Reactive Surfaces, Ltd LLP v. Toyota Motor Corporation
Filing
74
MEMORANDUM OPINION AND ORDER GRANTING 56 MOTION to Dismiss. Signed by Judge Lee Yeakel. (jk)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
2015
UG 13
PH
[:
AUSTIN DIVISION
Ii
REACTIVE SURFACES LTD, LLP,
PLAINTIFF,
§
§
§
V.
§
CAUSE NO. 1:14-CV-1009-LY
§
TOYOTA MOTOR CORPORATION,
DEFENDANT.
§
§
§
MEMORANDUM OPINION
AND ORDER ON MOTION TO DISMISS
Before the court in the above-styled and numbered cause are Defendant Toyota Motor
Corporation's Motion to Dismiss filed January 16, 2015 (Clerk's Doe. No. 56), Plaintiff Reactive
Surfaces Ltd, LLP's Response to Defendant's Motion To Dismiss filed May 1, 2015 (Clerk's Doe.
No. 67) and Defendant's Reply Brief In Support of Its Motion to Dismiss filed May 8, 2015 (Clerk's
Doe. No. 72).1
After thorough consideration of the motion, response, reply, applicable law, and the entire
case file, the court wifi grant Defendant's motion and dismiss Plaintiffs claims.
I. INTRODUCTION
On October 1, 2008, Plaintiff Reactive Surfaces Ltd, LLP ("Reactive") filed with the United
States Patent and Trademark Office ("PTO") United States Patent Application No. 12/243,755 in
connection with its product DeGreez, "an additive to functionalize coating capable of rendering a
coated surface seif-degreasing." Reactive has made, used, and sold DeGreez since sometime after
Defendant's Motion to Dismiss Plaintiffs Amended Complaint filed November 25, 2014
(Clerk's Doe. No. 39) is DISMISSED. The motion to dismiss currently before the court is directed
to Reactive's last live complaint.
32
the inception of the company on April 11, 2002. Reactive filed four additional related patent
applications between February 2013 and January 2014.2
Reactive alleges that Defendant Toyota Motor Corporation ("Toyota") owns several patents
and patent applications that are similar to its own patent applications. Between November 2013 and
August 2014, Reactive filed 15 "Suggestions for Declaration of Interference" with the United States
Commissioner of Patents, asking the Commissioner to find that Reactive's and Toyota's patent
applications claim the same inventions, and that only Reactive is entitled to patents for such
inventions. It appears that the Commissioner has not ruled on the Suggestions and that Reactive's
patent applications remain pending before the PTO. Nine of Toyota's 15 patent applications
referenced in the complaint have been
granted.3
Reactive brings a declaratory judgment action against Toyota, asserting claims of invalidity
and noninfringement and asking the court to resolve the Suggestions for Declaration of Interference
in its favor. Reactive also asserts state-law claims oftortious interference with a contract and tortious
interference with a business relationship. Toyota moves to dismiss all claims for lack of subjectmatter jurisdiction and also moves to dismiss all state-law claims for failure to state a claim. The
motion also attacks the state-law claims as being preempted by federal law.
Reactive has filed five patent applications: No. 12/243,755 filed October 1, 2008;
14/093,347 filed November 29, 2013; 14/097,128 filed February 4, 2013; 14/151,455 filed January
9, 2014; 14/156,007 filed January 15, 2014.
2
Relevant to this case, Toyota holds nine patents: 8,394,618 granted March 12, 2013;
8,324,295 granted December 4, 2012; 9,012,196 granted April21, 2015; 8,679,825 granted March
25, 2014; 8,361,768 granted January 29, 2013; 8,222,015 granted July 17, 2012; 8,252,571 granted
August 28, 2012; 8,796,009 granted August 5,2014; 8,911,986 granted December 16,2014. Toyota
has six patent applications pending before the PTO: 13/567,341 filed August 6, 2012; 13/229,277
filed September 9,2011; 11/562,503 filed November 22, 2006; 14/166,376 filed January 28, 2014;
13/856,244 filed April 3, 2013; 13/529,322 filed June 21, 2012.
2
II. ANALYSIS
A. Rule 12(b)(1) motion
Toyota primarily seeks to have this case dismissed for lack of subject-matter jurisdiction. See
Fed. R. Civ. P. 12(b)(1). When a party moves to dismiss a claim under Rule 12(b)(1), "the movant
is deemed to be challenging the factual basis for the court's subject matter jurisdiction." CedarsSinai
Med. Ctr. v. Watkins, 11 F.3d 1573, 1583 (Fed. Cir. 1993). For purposes of such a motion, "the
allegations in the complaint are not controlling.
