Google Inc. v. Rockstar Consortium US LP et al

Filing 58

ORDER DENYING MOTION TO DISMISS OR, IN THE ALTERNATIVE, TO TRANSFER by Judge Claudia Wilken denying 20 Motion to Dismiss for Lack of Jurisdiction (cwlc2, COURT STAFF) (Filed on 4/17/2014)

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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 GOOGLE INC., 5 6 7 8 9 United States District Court For the Northern District of California 10 No. C 13-5933 CW Plaintiff, v. ROCKSTAR CONSORTIUM U.S. LP, MOBILESTAR TECHNOLOGIES, LLC, Defendants. ORDER DENYING MOTION TO DISMISS OR, IN THE ALTERNATIVE, TO TRANSFER (Docket No. 20) ________________________________/ 11 12 13 14 15 16 17 18 19 20 21 22 Google Inc. filed this declaratory judgment action for noninfringement of seven patents owned by Defendants Rockstar Consortium U.S. LP (Rockstar) and MobileStar Technologies, LLC (MobileStar). Defendants now move to dismiss or, in the alternative, to transfer the action to the Eastern District of Texas, where the action could be consolidated with several other actions filed by Defendants against Google’s customers. opposes the motion or, in the alternative, requests jurisdictional discovery. The Court held oral argument on March 13, 2014. 25 26 27 28 After considering the papers and the arguments of counsel, the Court DENIES the motion to dismiss or transfer. BACKGROUND 23 24 Google Google is a corporation located in Mountain View, California. Docket No. 1 ¶ 2. Google produces the Android mobile platform, an open-source operating system that is used by many original equipment manufacturers around the world. Id. at ¶¶ 1-2. Nortel Networks was a prominent Canadian telecommunications 1 2 provider headquartered in Ottawa, Canada. See Madigan Decl., Exs. 3 1-2. 4 one in Santa Clara, California. 5 2009, Nortel filed for bankruptcy. 6 court ordered an auction of Nortel’s patent licensing operations, 7 including a portfolio of over 6,000 patents “spanning wireless, 8 wireless 4G, data networking, optical, voice, internet, service 9 provider, semiconductors” and many other aspects of Nortel had offices throughout the United States, including See id., Ex. 2. On January 14, Id., Exs. 3-4. The bankruptcy United States District Court For the Northern District of California 10 telecommunications and Internet search. 11 the same time, five of the world’s largest technology companies -- 12 Apple, Microsoft, Research in Motion, Sony, and Ericsson -- 13 jointly created and funded an entity called “Rockstar Bidco LP,” a 14 Delaware limited liability partnership. 15 contributed approximately $2.6 million to Rockstar Bidco. 16 Ex. 9 at 34. 17 patent licensing operation at the June 2011 auction, but Rockstar 18 Bidco ultimately prevailed with a bid of $4.5 billion. 19 Ex. 7. 20 Id., Exs. 4-6. Around See id., Exs. 7-8. Apple Id., Both Google and Rockstar Bidco bid on the Nortel Id., Rockstar Bidco transferred around 2,000 patents to its 21 owners, with at least 1,147 going to Apple. 22 Rockstar Bidco then reorganized itself into Rockstar, a Delaware 23 limited partnership which claims a principal place of business in 24 25 26 27 28 2 Id., Exs. 7, 14. 1 Plano, Texas. 2 and current Rockstar CEO John Veschi, Nortel's patent portfolio 3 and licensing team of about forty employees immediately moved to 4 Rockstar. 5 executives at Nortel. 6 in Nortel's old headquarters in Ottawa, Canada. 7 According to its own website, Rockstar produces no products, but 8 operates a "patent licensing business that owns and manages a 9 portfolio of more than 4,000 patents developed by" Nortel. United States District Court For the Northern District of California 10 Id., Exs. 7, 15.1 Id., Exs. 10-12. Id. Led by former Nortel executive Rockstar’s CFO and CTO had also been Veschi and the rest of his team remain Id., Ex. 12. Id., Ex. 13. 11 Rockstar has worked with Mark Wilson, an independent 12 contractor in California who provides Rockstar with “licensing 13 consulting services.” 14 charts appearing in a news article to which Rockstar contributed 15 and which it featured on its own website, Wilson was named as a 16 “licensing executive” in senior management. 17 12-13. 18 deleted from the website and Wilson has removed “Rockstar 19 Consortium” from his professional profile. Dean Decl. ¶ 34. In Rockstar organization Madigan Decl., Exs. This suggestion of an employee relationship has now been See id., Exs. 12-13, 20 21 22 23 24 25 26 27 28 Although Defendants assert that they both have principal places of business in Texas, they have not named any executives or employees who reside or work there. Rockstar’s website and the declaration of Afzal Dean, Rockstar Vice President and President of MobileStar, identifies officers and board members who represent both Defendants and who are almost all based in Canada, except one in Colorado. See, generally, Dean Decl; see also Madigan Decl., Exs. 10, 19, 23. Rockstar’s “nerve center,” or the place where its “officers direct, control, and coordinate the corporation’s activities,” thus appears to be in Ottawa, Canada. Hertz Corp. v. Friend, 559 U.S. 77, 92-93 (2010). 1 3 1 37. 2 not encompass enforcement of the patents-in-suit. 3 Defendants assert that Wilson’s patent licensing duties do On October 30, 2013, Rockstar created MobileStar, a wholly- 4 owned subsidiary and Delaware limited liability corporation 5 claiming a principal place of business in Plano, Texas. 6 Decl. ¶ 5. 7 suit in the Eastern District of Texas against ASUS, HTC, Huawei, 8 LG, Pantech, Samsung, and ZTE, alleging each company infringes 9 seven patents: U.S. Patent Nos. 6,037,937 (the ‘937 patent), Dean A day later, on October 31, 2013, Defendants filed United States District Court For the Northern District of California 10 6,463,131 (the ‘131 patent), 6,765,591 (the ‘591 patent), 11 5,838,551 (the ‘551 patent), 6,128,298 (the ‘298 patent), 12 6,333,973 (the ‘973 patent), and 6,937,572 (the ‘572 patent). (the 13 Halloween actions). 