiality clause.

The ExcelStor Agreement also allegedly required Papst to notify ExcelStor, on a quarterly basis, whether Papst was receiving royalties from a purchaser of HDDs manufactured by ExcelStor. The complaint alleged that Papst sent ExcelStor a notice on April 2, 2004, which falsely reported that Papst was not receiving royalties for the HDDs manufactured by ExcelStor from any source other than ExcelStor.

When ExcelStor obtained copies of the Hitachi Agreement, which revealed Hitachi's obligation to pay royalties, ExcelStor filed suit for a declaratory judgment that Papst violated the patent exhaustion doctrine: a declaratory judgment that the ExcelStor agreement was unenforceable inasmuch as it violated the patent exhaustion doctrine; as well as claims for fraud and breach of contract.

The case came before the Court on Papst's motion to dismiss for lack of subject matter jurisdiction, i.e., that the complaint did not present a question of federal law as claimed by ExcelStor. ExcelStor argued that its claims were based on federal patent law, and subject to federal jurisdiction pursuant to 28 U.S.C. §1338, which provides that "the district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents." In particular, according to the Court, "ExcelStor argues that its claims in the instant action are dependant on a ruling based on the first sale doctrine otherwise referred to as the patent exhaustion doctrine." According to the Court:

ExcelStor contends that this court has subject matter jurisdiction in this case because ExcelStor is entitled to relief under the patent exhaustion doctrine. Under the patent exhaustion doctrine, "the unrestricted sale of a patented article, by or with the authority of the patentee, 'exhausts' the patentee's right to control further sale and use of that article by enforcing the patent under which it was first sold." Jazz Photo Corp. v. International Trade Com'n, 264 F.3d 1094, 1105 (Fed.Cir.2001); LG Electronics, Inc. v. Bizcom Electronics, Inc., 453 F.3d 1364, 1369-70 (Fed.Cir.2006).

According to the Court, however, "the patent exhaustion doctrine is not a source of relief for ExcelStor."

It is not a cause of action that a party can bring and obtain relief such as the damages sought by ExcelStor in this action. Rather, the patent exhaustion doctrine is a defense for claims such as a patent infringement claim, prohibiting a party from suing for patent infringement to protect its proprietary rights since the party is deemed to have already received full compensation for ownership in such rights…. The patent exhaustion doctrine is a defense to a patent infringement claim, barring a party from pursuing an infringement claim if the party has already sold the patent rights to another party.

Moreover, "ExcelStor lacks any legitimate basis to seek a declaration that Section 4.3 of the ExcelStor Agreement violates the patent exhaustion doctrine," according to the Court.

ExcelStor is not entitled in a vacuum to have this court resolve an issue that does not present a live case or controversy. The references to the patent exhaustion doctrine by ExcelStor do not confer federal subject matter jurisdiction, and, as indicated above, parties cannot confer federal subject matter jurisdiction upon themselves. Also, the mere raising of a patent defense does not confer federal subject matter jurisdiction…. Thus, ExcelStor has not shown that the declaratory judgment claims in Counts I and II are based upon federal patent law.

The Court also rejected ExcelStor's argument that the fraud claim is substantially based on patent law because it turns on "Papst's false representation that it had complied with the Patent Exhaustion/First Sale Doctrine." According to the Court:

The Notice Provision does not make any reference to the patent exhaustion doctrine. Nor does the Notice Provision obligate Papst to state whether it is violating the patent exhaustion doctrine. Whether or not Papst violated the Notice Provision depends on whether Papst accurately identified other customers receiving the royalties, not whether it violated the patent exhaustion doctrine.

The Court found "no indication that Papst specifically stated in the notices that it was not violating the patent exhaustion doctrine." The Court concluded that "the determination of whether Papst made misrepresentations in the notices involves a factual inquiry that does not require a consideration of federal patent law. Therefore, ExcelStor has not shown that the fraud claim (Count III) is based upon federal patent law."

