Arris Group Inc. v. British Telecommunications Plc

• Decision Date: 19 May 2011
• Docket Number: No. 2010–1292.,2010–1292.
• Citation: 639 F.3d 1368
• Parties: ARRIS GROUP, INC., Plaintiff–Appellant,v.BRITISH TELECOMMUNICATIONS PLC, Defendant–Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

639 F.3d 1368

98 U.S.P.Q.2d 1812

ARRIS GROUP, INC., Plaintiff–Appellant,

v.BRITISH TELECOMMUNICATIONS PLC, Defendant–Appellee.

No. 2010–1292.

United States Court of Appeals, Federal Circuit.

May 19, 2011.

John M. DiMatteo, Willkie Farr & Gallagher, LLP, of New York, NY, argued for plaintiff-appellant. With him on the brief were Eugene L. Chang and Marc E. Montgomery.James H. Shalek, Proskauer Rose, LLP, of New York, NY, argued for defendant-appellee. With him on the brief were Nolan M. Goldberg and Theodore K. Cheng.Before RADER, Chief Judge, NEWMAN and DYK, Circuit Judges.DYK, Circuit Judge.

Arris Group, Inc. (“Arris”) brought suit against British Telecommunications, PLC (“BT”) seeking a declaratory judgment that claims in BT's patents—U.S. Patent Nos. 5,142,532 (“'532 patent”); 5,526,350 (“'350 patent”); 6,538,989 (“'989 patent”); and 6,665,264 (“'264 patent”) (collectively the “patents-in-suit”)—are invalid and not infringed by Arris. Arris also sought an injunction preventing BT from suing Arris or its customers for infringement of the patents-in-suit. The United States District Court for the Northern District of Georgia dismissed for lack of subject matter jurisdiction, finding that there was no Article III case or controversy between the parties. Arris Group, Inc. v. British Telecomm. PLC, 694 F.Supp.2d 1330, 1332–33 (N.D.Ga.2010). Because we conclude that an actual controversy existed between Arris and BT, we reverse the district court's decision and remand for further proceedings.

Background

The patents-in-suit claim systems and methods that relate in particular to cable networks that offer Voice over Internet Protocol (“VoIP”) telephone services. Plaintiff–Appellant Arris develops and manufactures cable telephony and data products for cable system operators for use in VoIP systems. This declaratory judgment action stems from BT's allegations that Cable One, Arris' customer, has infringed the patents-in-suit by using equipment purchased from Arris to implement VoIP services on Cable One's network.

VoIP is a communications protocol under which voice data is transmitted over a packet-switched network such as the internet, rather than over the traditional Public Switched Telephone Network (“PSTN”). To originate a VoIP telephone call, the analog voice signal must first be digitized and encoded into packets. In Cable One's network, this essential function is performed by devices sold by Arris known as Embedded Multimedia Terminal Adapters (“E–MTAs”). An E–MTA is a user-end device that combines a Cable Modem (“CM”) and a Multimedia Terminal Adapter (“MTA”) to allow for the connectivity of both Ethernet-compatible devices and traditional analog telephones. The MTA converts the telephone's analog voice signal into digital IP packets, delivers a dial tone, and manages other essential call functions.

In addition to E–MTAs, Cable One's VoIP network uses other Arris products known as Cable Modem Termination Systems (“CMTSs”). A CMTS is an electronic device, typically used at a cable company's head-end or hub-site, which communicates with multiple subscribers' cable modems and routes traffic to and from the internet. The use of CMTSs in Cable One's network is essential to the functionality of its VoIP services. Cable One's network and Arris' CMTS and E–MTA products all operate in accordance with the industry standards of (1) Data Over Cable Service Interface Specification (“DOCSIS”), which defines interface standards for cable modems and supporting equipment; and (2) PacketCable, which is an extension of DOCSIS used for VoIP.

On July 17, 2007, BT sent a letter to Cable One that accused Cable One's VoIP network of infringing various claims of the patents-in-suit and sought to begin licensing negotiations.¹ The specified claims included both system and method claims. In response to BT's letter, Cable One requested on August 15, 2007, that it be provided a “specific comparison of the claims of [the patents-in-suit] to our cable systems or operations.” J.A. 159. On August 23, 2007, BT sent Cable One a 118–page presentation showing “the applicability of selected claim elements in the four BT patents to Cable One's services.” J.A. 177; 178–295. The presentation specifically and repeatedly identified Arris' CMTSs and E–MTAs used in Cable One's network as embodying numerous elements and performing numerous method steps of the asserted claims. BT and Cable One subsequently met on October 23, 2007, at Cable One's offices in Phoenix, Arizona, where BT reviewed the 118–page presentation and further explained its infringement contentions.

