Capella Photonics, Inc. v. Cisco Systems, Inc.

Filing 226

ORDER by Judge Edward M. Chen Granting 221 Plaintiff's Motion to Dismiss Without Prejudice. (emcsec, COURT STAFF) (Filed on 9/6/2019)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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CAPELLA PHOTONICS, INC.,
Plaintiff,

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United States District Court
Northern District of California

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Case No. 14-cv-03348-EMC
ORDER GRANTING PLAINTIFF’S
MOTION TO DISMISS WITHOUT
PREJUDICE

v.
CISCO SYSTEMS INC, et al.,

Docket No. 221

Defendants.

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Plaintiff Capella Photonics, Inc. brought patent infringement claims against four

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Defendants in the Southern District of Florida. Those cases were consolidated and transferred to

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the Northern District of California. In 2014, one of the Defendants filed a petition with the Patent

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Trial and Appeal Board seeking institution of inter partes review on the challenged claims. In

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March 2015, the Court stayed this case pending the PTAB’s IPR Proceedings, and after the claims

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were cancelled by the PTAB (an outcome affirmed by the Federal Circuit), this Court lifted the

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stay in June 2019. Plaintiff now brings a Motion to Dismiss Without Prejudice, challenging the

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Court’s subject matter jurisdiction and alleging that the claims are now moot. Defendants seek

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dismissal of Plaintiff’s claims with prejudice, summary judgment in favor of Defendants, and the

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awarding of statutory costs.

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I.

BACKGROUND

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According to Plaintiff, “Capella is a pioneer of optical switching technology used in

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optical transmission networks by the telephone, Internet, and cable television industries.” Motion

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to Dismiss (“MTD”) at 3. The company has “an extensive of [sic] portfolio of patents on optical

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switching devices.” Id. This case is a consolidated patent infringement case that was originally

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filed as several cases in the Southern District of Florida in 2014. See Docket No. 1; Docket No.

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111. Plaintiff “alleged that each respective Defendant infringed U.S. Patent Nos. RE42,368 (the

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‘‘368 Patent’) and RE42,678 (the ‘‘678 Patent’)[.]” Opposition to Motion to Stay or in the

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Alternative to Amend at 6, Docket No. 209. Plaintiff served infringement contentions on those

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patents, and Defendants served invalidity contentions. Id. On July 15, 2014, one of the

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Defendants filed a petition with the Patent Trial and Appeal Board (“PTAB”) seeking institution

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of inter partes review (“IPR”) proceedings on the then asserted claims. Id. In July 2014, the case

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was transferred to this Court. See Order Granting Defendants’ Motion to Transfer, Docket No. 77.

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In March 2015, the Court stayed this case pending the PTAB’s IPR Proceedings. Docket
No. 172. Between January 2016 and October 2016, it was determined that all of Plaintiff’s claims

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United States District Court
Northern District of California

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identified in its preliminary infringement contentions for the ‘368 and ‘678 patents were invalid.

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Motion to Stay or in the Alternative to Amend at 7 (“MTS”), Docket No. 205. The Federal Circuit

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affirmed that determination in February 2018. MTS at 7. Plaintiff then exhausted its appeals on

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November 5, 2018 when the Supreme Court denied its petition for writ of certiorari. Id. “On

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December 10, 2018, the PTO issued IPR certificates cancelling claims 1-6, 9-13 and 15-22 of the

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‘368 Patent and claims 1-4, 9, 10, 13, 17, 19-23, 27, 29, 44-46, 53 and 61-65 of the ‘678 Patent.”

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MTS at 17; Becker Declaration ¶ 11, Docket No. 205–1. Other claims of those patents were not

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adjudicated.

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Meanwhile, “[o]n June 29, 2018, before the PTO cancelled the challenged claims,”

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Plaintiff filed reissue applications. MTS at 7. Plaintiff asserts that the “[c]laims in these newly

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reissued patents that are substantially identical with the original claims will constitute a

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continuation of the original Reissue Patents-in-Suit and have effect continuously from their

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original date of issuance.” Id. at 2. Plaintiff asked the Court to extend the imposed stay until after

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a determination on the reissue application. On June 4, 2019, the Court denied Plaintiff’s Motion

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to Extend Stay and its subsequent request to amend its infringement contentions to include claims

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not brought in the IPR proceedings. Docket No. 219. The Court also denied Defendants’ motion

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to dismiss for failure to prosecute pursuant to Federal Rule of Civil Procedure 41(b). Id.