The Court similarly rejected ExcelStor's argument that the breach of contract claim is based upon the patent exhaustion doctrine. Like the fraud claim, the breach of contract claim was grounded in Pabst's failure to report additional royalty sources, as required by the Agreement. According to the Court, "in determining the contractual obligations of the parties to the ExcelStor Agreement, the terms and intent of the parties in the formation of that particular agreement govern the precise obligations of the parties."

ExcelStor has not shown that general principles of federal patent law would govern the contractual relationship in any way. The terms of the ExcelStor Agreement provide the necessary guidance to resolve whether Papst breached the agreement and to determine the appropriate remedy for a breach. There is no need to consult the patent exhaustion doctrine. ExcelStor's insertion of the patent exhaustion doctrine into this case does not confer federal subject matter jurisdiction.

Finally, the Court rejected the argument that the state law issues are preempted by federal patent law.

ExcelStor argues that "the parties' license agreement must be construed (and thus enforced) in such a way so as not to exceed the proper scope of the patent monopoly that Papst is allowed to have under U.S. federal patent law…." ExcelStor contends that the federal interest in such a monopoly overrides any state interest. However, as is explained above, this action is premised upon a breach of the terms of the ExcelStor Agreement and alleged fraud involving the execution of the agreement. ExcelStor does not allege that the Notice Provision is ambiguous and that its scope is unclear. Whether Papst violated the terms of the ExcelStor Agreement involves a straightforward examination of the terms and facts in this case. ExcelStor alleges that pursuant to the Notice Provision Papst was supposed to report certain royalties from other customers. Whether or not Papst accurately provided such notice is a question of fact. ExcelStor has not shown how any interpretations concerning the scope of the ExcelStor Agreement and its relation to Papst's patent monopoly would come into play in such an analysis. Therefore, ExcelStor has not shown that the state law issues in this case would be preempted by federal law. Also, the possibility that ExcelStor might raise federal preemption as a defense in a state action is not itself a basis for federal subject matter jurisdiction….

District Court Refuses to Dismiss Indictment of Doctors for Prescribing Controlled Substances Over the Internet

U.S. District Judge Garcia-Gregory, in the District of Puerto Rico, denied a motion to dismiss an indictment charging seven doctors with violating the Controlled Substances Act by prescribing drugs over the internet without in-person examination of the customer-patient. The Court held that it was for the jury to decide whether the doctors' conduct exceeds the bounds of professional medical practice, rendering them criminally liable under §841, which prohibits the distribution of controlled substances by doctors when it is done "outside the scope of professional practice and not for a legitimate medical purpose." U.S. v. Rodriguez, Crim. No. 07-032(JAG) (D.P.R., October 24, 2007).

The defendants argued that Puerto Rico Telemedicine Regulating Act, Law No. 227 of August 11, 1998, 20 L.P.R.A. §6001 et seq., authorized them to practice telemedicine and, therefore, allowed them to prescribe controlled substances to their internet customers.

The case came before the Court on review of a Magistrate's Report and Recommendation, which concluded that the Telemedicine Law only authorizes the practice of telemedicine when both the physician and the patient are physically located in the Commonwealth of Puerto Rico. The Magistrate concluded that the "Defendants acted outside the scope of professional practice and not for a legitimate medical purpose when they carried out their telemedicine practice in several States other than Puerto Rico without having the proper licenses to do so in those jurisdictions." As characterized by the Court:

Defendants aver in their objections to the Magistrate-Judge's Report and Recommendation that the Superseding Indictment should be dismissed because they acted in conformity with the Telemedicine Law, which allegedly allows physicians to provide prescriptions to persons outside the geographical jurisdiction of the Commonwealth of Puerto Rico. Contrary to Magistrate-Judge Camille L. Velez-Rive's recommendation, Defendants allege that the Telemedicine Law made it unnecessary for them to obtain separate licenses from each of the States where the patients, who consulted them were located. According to Defendants, their conduct does not fall outside the scope of professional practice and constitutes a legitimate medical purpose.

