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Dominion Assets LLC v. Masimo Corp.

United States District Court, N.D. California, San Jose Division

June 27, 2014

DOMINION ASSETS LLC, Plaintiff,
v.
MASIMO CORPORATION, et al., Defendants.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS FOR LACK OF STANDING [Re: ECF No. 68]

BETH LABSON FREEMAN, District Judge.

This is a lawsuit for patent infringement brought by plaintiff Dominion Assets LLC ("Plaintiff") on May 30, 2012. Almost a year and a half after its inception, defendants Masimo Corporation and Cercacor Laboratories, Inc. (collectively, "Defendants") seek to dismiss the case on the ground that Plaintiff lacked legal title to-and accordingly the legal standing to enforce- the patents-in-suit on the day Plaintiff filed the Complaint.[1] (Def.'s Mot. to Dismiss, ECF 68, 82)[2] Plaintiff and Defendants respectively filed timely opposition and reply. (Pl.'s Opp., ECF 77; Def.'s Reply ECF 85) On June 5, 2014, the Court heard oral argument on the motion, after which it took the matter under submission. Having carefully considered the parties' written submissions and oral argument of counsel, for the reasons stated below, the Court GRANTS Defendants' Motion to Dismiss without leave to amend.

I. BACKGROUND

On May 30, 2012, Plaintiff filed the instant lawsuit, alleging that Defendants infringe three of its patents directed toward methods of non-invasively determining blood analyte (constituent) concentration: U.S. Patent Nos. 5, 379, 764 (the "764 Patent"), and 5, 460, 177 (the "177 Patent") (collectively, "patents-in-suit").[3] (Compl. ¶ 1, ECF 1) The patents-in-suit identify Diasense, Inc. as the assignee. ( Id. Exhs. A-C) Plaintiff alleges that it holds the title to each patent by assignment from Diasense, including "the right to sue for past, present and future damages." (Compl. ¶¶ 12-14) Although Defendants do not admit the truth of this allegation, the present motion to dismiss centers on what Plaintiff did with its patent rights after it allegedly obtained title from Diasense.

Based on documents unearthed in discovery, it appears that in 2010 Plaintiff entered into an agreement with third party Acacia Patent Acquisition LLC ("Acacia" or "APAC") for the purpose of monetizing the patents-in-suit ("Assignment Agreement"). (Decl. of Irfan A. Lateef Exh. 14, ECF 83 (hereinafter "Assignment Ag."); see also Pl.'s Opp. 1:14-15; Decl. of Keith Keeling ¶ 4, ECF 79) The Assignment Agreement, signed on December 10, 2010, identifies Plaintiff, the assignor, as the "sole and exclusive owner of the U.S. Patents listed in Exhibit A" and explains that "Assignor desires to sell to APAC all of Assignor's right, title and interest in and to the Patents." (Assignment Ag., at 1) The patents-in-suit are all listed in Exhibit A to the agreement and fall within the agreement's definition of "Patents." ( Id., at 12)

With respect to the assignment of patent rights, the Assignment Agreement states:

Effective immediately upon the date of Acceptable Completion as set forth in Section 1.3 below, Assignor assigns, conveys, transfers and sells to APAC, or APAC's designated Affiliate (as defined below) if APAC transfers or assigns its interest in this Agreement per Section 9.2 herein, the entire right, title, and interest in and to the Patents, including without limitation, all rights of Assignor to sue for past, present and future infringement of the Patents.... Assignor shall execute and deliver to APAC (or APAC's designated Affiliate) a separate Assignment, which is attached hereto as Exhibit B, and such other documents as APAC (or APAC's designated Affiliate) shall reasonably require in order to comply with the terms set forth in this Agreement.

( Id. § 1.1) Section 1.3 provides that Acacia must, after a short diligence period, notify Plaintiff in writing of "Acceptable Completion" in order for the Assignment Agreement to continue in full force. ( Id. § 1.3) Exhibit B to the agreement is titled "Assignment, " and notes at the bottom that the documents is "For USPTO Recording." ( Id., at 14) Additionally, the agreement contains a survival clause, which states: "Upon termination of this Agreement, the rights granted to APAC shall automatically terminate and such rights shall revert to Assignor." ( id. § 9.7)

