DCT

2:25-cv-01228

Novacloud Licensing LLC v. Microsoft Corp

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Key Events
Complaint

I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 2:25-cv-1228, E.D. Tex., 12/17/2025
  • Venue Allegations: Plaintiff alleges venue is proper in the Eastern District of Texas because Microsoft maintains regular and established physical places of business within the district. These allegedly include data servers at third-party data centers, Microsoft Windows "store-within-a-store" locations inside Best Buy retail stores, and Azure points of presence (POPs).
  • Core Dispute: Plaintiff alleges that Defendant’s datacenter and cloud computing infrastructure infringe four patents related to network resource management, packet distribution, network virtualization, and cloud application configuration.
  • Technical Context: The patents relate to foundational technologies for managing large-scale cloud computing and network infrastructure, a critical component of modern digital services such as Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS).
  • Key Procedural History: The complaint states that the asserted patents originated with Ericsson and were acquired by Plaintiff, a company formed in 2024. It further alleges that the parties engaged in licensing discussions regarding the patent portfolio beginning in June 2024 and continuing through October 2025 without reaching an agreement.

Case Timeline

Date Event
2008-01-23 ’028 Patent Priority Date
2012-05-04 ’867 Patent Priority Date
2012-09-03 ’172 Patent Priority Date
2013-03-19 ’028 Patent Issued
2014-03-24 ’173 Patent Priority Date
2014-09-02 ’867 Patent Issued
2019-03-05 ’173 Patent Issued
2019-10-01 ’172 Patent Issued
2024-02 Microsoft interacts with Ericsson regarding patent portfolio
2024-05 Microsoft announces land purchase for new data center
2024-06 NovaCloud initiates discussions with Microsoft
2024-10 NovaCloud and Microsoft meet to discuss patent portfolio
2025-12-17 Complaint Filing Date

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

U.S. Patent No. 8,401,028 - “Selection of an Edge Node in a Fixed Access Communication Network,” issued March 19, 2013

The Invention Explained

  • Problem Addressed: The patent’s background section describes the inefficiency of static methods for pooling network resources, such as gateway nodes. These methods cannot account for dynamic network conditions like traffic load or topology changes, which can lead to overloaded nodes, underutilized resources, and require significant manual reconfiguration by operators (’028 Patent, col. 1:49-2:52).
  • The Patented Solution: The invention proposes a centralized "selection logic" that dynamically chooses an appropriate "edge node" (e.g., a gateway) for a user's service request. This selection is based on real-time information about the status and capabilities of available edge nodes, which is retrieved from a "dynamically updated database." This allows for an optimized assignment based on current network conditions, after which the selection logic informs the user's host which node to connect to (’028 Patent, col. 3:1-10; Fig. 1).
  • Technical Importance: This approach of centralized, dynamic, data-driven resource allocation was an important development for creating more automated and efficient network management systems, predating and informing modern cloud load balancing and Software-Defined Networking (SDN) concepts (Compl. ¶34).

Key Claims at a Glance

  • The complaint asserts independent Claim 1 (Compl. ¶33, 63).
  • Essential elements of Claim 1 include:
    • At a selection node, receiving a request for a network service from a host entity.
    • Obtaining data from a dynamically updated database regarding the status and capabilities of each edge node.
    • Selecting an edge node based on the retrieved data to provide a path for the requested service.
    • Sending a response to the host entity that identifies the selected edge node.

U.S. Patent No. 8,825,867 - “Two Level Packet Distribution with Stateless First Level Packet Distribution to a Group of Servers and Stateful Second Level Packet Distribution to a Server Within the Group,” issued September 2, 2014

The Invention Explained

  • Problem Addressed: The patent’s background section identifies scalability issues with traditional stateful load balancers. Maintaining a state table for every network connection can exhaust memory and processing resources, particularly when connection volumes are high. Synchronizing this state information with a backup load balancer for redundancy also creates significant overhead (’867 Patent, col. 1:56-2:38).
  • The Patented Solution: The invention describes a two-level system for distributing network packets. The first level is "stateless" and uses a static method, such as a hash function, to select a group of servers for an incoming packet flow without maintaining per-flow state. The second level is "stateful" and is distributed among the servers within the selected group. This second level maintains the state necessary to select a specific server within the group and ensure "stickiness" (i.e., that all packets for a given flow are sent to the same server). The patent specifies that the two levels are implemented on distinct hardware, separating the high-volume stateless routing from the more intensive stateful processing (’867 Patent, col. 2:40-3:5; Fig. 3).
  • Technical Importance: This hybrid architecture offers a more scalable approach to load balancing in large data centers by centralizing the simple, stateless group selection and distributing the more complex, stateful server selection, thereby reducing the burden on any single component (Compl. ¶41).

