United States District Court, W.D. Washington, Seattle
ATM SHAFIQUL KHALID, an individual and on behalf of similarly situated, XENCARE SOFTWARE, INC., Plaintiff,
MICROSOFT CORP., a Washington Corporation, and JOHN DOE n, Defendants.
ORDER GRANTING DEFENDANT MICROSOFT CORPORATION'S
MOTION TO DISMISS
RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE.
matter comes before the Court on Defendant Microsoft
Corporation (“Microsoft”)'s Motion to Dismiss
Plaintiff ATM Shafiqul Khalid's amended complaint for
failure to state a claim. Dkt. #14. Plaintiff opposes the
motion in entirety. Dkt. #17. The Court finds oral argument
unnecessary to resolve the underlying issues. Having reviewed
Defendant's Motion, Plaintiff's Response,
Defendant's Reply, and the remainder of the record, the
Court GRANTS Defendant's Motion to Dismiss with leave to
amend certain claims as set forth below.
December 16, 2011, Plaintiff received a job offer from
Microsoft as a Senior Program Manager in its Bing division.
Dkt. #7 at ¶ 13. Upon accepting the position, Plaintiff
was required by Microsoft recruiter Shannon Carlsen to sign a
Microsoft Employee Agreement (the “Employee
Agreement”) which included a provision under Section 5
regarding assignment of certain intellectual property rights:
I will promptly and fully disclose to MICROSOFT any and all
inventions . . . whether or not patentable (collectively
“Inventions”) that I solely or jointly may
conceive, develop, reduce to practice or otherwise produce
during my employment with MICROSOFT, including those
Inventions I contend that MICROSOFT does not own. Subject to
the NOTICE below, I agree to grant and I hereby grant,
transfer and assign to MICROSOFT or its designee all my
rights, title and interest in and to such Inventions. . . .
My obligation to assign shall not apply to any Invention that
I can establish:
a) was developed entirely on my own time without using any
equipment, supplies, facilities, or trade secret information
owned or supplied to me by Microsoft;
b) does not relate (i) directly to the business of MICROSOFT
or (ii) to the actual or demonstrably anticipated research or
development of MICROSOFT; and
c) does not result, in whole or in part, from any work
performed by me for MICROSOFT.
. . . . In addition to the rights provided to MICROSOFT under
paragraph 6 below, as to any Invention complying with
5(a)-(c) above that results in any product, service or
development with potential commercial application, MICROSOFT
shall be given the right of first refusal to obtain exclusive
rights to the Invention and such product, service or
development . . . .
Dkt. #7-1 at 2-3. Section 6 of the Employee Agreement asked
Plaintiff to attach a list “describing all Inventions
belonging to me and made by me prior to my employment with
MICROSOFT that I wish to have excluded from this Agreement.
If no such list is attached, I represent that there are no
such Inventions.” Id. at 3. The Employment
Agreement further noted on its first page: “If you wish
to attach a list of inventions, per paragraph 6, below,
please contact your recruiter.” Id. at 2.
December 19, 2011, Plaintiff accepted Microsoft's
employment offer and signed the Employment Agreement. Dkt. #7
at ¶ 16. Plaintiff claims that because there was no way
to attach a list of inventions to the online agreement
pursuant to Section 6, he sent a separate email to Ms.
Carlsen attaching an invention exclusion list (the
“Exclusion List”) denoting nine patentable items.
Id. at ¶¶ 13, 16, 18. This Exclusion List
included inventions for a mini-cloud subscription service
(“the Mini Cloud”) and a framework to protect
computer systems from viruses and spyware (“the Safe
and Secure”) that he had filed prior to starting work
at Microsoft. Id. at ¶¶ 18-19. At his
Microsoft employee orientation program in January 2012,
Plaintiff claims he signed a hard copy of the Employee
Agreement, submitted his Exclusion List for the second time
and noted by hand in the hard copy Employee Agreement that he
submitted additional pages. Id. at ¶ 17.
worked at Microsoft from January 9, 2012 until February 2015.