The Court cited 21 U.S.C. § 841(a)(1), which makes it "unlawful for any person knowingly or intentionally… to manufacture, distribute, or dispense… a controlled substance." According to the Court, "although medical professionals are generally permitted to dispense controlled substances, they 'can be prosecuted under §841 when their activities fall outside the usual course of professional practice,'" quoting United States v. Moore, 423 U.S. 122, 124 (1975); United States v. Fuchs, 467 F.3d 889, 899 (5th Cir.2006).

The Court quotes from the Supreme Court decision in Moore, which states that "physicians who departed from the usual course of medical practice were subject to the same penalties as street pushers" and that Congress had intended the CSA to be more, not less, strict. Moore, 423 U.S. at 139. "Thus," according to the Court, "a physician is authorized to dispense controlled substances only if he acts with a legitimate medical purpose and in the usual course of professional practice." Nelson, 383 F.3d at 1233. "Conversely, a practitioner would be unauthorized to dispense a controlled substance if he acts without a legitimate medical purpose or outside the usual course of professional practice." Nelson, 383 F.3d at 1233. The Court noted that "the Courts of Appeal have upheld convictions of physicians and pharmacists for distributing controlled substances over the Internet," citing United States v. Fuchs, 467 F.3d 889 (5th Cir.2004); and United States v. Nelson, 383 F.3d 1227, 1232 (10th Cir.2006). According to the Court:

In prosecutions under §841 involving distribution of drugs that have been prescribed by a licensed physician, the Government is required to prove three elements: (1) that the defendant distributed a controlled substances, (2) that he or she acted intentionally and (3) that he or she prescribed the drug without a legitimate medical purpose and outside the course of professional practice. United States v. Feingold, 454 F.3d 1001, 1006 (9th Cir.2006); United States v. Johnson, 71 F.3d 539, 542 (6th Cir.1995); United States v. Tran Trong Cuong, 18 F.3d 1132, 1137 (4th Cir.1994); United States v. Varma, 691 F.2d 460, 462 (10th Cir.1982).

The Court emphasized that "the issue of whether a physician's conduct exceeds the bounds of professional medical practice, rendering him criminally liable under §841, is one for determination by a jury." Thus, "this is an element of the offense which the Government must prove to the jury, and is not properly the subject of a motion to dismiss." As characterized by the Court, "in essence, Defendants' objections are brought forth to achieve the dismissal of this case based on the theory that they acted with a legitimate medical purpose and in the usual course of professional practice." Defendants' arguments ignore the fact that the indictment in this case is not premised upon any statute or rule of law that specifically precludes the sale of prescription drugs over the Internet. It is, instead, premised upon a theory that the drugs were prescribed and distributed outside the bounds of professional medical practice. This is an element of the offense, which the Government must prove to the jury, and, therefore, is not properly the subject of a motion to dismiss. Consequently, Defendants' Motion to Dismiss must be denied.

Federal Circuit Rejects Patent Infringement Claim Based on Joint Infringement by Multiple Parties

A unanimous panel of the Federal Circuit Court of Appeals held that a competitor that provided a debit payment system did not infringe patented payment system method because it did not itself perform every step of patented method. The Court emphasized that a party cannot avoid infringement liability simply by contracting out the performance of one or more steps of a patented method, but ruled that absent control or direction of a third party that performs one or more of the steps of the patented method, there can be no liability for infringement by a party that does not perform each step of the patented method. BMC Resources, Inc. v. Paymentech, L.P., No. 2006-1503 (Fed.Cir., September 20, 2007).
BMC Resources, Inc. owns two patents that claim a method for processing debit transactions without a personal identification number (PIN). As described by the Court:

The patented invention provides an interface between a standard touch-tone telephone and a debit card network. On this interface, a customer may perform real-time bill payment transactions with only a telephone keypad. The invention includes an interactive voice response unit (IVR) that prompts the caller to enter an access code, account number, debit card number, and payment amount. This information, in turn, passes to a debit network and on to a banking or financial institution. Each of these entities participates in approving and carrying out the transaction. Using the invention, the caller may also obtain information regarding authorization for the transaction, and inquire about previously processed transactions. Thus, BMC's patents disclose a method for PIN-less debit bill payment (PDBP) featuring the combined action of several participants, including the payee's agent (for example, BMC), a remote payment network (for example, an ATM network), and the card-issuing financial institutions.

