TSMC Technology Inc. et al v. Zond LLC
Filing
41
REPORT AND RECOMMENDATIONS recommending granting-in-part D.I. 17 MOTION to Dismiss for Failure to State a Claim filed by Zond LLC. Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72(b)(2), briefin g consists solely of the Objections (no longer than ten (10) pages) and the Response to the Objections (no longer than ten (10) pages). No further briefing shall be permitted with respect to objections without leave of the Court. Objections to R&R due by 1/26/2015. Signed by Judge Christopher J. Burke on 1/8/2015. (dlk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
TSMC TECHNOLOGY, INC., TAIWAN
SEMICONDUCTOR MANUFACTURING
COMPANY, LIMITED and TSMC
NORTH AMERICA CORP.,
Plaintiffs,
)
)
)
)
)
)
)
v.
)
)
)
ZOND, LLC,
Civil Action No. 14-721-LPS-CJB
)
Defendant.
)
REPORT AND RECOMMENDATION
Presently before the Court is Defendant Zond, LLC's ("Zond" or "Defendant") Motion to
Dismiss (the "Motion to Dismiss"). (D.I. 17). For the reasons that follow, the Court
recommends that Defendant's Motion to Dismiss be GRANTED-IN-PART.
I.
Background
A.
The Parties
Plaintiff Taiwan Semiconductor Manufacturing Company, Ltd. ("TSMC Ltd.") is a
corporation organized under the laws of Taiwan, with its headquarters in Hsinchu, Taiwan. (D.I.
1 at~ 2) PlaintiffTSMC Technology, Inc. ("TTI") is a corporation organized under the laws of
Delaware with a place of business in San Jose, California, and is an indirect subsidiary ofTSMC
Ltd. (Id.
at~
1) Plaintiff TSMC North American Corp. ("TSMC NA," and together with TSMC
Ltd. and TTI, "Plaintiffs" or "TSMC") is a corporation organized under the laws of California,
with a place of business in San Jose, California, and is a subsidiary ofTSMC Ltd. (Id.
at~
3)
Zond is a limited liability company organized under the laws of Delaware. (Id.
at~
4). It
has its principal place of business in Mansfield, Massachusetts. (D.1. 15
at~
3) Zond is the
owner of the various patents-in-suit in this matter: United States Patent Nos. 6,806,651 ("the
'651 Patent"), 6,896,773 ("the '773 Patent"), 6,896,775 ("the '775 Patent"), 6,903,511 ("the '511
Patent"), 7,095,179 ("the '179 Patent"), and 7,446,479 ("the '479 Patent") (collectively, "the
Group Two Patents"). (D.I. 1 at~ 5)
B.
Facts Leading Up to the Filing of the Instant Case
In July 2013, Zond filed seven actions against seven different defendants or sets of
defendants in the United States District Court for the District of Massachusetts ("District of
Massachusetts"); in each case, Zond alleged infringement of seven of Zond's patents (the "Group
One Patents"). (D.I. 1 at~ 8; D.I. 8 at 3, 7-8); Zand, LLC v. Fujitsu Ltd. et al., Civil Action No.
13-cv-11634-WGY (D. Mass.) ("Zand, LLC !"), (D.I. 19). 1 In one of those actions (the "First
TSMC Massachusetts Action"), although the number and identity of the defendants changed
during the case, those defendants eventually came to include TSMC Ltd. and TSMC NA. (Zand,
LLC I, D.I. 19, D.I. 47)2 In that action, Zond focused its infringement allegations on certain
TSMC products ("circuit devices at the 28 and 20 [nanometer] and smaller nodes[]")
manufactured using ''unique manufacturing processes[.]" (Zand, LLC I, D.I 19 at~ 40). On June
2, 2014, the First TSMC Massachusetts Action was administratively closed, due to pending inter
partes review proceedings occurring before the United States Patent and Trademark Office
Zond also alleged infringement of an eighth patent, U.S. Patent No. 8,125,155 (the
'"155 Patent") in the original Complaint it filed in each of the Group One Patent cases, (see, e.g.,
Zand, LLC I, D.I. 1), but these allegations were dropped in Amended Complaints later filed in all
but one of these cases, (see, e.g., Zand, LLC I, D.I. 19).
