DCT

2:25-cv-00943

Toutvirtual Inc v. Microsoft Corp

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I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 2:25-cv-00943, E.D. Tex., 09/08/2025
  • Venue Allegations: Plaintiff alleges venue is proper in the Eastern District of Texas because Defendant maintains regular and established places of business within the district, including data centers, Azure network points of presence, and retail operations within Best Buy stores, and owns significant property in the district.
  • Core Dispute: Plaintiff alleges that Defendant’s Microsoft Azure cloud computing platform and its associated management services infringe five patents related to the automated, platform-independent management of virtualized computer environments.
  • Technical Context: The technology concerns centralized management systems that can inventory, provision, and dynamically reallocate virtual resources (like virtual machines and storage) across diverse and heterogeneous hardware and software platforms, a foundational concept in modern cloud computing and data center orchestration.
  • Key Procedural History: The complaint alleges a long history between the parties, beginning with ToutVirtual’s founding in 2005. It asserts that Microsoft was aware of ToutVirtual’s technology as early as 2007 through a partnership involving Microsoft's Virtual Hard Disk (VHD) Test Drive Program. The complaint further alleges that Microsoft’s own issued patents have cited the asserted patent family as prior art. A formal notice letter regarding the patents-in-suit was allegedly sent to Microsoft on December 4, 2024, and acknowledged later that month.

Case Timeline

Date Event
2005-01-01 ToutVirtual founded
2005-08-15 Earliest Priority Date for all Asserted Patents
2007-03-15 ToutVirtual joins Microsoft VHD Test Drive Program
2008-10-27 ToutVirtual announces partnership with Microsoft for Hyper-V support
2014-08-05 U.S. Patent No. 8,799,431 issues
2016-09-13 U.S. Patent No. 9,444,762 issues
2020-10-20 U.S. Patent No. 10,810,050 issues
2023-05-23 U.S. Patent No. 11,656,915 issues
2024-09-03 U.S. Patent No. 12,079,667 issues
2024-12-04 Plaintiff sends notice letter to Defendant
2024-12-23 Defendant acknowledges receipt of notice letter
2025-09-08 Complaint filed

II. Technology and Patent(s)-in-Suit Analysis

U.S. Patent No. 8,799,431 - “Virtual systems management”

  • Patent Identification: U.S. Patent No. 8,799,431, entitled “Virtual systems management,” issued August 5, 2014 (the “’431 Patent”).

The Invention Explained

  • Problem Addressed: Prior to the invention, managing virtualized network environments was highly complex, labor-intensive, and fragmented. Management tools were often proprietary, tying them to specific vendors’ CPUs, operating systems, or virtualization platforms, which became inefficient as data center environments grew more diverse (Compl. ¶21; ’431 Patent, col. 2:62-3:22). There was a need for more efficient, unified means of managing these heterogeneous environments (Compl. ¶22; ’431 Patent, col. 3:23-25).
  • The Patented Solution: The invention provides a centralized "control center" that acts as a single point of management for multiple, different virtual environments. This control center is platform-agnostic, meaning it can manage virtual assets "without regard to processors, operating systems, [or] virtualization platforms" (Compl. ¶40; ’431 Patent, col. 3:61-4:5). It uses modular components, illustrated in Figure 2, to perform functions like identifying resources, provisioning virtual assets, measuring performance, and automatically responding to dynamic demands on the network (Compl. ¶38; ’431 Patent, col. 3:37-41, Fig. 2).
  • Technical Importance: This platform-independent, automated approach offered a significant improvement in efficiency, scalability, and flexibility over the prior art's "tool-sprawl" of proprietary, platform-locked management systems (Compl. ¶¶37, 40).

Key Claims at a Glance

  • The complaint asserts independent method Claim 20 (Compl. ¶122).
  • The essential elements of Claim 20 include:
    • Providing a virtualization environment with a virtualization layer, network resources, and virtual assets.
    • Providing a controller coupled to the environment over a network.
    • Performing, with the controller, one or more functions from a specified group, including identification, management, and provisioning of assets.
    • Receiving a "Knowledge Block" that specifies parameters for sending alerts and for asset reallocation based on performance measurements, including detecting operational degradation.
    • Automatic dynamic deployment of virtual assets based on reallocation parameters.
    • Performing these functions "without regard to processors, operating systems, virtualization platforms, and application software."

U.S. Patent No. 9,444,762 - “Computer network systems to manage computer network virtualization”

  • Patent Identification: U.S. Patent No. 9,444,762, entitled “Computer network systems to manage computer network virtualization,” issued September 13, 2016 (the “’762 Patent”).

