Microchip Tech. v. Chamberlain Group

• Decision Date: 15 March 2006
• Docket Number: No. 05-1339.,05-1339.
• Parties: MICROCHIP TECHNOLOGY INCORPORATED, Plaintiff-Appellee, v. The CHAMBERLAIN GROUP, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 936

441 F.3d 936

MICROCHIP TECHNOLOGY INCORPORATED, Plaintiff-Appellee, v. The CHAMBERLAIN GROUP, INC., Defendant-Appellant.

No. 05-1339.

United States Court of Appeals, Federal Circuit.

March 15, 2006.

Brett L. Dunkelman, Osborn Maledon, P.A., of Phoenix, Arizona, argued for plaintiff-appellee. With him on the brief was Danielle Janitch.

Karl R. Fink, Fitch, Even, Tabin & Flannery, of Chicago, Illinois, argued for defendant-appellant. With him on the brief were John F. Flannery and Rudy I. Kratz.

Before LOURIE, RADER, and LINN, Circuit Judges.

LOURIE, Circuit Judge.

The Chamberlain Group, Inc. appeals from the decision of the United States District Court for the District of Arizona granting summary judgment in favor of Microchip Technology Inc., and holding that: (1) U.S. Patent Re. 36,703 was invalid; (2) equipment other than garage door openers could not infringe U.S. Patent Re. 35,364; and (3) Microchip possessed a patent license under all reissues of U.S. Patent 4,750,118, including U.S. Patent Re. 37,986. Microchip Tech. Inc. v. The Chamberlain Group, Inc., No. 01-1423, slip op. at 17 (D.Ariz. Jan. 27, 2005) ("Final Decision"). However, because the district court lacked jurisdiction under the Declaratory Judgment Act to decide the merits of this action, we vacate the district court's grant of summary judgment and remand with instructions for the district court to dismiss the action.

BACKGROUND

The central issue on appeal is whether the district court possessed the requisite jurisdiction for it to decide the merits of this declaratory judgment action. That determination was based on whether a case of actual controversy existed between Microchip and Chamberlain. The district court held that there was such a controversy and proceeded to decide the merits of the case. The declaratory plaintiff-appellee is Microchip, a manufacturer of integrated circuits, such as microprocessors. A microprocessor is, in its most basic form, a circuit that is embedded in a semiconductor chip and is capable of processing inputted electronic signals and performing electronic functions in response to those signals. Microchip sells its microprocessors to manufacturers of various products, including garage door openers ("GDOs"). Manufacturers of GDOs install the microprocessors that they purchase from Microchip in the GDO, in combination with several other structural and electronic components.

In addition to manufacturing microprocessors, Microchip provides software that can be used to program the microprocessors to perform specified functions. Of particular interest to manufacturers of GDOs, and to this appeal, is Microchip's KEELOQ® technology. A microprocessor programmed with the KEELOQ® software enables the GDO to automatically recognize or "learn" the opening code contained in a remote transmitter. As a result, the GDO user is not required to manually input into the microprocessor of the GDO the opening code contained in the remote transmitter, which may be long. The GDO manufacturer, moreover, is not required to program the Microchip microprocessor with the KEELOQ® software. It may choose to purchase Microchip's microprocessor alone and program the microprocessor with its own or a third-party's "learning" software.

The declaratory defendant-appellant is Chamberlain, a manufacturer and seller of GDOs. Chamberlain is the owner of the '118, '364, '703, and '986 patents (collectively, "the patents-in-suit"). The '364, '703, and '986 patents are reissues of the '118 patent. The patents-in-suit have a common specification, which discloses a GDO that uses a remote transmitter with a unique and permanent code and a receiver that can be placed into a program mode. '118 Patent, col. 1, ll. 34-39. In the program mode, the receiver is capable of receiving and storing two or more opening codes corresponding to two or more remote transmitters. Id. According to the '118 patent specification, the coding system of the patented GDO is easier to use than a conventional GDO because the user does not have to manually input opening codes into the receiver or the transmitter. Id., col. 1, ll. 52-54. Moreover, because the factory-installed opening codes in the remote transmitter of the patented GDO can be long and complex, it is more secure than a conventional GDO. Id. A conventional GDO cannot practically have an opening code that is too long or complex since the user must manually input the code, and the GDO must provide switches on its central processing unit that allow the user to input the code. Claim 1 of the '118 patent, in pertinent part, defines the various components comprising the patented GDO:

A garage door operator for a garage door comprising . . . [1] an output shaft connected to said garage door . . . [2] a radio receiver, [3] a decoder connected to receive the output of said radio receiver, [4] a microprocessor connected to receive the output of said decoder and to said garage door operation mechanism to energize it, [5] a switch moveable between program and operate positions connected to said microprocessor . . . [6] a memory means for storing a plurality of addresses . . . [7] a memory selection switch connected to said microprocessor, [8] a plurality of radio transmitters with different codes. . . .