14 and MobileStar alleged infringement by “certain mobile 15 communication devices having a version (or adaptation thereof) of 16 Android operating system,” which is developed by Google. 17 Decl., Exs. A-H. 18 and transferred the remaining five patents to MobileStar shortly 19 before filing litigation, but retained an exclusive license to 20 those patents. 21 In each of the Halloween actions, Rockstar See Dean Rockstar owns two of the seven patents-in-suit See Dean Decl. ¶¶ 5, 15, 24. On December 23, 2013, Google filed the present action in the 22 Northern District of California. 23 declaration that its Android platform and products (the Nexus 5, 24 Nexus 7, and Nexus 10) do not infringe the seven patents held by 25 Defendants that were asserted in the Halloween actions. 26 Docket No. 1. 27 28 In this action, Google seeks a See On December 31, 2013, Defendants responded with a New Year’s Eve amendment to one of the Halloween actions to include 4 1 allegations that Google infringes three of the asserted patents at 2 issue in this case: the ‘937, ‘131, and ‘591 patents. Rockstar v. 3 Samsung, Case No. 13-0900 (E.D. Tex.), Docket No. 19. Defendants 4 did not, however, assert that Google infringed the four additional 5 patents at issue in the Halloween actions and in this case: the 6 ‘551, ‘298, ‘973, and ‘572 patents. 7 Defendants moved to amend their complaint in the Texas case to 8 allege that Google infringed these four additional patents. 9 No. 13-0900, Docket Nos. 45-46. United States District Court For the Northern District of California 12 On March 10, 2014, Case LEGAL STANDARDS 10 11 See id. Under Rule 12(b)(2) of the Federal Rules of Civil Procedure, a defendant may move to dismiss for lack of personal jurisdiction. 13 In a declaratory action for non-infringement, because the 14 jurisdictional issue is intimately connected with substance of 15 patent laws, Federal Circuit law applies. 16 Corp. v. Aten Int’l Co., Ltd., 552 F.3d 1324, 1328 (Fed. Cir. 17 2008). Avocent Huntsville 18 Where the court decides the personal jurisdiction question 19 based on affidavits and other written materials, and without an 20 evidentiary hearing, a plaintiff need only make a prima facie 21 showing that a defendant is subject to personal jurisdiction. 22 Nuance Commc'ns, Inc. v. Abbyy Software House, 626 F.3d 1222, 1231 23 (Fed. Cir. 2010); Electronics For Imaging, Inc. v. Coyle, 340 F.3d 24 1344, 1349 (Fed. Cir. 2003). 25 complaint must be taken as true. 26 the defendant submit admissible evidence, conflicts in the 27 evidence must be resolved in the plaintiff’s favor. Uncontroverted allegations in the Id. 28 5 If both the plaintiff and Trintec 1 Indus., Inc. v. Pedre Promotional Products, Inc., 395 F.3d 1275, 2 1282 (Fed. Cir. 2005). 3 There are two independent limitations on a court’s power to 4 exercise personal jurisdiction over a non-resident defendant: the 5 applicable state personal jurisdiction rule and constitutional 6 principles of due process. 7 F.3d at 1349. 8 extensive with federal due process requirements, jurisdictional 9 inquiries under state law and federal due process standards merge United States District Court For the Northern District of California 10 11 Electronics For Imaging, Inc., 340 Because California’s jurisdictional statute is co- into one analysis. Id. The “constitutional touchstone” for the exercise of personal 12 jurisdiction “remains whether the defendant purposefully 13 established minimum contacts” in the forum state such that 14 “maintenance of the suit does not offend traditional notions of 15 fair play and substantial justice.” 16 Rudzewicz, 471 U.S. 462, 474 (1985); Int’l Shoe Co. v. Washington, 17 326 U.S. 310, 316 (1945). 18 doctrine has evolved to keep pace with the increasingly national 19 and international nature of modern business affairs, the Supreme 20 Court has repeatedly stressed that there must always be “some act 21 by which the defendant purposefully avails itself of the privilege 22 of conducting activities within the forum state, thus invoking the 23 benefits and protections of its laws.” 24 552 F.3d at 1329 (quoting Hanson v. Denckla, 357 U.S. 235, 253 25 (1958)). 26 defendant will not be haled into a jurisdiction solely as a result 27 of random, fortuitous, or attenuated contacts, or of the Burger King Corp. v. Although the application of this Avocent Huntsville Corp., “This purposeful availment requirement ensures that a 28 6 1 unilateral activity of another party or a third person.” 2 Id. (quoting Burger King Corp., 471 U.S. at 475). Personal jurisdiction may be either general or specific. 3 General jurisdiction exists when the defendant maintains 5 “continuous and systematic” contacts with the forum state, even if 6 the cause of action is unrelated to those contacts. 7 Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16 (1984). 8 Specific jurisdiction is satisfied where the defendant has 9 “purposefully directed his activities at residents of the forum, 10 United States District Court For the Northern District of California 4 and the litigation results from alleged injuries that ‘arise out 11 of or relate to’ those activities.” 12 at 472. 13 I. 14 Helicopteros Burger King Corp., 471 U.S. Personal Jurisdiction over Rockstar through MobileStar As a preliminary matter, Defendants argue that jurisdiction 15 over Rockstar and MobileStar should be assessed independently 16 because they are separate corporate entities. 17 contending that Rockstar’s contacts should be imputed to 18 MobileStar. 19 Google disagrees, The Court must begin from “the general rule that the 20 corporate entity should be recognized and upheld, unless specific, 21 unusual circumstances call for an exception.” 22 Aarotech Labs., Inc., 160 F.3d 1373, 1380 (Fed. Cir. 1998). 23 exception is where the parent and subsidiary are not really 24 separate entities and are alter egos of each other. 