MEMORANDUM AND ORDER RE: AND RELATED COUNTERCLAIMS.
Plaintiff Technology Licensing Corporation ("TLC") brought this action against defendant Technicolor USA, Inc. ("Technicolor"), for patent infringement. Technicolor then brought several counterclaims. TLC now moves to dismiss Technicolor's counterclaims pursuant to Federal Rule of Civil Procedure 12(b)(1) on the ground that the court does not have subject matter jurisdiction.
I. Factual and Procedural Background
TLC owns U.S. Patent Nos. Re. 40,411 (the "'411 patent") and Re. 40,412 (the "'412 patent"), which are July 1, 2008, reissues of U.S. Patent Nos. 5,754,250 and 5,486,869, respectively. (Third Am. Compl. ("TAC") ¶¶ 4, 6-8, Exs. A-D (Docket No. 317).) The '411 patent comprises "a method and apparatus for identifying and separating the synchronizing signal component of video like signals by identifying or detecting the arrangement or sequence of the known occurances [sic] of events or patterns of the sync" and the '412 patent "provides a synchronizing signal separation." (Id. Ex. A at 1, Ex. C at 1.)
On March 28, 2011, TLC filed a Notice of Acceptance of Technicolor's Rule 68 Offer of Judgment, (Docket No. 326), and the Clerk entered judgment on TLC's claims accordingly. (Docket No. 327.) The case was administratively closed despite Technicolor's remaining counterclaims: declaratory judgment of non-infringement, declaratory judgment of patent invalidity, and breach of a covenant made in a previous settlement agreement not to sue. (Docket No. 318.) Technicolor moved to reopen the case, which the court granted. (Docket No. 332.) Technicolor agrees that its claim for declaratory judgment of non-infringement was extinguished by the Rule 68 Offer of Judgment, but wishes to proceed on its two remaining counterclaims.
TLC has clarified that it understood the Rule 68 judgment to include its release of all asserted claims against Technicolor, and offers the following covenant not to sue: "TLC unconditionally agrees not to sue Technicolor USA, Inc. for infringement as to any claim of the patents-in-suit based upon the products currently manufactured and sold by Technicolor USA, Inc." (TLC's Resp. to Technicolor's Ex Parte Mot. to Reopen the Case at 4:16-18 ("Resp. to Ex Parte Mot.") (Docket No. 330).)
A. Effect of Rule 68 Judgment "Because a Rule 68 judgment is the product of an agreement between the parties, the parties define the scope of the judgment." Scosche Indus., Inc. v. Visor Gear Inc., 121 F.3d 675, 678 (Fed. Cir. 1997); see Fed. R. Civ. P. 68. Here, TLC's acceptance of Technicolor's Offer of Judgment stated that TLC accepted "in full compromise of all claims by [TLC] asserted against [Technicolor]." (TLC's Notice of Acceptance at 2:1-5.)
TLC apparently believed that, in accepting the Offer of Judgment, a final judgment would be entered on all claims. That understanding was certainly not unreasonable. Under the Rules, the term "judgment" refers to "any order from which an appeal lies." Fed. R. Civ. P. 54(a). A judgment is generally entered only when "all the claims and all the parties' rights and liabilities" are adjudged unless the court expressly determines that judgment should be entered as to fewer than all the claims. Fed. R. Civ. P. 54(b) (emphasis added). Thus, TLC had every reason to believe that its acceptance of the Offer of Judgment would dispose of the entire case.
Nevertheless, the court must interpret the Rule 68 judgment "according to general principles of contract law," limiting the scope of the judgment to its terms. Scosche, 121 F.3d at 678. In Scosche, the court reviewed the Offer of Judgment to determine the intent of the parties, finding that the judgment was limited to "satisfy[ing] Visor Gear's claim of infringement with respect to all allegedly infringing Scosche products up to the date of the judgment." Scosche, 121 F.3d at 678 (emphasis added). Thus, because the threat of future suit remained, Visor Gear's acceptance of the Offer of Judgment on its patent infringement claim did not extinguish Scosche's claim for declaratory judgment of patent invalidity.
In the instant action, it is clear from the plain language of TLC's Notice of Acceptance that the Rule 68 judgment applied only to "claims by [TLC] asserted against [Technicolor]." (TLC's Notice of Acceptance at 2:1-5 (emphasis added).)
Thus, the Rule 68 judgment by itself did not extend to counterclaims by Technicolor asserted against TLC, and the court must consider whether it retains subject matter jurisdiction over those counterclaims.
B. Declaratory Judgment of Patent Invalidity Claim "Federal courts are courts of limited jurisdiction.
They possess only that power authorized by Constitution and statute." Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Article III of the United States Constitution limits the power of the federal judiciary to "cases" and "controversies." U.S. Const. art. III § 2. "The requirement of actual controversy encompasses concepts such as ripeness, standing, and the prohibition against advisory judicial rulings . . . ." BP Chems. Ltd. v. Union Carbide ...