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Plaintiff now brings a Motion to Dismiss Actions Without Prejudice as Moot and for Lack
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of Jurisdiction (“MTD”). Docket No. 221. Plaintiff contends that “[a]s a result of the cancellation

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of all of Capella’s asserted patent claims and this Court’s subsequent rulings prohibiting Capella

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from adding new infringement claims of the Patents-in-Suit that have not been canceled, these

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actions are moot and the Court no longer has subject matter jurisdiction.” Id. at 3. It argues that

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“all pending claims and counterclaims . . . should be dismissed without prejudice for lack of

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subject matter jurisdiction/mootness.” MTD at 7. Defendants, on the other hand, believe that the

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matter should be dismissed with prejudice. Defendants’ Opposition to Motion to Dismiss

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(“Opposition”) at 1, Docket No. 223. Defendants request that the Court “deny Plaintiff’s motion

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and enter summary and/or final judgment in Defendants’ favor on Plaintiff’s infringement counts
pursuant to Federal Rules of Civil Procedure 54, 56, and/or 58 and award statutory costs to

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United States District Court
Northern District of California

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Defendants.” Id.
II.

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A.

DISCUSSION

Legal Standard
“A federal court lacks jurisdiction to hear a case that is moot.” Bishop Paiute Tribe v. Inyo

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Cty., 863 F.3d 1144, 1155 (9th Cir. 2017) (citing Foster v. Carson, 347 F.3d 742, 744 (9th Cir.

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2003)). “If there is no longer a possibility that an appellant can obtain relief for his claim, that

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claim is moot and must be dismissed for lack of jurisdiction.” Foster, 347 F.3d at 745 (citing

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Ruvalcaba v. City of L.A., 167 F.3d 514, 521 (9th Cir.1999)); see also Maya v. Centex Corp., 658

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F.3d 1060, 1067 (9th Cir. 2011) (The “lack of Article III standing requires dismissal for lack of

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subject matter jurisdiction . . . .” (emphasis removed)). In patent cases, “there is no bright-line

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rule for determining whether an action satisfies the case or controversy requirement”; instead a

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Court must evaluate whether “the dispute be definite and concrete, touching the legal relations of

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parties having adverse legal interests; and that it be real and substantial and admit of specific relief

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through a decree of a conclusive character, as distinguished from an opinion advising what the law

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would be upon a hypothetical state of facts.” Streck, Inc. v. Research & Diagnostic Sys., Inc., 665

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F.3d 1269, 1282 (Fed. Cir. 2012) (citing MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127

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(2007)).

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B.

Analysis

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1.

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The first question raised by this motion is whether Plaintiff’s claims are moot. Generally,

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when claims challenged in a patent infringement case are cancelled, the Plaintiff’s claims become

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moot. Put simply, “suits based on cancelled claims must be dismissed.” Fresenius USA, Inc. v.

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Baxter Int’l, Inc., 721 F.3d 1330, 1338 (Fed. Cir. 2013).

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Mootness

As the Federal Circuit noted in Mylan Pharm. Inc. v. Research Corp. Techs., Inc., 914 F.3d

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1366 (Fed. Cir. 2019), “there is no case or controversy regarding . . . cancelled claims.” Id. at

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1369 (citing Fresenius, 721 F.3d at 1347, and noting that in Fresenius the “litigation became moot
because of the cancellation of claims”); see also Target Training Int’l, Ltd. v. Extended Disc N.

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United States District Court
Northern District of California

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Am., Inc., 645 F. App’x 1018, 1023 (Fed. Cir. 2016) (“Fresenius makes clear that ‘when a claim is

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cancelled, the patentee loses any cause of action based on that claim, and any pending litigation in

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which the claims are asserted becomes moot.’”); SHFL Entm’t, Inc. v. DigiDeal Corp., 729 F.

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App’x 931, 934 (Fed. Cir. 2018) (quoting same language from Fresenius); Sanofi-Aventis U.S.,

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LLC v. Dr. Reddy's Labs., Inc., No. 2018-1804, 2019 WL 3807979, at *3 (Fed. Cir. Aug. 14,

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2019) (Federal Reporter citation not yet available) (quoting same language from Fresenius).

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Defendants cite Munchkin, Inc. v. Luv N’ Care, Ltd., No. CV 13-06787 JEM, 2018 WL

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7507424 (C.D. Cal. May 2, 2018) for the proposition that Fresenius “does not address subject

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matter jurisdiction.” id. at *2, and therefore that it does not support Plaintiff’s assertions of

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mootness. However, the Fresenius court did state—albeit in dicta—that “in general, when a claim

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is cancelled, the patentee loses any cause of action based on that claim, and any pending litigation

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in which the claims are asserted becomes moot.” Fresenius, 721 F.3d at 1340. In addition,

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Defendants’ argument ignores the numerous cases that have subsequently relied on Fresenius for

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the proposition that the cancellation of claims creates a mootness issue. As discussed above,

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where a claim is moot, it must be dismissed for lack of subject matter jurisdiction. See Foster, 347

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F.3d at 745; Maya, 658 F.3d at 1067.

