Fraunhofer-Gesellschaft Zur Forderung der angewandten Forschung e.V. v. Sirius XM Radio Inc.
Filing
175
MEMORANDUM AND ORDER: 1. Sirius XM's motion to dismiss, D.I. 10 , is GRANTED; and 2. Plaintiff's objections, D.I. 154 , are overruled; 3. The report and recommendations of the magistrate judge, D.I. 146 , is adopted in its entirety; 4. The motions to stay, D.I. 17 and 131 , are DENIED as moot. ***Civil Case Terminated. Signed by Judge Joseph F. Bataillon on 8/22/2018. (ceg)
Case 1:17-cv-00184-JFB-SRF Document 175 Filed 08/23/18 Page 1 of 7 PageID #: 7952
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
FRAUNHOFER-GESELLSCHAFT ZUR
FORDERUNG DER ANGEWANDTEN
FORSCHUNG E.V.,
1:17CV184
Plaintiff,
MEMORANDUM AND ORDER
v.
SIRIUS XM RADIO INC.,
Defendant.
This matter is before the court on Siriuis XM Radio’s motion to dismiss for failure
to state a claim, D.I. 10; motion to stay pending resolution of the motion to dismiss, D.I.
17; motion to stay pending inter partes review of the patents-in-suit by the patent trial
and appeals board, D.I. 131; the report and recommendation, D.I. 146; and objections
to the report and recommendation, D.I. 154. In the alternative, plaintiff asks this court to
dismiss without prejudice or to allow it to amend its complaint.
The standard of review is governed by 28 U.S.C. § 636(b)(1)(C) and Federal Rule of
Civil Procedure 72(b). The district court “shall make a de novo determination of those
portions of the report or specified proposed findings or recommendations to which objection
is made” and “may also receive further evidence or recommit the matter to the magistrate
judge with instructions.” 28 U.S.C. § 636(b)(1)(C). Similarly, Rule 72(b)(3) requires de
novo review of any recommendation that is dispositive of a claim or defense of a party.
The Supreme Court has construed the statutory grant of authority conferred on
magistrate judges under 28 U.S.C. § 636 to mean that nondispositive pretrial matters are
governed by § 636(b)(1)(A) and dispositive matters are covered by § 636(b)(1)(B). Gomez
Case 1:17-cv-00184-JFB-SRF Document 175 Filed 08/23/18 Page 2 of 7 PageID #: 7953
v. United States, 490 U.S. 858, 873-74 (1989); see also Fed. R. Civ. P. 72(a). Under
subparagraph (B), a district court may refer a dispositive motion to a magistrate judge “to
conduct hearings, including evidentiary hearings, and to submit to a judge of the court
proposed findings of fact and recommendations for the disposition.”
28 U.S.C. §
636(b)(1)(B); see EEOC v. City of Long Branch, 866 F.3d 93, 99–100 (3d Cir. 2017). The
product of a magistrate judge, following a referral of a dispositive matter, is often called a
“report and recommendation.” Id. “Parties ‘may serve and file specific written objections to
the proposed findings and recommendations’ within 14 days of being served with a copy of
the magistrate judge’s report and recommendation.” Id. (quoting Fed. R. Civ. P. 72(b)(2)).
“If a party objects timely to a magistrate judge’s report and recommendation, the
district court must ‘make a de novo determination of those portions of the report or specified
proposed findings or recommendations to which objection is made.’” EEOC, 866 F.3d at 99
(quoting 28 U.S.C. § 636(b)(1)).
STANDARD OF REVIEW
a. 12(b)(6)
Under the Federal Rules, a complaint must contain “a short and plain statement
of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The
rules require a “‘showing,’ rather than a blanket assertion, of entitlement to relief.” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 556 n.3. (2007) (quoting Fed. R. Civ. P.
8(a)(2)). “Specific facts are not necessary; the statement need only ‘give the defendant
fair notice of what the . . . claim is and the grounds upon which it rests.’” Erickson v.
Pardus, 551 U.S. 89, 93 (2007) (quoting Twombly, 550 U.S. at 555). In order to survive
a motion to dismiss under Fed. R. Civ. P. 12(b)(6), the plaintiff's obligation to provide the
2
Case 1:17-cv-00184-JFB-SRF Document 175 Filed 08/23/18 Page 3 of 7 PageID #: 7954
grounds for his entitlement to relief necessitates that the complaint contain “more than
labels and conclusions, and a formulaic recitation of the elements of a cause of action
will not do.” Twombly, 550 U.S. at 555.
