HR Technology, Inc. v. Imura International U.S.A., Inc. et al

Filing 319

MEMORANDUM AND ORDER denying 303 Motion to Dismiss for Lack of Jurisdiction; denying 305 Motion to Dismiss for Lack of Jurisdiction; denying 307 Motion to Dismiss for Lack of Jurisdiction. Signed by District Judge John W. Lungstrum on 6/3/2011. (ses)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

HR TECHNOLOGY, INC.,
f/k/a THERMAL SOLUTIONS, INC.,

)
)
)
Plaintiff,
)
)
v.
)
)
IMURA INTERNATIONAL U.S.A., INC.,
)
VITA CRAFT CORPORATION, and
)
MAMORU IMURA, an individual,
)
)
Defendants.
)
)
_______________________________________)

Case No. 08-2220-JWL

MEMORANDUM AND ORDER
This case, which includes a patent infringement claim by plaintiff, presently
comes before the Court on plaintiff’s motions to dismiss for lack of subject matter
jurisdiction certain declaratory judgment counterclaims and affirmative defenses asserted
by defendants relating to three patents (Doc. ## 303, 305, 307). Specifically, plaintiff
argues that those counterclaims and defenses no longer satisfy the “case or controversy”
requirement of Article III of the United States Constitution and the Declaratory
Judgment Act in light of plaintiff’s execution of certain covenants not to sue defendants
for infringement. For the reasons set forth below, the Court denies the motions to
dismiss.
In the form of declaratory judgment counterclaims and affirmative defenses,

defendants seek declarations of invalidity, non-infringement, and non-enforceability with
respect to three patents held by plaintiff (the ’169 Patent, the ’585 Patent, and the ’919
Patent). At various times, in this case and in other litigation between the parties, plaintiff
has alleged that defendants infringed those three patents. In the pretrial order in this
case, plaintiff has preserved a claim only for infringement of Claims 19, 22, 26, and 36
of the ’169 Patent.
Plaintiff previously moved for summary judgment on defendants’ declaratory
judgment counterclaims, on the basis that the Court lacked jurisdiction over those claims
because no justiciable controversy existed.1 Specifically, plaintiff argued that in this
case it alleges only past infringement by defendants and that defendants did not plan to
engage in the allegedly infringing activity—the manufacture or sale of certain cookware
using RFID technology—in the future. By Memorandum and Order of April 13, 2010
(Doc. # 217), the Court denied plaintiff’s motion, ruling that when viewed in defendants’
favor, the evidence was sufficient to create an issue of fact regarding whether defendants
did still intend to sell the cookware in the future.

1

“Basically, the question in each case is 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)
(quoting Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941)). The
Supreme Court has made clear that a party need not engage in the allegedly infringing
activity (and risk treble damages for infringement) simply to create a case or controversy
under Article III to support a declaratory judgment claim relating to a patent. See id. at
128-37.
2

Plaintiff now moves to dismiss all counterclaims and affirmative defenses
asserted by defendants relating to the ’585 Patent (Doc. # 305) or the ’919 Patent (Doc.
# 303), as well as all counterclaims and affirmative defenses other than defendants’
inequitable conduct counterclaim relating to all claims in the ’169 Patent except Claims
18-22, 25, 26, and 36 (Doc. # 307). Once again, plaintiff argues that the Court lacks
jurisdiction because there is no longer any present case or controversy concerning
defendants’ infringement of those patents and patent claims. Plaintiff rests that argument
solely on a January 18, 2011, e-mail from plaintiff’s counsel to defendants’ counsel,
which states that plaintiff “decided to offer the covenants below in order to moot the
issue and divest the Court of subject matter jurisdiction over most of [defendants’] patent
claims and defenses.” The actual covenants that follow in the e-mail state that plaintiff
“unconditionally covenants not to sue” defendants for infringement as to any claim of
the ’585 Patent and the ’919 Patent and as to Claims 1-17, 23, 24, 27-35, and 37-56 of
the ’169 Patent “based upon the Defendants’ manufacture, importation, use, sale, or offer
for sale of Defendants’ products as they exist today or have existed in the past.” Plaintiff
thus argues that, by virtue of these covenants not to sue, it may no longer claim
infringement of those patents and patent claims by defendants, and that therefore no
controversy remains to support defendants’ declaratory judgment claims and affirmative
defenses relating to those patents and patent claims. See Dow Jones & Co., Inc. v.
Ablaise Ltd., 606 F.3d 1338, 1345-48 (Fed. Cir. 2010) (“a covenant not to sue for patent
infringement divests the trial court of jurisdiction over claims that the patent is invalid,
3

because the covenant eliminates any case or controversy between the parties”) (citing
cases).
1.

