Powertech Technology Inc v. Tessera Inc

Filing 60

ORDER by Judge Claudia Wilken GRANTING 14 Defendant's Motion to Dismiss for Lack of Jurisdiction (cwlc2, COURT STAFF) (Filed on 6/1/2010)

1 2 3 4 5 6 7 8 9 10 United United States District Court For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 v. TESSERA, INC.,

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA POWERTECH TECHNOLOGY INC., Plaintiff, No. 10-00945 CW ORDER GRANTING DEFENDANT'S MOTION TO DISMISS (Docket No. 14)

Defendant.

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In this declaratory judgment action, Plaintiff Powertech Technology Inc. (PTI) seeks declarations of non-infringement and invalidity of Defendant Tessera, Inc.'s United States Patent No. 5,663,106 ('106 patent). Tessera moves to dismiss the action for PTI opposes the motion.

lack of subject matter jurisdiction.

Tessera objects to evidence submitted by PTI in support of its opposition. The motion was heard on May 13, 2010. Having

considered oral argument and the papers submitted by the parties, the Court GRANTS Tessera's Motion to Dismiss. are OVERRULED as moot. BACKGROUND The following allegations are contained in PTI's complaint. PTI, a corporation organized under the laws of Taiwan, contracts with manufacturers to package semiconductor chips. packages the chips in various layouts, including the stacked window-BGA (wBGA) and mold-type micro-BGA (BGA) formats. After PTI Tessera's objections

they are packaged, PTI returns the chips to the manufacturer, which then markets and sells them world-wide. Some of these packaged-

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chip products are imported into the United States. On or about October 20, 2003, PTI and Tessera entered into a licensing agreement, which includes the '106 patent. Under the

agreement, PTI pays Tessera royalties and provides royalty reports for all packaged chips covered by the licensed patents. On December 7, 2007, Tessera initiated actions before the International Trade Commission (ITC) and the United States District Court for the Eastern District of Texas,1 alleging that various chip manufacturers infringe, among others, its '106 patent. of these manufacturers are PTI's customers. Some

The district court

stayed its proceedings pending resolution of the ITC investigation. On August 28, 2009, the administrative law judge (ALJ) presiding over the ITC investigation issued an initial determination, concluding that the accused wBGA and BGA products do not infringe the '106 patent. The ALJ, however, did not find

that the chip manufacturers met their burden to prove invalidity. Tessera petitioned the ITC for review of the ALJ's findings. The ITC issued its final determination on December 29, 2009. Among other things, it concluded that the accused wBGA products do not infringe the '106 patent. Tessera has appealed this decision

to the Court of Appeals for the Federal Circuit. On February 23, 2010, PTI paid royalties for wBGA products to Tessera as required by the licensing agreement. However, PTI made

the payment "under protest" because it believes that the ITC The ITC investigation is captioned, In re Certain Semiconductor Chips With Minimized Package Size and Products Containing Same, Inv. No. 337-TA-630. The district court action is Tessera, Inc. v. A-DATA Tech. Co., No. 2:07-cv-534 (E.D. Tex.). 2
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decision demonstrates that the wBGA products are not covered by any of Tessera's licensed patents and that, as a result, it does not owe any royalties for wBGA products. Compl. ¶ 14.

PTI now seeks declarations that its "wBGA packaging services have not and do not infringe" the '106 patent and that the patent is invalid. Compl. ¶¶ 16 and 17. Tessera contends that PTI cannot

maintain its declaratory judgment action because PTI fails to present a justiciable controversy. LEGAL STANDARD Subject matter jurisdiction is a threshold issue which goes to the power of the court to hear the case. Federal subject matter GAF

jurisdiction must exist at the time the action is commenced.

Building Materials Corp. v. Elk Corp. of Dallas, 90 F.3d 479, 483 (Fed. Cir. 1996). To sustain subject matter jurisdiction in the

declaratory judgment context, an "actual controversy" must exist. Janssen Pharmaceutica, N.V. v. Apotex, Inc., 540 F.3d 1353, 1359 (Fed. Cir. 2008). When such a controversy is lacking, dismissal is

appropriate under Rule 12(b)(1) because the district court lacks subject matter jurisdiction over the claim. 12(b)(1). BACKGROUND The Declaratory Judgment Act permits a federal court to "declare the rights and other legal relations" of parties to "a case of actual controversy." 28 U.S.C. § 2201. The "actual Fed. R. Civ. P.

controversy" requirement of the 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 3

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F.3d 1330, 1337 (Fed. Cir. 2007).