Id., col. 5, 1. 7 to col. 6, 1. 6. As indicated above, Microchip sells microprocessors and software, not GDOs.

Prior to the commencement of this action, Chamberlain and Microchip were engaged in another patent suit not involving the present patents-in-suit. In 1998, Microchip sued Chamberlain for infringement of its patent that purportedly covered the KEELOQ® technology. Effective August 1, 1999, the parties entered into a settlement agreement that ended that lawsuit. Under the terms of the settlement agreement, Chamberlain received a license to certain of Microchip's patents, and Chamberlain promised not to bring suit against Microchip or its affiliates for infringement of the '118 and '364 patents. Relevant to this action, paragraph 5.09(c) of the settlement agreement provides as follows:

Under no circumstance shall the foregoing release be construed as a release of Microchip, its present Affiliates or any customers thereof with respect to claims arising out of or relating to [Chamberlain's] U.S. Patent No. 4,750,118 and U.S. Patent No. Re. 35,364 (the foregoing CGI patents are thereinafter referred to as the "CGI Patents"). The foregoing sentence notwithstanding, CGI, and its present and future Affiliates, hereby agrees that it will not bring suit against Microchip or Microchip's current Affiliates involving any of the CGI Patents.

On July 31, 2001, Microchip filed its complaint in this action. On July 25, 2002, Microchip filed an amended complaint. In the amended complaint, Microchip sought a declaration that (1) the '364 and '703 patents were invalid and/or unenforceable, (2) Microchip's products did not infringe either the '364 or '703 patent, and (3) due to the prior settlement agreement between Chamberlain and Microchip, which purportedly constituted a patent license to the '118 patent and all reissues of that patent, Chamberlain could not enforce the '364 and '703 patents against Microchip's customers because of the doctrine of patent exhaustion. In response, Chamberlain filed a motion to dismiss for lack of jurisdiction under Federal Rule of Civil Procedure 12(b)(1).

The district court concluded that there was a case of actual controversy and hence jurisdiction for it to decide the merits of the suit under the Declaratory Judgment Act. According to the court, although Microchip itself was not threatened with suit, Chamberlain had initiated lawsuits against Microchip's customers for the sale of GDOs that incorporated Microchip's microprocessors and learning software. Microchip Tech. Inc. v. The Chamberlain Group, Inc., No. 01-1423, slip op. at 3 (D.Ariz. Jan. 11, 2002) ("Jurisdiction Decision"). In reaching its conclusion, the court was not persuaded by the fact that Microchip's microprocessors were not alleged to infringe the patents-in-suit and that Microchip's customers could only infringe the patents-in-suit by using Microchip's microprocessors in combination with other components not supplied by Microchip. Id. Ultimately, the court reasoned that the "practical effect" of Chamberlain's conduct was that Microchip could not sell its non-infringing product without subjecting its customers to the threat of a patent infringement suit. Id., slip op. at 4. Thus, the court concluded that Microchip perceived a real threat of suit for patent infringement from Chamberlain, even though Microchip itself had no potential liability as a patent infringer. Id.

Chamberlain filed a renewed motion to dismiss after it settled a concurrent patent suit against one of Microchip's customers, Wayne-Dalton Corporation. Wayne-Dalton is a GDO manufacturer that utilizes Microchip's microprocessor programmed with the KEELOQ® software. In denying the renewed motion, the district court reiterated that its initial decision "was based on [Microchip's] reasonable apprehension that it cannot sell its allegedly non-infringing product without subjecting its customers, or itself, to the threat of litigation for patent infringement." Microchip Tech. Inc. v. The Chamberlain Group, Inc., No. 01-1423, slip op. at 3 (D.Ariz. July 3, 2002). According to the court, because Chamberlain had not agreed not to sue Microchip's other customers for patent infringement, Microchip still retained a reasonable apprehension that its customers would be exposed to legal action. Id.

Subsequently, the district court granted Microchip's motions for summary judgment, and held that: (1) the '703 patent was invalid; (2) equipment other than garage door openers could not infringe the '364 patent; and (3) Microchip possessed a license to all reissues of the '118 patent, including the '986 patent. Final Decision, slip op. at 17. The court dismissed the other...