Key Claims at a Glance

  • The complaint asserts independent Claim 1 (Compl. ¶40, 72).
  • Essential elements of Claim 1 include:
    • Receiving a packet at a static first level packet distribution module.
    • Statically selecting a group of servers for the packet without using state that assigns the packet to the group.
    • Distributing the packet to a distributed stateful second level packet distribution system, which is implemented on hardware distinct from the first level module.
    • Statefully selecting a server from the selected group by accessing state that assigns the flow to that server.
    • Distributing the packet to the selected server.

U.S. Patent No. 10,225,173 - “Method to Provide Elasticity in Transport Network Virtualisation,” issued March 5, 2019

  • Technology Synopsis: This patent describes a method for enabling "elasticity" (the ability to dynamically add or release resources) in virtualized, multi-domain networks. The invention involves a controller that receives information about the "elasticity capability" of physical network paths, summarizes those paths into abstract "virtual links," and then produces a virtual network topology that associates specific "elasticity parameters" with each virtual link. This abstraction allows a higher-level service controller to manage and provision network capacity more intelligently based on service demands (’173 Patent, Abstract; col. 2:3-13).
  • Asserted Claims: The complaint asserts Claim 1 (Compl. ¶47, 81).
  • Accused Features: The complaint alleges that Microsoft's cloud infrastructure and services provide elasticity in a multi-domain network environment in a manner consistent with the patent's claims (Compl. ¶58, 81).

U.S. Patent No. 10,430,172 - “Re-Configuration in Cloud Computing Environments,” issued October 1, 2019

  • Technology Synopsis: This patent discloses a data structure, called a "software template," used to manage the reconfiguration of applications in a cloud environment. The template defines a flow of actions for operations like scaling or software upgrades. A key aspect is that the template is composed of a non-editable portion controlled by the cloud provider and an extensible portion that the hosted application can add to via a programming interface. This structure enables dynamic and coordinated reconfiguration between the underlying cloud infrastructure and the application itself (’172 Patent, Abstract; col. 2:5-19).
  • Asserted Claims: The complaint asserts Claim 1 (Compl. ¶54, 90).
  • Accused Features: The complaint alleges that Microsoft's cloud computing services use data structures and software templates to manage the scaling and upgrading of hosted applications, infringing the patent (Compl. ¶58, 90).

III. The Accused Instrumentality

Product Identification

The complaint identifies the accused instrumentalities as "Microsoft's datacenter and network infrastructure and/or cloud computing services," providing "Azure Traffic Manager, Azure Application Gateway for Containers, Microsoft OneWAN, and Azure Research Manager" as non-limiting examples (Compl. ¶12, 58).

Functionality and Market Context

The complaint alleges that these services form the core of Microsoft's cloud computing platforms, providing functions such as traffic management, load balancing, network virtualization, and automated application management (Compl. ¶9). The complaint supports its venue allegations with a screenshot of a Collin County property search result, which identifies Microsoft Corporation as the owner of over $1.6 million in property at an "ALIGNED DATA CENTER" (Compl. p. 4). This visual evidence is used to establish a physical presence for Microsoft's cloud infrastructure within the district (Compl. ¶20, 26).

IV. Analysis of Infringement Allegations

The complaint states that claim charts demonstrating infringement are attached as Exhibits 5-8; however, these exhibits were not included with the filed complaint. The complaint does not provide a narrative description of infringement sufficient to construct a claim chart summary. The infringement allegations are presented in a conclusory manner, stating that the Accused Infrastructure and Services meet all limitations of at least Claim 1 of each Asserted Patent (Compl. ¶63, 72, 81, 90).

