Applied Materials, Inc. v. Demaray LLC, 5:20-cv-09341-EJD

• Decision Date: 16 September 2021
• Docket Number: 5:20-cv-09341-EJD
• Citation: Applied Materials, Inc. v. Demaray LLC, 5:20-cv-09341-EJD (N.D. Cal. Sep 16, 2021)
• Court: U.S. District Court — Northern District of California
• Parties: APPLIED MATERIALS, INC., Plaintiff, v. DEMARAY LLC, Defendant.

APPLIED MATERIALS, INC., Plaintiff, v. DEMARAY LLC, Defendant.

No. 5:20-cv-09341-EJD

United States District Court, N.D. California, San Jose Division

September 16, 2021

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS RE: DKT. NO. 30

EDWARD J. DAVILA, United States District Judge.

In this declaratory judgment action, Plaintiff Applied Materials Inc. (“Applied”) asks the Court to declare that its products do not infringe Defendant Demaray LLC's (“Demaray”) patents-(i) U.S. Patent No. 7, 544 276 (hereafter “276”) and (ii) U.S. Patent No. 7 3381, 657 (hereafter “657”) (collectively the “Asserted Patents”). Applied seeks further declaratory relief asserting that infringement is precluded by a non-exclusive, perpetual license and an assignment of rights.

Presently before the Court is Demaray's motion to dismiss, in which Demaray contends that Applied has failed to allege a justiciable controversy under the Declaratory Judgment Act. See Notice of Motion and Motion to Dismiss (“Mot.”), Dkt. No. 30. Additionally, Demaray argues Applied has failed to state a claim which would warrant declaratory relief for its licensing and assignment of rights-based claims. Id. Applied has filed an opposition (“Opp'n”) (Dkt. No. 38), to which Demaray filed a reply (“Reply iso Mot.”) (Dkt No. 41). Having considered the record, the parties' submissions, and the relevant legal authority, the Court GRANTS in part and DENIES in part Demaray's motion.^[1]

I. FACTUAL AND PROCEDURAL BACKGROUND

A. The Asserted Patents

Demaray's Asserted Patents concern the specific configuration of physical vapor deposition (“PVD”) reactors and a method for the deposition of thin layer films onto substrate materials used during the semiconductor manufacturing process. See Complaint (“Compl.”), Dkt. No. 1-1, Ex. A (Demaray LLC v. Intel Corp., (W.D. Tex. No. 6:20-cv-634-ADA filed July 14, 2020) (hereinafter, “Intel Compl.”)); see also Dkt. No. 1-2, Ex. B (Demaray v. Samsung Electronics Co., Ltd. (A Korean Company) et al, (W.D. Tex. No. 6:20-cv-636-ADA filed July 14, 2020) (hereinafter, “Samsung Compl.”)). Both patents are entitled “Biased Pulse DC Reactive Sputtering of Oxide Films” and share a common specification. The ‘276 patent discloses apparatus claims directed to PVD reactors having certain claim elements requiring the use of a reactor configuration with three power supply-related limitations: (1) a “pulsed DC power supply coupled to the target, ” (2) “an RF bias power supply coupled to the substrate, ” and (3) “a narrow band-rejection filter that rejects at a frequency of the RF bias power supply coupled between the pulsed DC power supply and the target area.” Compl. ¶ 33 (citing Intel Compl. ¶¶ 33, 36, 39; Samsung Compl. ¶¶ 36, 39, 42).

The ‘276 patent is supplemented by Demaray's ‘657 patent, which discloses method claims delineating the deposition of thin layer films onto a substrate by pulsed DC reactive sputtering using “a pulsed DC power supply coupled to the target” and “an RF bias power supply coupled to the substrate.” Compl. ¶ 29. The ‘657 patent also describes and claims the use of “a narrow band-rejection filter that rejects at a frequency of the RF bias power supply coupled between the pulsed DC power supply and the target area.” Id. The narrow band rejection filter allows the power sources to properly function, but prevents damaging feedback to the pulsed DC power source from the RF bias power supply. Id. ¶ 36 (citing Intel Compl. ¶¶ 39-40; Samsung Compl. ¶¶ 42-43).

B. Demaray's Actions Against Applied's Customers

Applied and Demaray's dispute follows allegations that Intel Corporation (“Intel”) and Samsung Electronics Co. Ltd. (“Samsung”), two of Applied's customers, have infringed Demaray's Asserted Patents. In July 2020, Demaray filed separate patent infringement lawsuits against Intel and Samsung in the Western District of Texas (“WDTX Customer Cases”), alleging that both have infringed the Asserted Patents by configuring reactors, including Applied's Endura line of reactors, in an infringing manner while also employing Demaray's patented method in the fabrication of their semiconductor devices. See generally Intel Compl.; Samsung Compl.

