Metropolitan News-Enterprise


Friday, October 15, 2021


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Ninth Circuit Won’t Countermand Order in Zoom Case

Judges Say Denial of Preliminary Injunction Was Appropriate in Case Where Zoom’s Service Is Blocked to New Customers of a Teleconferencing Service; Interpretation of Contract’s Sunset Provision Is in Dispute


By a MetNews Staff Writer


The Ninth U.S. Circuit Court of Appeals yesterday declined to interpret an ambiguous agreement between Zoom Video Communications, Inc., a San Jose-based communications technology company, and RingCentral, Inc., an outfit headquartered in San Mateo County that provides cloud-based teleconferencing services previously powered by Zoom’s technology.

The parties’ October 2013 Strategic Alliance Agreement (“SAA”) provides that RingCentral may bundle its communications services with Zoom’s technology, selling the package to customers. The term of the contract ended on October 2016, but with automatic one-year renewal periods to take effect unless either party notified the other, six months in advance, than it did not assent to an extension.

Zoom advised RingCentral on July 27, 2020, that it was terminating the relationship effective Jan. 31, 2021. RingCentral responded two days later that it was exercising its right under an “End of Life” (“EOL”) provision which empowers it to unilaterally extend the agreement up to a particular date.

Secret Cut-Off Date

That date is a secret. It was mentioned in a March 29 order by District Court Judge Edward J. Davila of the Northern District of California denying RingCentral a preliminary injunction but that opinion was filed under seal, then reissued with redactions agreed upon by the parties—and that included the date to which RingCentral could extend the SAA.

The provision, as recited in the public version of Davila’s order, reads:

“RingCentral may, in its sole discretion, defer the effective date of termination by up to [Redacted] from the end of the Term in order to transition customers to an alternative to the Service (the ‘EOL Period’). Zoom shall continue to provide the Service in accordance with this Agreement during this time and shall be entitled to any amounts due for use of the Service. During the EOL Period, Zoom shall continue to comply with the [Service Level Agreements]. This Agreement shall be deemed to continue to remain in effect through the EOL Period.”

RingCentral’s position is that the SAA remains in effect until the secret date, and until that date, it may market the bundled service. Zoom argues that RingCentral has no authorization to continue marketing the service during the EOL period.

Suit, Countersuit

Zoom brought suit on March 12 claiming that RingCentral, by continuing to market its bundle, was violating its intellectual property rights. Zoom immediately took steps to block RingCentral from activating Zoom’s services for new customers during the sunset period.

Three days after that, RingCentral brought a counterclaim for breach of contract and declaratory relief, as well as alleging a claim under California’s Unfair Competition Law.

Davila on March 17 issued a temporary restraining order, setting a March 25 hearing on a preliminary injunction. In his March 29 order, the judge said:

“…RingCentral’s claims depend on whether its right to market and resell Zoom’s Service to new customers extends into the EOL Period. After considering the arguments on both sides, the Court finds that neither RingCentral nor Zoom has shown a likelihood of success on the merits at this juncture. However, the dueling allegations and interpretations of the SAA demonstrate that this case presents serious factual questions.”

RingCentral’s Burden

He went on to say:

“Because, neither party has shown a likelihood of success on the merits but only serious questions on the merits, in order to obtain a preliminary injunction, RingCentral must have shown that it is likely to suffer irreparable injury in the absence of preliminary injunctive relief, that the balance of hardships tips sharply in its favor, and that an injunction is in the public interest.”

That burden, Davila said, was not met.

He ordered that Zoom provide service to those RingCentral customers who signed up before Jan. 31, but “is not required to provide the Service to any new customer RingCentral contracted with after January 31, 2021.”

Affirmance came in a memorandum opinion signed by Chief Judge Sidney Thomas, Senior Judge Michael Daly Hawkins, and Judge Michelle T. Friedland. They wrote:

“The existing record suggests that the contractual provisions at issue may be, in fact, ambiguous, and that determining their correct construction may require extrinsic evidence….

“Given these circumstances, the district court was entitled to defer determination of this disputed question until further development of the record at trial.”

The judges said that Davila did not abuse his discretion in finding that RingCentral had not met its burden and that the public’s interest did not call for issuance of a preliminary injunction.

The case is Zoom Video Communications, Inc. v. RingCentral, Inc., 21-15792.


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