.
.
and only uncontroverted factual allegations are
accepted as true." Id. (internal citations omitted). The parties are permitted to use affidavits and
other pleading materials to support and oppose the motion. In re RLB Contracting, Inc., 773 F.3d
596, 601 (5th Cir. 2014). Furthermore, "[tjhe burden of establishing subject matter jurisdiction in
federal court rests on the party seeking to invoke it." St. Paul Reinsurance Co., Ltd.
v.
Greenburg,
134 F.3d 1250, 1253 (5th Cir. 1998); see also Reynolds v. Army &Air Force Exch. Serv., 846 F.2d
746, 747 (Fed. Cir. 1998).
Thus, Reactive bears the burden of establishing subject-matter
jurisdiction. Since Reactive is seeking declaratory judgment, a determination of whether the court
has subject-matter jurisdiction rests on whether the court has declaratory-judgment jurisdiction.
The Declaratory Judgment Act and Federal Circuit law govern whether Reactive has standing
to seek a declaratory judgment concerning the patents. See 28 U.S.C.
§
2201(a);
WiA V Solutions
LLCv. Motorola, Inc., 631 F.3d 1257, 1263 (Fed. Cir. 2010). The Act provides, in part, that "[i]n
a case of actual controversy within its jurisdiction.
. .
any court of the United States, upon the filing
of an appropriate pleading, may declare the rights and other legal relations of any interested party
seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C.
§
2201(a).
The "actual controversy" requirement under the Act is coextensive with Article III's case-or-
3
controversy requirement. See Teva Pharm. USA, Inc.
v.
Novartis Pharm. Corp., 482 F.3d 1330,
1338 (Fed. Cir. 2007) (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227 (1937)).
"The
requirement of an actual controversy encompasses concepts such as ripeness, standing, and the
prohibition against advisory rulings." BP Chems. Ltd.
v.
Union Carbide Corp., 4 F.3d 975, 977 (Fed.
Cir. 1993); see also Caraco Pharm. Labs., Ltd. v. Forest Labs., Inc., 527 F.3d 1278, 1291 (Fed. Cir.
2008).
The existence of a case or controversy is highly dependent upon the particular facts at issue.
The difference between an actual controversy and an abstract question in a given case "is necessarily
one of degree" and must be ascertained by examining the totality of the circumstances to determine
whether there is a "substantial controversybetween parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory judgment." Golden
U.S. 103, 108 (1969) (quoting Maryland Cas. Co.
(1941)).
v.
v.
Zwickler, 394
Pacific Coal & Oil Co., 312 U.S. 270, 273
The Federal Circuit has applied this "under all the circumstances" standard, while
recognizing that a reasonable apprehension of suit is "one of many ways a patentee can satisfy the
all-the-circumstances test." Caraco Pharm. Labs., 527 F.3d at 1291. Moreover, the Federal
Circuit has held that "declaratory judgment 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." SanDisk Corp.
v.
STMicroelectronics, Inc., 480 F.3d 1372, 1381 (Fed. Cir. 2007). Therefore, the existence of an
adverse patent or a subjective fear of potential legal ramifications, without more, is insufficient to
invoke declaratory-judgment jurisdiction. Prasco, LLC v. Medicis Pharm. Corp., 537 F.3d 1329,
ru
1339 (Fed. Cir. 2008).
Rather, a justiciable controversy requires some affirmative act by the
patentee. Id.
The burden of establishing jurisdiction rests with Reactive. Thus, Reactive's conclusory
assertions that "[a]n actual, substantial case or controversy exists between the parties who have
adverse legal interests of sufficient immediacy and reality" do not suffice to create declaratoryjudgment jurisdiction, when Toyota, as is the case here, has challenged such assertions. Reactive
does, however, assert in its response to Toyota's motion that Toyota's "inequitable conduct at the
patent office constitutes an affirmative act."
Reactive directs the court to Therasense, Inc.
v.
