Adobe Systems Incorporated v. Kelora Systems LLC

Filing 41

ORDER by Judge Claudia Wilken GRANTING DEFENDANTS 23 MOTION TO DISMISS. (ndr, COURT STAFF) (Filed on 12/7/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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ADOBE SYSTEMS INCORPORATED,

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No. C 11-3938 CW

Plaintiff,

ORDER GRANTING
DEFENDANT’S MOTION
TO DISMISS
(Docket No. 23)

v.
KELORA SYSTEMS LLC,
Defendant.
________________________________/

United States District Court
For the Northern District of California

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Plaintiff Adobe Systems Incorporated brings this action

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against Defendant Kelora Systems, LLC seeking a declaratory

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judgment of non-infringement, invalidity and intervening rights as

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to all or part of U.S. Patent No. 6,275,821 (’821 patent).

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moves to dismiss for lack of subject matter jurisdiction.

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considered the parties’ submissions and oral arguments, the Court

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GRANTS Kelora’s motion to dismiss.

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Kelora
Having

BACKGROUND
Kelora is the owner of the ’821 patent, which claims methods

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related to executing a guided parametric search.

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Complaint (1AC) ¶ 12.

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programs for computers and electronics, including such

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technologies as Acrobat, Flash and PostScript.

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Adobe also provides web hosting and other merchandising and data

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analytics services, such as through its Omniture business.

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First Amended

Adobe develops and sells many software

Id. at ¶ 10.

Id.

On November 8, 2010, Kelora filed an action in the Western
District of Wisconsin, Kelora v. Target, asserting infringement of

the ’821 patent.

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more than ten defendants, including OfficeMax, Incorporated,

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retailers whom Kelora alleged infringed the ’821 patent by using

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the patented search methods on their retail websites.

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did not name or refer to Adobe in the Wisconsin action.

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Adobe alleges that Kelora’s allegations against OfficeMax rest “at

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least in part” on OfficeMax’s use of technology provided by Adobe.

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Id.

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produced by Kelora in Kelora v. Target, Wolff Decl. ¶ 4, Ex. E,

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United States District Court
For the Northern District of California

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and states that Kelora purports to accuse the Adobe technology

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licensed by OfficeMax in this chart, Opp., at 2.

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claim chart does not refer to or mention Adobe or any other third-

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party provider.

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that its technology covers all steps contained in the claim chart,

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nor has it provided evidence that it does.

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stated that it provides its licensees with the core functionality

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for the accused technology.

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clients, rather than providing them the licensed technology, Adobe

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maintains it on Adobe’s own servers and processes searches on the

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clients’ websites itself, and that Kelora’s accusations thus

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implicate not just Adobe’s technology but also its own actions.

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Id. at ¶ 13.1

In the complaint, Kelora named

Id.

Kelora

However,

Adobe submits a copy of the claim chart for the ’821 patent

However, the

Adobe has also made no claim in its complaint

At the hearing, Adobe

Adobe also stated that, for some

Kelora has also sent letters to at least thirty-two other

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entities, alleging infringement of the ’821 patent.

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Decl. ¶ 3.

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allegations against these entities, whom Adobe describes as

Id.; Wolff

In Adobe’s complaint, it states that Kelora’s

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The Wisconsin action was subsequently transferred to this
Court and assigned No. C11-1548.
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“purported licensees” of Adobe technology, are based on the use of

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technology that appears to have been provided “at least in part”

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by Adobe.

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these “purported licensees” are actual licensees of Adobe

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technology.

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to four Adobe licensees.

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In these letters, Kelora states that the company to whom the

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letter is addressed has infringed the ’821 patent through its use

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of parametric search on its website.

1AC, at ¶ 13.

At the hearing, Adobe clarified that

Adobe has provided copies of letters sent by Kelora
See Wolff Decl. ¶ 3, Exs. A, B, C, D.

None of the letters refers

United States District Court
For the Northern District of California

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to Adobe or any other specific provider of search functionality.

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See Wolff Decl. ¶ 3, Exs. C, D.

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indemnification demands from some of its licensees who have been

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approached or sued by Kelora.

