IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA

Sun Microsystems Inc.'s Motion for Summary Adjudication Re Interpretation of Section 2.7(a) of the TLDA was heard on June 24, 1999. The court has considered the moving and responding papers¹ and the arguments of counsel. For reasons set forth below, the court denies Sun's motion.

I. CONTRACTUAL LANGUAGE AT ISSUE

Sun moves for summary adjudication that "the most current Java Reference Implementation," as referenced in the last sentence of section 2.7(a) of the Technology License and Distribution Agreement ("TLDA") entered into between it and Microsoft, refers to Microsoft's Compatible Implementation of the Significant Upgrade in which the Supplemental Java Classes were delivered. Microsoft, on the other hand, argues that section 2.7(a) requires that any Supplemental Java Classes delivered by Sun must run on the version of Microsoft's reference implementation being commercially distributed at the time of Sun's delivery of the Supplemental Java Classes.²

Section 2.7(a) of the TLDA provides:

Licensee may determine, in its sole discretion, to include one or more Supplemental Java Classes in its Products; however, Licensee shall not be obligated to distribute any Supplemental Java Classes with its Products. Licensee shall use reasonable efforts to promptly inform SUN of its decision to exclude any such Supplemental Java Classes from Products. Licensee also shall use reasonable efforts to promptly make available to developers and customers free of charge any Supplemental Java Classes that Licensee decides, in its sole discretion, to exclude from Products. For the purposes of this Section 2.7, Licensee shall be deemed to have made such "reasonable efforts" if it (i) issues a press release and posts a message on its Worldwide Web site on such pages as Licensee's support for Java is described, stating the place where any excluded Supplemental Java Classes are available, and (ii) publishes any excluded Supplemental Java Classes on CD-ROMs that are distributed through Licensee's Microsoft Developer Network within 90 days after the date that SUN delivers such Supplemental Java Classes to Licensee and makes such Supplemental Java Classes available on its Worldwide Web site within 30 days after the date that SUN delivers such Supplemental Java Classes to Licensee. The Supplemental Java Classes delivered by SUN to Licensee shall run on the most current Java Reference Implementation. (Emphasis added).

"Java Reference Implementation" as defined in the TLDA means Microsoft's Java Runtime Interpreter and Java Classes. TLDA § 1.10.

II. ANALYSIS

Sun and Microsoft each contend that the last sentence of section 2.7 is reasonably susceptible to only one interpretation and that extrinsic evidence should not be considered in construing the language. However, they sharply disagree as to the correct interpretation. Each also submits that extrinsic evidence, if considered, supports its interpretation.

Interpretation of a contract, including a determination of whether any of its provisions are ambiguous, is a matter of law for the court. United States v. King Features Entertainment, Inc., 843 F.2d 394, 398 (9th Cir. 1988) (citing Beck Park Apts. v. United States Dept. of Housing, 695 F.2d 366, 369 (9th Cir. 1982)).³ However, parol evidence must still be considered by the district court, even if the written agreement is clear and unambiguous on its face, to determine whether the language of the contract is "reasonably susceptible" to an interpretation urged by a party. Brobeck, Phleger & Harrison v. Telex Corp., 602 F.2d 866, 871 (9th Cir. 1979), cert. denied, 444 U.S. 981, 100 S.Ct. 483, 62 L.Ed.2d 407 (1979) (citing Pacific Gas and Electric Co. v. G.W. Thomas Drayage Co., 69 Cal.2d 33, 37 (1968)); Brinderson-Newberg Joint Venture v. Pacific Erectors, Inc., 971 F.2d 272, 276-77 (9th Cir. 1992). If, after consideration of such extrinsic evidence, the court finds that the agreement is not reasonably susceptible to an asserted interpretation and is unambiguous, extrinsic evidence may not be used to alter the terms of the contract, and interpretation is a matter of law. Brobeck, 602 F.2d at 871; Brinderson, 971 F.2d at 277.

The court in interpreting an agreement is guided by the principle that the meaning of a particular provision in a contract is determined not only from the words in that provision, "but from a reading of the entire contract." Sunset Securities Co. v. Coward McCann, Inc., 47 Cal.2d 907, 911 (1957).

