Judge Ronald Gould, U.S. Court of Appeal for the Ninth Circuit.

An unsuccessful patent litigant can be precluded from bringing copyright claims that arise from the same allegations of IP theft, the U.S. Court of Appeals for the Ninth Circuit ruled Thursday.

The court ruled that Media Rights Technologies Inc. (MRT) cannot sue Microsoft Corp. for copyright and Digital Millennium Copyright Act violations that could have been included in its 2013 patent suit against the tech giant.

“These claims all arise from the same events—Microsoft's alleged misappropriation of MRT's software—as the prior patent infringement claims,” Judge Ronald Gould wrote for a unanimous panel. “They merely offer different legal theories for why Microsoft's alleged conduct was wrongful.”

But the court ruled MRT is still free to bring copyright claims based on alleged infringement that occurred after it filed its 2013 suit.

Though the ruling is case-specific, the narrative pleaded by MRT is a familiar one in the tech industry. The company contends it developed a pioneering digital rights management technology for preventing music piracy in the early 2000s. The company marketed it as BlueBeat Secure Player.

During confidential negotiations in 2004, Microsoft offered $50 million for a controlling share of the company, MRT alleges. MRT declined the offer. Microsoft then allegedly developed its own version of the software using MRT's technology. MRT says it can prove that Microsoft copied its source code because it embedded a digital watermark that shows up in a variety of Microsoft products.

MRT sued for patent infringement in 2013, asserting four patents, but dropped the suit after one of the patents was found invalid in a separate action. A year later, in 2017, it brought the present copyright and breach-of-contract suit in the Northern District of California. U.S. Magistrate Judge Sallie Kim ruled that all of the claims, accruing both before and after the patent suit, were precluded.

Before the Ninth Circuit, Feinberg Day Alberti Lim & Belloli partner Ian Feinberg argued that the copyright claims were “wildly different” from the patent claims and involved a different set of accused products. “Discovering that somebody has copied your code is wholly different from discovering that they may have infringed your patents,” he told the court.

The Ninth Circuit noted that under copyright law, a discrete claim arises each time an infringing work is reproduced or redistributed. Therefore, all of the alleged infringement that occurred after MRT brought its 2013 suit is fair game, the court concluded.

But the court found MRT should have been aware of the copyright violations by 2013, so all of the earlier claims are subject to claim preclusion. “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,” Gould wrote. “That the two actions 'relate to the same set of facts' favors preclusion.”

That echoed the argument Fish & Richardson partner Jonathan Lamberson made for Microsoft before the court: “Copying is central” to the patent complaint, he told the judges.

Moreover, Gould wrote, the patent and copyright claims form “a convenient trial unit that discloses a cohesive narrative,” which the Ninth Circuit has also found to favor preclusion.

“Indeed, patent infringement and copyright infringement claims are often tried together, including in large, complex cases,” Gould wrote, though he stressed that other patent and copyright suits will not always be preclusive of one another.

Ninth Circuit Judge Marsha Berzon and U.S. District Judge Frederic Block, visiting from Eastern District of New York, concurred.