The Court first addresses the parties’ arguments not relating to the actual

language of the covenants. Defendants argue that because plaintiff never filed a motion
to dismiss its claim of infringement of the ’585 Patent under Fed. R. Civ. P. 41, that
claim remains in the case, which gives rise to a controversy concerning that patent. The
Court rejects that argument. Rule 41 applies only to the dismissal of an entire action and
not merely the dismissal of a claim. See Gobbo Farms & Orchards v. Poole Chemical
Co., Inc., 81 F.3d 122, 123 (10th Cir. 1996). This claim has clearly been abandoned by
virtue of its omission from the pretrial order, see Cortez v. Wal-Mart Stores, Inc., 460
F.3d 1268, 1276-77 (10th Cir. 2006), and defendants have provided no authority for its
position that the claim somehow remains in the case. Moreover, plaintiff’s motion with
respect to the ’585 Patent is based on the covenant not to sue, which, if effective, would
serve as an absolute defense to the claim even if it were still technically alive.
2.

Defendants also argue that because they have alleged that plaintiff

breached license agreements by licensing invalid patents, the issue of invalidity cannot
be wholly removed from the case. That fact is irrelevant to the present motions, which
do not relate to defendants’ affirmative contract claims. Accordingly, in considering
whether defendants’ declaratory judgment claims and affirmative defenses should be
dismissed, the Court does not address any issues that may or may not be involved in

4

other claims not at issue in these motions.2
3.

Defendants also point to their claim for attorney fees under 35 U.S.C. §

285, which provides that in a patent case, “[t]he Court in exceptional cases may award
reasonable attorney fees to the prevailing party.” Defendants argue that the fee claim
confers jurisdiction on the Court to rule the patents to be unenforceable based on
inequitable conduct by plaintiff in prosecuting the patents.
In support of this argument defendants rely solely on the case of Monsanto Co.
v. Bayer Bioscience N.V., 514 F.3d 1229 (Fed. Cir. 2008). In that case, even though
Bayer had dismissed its patent claims and given Monsanto a covenant not to sue, the
court rejected Bayer’s argument that the district court did not have jurisdiction to find
that the patents were unenforceable in ruling on a fee claim under Section 285. See id.
at 1242-43. The court noted that the district court’s jurisdiction to rule on the fee claim
encompassed the jurisdiction to make findings of inequitable conduct, based on prior law
allowing a prevailing party to establish an “exceptional case” under the statute by
showing inequitable conduct. See id. at 1242 (citing Brasseler, U.S.A. I, L.P. v. Stryker
Sales Corp., 267 F.3d 1370, 1380 (Fed. Cir. 2001)). Thus, the court held that the district
court was required to find the patents unenforceable once it found inequitable conduct.
See id. at 1243.
Under Monsanto, defendants are correct that, even if plaintiff’s covenants could

2

For that reason, the Court does not address plaintiff’s argument that multiple
defendants cannot have standing to pursue the contract claims.
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divest the Court of jurisdiction over defendants’ declaratory judgment claims, the Court
could still possibly declare the three patents unenforceable in ruling on defendants’ fee
claim. Monsanto does not suggest, however, that the fee claim confers or creates
jurisdiction over the declaratory judgment claims. To the contrary, in Monsanto the
court ruled that the district court retained jurisdiction over the fee claim even if the
covenant divested that court of jurisdiction over the declaratory judgment claims. See
id. at 1242. Thus, the fee claim has no effect on the viability of the declaratory judgment
claims and affirmative defenses that are the subject of these motions, including
defendants’ claims seeking declaratory judgments that the ’585 Patent and the ’919
Patent are unenforceable based on inequitable conduct. Nor would the dismissal of the
inequitable conduct claims affect defendants’ ability to pursue their fee claim, which is
not at issue in these motions.3
4.

Finally, the Court considers defendants’ opposition based on the actual

language of the covenants at issue. “Whether a covenant not to sue will divest the trial