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allege that it has a legal obligation to provide indemnification

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to its licensees or provide evidence that it does.

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hearing, Adobe stated that its contracts with its licensees

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contain terms that legally oblige Adobe to indemnify its licensees

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against claims such as those brought by Kelora.

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Adobe has received

Wolff Decl. ¶ 3.

Adobe did not

At the

On August 11, 2011, in Kelora v. Target, C11-1548,2 OfficeMax

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filed a third-party complaint against Adobe, alleging that

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OfficeMax had, through its predecessor company, contracted with an

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A court may consider “matters of judicial notice” without
converting a motion to dismiss into a motion for summary judgment.
United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).
Facts are judicially noticeable if they are “capable of accurate
and ready determination by resort to sources whose accuracy cannot
be reasonably questioned.” Id. The publicly available docket
entries in Kelora v. Target are thus subject to judicial notice.

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entity now owned by Adobe, for various search tools and

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professional services, which serve the basis of Kelora’s suit

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against OfficeMax.

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No. 335, ¶¶ 6-9.

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that Adobe had a duty to defend and indemnify OfficeMax for its

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expenses in defending against Kelora’s action and for any

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settlement or judgment arising therefrom, under the terms of

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certain agreements between OfficeMax and Adobe.

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OfficeMax further alleged that Adobe has not agreed fully to

Third-Party Complaint in C11-1548, Docket

In the third-party complaint, OfficeMax alleged

Id. at ¶¶ 13-14.

United States District Court
For the Northern District of California

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indemnify and defend OfficeMax from Kelora’s lawsuit.

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¶ 10.

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stating that on August 5, 2011, Adobe “accepted the tender of

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defense and indemnity from OfficeMax regarding the infringement

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claims” and that OfficeMax acknowledged this on August 8, 2011.

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Wolff Decl. ¶ 2.

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Adobe had done so pursuant to a legal obligation to indemnify

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OfficeMax.

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its third-party complaint against Adobe without prejudice.

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On August 10, 2011, Adobe filed this action under the

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Declaratory Judgment Act, 28 U.S.C. § 2201, “so that Adobe may

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ascertain its rights regarding the ’821 patent.”

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seeks declaratory judgment that Adobe technology does not infringe

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on the ’821 patent, and of invalidity and intervening rights.

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Kelora now moves to dismiss Adobe’s complaint, arguing that the

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Court lacks subject matter jurisdiction over it because there is

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no substantial controversy between itself and Adobe.

Id. at

Adobe has submitted a declaration in the instant case

Notably, the declaration does not state that

On November 30, 2011, OfficeMax voluntarily dismissed

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1AC ¶ 22.

Adobe

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LEGAL STANDARD
Subject matter jurisdiction is a threshold issue which goes

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to the power of the court to hear the case.

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matter jurisdiction must exist at the time the action is

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commenced.

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Equalization, 858 F.2d 1376, 1380 (9th Cir. 1988).

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court is presumed to lack subject matter jurisdiction until the

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contrary affirmatively appears.

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Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989).

Federal subject

Morongo Band of Mission Indians v. Cal. State Bd. of
A federal

Stock W., Inc. v. Confederated

United States District Court
For the Northern District of California

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Dismissal is appropriate under Rule 12(b)(1) when the

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district court lacks subject matter jurisdiction over the claim.

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Fed. R. Civ. P. 12(b)(1).

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1ACial attack on the sufficiency of the pleadings to establish

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federal jurisdiction, or allege an actual lack of jurisdiction

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which exists despite the formal sufficiency of the complaint.

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Thornhill Publ'g Co. v. Gen. Tel. & Elecs. Corp., 594 F.2d 730,

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733 (9th Cir. 1979); Roberts v. Corrothers, 812 F.2d 1173, 1177

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(9th Cir. 1987).

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actual lack of jurisdiction, the plaintiff “must furnish

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affidavits or other evidence necessary to satisfy its burden of

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establishing subject matter jurisdiction.”

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Union High Sch., 343 F.3d 1036, 1039 n.2 (9th Cir. 2003).