C. Applied's Actions Against Demaray

In response to the WDTX Customer Cases, Applied filed a declaratory relief action against Demaray, which also focused on the Asserted Patents. See Applied Materials, Inc. v. Demaray LLC, (N.D. Cal. No. 5:20-cv-05676 filed August 13, 2020) (“Applied I”). Compl. ¶ 40. Similar to its claims in this action, Applied sought a declaration that its reactors did not infringe the Asserted Patents. Applied I, First Amended Complaint, Dkt. No. 13 ¶ 1. Applied also sought to enjoin Demaray from continuing to litigate the WDTX Customer Cases while the declaratory relief action remained ongoing. See Applied I, Motion for Preliminary Injunction, Dkt. No. 14.

Demaray opposed Applied's request for a preliminary injunction, arguing in part that the Court lacked subject matter jurisdiction over Applied's action and should therefore deny its request to enjoin Demaray. See Applied I, Opposition to Applied Materials' Motion for Preliminary Injunction, Dkt. No. 13 at 5-8. Thereafter, Demaray also filed a motion to dismiss the Applied I action for lack of subject matter jurisdiction or alternatively, for failure to state a claim. Applied I, Dkt. No. 39. Before ever turning to Demaray's motion to dismiss, the Court denied Applied's motion for preliminary injunction finding that it lacked subject matter jurisdiction over its action for declaratory relief. Applied I, Order Denying Motion for Preliminary Injunction (“Prelim. Ord”), Dkt. No. 47. At that time, Applied had not sufficiently alleged the existence of an actual case or controversy between the parties; Applied failed to sufficiently allege either that Demaray had engaged in affirmative acts directed at Applied or that Applied might be liable for direct or indirect infringement related to its customers' alleged infringement. Id. at 4-12.

Following the denial of its motion for preliminary injunction, Applied filed this separate action for declaratory relief on December 24, 2020.^[2] Applied's latest complaint includes new factual allegations relating to Demaray's conduct since Applied filed its first amended complaint in Applied I. The complaint notes: (i) declarative statements from Intel and Samsung officials asserting that neither company performs the post-installation modifications to Applied's reactors which Demaray contends takes place; (ii) Demaray's refusal to grant Applied a covenant not to sue; (iii) Demaray's refusal to inform Applied or the Court if it will assert compulsory counterclaims against Applied; (iv) Demaray's requests to obtain discovery from Applied to determine if Applied allegedly infringes the Asserted Patents; (v) that Demaray asked Applied to produce materials regarding the reactors it supplies to Intel and Samsung; and (vi) representations made by Demaray to the court in the WDTX Customer Cases about the need for discovery from Applied to determine which of Intel's and Samsung's reactors allegedly infringe. Compl. ¶ 52.

Moreover, Applied alleges that Demaray's filings and the continued litigation of the WDTX Customer Cases also give rise to a substantial controversy between the parties because Applied owns and/or is licensed to use the Asserted Patents. Demaray's founder, Ernest Demaray, and three other named inventors of the Asserted Patents are former and/or current employees of Applied or Applied's affiliate, Applied Komatsu. Compl. ¶ 18. In December of 1998, Mr. Demaray along with other employees from Applied and Applied Komatsu, left to start a new company, Symmorphix, and began work on similar thin film technology they initially worked on at Applied. Id. ¶ 18-19. Applied Komatsu and Symmorphix executed a Sale and Relationship Agreement (“SRA”), which Applied alleges was later amended to grant Applied Komatsu a perpetual, royalty-free license to “any patent applications filed for inventions, improvements, or enhancements developed by Symmorphix relating to sputtered silicon deposition technology.” Id. ¶ 78. Applied also alleges that the SRA allowed Applied Komatsu to transfer or assign the license to Applied and for Applied Komatsu's customers to use the inventions as well. Id. Separately, Applied contends that one of the named inventors of the Asserted Patents, Mukundan Narasimhan, was an employee of Applied and under the provisions of his employee agreement, Mr. Narasimhan's ownership rights in the Asserted patents' parent application were automatically assigned to Applied. Id. ¶ 90.

Applied now seeks (1) a declaration that Applied's reactors, including those in the Endura product line, do not directly or indirectly infringe any claim of the ‘276 patent; (2) a declaration that Applied's reactors, including those in the Endura product line, do not directly or indirectly infringe any claim of the ‘657 patent; (3) a declaration that Applied holds a non-exclusive, perpetual, royalty free license to the Asserted Patents; and (4) a declaration that Applied's reactors cannot infringe the Asserted Patents because of an assignment of rights to Applied and Demaray's failure to join all co-owners. In response, Demaray has filed the instant motion to dismiss, seeking dismissal under Federal Rules of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction and 12(b)(6) for failure to state a claim upon which relief can be granted.

II. LEGAL STANDARDS

A. Federal Rule of Civil Procedure 12(b)(1)

A defendant may move to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. Although lack of statutory standing requires...