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Defendants also attempt to distinguish Target Training. They argue that the case “is
unavailing because the mootness finding there was premised on the fact that Target Training,
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unlike Plaintiff here, never ‘sought to assert’ other claims in the patent-in-suit.” Opposition at 4.

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Conversely, in the instant case, Plaintiff has already attempted to “add claims from the Patents-in-

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Suit that have not been cancelled,” MTD at 1–2, and applied to have Plaintiff’s cancelled claims

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reissued, MTD at 5. But the Court has denied Plaintiff’s request to amend in claims which were

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not cancelled and which were not previously asserted. They are not part of this case. As to the

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asserted claims which were cancelled, “[u]pon reissue Capella will surrender the original Reissue

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Patents-in-Suit.” MTS at 2. Plaintiff will have to assert a newly reissued patent in a new suit if it

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seeks to enforce it. That does not alter the fact that this litigation is moot.

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Accordingly, the Court finds that Plaintiff’s claims have become moot and that the Court
therefore lacks jurisdiction over this case. As a result, it DISMISSES Plaintiff’s claims.

United States District Court
Northern District of California

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2.

Dismissal Without Prejudice

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Having determined that Plaintiff’s claims must be dismissed, the Court must also

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determine whether to dismiss the claims with or without prejudice. Plaintiff argues that the

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dismissal should be without prejudice, MTD at 1, while Defendants ask the Court to dismiss

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Plaintiff’s claims with prejudice, Opposition at 6. Generally, “dismissal for lack of jurisdiction is

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not a dismissal on the merits. Rather, the Supreme Court has specifically rejected deciding the

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merits of a case where the court lacks jurisdiction because jurisdiction is a threshold question, and

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‘without jurisdiction the court cannot proceed at all in any cause.’” Target Training, 645 F. App’x

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at 1025 (citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998)); Transp. Techs.,

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LLC v. Los Angeles Metro. Transportation Auth., No. CV 15-6423-RSWL-MRW, 2019 WL

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2058630, at *2 (C.D. Cal. May 8, 2019) (quoting the same language from Steel Co.); Puget

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Bioventures, LLC v. Biomet Orthopedics LLC, 325 F. Supp. 3d 899, 904 (N.D. Ind. 2018) (“The

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Court will therefore dismiss these moot allegations for lack of jurisdiction, without prejudice.”).

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In addition, “the law universally disfavors dismissing an action with prejudice based on lack of

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standing, and there is a strong presumption that such a dismissal is improper.” Univ. of Pittsburgh

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v. Varian Med. Sys., Inc., 569 F.3d 1328, 1333 (Fed. Cir. 2009).

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However, even cases dismissed for lack of standing are sometimes dismissed with

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prejudice. “Ordinarily, dismissal for lack of standing is without prejudice. On occasion, however,
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a dismissal with prejudice is appropriate, especially where it is plainly unlikely that the plaintiff

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will be able to cure the standing problem.” Fieldturf, Inc. v. Sw. Recreational Indus., Inc., 357

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F.3d 1266, 1269 (Fed. Cir. 2004) (internal quotation, citations, and brackets omitted). Indeed, in

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Kimberly-Clark Worldwide Inc. v. First Quality Baby Products LLC, Case No. 14-cv-1466, 2017

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WL 481434, (E.D. Wis. Jan. 1, 2017), cited by Defendants, the court found the case to be the “rare

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case where dismissal for lack of subject matter jurisdiction with prejudice is appropriate.” Id. at

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*2. Because the Kimberley-Clark Plaintiff “[would] not be able to cure that defect and bring

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subsequent actions involving the former . . . patent,” the court determined that the “Patent Claim

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[would] therefore be dismissed with prejudice.” Id. But as expressed at the hearing, the Court is

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concerned that dismissal with prejudice would have consequences, potentially on the entirety of

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United States District Court
Northern District of California

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the two patents at issue, including claims not adjudicated in this Court or before the PTAB. Its

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effect upon any enforcement of substantially similar claims in a reissued patent are not clear

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either. The Court is wary of inadvertently barring future actions that could otherwise have

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properly come before this Court or other courts. There is no justification to undertake the risk of

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such broad unintended consequences. As a result, the Court finds dismissal with prejudice to be

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improper.

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For that reason, the Court ORDERS that the dismissal of Plaintiff’s claims will be without

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prejudice.