2
At one point in the First TSMC Massachusetts Action, two other TSMC-related
entities, TSMC Development, Inc. and Wafertech, LLC, were named defendants. (Zand, LLC I,
D.I. 19) Those defendants were eventually dismissed from the case. (Zand, LLC I, D.I. 47)
2
("PTO"). (D.I. 1 at ii 8; Zand, LLC I, D.I. 124)
On June 5, 2014, counsel for Zond sent a letter addressed to TSMC Ltd. and TSMC NA,
to the attention of their in-house counsel (the "June 5 Letter"). (D.I. 1, ex. G at 1; D.I. 22 at 4)
The letter, after recapping the history of the First TSMC Massachusetts Action, concluded as
follows:
[B]ased on investigation, including the discovery in the [First
TSMC Massachusetts Action], Zond believes that [TSMC Ltd. and
TSMC NA, referred to together in the letter as "TSMC"] infringes
several other Zond patents, including without limitation [the six
Group Two Patents]. Zond intends to vigorously protect and
enforce its intellectual property rights. In particular, Zond intends
to file next week a new action in the District of Massachusetts,
related to the [First TSMC Massachusetts Action], involving the
same parties and the same accused TSMC products and processes,
including products sold by TSMC to many of its customers. Unless
TSMC promptly obtains a license to the right to use Zond's
patented technology, Zond sees litigation as the only available
avenue to put an end to TSMC's continued infringing activities.
IfTSMC wishes to obtain a license to the above referenced and
other Zond patents, please reach out to me by Noon Eastern time, on
Monday, June [9], 2014.
(D.I. 1, ex. G at 1-2)
C.
Procedural Background as to the Instant Case
Instead of "reach[ing] out" to Zond's counsel in response to the above-referenced letter,
on June 8, 2014, Plaintiffs commenced this action. (D.I. 1) In Plaintiffs' Complaint, they seek a
declaratory judgment that they do not infringe, directly or indirectly, each of the Group Two
Patents. (Id. at iMf 14-37)
On July 8, 2014, Zond filed the Motion to Dismiss. (D.1. 17) On October 16, 2014,
Chief Judge Leonard P. Stark referred this action to the Court to hear and resolve all pretrial
3
matters, up to and including the resolution of case-dispositive motions. (D.I. 28) On November
4, 2014, the Court heard oral argument on the instant Motion to Dismiss, as well as on Plaintiffs'
motion seeking to enjoin Zond's later-filed action in the District of Massachusetts (the "Motion
to Enjoin") and Zond's motion seeking to transfer venue of this case to the District of
Massachusetts (the "Motion to Transfer"). (D.I. 33 (hereinafter "Tr.")) 3
II.
DISCUSSION
Zond's Motion to Dismiss seeks, respectively: (1) dismissal ofTTI as a party due to lack
of subject matter jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(1 ); (2) dismissal
of claims as to all parties for failure to state a claim pursuant to Rule 12(b)( 6); and (3)
discretionary dismissal of the action pursuant to the Declaratory Judgment Act. (D.I. 18 at 1)
The Court will address each issue in tum.
A.
Motion to Dismiss for Lack of Subject Matter Jurisdiction
Zond seeks to dismiss TTI's claims against it for lack of subject matter jurisdiction,
pursuant to the Declaratory Judgment Act.
1.
Legal Standard
Rule 12(b)(1) authorizes dismissal of a complaint for lack of subject matter jurisdiction.
"Under Rule 12(b)(1 ), the court's jurisdiction may be challenged either facially (based on the
legal sufficiency of the claim) or factually (based on the sufficiency of jurisdictional fact)."
Kuhn Constr. Co. v. Diamond State Port Corp., Civ. No. 10-637-SLR, 2011WL1576691, at *2
(D. Del. Apr. 26, 2011). "In reviewing a facial attack, the court must only consider the
3
On December 19, 2014, the Court issued a Report and Recommendation
recommending that the District Court grant the Motion to Enjoin and ordering the denial of the
Motion to Transfer. (D.I. 34)
4
allegations of the complaint and documents referenced therein and attached thereto, in the light
most favorable to the plaintiff." Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir.
2000). "In reviewing a factual attack, the court may consider evidence outside the pleadings."
Id.