The court finds that the language of section 2.7(a) is reasonably susceptible to Microsoft's asserted interpretation. Section 2.7(a) states that the Supplemental Java Classes delivered by Sun shall run on "the most current Java Reference Implementation." Webster's defines "current" as "occurring in or existing at the present time" and "most recent." Webster's Ninth New Collegiate Dictionary 316 (1990). Microsoft's reference implementation which responds to a Significant Upgrade would not meet these definitions since obviously such an implementation would not be "existing at the present time." The most current implementation at the time of delivery would be the implementation then made available by Microsoft. Accordingly, the plain language of section 2.7(a) supports Microsoft's interpretation and is reasonably interpreted to require Sun to deliver Supplemental Java Classes that run on Microsoft's then-existing and commercially distributed Virtual Machine.

Sun argues, among other things, that Microsoft's interpretation would delay the release of Supplemental Java Classes and place control of the timing of releases in the hands of Microsoft rather than Sun. This, according to Sun, is something it would never have agreed to because it was to have control over the pace of the development of its technology. However, the language of the TLDA is reasonably read to support the conclusion that Microsoft did obtain some control over the pace of the release of Supplemental Java Classes if those classes necessitated an upgrade of Microsoft's virtual machine. Under § 2.6(a)(iv) Sun can deliver to Microsoft a Significant Upgrade to the Java Reference Implementation. Microsoft then must deliver to Sun within six months or before commercial release an upgraded virtual machine which passes the test suite that accompanied the Upgrade. Id. After that upgraded virtual machine is delivered to Sun, Sun can deliver to Microsoft Supplemental Java Classes which require the upgraded virtual machine to run. At that time the "Supplemental Classes delivered by Sun to Licensee (would) run on the most current Java Reference Implementation." TLDA § 2.7(a).

Both Sun and Microsoft offer extrinsic evidence to support their respective interpretations of section 2.7. Sun submits that the negotiation history of the TLDA and a post-execution statement by Microsoft's lead negotiator that Microsoft was obligated to support Sun's JavaBeans, which included Supplemental Java Classes requiring changes to Microsoft's virtual machine, support its interpretation for "most current Java Reference Implementation." Microsoft, on the other hand, contends that the negotiation history supports its interpretation and that its chief negotiator specifically bargained for the interpretation of "most current" that it now advocates. Microsoft also refers to post-execution comments made by Sun engineers suggesting that they understood the disputed language the same way Microsoft does. As discussed above, the language itself supports Microsoft's interpretation and the extrinsic evidence does not unequivocally support Sun's interpretation. In fact, the question that must be answered in one of Microsoft's pending partial summary judgment motions is whether the extrinsic evidence makes the language reasonably susceptible to Sun's interpretation of "most current Java Reference Implementation." Although Sun offers some appealing arguments as to why the TLDA should have said what Sun now claims it does, the court finds that the language used is reasonably susceptible to Microsoft's implementation.

III. ORDER

In light of the foregoing, the court denies Sun's Motion for Summary Adjudication Re Interpretation of Section 2.7(a) of the TLDA.

Copy of Order mailed on _______ April 5, 2000 _______ to:

Lloyd R. Day, Jr.
Vernon M. Winters
Day, Casebeer, Madrid & Batchelder
20400 Stevens Creek Boulevard, Suite 750
Cupertino, CA 95014

Counsel for Plaintiff

David T. McDonald
Karl J. Quackenbush
Preston, Gates & Ellis
701 Fifth Avenue, Suite 5000
Seattle, WA 98104-7078

Barbara A. Caulfield
Orrick, Herrington, & Sutcliffe LLP
400 Sansome Street
San Francisco, CA 94111-3143

Allen Ruby
Ruby & Schofield
60 South Market Street, Suite 1500
San Jose, CA 95113

Thomas Burt
Microsoft Corporation
One Microsoft Way, Bldg. 8
Redmond, WA 98052

Counsel for Defendant

FOOTNOTES

¹ The court has considered supplemental memoranda filed by the parties regarding the impact of the decision in Sun Microsystems v. Microsoft Corp., 118 F.3d 1115 (9th Cir. 1999) on this current motion and other pending summary judgment motions.  back to text

² Microsoft, in its Motion for Partial Summary Judgment Re: Sun Microsystem's Refusal to Deliver Technology Upgrades and Meet Other Requirements of the TLDA, also moves for summary judgment as to the interpretation of section 2.7(a). The ruling on that motion will be the subject of a separate order.  back to text

³ The parties agree that the TLDA is a fully integrated agreement and that parol evidence cannot be used to establish a collateral understanding of the parties. See § 12.3 of the TLDA. Under California law, if a contract was intended to be a complete and final expression of the parties' agreement, parol evidence cannot be used to show a collateral agreement or understanding of the parties. Brinderson-Newberg Joint Venture v. Pacific Erectors, Inc., 971 F.2d 272, 276-77 (9th Cir. 1992).  back to text