BMC filed suit for patent infringement against Paymentech, L.P., which processes financial transactions for its clients. According to the Court, Paymentech processes a PDBP transaction according to the following sequence:

1. the customer calls the merchant to pay a bill using an IVR;
2. the merchant collects payment information from the customer and sends it to Paymentech;
3. Paymentech routes the information to a participating debit network;
4. the debit network forwards the information to an affiliated financial institution;
5. the financial institution authorizes or declines the transaction, and if authorized, charges the customer's account according to the payment information collected by the merchant; and
6. information regarding the status of the transaction moves from the financial institution to the debit network and then, through Paymentech, to the merchant who informs the customer of the status of the transaction.

The district court granted summary judgment of noninfringement for Paymentech, holding that Paymentech had not infringed the claims because it performed some but not all of the steps of the asserted method claims. The Court of Appeals affirmed: "Because the record contains no basis to hold Paymentech vicariously responsible for the actions of the unrelated parties who carried out the other steps, this court affirms the finding of non-infringement."

As framed by the Court, "the case presents the issue of the proper standard for joint infringement by multiple parties of a single claim.... As the parties agree, Paymentech does not perform every step of the method at issue in this case. With other parties performing some claimed method steps, this court must determine if Paymentech may nonetheless be liable for direct infringement under 35 U.S.C. §271(a) (2000).

Section 271(a) states:

Except as otherwise provided in this title, whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent.

According to the Court, "direct infringement requires a party to perform or use each and every step or element of a claimed method or product." Warner-Jenkinson Co., Inc. v. Hilton Davis Corp., 520 U.S. 17, 117 S.Ct. 1040, 137 L.Ed.2d 146 (1997). "For process patent or method patent claims," according to the Court, "infringement occurs when a party performs all of the steps of the process." Joy Techs., Inc. v. Flakt, Inc., 6 F.3d 770, 773 (Fed.Cir.1993).

The Court noted that "when a defendant participates in or encourages infringement but does not directly infringe a patent, the normal recourse under the law is for the court to apply the standards for liability under indirect infringement." But according to the Court, "indirect infringement requires, as a predicate, a finding that some party amongst the accused actors has committed the entire act of direct infringement." Dynacore Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263, 1272 (Fed.Cir.2004).

The Court observed that "these rules for vicarious liability might seem to provide a loophole for a party to escape infringement by having a third party carry out one or more of the claimed steps on its behalf." But "to the contrary," according to the Court, "the law imposes vicarious liability on a party for the acts of another in circumstances showing that the liable party controlled the conduct of the acting party."

In the context of patent infringement, a defendant cannot thus avoid liability for direct infringement by having someone else carry out one or more of the claimed steps on its behalf. In [Cross Med. Prods. v. Medtronic Sofamor Danek, 424 F.3d 1293 (Fed.Cir., 2005)], this court refused to attribute the acts of surgeons in making the claimed apparatus to the medical device manufacturer because the medical device manufacturer representative, who appeared in the operating room and identified instruments for the surgeons, did not direct the surgeons' actions. The Court remanded the case for a determination of whether the surgeons directly infringed by making the claimed apparatus and whether the medical device manufacturer could be held vicariously liable for such infringing acts. 424 F.3d at 1312.

