Adidas AG v. Under Armour Inc. et al

Filing 162

MEMORANDUM. Signed by Judge Gregory M. Sleet on 6/15/2015. (mdb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

ADIDAS AG and ADIDAS AMERICA, INC.,
Plaintiffs,

v.
UNDER ARMOUR, INC. and
MAPMYFITNESS, INC.,
Defendants,

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Civil Action No. 14-130-GMS

MEMORANDUM
I.

INTRODUCTION
Plaintiff adidas AG ("adidas AG") initiated th.is patent infringement lawsuit against

defendants Under Armour, Inc. and MapMyFitness, Inc. (collectively, "the Defendants") on
February 2, 2014. (D.I. 1.) On March 14, 2014, adidas AG filed its First Amended Complaint,
adding adidas America, Inc. ("adidas America") as a plaintiff (collectively, ''the Plaintiffs").
(D.I. 10.) 1 Presently before the court are (1) the Defendants' motion to dismiss adidas America
for lack for subject matter jurisdiction (D.I. 46); and (2) the Plaintiffs' Notice and Motion for
Application of German and Dutch Law. (D.I. 50.) For the following reasons, the court will
grants the Defendants' motion to dismiss and deny the Plaintiffs' motion to apply foreign law as
moot.

1

The Plaintiffs filed a Second Amended Complaint on September 11, 2014, asserting additional patents.
(D.I. 44.) The asserted patents are as follows: U.S. Patent Nos. 7,292,867; 7,805,149; 7,941,160; 7,957,752;
8,068,858; 8,244,226; 7,905,815; 7,931,562; 8,092,345; 8,579,767; 8,725,276; 8,721,502; 8,652,009.

II.

BACKGROUND
This case involves a complex series of contracts between adidas AG and its various

subsidiaries. The parties dispute the interpretation and practical import of these agreements, so
the court will only lay out generally what the agreements purport to do.
adidas AG is a German company and the undisputed legal owner of each of the asserted
patents in this suit.
American AG. (Id.

(D.I. 44,
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2, 11-23.) adidas America is an American subsidiary of

3.) The Defendants challenge the Plaintiffs' assertion that adidas America

is the exclusive licensee for the asserted patents within the United States. (Id.

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24.)

In 2009, adidas AG entered into a licensing agreement ("Licensing Agreement") with
adidas International Trading B.V. ("adidas IT"). (D.I. 47, Ex. 7.) adidas IT is not a party to this
lawsuit. The Licensing Agreement conferred upon adidas IT a "non-exclusive right and licence
to use the KNOW HOW to manufacture or have manufactured LICENSED PRODUCTS
anywhere in the world." (Id. § 2.1.) KNOW HOW was defined as:
[A]ny inventions, technical knowledge, methods, manufacturing
secrets, designs, specifications, drawings, marketing plans,
business plans, manuals, and the like, owned by or proprietary to
or acquired during the term of this AGREEMENT by [adidas
AG] ... which [adidas AG] considers reasonably necessary to the
manufacture and distribution of LICENSED PRODUCTS and
which shall include, without limitation the PATENTS.
(Id. § 1.11.)

The PATENTS referenced in this definition were not identified specifically.

Rather, "'PATENTS' means those utility and design patents and patent applications owned by
[adidas AG] ... [covering] the inventions and designs as listed in Exhibit B .... " (Id. § 1.11.)
Among the products listed in Exhibit Bis the adidas miCoach product. (Id. Ex. B.)
In 2011, adidas IT entered into a distribution agreement ("Distribution Agreement") with
adidas America. (D.I. 47, Ex. 8.) Under the Distribution Agreement, adidas IT appointed adidas