25 Corp., 248 F.3d 915, 926 (9th Cir. 2001); see also Danjaq, S.A. v. 26 Pathe Commc'ns Corp., 979 F.2d 772, 775 (9th Cir. 1992) (finding 27 that many courts have discussed whether a parent's citizenship can 28 be imputed to the subsidiary and recognized that it can where the 7 3D Sys., Inc. v. One Doe v. Unocal 1 subsidiary is the alter ego of the parent). Courts have invoked 2 this exception where the plaintiff makes a prima facie case that 3 (1) there is a unity of interest and ownership such that the 4 separate personalities of the two entities no longer exist and 5 (2) failure to disregard the separate identities “would result in 6 fraud or injustice.” Doe, 248 F.3d at 926. 7 In a similar situation, the Federal Circuit found that the 8 parent-subsidiary relationship between a parent company and its 9 wholly-owned subsidiary holding company justified imputing the United States District Court For the Northern District of California 10 parent company’s California contacts to the subsidiary. 11 Screen Mfg. Co., Ltd. v. CFMT, Inc., 142 F.3d 1266, 1271 (Fed. 12 Cir. 1998). 13 14 15 16 17 18 19 20 21 22 23 Dainippon The court observed: Stripped to its essentials, CFM contends that a parent company can incorporate a holding company in another state, transfer its patents to the holding company, arrange to have those patents licensed back to itself by virtue of its complete control over the holding company, and threaten its competitors with infringement without fear of being a declaratory judgment defendant, save perhaps in the state of incorporation of the holding company. This argument qualifies for one of our “chutzpah” awards. See Refac Int'l, Ltd. v. Lotus Dev. Corp., 81 F.3d 1576, 1584, 38 USPQ2d 1665, 1671 (Fed. Cir. 1996); Checkpoint Sys., Inc. v. United States Int'l Trade Comm'n, 54 F.3d 756, 763 n. 7, 35 USPQ2d 1042, 1048 n.7 (Fed. Cir. 1995) (noting that “chutzpah” describes “the behavior of a person who kills his parents and pleads for the court's mercy on the ground of being an orphan”). Id. (reversing district court’s finding that it lacked personal jurisdiction because of CFMT, the newly-formed subsidiary). With 24 25 26 these observations in mind, the Federal Circuit determined that it would be “reasonable and fair” to find jurisdiction over both CFM 27 and CFMT because of their parent-subsidiary relationship. 28 The court reasoned that, while a “patent holding subsidiary is a 8 Id. 1 legitimate creature . . . , it cannot fairly be used to insulate 2 patent owners from defending declaratory judgment actions in those 3 fora where its parent company operates under the patent and 4 engages in activities sufficient to create personal jurisdiction 5 and declaratory judgment jurisdiction.” 6 Id.2 The facts in this case are at least as strong as those in 7 8 9 Dainippon. As in Dainippon, MobileStar here had some contact with the forum state: it met with Google in California to attempt to United States District Court For the Northern District of California 10 negotiate a license. 11 negotiation a sublicense with Dainippon in California further 12 strengthen CFMT’s contacts with that state.”). 13 fundamentally, as in Dainippon, the circumstances here strongly 14 See id. (“Moreover, CFMT’s attempts to More suggest that Rockstar formed MobileStar as a sham entity for the 15 sole purpose of avoiding jurisdiction in all other fora except 16 17 MobileStar’s state of incorporation (Delaware) and claimed 18 principal place of business (Texas). 19 initiated litigation against Google’s customers, Rockstar freshly 20 minted MobileStar, with no California contacts, and assigned the 21 22 23 24 25 26 27 28 A mere day before it Defendants initially attempted to argue that Dainippon’s holding was based “first and foremost” on its determination “that the subsidiary itself had minimum contacts with the forum, and those contacts (not the parent’s contacts) justified the imposition of personal jurisdiction,” insinuating the rest was dicta. Defendants’ Reply at 3 (internal quotation marks and italics omitted). However, Defendants later conceded that Dainippon stood for the proposition that one valid ground for setting aside corporate formalities for purposes of assessing the interests of fair play and substantial justice was if the defendants engaged in “a deliberate attempt to manipulate jurisdiction.” Id. at 4. 2 9 1 asserted patents to that subsidiary. Dean Decl. ¶ 15. Other 2 evidence suggesting MobileStar maintains no independent identity 3 is the fact that all MobileStar employees also work for Rockstar. 4 MobileStar has three officers (President Afzal Dean, Vice 5 President Chad Hilyard, and Corporate Secretary Mike Dunleavy) and 6 7 one board member (Director of the Board John Veschi); all serve on Rockstar’s board as well. Dean Decl. ¶ 10. MobileStar 8 9 purportedly operates out of the same office suite listed for United States District Court For the Northern District of California 10 Rockstar. 11 “there is no hint whatsoever of any manipulation” and that 12 “MobileStar was created for legitimate reasons having nothing to 13 do with personal jurisdiction,” Rockstar does not actually provide 14 any evidence supporting this point. 15 Dean Decl. ¶¶ 5, 15. Although Rockstar asserts that Defendants’ Reply at 4. Because the evidence presented supports Google’s allegation that 16 17 18 Rockstar created MobileStar solely to dodge jurisdiction, the traditional notions of fair play and justice would not be offended 19 if the Court considers the two entities jointly for purposes of 20 jurisdiction and imputes Rockstar’s contacts to the forum state to 21 MobileStar.3 22 23 24 25 26 27 28 Cf. In re Microsoft, 630 F.3d 1361, 1364-65 (Fed. Cir. 2011) (for purposes of a motion to transfer, ignoring the impact of litigation-driven incorporation under the laws of Texas, which occurred sixteen days before filing suit); In re Zimmer Holdings, Inc., 609 F.3d at 1381 (rejecting connections to Texas as “recent, ephemeral, and an artifact of litigation”). 