BMC argued that the district court erred in dismissing the argument that On Demand Machine Corp. v. Ingram Industries, Inc., 442 F.3d 1331 (Fed.Cir., 2006) sanctioned a finding of infringement by a party who performs some steps of a claim in cases where a patent claims an invention that cannot be performed by one person. In that case, the jury was instructed that —

It is not necessary for the acts that constitute infringement to be performed by one person or entity. When infringement results from the participation and combined action(s) of more than one person or entity, they are all joint infringers and jointly liable for patent infringement. Infringement of a patented process or method cannot be avoided by having another perform one step of the process or method. Where the infringement is the result of the participation and combined action(s) of one or more persons or entities, they are joint infringers and are jointly liable for the infringement.

Although the Court of Appeals affirmed, according to the Court, "it did so without any analysis of the issues presented relating to divided infringement." The district court discounted On Demand because the "decision did not in any way rely on the relationship between the parties," and the Court of Appeals concluded that "the district court properly analyzed the law and this court's cases."

As Paymentech succinctly noted in its brief, "it is unlikely the Court intended to make a major change in its jurisprudence in the On Demand [statement] that was not even directly necessary to its decision in the case."… In other words, BMC's interpretation of On Demand goes beyond settled law. On Demand did not change this court's precedent with regard to joint infringement.

According to the Court, "infringement requires, as it always has, a showing that a defendant has practiced each and every element of the claimed invention."
This holding derives from the statute itself, which states "whoever without authority makes, uses, offers to sell, or sells any patented invention within the United States, or imports into the United States any patented invention during the term of the patenttherefor, infringes the patent." 35 U.S.C. §271(a) (2000). Thus, liability for infringement requires a party to make, use, sell, or offer to sell the patented invention, meaning the entire patented invention.

Where a defendant participates in infringement but does not directly infringe the patent, the law provides remedies under principles of indirect infringement. However, this court has held that inducement of infringement requires a predicate finding of direct infringement. Dynacore, 363 F.3d at 1272.

However, according to the Court, "a party cannot avoid infringement… simply by contracting out steps of a patented process to another entity."
In those cases, the party in control would be liable for direct infringement. It would be unfair indeed for the mastermind in such situations to escape liability. District courts in those cases have held a party liable for infringement.

The Court acknowledged that "the standard requiring control or direction for a finding of joint infringement may in some circumstances allow parties to enter into arms-length agreements to avoid infringement." However, "this concern does not outweigh concerns over expanding the rules governing direct infringement."

For example, expanding the rules governing direct infringement to reach independent conduct of multiple actors would subvert the statutory scheme for indirect infringement. Direct infringement is a strict-liability offense, but it is limited to those who practice each and every element of the claimed invention. By contrast, indirect liability requires evidence of "specific intent" to induce infringement. Another form of indirect infringement, contributory infringement under §271(c), also requires a mens rea (knowledge) and is limited to sales of components or materials without substantial noninfringing uses. Under BMC's proposed approach, a patentee would rarely, if ever, need to bring a claim for indirect infringement.

The Court pointed out that "the concerns over a party avoiding infringement by arms-length cooperation can usually be offset by proper claim drafting." According to the Court, "a patentee can usually structure a claim to capture infringement by a single party." The Court suggested that "in this case, for example, BMC could have drafted its claims to focus on one entity."

The steps of the claim might have featured references to a single party's supplying or receiving each element of the claimed process. However, BMC chose instead to have four different parties perform different acts within one claim. BMC correctly notes the difficulty of proving infringement of this claim format. Nonetheless, this court will not unilaterally restructure the claim or the standards for joint infringement to remedy these ill-conceived claims.

Applying the rule to the instant case, the Court concluded that "BMC's charges against Paymentech properly results in a finding of no infringement." The Court held that while BMC offered evidence of some relationship between Paymentech and the debit networks, the "evidence was insufficient to create a genuine issue of material fact as to whether Paymentech controls or directs the activity of the debit networks."

Without this direction or control of both the debit networks and the financial institutions, Paymentech did not perform or cause to be performed each and every element of the claims. In this situation, neither the financial institutions, the debit networks, nor the payment services provider, Paymentech, bears responsibility for the actions of the other.

