Clearplay, Inc. v. Nissim Corp.

• Citation: 555 F.Supp.2d 1318
• Decision Date: 02 April 2008
• Docket Number: No. 07-81170-CIV.,07-81170-CIV.
• Parties: CLEARPLAY, INC., Plaintiff, v. NISSIM CORP., Defendant.
• Court: U.S. District Court — Southern District of Florida

555 F.Supp.2d 1318

CLEARPLAY, INC., Plaintiff, v. NISSIM CORP., Defendant.

No. 07-81170-CIV.

United States District Court, S.D. Florida.

April 2, 2008.

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Christa C. Werder, David Storrs Wood, Baker & Hostetler, Orlando, FL, for Plaintiff.

John C. Carey, Allison J. Cammack, Carey Rodriguez Greenberg & Paul LLP, Miami, FL, for Defendant.

ORDER GRANTING MOTION TO DISMISS COMPLAINT

PAUL C. HUCK, District Judge.

THIS CAUSE is before the Court upon Defendant's Motion to Dismiss Complaint (D.E.# 5). The Court has reviewed the Motion, Plaintiffs response, Defendant's reply, the Complaint, and all other pertinent parts of the record.

I. FACTUAL ALLEGATIONS¹

Plaintiff is a Utah corporation with its principal place of business in Salt Lake City, Utah. It manufactures and produces DVD players and related software and hardware. Defendant is a Florida corporation with its principal place of business in Boca Raton, Florida.

On or about December 10, 2001 Plaintiff began marketing a "filtering" computer program and membership service allowing customers to filter their DVD movies by skipping or muting certain "objectionable" content. In April 2004 Thomson, Inc. began selling an RCA brand DVD player that incorporated Plaintiffs filtering technology at Walmart and other national retailers. On May 13, 2004 Defendant sued Plaintiff in this Court alleging claims of patent infringement under the Patent Act (Title 35, U.S.Code), misappropriation of trade secrets, and breach of contract in connection with Thomson, Inc's sale of RCA DVD players incorporating the filtering technology. See Nissim Corp. v. Clearplay, Inc., et al, No. 04-21140-CIV-PCH. In its patent infringement claims, Defendant asserted that in marketing and selling the filtering program and related technologies in the form of the RCA DVD player, Plaintiff infringed on four of Defendant's U.S. patents. Defendant and Plaintiff settled that case on the eve of trial, November 23, 2005, entering into a confidential settlement and licensing agreement in which Defendant granted Plaintiff a license to produce and sell a modified version of its filtering technology. See Compl. Ex. A.

In October 2006 the retail store Target offered Plaintiff an opportunity to place its DVD players in Target's spring 2007 "Planogram," a blueprint that designates certain locations in each Target store for the placement of the "display product and product stock." Target only modifies its Planogram on an annual basis, so being, placed in Target's spring 2007 Planogram would ensure Plaintiffs products to remain in Target's electronics department from May 2007 to at least April 2008. In light of these discussions, Plaintiff invested more than $1 million into producing point of sale displays for Target stores.

In January 2007 Target placed its first order for Plaintiffs DVD players bearing the model number CP007-USB, which were compatible with Plaintiffs filtering software. See Compl. Ex. B. Customers who purchased these DVD players would be able to sign up for Plaintiffs filtering service, in order to filter content from DVD movies in their homes. However, without obtaining a "filter file" from Plaintiff that loads the "filtering user interface" onto the DVD player and provides filtering information for specific movie titles, these DVD players would simply play DVD movies without any filtering.

In June 2007, after learning that Plaintiff sold its DVD players to Target, Defendant sent Target a letter. See Compl. Ex. C. This letter alleged that Plaintiffs CP007-USB DVD players were not covered by the November 2005 license and that such products thus infringed on De* fendant's patents. Id. Defendant stated that the DVD players did not "operate as advertised" and were qualitatively deficient, thus failing to conform to the specifications outlined in the November 2005 license agreement. Id. Defendant informed Target that its sale of unlicensed products would render Target itself liable as a patent infringer, and demanded that Target remove the "unlicensed" DVD players from its shelves and discontinue their sale. Id. Also in June 2007 Defendant published a press release on its website stating that Plaintiff was violating its intellectual property rights by selling the CP007-USB players, which were "deficient and inconsistent with the quality standard [Defendant] has established," and unlicensed. See Compl. Ex. D. The press release stated that "all sellers of unlicensed goods may be held liable as direct patent infringers." Id. Further, on June 11, 2007 Defendant filed a motion to enforce the November 2005 settlement agreement in Nissim Corp. v. Clearplay, Inc., et al, No. 07-21140-CIV-PCH (see D.E. #442) — the parties are currently engaged in discovery before Magistrate Judge Andrea M. Simonton.