The factual allegations of a complaint are assumed true and construed in favor of
the plaintiff, “even if it strikes a savvy judge that actual proof of those facts is improbable
and ‘that a recovery is very remote and unlikely.’” Id. (quoting Scheuer v. Rhodes, 416
U.S. 232, 236 (1974)). “On the assumption that all the allegations in the complaint are
true (even if doubtful in fact),” the allegations in the complaint must “raise a right to relief
above the speculative level.”
Twombly, 550 U.S. at 555-56.
In other words, the
complaint must plead “enough facts to state a claim for relief that is plausible on its
face.” Id. at 547. “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.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (stating that the
plausibility standard does not require a probability but asks for more than a sheer
possibility that a defendant has acted unlawfully.).
Twombly is based on the principles that (1) the tenet that a court must accept as
true all of the allegations contained in a complaint is inapplicable to legal conclusions
and (2) only a complaint that states a plausible claim for relief survives a motion to
dismiss. Id. at 678-79. Determining whether a complaint states a plausible claim for
relief is “a context-specific task” that requires the court “to draw on its judicial
experience and common sense.” Id. at 679. Accordingly, under Twombly, a court
considering a motion to dismiss may begin by identifying pleadings that, because they
are no more than conclusions, are not entitled to the assumption of truth. Id. Although
3
Case 1:17-cv-00184-JFB-SRF Document 175 Filed 08/23/18 Page 4 of 7 PageID #: 7955
legal conclusions “can provide the framework of a complaint, they must be supported by
factual allegations.” Id. When there are well-pleaded factual allegations, a court should
assume their veracity and then determine whether they plausibly give rise to an
entitlement to relief. Id.
Thus, the court must find “enough factual matter (taken as true) to suggest” that
“discovery will reveal evidence” of the elements of the claim. Twombly, 550 U.S. at 556;
Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 347 (2005) (explaining that something
beyond a faint hope that the discovery process might lead eventually to some plausible
cause of action must be alleged). When the allegations in a complaint, however true,
could not raise a claim of entitlement to relief, the complaint should be dismissed for
failure to state a claim under Fed. R. Civ. P. 12(b)(6). Twombly, 550 U.S. at 558; Iqbal,
556 U.S. at 679.
DISCUSSION
MCM is the method used to transmit data which splits components and sends
them over separate carrier signals. Plaintiff developed patented technology related to
multicarrier modulation for use in satellite radio broadcasting.
On March 4, 1998,
Fraunhofer entered into an exclusive license agreement with WorldSpace International
Network Inc. (“WorldSpace”) to license all patents for MCM technologies (the “MCM
License”). Fraunhofer subsequently obtained U.S. Patent Nos. 6,314,289 (“the ’289
patent”), 6,931,084 (“the ’1084 patent”), 6,993,084 (“the ’3084 patent”), and 7,061,997
(“the ’997 patent”) (collectively, the “patents-in-suit”), which relate to MCM technologies
and are covered by the MCM License. Later, WorldSpace gave a sublicense to XM
4
Case 1:17-cv-00184-JFB-SRF Document 175 Filed 08/23/18 Page 5 of 7 PageID #: 7956
Satellite, and XM used the license technology to assist in the development of the XM
DARS system. XM then merged in 2008 with Sirius.
In 2008 WorldSpace filed a Chapter 11 bankruptcy. A settlement agreement was
approved between WorldSpace, Fraunhofer, and Yamzi and it rejected the MCM
license.
The magistrate judge recommended that this court grant the motion to dismiss
and deny the motions to stay as moot. The magistrate judge determined that:
Section 365(d)(1) [footnote omitted] of Title 11 provides that, “[i]n a case
under chapter 7 of this title, if the trustee does not assume or reject an
executory contract ... within 60 days after the order for relief .. then such
contract or lease is deemed rejected.” 11 U.S.C. § 365(d)(1). Thus, the
MCM License was deemed rejected as of August 12, 2012, following the
conversion of the WorldSpace bankruptcy to chapter 7. The law is wellestablished that the rejection of an executory contract in bankruptcy
constitutes a breach, relieving the debtor of both the burdens and the
benefits of the agreement. In re Teleglobe Commc'ns Corp., 304 B.R. 79,
83 (D. Del. 2004). Consequently, by not assuming the MCM License,
WorldSpace forfeited its exclusive licensing rights to the patents-in-suit
and suspended its obligations under the MCM License. See In re Diomed
Inc., 394 B.R. 260,268 (Bankr. D. Mass. 2008) (holding that once rejection
occurred, the debtor's right to the continued use of the exclusive patent
license ended).
