Microsoft Corp. v. DAK Industries, Inc. (In re DAK Industries, Inc.)

Microsoft Corporation appeals from an order of the district court affirming the bankruptcy court’s denial of its administrative expense claim filed pursuant to 11 U.S.C. § 503 . We have jurisdiction under 28 U.S.C. § 158 (d), and we affirm.

FACTS AND PROCEEDINGS BELOW

In April 1991, Microsoft, a distributor of computer software, and DAK Industries, Inc., a distributor of computer hardware, entered into a “License Agreement” granting DAK certain nonexclusive, worldwide “license rights” to Microsoft’s Word for Windows software (Word). The agreement gave DAK the right to adapt Word to enable it to run on computer systems sold by DAK, to copy Word, and to distribute and license Word to consumers during a specified term. DAK also received the right to accept updates and new versions of Word, as well as the right to distribute copyrighted documentation that explained how to use Word. As a practical matter, the agreement provided that Microsoft would furnish DAK with a master disk containing Word, and that DAK would copy the program and load it onto computer hardware units, which it then sold to end consumers.

The agreement provided that DAK would pay a “royalty rate” of $55 per copy…