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America "to act as [the] exclusive distributor for the sale" of adidas-brand products in the United
States. (Id. § 2.1, App. A.) The Distribution Agreement discussed adidas America's authority to
enforce adidas-brand trademarks. (Id. § 13.) There is no mention of patents held by adidas.
On March 11, 2014, after adidas AG initiated this action but prior to adidas America
joining suit, all three entities-adidas AG, adidas IT, and adidas America-entered into a
Restatement and Clarification Agreement ("Clarification Agreement"). (D.I. 47, Ex. 9.) The
Clarification Agreement purported to make clear that adidas America was an exclusive licensee
of "adidas brand intellectual property":
For the avoidance of doubt, the parties agree and hereby restate
and clarify that adidas AG and adidas [IT], by and through the
License Agreement and the Distribution Agreement, have granted
adidas America[], as the exclusive distributor of adidas products in
the United States ... , an exclusive license to all adidas brand
intellectual property (which includes all ... Patents identified in
[Exhibit B] of the License Agreement ....
To the extent that there is any ambiguity arising out of the
language in the various Agreements regarding adidas America['s]
exclusive license, the Parties agree that they intended and hereby
confer (retroactively, if necessary) an exclusive license to adidas
America[] to the adidas AG intellectual property (which includes
any Mark or Patent as those terms are defined in the License
Agreement that relates to a Licensed Product) ....
(Id. §§ 2.1, 2.4.)

Finally, on June 20, 2014, adidas IT, adidas America, and Reebok International Ltd.
("Reebok") executed yet another distribution agreement ("Reebok Agreement").
Ex. A.)

(D.I. 57,

The Reebok Agreement expressly terminated the effectiveness of the original

Distribution Agreement and appointed both adidas America and Reebok as joint exclusive
distributors of adidas-brand products. (Id. at 2; § 2.1.)

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III.

STANDARDOFREVIEW
The court lacks subject matter jurisdiction over and must dismiss a party that does not

possess standing. See Fed. R. Civ. P. 12(b)(l), (h)(3); Ballentine v. United States, 486 F.3d 806,
810 (3d Cir. 2007) ("A motion to dismiss for want of standing is ... properly brought pursuant
to Rule 12(b)(l), because standing is a jurisdictional matter."). Motions to dismiss brought
under Rule 12(b)(l) may present facial or factual attacks on jurisdiction:
[W]e must emphasize a crucial distinction, often overlooked,
between 12(b)(l) motions that attack the complaint on its face and
12(b)(l) motions that attack the existence of subject matter
jurisdiction in fact, quite apart from any pleadings. The facial
attack ... offer[ s] similar safeguards to the plaintiff [as Rule
12(b)(6) or Rule 56]: the court must consider the allegations of the
complaint as true. The factual attack, however, differs greatly for
here the trial court may proceed as it never could under [those
Rules]. Because at issue in a factual 12(b)( 1) motion is the trial
court's jurisdiction its very power to hear the case there is
substantial authority that the trial court is free to weigh the
evidence and satisfy itself as to the existence of its power to hear
the case. In short, no presumptive truthfulness attaches to
plaintiff's allegations, and the existence of disputed material facts
will not preclude the trial court from evaluating for itself the
merits ofjurisdictional claims.

Mortensen v. First Fed. Sav. & Loan Ass 'n, 549 F.2d 884, 891 (3d Cir. 1977) (emphasis added);
see also Constitution Party of Pa. v. Aichele, 757 F.3d 347, 357-58 (3d Cir. 2014). The district
court must first determine whether the defendant's motion presents a facial or factual challenge
"because that distinction determines how the pleading must be reviewed." Aichele, 757 F.3d at
357. The plaintiff bears the burden of establishing that jurisdiction exists. Mortensen, 549 F.2d
at 891; Sicom Sys., Ltd. v. Agilent Techs., Inc., 427 F.3d 971, 976 (Fed. Cir. 2005)
IV.

DISCUSSION
The Defendants make facial and factual challenges to the adidas America's standing to

participate in this lawsuit as an exclusive licensee of the patents-in-suit.

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"A patent grant bestows the legal right to exclude others from making, using, selling, or
offering to sell the patented invention in the United States, or importing the invention." Morrow

v. Microsoft Corp., 499 F.3d 1332, 1339 (Fed. Cir. 2007). By statute, however, this exclusionary
right rests with the patentee. See 35 U.S.C. § 281 ("A patentee shall have remedy by civil action
for infringement of his patent.") Not all parties with some interest in the patent are necessarily
entitled to enforce it through the federal courts:
There are three general categories of plaintiffs encountered when
analyzing the constitutional standing issue in patent infringement
suits: those that can sue in their own name alone; those that can sue
as long as the patent owner is joined in the suit; and those that
cannot even participate as a party to an infringement suit.