Following the October 23 meeting, Cable One sent a letter to Arris in November 2007 notifying Arris of BT's infringement accusations. Cable One additionally demanded in the letter that Arris “defend, indemnify and hold harmless Cable One from these assertions of infringement.” J.A. 588.

On January 18, 2008, BT “proposed ... a face-to-face meeting with Cable One and its vendors ... to determine if we have a basis for further licensing discussions.” J.A. 301. In late February 2008, Cable One requested that Arris be included in the next meeting. The meeting was held on March 14, 2008, at Arris' office in Suwanee, Georgia. During the meeting, BT presented the same 118–page presentation of BT's infringement contentions that it had presented to Cable One at the Phoenix meeting.

The parties—including Arris—met again at Arris' Suwanee office on August 29, 2008, where they discussed potential licensing for Cable One. At the meeting, Arris presented a response to BT's infringement contentions. Arris contended that certain relevant claim limitations were not met by Arris' CMTS or E–MTA products used in Cable One's network. See J.A. 730, 740–41, 749, 751, 760–61.

Following the August meeting, BT requested that Arris send “formal rebuttal information” regarding its infringement contentions, J.A. 590, and it further requested a telephone conference with the parties' “technical people,” J.A. 592. On September 17, 2008, Arris sent BT further materials containing its non-infringement arguments, seeking to absolve Cable One of infringement by demonstrating how components within Cable One's network did not meet one or more of the limitations in the claims-at-issue. Two conference calls took place thereafter on September 24, 2008, and November 13, 2008, during which Arris presented its non-infringement arguments and BT responded to them.

On November 24, 2008, BT requested that both Arris and Cable One agree to receive a specific licensing proposal under the terms of a nondisclosure agreement BT had entered into with Cable One. Arris and Cable One agreed, and on December 15, 2008, BT sent copies of its licensing proposal to both parties. The proposed licensing agreement explicitly stated that the license would be “granted to Cable One only.” J.A. 336. No license agreement was consummated.

On March 31, 2009, Arris filed this declaratory judgment action in the United States District Court for the Northern District of Georgia, seeking: (1) a declaration that Arris does not infringe the patents-in-suit; (2) an injunction preventing BT from instituting infringement actions against Arris or its customers; and (3) a declaration that the patents-in-suit are invalid. The district court found that there was no Article III case or controversy between Arris and BT, because throughout the parties' meetings and conversations, BT “only discussed Cable One's infringement and did not discuss any infringement by Arris.” Arris, 694 F.Supp.2d at 1331–32; see also id. at 1331, 1332, 1333. In the district court's view, “the defendant's actions [were] directed [solely] toward Cable One, Arris' customer, rather than Arris itself,” which the court found “[did] not constitute a real and immediate injury for Article III jurisdiction.” Id. at 1333. The court accordingly dismissed Arris' declaratory judgment action for lack of subject matter jurisdiction. Id.

Arris appealed the district court's decision to this court. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(1).

Discussion

We review the district court's dismissal for lack of subject matter jurisdiction de novo. Air Measurement Techs. Inc. v. Akin Gump Strauss Hauer & Feld, LLP, 504 F.3d 1262, 1267 (Fed.Cir.2007). A party has standing to bring an action under the Declaratory Judgment Act if an “actual controversy” exists, 28 U.S.C. § 2201(a), which “is the same as an Article III case or controversy.” 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, 239–41, 57 S.Ct. 461, 81 L.Ed. 617 (1937)). The burden is on the party claiming declaratory judgment jurisdiction to establish that an Article III case or controversy existed at the time the claim for declaratory relief was filed. King Pharm., Inc. v. Eon Labs, Inc., 616 F.3d 1267, 1282 (Fed.Cir.2010); Benitec Austl., Ltd. v. Nucleonics, Inc., 495 F.3d 1340, 1344 (Fed.Cir.2007).

I

This case again presents a question of standing to bring a declaratory judgment action for a determination of non-infringement and invalidity. In MedImmune, Inc. v. Genentech, Inc., the Supreme Court rejected our prior, more stringent standard for declaratory judgment standing insofar as it required a “reasonable apprehension of imminent suit.” 549 U.S. 118, 132 n. 11, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007); see also ABB Inc. v. Cooper Indus., LLC, 635 F.3d 1345, 1347–48 (Fed.Cir.2011) (recognizing MedImmune's rejection of the reasonable apprehension test); Teva Pharm., 482 F.3d at 1338–39 (same); SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1378–79 (Fed.Cir.2007) (same). Under the Court's new standard, an Article III case or controversy exists when “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...