3

Plaintiff argues that, even without the covenants not to sue, the Court lacks
jurisdiction over defendants’ inequitable conduct declaratory judgment claims relating
to the ’585 Patent and the ’919 Patent because plaintiff was no longer alleging
infringement of those patents in this case at the time defendants added those claims by
amendment. As noted above, however, the absence of an infringement claim does not
mean that a case or controversy may not exist. See supra note 1. The Court also notes
that plaintiff did not properly raise this argument, which was made for the first time in
plaintiff’s reply brief. See, e.g., U.S. Fire Ins. Co. v. Bunge N. Am., Inc., 2008 WL
3077074, at *9 n.7 (D. Kan. Aug. 4, 2008) (court will not consider issues raised for first
time in reply brief) (citing Minshall v. McGraw Hill Broadcasting Co., 323 F.3d 1273,
1288 (10th Cir. 2003)).
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court of jurisdiction depends on what is covered by the covenant.” Revolution Eyewear,
Inc. v. Aspex Eyewear, Inc., 556 F.3d 1294, 1297 (Fed. Cir. 2009). For instance, in
Revolution Eyewear, the court held that because the covenant at issue did not extend to
future sales of the product, it did not divest the district court of jurisdiction, and that
because the declaratory judgment plaintiff retained stores of the product to sell, the
district court would not merely be rendering an advisory opinion. See id. at 1298-1300.
Defendants argue that the covenants here are not broad enough to eliminate any
possible future claim by plaintiff of infringement by defendants because they cover only
defendants’ products “as they exist today or have existed in the past.” Thus, defendants
argue that the covenants cover the RFIQ products that they had already produced when
plaintiff terminated the licenses, but they do not preclude a future infringement claim by
plaintiff if defendants develop different products using the patents’ RFID technology.4
In response, plaintiff argues that the covenants were not intended to be so narrow
as to apply only to the RFIQ system as it existed in 2006. Plaintiff interprets the

4

The Court rejects defendants’ other arguments relating to the scope of the
covenants. The fact that the covenants do not explicitly refer to methods is immaterial,
as the covenants apply to all claims of two patents and specific claims of the third, and
infringement claims would be barred as to those patents and claims. Moreover, the fact
that plaintiff’s surviving infringement claims under the ’169 Patent could preclude
defendants’ development of their products even with the covenants is irrelevant, as the
covenants could still eliminate any possible claim of infringement (and thus any
controversy) relating to the other two patents and the other claims of the ’169 Patent.
Finally, because the covenants track the language of the infringement statute, 35 U.S.C.
§ 271(a), the Court rejects defendants’ argument that the covenants are too narrow
because they don’t refer to the exporting of parts.
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covenants in its reply brief as follows: “The covenant was not limited to any particular
pan or pot size, so if Vita Craft wanted to add, for example, a stockpot or a different size
sauce pan, the covenant covers the new size.” Plaintiff also concedes that the covenant
was not intended to be unlimited in scope, as it was not intended to cover future
unknown products that fall outside the “clarification” quoted above.5

That

“clarification” that the covenant covers application of defendants’ previously-produced
RFIQ system to new pot sizes is not sufficient, however, to include all possible
applications of the patents’ technology to defendants’ cookware, which applications
would therefore remain subject to a possible claim by plaintiff of infringement. As
recognized by the Federal Circuit in Revolution Eyewear, the mere fact that plaintiff has
granted covenants not to sue is not enough; rather, the scope of the covenants must be
considered.
The Court agrees with plaintiff that the covenants need not cover every possible
act of infringement that defendants could possible commit in the future; for instance, on
the present record, they need not cover defendants’ future application of the patents’
technology to some heretofore-unmentioned product other than cookware.

As

defendants concede, they must have made “meaningful preparation” for the development
of the product before a case or controversy arises. See Cat Tech LLC v. TubeMaster,
Inc., 528 F.3d 871, 880-81 (Fed. Cir. 2008). Plaintiff, however, has not disputed

5

Plaintiff argues that it may effectively broaden the scope of its covenants by its
statements in its brief, which would also bind plaintiff.
8

defendants’ evidence (the same evidence on which they relied in opposing plaintiff’s
previous summary judgment motion) that they invested a great deal of money and time
in developing applications of the patents’ RFID technology, as permitted by the licenses,
to their cookware.6 The Court previously held that that evidence was sufficient to
demonstrate a controversy and support subject matter jurisdiction at this stage of the
litigation. Plaintiff’s covenants—even as “clarified” in its brief—do not extend to all
future applications of the patents’ technology to defendants’ cookware; therefore, the
covenants do not eliminate any case or controversy concerning the patents and patent
claims referenced in those covenants, and the Court retains subject matter jurisdiction
over defendants’ declaratory judgment counterclaims and affirmative defenses relating
to those patents and patent claims. For that reason, the Court denies plaintiff’s motions
to dismiss.

IT IS THEREFORE ORDERED BY THE COURT THAT plaintiff’s motions to
dismiss certain counterclaims and affirmative defenses (Doc. ## 303, 305, 307) are
denied.

IT IS SO ORDERED.

6

Plaintiff argues that the appropriate controversy is limited to the scope of the
patents, not the scope of the license agreements. Plaintiff is correct that the controversy
must involve a possible claim of infringement of the patents. The license agreements,
however, provide context concerning defendants’ potentially-infringing future activity.
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Dated this 3rd day of June, 2011, in Kansas City, Kansas.

s/ John W. Lungstrum
John W. Lungstrum
United States District Judge

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