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A Rule 12(b)(1) motion may either be a

Once the defendant has introduced evidence of an

Savage v. Glendale

DISCUSSION
The Declaratory Judgment Act, in accordance with Article III

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of the Constitution, requires an “actual controversy” before the

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Court “may declare the rights and other legal relations of any

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interested party seeking such declaration.”

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A plaintiff may establish that jurisdiction is proper only where
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28 U.S.C. § 2201(a).

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“the facts alleged, under all the circumstances, show that there

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is a substantial controversy, between parties having adverse legal

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interests, of sufficient immediacy and reality to warrant the

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issuance of a declaratory judgment.”

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Genentech, Inc., 549 U.S. 118, 127 (2007) (citing Md. Casualty Co.

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v. Pacific Coal & Oil Co., 312 U.S. 270 (1941)).

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legal interest” requires a “dispute as to a legal right--for

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example, an underlying legal cause of action that the declaratory

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defendant could have brought or threatened to bring.”

MedImmune, Inc. v.

This “adverse

Arris Group

United States District Court
For the Northern District of California

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Inc. v. British Telecommunications PLC, 639 F.3d 1368, 1374 (Fed.

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Cir. 2011).

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“unique and substantial discretion in deciding whether to declare

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the rights of litigants.”

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(internal citations omitted).

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Under the “all the circumstances” test, courts have

MedImmune, Inc., 549 U.S. at 136

“Prior to MedImmune, the Federal Circuit generally required

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that a declaratory judgment plaintiff in a patent dispute

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demonstrate: ‘(1) conduct by the patentee that created a

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‘reasonable apprehension’ of suit on the part of the declaratory

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judgment plaintiff and (2) present activity by the declaratory

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judgment plaintiff that could constitute infringement or

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‘meaningful preparation’ to conduct potentially infringing

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activity.’”

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2011 WL 4915847, at *2 (N.D. Cal.) (quoting Prasco, LLC v. Medicis

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Pharm. Corp., 537 F.3d 1329, 1336 (Fed. Cir. 2008).

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MedImmune requires courts to eschew bright-line rules for

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exercising declaratory jurisdiction, numerous decisions have found

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that the factors included in the Federal Circuit's previous two-

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part test remain relevant to the ‘all the circumstances’

Proofpoint, Inc. v. Innova Patent Licensing, LLC,

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“Although

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analysis.”

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MedImmune decision “lowered the bar for a plaintiff to bring a

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declaratory judgment action in a patent dispute.”

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Nanya Technology Corp., 2008 WL 3539503, at *3 (N.D. Cal.)

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(quoting Frederick Goldman, Inc. v. West, 2007 WL 1989291, at *3

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(S.D. N.Y.)) (internal formatting omitted).

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has more recently held that, while MedImmune did relax the prior

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rule, “declaratory judgment jurisdiction will not arise merely on

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the basis that a party learns of the existence of an adversely

Id.

This Court has previously recognized that the

Fujitsu Ltd. v.

The Federal Circuit

United States District Court
For the Northern District of California

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held patent, or even perceives that such a patent poses a risk of

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infringement, in the absence of some affirmative act by the

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patentee” directed at the specific plaintiffs.

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Molecular Pathology v. United States PTO, 653 F.3d 1329, 1344,

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1348 (Fed. Cir. 2011).
Adobe argues that declaratory jurisdiction is appropriate

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Ass'n for

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because (1) Kelora’s claims against Adobe’s licensees exposes

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Adobe itself to claims for direct and indirect infringement; and

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(2) Kelora’s claims against Adobe’s licensees triggers a duty by

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Adobe to defend and indemnify them against Kelora’s claims.

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I.

Jurisdiction Based on Exposure to Liability

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In order to establish an “actual controversy” based on
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enforcement activity by a patent holder, the plaintiff seeking

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declaratory judgment must show that the patent holder took some

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affirmative acts directed at that plaintiff, not just broad and

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widespread enforcement activity.

