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Square, Inc. v. Morales

United States District Court, Ninth Circuit

November 27, 2013

SQUARE, INC., Plaintiff,
v.
FERNANDO MORALES and JOHN DOE, efendants.

ORDER GRANTING MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION AND DENYING MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION Docket 16

SAUNDRA BROWN ARMSTRONG, District Judge.

Plaintiff Square, Inc. ("Square") brings this declaratory relief action against Defendant Fernando Morales ("Morales") seeking, among other things, a declaration of non-infringement and invalidity with respect to claim 6 of United States Patent No. 5, 872, 589 ("the '589 patent"). Compl., Dkt. 1. The parties are presently before the Court on Morales' motion to dismiss for lack of personal jurisdiction and motion to dismiss Square's third claim for relief for lack of subject matter jurisdiction. Dkt. 16. Square opposes the motions. Dkt. 42. Having read and considered the papers filed in connection with these matters and being fully informed, the Court hereby GRANTS Morales' motion to dismiss for lack of personal jurisdiction, and DENIES as moot Morales' motion to dismiss Square's third claim for relief for lack of subject matter jurisdiction, for the reasons stated below. The Court, in its discretion, finds these matters suitable for resolution without oral argument. See Fed.R.Civ.P. 78(b); N.D. Cal. Civ. L.R. 7-1(b).

I. BACKGROUND

A. Factual Background

Square is a California corporation with its principal place of business in San Francisco, California. Compl. ¶ 2. Square develops and manufactures software and hardware products and services that allow users to accept credit and debit card payments through their mobile devices. Id . ¶ 3. Among other offerings, Square develops and disseminates the Square Reader. Pl.'s Opp. at 1. By plugging a Square Reader into a mobile phone or tablet, individuals and businesses are able to accept credit and debit card payments. Id. at 1-2.

Morales is an individual who resides in Rancho Viejo, Texas. Compl. ¶ 5. Morales has developed a software application or "app" for use on Android mobile devices entitled "sos2facebook" or "sos2fb, " which he claims is protected by the '589 patent. Id . ¶ 14. The '589 patent, entitled "Interactive TV System for Mass. Media Distribution, " was issued to Morales on February 16, 1999 with Interactive Return Service, Inc. ("IRS") named as the assignee of the patent.[1] Id . ¶ 20.

On February 8, 2013, Morales traveled to Square's office in San Francisco and requested to speak with Square's General Counsel regarding Square's infringement of the '589 patent. See Compl. ¶¶ 10, 24; Morales Decl. ¶ 5, Dkt. 43-1. A security officer, however, denied Morales access to Square's office and its employees. Compl. ¶ 10. Before leaving Square's office, Morales provided the security officer with a photocopied sheet entitled "Square and Patent #5, 872, 589 claim #6, " which displayed a device resembling a Square Reader and language reciting claim 6 of the '589 patent. Id . Morales also gave the security officer a business card, which contains a reference to "S.O.S.2facebook" and states that "App protected by Patent # 5, 872, 589." Id.

Later that same day, Morales sent an email to Square asserting that it was infringing "Claim #6" of the '589 patent. Compl. ¶ 11. In this email, Morales requested to meet with a representative from Square's legal department before he returned to Texas the next morning to "discuss a win-win solution." Id . However, no meeting took place between Morales and any employee of Square on February 8, 2013.

After his unsuccessful attempt to meet with Square's legal counsel, Morales sent a series of emails to Square in March 2013 reiterating his allegation that Square infringes claim 6 of the '589 patent and attempting to "coerce" Square into accepting a business deal in exchange for settling his infringement claims. See Compl. ¶¶ 12, 26-29; Pl.'s Opp. at 3-4. According to Square, Morales has repeatedly accused Square of infringing claim 6 of the '589 patent, insisted on a business deal that would integrate and co-market his technology with Square's, requested exorbitant sums of cash and stock awards, imposed a deadline of March 31, 2013 for compliance with his demands, threatened an "ex parte TRO" to shut down use of Square's products, and has rebuffed overtures to discuss his contentions by phone. See id. ¶¶ 25-30; see also Pl.'s Opp. at 1, 3-4.

Square alleges that Morales has subjected himself to personal jurisdiction in the Northern District of California by traveling to San Francisco to threaten it with patent infringement, relying on local businesses to establish a business platform for exploiting his claimed technology, [2] attempting to license and/or sell his sos2facebook software application to Square in this district, [3] and by attempting to manipulate Square's software by updating his application to trigger the launch of Square's software when a user plugs in the Square Reader. See id. ¶¶ 13, 15-17; Pl.'s Opp. at 3.

B. Procedural History

On March 1, 2013, Square commenced the instant action against Morales alleging claims for: (1) declaratory judgment of non-infringement of claim 6 of the '589 patent; (2) declaratory judgment of invalidity of claim 6 of the '589 patent; and (3) declaratory judgment of patent ownership. See Compl. ¶¶ 31-42. According to Square, "this lawsuit is a direct result of Mr. Morales' claim that the Square Reader infringes [the '589 patent], his conduct in the lobby of Square's San Francisco headquarters, and his attempts to market his software through Square." Pl.'s Opp. at 1. By this action, Square seeks a declaration that it has not infringed and is not infringing claim 6 of the '589 patent, a declaration that claim 6 of the '589 patent is invalid, a declaration of the identity of the current owner of the '589 patent or that the '589 patent is no longer owned by any person or entity, and an award of attorneys' fees and costs. See Compl. at 8. The parties are now before the Court on Morales' motion to dismiss for lack of personal jurisdiction and motion to dismiss Square's third claim for relief for lack of subject matter jurisdiction. Dkt. 16. Square opposes the motions. Dkt. 42.

II. LEGAL ...


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