The Invention Explained

  • Problem Addressed: The patent addresses the same problem as the ’431 Patent: the inefficiency and complexity of managing diverse, multi-platform virtual environments using multiple proprietary tools (Compl. ¶44; ’762 Patent, col. 3:39-59).
  • The Patented Solution: The ’762 Patent also describes a centralized control center with modular components for platform-independent, automated management of virtual assets. The complaint and claims place a specific emphasis on a "physical control center" that actively manages multiple different virtualization environments through automated responses (Compl. ¶¶45, 47; ’762 Patent, col. 6:17-23). This architecture is designed to overcome the limitations of platform-locked tools by enabling management from a single, unified console (Compl. ¶44; ’762 Patent, col. 3:33-35).
  • Technical Importance: The invention provides a unified and automated solution to the problems of fragmented, tool-based administration in increasingly diversified virtual environments (Compl. ¶47).

Key Claims at a Glance

  • The complaint asserts independent method Claim 20 (Compl. ¶153).
  • The essential elements of Claim 20 include:
    • Providing a virtualization environment with physical resources, virtual assets, and a virtualization layer running on a specific physical resource.
    • Providing a physical controller coupled to the environment over a network.
    • Performing one or more functions (e.g., identification, management, provisioning) by the controller that communicates with the virtualization layer.
    • Provisioning virtual assets using "Knowledge Block parameters."
    • Automatic dynamic deployment of virtual assets.
    • Performing functions "without regard to processors, operating systems, virtualization platforms, and application software."

U.S. Patent No. 10,810,050 - “Virtual systems management”

  • Patent Identification: U.S. Patent No. 10,810,050, entitled “Virtual systems management,” issued October 20, 2020 (the “’050 Patent”).
  • Technology Synopsis: This patent claims an apparatus for automatic management of a virtualization environment. It describes a control center computer that executes a "virtual mapping layer" to determine an inventory of resources regardless of the underlying platform, and a "provisioning manager" that automatically provisions virtual assets to physical resources based on specified parameters in a provisioning request (Compl. ¶186; ’050 Patent, Abstract).
  • Asserted Claims: Independent apparatus Claim 9 is asserted (Compl. ¶184).
  • Accused Features: The complaint alleges that Azure’s apparatus, including a control center (Azure Portal, Windows Admin Center) coupled to computer devices (Azure Dedicated Host), infringes. The alleged "virtual mapping layer" is Azure Resource Manager, and the "provisioning manager" is Azure Monitor with its Autoscale functionality (Compl. ¶¶188, 190, 192).

U.S. Patent No. 11,656,915 - “Virtual systems management”

  • Patent Identification: U.S. Patent No. 11,656,915, entitled “Virtual systems management,” issued May 23, 2023 (the “’915 Patent”).
  • Technology Synopsis: This patent claims a method for providing end-user access to virtualization system resources over a network. The method involves implementing a virtualization system with a control computer and physical resources, connecting an end user to the control computer, and allowing the user to access virtual assets through that connection (Compl. ¶214; ’915 Patent, col. 7:55-67).
  • Asserted Claims: Independent method Claim 1 is asserted (Compl. ¶212).
  • Accused Features: The accused method is Azure's system for providing user access to virtual assets (e.g., virtual machines). The "control computer" is identified as Azure Resource Manager, Azure Portal, and Windows Admin Center, which connects end users to virtual assets running on physical servers (Compl. ¶¶216, 218, 219).

U.S. Patent No. 12,079,667 - “Virtual systems management”

  • Patent Identification: U.S. Patent No. 12,079,667, entitled “Virtual systems management,” issued September 3, 2024 (the “’667 Patent”).
  • Technology Synopsis: This patent claims a method for data storage across virtual system resources. The method involves implementing a virtualization system with a control center application, physical resources, and virtual assets (including virtual storage assets), then obtaining data, selecting virtual assets for storage based on an allocation, and causing the data to be stored at the selected virtual storage assets (Compl. ¶237; ’667 Patent, col. 23:57-24:3).
  • Asserted Claims: Independent method Claim 1 is asserted (Compl. ¶235).
  • Accused Features: The complaint alleges that Azure's data storage services infringe. The accused method includes using Azure's control center applications (Azure Resource Manager, Azure Portal) to select and allocate data to be stored in virtual storage assets like Azure Blob Storage (Compl. ¶¶240, 243, 244).

III. The Accused Instrumentality

Product Identification

  • The Microsoft Azure cloud computing platform, including a wide array of its constituent services such as Azure Resource Manager, Azure Portal, Windows Admin Center, Azure Monitor, Azure Arc, Azure Dedicated Host, and Azure Storage (Compl. ¶¶74, 115).

