Ameranth, Inc. v. Chownow, Inc.
| Decision Date | 19 August 2021 |
| Docket Number | 3:20-cv-02167-BEN-BLM |
| Parties | AMERANTH, INC., a Delaware corporation, Plaintiff, v. CHOWNOW, INC., a Delaware corporation, Defendant. CHOWNOW, INC., a Delaware corporation, Counter-claimant, v. AMERANTH, INC., a Delaware corporation, Counter-defendant. |
| Court | U.S. District Court — Southern District of California |
ORDER DENYING PLAINTIFF'S MOTION TO: (1) DISMISS THE COUNTERCLAIM FOR (A) FAILURE TO STATE A CLAIM AND (B) LACK OF SUBJECT MATTER JURISDICTION AND (2) REMAND TO STATE COURT PURSUANT TO 28 U.S.C. § 1447(c) [ECF No. 12, 13 15, 19, 20, 24, 28, 29, 30]
Plaintiff/Counter-defendant Ameranth, Inc., a Delaware corporation ("Plaintiff or "Ameranth") brings this action for breach of a patent licensing agreement against Defendant/Counter-claimant ChowNow, Inc., a Delaware corporation ("Defendant" or "ChowNow"). ECF No. 1; see also ECF No. 12-1 at 6:3-4.
Before the Court are the following Motions: Plaintiffs Motion to (1) Dismiss for (a) Failure to State a Claim for Relief and (b) Lack of Subject Matter Jurisdiction and (2) Remand to State Court, ECF No. 12 (the "Motions"). Defendant opposed both motions. ECF No. 19. Plaintiff replied. ECF No. 24. The Motions were submitted on the papers without oral argument pursuant to Civil Local Rule 7.1(d)(1) and Rule 78(b) of the Federal Rules of Civil Procedure. ECF No. 25. After considering the papers submitted, supporting documentation, and applicable law, the Court DENIES both of Plaintiff s Motions.
A judge in this district recently noted that this is by no means the first patent infringement case brought by Ameranth and will undoubtedly not be the last. See, e.g., Ameranth, Inc. v. Domino's Pizza, Inc., No. 3:12-cv-00733-DMS-WVG, 2021 WL 409725, at *1 (S.D. Cal. Feb. 5, 2021), reconsideration denied, No. 12CV0733 DMS (WVG), 2021 WL 1853553 (S.D. Cal. May 10, 2021) ().[1] The instant case arises from Ameranth's ownership of several patents licensed to Defendant. See generally ECF No. 1. Defendant eventually ceased paying royalties to Plaintiff on the basis that, inter alia, it believed it did not practice the patents covered by the underlying license agreement and most of those patents had been declared invalid. Id. Plaintiff contends that Defendant's failure to continue paying royalties constitutes a breach of the agreements between the parties. Id.
Plaintiff is a San Diego-based online and mobile food ordering technology and software company that provides web and mobile data synchronization solutions as part of its food and beverage technology systems to restaurants throughout the United States. Complaint, ECF No. 1-2 ("CompL") at 3:6-9[3]; see also Motion to Dismiss and Remand, ECF No. 12-1 ("Mot.") at 7:12-14. The United States Patent and Trademark Office ("USPTO") issued multiple utility patents to Plaintiff, including Patent Nos. 6, 384, 850 (the "850 Patent"), 6, 871, 325 (the "325 Patent"), 6, 982, 733 (the "733 Patent"), 8, 146, 077 (the "077 Patent"), 9, 009, 060 (the "060 Patent"), and 9, 747, 651 (the "651 Patent") (collectively, the Licensed Patents"). Plaintiff also has other related patent applications pending. Mot. at 7:14-17; see also Opposition to Motion to Dismiss and Remand, ECF No. 19 ("Oppo.") at 7:25-28. These patents pertain to a "synchronous communications system and method for generation of computerized menus." Cross-Complaint, ECF No. 1-4 ("Cross-Compl.") at 4:11-13. Plaintiff readily admits that it licenses "its patents to dozens of companies in the hospitality industry." Mot. at 7:17-18.
Defendant is also an online and mobile food ordering company that provides food and beverage ordering technology systems and services to restaurants throughout the United States, including in San Diego, California. Compl. at 3, If 4. Defendant provides its local restaurant customers with Software as a Service tools to help them grow their business by allowing them to process an unlimited number of customer orders through their own websites and mobile applications for a fixed monthly cost. Cross-Compl. at 3, ¶ 2.
On May 18, 2012, Plaintiff sued ChowNow in the Southern District of California in Ameranth, Inc. v. ChowNow, LLC, Case No. 3:12-cv-01201-JLS-NLS ChowNow F), alleging three counts of infringement pertaining to the 850, 325, and 077 patents, arising out of Defendant's alleged use of Plaintiff s three aforementioned patents. ChowNow I, ECF No. 1; see also Mot. at 7:22-23; Oppo. at 7:19-22. This case was voluntarily dismissed pursuant to Rule 41(a)(1) of the Federal Rules of Civil Procedure ("FRCP"), with prejudice, due to a settlement between the parties. ChowNow I, ECF No. 8.
