United States District Court, N.D. California
ORDER GRANTING IN PART DEFENDANTS' MOTIONS TO SEVER, TRANSFER, AND DISMISS (Docket Nos. 25, 26)
CLAUDIA WILKEN, District Judge.
Plaintiff Apple Inc. brought this action against Defendants Wi-LAN Inc. and Open Network Solutions, Inc. (ONS), seeking declaratory judgment of non-infringement, invalidity, and unenforceability of seven patents. Each Defendant moves to sever its case from that of the other Defendant, to transfer, and to dismiss certain claims. Plaintiff opposes the motions. After considering the parties' submissions and oral argument, the Court GRANTS Wi-LAN's motion (Docket No. 25) to sever and transfer and to dismiss one count with leave to amend; and GRANTS ONS's motion (Docket No. 26) to sever and to dismiss one count with leave to amend, and denies its motion to transfer.
The following facts are alleged in the amended complaint. Apple is a corporation located in Cupertino, California, which manufactures computers, mobile phones, tablets, portable digital media players, and other consumer electronics products.
Wi-LAN is a Canadian corporation with its principal place of business in Ottawa, Ontario, Canada. ONS is a wholly-owned subsidiary of Wi-LAN, incorporated in Delaware just five months ago. Both Wi-LAN and ONS are primarily in the business of acquiring and asserting patents.
Before Apple initiated this case, Wi-LAN had sued Apple four times: Wi-LAN Inc. v. Acer, Inc., et al., Case No. 2:07-cv-473 (E.D. Texas); Wi-LAN Inc. v. Apple Inc., Case No. 6:11-cv-453 (E.D. Texas); Wi-LAN Inc. v. Apple Inc., Case No. 6:12-cv-920 (E.D. Texas); and Wi-LAN USA, Inc. v. Apple Inc., Case No. 1:12-cv-24318 (S.D. Fla.). The case initially brought in the Southern District of Florida has since been transferred on Apple's motion to the Southern District of California,  where it has been assigned the case number 13-cv-798-DMS(BLM) (the 2013 CASD case).
On June 13, 2014, ONS sent a letter to Apple alleging that several Apple products, including Apple TV, the iPhone, the iPad, and the iPod Touch, "fall with[in] the scope of the claims" of the ONS patents-in-suit, and asking Apple to respond by June 27, 2014. Am. Compl. ¶ 18; Decl. Scarsi Ex. D (Docket No. 35-4) (ONS Notice Letter). On June 16, 2014, Wi-LAN sent an email to Apple alleging that various Apple products infringed the Wi-LAN patents-in-suit. Am. Compl. ¶ 15; Decl. Scarsi Ex. I (Docket No. 35-9).
Apple initiated this case on June 19, 2014, by filing its complaint against Wi-LAN; later that same day, Apple filed its amended complaint asserting claims against both Wi-LAN and ONS. On June 23, 2014, Wi-LAN sued Apple in the United States District Court for the Southern District of California, alleging infringement of the same five Wi-LAN patents that are at issue in this case. Wi-LAN, Inc. v. Apple Inc., No. 14-cv-1507-DMS(BLM) (S.D. Cal.) (the 2014 CASD case).
Wi-LAN moves (1) to sever Apple's claims against it from Apple's claims against ONS; (2) to transfer Apple's claims against it to the Southern District of California; and (3) to dismiss Apple's claim for unenforceability due to unclean hands for failure to state a claim upon which relief can be granted.
ONS moves (1) to dismiss Apple's claims against it for lack of declaratory judgment jurisdiction; (2) to dismiss Apple's claim for unenforceability due to unclean hands for failure to state a claim upon which relief may be granted; (3) to sever Apple's claims against it from Apple's claims against Wi-LAN; and (4) to transfer Apple's claims against it to the District of Delaware.
I. ONS's Motion to Dismiss for Lack of Declaratory Judgment Jurisdiction
ONS argues that, because it gave Apple until June 27, 2014, to respond to the ONS Notice Letter, there was no "substantial conflict" of "sufficient immediacy and reality" to create an actual controversy when Apple filed suit on June 19, 2014, and therefore, the Court lacks declaratory judgment jurisdiction.
The Declaratory Judgment Act provides, "In a case of actual controversy within its jurisdiction, any court of the United States... may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201. The "actual controversy" requirement of the Declaratory Judgment Act is the same as the "case or controversy" requirement of Article III of the United States Constitution. Teva Pharm. USA, Inc. v. Novartis Pharm. Corp. , 482 F.3d 1330, 1337 (Fed. Cir. 2007). The declaratory judgment plaintiff must establish that the "facts alleged under all the circumstances show that there is a substantial controversy between parties having adverse legal interests of sufficient immediacy and reality to warrant the issuance of declaratory judgment." Micron Tech., Inc. v. Mosaid Techs., Inc. , 518 F.3d 897, 901 (Fed. Cir. 2008) (citing MedImmune, Inc. v. Genentech, Inc. , 549 U.S. 118, 127 (2007)). In a patent case, "whether there has been potentially infringing activity or meaningful preparation to conduct potentially infringing activity remains an important element in the totality of circumstances which must be considered in determining whether a declaratory judgment is appropriate.'" Prasco, LLC v. Medicis Pharm. Corp. , 537 F.3d 1329, 1336 n.4 (Fed. Cir. 2008) (quoting Cat Tech LLC v. TubeMaster, Inc. , 528 F.3d 871, 880 (Fed. Cir. 2008)).
Here, the totality of the circumstances-specifically, ONS's history of recent litigation asserting infringement of the ONS patents-in-suit and the content of the ONS Notice Letter- demonstrates that there was an actual controversy when Apple filed this suit.
First, the ONS Notice Letter names several specific Apple products that it alleges "fall within the scope of the claims of the 476 and 259 patents, " ONS Notice Letter at 1, and there is no dispute that Apple has engaged in potentially infringing activity.
In addition, "the Federal Circuit and several other courts have held that a patentee's history of litigation with other parties is an appropriate factor for courts to consider in determining whether subject matter jurisdiction exists under the Declaratory Judgment Act." Pharmanet, Inc. v. DataSci LLC, 2009 U.S. Dist. LEXIS 11661, at *19 (D.N.J.) (citing, inter alia, Prasco , 537 F.3d at 1341)). Here, ONS acknowledges that between May 16, 2014, and June 19, 2014, the date on which Apple initiated this case, ONS filed sixteen suits in the District of Delaware alleging infringement of the ONS patents-in-suit.
District courts have found that notice letters similar to the ONS Notice Letter were sufficient to create an actual controversy. For example, in Pharmanet, the defendant's attorney sent the plaintiffs a letter that identified a patent that the defendant owned, offered to license that patent to the plaintiff, and provided a date by which the defendant expected the plaintiff to respond. 2009 U.S. Dist. LEXIS 11661, at *5-6. Rather than responding, the plaintiff filed suit seeking declaratory judgment of non-infringement and invalidity. Id . at 6-7. Notwithstanding the fact that the deadline in the defendant's notice letter had not passed when the lawsuit was filed, the district court found that it was "objectively reasonable for a reader to perceive that failure to respond by that date would result in the filing of an infringement suit against them." Id . at *27-28. Ultimately, the Pharmanet court held ...