Fairchild Semiconductor v. Third Dimension (3D), Civil No. 08-158-P-H.
| Decision Date | 10 December 2008 |
| Docket Number | Civil No. 08-158-P-H. |
| Citation | 589 F.Supp.2d 84 |
| Parties | FAIRCHILD SEMICONDUCTOR CORPORATION, Plaintiff v. THIRD DIMENSION (3D) SEMICONDUCTOR, INC., Defendant. |
| Court | U.S. District Court — District of Maine |
Michael J. Sullivan, Robert H. Stier, Sean L. Sweeney, Pierce Atwood LLP, Portland, ME, Stephen H. Galebach, Pierce Atwood LLP, Boston, MA, for Plaintiff.
Michael W. Shore, Alfonso G. Chan, Glenn Edward Janik, Patrick J. Conroy, Patrick A. Traister, Shore Chan Bragalone LLP, Dallas, TX, John S. Whitman, Richardson, Whitman, Large & Badger, Portland, ME, for Defendant.
DECISION AND ORDER ON MOTIONS TO DISMISS
When two American businesses enter into an agreement concerning their worldwide commerce and specify in their agreement certain forums in which their agreement-related disputes can be heard, should a United States court honor the forum selection clause? The Supreme Court has said that the answer is yes. Does the answer change if the agreement is a worldwide patent license for patents issued by more than one country, and the parties are disputing royalty obligations that depend in part on whether the licensee's products are "covered by" a foreign patent? The answer to that question is more difficult, because a recent Federal Circuit decision, although not involving a forum selection clause, seems vehement that a United States court should almost always decline to hear a dispute about foreign patents, at least if its jurisdiction is discretionary. But in a diversity of citizenship case, which this case is, "forum non conveniens" guides the analysis. It leads me to conclude that the forum selection clause should still be honored, even though the royalty dispute depends in part upon the scope of a Chinese patent. I also conclude that the patentee may not sue for infringement damages while the license remains in effect.
Fairchild Semiconductor Corporation's ("Fairchild") principal place of business is in Maine.1 In February 2001, Fairchild entered a non-exclusive Patent License Agreement ("License Agreement") with Power Mosfet Technologies, L.L.C. ("PMT"), a Texas company.2 The enumerated licensed patents are two United States patents and two Chinese patents for metal-oxide-semiconductor field-effect transistors ("MOSFETs") and "[a]ll other patent applications on derivative inventions filed in the U.S., China, and any other countries."3 Fairchild received "a worldwide, non-exclusive, non-assignable, non-divisible personal license under the Licensed Patents to make, have made, use, offer to sell, sell, lease, import support [sic], and otherwise dispose of Licensed Products."4 PMT covenanted "not to sue or assert any claim for infringement."5
Fairchild paid an immediate license fee of $15,000 to PMT.6 The License Agreement requires Fairchild to pay, in addition, royalties of 4.75 percent on Fairchild products "covered by" "at least one claim" of any of the licensed patents.7 On January 31, 2002, PMT assigned the License Agreement to the defendant Third Dimension Semiconductor, Inc. ("3D"), a Texas company whose principal place of business is in Arizona.8 3D is now the owner of the licensed patents.
Fairchild has not paid royalties under the License Agreement aside from the initial license fee. In March 2007, 3D began asserting that Fairchild's SuperFET™ products generate royalties under the License Agreement.9 Two patents are involved: U.S. Patent No. 5,216,275 ("the '275 Patent"), and Chinese Patent No. 91,101,845 ("the '845 Patent"). The Eastern District of Texas and the Federal Circuit have construed the U.S. '275 Patent in Power Mosfet Technologies v. Siemens AG.10
On April 24, 2008, 3D gave notice to Fairchild that 3D intended to terminate the License Agreement, and threatened to sue Fairchild in Texas and China because Fairchild had not paid royalties nor provided an accounting.11 Fairchild then brought this declaratory judgment action in the District of Maine seeking a declaration that it owes no royalties because 3D's patents do not cover Fairchild's Super-FET™ devices, that Fairchild has not infringed any claim of the licensed patents, that Fairchild has not breached the License Agreement, that the license remains in effect and that the License Agreement prevents 3D from suing for infringement.12 According to the License Agreement, for any disputes, "[t]he parties consent to the jurisdiction of the Federal Court for the District of Maine and the Federal Court for the Eastern or Northern Districts of Texas."13 3D counterclaimed, claiming breach of the royalty obligation (and related obligations) under the License Agreement, and seeking patent infringement damages for infringing the U.S. '275 patent.14 It also sued Fairchild in the Eastern District of Texas on the same subjects as its counterclaim here.