Moreover, WorldSpace's prospective licensing rights under the MCM
License were effectively nullified by the June 2, 2010 sale order entered in
the bankruptcy proceeding, in which WorldSpace acknowledged its
default. (D.I. 20, Ex. D at 183) (“WorldSpace is in default under the
license from Fraunhofer for the patents listed and identified in Schedule
1.1 (i) as licensed from Fraunhofer.”)
D.I. 146, at 6-7. The magistrate judge then concluded that there is no indication that
XM Satellite failed to meet its obligations under the Settlement Agreement, or that other
breaches occurred, and thus the sublicense continues. See Rhone Poulenc Agro, S.A.
5
Case 1:17-cv-00184-JFB-SRF Document 175 Filed 08/23/18 Page 6 of 7 PageID #: 7957
v. DeKalb Genetics Corp., 284 F.3d 1323, 1332 (Fed. Cir. 2002) (observing that a
sublicense continues, even when the principal license is terminated for breach of
contract).
The plaintiff objects to the recommendation to dismiss this case. It argues that
the magistrate judge is incorrect, as a sublicensor cannot grant greater rights than those
received in the original license with the property owner. See, e.g., TransCore, LP v.
Elec. Transaction Consultants Corp., 563 F.3d 1271, 1275 (Fed. Cir. 2009) (“the
premise that one cannot convey what one does not own … is particularly important in
patent licensing”). Plaintiff states that “[u]nder SXM’s theory, even though the patent
rights that WorldSpace received were expressly contingent on certain payments to
Fraunhofer, WorldSpace was somehow able to grant sublicense rights to SXM that
were free of any such contingency.” D.I. 154, at 8. Further, plaintiff contends that the
license and sublicense both expressly permit termination. Plaintiff states in this regard
that “[b]ut because the patent rights in this case were indisputably executory in nature
(R&R at 6 n.6), it is not appropriate to treat the granting of a sublicense to SXM as a
thing that was permanently transferred to SXM at the time it entered into its agreement
with WorldSpace.” D.I. 154, at 14.
Sirius counters these arguments, contending that Judge Fallon’s determination
that as a matter of law, that SXM has a sublicense to the Asserted Patents based on the
express and unambiguous language of the governing agreements should be affirmed.
Sirius also argues that Fraunhofer cannot recast its claims in an amended complaint, as
the same legal arguments will occur that have already been decided by Judge Fallon.
6
Case 1:17-cv-00184-JFB-SRF Document 175 Filed 08/23/18 Page 7 of 7 PageID #: 7958
A valid license is generally a complete defense to infringement. See Intel Corp.
v. Broadcom Corp., 173 F. Supp. 2d 201,228 (D. Del. 2001). The court agrees with the
magistrate judge.
As a matter of law, WorldSpace granted SXM’s predecessor a
sublicense in 1998, and any subsequent alleged loss of rights by WorldSpace does not
change its irrevocable rights under this agreement and license. The court agrees that
any attempt to amend the complaint would be futile. See, e.g., Casella v. Home Depot
USA, Inc., 2010 WL 3001919, at *4 (D.N.J. July 28, 2010) (finding that plaintiff’s motion
to file a first amended complaint “must be denied as futile”). Accordingly, the court will
adopt the order of the magistrate judge in its entirety.
THEREFORE, IT IS ORDERED THAT:
1. Sirius XM’s motion to dismiss, D.I. 10, is granted; and
2. Plaintiff’s objections, D.I. 154, are overruled.
3. The report and recommendation of the magistrate judge, D.I. 146, is adopted
in its entirety.
4. The motions to stay, D.I. 17 and 131, are denied as moot.
Dated this 22nd day of August, 2018.
BY THE COURT:
s/ Joseph F. Bataillon
Senior United States District Judge
7
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?