Functionality and Market Context

  • The complaint describes Microsoft Azure as a unified cloud platform providing integrated tools for managing virtualized computer environments, such as virtual machines and virtual desktops (Compl. ¶74). Azure Resource Manager (“ARM”) is identified as the central "deployment and management service" that provides a unified management layer to create, update, and delete resources (Compl. ¶75). The Azure Portal is described as the unified, web-based console for managing and monitoring these resources (Compl. ¶78), while Windows Admin Center provides a browser-based interface for managing servers and clusters across both Azure and on-premises environments (Compl. ¶79). The complaint also highlights Azure Monitor as a comprehensive solution for collecting, analyzing, and responding to monitoring data, which enables automated features like Autoscale (Compl. ¶¶88, 94). The "Azure Governance Architecture" diagram illustrates the relationship between the Policy Engine, ARM, and various management tools (Compl. p. 75).

IV. Analysis of Infringement Allegations

’431 Patent Infringement Allegations

Claim Element (from Independent Claim 20) Alleged Infringing Functionality Complaint Citation Patent Citation
providing a virtualization environment that has a virtualization layer, network resources and virtual assets... Azure provides a virtualization environment including hypervisors (virtualization layer), servers (network resources), and virtual machines (virtual assets). ¶126 col. 3:49-61
providing a controller coupled to the virtualization environment over a network; Azure provides controllers such as Azure Resource Manager, Azure Portal, and Windows Admin Center, which are coupled to the environment over a cloud network. ¶128 col. 6:10-16
performing one or more functions by the controller that communicates with the virtualization layer from the group of functions consisting of (1) identification and management of network resources and virtual assets... Azure's controller provides a unified console (Azure Portal) to identify, manage, and monitor network resources and virtual assets like virtual machines and applications. The Azure Monitor diagram shows its capability to collect data from various sources (Compl. p. 85). ¶130 col. 3:61-4:6
(3) receiving a Knowledge Block that specifies parameters that send an alert message...and determines one or more reallocation parameters... Azure allows users to configure alerts (via Azure Monitor Alerts) that detect issues and provides automated responses and reallocation solutions through services like Azure Automation. ¶132 col. 17:49-54
(4) automatic dynamic deployment of virtual assets across the computer network based on the reallocation parameters... Azure provides automatic dynamic deployment through runbook provisioning requests that are automated and accessible via Azure to deploy assets on servers. ¶133 col. 8:15-22
wherein such functions are carried out without regard to processors, operating systems, virtualization platforms, and application software of the virtualization environment. Azure allows for automation and monitoring of virtual applications across various cloud environments, including non-Microsoft platforms like AWS and GCP. ¶137 col. 3:61-4:5
  • Identified Points of Contention:
    • Scope Questions: A central question may be whether the term "controller" as used in the patent, which Figure 1 depicts as a discrete component, can be construed to read on the distributed collection of software services (ARM, Portal, Admin Center) that form Azure's control plane.
    • Technical Questions: The complaint maps the term "Knowledge Block" to Azure's user-configurable alert and automation rules (Compl. ¶132). The infringement analysis may turn on whether Azure's system performs the specific functions of a "Knowledge Block" as defined in the claim, which includes parameters to "detect operational degradation of a member of the virtualization environment which is halted and removed."

’762 Patent Infringement Allegations

Claim Element (from Independent Claim 20) Alleged Infringing Functionality Complaint Citation Patent Citation
providing a virtualization environment that has physical resources, virtual assets and a virtualization layer running on a specific physical resource... Azure provides a virtualization environment with physical servers, virtual machines, and hypervisors that run on a specific server managing one or more virtual assets. ¶157 col. 3:49-59
providing a physical controller coupled to the virtualization environment over a network; Azure provides controllers (ARM, Portal) executed on a physical computer, such as an Azure Dedicated Host, which is coupled to the environment over a cloud network. ¶159 col. 6:17-23
performing one or more functions by the controller that communicates with the virtualization layer...consisting of identification and management of network resources and virtual assets... The Azure controller, running on a physical computer, communicates via APIs with the virtualization layer (Hyper-V) to identify, manage, and monitor resources via a unified console. ¶¶160-161 col. 4:5-18
provisioning of virtual assets using Knowledge Block parameters in response to network workflow demands... Azure allows users to configure alerts and Autoscale functionality which provisions virtual assets based on predefined rules and workflow demands. ¶¶162-163 col. 8:15-22
wherein such functions are carried out without regard to processors, operating systems, virtualization platforms, and application software... Azure allows for automation and monitoring of resources and applications running in heterogeneous environments, including on-premises servers and other public clouds like AWS and GCP. ¶168 col. 4:21-28
  • Identified Points of Contention:
    • Scope Questions: The claim requires a "physical controller." The complaint alleges this is satisfied by Azure's management software (ARM, Portal) "executed on a physical control computer (e.g., Azure Dedicated Host)" (Compl. ¶159). A potential point of contention is whether this distributed software architecture, which may not reside entirely on one physical machine, meets the claim's requirement for "a physical controller."
    • Technical Questions: Similar to the ’431 Patent, the analysis will question whether Azure's configurable rules and policies for provisioning meet the specific definition of "Knowledge Block parameters" as understood in the context of the patent.

