EMC Corp. v. Pure Storage, Inc.

• Decision Date: 29 February 2016
• Docket Number: Civil Action No. 13–1985–RGA
• Citation: 165 F.Supp.3d 170
• Parties: EMC Corporation, EMC International Company, and EMC Information Systems International, Plaintiffs, v. Pure Storage, Inc., Defendant.
• Court: U.S. District Court — District of Delaware

165 F.Supp.3d 170

EMC Corporation, EMC International Company, and EMC Information Systems International, Plaintiffs,

v.Pure Storage, Inc., Defendant.

Civil Action No. 13–1985–RGA

United States District Court, D. Delaware.

Signed February 29, 2016

Jack B. Blumenfeld, Esq., Jeremy A. Tigan, Esq., Stephen J. Kraftschik, Esq., Morris, Nichols, Arsht & Tunnell LLP, Wilmington, DE; Joshua A. Krevitt, Esq., Paul E. Torchia, Esq., Gibson, Dunn & Crutcher LLP, New York, NY; Stuart M. Rosenberg, Esq., Gibson, Dunn & Crutcher LLP, Palo Alto, CA; Chris R. Ottenweller, Esq., Matthew H. Poppe, Esq., Jesse Y. Cheng, Esq., ORRICK, Herrington & Sutcliffe LLP, Menlo Park, CA; Alyssa M. Caridis, Orrick, Herrington & Sutcliffe LLP, Los Angeles, CA; T. Vann Pearce, Jr., Esq., Orrick, Herrington & Sutcliffe LLP, Washington, D.C.; Paul T. Dacier, Esq., Krishnendu Gupta, Esq., William R. Clark, Esq., Thomas A. Brown, Esq., EMC Corporation, Hopkinton, MA, attorneys for Plaintiffs.

John W. Shaw, Esq., David M. Fry, Esq., Shaw Keller LLP, Wilmington, DE; Robert A. Van Nest, Esq., Matthew Werdegar, Esq., R. Adam Lauridsen, Esq., Corey Johanningmeier, Esq., David Rizk, Esq., Keker & Van Nest LLP, San Francisco, CA; Joseph FitzGerald, Esq., Pure Storage, Inc. Mountain View, CA, attorneys for Defendant.

MEMORANDUM OPINION

ANDREWS, UNITED STATES DISTRICT JUDGE:

Presently before the Court is Defendant Pure Storage, Inc.'s challenge to Plaintiff EMC Corporation's standing to assert U.S. Patent Nos. 7,373,464 and 7,434,015 (“the deduplication patents”). (D.I. 372 at 9; D.I. 372–1 at 49–55). The matter has been fully briefed. (D.I.390, 403, 410). The parties agree that the record before the Court contains everything necessary to decide the standing issue without a hearing. (D.I. 390 at 18; D.I. 403 at 15 n.6). For the reasons stated below, the Court holds that EMC Corporation has standing to sue for infringement of the deduplication patents.

I. BACKGROUND

Deduplication reduces the demand for storage space in a data storage system by ensuring that only a single copy of unique data is stored. (D.I. 215 at 10). The deduplication patents, which disclose systems and methods for providing efficient data storage using deduplication techniques, were issued to co-inventors Benjamin Zhu, Kai Li, and Hugo Patterson. ('464 patent, (57), (75), 1:19–21; '015 patent, (57), (76), 1:18–20). The co-inventors assigned the deduplication patents to Data Domain, Inc. (D.I. 391–1 at 2, 4).

In 2009, EMC Corporation acquired Data Domain. (D.I. 391–1 at 6). Shortly thereafter, EMC Corporation entered a series of agreements with its affiliates to reorganize its operating structure. (See D.I. 391–2 at 34–55). An Agreement and Plan of Reorganization (the “Reorganization Agreement”) governed the reorganization. (Id. ). One aspect of the reorganization involved transferring ownership of Data Domain's assets to EMC Corporation. (See id. at 53–54). The transfer of Data Domain's assets to EMC Corporation proceeded in several steps. First, Data Domain, Inc. was converted to Data Domain LLC. (D.I. 391–1 at 10–11). Second, Data Domain LLC assigned “all right, title and interest” in its intellectual property, including the deduplication patents, to Data Domain Holding, Inc. (“New Data Domain”). (Id. at 17). Third, New Data Domain entered a License and Assignment Agreement (“EIC License Agreement”) with EMC International Company (“EIC”). (Id. at 22–34). Fourth, EIC granted an exclusive sublicense to EMC Information Systems International (“EISI”). (Id. at 36–43; D.I. 391–2 at 1–4). Fifth, New Data Domain transferred “all right, title and interest” in its intellectual property to EMC Corporation. (D.I. 391–2 at 6–8). Additionally, EMC Corporation became an authorized reseller of Data Domain products. (Id. at 10–20).

II. LEGAL STANDARD

Standing to sue is a threshold requirement in every federal case.

Warth v. Seldin, 422 U.S. 490, 498, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). Whether a plaintiff has standing to sue is a matter of law to be determined by the court. Vaupel Textilmaschinen KG v. Meccanica Euro Italia SPA, 944 F.2d 870, 873 (Fed.Cir.1991). “Because the court (and not a jury) decides standing, the district court must decide issues of fact necessary to make the standing determination.” Crayton v. Concord EFS, Inc. (In re ATM Fee Antitrust Litig. ), 686 F.3d 741, 747 (9th Cir.2012). “The party bringing the action bears the burden of establishing that it has standing.” Sicom Sys., Ltd. v. Agilent Techs., Inc., 427 F.3d 971, 976 (Fed.Cir.2005).