The Declaratory Judgment Act requires that a "case of actual controversy" exist between
the parties before a federal court may exercise jurisdiction. 28 U.S.C. § 220l(a). In determining
whether there is subject matter jurisdiction over declaratory judgment claims, a court should ask
''whether the facts alleged, under all the circumstances, show that there is a substantial
controversy, between parties having adverse legal interests, of sufficient immediacy and reality to
warrant the issuance of a declaratory judgment." Medimmune, Inc. v. Genentech, Inc., 549 U.S.
118, 127 (2007) (internal quotation marks and citation omitted) (noting that the Declaratory
Judgment Act's requirement that a '"case of actual controversy'" exist is a reference to the types
of cases and controversies that are justiciable under Article III); see also Frasco, LLC v. Medicis
Fharm. Corp., 537 F.3d 1329, 1334 (Fed. Cir. 2008). A case or controversy must be "based on a
real and immediate injury or threat of future injury that is caused by the defendants-an
objective standard that cannot be met by a purely subjective or speculative fear of future harm."
Frasco, LLC, 537 F.3d at 1339 (emphasis in original). Thus, in the patent context, "jurisdiction
generally will not arise merely on the basis that a party learns of the existence of a patent owned
by another or even perceives such a patent to pose a risk of infringement, without some
affirmative act by the patentee." Id. (internal quotation marks and citation omitted).
A decision as to whether an actual controversy exists in the context of a patent
declaratory judgment claim "will necessarily be fact specific and must be made in consideration
5
of all the relevant circumstances." WL. Gore &Assocs., Inc. v. AGA Med. Corp., Civil No. 11539 (JBS-KMW), 2012 WL 924978, at *4 (D. Del. Mar. 19, 2012) (citing Medimmune, Inc., 549
U.S. at 127). The burden is on the party asserting declaratory judgment jurisdiction (here,
Plaintiffs) to establish that an Article III case or controversy existed at the time that the claim for
declaratory relief was filed and that it has continued since. Danisco US. Inc. v. Novozymes A/S,
744 F.3d 1325, 1329 (Fed. Cir. 2014); Butamax Advanced Biofuels LLC v. Gevo, Inc., Civ. No.
12-1301-SLR, 2013 WL 1856308, at *2 (D. Del. May 2, 2013).
2.
Discussion
As an initial matter, the parties spar a bit over whether Zond's challenge is a facial or
factual attack on subject matter jurisdiction, and, relatedly, as to what evidence may be
considered here. (D.I. 25 at 7; Tr. at 109, 115, 137-40) Zond argues that the challenge is a facial
one, while Plaintiffs assert that it is a factual challenge. (Id.) The Court agrees with Zond.
When Zond asserts that jurisdiction does not exist as to TTI's claims, it does not rely upon any
fact evidence outside of the Complaint. In re Schering Plough Corp. Intron/Temodar Consumer
Class Action, 678 F.3d 235, 243 (3d Cir. 2012) ("The Defendants' Rule 12(b)(l) motions are
properly understood as facial attacks because they contend that the Amended Complaints lack
sufficient factual allegations to establish standing."); see also Cedars-Sinai Med. Ctr. v. Watkins,
11 F.3d 1573, 1583 (Fed. Cir. 1993). Instead, Zond's emphasis is on why the allegations in the
Complaint (and the June 5 Letter, attached as an exhibit to the Complaint), even accepted as true,
do not demonstrate that a case or controversy exists. (D .I. 18 at 15 (Zond asserting that none of
the "pied statements" as to TTI supports subject matter jurisdiction)); cf Panavise Prods., Inc. v.
Nat'l Prods., Inc., 306 F. App'x 570, 572 (Fed. Cir. 2009) (explaining that a "factual attack" to
6
subject matter jurisdiction was made where the defendant submitted a declaration that challenged
the facts alleged by the declaratory judgment plaintiff in the complaint). 4 Accordingly, the Court
will consider this to be a facial challenge, and will therefore consider only "the allegations of the
complaint and documents referenced therein and attached thereto" in resolving that challenge.