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3.

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As noted in Plaintiff’s Motion to Dismiss, “one of the Defendants, Ciena, asserted

Defendant Ciena’s Counterclaims

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counterclaims seeking declaratory relief (non-infringement and invalidity) with respect to the

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Patents-in-Suit.” MTD at 4; see also Docket No. 155. Plaintiff urges that these claims “be

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dismissed without prejudice for lack of jurisdiction/mootness – as they seek declaratory relief

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directed to the validity and infringement of the ‘368 and ‘678 Patent claims . . . which have all

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been formally cancelled by the USPTO.” MTD at 4. And Defendant Ciena is in agreement:

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“Ciena respectfully requests that, if the Court enters the judgment requested above on Capella’s

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infringement counts, it also dismiss these counterclaims without prejudice pursuant to Fed. R. Civ.

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Pro. 41(a)(2).” Opposition at 5 (citing Fed. R. Civ. Pro. 41(c) (applying Rule 41 to
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counterclaims)).

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Consequently, the Court DISMISSES Defendant Ciena’s counterclaims without prejudice.

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4.

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Lastly, Defendants contend that they “are the prevailing party in these litigations,”

Prevailing Party Status and Statutory Costs

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Opposition at 5, and—as a result—they request that the Court “award statutory costs to

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Defendants,” Opposition at 1. Rule 54(d) of the Federal Rules of Civil Procedure states: “Unless

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a federal statute, these rules, or a court order provides otherwise, costs—other than attorney’s

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fees—should be allowed to the prevailing party.” Fed. R. Civ. Pro 54(d). Within the context of

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patent litigation, the law of the Federal Circuit determines prevailing party status. See Manildra
Mill. Corp. v. Ogilvie Mills, Inc., 76 F.3d 1178, 1181 (Fed. Cir. 1996). To be a prevailing party, a

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United States District Court
Northern District of California

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party must “at least . . . obtain a court order materially changing the legal relationship of the

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parties.” Raniere v. Microsoft Corp., 887 F.3d 1298, 1304 (Fed. Cir. 2018). This change must be

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marked by “judicial imprimatur,” such that there has been “a judicially sanctioned change in the

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legal relationship of the parties.” CRST Van Expedited, Inc. v. E.E.O.C., 136 S. Ct. 1642, 1646

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(2016) (internal quotations omitted) (quoting Buckhannon Bd. & Care Home, Inc. v. W. Virginia

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Dep't of Health & Human Res., 532 U.S. 598, 604–05 (2001)).

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In addition, “the Supreme Court recently clarified . . . that a defendant need not obtain a

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favorable judgment on the merits in order to be a prevailing party.” Raniere, 887 F.3d at 1304

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(citing CRST Van Expedited, Inc. v. E.E.O.C., 136 S. Ct. 1642, 1651 (2016)) (emphasis added). A

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district court’s dismissal with prejudice of a party’s infringement suit is “tantamount to a decision

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on the merits, making it sufficient to establish” who was the prevailing party. Raniere, 887 F.3d at

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1307. Conversely, “a plaintiff's voluntary dismissal without prejudice pursuant to Rule 41(a)(1)(i)

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does not bestow ‘prevailing party’ status upon the defendant.” RFR Indus., Inc. v. Century Steps,

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Inc., 477 F.3d 1348, 1353 (Fed. Cir. 2007). Where a Court dismisses a case without prejudice, the

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ruling is insufficient to confer prevailing party status; that is because dismissal without prejudice

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“does not constitute a change in the legal relationship of the parties because the plaintiff is free to

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refile its action.” Id.; see also Transp. Techs., 2019 WL 2058630, at *3 (“Defendant fails to cite

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any case, nor was the Court able to find any case, where a court granted prevailing party status to a
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defendant when the case was dismissed on jurisdictional grounds without prejudice.”). While the

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IPR proceedings before the PTAB did change the legal relationship between the parties, recovery

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of costs therein must be decided in those proceedings, not in this Court. Thus, the Court declines

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to bestow prevailing party status upon Defendants in this litigation.
III.

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CONCLUSION

For the foregoing reasons, the Court GRANTS Plaintiff’s Motion to Dismiss Plaintiffs’

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claims without prejudice. The Court DISMISSES Defendant Ciena’s counterclaims without

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prejudice. Finally, the Court DENIES Defendants’ request to be declared prevailing parties and,

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as a result, declines to award Defendants statutory costs.

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This order disposes of Docket No. 221.

United States District Court
Northern District of California

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IT IS SO ORDERED.

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Dated: September 6, 2019

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______________________________________
EDWARD M. CHEN
United States District Judge

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