Fourth Circuit Gives Novell 'Half a Loaf' in Antitrust Case Against Microsoft

The Fourth Circuit Court of Appeals held that Novell, Inc. had standing to bring antitrust claims against Microsoft arising from Microsoft's monopolization of the PC operating system market because "its popular applications, though themselves not competitors or potential competitors to Microsoft's Windows, offered competing operating systems the prospect of surmounting the applications barrier to entry and breaking the Windows monopoly. However, the Court found that the Novell claims alleging injury in the office productivity market were barred by the statute of limitations, which was not tolled by the government's antitrust case against Microsoft because "the office-productivity market... is neither identical to nor completely encompassed by the PC operating-system market at issue in the government action." Novell, Inc. v. Microsoft Corp., No. 06-1134 (4th Cir., October 15, 2007).

The case came before the Court on cross appeals from two interlocutory orders in an antitrust action filed by Novell, Inc. against Microsoft Corp. in the wake of Microsoft's settlement of antitrust claims brought by the federal government. As described by the Court:

Novell pursues six claims on appeal. Four of these, styled Counts II, III, IV, and V, allege monopolization or attempted monopolization of the markets for office-productivity applications. Novell's products, Word Perfect and Quattro Pro, directly competed in such markets. The other two claims, Counts I and VI, are based on the same alleged conduct as Counts II through V and seek recovery for damage to the same Novell products, but are predicated on the theory that Microsoft's conduct injured competition in the market for PC operating systems, a market in which Novell did not directly compete.

According to the Court, all six of Novell's claims arose prior to March 1996, and are time-barred under the four-year federal statute of limitations for antitrust actions, 15 U.S.C. §15b, unless the statute of limitations is tolled by the filing of the DOJ complaint in May 1998, which tolls the statute of limitations for private antitrust actions "based in whole or in part on any matter complained of" by the government.

On Microsoft's motion, the district court dismissed Counts II through V of Novell's complaint on the ground that the claimed injury was not specifically alleged in the DOJ complaint, and therefore the statute of limitations on those claims was not tolled. The district court denied Microsoft's motion to dismiss Counts I and VI, finding that Novell has antitrust standing to raise those claissms. The district court certified its rulings for interlocutory review.

The Court first reviewed the district court's ruling that Novell has antitrust standing to bring Counts I and VI. According to the Court, "Novell concedes that its products did not directly compete in the market for PC operating systems," but "contend[ed] that the technological connection between operating systems and applications gives rise to a significant barrier to entry into the operating-systems market and thus protects Microsoft's Windows monopoly. As explained by the Court, "Novell maintains that its office-productivity applications could perform well on a variety of operating systems and that, during the relevant time period, they were the dominant office-productivity applications in the market."

The thrust of Novell's argument is that its popular applications, though themselves not competitors or potential competitors to Microsoft's Windows, offered competing operating systems the prospect of surmounting the applications barrier to entry and breaking the Windows monopoly. That is, Novell argues its products could provide a path onto the operating-system playing field for an actual competitor of Windows, because a competing operating system, running the popular Novell software applications, would offer consumers an attractive alternative to Windows.

Novell alleged three unlawful actions on the part of Microsoft that harmed its products and also harmed competition in the PC operating-systems market. As characterized by the Court—

First, Novell claims Microsoft withheld frosm Novell key technical information necessary to make well-functioning office-productivity applications for Windows 95….
Second, Novell argues that Microsoft impeded Novell's access to distribution channels, including original equipment manufacturers ("OEMs")….
Finally,… Novell claims that Microsoft required it, as a condition of being certified as Windows-compatible, to use Windows-specific technologies that degraded the performance of Novell's office-productivity applications on other operating systems….

In Assoc. Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters ("AGC"), 459 U.S. 519, 529-30, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983), the Supreme Court held that a multi-factor analysis is required to determine whether a private plaintiff has antitrust standing. The Fourth Circuit distilled five factors in Kloth v. Microsoft, 444 F.3d 312 (4th Cir., 2006):

(1) the causal connection between an antitrust violation and harm to the plaintiffs, and whether that harm was intended; (2) whether the harm was of a type that Congress sought to redress in providing a private remedy for violations of the antitrust laws; (3) the directness of the alleged injury; (4) the existence of more direct victims of the alleged antitrust injury; and (5) problems of identifying damages and apportioning them among those directly and indirectly harmed.