Gould Elecs. Inc., 220 F.3d at 176. 5
The Complaint contains very few allegations related to TTL In fact, the only allegation
that specifically mentions TTI comes in the paragraph in which Plaintiffs list TTI's state of
incorporation and the location of its place of business. (D.I. 1 at ii 1) It is also notable that when
the Complaint begins to discuss the existence of a legal controversy between certain TSMC
entities and Zond, TTI's name is conspicuously absent from those paragraphs. The Complaint's
first reference to the "immediate and real threat of harm posed by Zond[,]" for example, comes
when it describes the June 5 Letter, in which it states that Zond was "threatening to bring a new
lawsuit against TSMC Ltd. and TSMC [NA] alleging infringement of the Patents-in-Suit, none of
4
In its briefing on this issue, Zond does occasionally make reference to a document
outside of the pleadings, such as when it notes the content of a declaration ofTSMC Ltd. Senior
Vice President Richard L. Thurston (the "Thurston Declaration") that Plaintiffs filed along with
the Motion to Enjoin. (D.I. 18 at 15 (citing D.I. 8, ex. A)) But Zond is not referencing this
material in order to challenge the factual accuracy of allegations in the Complaint; its claim is
clearly that the content of the Complaint itself does not support subject matter jurisdiction. (Id.)
To the extent that Zond makes fleeting reference to the Thurston Declaration in its briefing, in
the Court's view, it does so largely to underscore the lack of factual allegations in the Complaint
as to TTI's claims. (See, e.g., D.I. 25 at 7 (Zond arguing that "none of [the] facts [in the
Thurston Declaration] were pied within the four comers ofTSMC's Complaint and, therefore, do
nothing to cure its facial deficiencies."))
In light of this, to the extent that Plaintiffs cite to the Thurston Declaration in
order to bolster their claim of subject matter jurisdiction (i.e., to demonstrate the nature of TTI's
involvement with semiconductor circuits that are the subject of the suit), the Court declines to
consider the contents of that extra-Complaint evidence.
7
which have ever been asserted against TSMC Ltd. and TSMC [NA]." (Id. at ii 9 (emphasis
added)) The Complaint goes on to claim that it is that "threat letter[,]" in conjunction with the
"prior litigation [in the District of Massachusetts involving the Group One Patents] against
TSMC Ltd. and TSMC [NA], and others in the semiconductor industry[,]" that is alleged to give
rise to "an actual and justiciable controversy between TSMC and Zond as to the noninfringement of the Patents-in-Suit." (Id. at ii 11 (emphasis added))
Yet neither the June 5 "threat letter" nor the referenced "prior litigation" involved TTL
The June 5 Letter is addressed only to TSMC Ltd. and TSMC NA, and it makes no mention of
TTL (Id., ex. G at 1) Indeed, there is no indication in the Complaint that Zond has ever accused
TTI of infringing any of its patents (including the Group Two Patents), or that Zond has ever
engaged TTI in any "prior litigation."6 The lack of any allegation that Zond has engaged in preComplaint communications with TTI, while not dispositive in and of itself, provides strong
indication that there is no subject matter jurisdiction here. Edmunds Holding Co. v. Autobytel
Inc., 598 F. Supp. 2d 606, 610 (D. Del. 2009) ("Thus, while an overt, specific act toward the
declaratory judgment plaintiff is not required to demonstrate the existence of an actual
controversy, none of the cases that [plaintiff] cites supports the proposition that the absence of an
overt, specific act is not a significant hurdle to a finding of jurisdiction under the Declaratory
Judgment Act."). 7
6
Indeed, it appears undisputed that, prior to this suit, Zond never communicated
with TTI in any way, nor ever made reference to its existence. (D.I. 18 at 3, 8)
7
Compare Panavise Prods., Inc., 306 F. App'x at 573 (finding that a declaratory
judgment plaintiff lacked subject matter jurisdiction for its claims against a defendant, where,
inter alia, there was a total "lack of direct pre-complaint communication between [defendant]
patentee and [the] declaratory plaintiff' and where none of the defendant's six prior lawsuits
8
Even to the extent that TTI had not received direct threats or other communications from
Zond, the Complaint could have articulated a specific rationale as to why TTI nevertheless
objectively faced the threat of future injury from Zond. (D.I. 18 at 15 (Zond noting that the
Complaint does not allege "that [TTI] engages in any potential[ly] infringing activity or plans to
do so")); see also Cat Tech LLCv. TubeMaster, Inc., 528 F. 3d 871, 880 (Fed. Cir. 2008) (noting
that if a declaratory judgment plaintiff "has not taken significant, concrete steps to conduct
infringing activity, the dispute is neither 'immediate' nor 'real' and the requirements for
justiciability have not been met"). Yet Plaintiffs did not do so.