  • Identified Points of Contention (’028 Patent):
    • Scope Questions: A potential dispute may arise over whether the patent's terms, such as "host entity" in a "fixed access communications network," can be construed to apply to users and services in a modern, distributed cloud computing environment, which differs from the ISP-centric context described in the patent (’028 Patent, col. 4:45-50).
    • Technical Questions: What specific component in Microsoft's architecture performs the function of the claimed "selection node"? What evidence demonstrates that it consults a "dynamically updated database" containing the specific "status and capabilities" of each potential "edge node" before making a selection?
  • Identified Points of Contention (’867 Patent):
    • Scope Questions: The construction of "implemented on hardware that is distinct" will be a central issue. A dispute may arise over whether this requires physically separate machines or if it can be met by logically distinct resources within a single server or chassis, such as different processor cores or line cards.
    • Technical Questions: What is the evidentiary basis for the allegation that the accused system separates its packet distribution into a "stateless" first level and a "stateful" second level? What proof will be offered to show that the first level's selection process does not involve using state, as the claim requires?

V. Key Claim Terms for Construction

  • For the ’028 Patent:
    • The Term: "dynamically updated database" (Claim 1)
    • Context and Importance: The invention's asserted novelty lies in its use of dynamic, rather than static, information for node selection. The definition of this term is therefore critical to the infringement analysis. The dispute will likely center on how "dynamic" the updates must be to meet the claim limitation.
    • Intrinsic Evidence for a Broader Interpretation: The specification suggests the data is "retrieved dynamically by determining network conditions," without specifying a required frequency or mechanism, which may support a broader reading that includes any non-static data source (’028 Patent, col. 3:11-13).
    • Intrinsic Evidence for a Narrower Interpretation: The patent's background criticizes prior art for its inability to "take account of current network conditions such as the current load on the transport network," suggesting that "dynamically updated" may imply updates reflecting near-real-time operational metrics rather than merely periodic configuration changes (’028 Patent, col. 2:27-29).
  • For the ’867 Patent:
    • The Term: "implemented on hardware that is distinct" (Claim 1)
    • Context and Importance: This structural limitation is key to distinguishing the claimed invention from single-component load balancers where stateless and stateful logic might run on the same hardware. Proving infringement will hinge on demonstrating this hardware separation in the accused systems.
    • Intrinsic Evidence for a Broader Interpretation: The patent’s figures depict the two levels in separate schematic boxes labeled "Hardware," which may support an argument for distinct physical or logically partitioned systems (’867 Patent, Fig. 3). The term itself is not further defined, potentially allowing for a broader interpretation that includes different cards in a chassis or even separate processing units.
    • Intrinsic Evidence for a Narrower Interpretation: The description of the two levels as separate systems could support a narrower construction requiring physically separate devices or chassis. An argument could be made that different software modules running on the same multi-core server do not constitute "distinct" hardware in the context of the invention.

VI. Other Allegations

  • Indirect Infringement: The complaint alleges induced infringement for each patent, asserting that Microsoft actively encourages others, such as customers, to use the infringing cloud infrastructure and services. The complaint references (but does not provide) publications and documentation in its claim chart exhibits as evidence of this encouragement (Compl. ¶64, 73, 82, 91).
  • Willful Infringement: The complaint alleges willful infringement for all asserted patents. The basis for willfulness is alleged knowledge of the patents and their infringement "at least as of the filing of this Complaint" (Compl. ¶65, 74, 83, 92). The complaint also details pre-suit licensing discussions between the parties, which suggests the possibility that Plaintiff may later argue these discussions established pre-suit knowledge (Compl. ¶13-14).

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

  • Definitional Scope: A core issue will be one of definitional scope: can terminology from the patents, which appears rooted in earlier telecommunications and enterprise network contexts (e.g., "fixed access communications network"), be construed to read on the architecture and operation of a modern, highly virtualized, and software-defined cloud platform like Microsoft Azure?
  • Evidentiary Proof of System Architecture: For claims with specific structural limitations, such as the '867 patent’s requirement for "distinct" hardware, a key evidentiary question will be one of architectural proof: can Plaintiff obtain evidence through discovery to show that Microsoft’s complex and proprietary infrastructure is actually built in the specific manner required by the claims?
  • Functional Operation: Given the lack of specific technical mappings in the complaint, the case may turn on a question of functional operation: do the accused Azure services perform the specific, ordered, and sometimes structurally limited steps of the asserted method claims, or is there a fundamental mismatch between the patented methods and the actual technical implementation of Microsoft’s cloud services?