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Cary A. Jardin v. Datallegro

June 3, 2011

CARY A. JARDIN,
PLAINTIFF,
v.
DATALLEGRO, INC. AND STUARTFROST,
DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER: (1) GRANTING PLAINTIFF'S MOTION TO DISMISS DEFENDANTS' REMAINING COUNTERCLAIMS; (2) ENTERING JUDGMENT OF NON-INFRINGEMENT; AND (3) DENYING AS MOOT DEFENDANTS' MOTION FOR SUMMARY JUDGMENT OF INVALIDITY [Doc. Nos. 201, 179]

Presently before the Court is Plaintiff's motion to dismiss Defendants' counterclaims for declaratory judgment that Plaintiff's '874 patent is invalid and unenforceable. [Doc. No. 201.] For the reasons stated below, the Court GRANTS Plaintiff's motion and dismisses Defendants' counterclaims WITHOUT PREJUDICE. Accordingly, the Court also enters judgment of non-infringement and DENIES AS MOOT Defendants' pending motion for summary judgment of invalidity. [Doc. No.

BACKGROUND

At the outset of this litigation, Plaintiff alleged versions 2.X and 3.X of products manufactured and sold by Defendant DATAllegro infringed U.S. Patent No. 7,177,874 (the "'874 patent"). With their answer, Defendants filed counterclaims seeking declaratory judgment of non-infringement, invalidity, and unenforceability against Plaintiff. [Doc. No. 44.]

On April 1, 2011, the Court granted Defendants' motion for summary judgment of non-infringement. [Doc. No. 191.] Defendants' counterclaims for declaratory judgment of invalidity and unenforceability remain before the Court. On March 16, 2011, Defendants moved for summary judgment on their invalidity claim. [Doc. No. 179.] Defendants indicated during oral argument that they intend to pursue at trial their unenforceability claim. [See also Defs.' Opp'n to Pl.'s MTD, Doc. No. 208, at 2 ("Defendants intend to show at trial that Plaintiff's patent is also unenforceable . . . .").]

The accused DATAllegro product was discontinued in 2008. [Pl.'s MTD, Ex. 4, Microsoft Corp.'s Opp'n to Pl.'s Mot. to Compel, 11cv87, Doc. No. 8 ("Microsoft Opp'n"), at 6:15-17.] Mr. Frost no longer works at DATAllegro or its parent company, Microsoft, and there are no pending allegations that either Defendant is currently infringing the '874 patent or producing any products that could infringe that patent. [Pl.'s MTD, Ex. 4, Frost Dep., at 12:12-13:17.]

Plaintiff now moves to dismiss Defendants' counterclaims, arguing alternatively that (1) the Court's granting summary judgment of non-infringement eliminated any case or controversy between the parties, and thus divested the Court of subject-matter jurisdiction over Defendants' claims, or (2) the Court should exercise its broad discretion under the Declaratory Judgment Act and dismiss Defendants' counterclaims.

LEGAL STANDARD

"A declaratory action is available when the facts as alleged 'under all circumstances, show that there is a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of declaratory judgment.'" Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 556 F.3d 1294, 1297 (Fed. Cir. 2009) (quoting MedImmune v. Genentech, Inc., 549 U.S. 118, 127 (2007)). In assessing whether an actual controversy sufficient to establish jurisdiction over a claim for declaratory judgment exists, the Court must evaluate the totality of the circumstances "on the particular facts and relationships involved." Id.

"[A] case or controversy adequate to support jurisdiction of a declaratory judgment counterclaim necessarily exists if a party has actually been charged with infringement of a patent." Fort James Corp. v. Solo Cup Co., 412 F.3d 1340, 1348 (Fed. Cir. 2005). "[T]he actual controversy must be extant at all stages of review, not merely at the time the complaint is filed." Revolution Eyewear, 556 F.3d at 1297 (internal quotation marks and citations omitted). Counterclaims for invalidity and unenforceability "raise[] issues beyond the initial claim for infringement that are not disposed of by a decision of non-infringement." Fort James, 412 F.3d at 1348. Thus, a finding of non-infringement, leaving no possibility of liability pending a patentee's appeal, does not divest a district court of jurisdiction to hear those counterclaims. Id.

The Declaratory Judgment Act, however, "provides that a court 'may declare the rights and other legal relations of any interested party,' 28 U.S.C. § 2201(a) (emphasis added), not that it must do so." MedImmune, 549 U.S. at 136 (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995)). "This text has long been understood 'to confer on federal courts unique and substantial discretion in deciding whether to declare the rights of litigants.'" Id. (quoting Wilton, 515 U.S. at 286); see also Teva Pharm. USA, Inc. v. Novartis Pharm. Corp., 482 F.3d 1330, 1338 (Fed. Cir. 2007) ("[E]ven if there is an actual controversy, the district court is not required to exercise jurisdiction to address the merits of the action, as it retains discretion under the Act to decline declaratory judgment jurisdiction."); Nystrom v. TREX Co., Inc., 339 F.3d 1347, 1350-51 (Fed. Cir. 2003) ("We have previously held that a district court has discretion to dismiss a counterclaim alleging that a patent is invalid as moot where it finds no infringement.").

DISCUSSION

No one disputes that the Court had jurisdiction over Defendants' counterclaims for declaratory judgment when they were first filed. See Fort James, 412 F.3d at 1348. Because they "raise[] issues beyond the initial claim for infringement that are not disposed of by a decision of non-infringement," the Court retains subject-matter jurisdiction over Defendants' counterclaims. Id.

However, the Court has substantial discretion in deciding whether to assert jurisdiction over Defendants' counterclaims for declaratory judgment. MedImmune, 549 U.S. at 136. Here, judicial economy is best ...


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