It is true that the Complaint notes that Zond has sued other TSMC entities (TSMC Ltd.
and TSMC NA) in the First TSMC Massachusetts Action as to the same accused products and
processes--one of a number of suits involving the Group One Patents that Zond filed in the
District of Massachusetts. (D.I. 1 at ,-r 8) And "[p]rior litigious conduct is one circumstance to
be considered in assessing whether the totality of the circumstances creates an actual
controversy." Prasco, LLC, 537 F.3d at 1341. But TTI itself was not targeted in that Group One
Patent litigation, nor is there any allegation that, aside from the First TSMC Massachusetts
Action, Zond has ever sued any other TSMC entities. Cf Prasco, LLC, 537 F.3d at 1341
(finding that defendant patentee's one prior suit against the declaratory judgment plaintiff, which
concerned different products and unrelated patents, was "not the type of pattern of prior conduct
asserting infringement of the patent-in-suit had targeted the plaintiffs products), with Micron
Tech., Inc. v. Mosaid Techs., Inc., 518 F.3d 897, 901-02 (Fed. Cir. 2008) (finding that subject
matter jurisdiction existed where the declaratory judgment plaintiff had itself been the recipient
of several threatening letters, had watched the defendant sue other competitors in the field in
recent years, and where the defendant's public statements and annual reports suggested an intent
to continue an aggressive litigation strategy).
9
that makes reasonable an assumption that [the defendant] will also take action against [the
plaintiff] regarding [plaintiff's] new product."). The Court does not find the magnitude of
Zond's asserted prior litigious conduct to be so great as to overcome the deficiencies set out
above.
For all of these reasons, the Court concludes that TTI has not made sufficient allegations
in the Complaint to allow for a finding that an actual controversy exists between it and Zond with
respect to the Group Two Patents. Ultimately, then, TTI's allegations fall well short of what is
necessary to establish subject matter jurisdiction under the Declaratory Judgment Act.
B.
Motion to Dismiss for Failure to State a Claim
The portion of Defendant's Motion to Dismiss that is filed pursuant to Rule 12(b)(6)
seeks dismissal of all of Plaintiffs' claims regarding non-infringement. The Court will first
address the direct non-infringement claims, and then the indirect non-infringement claims. 8
1.
Direct non-infringement
A plaintiff pleading a claim of direct infringement must put forward allegations that equal
or exceed the level of specificity required by Form 18 of the Federal Rules of Civil Procedure.
McRo, Inc. v. Rockstar Games, Inc., Civil Action Nos. 12-1513-LPS-CJB, 12-1517-LPS-CJB,
8
Zond also identified another ground for dismissal under Rule 12(b)(6): improper
"group pleading[.]" (D.I. 18 at 16-17) During oral argument, however, Zond conceded that this
ground for dismissal "goes hand in hand with the declaratory judgment jurisdiction issue for
[TTI]." (Tr. at 115; see also D.I. 18 at 16 ("TSMC's group pleading attempts to hide the fact that
[TTI] lacks standing by pleading that all TSMC entities have a real controversy with Zond[.]");
D .I. 25 at 8-9) In other words, Zond' s claim is that in order to cover up for the lack of subject
matter jurisdiction as to TTI's claims, Plaintiffs used improper group pleading to conflate TTI's
allegations with those of the other TSMC Plaintiffs. In light of the fact that the Court has
recommended dismissal ofTTI's claims due to a lack of subject matter jurisdiction, the Court
finds that this additional asserted ground for dismissal is moot, and need not be addressed.
10
12-1519-LPS-CJB, 2014 WL 1051527, at *2 (D. Del. Mar. 17, 2014) (citing K-Tech Telecomms.,
Inc. v. Time Warner Cable, Inc., 714 F.3d 1277, 1283-84 (Fed. Cir. 2013)), report and
recommendation adopted, 2014 WL 1677366 (D. Del. Apr. 24, 2014). Form 18 provides the
following exemplary language relating to the required allegation of infringement:
3. The defendant has infringed and is still infringing the Letters
Patent by making, selling, and using electric motors that embody
the patented invention, and the defendant will continue to do so
unless enjoined by this court.