Becton, Dickinson & Co. to support its
position that inequitable conduct constitutes an affirmative action as is required to create ajusticiable
controversy. 649 F.3d 1276 (Fed. Cir. 2011). However, in Therasense, inequitable conduct was
used as a defense against an infringement action, not a declaratory-judgment action. Although
inequitable conduct is relevant to adjudicate a dispute over patents, it is not relevant to determine
whether there is a justiciable dispute in the first place. Inequitable conduct alleged as a defense to an
anticipated dispute does not create declaratory-judgment jurisdiction. Inland Dredging v. Sanchez,
468 F.3d 864, 866 (5th Cir. 2006); see also Hanes Corp.
v.
Millard, 531 F.2d 585, 592-93 (D. C.
Cir. 1976) ("The anticipation of defenses is not ordinarily a proper use
procedure.
.
.
of the declaratory judgment
[i]t deprives the plaintiff ofhis traditional choice of forum and timing, and it provokes
a disorderly race to the courthouse."). A declaratory claim should be dismissed if it was filed for the
purpose of anticipating a trial of the same issues in a court of coordinate jurisdiction. See Mission
Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599, 601 (5th Cir. 1983);Amerada Petroleum Corp.
v.
Marshall, 381 F.2d 661, 663 (5th Cir. 1967). Thus, to the extent that the inequitable conduct is
5
used as a defense to support Reactive's noninfringement claim, it does not give the court declaratory-
judgment jurisdiction. Moreover, Therasensethe single case upon which Reactive reliesdoes not
establish inequitable conduct as an affirmative action giving rise to declaratory-judgment jurisdiction.
Reactive alleges that Toyota "lied, mischaracterized its [own] patents, and misrepresented and
omitted relevant prior art described in the [P]laintifl's patents and patent applications." Reactive
argues that these actions satisfy the Prasco requirement of an affirmative action. Examples of
affirmative actions include "creating a reasonable apprehension ofan infringement suit," "demanding
the right to royalty payments," "or creating a barrier to the regulatory approval of a product that is
necessary for marketing." Prasco, 537 F.3d at 1339. And a defendant making an implied assertion
of patent rights against the plaintiffs products constitutes an affirmative action. HewlettPackard
Co. v. Acceleron LLC, 587 F.3d 1358, 1364 (Fed. Cir. 2009) ("[The defendant] took the affirmative
step of twice contacting [the plaintifi] directly, making an implied assertion of its rights under the
[defendant's patent] against [plaintiffs products]
. . . .
Therefore, we hold that there is declaratory
judgment jurisdiction.")
The inequitable acts that Reactive alleges Toyota has taken are substantively different from
the types of acts which have been found to be examples of "affirmative action" giving rise to
declaratory-judgment jurisdiction. Reactive alleges that such conduct occured while Toyota was
prosecuting its patent applications before the PTO. Toyota argues that, during prosecution, it was
not attempting to invalidate Reactive's applications or even establish a conflict between the two
parties' applications. Reactive itself admits that Toyota was attempting to have Toyota's own
applications approved by explaining how Toyota's applications differ from Reactive's. This is
different than if Toyota had attempted to have Reactive's applications rejected by explaining how the
parties' applications conflicted. Toyota has never alleged that Reactive's applications or products
interfere with or potentially infringe upon Toyota's patents. The "lying" or "misrepresentation"
alleged by Reactive does not create a controversy.
Reactive also argues that acts that occur before the PTO during the prosecution of patents
can give rise to a justiciable controversy. Reactive argues that the Suggestions for Interference with
the PTO between Reactive's and Toyota's patents therefore give rise to a justiciable controversy.
However, the case Reactive uses to support its position is not analogous to the facts present here.
Danisco US. Inc.
v.
Novozymes A/S, 744 F. 3d 1325, 1329 (Fed. Cir. 2014). In Danisco, the court
determined that a dispute "capable of conclusive resolution through a declaratory judgment" existed
where the parties had "plainly been at war over patents.
. .
and [were] likely to be for the foreseeable
future." Danisco, 744 F.3d at 1331. This finding was based on (1) "a history of patent litigation
between the same parties involving related technologies, products, and patents," (2) explicit
statements made by the defendant during its prosecution of the patent-at-issue that the plaintifi' s
patents and products infringe the claims being prosecuted and (3) administrative action taken by the
defendant to attack patents owned by the plaintiffs. Id. No such history of litigation exists between
Reactive and Toyota, and Toyota has neither made analogous statements nor taken actions to attack
Reactive's patent applications. Toyota has made statements during the prosecution of its patents
regarding Reactive's patent applications, but they have related to the validity ofToyota' s applications
rather than to the invalidity of Reactive's applications. Further, the Suggestions are not analogous
to the administrative action taken in Danisco because the Suggestions were filed by Reactive rather
than by Toyota. Reactive presents no further support of its position that a justiciable controversy
exists. Although Reactive correctly states that "[t]he purpose
7
of the Declaratory Judgment Act.
in patent cases is to provide the allegedly infringing party relief from uncertainty and delay regarding
its legal rights," there stifi must be an allegedly infringing party or a justiciable controversy.