After executing the Assignment Agreement, Acacia provided notice of Acceptable Completion on December 17, 2010. (Lateef Decl. Exhs. 19, 21, ECF 83-5, 83-7)[4] Around that time, the contracting parties also discussed executing the separate assignment in Exhibit B, but Acacia's Business Development Manager, Michael Zhang, told Plaintiff's Managing Director, Keith Keeling, to "hold off on that part as we will provide an updated copy when the time is appropriate." (Lateef Decl. Exh. 30, ECF 83-14) Exhibit B was never executed. (Keeling Decl. ¶ 5; see also Pl.'s Opp. 3 n.4)

Approximately fifteen months later, on March 30, 2012, Plaintiff informed Acacia in writing that it was "terminating the agreement effective immediately." (Lateef Decl. Exhs. 15, 16, ECF 83-1, 83-2) The stated reason for this termination was Acacia's failure to "enforce[] the patents subject to the agreement or [make] any progress to monetize the patents." ( id.; see also Keeling Decl. ¶¶ 6-7) Acacia's response to this termination letter is unclear, as there is a gap in the documentary record from March 30 to about April 26, 2012. To fill this gap, Plaintiff submitted a declaration from Mr. Keeling testifying that "[i]n April and May 2012, Acacia agreed to terminate and discontinue performance under the Agreement." (Keeling Decl. ¶ 8; see also Lateef Decl. Exh. 24, at 253:15-254:3, Apr. 15, 2014, ECF 83-9 (hereinafter "Keeling Dep.")) Plaintiff also submitted a declaration from Darren Miller, Acacia's Vice President of Contracts, stating:

In April and May of 2012, Acacia considered its options regarding its relationship with Dominion in light of Mr. Keeling's March 30, 2012 notice of termination. Based on that notice and the discussions that followed, by May 30, 2012, Acacia determined that Dominion had no desire for Acacia to continue its performance under the agreement and Acacia complied with the request.

(Decl. of Darren Miller ¶ 3, ECF 80)

What is clear is that on April 30, 2012, Mr. Zhang sent to Mr. Keeling, by email, "our language for terminating our original assignment agreement." (Lateef Decl. Exh. 20, ECF 83-6) The proposed termination language included provisions for Plaintiff's acceptance of encumbrances placed on the covered patents, (Lateef Decl. Exh. 18, § 1.3, ECF 83-4), as well as Plaintiff's release of all claims against Acacia relating to the underlying assignment agreement, the encumbrances, and the covered patents, ( id. §§ 2.1-2.2). Plaintiff did not sign Acacia's proposed termination agreement due to these additional provisions requested by Acacia, (Keeling Decl. ¶ 8), and the contracting parties scheduled a conference call for May 30, 2012 in order to "discuss any questions you may have on the termination language." (Lateef Decl. Exh. 20) On May 30, 2012, Plaintiff filed the instant lawsuit. ( see Compl.)

It was not until almost two years later that Plaintiff and Acacia finally executed a written "Termination and Assignment Agreement." (Lateef Decl. Exh. 28, ECF 83-13 (hereinafter "Term. Ag.")) The Termination Agreement purports to terminate the underlying assignment agreement "[a]s of the Effective Date, " ( id. § 1.1), which is defined as "the date on which the last Party executes this Agreement below, " ( id., at 1). Plaintiff signed the Termination Agreement on April 14, 2014 and Acacia signed on April 18, 2014, making that agreement effective on the latter date. ( Id., at 3) The assignment back provision states that Acacia, as assignor: hereby does transfer and assign unto Dominion all of Assignor's rights, obligations and interests in and to the Returned Patents including, without limitation, all rights of Assignor to sue for and collect past, present, and future damages and the right to all past, present, and future claims or causes of action for damages or equitable relief for infringement of the Returned Patents, subject to any and all Encumbrances.

( Id. § 1.2) The "Returned Patents" are identified in Exhibit A to the Termination Agreement, which lists the patents-in-suit. ( Id., at 4) Additional provisions provide for Plaintiff's acceptance of encumbrances placed on the Returned Patents, including "those granted to Oracle Corporation, Microsoft Corporation and Samsung Electronics Co., Ltd., " ( id. § 1.3), as well as Plaintiff's release of all claims against Acacia relating to the underlying assignment agreement, the encumbrances, and the Returned Patents, ( id. §§ 2.1-2.3).

II. LEGAL STANDARDS

A. Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(1)

On a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1), the burden is on the plaintiff, as the party asserting jurisdiction, to establish that subject matter jurisdiction exists. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A jurisdictional challenge may be either facial or factual. White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). A facial challenge asserts that even if assumed true, "the allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction." Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). By contrast, "a factual attack... disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction." Id. ...


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