A “patentee” has standing to bring a civil action for patent infringement. 35 U.S.C. § 281. The “patentee” is the owner of the patent, either by issuance or assignment. 35 U.S.C. § 100(d). An assignment by the patent title holder thus gives the assignee standing to bring an infringement action in his or her own name. Vaupel Textilmaschinen KG v. Meccanica Euro Italia SPA, 944 F.2d 870, 875 (Fed.Cir.1991) ; see also Waterman v. Mackenzie, 138 U.S. 252, 255, 11 S.Ct. 334, 34 L.Ed. 923 (1891). A patent owner's transfer of “all substantial rights” in the asserted patents to an exclusive licensee “is tantamount to an assignment of those patents to the exclusive licensee, conferring standing to sue solely on the licensee” and divesting the patent owner of any right to sue. Alfred E. Mann Found. for Scientific Research v. Cochlear Corp., 604 F.3d 1354, 1358–59 (Fed.Cir.2010). Where an exclusive license agreement transfers less than “all substantial rights” in the patents, “either the licensee or the licensor may sue, but both of them generally must be joined as parties to the litigation.” Id. at 1360.

“It is well settled that whether a transfer of a particular right or interest under a patent is an assignment or a license does not depend upon the name by which it calls itself, but upon the legal effect of its provisions.” Vaupel Textilmaschinen KG, 944 F.2d at 875 (alteration and internal quotation marks omitted). Thus, to determine whether an exclusive license agreement transfers “all substantial rights” in the patents to the licensee, the court “must ascertain the intention of the parties [to the license agreement] and examine the substance of what was granted.” Mentor H/S, Inc. v. Med. Device Alliance, Inc., 240 F.3d 1016, 1017 (Fed.Cir.2001). Courts consider whether the licensor granted various rights to the exclusive licensee to determine whether the license rendered the exclusive licensee the owner of the patent. Alfred E. Mann Found., 604 F.3d at 1360–61 (e.g., “the exclusive right to make, use, and sell products or services under the patent, ... the licensee's right to sublicense, ... the right of the licensor to receive a portion of the recovery in infringement suits brought by the licensee, the duration of the license rights granted to the licensee, the ability of the licensor to supervise and control the licensee's activities, the obligation of the licensor to continue paying patent maintenance fees, and the nature of any limits on the licensee's right to assign its interests in the patent”). Often, “the nature and scope of the exclusive licensee's purported right to bring suit, together with the nature and scope of any right to sue purportedly retained by the licensor, is the most important consideration.” Id. at 1361. That the licensor retained the right to sue accused infringers often precludes a finding that all substantial rights were transferred to the licensee, unless that right is illusory. Id. A “licensor's right to sue is rendered illusory by the licensee's ability to settle licensor-initiated litigation by granting royalty-free sublicenses to the accused infringers.” Id.

Courts interpret assignment and license agreements that are relevant to the standing inquiry according to state law. Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359, 1370 (Fed.Cir.2008). Here, the relevant agreements are governed by Massachusetts law. (See D.I. 390 at 7; D.I. 403 at 8; see, e.g., D.I. 391–1 at 30; D.I. 391–2 at 7, 46). Under Massachusetts law, an unambiguous contract is interpreted as a matter of law, without resort to extrinsic evidence. Mass. Mun. Wholesale Elec. Co. v. Town of Danvers, 411 Mass. 39, 577 N.E.2d 283, 289 (1991). “In considering whether a contract is ambiguous, we read the agreement in a reasonable and practical way, consistent with its language, background, and purpose.” Lass v. Bank of Am., N.A., 695 F.3d 129, 134 (1st Cir.2012) (internal quotation marks omitted) (applying Mass. law). “[I]nstruments deriving from a given transaction shall be read together.” Id. at 135 (internal quotation marks omitted). Ambiguity exists if the contract “is susceptible of more than one meaning and reasonably intelligent persons would differ as to which meaning is the proper one.” S. Union Co. v. Dep't of Pub. Utilities, 458 Mass. 812, 941 N.E.2d 633, 640 (2011) (internal quotation marks omitted). Courts may consider extrinsic evidence to resolve the ambiguity where “the bare language suggests one outcome but does not rule out the other.” Principal Mut. Life Ins. Co. v. Racal–Datacom, Inc., 233 F.3d 1, 3 (1st Cir.2000) (applying Mass. law).

III. ANALYSIS

Pure argues that EMC Corporation possesses insufficient rights to the deduplication patents to have standing to sue for infringement. (D.I. 403 at 7). Plaintiffs maintain that EMC Corporation has standing because the assignment and licensing history of the deduplication patents demonstrates that EMC Corporation obtained, and has since held, title to the deduplication patents; the right to sue and control litigation for infringement of the deduplication patents; the right to make, use, or sell products practicing the deduplication patents, other than Data Domain products; and the right to license the deduplication patents except in connection with Data Domain's business. (D.I. 390 at 10). Pure argues that EISI obtained and currently possesses sufficient rights to the deduplication patents to...