Before passage of the Act,

"competitors were victimized by patent owners who engaged in extrajudicial patent enforcement with scare-the-customer-and-run tactics that infected the competitive environment of the business community with uncertainty and insecurity and that rendered competitors helpless and immobile so long as the patent owner refused to sue." Id. at 1336 n.2 (citations, internal quotation The Act "was intended `to prevent

and editing marks omitted).

avoidable damages from being incurred by a person uncertain of his rights and threatened with damage by delayed adjudication.'" Tech LLC v. Tubemaster, Inc., 528 F.3d 871, 879-80 (Fed. Cir. 2008). Exercise of declaratory judgment jurisdiction is Id. at 883. Cat

discretionary.

Until relatively recently, the Federal Circuit required that, in order to prove an actual controversy, a plaintiff had to establish that the defendant's conduct created an objectively "reasonable apprehension" that the defendant would initiate suit imminently if the plaintiff continued the allegedly infringing activity. See Teva, 482 F.3d at 1334-36. In MedImmune, Inc. v.

Genentech, Inc., however, the Supreme Court noted that the Federal Circuit's "reasonable apprehension of imminent suit" test conflicted with several cases in which the Supreme Court had found that a declaratory judgment plaintiff had a justiciable controversy. 549 U.S. 118, 132 n.11 (2007). The Supreme Court

instructed that, although there is no bright-line rule for distinguishing cases that satisfy the actual controversy requirement from those that do not, all that is required is 4

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that the dispute be definite and concrete, touching the legal relations of parties having adverse legal interests; and that it be real and substantial and admit of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts. . . . Basically, the question in each case is whether 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 a declaratory judgment. Id. at 127 (citations and internal quotation marks omitted). Following MedImmune, the Federal Circuit recognized that the Supreme Court did not approve of its reasonable apprehension of imminent suit test. SanDisk Corp. v. STMicroelectronics, Inc., 480 The

F.3d 1372, 1380 (Fed. Cir. 2007); Teva, 482 F.3d at 1340.

Federal Circuit discarded its "reasonable apprehension" requirement in favor of MedImmune's "all circumstances" test. Teva, 482 F.3d

at 1339 ("[W]e follow MedImmune's teaching to look at `all the circumstances' . . . to determine whether Teva has a justiciable Article III controversy."). Whether a declaratory judgment action is justiciable depends "on the application of the principles of declaratory judgment jurisdiction to the facts and circumstances of each case." SanDisk, 480 F.3d at 1381. Considering all of the circumstances, the Court finds that PTI has not established a controversy of sufficient immediacy to warrant a declaratory judgment action. PTI maintains that it faces

an imminent threat of injury based on the ITC investigation and the infringement suit initiated by Tessera against PTI's customers. However, even though Tessera has asserted the '106 patent against 5

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PTI's customers, PTI has neither alleged facts nor presented evidence to show that these actions are based on its wBGA products. PTI's products are manufactured pursuant to a license with Tessera, which has explicitly excluded licensed products from its enforcement actions.2 PTI offers no evidence to support its

position that its products are at issue, notwithstanding Tessera's disclaimer.3 Indeed, PTI concedes that "the named respondents and

defendants in Tessera's suits may obtain products from other sources in addition to PTI." Opp'n at 9 n.6. This concession is

consistent with Tessera's disclaimer, in that the enforcement actions arise from the chip manufacturers' sale and importation of products not produced by PTI. PTI fails to carry its burden to

show that the actions taken against its customers create an actual controversy upon which its declaratory judgment action can be based. PTI likewise fails to allege an actual controversy arising from the parties' licensing agreement. PTI pleads that it "does

not believe that [its] wBGA products are covered by any licensed Tessera patent, and therefore, the royalties are not owed on PTI's

In the ITC complaint, Tessera states, "To the extent that any Accused Product is found to be properly licensed (through the Limited Tape Licenses or otherwise) under Tessera's patents, Tessera does not intend to bring -- nor should Tessera be construed to have brought -- any such Accused Product(s) within the scope of the present Investigation." Weatherwax Decl., Ex. 4 ¶ 9. At the hearing, Tessera repeated this disclaimer in open court and stated that it would amend its patent infringement complaint filed in the Eastern District of Texas to include similar language. PTI asserts that the Court can infer that PTI packaged the BGA products accused in the ITC investigation. This is immaterial because wBGA, not BGA, products are at issue in this action. 6
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wBGA products."