3D has moved for dismissal of, or abstention on, Count 2 in Fairchild's declaratory judgment action.15 That is the Count dealing with whether royalties are due on Fairchild products that 3D says are "covered by" the Chinese '845 patent. 3D says that resolving Count 2 will require interpretation of the Chinese patent's scope, and that a United States court has no jurisdiction to do so, or at least should decline to do so.
Fairchild has moved to dismiss 3D's counterclaim (and 3D's claim in the Texas proceeding) for U.S. '275 patent infringement damages on the basis that as long as the license is in effect, Fairchild cannot be held liable for patent infringement damages.16
On July 8, 2008, I issued a temporary restraining order ("TRO") enjoining 3D from terminating the License Agreement until I could hear the preliminary injunction request.17 Thereafter, the Texas case was transferred here and consolidated with this lawsuit.18 On November 5, 2008, I heard testimony on the preliminary injunction motion. I deal with that motion in a separate opinion.
Under the License Agreement, Fairchild is licensed to sell products that are covered by the U.S. '275 patent, and 3D has covenanted not to sue or assert any claim for infringement against Fairchild.19 Thus, as long as the license is in effect, there can be no infringement of the '275 patent by Fairchild. Until then, Fairchild may be obliged to pay royalties in accordance with the License Agreement's formula, but not infringement damages. The License Agreement has not been terminated because, when 3D initiated termination proceedings, I issued a temporary restraining order halting termination. Fairchild persuaded me that such relief was appropriate based upon the Federal Circuit decision in Cordis Corp. v. Medtronic, Inc. ("Cordis II").20
Once I lift that order (if I do), or if it is vacated on appeal, then 3D can complete its license termination proceedings. Only then can it claim infringement damages from Fairchild's conduct, rather than royalties under the License Agreement.
3D says that its claim for infringement damages is a compulsory counterclaim because Fairchild has asked for a declaratory judgment of non-infringement.21 But Federal Rule of Civil Procedure 13 makes compulsory only a claim that the defendant has at the time of service. Until the License Agreement terminates, 3D has no claim for infringement damages (although it may have a claim for license royalties), and its counterclaim for infringement damages therefore is not compulsory.22 Fairchild as licensee is entitled to seek a declaration of non-infringement even while the license is in effect under Cordis II and MedImmune v. Genentech.23 That declaratory relief request does not give 3D a right to counterclaim for infringement damages. I therefore GRANT Fairchild's motion to dismiss the counterclaim (as well as Count V—"Second Cause of Action"—in the consolidated Texas complaint24) for infringement damages.
In Count II, "Declaratory Judgment on Contractual Rights and Obligations," Fairchild requests a declaratory judgment that it owes no royalties with respect to the Chinese '845 patent.26 Under the License Agreement, that dispute requires a determination whether the Fairchild products in question are "covered by" (the License Agreement's terminology) one or more of the claims of the '845 patent.27 Fairchild asserts that 3D has claimed that Fairchild's SuperFET™ devices "would infringe the CN '845 patent but for the Agreement," and Fairchild denies the claim.28 3D has moved to dismiss the count for lack of subject matter jurisdiction, for failure to state a claim or, in the alternative, to abstain. Fairchild argues that subject matter jurisdiction does exist, that abstention is inappropriate because the parties agreed in their License Agreement that this District Court is an appropriate forum for all their license disputes, and that it has stated a proper claim under Federal Rule Civil Procedure 12(b)(6).29
Diversity of citizenship confers subject matter jurisdiction over the License Agreement contractual dispute as to whether license royalties are due for any licensed patent, including the Chinese patent.30 The critical issue is whether I should exercise the jurisdiction in the case of the Chinese patent because doing so may require consideration of Chinese patent law.
The parties agreed explicitly in their License Agreement that the District of Maine could be used to resolve all their license disputes under the Agreement.31 There is a vigorous line of authority that holds that, when subject matter jurisdiction exists, a federal court should recognize and enforce a consensual choice of forum. In M/S Bremen v. Zapata Off-Shore Co.,32 for example, the Supreme Court expressed its strong interest in enforcing forum selection clauses that...
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