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Pathology, 653 F.3d at 1344-48; see also Proofpoint, 2011 WL

See Ass’n for Molecular

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4915847, at *3 (relying on Ass’n for Molecular Pathology to find

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no affirmative acts supporting declaratory judgment jurisdiction

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where there were no allegations that the patent holder “claimed a

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right to a royalty from [the supplier], sent [the supplier] a

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cease-and-desist letter, or communicated with [the supplier’s]

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employees”).

Here, Adobe has not alleged that Kelora has

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communicated with Adobe at all before Adobe instituted this suit.
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Further, while Kelora contacted some Adobe customers, the evidence

United States District Court
For the Northern District of California

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that Adobe has put forward shows that Kelora did not mention Adobe

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in those third-party communications or state that Adobe’s products

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were the basis for the enforcement actions against those third

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parties.

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not directly contact the plaintiff, the patentee’s demand letters

In the cases cited by Adobe, although the patentee did

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to the plaintiff’s clients specifically referred to the plaintiff
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or its products by name and identified the products and services
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provided by the plaintiff as the infringing items.

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Group, Inc., 639 F.3d at 1377 (describing in depth how “BT

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explicitly and repeatedly singled out Arris’ products used in

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Cable One’s network to support its infringement contentions”

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before finding that, under all of the circumstances, there was a

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See Arris

dispute between Arris and BT sufficient to constitute a case or

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controversy); D&R Communications, LLC v. Garrett, 2011 WL 2418246,
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at *4 (D. N.J.) (finding jurisdiction based on Garrett’s letters

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to D&R’s clients alleging that D&R products and services violated

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Garrett’s patent); Microsoft Corp. v. Phoenix Solutions, Inc., 741
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F. Supp. 2d 1156, 1157-61 (C.D. Cal. 2010) (finding an actual

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controversy between Phoenix and Microsoft where “Phoenix

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specifically alleges that the Tellme IVR system provided by

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Microsoft to American Express infringes the patents-in-suit”);

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Arrowhead Industrial Water, Inc. v. Ecolochem, Inc., 846 F.2d 731,

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736 (Fed. Cir. 1988) (letters to a customer “citing Arrowhead and

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only Arrowhead and saying Arrowhead is not licensed”).
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Further, in cases where a court found a controversy based on

United States District Court
For the Northern District of California

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infringement claims made against a declaratory plaintiff’s

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customers, the defendant asserted infringement claims against the

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customers based on facts which, if proven, would compel the

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conclusion that the plaintiff itself had also directly infringed.

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While Adobe stated at the hearing that it provided its customers

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with all of the technology that Kelora alleges is infringing, this
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was not alleged in the complaint or demonstrated by the evidence
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that Adobe submitted with its opposition.

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the claims chart produced by Kelora in Kelora’s case against

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OfficeMax and says that Kelora’s claims are based on the search

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techniques that OfficeMax uses on its website, Adobe does not make

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clear which steps on the claims chart are performed using Adobe’s

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While Adobe points to

technology and states that Kelora’s accusations rest “in part on

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the alleged use . . . of Adobe technology.”

Opp. at 5.

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Accordingly, Adobe has not made a showing that a finding of

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infringement on the part of OfficeMax or any of its other

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customers would necessarily imply that Adobe has also infringed,
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or, conversely, that a finding that Adobe’s products do not

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infringe would necessarily imply that its customers do not use

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Adobe’s products in an infringing way.

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Adobe has also not made allegations or presented evidence
sufficient to support a finding that there is a controversy as to
its liability for contributory infringement.

“To establish

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contributory infringement, a patent owner must show: ‘(1) that
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there is direct infringement, 2) that the accused infringer had

United States District Court
For the Northern District of California

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knowledge of the patent, 3) that the component has no substantial

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noninfringing uses, and 4) that the component is a material part

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of the invention.’”

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(quoting Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321, 1326 (Fed.

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Cir. 2010)).

Proofpoint, 2011 WL 4915847, at *5 n.4

Adobe has not alleged, or pointed to allegations,

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that its products cannot be used without infringing the ’821
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patent and there is no indication that Adobe had the requisite
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knowledge or intent for indirect infringement.

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Inc. v. Data Drive Thru, Inc., 645 F. Supp. 2d 830, 839 (N.D. Cal.

