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BRITESMILE, INC. v. DISCUS DENTAL

November 18, 2005.

BRITESMILE, INC. and BRITESMILE DEVELOPMENT, INC., Plaintiffs,
v.
DISCUS DENTAL, INC., et al., Defendants. AND RELATED COUNTERCLAIMS.



The opinion of the court was delivered by: JEFFREY WHITE, District Judge

ORDER GRANTING IN PART AND DENYING IN PART BRITESMILE'S MOTION TO DISMISS DISCUS DENTAL'S COUNTERCLAIMS IV-XII
Now before the Court is the motion of Plaintiffs BriteSmile, Inc. and BriteSmile Development, Inc. (collectively "BriteSmile") to dismiss the fourth through twelfth counterclaims filed by Defendant Discuss Dental, Inc. ("Discus"). Having carefully considered the parties' arguments and the relevant legal authority, the Court hereby GRANTS IN PART and DENIES IN PART the motion to dismiss.

FACTUAL BACKGROUND

  On May 3, 2005, BriteSmile sent a letter to dentists who use Discus' teeth whitening products. The letter stated in pertinent part:
. . . BriteSmile believes that your use of certain teeth whitening products of Discus Dental, Inc. ("Discus") infringes valuable property rights of BriteSmile, and that this activity must cease and desist.
BriteSmile is the owner of a substantial patent portfolio dedicated to tooth whitening technology, including the following U.S. patents which may be of interest to you: U.S. Patent Nos. 6,343,933; 6,514,543; 6,536,628; 6,331,292; 5,922,307; 6,312,670; 6,322,773; and 6,488,914. BriteSmile has made a significant investment in its patent portfolio and is vigorous in its enforcement of these and other patents. You should be aware that BriteSmile is suing Discus over Discus' making, using and selling of technology that infringes several of these patents.
As a seller of Discus products, you are also infringing one or more of the BriteSmile patents. In particular, Discus' Zoom! Chairside system infringes one or more BriteSmile patents. In addition, several of Discus' take home products, including Zoom! Take Home, Nite White and Excel, which use a two component gel and a dual chamber static mixer, infringe other BriteSmile patents. Your use and sale of these Discus products constitutes infringement under U.S. patent laws.
As an alternative to Discus' Zoom! Chairside system, BriteSmile is interested in granting you rights under BriteSmile's substantial patent portfolio by inviting you to become a licensed provider of BriteSmile products and services. Whether or not you are interested to become part of the BriteSmile opportunity, BriteSmile insists that you immediately cease and desist from all infringing use and sale of the Discus products covered by the above patents.
(Declaration of Shirish Gupta ("Gupta Decl."), Ex. 1.) On June 15, 2005, BriteSmile sent a follow-up letter to dentists stating:
. . . [T]he patent infringement litigation between BriteSmile and Discus is ongoing, with Discus still accused of infringement of three BriteSmile patents: U.S. Patent Nos. 6,343,933; 6,514,543; 6,536,628. In fact, Discus has changed its formulations for its products, and many of those changes were just revealed to BriteSmile.
As a result of Discus' formulation changes, BriteSmile is not interested at this time in pursuing Discus' customers, the dentists, for past infringement based on those old formulations. BriteSmile will seek damages in that regard from Discus.
As far as the new formulations are concerned, BriteSmile is currently evaluating whether those formulations infringe any BriteSmile intellectual property. If so, BriteSmile will consider all of its legal options for addressing the infringement by Discus and its customers.
(Gupta Decl., Ex. 3.)

  Based in large part on these letters, Discus filed amended counterclaims against BriteSmile, seeking a declaratory judgment of non-infringement and invalidity of U.S. Patent Nos. 6,488,914 ("'914 Patent"), 6,331,292 ("'292 Patent"), 5,922,307 ("'307 Patent"), 6,312,670 ("'670 Patent"), and 6,322,773 ("'773 Patent") pursuant to 22 U.S.C. § 2201.*fn1 Based on these letters accusing Discus' products of infringement and initially threatening to sue the dentists, Discus also filed counterclaims for tortious interference with prospective economic advantage and economic business relations, unfair competition under California Business and Professional Code § 17200, common law unfair competition, and trade libel.

  BriteSmile now moves to dismiss the declaratory relief counterclaims for lack of subject matter jurisdiction, arguing that Discus does not have a reasonable apprehension of being sued over the above patents. Alternatively, BriteSmile urges the Court to exercise its discretion to decline to hear the declaratory relief counterclaims. BriteSmile also moves to dismiss the state law counterclaims, arguing that they are preempted by the patent laws and that Discus failed to sufficiently allege these claims. The Court will address these arguments in turn.

