Google Inc. v. Eolas Technologies Inc.

          ORDER GRANTING MOTION TO DISMISS AS MODIFIED Re: ECF, 37

          JON S. TIGAR JUDGE

         Before the Court is Defendant Eolas Technologies, Inc.'s Motion to Dismiss. The Court will stay the case in light of a previously filed case in another district, and therefore grants the motion as modified.

         I. BACKGROUND

         A. Factual Background

         1. The Parties and the Patent-in-Issue

         Plaintiff Google Inc. ("Google") sues Defendant Eolas Technologies Incorporated ("Eolas") for a declaratory judgment of non-infringement of U.S. Patent No. 9, 195, 507 ("the ‘507 patenf), which Eolas owns. ECF No. 27 ¶ 1. The ‘507 patent involves methods of running applications on a distributed hypermedia computer network. Id ¶ 22. As Google explains it, these are methods that allow users to interact with online video, music or audio clips, Internet search features, and maps and embedded applications in a browser. Id ¶ 20.

         Google is incorporated in Delaware, with its principal place of business in California. Id ¶ 7. Eolas was incorporated in California between 1994 and 1999, but it has been incorporated and had its principal place of business in Texas since 2009. ECF No. 37-5 ¶¶ 3-4. Google alleges that Eolas was founded in California in 1994 to help commercialize an invention conceived at the University of California, San Francisco. ECF 53-3 at 8-9. The Regents of the University of California ("the Regents") was the initial owner of the patent application for the invention. ECF No. 27 ¶ 11. The Regents is a resident of California. Id In 1995, Eolas and the Regents entered into an exclusive patent license agreement ("Exclusive License Agreement, " as amended in 2009), whereby the Regents granted an exclusive license to Eolas to the patent application and "any reissues, extensions, substitutions, continuations, divisions and continuations-in-part" based on and including any subject matter claim in or covered by that application. ECF No. 53-13 at 8, 10.

         The Exclusive License Agreement imposed many continuing obligations on Eolas, including marketing and sale of patents, joint prosecution and defense of patent-related actions, indemnification of the Regents, regular recordkeeping, bookkeeping, accounting, and reporting to the Regents for patent-related activities, the payment of patent royalties to the Regents, and a duty of due diligence in all patent-related activities. Id at 10, 13-17, 20-21, 23-26. On October 9, 2015, Eolas and the Regents entered into a patent assignment agreement ("the Assignment "), under which the Regents assigned to Eolas certain patents and patent applications, and "all divisions, continuations, continuations-in-part, extensions, reissues and renewals" of such patents and patent applications, and "all United States and foreign patents which may be granted" on the patent applications. ECF No. 37-5 at 19. The Assignment explicitly terminated the Exclusive License Agreement. Id at 14.

         The patents and patent applications specifically mentioned in the Assignment are Patents Nos. 5, 838, 906 ("the ‘906 patent "), 7, 599, 985 ("the ‘985 patent "), 8, 086, 662 ("the ‘662 patent "), and 8, 082, 293 ("the ‘293 patent "), as well as U.S. Patent Application No. 13/292, 434, from which the ‘507 patent eventually issued on November 24, 2015. Id at 21-22. Google alleges that the ‘906, the ‘985, the ‘293, the ‘662, and the ‘507 patents are all directed to running applications on a distributed hypermedia computer. ECF No. 27 ¶¶ 19-22. According to Google, these patents are all related because they all issued as continuations of a single patent application, United States Patent Application No. 08/324, 443 ("the ‘443 application"). Id

         Under the Assignment, the "purchase price" of the patent rights is listed as five percent of net revenues received pursuant to each license agreement that Eolas secures with third parties, which Eolas shall pay to the Regents on a calendar quarter basis. ECF No. 37-5 at 7. Like the Exclusive License Agreement, the Assignment imposed continuing obligations upon Eolas and the Regents. These obligations include: (1) keeping accurate books and records accounting for all the amounts due from Eolas to the Regents, and maintaining "sufficient supporting documentation to substantiate the accuracy" of the payments due to the Regents; (2) making these books and records available for inspection by the Regents in order for the Regents to assess and determine Eolas' compliance with the terms of the Assignment; (3) requirements for the Regents to cooperate with Eolas in the enforcement, litigation, and licensing of the patents assigned; (4) Eolas' obligation to provide counsel to the Regents should the Regents be named as a defendant in non-infringement declaratory suits; (5) Eolas' obligation to notify the Regents of any licenses granted by Eolas to third parties (Article 3.7); (6) Eolas' obligation to exercise due diligence and reasonable efforts to enter into license agreements; and (7) requirements that Eolas indemnify and hold harmless the Regents. Id at 6-7, 8, 11, 12. The Assignment also explicitly selects California law as the governing law. Id at 13-14.

         In February 2016, after Google had commenced this action, Eolas and the Regents executed the First Amendment to Patent Assignment Agreement ("the Amendmenf), which materially modified the Assignment. ECF No. 37-6. First, the Amendment removed Eolas' obligation to exercise due diligence and reasonable efforts to enter into license agreements with third parties. Id at 2. Second, it removed the requirement that Eolas provide reports of the payments due the Regents. Id Third, the Amendment removed the provision that selected California law as the governing law. Id Lastly, it modified the Regents' obligation to cooperate with Eolas' efforts to enforce, litigate, and license the patents assigned. Id Article 4 ("the Cooperation; Expenses article") read:

4.1 In aid of the assignment . . . The Regents will provide assistance to Eolas from time-to-time [sic], as requested at Eolas' expense for out of pocket costs, unless otherwise specified elsewhere in this Agreement, in:

4.1.1 Locating and providing copies of documents which relate to the Patent Rights that are reasonably requested by Eolas in connection with efforts to enforce the Patent Rights; . . .

4.1.4 Cooperating in any litigation or licensing relating to the Patents by causing its employees and, to the extent reasonably feasible, former employees to execute and deliver documents and provide support and testimony relating to the Patents with representation for such employees and former employees to be provided by Eolas.

ECF No. 37-5 at 6-7.

         Under the Amendment, Article 4 now reads:

4.1 In the event that The Regents provide assistance to Eolas in:

4.1.1 locating and providing copies of documents which relate to the Patent Rights in connection with efforts to enforce the Patent Rights;

4. executing and delivering any additional documents which are reasonably required in order to effectuate and perfect the assignment accomplished by this Agreement; and

5. 4.1.3 any litigation or licensing relating to the Patents; then Eolas shall pay to The Regents expenses for ...