In July 2007 Plaintiff responded to Defendant's letter to Target with its own letter to Target. See Compl. Ex. E. This letter stated that Defendant's claims of patent infringement were incorrect, and that Plaintiffs CP007-USB DVD player was covered by a license from Defendant pursuant to their November 2005 agreement. Id. As of the time of this letter, Target was continuing to sell Plaintiffs DVD players. In October 2007 Defendant sent another letter to Target, again demanding that Target remove Plaintiffs "unlicensed" and "infringing" DVD players from its shelves. See Compl. Ex. F. Defendant further stated that unless Target pulled the DVD players Defendant would sue Target for patent infringement, and attached a draft complaint against Target seeking to recover for patent infringement under the federal Patent Act. See id.

On or about November 1, 2007 Plaintiff responded to this letter by again writing to Target and stating that its DVD players were covered by a valid license, and that in any case the players did not infringe on Defendant's patent rights. See Compl. Ex. G. The next day Target cancelled several large purchase orders for additional DVD players from Plaintiff and agreed not to place any additional orders, based on Defendant's allegations that they infringed on its patents. See Compl. Ex. I. On or about the same day Target stopped selling Plaintiffs DVD players on its website, www.target.com. See id. Further, on or about the same day, Defendant published a press release on its website stating that Target had ceased sales of Plaintiffs DVD player, and that such players were not covered by a license from Defendant. See Compl. Ex. J. Before Target cancelled its orders with Plaintiff and Defendant published the press release announcing such cancellation, Plaintiff had been in the process of negotiating future purchase orders with Target and other clients. On October 28, 2007 Target had physically placed a point-of-sale interactive display featuring Plaintiff's DVD player into the 2008 Pianogram at Target's corporate headquarters, and had included the player in the Pianogram for May 2008 through April 2009.

II. PROCEDURAL BACKGROUND

Plaintiff filed a two count Complaint in this Court on December 10, 2007 bringing the following Florida state law Claims: Count I, tortious interference with a contractual relationship, and Count II, tortious interference with potential advantageous business relationships. Plaintiff invoked the jurisdiction of this Court under 28 U.S.C. § 1332(a)(1), diversity jurisdiction.²

On January 2, 2008 Defendant filed its Motion to Dismiss both counts of the Complaint (D.E.# 5). In its Motion Defendant offered two main arguments for dismissing Plaintiffs state law claims: A) that those claims are preempted by federal patent law, and B) that those claims are barred by the Noerr-Pennington doctrine. Defendant's Motion is now fully briefed and ripe for resolution.

III. MOTION TO DISMISS STANDARD

In reviewing a motion to dismiss, all well-pleaded facts in the plaintiffs complaint and all reasonable inferences drawn from those facts must be taken as true. Jackson v. Okaloosa County, Fla., 21 F.3d 1531, 1534 (11th Cir.1994). Federal Rule of Civil Procedure 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief." Specific facts are not necessary; the statement need only "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, ___ U.S. ___ ___, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Nonetheless, when on the basis of a dispositive issue of law no construction of the factual allegations will support the cause of action, dismissal of the complaint is appropriate. Marshall County Bd. of Educ. v. Marshall County Gas Dist, 992 F.2d 1171, 1174 (11th Cir.1993).

IV. ANALYSIS

One of Defendant's arguments in support of its Motion to Dismisses that Plaintiffs state law claims of tortious interference with a contractual relationship (Count I) and tortious interference with potential advantageous business relationships (Count II) are preempted by federal patent law. Defendant claims that this is true "[a]s a result of ... clear Federal Circuit precedent." Mot. to Dismiss, D.E. # 5 at 6. In response, Plaintiff argues that the Court should not look to the law of the Federal Circuit as controlling because this case is before the Court under diversity jurisdiction, because this case could not be appealed to the Federal Circuit, and because this case does not involve a substantive "law field" assigned exclusively to the Federal Circuit. Thus, before evaluating Defendant's argument that Plaintiffs state law claims are preempted, the Court must first determine the law applicable to that inquiry.

1. Applicable Law

In arguing that Federal Circuit law should not apply to the question of whether its state tort claims are preempted, Plaintiff states that it brought this action under diversity jurisdiction and not patent law jurisdiction, that this case could not be...