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2009) (“The Federal Circuit held there was no indication that

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Microchip had contributed to or induced infringement by its

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customers, because there was no evidence that Microchip's

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See Ours Tech.,

technology could not be used without infringing Chamberlain's

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patent or that Microchip had the required level of intent to cause
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and encourage the alleged infringement.”) (citing Microchip Tech.

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Inc. v. Chamberlain Group, Inc., 441 F.3d 936, 944 (Fed. Cir.

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2006)).
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However, given Adobe’s representations at the hearing that it

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does in fact provide, and in some cases, continue to maintain all

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of the technology that Kelora alleges is infringing, it appears

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that Adobe will be able truthfully to amend its complaint to

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remedy these deficiencies.

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Jurisdiction based on Duty to Indemnify

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Adobe argues that it has a separate basis for jurisdiction

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based on its duty to indemnify its licensees against Kelora’s

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claims.

Adobe bases its argument that indemnity is an alternative

United States District Court
For the Northern District of California

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basis for declaratory judgment on the Federal Circuit’s language

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in Arris, in which the court stated,

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that, where a patent holder accuses customers of direct
infringement based on the sale or use of a supplier's
equipment, the supplier has standing to commence a
declaratory judgment action if (a) the supplier is
obligated to indemnify its customers from infringement
liability, or (b) there is a controversy between the
patentee and the supplier as to the supplier's liability
for induced or contributory infringement based on the
alleged acts of direct infringement by its customers.
Arris, 639 F.3d at 1375.

However, in that case, the court did not

reach the issue of subject matter jurisdiction based on
indemnification obligations, because it found that jurisdiction
under the second prong.

Id.

At least one court has found subject matter jurisdiction
where there was a clear legal obligation to indemnify customers.
See WS Packaging Group, Inc. v. Global Commerce Group, 505 F.
Supp. 2d 561, 566-67 (E.D. Wis. 2007) (declaratory action
plaintiff had a clear obligation to indemnify customers under the
Wisconsin UCC and there was imminent personal threat of lawsuits
against plaintiff’s clients).

However, courts have been unwilling
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to find jurisdiction where there have been “mere allegations of

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indemnity obligations,” instead of a clear legal obligation.

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Proofpoint, 2011 WL 4915847, at *5 (declining to find an actual

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controversy where plaintiff “has not alleged the existence of a

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valid agreement nor described its supposed obligations,” but has

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only indicated that the prosecution activities have “spawned

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indemnity ‘requests’”).

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(“Microchip has not produced any agreement indemnifying a customer

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against infringement of the patents-in-suit.”); Ours Technology,

See also Microchip, 441 F.3d at 944

United States District Court
For the Northern District of California

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Inc., 645 F. Supp. 2d at 839 (declining to find an actual

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controversy where “the court has been provided with no agreement

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or other written document evidencing a legal basis for the

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[customers] to have been indemnified by OTI” and thus the fact

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that OTI agreed to indemnify them “fails to carry any weight, let

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alone enough weight to create an adverse legal interest”).

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Here, Adobe has not alleged or demonstrated that it has any

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legal obligation to indemnify OfficeMax or any other customer.

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Thus, even though Adobe had agreed to indemnify OfficeMax, it may

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have volunteered to do so, without a legal obligation.

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Accordingly, the indemnification demands do not give rise to

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subject matter jurisdiction by themselves.

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stated at the hearing that it is contractually obliged to

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indemnify its licensees, it appears that Adobe will be able to

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easily remedy this deficiency.

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However, because Adobe

CONCLUSION
For the foregoing reasons, Kelora’s motion to dismiss (Docket

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No. 23) is GRANTED with leave to amend.

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on Kelora a second amended complaint within seven days of the date
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Adobe may file and serve

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of this Order.

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amended complaint within seven days thereafter.

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motion to dismiss will be decided on the papers.

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Kelora may file a motion to dismiss the second
Any subsequent

IT IS SO ORDERED.

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Dated: 12/7/2011

CLAUDIA WILKEN
United States District Judge

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United States District Court
For the Northern District of California

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