Id. at ¶¶ 17, 21. Plaintiff claims that
during his employment, the United States Patent and Trademark
Office issued patents for the Mini Cloud (patent number 8,
782, 637) and the Safe and Secure (patent number 8, 286, 219)
on July 15, 2014 and October 9, 2012, respectively.
Id. at ¶¶, 19, 28. Plaintiff further
claims that during his employment, he met with various
Microsoft executives who declined Plaintiff's proposals
for business models based on his invention ideas.
Id. at ¶¶ 32-37. In early February 2015,
Microsoft terminated Plaintiff's employment. Id.
at ¶ 38.
February 19, 2015, Microsoft's in-house counsel notified
Plaintiff that he had not listed any inventions under Section
6 of the Employment Agreement. Id. at ¶ 40-41.
For that reason, in-house counsel stated, Microsoft retained
an assignment right in the patents for the Mini Cloud and the
Safe and Secure. Plaintiff claims that Microsoft continued to
deny receipt of his Exclusion List, despite Plaintiff's
requests to various employees for hard copies of his signed
Employee Agreement. Id. at ¶¶ 42-45. On
July 9, 2015, in response to Plaintiff's correspondence
regarding his Mini Cloud and Safe and Secure patents,
in-house counsel for Microsoft allegedly offered to put
together an agreement if Plaintiff “agreed to give
Microsoft royalty free access to all present and future
patents related to the Mini-cloud systems in exchange for
resolving all disputes.” Id. at ¶ 46.
Plaintiff claims he declined this offer.
27, 2016, Plaintiff received a letter from Microsoft's
outside counsel re-stating Microsoft's position that
Plaintiff had granted Microsoft a “royalty-free
license, irrevocable, worldwide license” to those
inventions. Id. at ¶ 49 (quoting Dkt. #7-7 at
4). Outside counsel offered to transfer to Plaintiff all of
Microsoft's ownership interest in the Safe and Secure and
Mini Cloud patent families in exchange for his granting
Microsoft a non-exclusive, royalty-free license to the
disputed patent families and fully releasing Microsoft from
all claims and liability. Dkt. #7-7 at 4.
January 28, 2019, Plaintiff filed this action against
Microsoft. Dkt. #1. In addition to alleging fraud in his
particular case, Plaintiff seeks to challenge the general
legality of Microsoft's Employee Agreement on behalf of
all Microsoft employees who signed similar agreements with
Microsoft. Under Plaintiff's theory, Microsoft obtains an
employee's patent rights through an overly-broad patent
rights assignment provision under Section 5. Dkt. #7 at
¶ 65-67. When the employee leaves Microsoft, Plaintiff
claims that Microsoft then disregards or destroys their
exclusion list submitted under Section 6, thereby
“contaminating” the employee's patent and
requiring the employee to invest tremendous financial
resources to clear their patent right through court.
Id. at ¶¶ 71-72. As a result, Microsoft
employees-who cannot afford to litigate Microsoft, nor want
to abandon their patent work-hand over their patent rights
from the time they sign their employment agreements yet
continue working to develop their patents. Id. at
¶¶ 75, 85-89. Plaintiff claims that Microsoft's
scheme specifically violates laws under antitrust, forced
labor, racketeering, civil rights, and fraud. Id. at
Relevant Legal Standards
Motion to Dismiss
making a 12(b)(6) assessment, the court accepts all facts
alleged in the complaint as true and makes all inferences in
the light most favorable to the non-moving party. Baker
v. Riverside County Office of Educ., 584 F.3d 821, 824
(9th Cir. 2009) (internal citations omitted). However, the
court is not required to accept as true a “legal
conclusion couched as a factual allegation.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007)). The complaint “must contain sufficient factual
matter, accepted as true, to state a claim to relief that is
plausible on its face.” Id. at 678. This
requirement is met when the plaintiff “pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. The complaint need not include
detailed allegations, but it must ...