3 10 1 2 II. General Jurisdiction General, or “all-purpose” personal jurisdiction, subjects a 3 defendant to suit in a forum only where a defendant’s contacts 4 with that forum “are so continuous and systematic as to render 5 them essentially at home in the forum State.” 6 Bauman, 134 S. Ct. 746, 754 (2014) (quoting Goodyear Dunlop Tires 7 Daimler AG v. Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011)). The 8 “paradigm bases for general jurisdiction” for a corporation are 9 United States District Court For the Northern District of California 10 11 12 its place of incorporation and principal place of business. at 760. Both Rockstar and MobileStar are incorporated in Delaware and 13 claim to have principal places of business in Plano, Texas. 14 Decl. ¶ 5, 15. 15 16 Id. Dean Neither Defendant is licensed to do business in California, nor do they own real or personal property, pay taxes, maintain offices, or file lawsuits in California. Dean Decl. 17 18 19 ¶¶ 6-9, 16, 22-24, 29-33. Google nevertheless contends that Rockstar has stepped in the 20 shoes of its predecessor, Nortel, and assumed its jurisdictional 21 position.4 Although Nortel was a Canadian company, it maintained 22 23 24 25 26 27 28 See Doe, 248 F.3d at 926 (explaining requirements for alter ego theory and agency theory for imputing contacts of one corporation to another). See also Katzir's Floor & Home Design, Inc. v., 394 F.3d 1143, 1150 (9th Cir. 2004) (“The general rule of successor liability is that a corporation that purchases all of the assets of another corporation is not liable for the former corporation's liabilities unless, among other theories, the purchasing corporation is a mere continuation of the selling corporation.”). 4 11 1 its primary United States campus in Santa Clara and designated a 2 registered agent for service of process in California. 3 Madigan Decl., Exs. 3, 27. 4 defended them in California. 5 Nortel Networks Corp., Case No. 06-00532 (N.D. Cal.) and Nortel 6 7 See Nortel routinely brought suits and See, e.g., Times Networks, Inc. v. Networks Inc. v. State Bd. of Equalization, 191 Cal. App. 4th 1259 (2011). 8 9 Google does not allege that Rockstar maintained Nortel’s United States District Court For the Northern District of California 10 Santa Clara presence in California. 11 although the bulk of Rockstar’s employees operate out of Canada, 12 Rockstar nevertheless pursues a significant patent licensing 13 business aimed at the technology industry in the Silicon Valley, 14 in California. 15 Google contends instead that, As Rockstar has stated on many occasions to the press and others, Rockstar is exclusively “a patent licensing 16 17 18 business” and operates by reverse-engineering products on the market and proposing that the companies which offer those products 19 purchase licenses. 20 Rockstar does not currently sell any products; commercialization 21 of its significant patent portfolio is its only business. 22 the Silicon Valley technology industry is Rockstar’s main target, 23 24 Madigan Decl., Ex. 7, 13; Dean Decl. ¶¶ 18-21. Because as acknowledged by Rockstar’s CEO, Rockstar naturally would have to come into constant contact with the forum state. Madigan 25 26 Decl., Exs. 16, 35. Rockstar confirmed that, as of May 2012, it 27 had “started negotiations with as many as 100 potential licensees” 28 and has since approached many more. 12 Id., Exs. 7, 17. At least a 1 couple of these meetings were in California. See Dean Decl. ¶ 18. 2 Rockstar has one employee or independent contractor in California, 3 Wilson, who contacts potential licensees in California. 4 Madigan Decl. Ex. 17. 5 6 7 See Google’s showing is insufficient to render Defendants “essentially at home” in California. Even if it is true that Defendants engage in “continuous and systematic” business in the 8 9 forum state, that does not mean that Defendants’ presence in the United States District Court For the Northern District of California 10 forum state is so substantial that it should fairly be subject to 11 suit “on causes of action arising from dealings entirely distinct 12 from those activities.” 13 II. 14 15 16 Daimler AG, 134 S. Ct. at 761. Specific Jurisdiction Specific jurisdiction exists where the cause of action arises out of the defendant’s contacts with the forum state, even if those contacts are isolated and sporadic. Red Wing Shoe Co., Inc. 17 18 19 v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1359 (Fed. Cir. 1998) (citing Burger King Corp., 471 U.S. at 471-77). Even a 20 single act may support a finding of personal jurisdiction so long 21 as it creates a “substantial connection with the forum, as opposed 22 to an attenuated affiliation.” 23 developed a three-factor test to determine whether specific 24 Id. The Federal Circuit has jurisdiction exists: “whether (1) the defendant purposefully 25 directed its activities at residents of the forum state, (2) the 26 27 28 claim arises out of or relates to the defendant's activities with the forum state, and (3) assertion of personal jurisdiction is 13 1 2 3 reasonable and fair.” Electronics For Imaging, Inc., 340 F.3d at 1350. Here, Defendants sued seven Google customers, alleging that 4 they infringed by making and selling “certain mobile communication 5 devices having a version (or adaptation thereof) of Android 6 7 operating system” which is developed by Google. Exs. A-H. See Dean Decl., Both Defendants met with Google in California to 8 9 discuss licensing of the patents-in-suit. Rockstar also met in United States District Court For the Northern District of California 10 California with a few of the Google customers sued in the 11 Halloween actions to discuss licensing of the patents-in-suit. 12 These contacts with Google and its customers in California created 13 a cloud of patent infringement charges over Google’s Android 14 platform. 