Applying those factors in this case, the Court found that "the injury that Novell alleges here is plainly an injury to competition that the anti-trust laws were intended to forestall," and "the analysis of the causal link between these activities and the decline in Novell's office-productivity-applications market share is straightforward."

Microsoft's use of its monopoly power in the operating-system market to foreclose the distribution channels for Novell's applications, for example, would have naturally tended to decrease Novell's market share and consequently decrease the value of its applications. Likewise, withholding crucial data on its soon-to-be-released Windows 95 operating system would have put Novell at a competitive disadvantage vis-a-vis Microsoft's office-productivity applications, leading naturally to a loss of market share for Novell. This loss of market share could make a competing operating system featuring Novell's office-productivity applications less attractive to consumers, harming that competing operating system's potential to surmount the barrier protecting the Windows monopoly.

"In sum," according to the Court, "the first two AGC factors weigh in favor of granting Novell antitrust standing."

The facts alleged by Novell, taken as true for the purposes of this appeal, are sufficient to demonstrate that Novell suffered an antitrust injury and that its injury can be traced to Microsoft's alleged antitrust violations. While the showing of an antitrust injury demonstrates that a case is of the type for which antitrust standing is recognized, such a showing is not necessarily sufficient to demonstrate that the particular plaintiff has antitrust standing. Thus, we now turn to an analysis of the remaining AGC factors.

The latter three AGC factors—"the directness of the alleged injury;" "the existence of more direct victims of the alleged antitrust injury;" and "problems of identifying damages and apportioning them among those directly and indirectly harmed"—"are intended to further restrict entry into the federal courts for private enforcement of the antitrust laws," according to the Court.

The Court found that "Microsoft's withholding of information from Novell's software developers relating to Windows 95 clearly has no more direct victim than Novell," and that "Novell may be the best-situated plaintiff to assert these claims. Indeed, today Novell may be one of the few private plaintiffs whose claims in this regard are neither time-barred nor too tenuous to support antitrust standing."

With respect to the fifth factor, the Court observed that "there is little risk that any damages Novell might prove would need to be allocated or apportioned among any more-directly injured parties."

In sum, according to the Court, "we therefore find that the AGC factors favor granting standing to Novell to assert Counts I and VI," and "thus affirm the district court's denial of Microsoft's motion to dismiss as to these claims on the antitrust-standing issue."

With respect to Novell's standing to bring Counts II through V, the Court rejected Novell's argument that there was a substantial overlap between its own claims and those brought by the Government. According to the Court, "Novell's reading would require us to look beyond the face of the DOJ complaint," which "only expressly alleges harm to the markets for PC operating systems and for Internet browsers." The Court found that "Novell's allegations of harm to the office-productivity-applications market… overlap little with the subject matter of the DOJ complaint.

In addition, "a straightforward application of the different-markets rule also bars application of the tolling provision here."

Though Novell characterizes the different-markets rule as merely "a helpful rule of thumb," … Novell cites only cases involving either the same markets in the government and private suits, or markets much more closely linked than the PC operating-system market and the office-productivity-applications market. Indeed, the Supreme Court has accepted tolling only where the private plaintiffs make claims in markets identical to, or completely encompassed by, those at issue in the earlier government suit…. Because the office-productivity market at issue in Counts II through V is neither identical to nor completely encompassed by the PC operating-system market at issue in the government action, these cases are of little service to Novell.

Accordingly, "we therefore hold that the tolling provision of §5(i) of the Clayton Act does not preserve Counts II through V of Novell's complaint. After tarrying with these claims for more than eight years, Novell cannot now resurrect stale causes of action, and Microsoft is entitled 'to the comfort of repose.'"