CHS: Microsoft's copyright infringement claims are barred

Microsoft sued Franklin, Tenn.-based Community Health Systems in March, alleging copyright infringement and breach of contract. In a recently filed answer to the complaint, CHS denies most of the allegations and asserts nine affirmative defenses.

Here are five things to know about the lawsuit:

1. Microsoft and CHS have entered into several licensing agreements for various software products over the past 17 years. In its complaint, pending in U.S. District Court for the Middle District of Tennessee, Microsoft alleges CHS "intentionally facilitated the continued use of Microsoft software" by hospitals CHS divested in recent years, despite having no right to do so.

"CHS has been willfully infringing Microsoft's copyrights through direct or indirect extensive, unlicensed use of Microsoft's software," the complaint states.

2. In October 2016, Microsoft notified CHS it planned to exercise its contractual rights to verify CHS' compliance with the licensing agreements through the use of an independent auditor. According to the complaint, the independent auditor and Microsoft repeatedly asked CHS, which had "produced only a small fraction of the data required for the independent verification process," to comply with the verification terms of the agreement for 16 months after the initial notification.

"CHS has been largely not responsive to, if not obstructionist of, Microsoft's contractual right to an independent verification," the complaint states. "CHS has been given every opportunity to comply with the independent verification process, and Microsoft has exhausted its best efforts to resolve this matter without judicial intervention."

3. CHS answered the complaint May 31 and denied the majority of Microsoft's allegations. CHS also brought nine affirmative defenses and asked the judge to rule in its favor.

4. CHS alleges Microsoft's claims are barred for several reasons, including because of an express and/or implied license authorizing the conduct at issue and because Microsoft unreasonably delayed asserting its claims. CHS further alleges Microsoft violated the duty of good faith and fair dealing with regard to the verification process, and any damages alleged by Microsoft were the result of a third party's conduct.

5. More details about the licensing agreements and alleged violations of the contracts will be revealed in coming months as the case progresses. The judge issued an initial case management order June 7, laying out the timeline for discovery and other aspects of the case.

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