Cont'l Auto. Sys., Inc. v. Avanci, LLC

• Decision Date: 10 September 2020
• Docket Number: Civil Action No. 3:19-cv-02933-M
• Citation: 485 F.Supp.3d 712
• Court: U.S. District Court — Northern District of Texas
• Parties: CONTINENTAL AUTOMOTIVE SYSTEMS, INC., Plaintiff, v. AVANCI, LLC, et al., Defendants.

485 F.Supp.3d 712

CONTINENTAL AUTOMOTIVE SYSTEMS, INC., Plaintiff,

v.AVANCI, LLC, et al., Defendants.

Civil Action No. 3:19-cv-02933-M

United States District Court, N.D. Texas, Dallas Division.

Signed September 10, 2020

Stephen Korniczky, Pro Hac Vice, James V. Fazio, Pro Hac Vice, Martin Bader, Pro Hac Vice, Matthew Holder, Pro Hac Vice, Patrick M. McGill, Pro Hac Vice, Ryan Cunningham, Pro Hac Vice, Sheppard Mullin Richter Hampton LLP, San Diego, CA, Allan Jansen, Pro Hac Vice, Sheppard Mullin Richter & Hampton LLP, Costa Mesa, CA, Jennifer Klein Ayers, Sheppard Mullin Richter & Hampton LLP, Dallas, TX, Lai Lam Yip, Pro Hac Vice, Michael Scarborough, Pro Hac Vice, Mona Solouki, Sheppard Mullin Richter & Hampton LLP, San Francisco, CA, for Plaintiff.

Jeffrey L. Kessler, Pro Hac Vice, Aldo A. Badini, Pro Hac Vice, Susannah P. Torpey, Winston & Strawn LLP, New York, NY, Ian Papendick, Jeanifer Ellen Parsigian, Winston & Strawn LLP, San Francisco, CA, Mark S. Werbner, Winston & Strawn LLP, Dallas, TX, for Defendants Avanci LLC, Avanci Platform International Limited.

Teresa T. Bonder, Pro Hac Vice, Rachel Adi Naor, Alston & Bird LLP, San Francisco, CA, Amanda Waide, Pro Hac Vice, Andrew Tuck, Pro Hac Vice, Bryan Lutz, Pro Hac Vice, Cassandra Kerkhoff Johnson, John D. Haynes, Pro Hac Vice, Kristen Bromberek, Pro Hac Vice, Mark A. McCarty, Pro Hac Vice, Matthew D. Richardson, Pro Hac Vice, Alston & Bird LLP, Atlanta, GA, Michael J. Newton, Alston & Bird LLP, Theodore Stevenson, III, Warren H. Lipschitz, McKool Smith, Dallas, TX, Ryan W. Koppelman, Alston & Bird, East Palo Alto, CA, for Defendants Nokia Corporation, Nokia of America Corporation, Nokia Solutions and Networks US LLC, Nokia Solutions and Networks Oy, Nokia Technologies OY.

James G. Kress, Andrew Leader Lucarelli, H Nathan Chubb, Baker Botts LLP, Washington, DC, Harrison Gheens Rich, Baker Botts, Dallas, TX, Peter K. Huston, Pro Hac Vice, Baker Botts, Stuart Christopher Plunkett, Baker Botts L.L.P., Tina Vy Ngo, Pro Hac Vice, Baker Botts LLP, San Francisco, CA, for Defendant Conversant Wireless Licensing SARL.

Hong Zhong, Pro Hac Vice, Jason Sheasby, Pro Hac Vice, Irell & Manella LLP, Los Angeles, CA, David Thomas DeZern, Eric S. Tautfest, Jared M. Hoggan, M Jill Bindler, Gray Reed & McGraw, P.C., Dallas, TX, Ingrid Petersen, Irell and Manella LLP, Newport Beach, CA, for Defendants Optis UP Holdings LLC, Optis Cellular Technology LLC, Optis Wireless Technology LLC.

Christopher Kao, Pro Hac Vice, Brock S. Weber, Pro Hac Vice, David Tsai, Pro Hac Vice, Pillsbury Winthrop Shaw Pittman LLP, San Francisco, CA, Fusae Nara, Pro Hac Vice, Hinako Gojima, Pro Hac Vice, Pillsbury Winthrop Shaw Pittman LLP, New York, NY, Tamara Dawn Bruno, Pro Hac Vice, Vincent E. Morgan, Pillsbury Winthrop Shaw Pittman LLP, Houston, TX, for Defendant Sharp Corporation.

ORDER

BARBARA M. G. LYNN, CHIEF JUDGE

Before the Court is Defendants' Amended Motion to Dismiss First Amended Complaint. [ECF No. 270]. Defendants move to dismiss Plaintiff's claims for lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a claim under Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), and 12(b)(6). For the following reasons, the Motion is GRANTED .

I. Factual and Procedural Background

In its First Amended Complaint (the "FAC") [ECF No. 97], Plaintiff Continental Automotive Systems, Inc., a producer and supplier of telematics control units ("TCUs") for vehicles, alleges as follows. It sells TCUs to car manufacturers ("OEMs") that use the TCUs to provide their cars various functionalities, including cellular connectivity. To connect to cellular networks, the TCUs include a baseboard processor in a network access device built into the TCU. To access second generation ("2G"), third generation ("3G") and fourth generation ("4G") cellular networks, the baseboard processors, network access devices, and TCUs must comply with standards set by standard setting organizations ("SSOs").