15 Google’s causes of action for declaratory judgment of non-infringement, which are intended to “clear the air of 16 17 18 infringement charges” targeting Google’s Android platform, “arise out of or relate to” Defendants’ contacts with the forum. See Red 19 Wing Shoe Co., Inc., 148 F.3d at 1360 (holding that “cease-and- 20 desist letters are the cause of the entanglement and at least 21 partially give rise to the plaintiff’s action”). 22 23 24 Defendants argue that imposing jurisdiction based on the act of sending cease-and-desist letters alone violates the principles of fair play and substantial justice. Id. The Federal Circuit 25 26 has explained that exercising personal jurisdiction over a 27 patentee based solely on the sending of cease-and-desist letters 28 would be unfair under the second prong of the traditional due 14 1 process inquiry: “whether the maintenance of personal jurisdiction 2 would comport with fair play and substantial justice.” 3 1361 (quotation marks omitted). 4 “afford[s] the patentee sufficient latitude to inform others of 5 its patent rights without subjecting itself to jurisdiction in a 6 7 foreign forum.” Id. Id. at This is because due process An offer to license may sometimes be “more closely akin to an offer for settlement of a disputed claim rather 8 9 than an arms-length negotiation in anticipation of a long-term United States District Court For the Northern District of California 10 continuing business relationship,” and, if so, by itself may be 11 insufficient to justify exercising specific jurisdiction. 12 Accordingly, to find specific jurisdiction, the Federal Circuit 13 has required that a showing that a defendant engaged in “other 14 activities” in the forum state related to the action at hand. 15 Id.; Avocent Huntsville Corp., 552 F.3d at 1334. Id. These activities 16 17 18 19 20 need not be limited to those directed at Google itself, but must be related in some way to the patents-in-suit. Avocent Huntsville Corp, 552 F.3d at 1334. Courts have held that such “other activities” may include 21 forming obligations with forum residents that relate to 22 enforcement of the asserted patents. 23 24 Some examples of “other activities” that courts have recognized include “initiating judicial or extra-judicial patent enforcement within the forum, or 25 26 27 entering into an exclusive license agreement or other undertaking which imposes enforcement obligations with a party residing or 28 15 1 regularly doing business in the forum.” Id.5 A review of Federal 2 Circuit case law reveals that the relationship must extend beyond 3 the mere payment of royalties or cross-licensing payments, “such 4 as granting both parties the right to litigate infringement cases 5 6 or granting the licensor the right to exercise control over the licensee's sales or marketing activities.” Breckenridge Pharm., 7 8 9 Inc. v. Metabolite Labs., Inc., 444 F.3d 1356, 1366 (Fed. Cir. 2006). The defendants must create “continuing obligations between United States District Court For the Northern District of California 10 themselves and residents of the forum,” forming a “substantial 11 connection” that proximately results from the defendants’ own 12 actions such that it would not be “unreasonable to require 13 defendants to submit to the burdens of litigation in that forum as 14 well.” Electronics For Imaging, Inc., 340 F.3d at 1350. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 See Campbell Pet Co. v. Miale, 542 F.3d 879, 886 (Fed. Cir. 2008) (finding jurisdiction over a patentee who conducted extrajudicial patent enforcement by enlisting a third party in the forum to remove defendant’s products from a trade show); Genetic Implant Sys., Inc. v. Core-Vent Corp., 123 F.3d 1455, 1458 (Fed. Cir. 1997) (holding that specific jurisdiction existed over patentee because it had appointed an in-state distributor to sell a product covered by the asserted patent, which was a business relationship “analogous to a grant of a patent license” and created obligations to sue third-party infringers); Akro Corp. v. Luker, 45 F.3d 1541, 1548-49 (Fed. Cir. 1995) (because defendant had entered into an exclusive licensing agreement with one of the alleged infringer’s competitors, which meant that defendant had “obligations . . . to defend and pursue any infringement” against the patent, specific jurisdiction was proper); SRAM Corp. v. Sunrace Roots Enter. Co., Ltd., 390 F. Supp. 2d 781, 787 (N.D. Ill. 2005) (specific jurisdiction was proper where defendant had “purposefully directed its activities” at residents of the forum by marketing a product that directly competed with the alleged infringer). 5 16 1 Google contends that Defendants have accepted substantial 2 obligations to Apple, a forum resident, which require Defendants 3 “to defend and pursue any infringement against” their patents. 4 Akro Corp., 45 F.3d at 1543. 5 majority shareholder of Defendants and exerts substantial control 6 7 Google alleges that Apple is a over them, and as a result Defendants are obliged to act on Apple’s behalf in a campaign to attack Google’s Android platform.6 8 9 In support of this allegation, Google submits strong evidence United States District Court For the Northern District of California 10 that Apple is indeed the majority shareholder of Defendants based 11 on Apple’s majority investment in Rockstar’s predecessor entity, 12 Rockstar Bidco.7 13 14 Currently, Rockstar is a Delaware limited partnership which lists “Rockstar Consortium LLC” located in New York as general partner. Id., Exs. 32-33; Dean Decl. ¶ 15. But 15 16 17 18 Apple contributed $2.6 billion, or fifty-eight percent of the $4.5 billion total investment in Rockstar Bidco. at 34. Madigan Decl., Ex. 9 Although Rockstar Bidco reorganized itself to become 19 20 21 22 23 24 25 26 27 28 Defendants contend that Google has not proven that alter ego or agency theories apply, and thus Apple’s contacts with the forum cannot be imputed to Defendants. See Defendants’ Reply at 11. Defendants misunderstand Google’s argument. Google does not seek to impute to Defendants Apple’s contacts with the forum state, but instead argues that Defendants have undertaken a substantial obligation to Apple related to the asserted patents that makes it reasonable to impose specific jurisdiction. 