  ANALYSIS

  A. Legal Standards Applicable to Declaratory Relief Jurisdiction.

  In order to establish subject matter jurisdiction, Discus bears the burden of establishing that an "actual controversy" existed at, and has continued since, the time it filed its counterclaims. See Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1058 (Fed. Cir. 1995). The Federal Circuit applies a two-part test to determine if there is an actual controversy. See, e.g., Fina Research, S.A. v. Baroid Ltd., 141 F.3d 1479, 1481 (Fed. Cir. 1998). First, the patentee must make an explicit threat or take other action that creates a reasonable apprehension on the part of the declaratory plaintiff that it will face an infringement suit. Super Sack, 57 F.3d at 1058. Second, there must be present activity that could constitute infringement or concrete steps taken with the intent to conduct such activity. Id. The focus of BriteSmile's motion is whether Discus has met its burden under the first prong.

  B. Discus Has Not Met Its Burden to Show It Had A Reasonable Apprehension of Suit.

  "The reasonableness of a party's apprehension is judged using an objective standard[]" based on the totality of the circumstances. Vanguard Research, Inc. v. Peat, Inc., 304 F.3d 1249, 1254 (Fed. Cir. 2002). "To put a putative infringer in reasonable apprehension of suit does not require an express charge of infringement and threat of suit; rather, such apprehension may be induced by subtler conduct if that conduct rises `to a level sufficient to indicate an intent [on the part of the patentee] to enforce its patent,' i.e., to initiate an infringement action." EMC Corp. v. Norand Corp., 89 F.3d 807, 811 (Fed. Cir. 1996) (quoting Shell Oil Co. v. Amoco Corp., 970 F.2d 885, 887 (Fed. Cir. 1992)).

  The facts of this case establish that on May 3, 2005, BriteSmile sent to dentists informing them of its belief that their use of certain Discus' teeth whitening products "infringes valuable intellectual property rights of BriteSmile." BriteSmile then listed eight patents, the three of which BriteSmile has sued Discus for infringement in this action plus the '914, '292, '307, '670, and '773 Patents, "which may be of interest to [the dentists]." BriteSmile stated that it is suing Discus over "several of these patents" and accused the dentists of infringing "one or more of the BriteSmile patents," without specifying which one or ones. Due to the number of patents lists in the letter and the fact that BriteSmile has only sued Discus over three of these patents in this lawsuit which has been proceeding now for over three years, the Court concludes that the letter is ambiguous as to whether it indicates an intent by BriteSmile specifically to initiate an infringement action on the '914, '292, '307, '670, or '773 Patents.

  Discus' reliance on Fina Research for the proposition that a letter referring to multiple patents may create a reasonable apprehension of suit over any of those patents is misplaced. In Fina Research, the patentee sent two letters in which it directly accused the declaratory plaintiff of infringing "one or both" of two patents and stated the patentee's intent to "vigorously protect and enforce its rights in the subject patents, including the filing of suit if necessary." Fina Research, 141 F.3d at 1482 (emphasis in original). The patentee averred that the product at issue did not infringe one of these patents, and thus, the declaratory plaintiff only faced potential liability over the other patent. Under these circumstances, the court concluded that the letters created a reasonable apprehension of suit with respect to the patent on which the declaratory plaintiff faced potential liability. Id. at 1482-83.

  In contrast here, BriteSmile's letter refers to eight patents, three of which are the subject of the infringement lawsuit which was been proceeding for over three years. The Court finds that BriteSmile's stated intent to initiate infringement actions with respect to the '914, '292, '307, '670, and '773 Patents is much more ambiguous than the patent at issue in Fina Research. Moreover, here, BriteSmile sent a follow-up letter in which BriteSmile only refers to the '933, '543, and '628 Patents and clarifies that it has no current intent to sue the dentists for infringement based on Discus' old formulations. These two letters, read together, in conjunction with the fact that BriteSmile has sued Discus over only three of the eight patents in a lawsuit which is now over three years old, do not create a reasonable apprehension of suit at this time. Accordingly, the Court grants BriteSmile's motion as to Discus' fourth through eight counterclaims without prejudice to Discus refiling such claims if BriteSmile makes any further threatening statements regarding these patents.

  Even assuming arguendo that these letters do create a reasonable apprehension of suit, the Court exercises its "unique and substantial" discretion to decline to hear these counterclaims for declaratory relief. See Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995); EMC, 89 F.3d at 810. "Even if there is an actual controversy, the district court is not required to exercise declaratory judgment jurisdiction, but has discretion to decline that jurisdiction" EMC, 89 F.3d at 810; see also Serco Servs. Co., L.P. v. Kelley Co., Inc., 51 F.3d 1037, 1039 (Fed. Cir. 1995) (court may ...


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