Morrow, 499 F.3d at 1339. Plaintiffs in the first category hold all or substantially all rights to the
patents. Id. at 1340. Plaintiffs in the third category lack any exclusionary rights and

ther~fore

are not "injured by a party that makes, uses, or sells the patented invention." Id. at 1341
(emphasis added). Plaintiffs in the second category, however, occupy a middle ground. Often
referred to as "exclusive licensees," these plaintiffs hold some exclusionary rights and there.fore
are entitled to join the patent owner in enforcing those rights. Id. at 1340; see also Mitutoyo

Corp. v. Cent. Purchasing, LLC, 499 F.3d 1284, 1292 (Fed. Cir. 2007) ("In order for a licensee
to have co-plaintiff standing, it must hold at least some of the proprietary rights under the
patent." (emphasis added)). The dispute in this case is whether adidas America falls into the
second or third category.
The bulk of the Defendants' motion makes a factual attack on adidas America's standing.
But the Defendants also point to specific language in the amended complaint in support of a
facial challenge. In particular, the amended complaint states that "adidas AG is the owner by
assignment of all right, title, and interest in and to" each of the asserted patents. (D .I. 44, iMf 11-

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23 (emphasis added).) The Defendants contend that, if adidas AG truly holds all the interests in
the asserted patents, then adidas America cannot have any proprietary interest to satisfy its own
standing. Elsewhere in the amended complaint, however, the Plaintiffs clearly allege that adidas
America "is the exclusive licensee in the United States for each of the" asserted patents. (Id.

,-i 24.) While the Defendants view these statements as inconsistent and grounds for dismissal, the
court agrees with the Plaintiffs that alleging that adidas AG owns all "right, title, and interest" in
the patents does not make it impossible for adidas America to have an exclusive licensee to use
some of those rights. Under the "more generous standard of review associated with" a facial
attack, the Plaintiffs' amended complaint adequately alleges adidas America's standing.
Turning to the Defendants' factual challenge, the court "look[s] beyond the pleadings to
ascertain" whether the facts of the case-in reality-support tll;e jurisdictional allegations of the
complaint. See Aichele, 757 F.3d at 358. The court finds that the Plaintiffs have failed to carry
their burden to establish that adidas America has standing as a co-plaintiff in this action.
First, it is important to note that the Plaintiffs have never made a showing that the
patents-in-suit were the subject of the numerous contractual· agreements among the adidas
entities. The patents that were the subject of the original Licensing Agreement between adidas
AG and adidas IT were never identified by number, only by their associated commercial
embodiments.

(D.I. 47, Ex. 7, Ex. B.) Among these embodiments is the adidas miCoach

product, the apparent competitor product to the Defendants' accused products. 2 But strangely,
the Plaintiffs have never made any attempt to link the asserted patents to the miCoach product.
Therefore, if it accepts (for the moment) that the described series of agreements succeeding in
making adidas America an exclusive licensee to the intellectual property identified in the

2

The court is forced to infer this from the briefing. The adidas miCoach product is never mentioned in the
complaint or any of its amendments.

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Licensing Agreement, the court is left only with the conclusion that adidas America is the
exclusive licensee to the miCoach patents (in addition to the other named products' patents).
What these patents are, the court cannot say.
From what the court can tell, the Plaintiffs looked at the accused products, identified the
adidas patents they believed read on the accused products, and then simply assumed those
patents are the same for the miCoach product.

The Plaintiffs are not permitted to work

backwards from the accused infringing products to satisfy their burden of establishing standing.
The Plaintiffs make the conclusory statement that "[t]here is no dispute that [the licensing
agreements] include[] the asserted patents, which relate to adidas America's 'miCoach'
products."

(D.I. 52 at 4.)

acknowledgment.

This is not true.

The Defendants have never made such an

(D.I. 47 at 9 11.3 ("If one assumes that that the adidas MiCoach product

embodies the inventions covered by the Asserted Patents (which Plaintiffs have not
established) ...." (emphasis added)); D.I. 57 at 3 n.3.)

The Plaintiffs bear the burden of establishing that jurisdiction exists.

