Scientific Telecommunications LLC v. Adtran Inc.

Filing 54

MEMORANDUM ORDER granting 20 MOTION to Dismiss Based upon COUNT III OF DEFENDANT ADTRAN, INC.'S COUNTERCLAIM filed by Scientific Telecommunications LLC. Signed by Judge Sue L. Robinson on 7/25/2016. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
SCIENTIFIC
TELECOMMUNICATIONS LLC,
Plaintiff,
v.
ADTRAN, INC.
Defendant.

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Civ. No. 15-647-SLR

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MEMORANDUM ORDER
At Wilmington this ~day of July, 2016, having reviewed plaintiff Scientific
Telecommunications LLC's ("plaintiff") motion to dismiss count Ill of defendant
ADTRAN, lnc.'s ("defendant") counterclaim, and the papers filed in connection
therewith;
IT IS ORDERED that said motion (D.I. 20) is granted for the reasons that follow:
1. Background. On October 30, 2014, plaintiff sent a letter (the "letter") to
defendant regarding the exploration of licensing opportunities for the patents-in-suit. 1
(D.I. 12, ex. A) In February 2015, the parties entered into a non-disclosure agreement
("NOA"), drafted by defendant, under Alabama contract law. (D.I. 9, ex. B). In July
2015, plaintiff filed this action against defendant alleging willful infringement on the
grounds that, since receiving the letter, defendant "has been aware of an objectively
high likelihood that its actions constituted, and continue to constitute, infringement of the
[patents-in-suit]." (D.I. 1 at~ 23) Plaintiff's complaint further states that "the case is

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United States Patents Nos. 6,058,429 and 7,222, 188.

exceptional based on the parties' pre-suit licensing discussions and [defendant]'s
continuing to sell its accused products after gaining knowledge of the patents-in-suit as
a result of those discussions." (D.I. 26 at 1) Defendant filed an answer and
counterclaim in October 2015. (Id.) Count Ill of the counterclaim asserts that plaintiff
breached the NDA. 2 (D.I. 12 at 14) Paragraph eight of the NOA states:
Without limiting the confidentiality obligations herein, the Parties agree
that their discussions with respect to the Purpose shall be considered
settlement discussions subject to Federal Rule of Evidence 408. [Plaintiff]
agrees that it shall not use [defendant]'s entering into this Agreement,
[defendant]'s consideration of any information disclosed to [defendant] by
[plaintiff] hereunder, or any action or inaction by [defendant] in connection
with this Agreement, the Purpose, or such information as a basis for
asserting that any alleged infringement by [defendant] of the ... Patents is
willful or that the case is otherwise exceptional in any litigation between
the Parties.
(D.I. 19

at~

10)

2. Standard. A motion filed under Federal Rule of Civil Procedure 12(b)(6) tests
the sufficiency of a complaint's factual allegations. Bell At/. Corp. v. Twombly, 550 U.S.
544, 555 (2007); Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). A complaint must
contain "a short and plain statement of the claim showing that the pleader is entitled to
relief, in order to give the defendant fair notice of what the ... claim is and the grounds
upon which it rests." Twombly, 550 U.S. at 545 (internal quotation marks omitted)
(interpreting Fed. R. Civ. P. 8(a)). Consistent with the Supreme Court's rulings in

Twombly and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Third Circuit requires a twopart analysis when reviewing a Rule 12(b)(6) motion. Edwards v. A.H. Cornell & Son,

Inc., 610 F.3d 217, 219 (3d Cir. 2010); Fowlerv. UPMC Shadyside, 578 F.3d 203, 210

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The NOA and count Ill of the counterclaim are heavily redacted. (D.112 at 13-15, ex.
B) The court has considered all of the parties' arguments in its analysis.

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(3d Cir. 2009). First, a court should separate the factual and legal elements of a claim,
accepting the facts and disregarding the legal conclusions. Fowler, 578 F.3d. at 21011. Second, a court should determine whether the remaining well-pied facts sufficiently
show that the plaintiff "has a 'plausible claim for relief."' Id. at 211 (quoting Iqbal, 556
U.S. at 679). As part of the analysis, a court must accept all well-pleaded factual
allegations in the complaint as true, and view them in the light most favorable to the
plaintiff. See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Christopher v. Harbury, 536
U.S. 403, 406 (2002); Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008).
In this regard, a court may consider the pleadings, public record, orders, exhibits
attached to the complaint, and documents incorporated into the complaint by reference.
Tellabs, Inc. v. Makar Issues & Rights, Ltd., 551 U.S. 308, 322 (2007); Oshiver v. Levin,
Fishbein, Sedran & Berman, 38 F.3d 1380, 1384-85 n.2 (3d Cir. 1994).

3. The court's determination is not whether the non-moving party "will ultimately
prevail" but whether that party is "entitled to offer evidence to support the claims."
United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 302 (3d Cir.

2011 ). This "does not impose a probability requirement at the pleading stage," but
instead "simply calls for enough facts to raise a reasonable expectation that discovery
will reveal evidence of [the necessary element]." Phillips, 515 F.3d at 234 (quoting
Twombly, 550 U.S. at 556). The court's analysis is a context-specific task requiring the

court "to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 663-64.
4. Analysis. Defendant's counterclaim rests on whether the NOA is applicable
to defendant's knowledge of the patents-in-suit prior to the NDA's execution. Defendant
received notice of the patents-in-suit before the parties entered into the NOA. The

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Eleventh Circuit has held that "if the parties had intended retroactivity, they would have
explicitly said so." Carter v. Doll House II, Inc., 608 F. App'x 903, 904 (11th Cir. 2015)
(quoting Thomas v. Carnival Corp., 573 F.3d 1113, 1119 (11th Cir. 2009)). Additionally,
that Court looks to whether there is "language that ... provides assurance about any
past events or actions." News Am. Mktg. In-Store, LLC v. Emmel, 429 F. App'x 851,
855 (11th Cir. 2011) (noting "[t]he specific promises undertaken were couched in
language that applies only prospectively). Here, while defendant contends that the NOA
clearly prohibits plaintiff from using any discussions, the NOA does not specifically state
that the prior communications or the letter are included in its terms. Additionally, the
NOA expressly states that the Effective Date is February 13, 2015 and it is silent with
respect to retroactive effect. 3 (D.I. 9, ex. B)
5. Moreover, "to whatever extent there is any ambiguity in the agreement as to
what acts are covered and what are not ... that ambiguity is generally construed
against the drafter of the contract." Id. at 856; see First Mercury Syndicate v. Franklin

County, 623 So. 2d 1075 (Ala. 1993). In the instant action, defendant drafted the NOA.
The letter was received by defendant several months prior to the execution of the NOA.
It follows that defendant could have expressly stated that the NOA would have a
retroactive effect to include the initial letter. The court concludes that the NOA is not

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This analysis is consistent with Alabama case law. The Alabama Supreme Court has
held that "[u]nder Alabama law, this Court, when interpreting a contract, must follow the
plain language of the contract. General contract law requires a court to enforce an
unambiguous, lawful contract, as it is written." Pub. Bldg. Auth. of City of Huntsville v.
St. Paul Fire & Marine Ins. Co., 80 So. 3d 171, 180 (Ala. 2010) (quotations and citations
omitted).

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retroactive. To the extent the counterclaim addresses defendant's knowledge prior to
the NOA, plaintiff's motion is granted. 4

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The court understands that plaintiff is basing its willful infringement claim on
defendant's knowledge of the patents-in-suit beginning in October 2014 and ending
upon the execution of the NOA on February 13, 2015.

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