6 As previously noted, Rockstar wholly owns MobileStar and the Court considers the two entities jointly for purposes of jurisdiction because it is likely that MobileStar was created solely for litigation purposes. 7 17 1 2 3 Rockstar, it does not appear that any ownership interests changed, nor do Defendants assert otherwise. Even if Apple is a majority shareholder of Rockstar, if 4 Defendants were able to demonstrate that Apple is a mere passive 5 shareholder and takes no part in patent assertion strategy, then 6 7 the relationship between Apple and Defendants might not be sufficient to uphold specific jurisdiction. Cf. Breckenridge 8 9 Pharm., Inc., 444 F.3d at 1366. Google alleges that Apple’s role United States District Court For the Northern District of California 10 extends beyond the mere receipt of profits. 11 stated that he does not talk to its shareholders about potential 12 licensing partners or infringement suits, but admitted that he has 13 to show them “progress and that real work is being done.” 14 Decl., Ex. 12 at 4-5. 15 Rockstar’s CEO Veschi Madigan Veschi holds periodic calls and meetings with the owners, primarily with their intellectual property 16 17 18 departments, and Veschi acknowledges that they “work well together.” Id. at 5. Although Veschi states they avoid talking 19 about details, it does appear at least telling that Veschi speaks 20 directly and periodically with the owners’ intellectual property 21 departments to demonstrate that “work is being done.” 22 23 24 Id. at 4-5. Google demonstrates a direct link between Apple’s unique business interests, separate and apart from mere profitmaking, and Defendants’ actions against Google and its customers. 25 26 27 28 18 Google and 1 Apple’s rivalry in the smartphone industry is well-documented.8 2 Apple’s founder stated that he viewed Android as a “rip off” of 3 iPhone features and intended to “destroy” Android by launching a 4 “thermonuclear war.” 5 6 Id., Ex. 31. Defendants’ litigation strategy of suing Google’s customers in the Halloween actions is consistent with Apple’s particular business interests. In suing 7 8 9 the Halloween action defendants, Defendants here limited their infringement claims to Android-operating devices only, even where United States District Court For the Northern District of California 10 they asserted a hardware-based patent. 11 Ex. A and the ‘551 patent. 12 tactic advances Apple’s interest in interfering with Google’s 13 Android business. 14 See, e.g., Dean Decl., This “scare the customer and run” See Campbell, 542 F.3d at 887 (finding jurisdiction where the patentee “took steps to interfere with the 15 plaintiff’s business”). 16 17 In sum, with conflicts in the allegations and evidence 18 resolved in its favor, Google has shown that it is likely that 19 Defendants have created continuing obligations with a forum 20 resident to marshal the asserted patents such that it would not be 21 unreasonable to require Defendants to submit to the burdens of 22 23 24 25 26 27 28 See, e.g., Madigan Decl., Ex. 24 (Rockstar’s “stockpile was finally used for what pretty much everyone suspected it would be used for -- launching an all-out patent attack on Google and Android”); Ex. 25 (“This is an all out assault on Google and the Android smartphone ecosystem and it would be fair to say that most experts expected those patents would rear their ugly head sometime in the future”); Ex. 26 (new attention focused on Rockstar “largely because it gives the appearance that three leading competitors to Android are teaming up against it”); Ex. 27 (further detailing Apple’s anti-Android litigation campaign). 8 19 1 litigation in this forum. Electronics For Imaging, Inc., 340 F.3d 2 at 1350. 3 residents of this forum in a way which relates materially to the 4 enforcement or defense of the patent, which is sufficient to 5 establish specific jurisdiction. 6 Defendants have purposefully directed activities to Avocent Huntsville Corp., 552 F.3d at 1338.9 7 8 9 III. Jurisdiction under Declaratory Judgment Act The Declaratory Judgment Act provides, “In a case of actual United States District Court For the Northern District of California 10 controversy within its jurisdiction, any court of the United 11 States . . . may declare the rights and other legal relations of 12 any interested party seeking such declaration, whether or not 13 further relief is or could be sought.” 14 28 U.S.C. § 2201. The declaratory judgment plaintiff must establish that the “facts 15 alleged under all the circumstances show that there is a 16 17 substantial controversy between parties having adverse legal 18 interests of sufficient immediacy and reality to warrant the 19 issuance of a declaratory judgment.” 20 Technologies, Inc., 518 F.3d 897, 901 (Fed. Cir. 2008) (citing 21 MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 126 (2007) 22 (holding that there was a real and substantial controversy based 23 Micron Tech., Inc. v. Mosaid on threatening letters and public statements showing an “intent to 24 25 26 27 28 continue an aggressive litigation strategy”)). Because the Court finds personal jurisdiction over Defendants is proper, venue is also proper. Trintech Indus., 395 F.3d at 1280 (“Venue in a patent action against a corporate defendant exists wherever there is personal jurisdiction”). 9 20 1 Even when declaratory judgment jurisdiction is present, 2 courts have some discretion to decline to exercise that 3 jurisdiction. 4 (1995). 