Compl. ¶ 14.

However, under the licensing

agreement's unambiguous terms, PTI's obligation to pay royalties does not turn on whether its products are covered by the '106 patent. To argue the contrary, PTI cites its obligation to pay

royalties for "TCC Licensed Products sold by Licensee hereunder," asserting that "hereunder" somehow refers to a requirement that the products be covered by the patents addressed in the licensing agreement. Opp'n at 14 (emphasis in original). The agreement's

language is not reasonably susceptible of this interpretation. "Hereunder" means "[i]n accordance with this document." Black's

Law Dictionary 796 (9th ed. 2009); see also Mediterranean Enters., Inc. v. Sanyong Corp., 708 F.2d 1458, 1464 (9th Cir. 1983) ("We interpret `arising under' as synonymous with `arising under the Agreement.'"). Thus, the language PTI cites merely requires it to

pay royalties on TCC Licensed Products sold in accordance with the agreement. Even when read with other language in the agreement,

"hereunder" does not tie PTI's payment obligation to coverage by Tessera's patents. To support its reading, PTI cites the declaration of Duh-Kung Tsai, its chairman, who states that, during negotiations, PTI understood that the agreement addressed products covered by Tessera's patents. Even if the agreement language were reasonably

susceptible of PTI's interpretation and the Court admitted parol evidence, Tsai's declaration would be irrelevant. assert that he took part in the negotiations. He does not

Nor does he offer

evidence that such a belief was expressed to Tessera at the time the parties executed the agreement. 7 See Shaw v. Regents of Univ.

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of Cal., 58 Cal. App. 4th 44, 55 (1997) ("The true intent of a contracting party is irrelevant if it remains unexpressed.") MedImmune, upon which PTI relies heavily, is distinguishable on the facts. There, the petitioner and the respondent entered

into a licensing agreement, which covered an existing patent and an invention claimed in a then-pending patent application. at 121. 549 U.S.

The petitioner agreed to pay royalties in exchange for the Id. Such products

right to make, use and sell licensed products.

were defined as those manufactured, used or sold which "if not licensed under the Agreement, infringe one or more claims of either or both of the covered patents, which have neither expired nor been held invalid by a court or other body of competent jurisdiction from which no appeal has been or may be taken." Id. After the

above-mentioned application ripened into a patent, the respondent notified the petitioner that one of its drugs was covered by the new patent and that royalties were therefore due. Id. The

petitioner believed that its drug did not infringe the patent and, as a result, royalties were not due. Id. Fearing an infringement

action, the petitioner nevertheless paid the demanded royalties "under protest" and sought a declaratory judgment. Id. at 122.

Here, as already noted, PTI's obligation to pay royalties is not based on a finding of infringement. Moreover, unlike in

Medimmune, it is not apparent that the '106 patent singularly precludes PTI from distributing its wBGA products. The

declarations of non-infringement and invalidity sought by PTI would not necessarily enable it to sell its wBGA products without

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maintaining its license from Tessera.4

PTI has not shown that the

resolution of its allegations against the '106 patent would redress any imminent injury and materially alter the status quo. Even if PTI established an actual controversy, the Court, in the exercise of its discretion, would decline to hear the case. Tessera's suit in the Eastern District of Texas against PTI's customers, which was filed in 2007, addresses the '106 patent. However, that litigation is stayed pending the ITC proceedings. an actual controversy existed between PTI and Tessera because of this litigation, the interests of judicial efficiency would favor hearing PTI's declaratory judgment action along with Tessera's infringement suit. CONCLUSION For the foregoing reasons, the Court GRANTS Tessera's Motion to Dismiss. as moot. (Docket No. 14.) Tessera's objections are OVERRULED If

The case management conference scheduled for June 22,

2010 is VACATED. IT IS SO ORDERED. Dated: June 1, 2010 CLAUDIA WILKEN United States District Judge

In an attempt to create an actual controversy, PTI asserted at the hearing that it would cancel its agreement with Tessera if the '106 patent were deemed invalid or not infringed. Notably, PTI did not take this position in its papers and, although Mr. Tsai could have stated as much in his declaration, he did not do so. 9

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