Plaintiff alleges that SSOs are private organizations that establish uniform industry standards that provide guidance to product manufacturers. When an SSO sets a standard, it designates patented technologies that satisfy the standard, and a manufacturer that wishes to produce products that practice the standard must obtain licenses to the standard essential patents ("SEPs"). For a patent to be designated essential, Plaintiff contends that SEP holders must agree with the SSOs that they will license their SEPs on fair, reasonable, and non-discriminatory ("FRAND") terms and conditions. Plaintiff asserts that these terms should reflect the ex-ante value of the SEP, excluding its value obtained solely from its inclusion in the standard.

Plaintiff alleges that Defendants Nokia Corporation, Nokia of America Corporation, Nokia Solutions and Networks US LLC, Nokia Solutions and Networks Oy, Nokia Technologies Oy (the "Nokia Defendants"), Conversant Wireless Licensing SARL (the "Conversant Defendant"), Optis UP Holdings, LLC, Optis Cellular Technology, LLC, Optis Wireless Technology, LLC (the "Optis Defendants"), and Sharp Corporation (the "Sharp Defendant") (collectively, the "Licensor Defendants") own SEPs for 2G, 3G, and 4G connectivity standards established by various SSOs, including the European Telecommunications Standards Institute ("ETSI"), the Telecommunications Industry Association ("TIA"), and the Alliance for Telecommunications Industry Solutions ("ATIS"). Plaintiff claims that as a result, the Licensor Defendants are obligated to license those SEPs to Plaintiff on FRAND terms and conditions.

Plaintiff further claims that the Licensor Defendants pooled their SEPs, by agreeing that Defendants Avanci, LLC and Avanci Platform International Limited (the "Avanci Defendants") would serve as their joint licensing agent, offering their patents in a pooled arrangement. Plaintiff alleges that, while the Avanci licensing pool is purportedly intended to allow customers to obtain from a single supplier licenses for many necessary 2G, 3G, and 4G SEPs, it is actually an agreement between Defendants to require non-FRAND¹ terms for SEP licenses, offered only to OEMs, who are better positioned and thus more likely to accept those excessive, unreasonable terms than would component suppliers like Plaintiff.

Plaintiff originally brought this action in the Northern District of California, for violations of §§ 1 and 2 of the Sherman Act, declaratory judgment as to Defendants' FRAND obligations, breach of contract, promissory estoppel, and violations of California unfair competition law (the "UCL"). Several Defendants then moved to transfer venue to this Court under 28 U.S.C. § 1404(a). While the motion to transfer was pending, Defendants also filed a joint Motion to Dismiss. The Northern District of California granted the venue motion, and transferred the action to this Court. [ECF No. 204]. Following the transfer, the parties filed updated briefs on Defendants' Motions to Dismiss, to reflect Fifth Circuit law.²

II. Legal Standard

A court must dismiss a case if it lacks subject matter jurisdiction. Stockman v. Fed. Election Comm'n , 138 F.3d 144, 151 (5th Cir. 1998). When considering a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, a court may dismiss the case based on "(1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Barrera-Montenegro v. United States , 74 F.3d 657, 659 (5th Cir. 1996). "A ‘facial attack’ on the complaint requires the court merely to look and see if plaintiff has sufficiently alleged a basis of subject matter jurisdiction, and the allegations in his complaint are taken as true for the purposes of the motion."

Menchaca v. Chrysler Credit Corp. , 613 F.2d 507, 511 (5th Cir. 1980). "A ‘factual attack,’ however, challenges the existence of subject matter jurisdiction in fact, irrespective of the pleadings, and matters outside the pleadings, such as testimony and affidavits, are considered." Id.

A complaint must also contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). It does not need to include "detailed factual allegations." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). To survive a Rule 12(b)(6) motion to dismiss, the complaint must provide a factual basis "to ‘state a claim to relief that is plausible on its face.’ " Id. (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). When considering a motion to dismiss, the court will accept all well-pleaded factual allegations as true "with all reasonable inferences drawn in the light most favorable to the plaintiff." Causey v. Sewell Cadillac-Chevrolet, Inc. , 394 F.3d 285, 288 (5th Cir. 2004). The court will not credit "conclusory allegations, unwarranted factual inferences, or legal conclusions." Ferrer v. Chevron Corp. , 484 F.3d 776, 780 (5th Cir. 2007).³

III. The Government's Statement of Interest

The Government seeks leave to file a Statement of Interest. [ECF No. 278]. Under 28 U.S.C. § 517, the Department of Justice may "attend to the interests of the United States in a suit pending in a court of the United States." "It is solely within the Court's discretion to permit or deny a statement of interest." LSP Transmission Holdings, LLC v. Lange , 329 F. Supp. 3d 695, 703 (D. Minn. 2018), aff'd sub nom. LSP Transmission Holdings, LLC v. Sieben , 954 F.3d 1018 (8th Cir. 2020). This depends on "whether the information is timely, useful, or otherwise necessary to the administration of justice." Id. However, the scope of 28 U.S.C. § 517 is broad, and generally favors allowing statements of interest. See Gil v. Winn Dixie Stores, Inc. , 242 F. Supp. 3d 1315, 1317 (S.D. Fla. 2017) ("Courts have interpreted 28 U.S.C. § 517 broadly and...