Goodyear Tire & Rubber Co.
v.
Releasomers, Inc., 824 F.2d 953, 956 (Fed. Cir. 1987). Reactive
has not met its burden of proving that such a controversy exists. Therefore, the court wifi dismiss
Reactive's claims for lack of subject-matter jurisdiction.
B. Rule 12(b)(6) motion
When a party moves to dismiss a claim under Federal Rule of Civil Procedure 1 2(b)(6), the
movant is deemed to be challenging the plaintiff's claims for failure to state a claim upon which relief
can be granted. In order to survive such an attack, a complaint must allege "more than labels and
conclusions
v.
.
. .
a formulaic recitation
of a cause of action's elements will not do." Bell Ati. Corp.
Twombly, 550 U.S. 544, 548 (2007). In response to Toyota's motion to dismiss, Reactive merely
states the elements of tortious interference with contract and then restates the elements, inserting
applicable party names. Reactive repeats the tactic with its claim of tortious interference with
prospective relations. Reactive relies on paragraph 22 ofits First Amended Complaint to supply the
necessary factual assertions. However, the only facts mentioned it paragraph 22 are that Reactive
held an invitation-only auction and that a third-party, the relationship with which Reactive alleges
Toyota interfered, attended. Reactive then continues to state the elements of tortious interference
with prospective relations, reciting conclusions rather than facts.
Furthermore, "state tort claims against a patent holder, including tortious interference claims,
based on enforcing a patent in the marketplace, are 'preempted' by federal patent laws, unless the
claimant can show that the patent holder acted in 'bad faith' in the publication or enforcement of its
patent." 800 Adept, Inc.
v.
Murex Sec., Ltd., 539 F.3d 1354, 1369 (Fed. Cir. 2008). "[A] party
attempting to prove bad faith on the part of a patentee enforcing its patent rights has a heavy burden
to carry." Id. at 1370.
Reactive fails to address the clear issue of preclusion and fails to explain how Toyota has
acted in bad faith. Further, Reactive does not assert that Toyota's alleged inequitable conduct
constitutes bad faith. The court concludes that Reactive has failed in its burden to establish bad faith.
Additionally, the court finds no support for the position that a state-law tort claim may be
based on inequitable conduct before the PTO. The Federal Circuit has found that a tort claim for
intentional interference with contractual relations "is premised upon bad faith misconduct in the
marketplace." Dow Chem. Co.
v.
Exxon Corp., 139 F.3d 1470, 1477 (Fed. Cir. 1998). This tort
claim can be contrasted with an abuse-of-process claim that requires bad-faith misconduct before the
PTO. Id; see also OFI, Inc.
v.
Bean Station Furniture, 286 F. Supp.2d 663, 666 (M.D.N.C. 2003)
(citing Dow, 139 F.3d at 1477) ("the bad faith necessary to establish a state law tort claim must occur
in the marketplace, not before the PTO"). Reactive does not allege that Toyota acted in "bad faith"
in asserting its patents in the marketplace. Instead, Reactive's state-law tort claims are based on
allegations of Toyota "asserting its patents issued directly as a result of its wrongful conduct before
the [PTO]," Toyota's "unlawful conduct before the [PTO]," and Toyota's "conduct [being]
independently tortious or unlawful in view of its conduct before the [PTO]." By Reactive's own
admissions, Reactive's state-law tort claims are based solely on Toyota's alleged conduct at the PTO,
not in the marketplace. The court concludes that all of Reactive's state-law claims are preempted by
federal law and are based on conduct for which no cause of action in tort lies. Therefore, the court
will dismiss Reactive's state-law claims.
IT IS THEREFORE ORDERED that Defendant Toyota Motor Corporation's Motion to
Dismiss (Clerk's Doc. No. 56) is GRANTED.
IT IS FURTHER ORDERED that all of Plaintiff Reactive Surfaces Ltd, LLP's claims
against Toyota are DISMISSED WITHOUT PREJUDICE.
SIGNED this
day ofAugust, 2015.
TED STAT S DIST ICT JUDGE
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