Fed. R. Civ. P., App. of Forms, Form 18 (emphasis in original). 9 District Courts that have held
(as this Court has) that Form 18' s requirements apply to direct infringement claims have also
held that those same requirements apply to claims for a declaratory judgment of noninfringement. See, e.g., Gradient Enters., Inc. v. Skype Techs. S.A., 932 F. Supp. 2d 447, 451
(W.D.N.Y. 2013); PageMelding, Inc. v. ESPN, Inc., No. C 11-06263, 2012 WL 3877686, at *2
(N.D. Cal. Sept. 6, 2012). Neither party disputes that this is the applicable standard, (D.I. 18 at
13-14; D.I. 22 at 7), and the Court will apply it here.
Zond claims that Plaintiffs' direct non-infringement allegations do not meet even the
"lenient pleading standards of Form 18" because "TSMC does not allege anywhere in its
Complaint which of its products does not infringe Zond's patents." (D.I. 18 at 2; see also id. at
13-14; D.I. 25 at 1, 3-4) In terms of providing sufficient notice as to the nature of the accused
products at issue, Form 18 requires little: only an identification of a general category of accused
9
In total, Form 18 requires "(1) an allegation of jurisdiction; (2) a statement that the
plaintiff owns the patent; (3) a statement that defendant has been infringing the patent 'by
making, selling, and using [the device] embodying the patent'; (4) a statement that the plaintiff
has given the defendant notice of its infringement; and (5) a demand for an injunction and
damages." K-Tech Telecomms., 714 F.3d at 1283 (citation omitted). Zond challenges Plaintiffs'
allegations only as to whether the third of these requirements is met.
11
products. Clouding IP, LLC v. Amazon.com, Inc., C.A. Nos. 12-641-LPS, 12-642-LPS,
12-675-LPS, 2013 WL 2293452 at *2 (D. Del. May 24, 2013).
The Complaint's counts seeking a declaration of non-infringement are essentially
identical (with only the patent number modified), (see, e.g., D.I. 1, iii! 14-3 7); they simply state
that "TSMC has not infringed and does not infringe ... directly ... any claim of the [patents-insuit]" and that "TSMC ... is entitled to a declaration of non-infringement of the [patents-insuit,]" (see, e.g., id. at iii! 16-17). However, the counts also incorporate the remainder of the
allegations in the Complaint by reference. (See, e.g., id. at iJ 14) An introductory paragraph in
the Complaint, in tum, makes reference to the June 5 Letter that gave rise to the "immediate and
real threat of harm" precipitating "this Declaratory Judgment action." (Id. at iJ 9). That letter,
attached as Exhibit G to the Complaint, indicates that the controversy at issue here involves "the
same accused TSMC products and processes" that were at issue in the First TSMC
Massachusetts Action. (Id., ex. G at 1) And as Zond is aware, in the First TSMC Massachusetts
Action, the TSMC accused products were delineated as "circuit devices at the 28 and 20 nm and
smaller nodes" and the accused TSMC processes were "generating and using strongly ionizing
plasmas in a manufacturing environment" to manufacture such circuit devices. (Zand L LLC,
D.I. 19 at iJ 40) 10
Thus, it is clear from the Complaint that Plaintiffs have identified "the same accused
10
In resolving a Rule 12(b)(6) motion, a court can take into account, inter alia, the
content of exhibits attached to a complaint and matters of public record (such as the content of a
complaint filed in another case). See ING Bank,fsb v. PNC Fin. Servs. Grp., Inc., 629 F. Supp.
2d 351, 354 (D. Del. 2009) (citing Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 998
F. 2d 1192, 1195 (3d Cir. 1993)); see also Marshall Inv. Corp. v. Krones, Inc., Civil Action No.
13-CV-118, 2013 WL 1962671, at *1 n.2 (W.D. Pa. May 10, 2013).
12
products and processes that Zond is accusing in the [First TSMC Massachusetts Action,]" (Tr. at
141 ), and it is also clear as to the general categories of products and processes that were at issue
there. For these reasons, the instant allegations are sufficient to satisfy Form 18's low bar. See
Clouding IP, 2013 WL 2293452, at *2.
2.
Indirect non-infringement
Allegations of indirect patent infringement must meet the requirements of Federal Rule of
Civil Procedure 8, as those requirements have been further elucidated by the Supreme Court of
the United States in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal,
556 U.S. 662 (2009). See McRo, Inc., 2014 WL 1051527, at *4 (citation omitted). When a court
examines whether these requirements have been met, it must conduct a two-part analysis.
Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the court separates the
factual and legal elements of a claim, accepting "all of the complaint's well-pleaded facts as true,
but [disregarding] any legal conclusions." Id. at 210-11. Second, the court determines "whether
the facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim
for relief.'" Id. at 211 (quoting Iqbal, 556 U.S. at 679). "A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Twombly, 550
U.S. at 556). In assessing the plausibility of a claim, the court must "construe the complaint in
the light most favorable to the plaintiff, and determine whether, under any reasonable reading of
the complaint, the plaintiff may be entitled to relief." Fowler, 578 F.3d at 210 (internal quotation
13
marks and citation omitted). 11
Plaintiffs' allegations of indirect non-infringement are extremely sparse, to the point of
almost being non-existent. The counts of the Complaint simply state that "TSMC has not
infringed and does not infringe ... contributorily, or by inducement [] any claim of the [patentsin-suit]" and that "TSMC ... is entitled to a declaration of non-infringement of the [patents-insuit]." (E.g., D.I. mf 16-17). Indeed, the counts are so sparse that they do not even recite the
wording of the elements of contributory or induced infringement (let alone facts that assertedly
demonstrate that these elements have been placed at issue or otherwise cannot be satisfied here).
(Id.)
Thus, for example, there are no factual allegations in the Complaint (or any exhibits
attached thereto) indicating why, as to contributory non-infringement, the accused products at
issue are not "especially made or especially adapted for use in an infringement[.]" 35 U.S.C. §
271(c). As to induced non-infringement claims, there are not any factual allegations that, for
example, address why Plaintiffs did not have the specific intent to induce infringement by the
asserted direct infringers. See McRo, Inc., 2014 WL 1051527, at *6. Nor are there any factual
allegations as to how Zond has previously argued why Plaintiffs are engaging in indirect
infringement of the patents-in-suit. In their briefing, Plaintiffs provide no further specificity on
11
Again, there is no dispute that these pleading requirements, which would apply to
a plaintiffs claim of indirect infringement, also apply here to a declaratory judgment plaintiffs
claim of indirect non-infringement. (D.I. 18 at 10; D.I. 22 at 9) The Court thus applies these
requirements herein. See, e.g., Gradient Enters., Inc., 932 F. Supp. 2d at 451; PageMelding,
Inc., 2012 WL 3877686, at *2.
14
this score. (D.1. 22 at 9-11) 12
It is true that in the First TSMC Massachusetts Action, Zond accused certain of the
Plaintiffs of indirect infringement as to the same accused products that are at issue here. And
perhaps Plaintiffs intend to import some aspects of Zond' s allegations in that case into their own
declaratory judgment claims of indirect non-infringement here. (Tr. at 147) But the current
Complaint makes no clear or direct reference to the specific nature of the indirect infringement
allegations in that prior suit. Nor does it articulate how what was alleged there has relevance to
claims in this case, which relate to a different set of patents (i.e., the Group Two Patents) than
those at issue in the First TSMC Massachusetts Action.
In the end, Plaintiffs are seeking a declaration of indirect non-infringement without
identifying "allegations by the patentee or other record evidence that establish at least a
reasonable potential that such a claim could be brought." Microsoft Corp. v. DataTern, Inc., 755
F.3d 899, 905 (Fed. Cir. 2014); see also PageMelding, Inc., 2012 WL 3877686, at *3
("[Declaratory judgment claimant] has not alleged any facts, that if true, would lead to a
reasonable inference that it did not intend another party to infringe the patent-at-issue."). Thus,
12
In their briefing, Plaintiffs cite to only one case in support of their position as to
this issue: Elan Pharma International Ltd. v. Lupin Ltd., Civil Action No. 09-1008 (JAG), 2010
WL 1372316 (D.N.J. Mar. 31, 2010). Elan is cited for the proposition that because the parties
will eventually be required to disclose their non-infringement contentions later in the case,
pursuant to the Court's Revised Patent Form Scheduling Order, then requiring more of Plaintiffs
now would ''undermine this Court's procedures." (D.1. 22 at 10) For the reasons set out in
Idenix Pharmaceuticals, Inc. v. Gilead Sciences, Inc., Civil Action No. 13-1987-LPS, 2014 WL
4222902, at *5 (D. Del. Aug. 25, 2014), the Court rejects this argument. Regardless of what
internal procedures a court deploys for patent cases, such procedures could not modify the
pleading requirements set forth in the Federal Rules of Civil Procedure, nor allow for disposing
with such requirements. See id. at *5 n.6; cf Senju Pharm. Co., Ltd. v. Apotex, Inc., 921 F. Supp.