Mortensen,

549 F.2d at 891; Sicom, 427 F.3d at "976. As a preliminary matter-before the court even gets to
the question of what type of interest adidas America may hold-the Plaintiffs must prove that
adidas America holds some interest in the patents actually asserted. The Plaintiffs have made no
showing that the asserted patents are tied to the adidas mi Coach product, or any other product for
that matter. It is not the court's role to fill in gaps, which the Plaintiffs may consider obvious
inferences. Rather, the Plaintiffs must come forward with evidence to overcome the presumption
that jurisdiction is lacking. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377
(1994) ("Federal courts are courts oflimitedjurisdiction.... It is to be presumed that a cause lies

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outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party
asserting jurisdiction." (citations omitted)). They have not done so.
Notwithstanding the Plaintiffs' failure to tie the asserted patents to any of the contractual
agreements, the court agrees with the Defendants that the most recent Reebok Agreement
resolves the issue definitively. The Reebok Agreement explicitly terminated the effectiveness of
the previous Distribution Agreement and, by extension, the provisions of the Clarification
Agreement purporting to explain the Distribution Agreement.

(D.I. 57, Ex. A at 2,

ii

F.)

Critically, the Reebok Agreement appointed both adidas America and Reebok as the exclusive
distributors for adidas products in the United States. 3 (Id. § 2.1.) As a result, adidas America
"does not possess the requisite exclusive right to sell" products made according to the asserted
patents, necessary to qualify it as an exclusive licensee. See Mitutoyo, 499 F.3d at 1291. The
Federal Circuit's analysis in Mitutoyo is highly convincing:
Mitutoyo [plaintiff] and MAC [putative co-plaintiff] contend that
MAC has standing because it is the exclusive distributor of
Mitutoyo products in the United States. This argument, however,
misunderstands the relevant inquiry. In order for a licensee to have
co-plaintiff standing, it must hold at least some of the proprietary
rights under the patent. Consequently, the pertinent question is
whether MAC has the exclusive right to sell products made
according to the '902 patent in the United States; the exclusive
right to sell only Mitutoyo's products made according to the '902
patent, however, is not a sufficient basis for standing. Because
Mitutoyo represented to the trial court that General Tool Corp.
imports products covered by the '902 patent and has the right to
sell them in the United States, MAC does not possess the requisite
exclusive right to sell.
Id.

Even if the court were to accept the Plaintiffs' assertion--outlined in the Clarification

Agreement-that "exclusive distributor" actually meant "exclusive licensee," the Reebok

3 Oddly enough, the Reebok Agreement uses the same language of the original Distribution Agreementfocusing on distribution rather than exclusive licensing-even after the Clarification Agreement attempted to
explain what was really meant by the arguably unclear language.

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Agreement conclusively demonstrates that adidas America is not the exclusive seller of products
made according to the asserted patents.

See id.

Thus, adidas America's interest is not

exclusionary. Although the Reebok Agreement was executed after adidas America joined as a
co-plaintiff, the law makes clear standing must exist throughout the pendency of litigation. See

Canadian Lumber Trade Alliance v. United States, 517 F.3d 1319 (Fed. Cir. 2008) ("One
commentator has defined mootness as 'the doctrine of standing set in a time frame: The requisite
personal interest that must exist at the commencement of the litigation (standing) must continue
throughout its existence (mootness)."' (quoting U.S. Parole Comm'n v. Geraghty, 445 U.S. 388,
397 (1980))). adidas America falls into the third category of patent plaintiffs and lacks standing
to sue. Morrow, 499 F.3d at 1339.4

V.

CONCLUSION
For these reasons, the Defendants' motion to dismiss for lack of subject matter

jurisdiction (D.I. 46) is granted. adidas America is dismissed for lack of standing.

Dated: June

ll___, 2015

4
The court made several assumptions about the legal effect of the Licensing Agreement, the Distribution
Agreement, and the Clarification Agreement in reaching its decision. But in light of the its more narrow ruling, the
court declines to address the parties' remaining arguments concerning the proper interpretation of these agreements,
which likely would have required the application of foreign law. The Plaintiffs' Notice and Motion for Application
of German and Dutch Law (D.I. 50) is denied as moot.

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