5 the Declaratory Judgment Act, the court “must determine whether 6 7 Wilton v. Seven Falls Co., 515 U.S. 277, 289-90 In order to decide whether to exercise jurisdiction under hearing the case would serve the objectives for which the Declaratory Judgment Act was created.” Capo, Inc. v. Dioptics 8 9 Med. Products, Inc., 387 F.3d 1352, 1355 (Fed. Cir. 2004). When United States District Court For the Northern District of California 10 the objectives of the Declaratory Judgment Act are served by the 11 action, dismissal is rarely proper. 12 founded reasons for declining to entertain a declaratory judgment 13 action.” 14 15 Id. “There must be well- Id. The present suit serves the purposes of the Declaratory Judgment Act, which “in patent cases is to provide the allegedly 16 17 18 infringing party relief from uncertainty and delay regarding its legal rights.” Micron Tech., Inc., 518 F.3d at 902. A real and 19 substantial controversy existed when Google filed suit. 20 Defendants had sued a number of Google’s customers, based in part 21 22 23 24 25 26 27 28 21 1 on their use of the Android platform developed by Google.10 2 Defendants did not, however, name Google as a defendant. 3 tactic of targeting the customers instead of the manufacturer 4 “infects the competitive environment of the business community 5 6 with uncertainty and insecurity.” This Electronics for Imaging, Inc. v. Coyle, 394 F.3d 1341, 1346 (Fed. Cir. 2005). In response to 7 8 9 the uncertainty caused by Defendants’ actions, Google filed this declaratory judgment action to “clear the air of infringement United States District Court For the Northern District of California 10 charges.” 11 uncertainty still exists in part because, although Defendants 12 later amended one of the Halloween actions to implicate Google 13 directly, they accused Google of infringing only three of the 14 Avocent Huntsville Corp., 552 F.3d at 1329. seven of the patents at issue here. That Case No. 13-0900, Docket 15 No. 19. Although Defendants recently sought to include the final 16 17 18 19 20 21 22 23 24 25 26 27 28 four other patents in the Texas case, leave to amend has not yet Defendants filed a Statement of Recent Decision calling the Court’s attention to Microsoft Corp. v. DataTern, Inc., 2013-1184, 2014 WL 1327923 (Fed. Cir. Apr. 4, 2014). The Federal Circuit noted that, although suits against customers do not “automatically give rise to a case or controversy regarding induced infringement,” there is a case or controversy if “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.” Id. at *2-3. The vast majority of the claims brought in the Halloween actions appear to be targeted specifically at Android features; the exception is the ‘551 patent, with which it is not clear if Android is specifically involved. It is also not clear if Defendants approached Google to license the ‘551 patent. See id. at *2. Because the DataTern court had the benefit of claim charts to discern the details of the patentee’s infringement theories, the Court may revisit the inclusion of the ‘551 patent at a later date. 10 22 1 been granted. Case No. 13-0900, Docket Nos. 45-46. Because the 2 patent owners failed to “grasp the nettle and sue,” Google was 3 justified in bringing the present action. 4 Imaging, Inc., 394 F.3d at 1346. 5 IV. 6 7 8 Electronics for Motion to Transfer A. First-to-File Rule When cases between the same parties raising the same issues are pending in two or more federal districts, the general rule is 9 United States District Court For the Northern District of California 10 11 to favor the forum of the first-filed action, regardless of whether it is a declaratory judgment action. Micron Tech., Inc., 12 518 F.3d at 904. 13 rule on motions to dismiss or transfer based on exceptions to the 14 first-to-file rule or on the convenience factors. 15 parties dispute which is the first-filed action. 16 17 The court of the actual first-filed case should See id. The Google argues that the first-filed action is the present suit, which was filed before Google faced charges in the Eastern District of Texas due 18 19 to Defendants’ New Year’s Eve amendment. Defendants argue that 20 the Halloween actions themselves constituted the first-filed 21 suits. 22 Halloween actions did not name Google specifically, Defendants 23 contend that they should be considered first-filed suits against 24 Google because they involved “substantially the same” parties as 25 Defendants’ Motion to Dismiss at 5, 19-24. those implicated here. Although the Id. (citing Futurewei Techs., Inc. v. 26 27 28 Acacia Research Corp, 737 F.3d 704, 706 (Fed. Cir. 2013)). However, the present situation is not equivalent to the 23 1 “substantially similar” parties that were implicated in Futurewei, 2 which were a patent owner, its exclusive licensee, and the 3 licensee’s wholly-owned subsidiary/assignee. 4 contrast, the relationship between Google and the Halloween 5 defendants is one of manufacturer and customer. 6 7 Halloween defendants are not in privity. Id. at 705-06. By Google and the Cf. Microchip Tech, Inc. v. United Module Corp., 2011 WL 2669627, at *3 (N.D. Cal.) 8 9 United States District Court For the Northern District of California 10 (“similar” parties were parent and its wholly-owned subsidiary). Even if the parties were substantially similar in the 11 Halloween actions and this one, the customer-suit exception to the 12 first-to-file rule would apply. 13 553 F.2d 735, 737 (1st Cir. 1977) (“an exception to the first- 14 filed rule has developed in patent litigation where the earlier 15 Codex Corp v. Milgo Elec. Corp, action is an infringement suit against a mere customer and the 16 17 18 later suit is a declaratory judgment action brought by the manufacturer of the accused devices”). Because the determination 19 of the infringement issues here would likely be dispositive of the 20 other cases, and the manufacturer presumably has a greater 21 interest in defending against charges of patent infringement than 22 the customers, the present suit takes precedence. 