2d 297, 302-03 (D. Del. 2013).
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Plaintiffs' claims are plainly insufficient to state a claim for indirect non-infringement.
C.
Discretionary Dismissal Under the Declaratory Judgment Act
Lastly, Zond asserts that the Court should decline to exercise jurisdiction over Plaintiffs'
declaratory judgment claims because the action has been filed contrary to the purpose of the
Declaratory Judgment Act. (D.I. 18 at 4); see also Serco Servs. Co., L.P. v. Kelley Co., Inc. v.
Kelley Co., Inc., 51F.3d1037, 1038 (Fed. Cir. 1995) (noting that a court has discretion under the
Declaratory Judgment Act to dismiss declaratory judgment claims, including to do so in favor of
a later-filed infringement suit regarding the same matter). More specifically, Zond asserts that by
filing the instant action in this District, and not the District of Massachusetts (home to the First
TSMC Massachusetts Action), Plaintiffs filed an anticipatory suit and were engaging in "forum
shopping" that should not be countenanced. (D.I. 18 at 4, 18)
Zond's arguments in this regard are the same as those it made in opposing Plaintiffs'
Motion to Enjoin and in promoting its own Motion to Transfer. (Id. at 18 (Zond asserting that
"all of the factors that support [its] Motion for Transfer ... also support declining to exercise
jurisdiction under the Declaratory Judgment Act.") In resolving those two motions in a
previously-filed Report and Recommendation, the Court addressed each of these arguments and
explained why it ultimately found them unavailing. See generally TSMC Tech., Inc. v. Zand,
LLC, Civil Action No. 14-721-LPS-CJB, 2014 WL 7251188 (D. Del. Dec. 19, 2014). For the
same reasons as those discussed in that Report and Recommendation, the Court does not
recommend that the District Court exercise its discretion under the Declaratory Judgment Act to
dismiss this suit.
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III.
CONCLUSION
For the foregoing reasons, the Court recommends that Zond's Motion to Dismiss be
GRANTED-IN-PART. Specifically, the Court recommends that the Motion be granted with
respect to all claims made by TTI, with such claims being dismissed for lack of subject matter
jurisdiction. And it recommends that the Motion also be granted with respect to all of Plaintiffs'
indirect non-infringement claims. However, the Court recommends that the Motion be denied in
all other respects.
As to TTI's claims (particularly because the challenge to subject matter jurisdiction here
was a facial one), and as to all of Plaintiffs' indirect non-infringement claims, the Court
recommends that dismissal be without prejudice. It is within this Court's discretion to grant
leave to amend, see Farnan v. Davis, 371 U.S. 178, 182 (1962), and because amendment should
be allowed "when justice so requires[,]" Fed. R. Civ. P. 15(a)(2), and because it is not clear that
amendment would cause undue prejudice or would be futile, the Court recommends that Plaintiff
be given leave to file a further amended complaint addressing the deficiencies outlined above.
See, e.g., AngioDynamics, Inc. v. Diomed Holdings, Inc., C.A. No. 06-02 GMS, 2006 WL
2583107, at *5 (D. Del. Sept. 7, 2006); accord Sicom Sys., Ltd. v. Agilent Techs., Inc., 427 F.3d
971, 980 (Fed. Cir. 2005) (explaining that "dismissal with prejudice is generally inappropriate
where [a] standing defect can be cured").
This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(l)(B), Fed. R.
Civ. P. 72(b)(l), and D. Del. LR 72.1. The parties may serve and file specific written objections
within fourteen ( 14) days after being served with a copy of this Report and Recommendation.
Fed. R. Civ. P. 72(b)(2). The failure of a party to object to legal conclusions may result in the
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loss of the right to de novo review in the district court. See Henderson v. Carlson, 812 F.2d 874,
878-79 (3d Cir. 1987); Sincavage v. Barnhart, 171 F. App'x 924, 925 n.1 (3d Cir. 2006).
The parties are directed to the Court's Standing Order for Objections Filed Under Fed. R.
Civ. P. 72, dated October 9, 2013, a copy of which is available on the District Court's website,
located at http://www.ded.uscourts.gov.
Dated: January 8, 2015
Christopher J. Burke
UNITED STATES MAGISTRATE JUDGE
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