On June 22, 2012, as part of the settlement reached in ChowNow I, Plaintiff and Defendant entered into an original licensing agreement pursuant to which Plaintiff granted a non-exclusive license[4] to Defendant to certain patents owned by Plaintiff in consideration for Defendant's agreement to (1) mark its system with Plaintiffs patents; (2) submit quarterly reports to Plaintiff of Defendant's royalty producing activities within the Fields of Use[5]; and (3) make royalty payments to Plaintiff." Mot. at 8:3-7; Oppo. at 8:9-15; see also Compl. at 3:13-17; Licensing Agreement, ECF No. 14-1 at 3, § 2.1.1. The licensing agreement (the "Licensing Agreement") pertained to the 850 Patent, 325 Patent, 733 Patent, and 077 Patent. ECF No. 14.
This Licensing Agreement does not preclude Plaintiff from suing Defendant for patent infringement arising out of Defendant's use of the Licensed Patents outside the Field of Use or for Defendant's discontinuation of royalty payments, which would cause the Agreement to terminate. Other sections of the Agreement, such as Section 2.2.1, governing Plaintiffs "Release of Claims" confirm this:
Ameranth hereby releases and forever discharges, and covenants not to sue ChowNow ... from any and all claims, causes of action, . . known or unknown, actual or potential, suspected or unsuspected, . . . which Claims have been, or could have been, made as of the Effective Date of this Agreement, or which might be made at any time in the future, that arise out of, or relate to, directly or indirectly, the alleged infringement, prior to the Effective Date, of the Licensed Patents by any ChowNow . . . product, device, article of manufacture, service or system used or to be used in the Field of Use.
Licensing Agreement, ECF No. 14-1 at 3, § 2.2.1 (emphasis added). Thus, the release only applied to infringement occurring before the Agreement within the Field of Use. See id.; see also Id. at 5, § 3.1 (providing that "[t]he Patent License grant set forth herein to ChowNow is limited to the Fields of Use").
On December 20, 2013, Plaintiff and Defendant entered into the First Amended License Agreement (the "FAA"), the operative contract in dispute in this lawsuit, which pertains to the same four Licensed Patents, contains similar terms, and provides Defendant with non-exclusive licensing rights in exchange for Defendant's obligation to pay certain running royalties. Mot. at 8:8-14; Oppo. at 8:16-22; Compl. at 3:21-28. Both the Licensing Agreement and FAA (collectively, the "Agreements") contain a provision, Section 5.3, stating that "[t]he Royalty Payments shall no longer be due if all claims under the Licensed Patents are finally held invalid and/or the Licensed Patents are held to be unenforceable (after all appeals are exhausted) prior to the due date for such Royalty Payments." Licensing Agreement, ECF No. 14 at 7, FAA, § 5.3; see also Compl. at 4:14-18 (quoting same). Additionally, pursuant to Section 6.3 of the FAA, if one party "materially defaults in the performance of any provision of this Agreement," the non-defaulting party may provide written notice to the defaulting party, and if the defaulting party fails to cure the default "within sixty (60) days of provision of such notice, the Agreement will terminate." FAA at 8, § 6.3. Upon termination of the Agreements "for any reason, all rights granted to ChowNow under Section 2 of this Agreement, and any responsibility of ChowNow to make future payments to Ameranth beyond the date of termination, will immediately terminate." Id. at 8, § 6.4. Thus, based on these provisions, if one party, like Defendant, breached the Agreements and failed to cure that breach within sixty days, the Agreements terminated, "all bets were off," and Plaintiff could sue Defendant for patent infringement.
In 2016, the Federal Circuit (1) affirmed the PTAB's determination that "[c]laims 1-11 of the 850 patent claims 1-10 of the 325 patent, and claims 1-16 of the 733 patent are all unpatentable under § 101" and (2) reversed the PTAB's determinations that the other claims were patentable. Apple, Inc. v. Ameranth, Inc., 842 F.3d 1229, 1245 (Fed. Cir. 2016).[6] A few years later, in Ameranth, Inc. v. Domino's Pizza, LLC, 792 Fed.Appx. 780, 782, 788 (Fed. Cir. 2019), cert, denied, No. 19-1351, 2020 WL 5882297 (U.S. Oct. 5, 2020), the Federal Circuit affirmed the district court's entry of judgment that claims 1, 6-9, 11, and 13-18 of Plaintiffs 077 Patent were "patent ineligible." Thus, the aforementioned claims have been adjudicated as unpatentable, and this Court is bound by those rulings. See, e.g., Pfaffv. Wells Electronics, Inc., 5 F.3d 514, 518 (Fed. Cir. 1993) (...
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