The following is a summary of the precedential patent-related opinions issued by the Court of Appeals for the Federal Circuit for the week ending December 6, 2013. Lindsey Yeargin and Ross Barton prepared this edition.
Case Summaries
Litigation Practice and Procedure: Procedure: Motions to Dismiss
Licenses
Futurewei Technologies, Inc., et al. v. Acacia Research Corp., et al., No. 13-1090 (Fed. Cir. (C.D. Cal.) Dec. 3, 2013). Opinion by Taranto, joined by Mayer and Reyna.
In affirming the dismissal of the complaint, the Federal Circuit concluded that the first-to-file rule requires the dismissal of counts of a complaint when those counts could have been brought in an earlier-filed action.
On July 31, 2009, Access Co., Ltd. (“Access”), the owner of the five patents-in-suit, entered into an exclusive license agreement with Acacia Patent Acquisition LLC (“APAC”), a wholly owned subsidiary of Acacia Research Corporation (“Acacia Research”). The agreement gave APAC the exclusive right to sublicense the patents and sue for infringement of the patents. The agreement broadly disclaimed any third-party-beneficiary rights, and further stated that APAC could not enforce the covered patents against any of Access’s customers. On December 14, 2009, APAC assigned all of its rights in the patents-in-suit to a wholly owned subsidiary, SmartPhone Technologies LLC (“SmartPhone”).
On April 3, 2012, SmartPhone sued Futurewei Technologies, Inc. and Huawei Device USA Inc. (collectively “Huawei”) in the U.S. District Court for the Eastern District of Texas for infringement of numerous patents. The next day, April 4, 2012, Huawei brought a declaratory judgment action against SmartPhone, Acacia Research, and Access in the U.S. District Court for the Central District of California. Counts 1-5 of Huawei’s complaint sought a declaratory judgment of noninfringement, counts 6-10 sought a declaratory judgment of invalidity of the patents-in-suit, count 11 sought enforcement of Huawei’s rights as a third-party beneficiary of the license agreement, counts 12-15 sought to impose tort liability under California law, and count 16 sought a declaratory judgment that Acacia Research and SmartPhone were acting as corporate alter egos.
Based on the infringement action filed against Huawei in Texas, the California district court dismissed counts 1-10 of Huawei’s complaint under the first-to-file rule, which allows a district court to decline jurisdiction when a separate complaint involving substantially similar issues and parties has already been filed in another district court. The California district court dismissed count 11 of Huawei’s complaint for failure to state a claim, and the court also dismissed counts 12-15. Finally, the California district court dismissed count 16 because it concluded that it was a compulsory counterclaim in the Texas case. Huawei appealed the dismissal of counts 11 and 16 of its complaint.
The Federal Circuit affirmed the district court’s dismissal of counts 11 and 16, although on different grounds than those relied upon by the California district court. Specifically, the Federal Circuit concluded that counts 11 and 16 should be dismissed under the first-to-file rule. The Federal Circuit stated that because the first-to-file rule exists to promote judicial economy and to avoid conflicting decisions from two separate courts on the same issues, count 11, which sought a declaratory judgment that Huawei is a third-party beneficiary of the license agreement, could justly and efficiently be brought in the Texas action because provisions of the license agreement were already at issue in that case. Similarly, the Federal Circuit concluded that count 16, which sought a declaratory judgment that SmartPhone was acting as Acacia Research’s alter ego, should have been brought in the Texas action, as substantive claims related to that count were already being litigated there. Further, the Federal Circuit determined that, under California law, alter ego claims could not be brought as stand-alone substantive claims. Finally, the Federal Circuit concluded that the facts of this action did not give rise to any possible exception to the first-to-file rule. Accordingly, the Federal Circuit affirmed the district court’s dismissal of Huawei’s complaint.
http://www.cafc.uscourts.gov/images/stories/opinions-orders/13-1090.Opinion.11-27-2013.1.PDF
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