23 24 Kahn v. Gen. Motors Corp., 889 F.2d 1078, 1081 (Fed. Cir. 1989); Cf. ContentGuard Holdings, Inc. v. Google, Inc., Case No. 14-0061 25 26 27 28 (E.D. Tex.), Docket No. 37, at 6. B. Convenience Factors The Court could make an exception to the general rule giving 24 1 preference the first-filed case if doing so would be “in the 2 interest of justice or expediency, as in any issue of choice of 3 forum.” 4 of “competing forum interests” between accused infringers and 5 patent holders, the court may consider the “convenience factors” 6 7 Micron Tech., Inc., 518 F.3d at 904. To resolve disputes under the transfer analysis of 28 U.S.C. § 1404(a), including: the convenience and availability of witnesses, the absence of 8 9 jurisdiction over all necessary or desirable parties, the United States District Court For the Northern District of California 10 possibility of consolidation with related litigation, and 11 considerations relating to the interests of justice. 12 05. 13 WL 5568345, at *2 (N.D. Cal.) (listing additional transfer 14 factors). See Reflex Packaging, Inc. v. Audio Video Color Corp., 2013 15 16 Id. at 902- 1. Convenience and availability of witnesses The convenience and availability of witnesses is “probably 17 18 19 the single most important factor” in the transfer analysis. Genentech, Inc., 566 F.3d 1338, 1343 (Fed. Cir. 2009). In re This 20 factor favors California because Google’s Android products, the 21 target of this infringement action, were designed and created 22 here. 23 development of the accused Android platform’s features reside near 24 Many of the witnesses who can testify to the design and Google’s headquarters in Mountain View, California. Dubey Decl. 25 ¶¶ 3-8. Other witnesses, such as the inventors of the patents-in- 26 27 28 suit, are likely to be in Canada. Defendants do not name any witnesses in Texas essential to the suit. 25 2. 1 2 3 Jurisdiction over parties to this action and possibility of consolidation with related litigation Defendants argue that this Court lacks jurisdiction over some 4 of the customer defendants to the Halloween actions in Texas. 5 Defendants contend those customers necessarily would be 6 7 indispensable parties to this litigation because their rights in the patents-in-suit are at play. However, those parties are not 8 9 essential to resolution of claims between Defendants and Google. United States District Court For the Northern District of California 10 It cannot be said that any customer who uses the technology at 11 issue is an indispensable party. 12 13 14 The Halloween actions might not and need not be transferred here.11 They might be stayed in Texas and be reopened upon completion of this suit, which likely will resolve some of the 15 infringement issues there. If the Texas actions are transferred 16 17 18 here, they can be consolidated with this case at least for pretrial purposes. 3. 19 20 Other factors Other factors that may be considered include: the plaintiff’s 21 choice of forum, the convenience of the parties, the ease of 22 access to the evidence, the familiarity of each forum with the 23 applicable law, the local interest in the controversy, the 24 25 26 27 28 In each of the remaining Halloween actions, the defendant has filed a motion to stay or, in the alternative, to transfer the case to this district. See Docket Nos. 46, 48, 50-51, 55. 11 26 1 2 3 relative court congestion, and the interests of justice. Reflex Packaging, Inc., 2013 WL 5568345, at *2. Defendants argue that they are the true plaintiffs and 4 accordingly, their choice of forum should take precedence. 5 Court finds this factor at best to favor Defendants only slightly 6 7 because each side accuses the other of forum shopping. The Indeed, Defendants have not identified any witnesses residing in Texas, 8 9 their primary operations and headquarters are in Canada, and they United States District Court For the Northern District of California 10 admit that many of the inventors of the patents-in-suit were 11 listed at least years ago as being from Canada. 12 argument of their own convenience is similarly attenuated because, 13 again, their operations appear to be based in Canada, not Texas. 14 15 Defendants’ The Northern District of California has the greater interest in this litigation because the claims here will “call into 16 17 18 question the work and reputation of several individuals residing in or conducting business in this community.” In re Hoffman-La 19 Roche, 587 F.3d 1333, 1336 (Fed. Cir. 2009). 20 Eastern District of Texas have recognized that the “Northern 21 District of California has an interest in protecting intellectual 22 property rights that stem from research and development in Silicon 23 24 Valley.” Courts in the Affinity Labs of Texas v. Samsung Elecs. Co., Ltd., 2013 WL 5508122, at *3 (E.D. Tex.). Although Defendants claim to have 25 26 27 substantial ties to Texas, their headquarters appear to be in Canada. The interest of the Eastern District of Texas in this 28 27 1 2 controversy is therefore outweighed by the compelling interests in California. 3 The remaining factors are either neutral or favor Google. 4 Because Google, the accused infringer, resides in California, much 5 of the evidence is here. 6 7 Some of the evidence may be in Canada or other states; however, that does not make Texas the more convenient forum. Each forum is familiar with patent law, and 8 9 United States District Court For the Northern District of California 10 11 12 both have similar court congestion and time to trial. cases are in early stages. On balance, the factors do not weigh in favor of transferring the action to the Eastern District of Texas. 13 14 All of the CONCLUSION The motion to dismiss or transfer is DENIED. 15 16 IT IS SO ORDERED. 17 18 19 Dated: 04/17/2014 CLAUDIA WILKEN United States District Judge 20 21 22 23 24 25 26 27 28 28

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