V. Key Claim Terms for Construction

  • The Term: "controller" (’431 Patent) / "physical controller" (’762 Patent)

    • Context and Importance: This term is the central component of the claimed invention. The dispute will likely focus on whether Microsoft's distributed, software-defined control plane (ARM, Azure Portal, etc.) is equivalent to the "controller" described in the patents, particularly the more specific "physical controller" in the ’762 Patent. Practitioners may focus on this term because the patents' diagrams depict a discrete "Control Center," which could be interpreted as a more monolithic architecture than Azure's.
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: The specification describes the "Control Center" as an "application that provides an interface to virtualization environments" and can be deployed on typical physical devices, suggesting it is primarily a software construct (Compl. ¶45; ’762 Patent, col. 6:17-23). The complaint alleges the combination of Azure services functions as this controller (Compl. ¶128).
      • Evidence for a Narrower Interpretation: Figure 1 of the patents depicts "Control Center A" and "Control Center B" as distinct boxes in the network diagram, which could be argued to imply a discrete, centralized hardware appliance or server rather than a distributed set of cloud services (’431 Patent, Fig. 1). The term "physical controller" in the ’762 Patent could be argued to strengthen this narrower interpretation.

  • The Term: "Knowledge Block" (’431 Patent and ’762 Patent)

    • Context and Importance: This term appears to be a specific neologism in the patent. The infringement theory relies on mapping Azure's user-configured alert rules and Autoscale policies to this term. The viability of the infringement case may depend on whether this mapping is technically and legally sound.
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: The claims themselves define the term functionally as specifying "parameters that send an alert message" and "determine one or more reallocation parameters" based on performance measurement and operational degradation (Compl. ¶124). The complaint alleges Azure's alerts and runbooks perform these functions (Compl. ¶¶132-134).
      • Evidence for a Narrower Interpretation: The specification describes Knowledge Blocks in the context of "Application Criticality Rules (ACRs)" and suggests a more structured, integrated, and potentially pre-defined rules engine than the generalized, user-scripted automation offered by Azure (see ’431 Patent, col. 17:49-54). A party might argue that simple user-defined "if-then" rules for autoscaling do not constitute the specific "Knowledge Block" taught by the patent.

VI. Other Allegations

  • Indirect Infringement: The complaint alleges that Microsoft induces infringement by providing the Azure platform and actively encouraging and instructing customers—through user manuals, technical documentation, service agreements, and marketing—to configure and use it in ways that directly infringe the asserted method claims (Compl. ¶¶144-145, 175-176).
  • Willful Infringement: The complaint makes detailed allegations to support willfulness. It alleges Microsoft had pre-suit knowledge of ToutVirtual's patent portfolio dating back to at least 2007, citing a commercial partnership and Microsoft's own patents citing the asserted patents' family as prior art (Compl. ¶¶70, 143). It further establishes a definitive date for knowledge of the asserted patents via a formal notice letter sent in December 2024 (Compl. ¶71). The complaint alleges that despite this longstanding knowledge, Microsoft continued its infringing activities (Compl. ¶72).

VII. Analyst’s Conclusion: Key Questions for the Case

  • A central issue will be one of architectural scope: can the patents' concept of a centralized "controller" or "physical controller," conceived in the context of discrete data center hardware, be construed to cover Microsoft Azure’s distributed, software-defined control plane, which is composed of numerous interconnected cloud services?
  • A key question of claim construction will be definitional: do Azure's highly flexible, user-configured automation tools for alerts and autoscaling meet the specific, structured definition of the "Knowledge Block" required by the asserted claims, or is there a fundamental mismatch between the patent's integrated rules-based system and Azure’s generalized features?
  • A pivotal issue for willfulness and potential damages will be evidentiary: what was the nature and extent of Microsoft’s knowledge of ToutVirtual's technology and patent portfolio stemming from the alleged 2007-2008 partnership and patent citations, and how does this pre-suit history inform whether any infringement was willful?