Neuralstem, Inc. v. Stemcells, Inc., Civil Action No. AW-08-1173.

• Decision Date: 27 August 2008
• Docket Number: Civil Action No. AW-08-1173.
• Citation: 573 F.Supp.2d 888
• Parties: NEURALSTEM, INC., Plaintiff, v. STEMCELLS, INC., et al., Defendants.
• Court: U.S. District Court — District of Maryland

573 F.Supp.2d 888

NEURALSTEM, INC., Plaintiff, v. STEMCELLS, INC., et al., Defendants.

Civil Action No. AW-08-1173.

United States District Court, D. Maryland, Southern Division.

August 27, 2008.

Michael Thomas Murphy, Michael Jay Schrier, Bell Boyd and Lloyd PLLC, Washington, DC, Alan Lynn Barry, Christian Guillermo Stahl, Sanjay Krishna Murthy, Bell Boyd and Lloyd LLC, Chicago, IL, for Plaintiff.

Jeremy I. Medovoy, John R. Fuisz, McDermott Will and Emery LLP, Washington, DC, William G. Gaede, III, McDermott Will and Emery LLP, Palo Alto, CA, for Defendants.

MEMORANDUM OPINION

ALEXANDER WILLIAMS, JR., District Judge.

Plaintiff Neuralstem, Inc. ("Neuralstem" or "Plaintiff") brings this declaratory judgment action against StemCells, Inc. and Stemcells California, Inc. (collectively "StemCells") and Neurospheres Holding, Ltd. ("Neurospheres" or collectively "Defendants"), seeking a finding of non-infringement and invalidity of patents. Currently pending before the Court is Defendants' Motion to Dismiss for Lack of Subject Matter Jurisdiction, Lack of Personal Jurisdiction, and Improper Venue or, in the Alternative, to Transfer to the Northern District of California (Doc. No. 25). The Court held a telephonic conference to discuss the pending motion on August 13, 2008.¹ See Local Rule 105.6 (D.Md.2008). The Court has reviewed the entire record, as well as the pleadings and exhibits, with respect to the instant motion. The issues having been fully briefed and argued by the parties, this matter is now ripe for review. For the reasons set forth below, the Court will DENY-in-part and GRANT-in-part Defendants' Motion.

FACTUAL AND PROCEDURAL BACKGROUND

Defendant StemCells is a Delaware corporation, located in Palo Alto, California, that discovers and develops stem cells therapeutics.² Plaintiff Neuralstem is a Delaware corporation located in Rockville, Maryland.

On July 24, 2006, StemCells filed suit against Neuralstem in this Court (the "Maryland action"), alleging infringement of four of StemCells' patents: namely, U.S. Patent Nos. 5,851,832 (the "'832 Patent"), 6,294,346 (the "'346 Patent"), 6,497,872 (the "'872 Patent"), and 7,101,709 (the "'709 Patent"). Neuralstem petitioned the United States Patent and Trademark Office ("USPTO") for a reexamination of all four patents, which was subsequently granted. The Maryland action remains stayed and administratively closed pending the completion of the reexaminations.

On October 3, 2006, and April 22, 2008, the USPTO issued U.S. Patent Nos. 7,115,418 (the "'418 Patent") and 7,361,505 (the "'505 Patent"), respectively, to Neurospheres. StemCells is the exclusive licensee to these patents, which both arose out of the complex prosecution history that also resulted in the four patents at issue in the Maryland action—the '832, '346, '872, and '709 Patents. With regards to the '505 Patent, StemCells issued a press release on April 23, 2008, stating:

The issuance of this patent rounds out and strengthens our neural stem cell portfolio, which we believe is unparalleled in its breadth, depth, and completeness ... We are confident that any third party wishing to commercialize neural stem cells as potential therapeutics or to use them as drug screening tools will have to seek a license from us irrespective of how they derive the cells. We have already granted licenses to several companies and are considering licensing others.

(Pl.Opp.Br., Ex. G.) StemCells notes that no communications have occurred between StemCells and Neuralstem concerning either the '418 and '505 Patents, either before or after StemCells issued its press release.

Neuralstem filed this declaratory judgment action against StemCells and Neurospheres, on May 7, 2008, seeking to find that the '505 Patent is unenforceable, not infringed, and invalid. Just hours after Neuralstem filed this declaratory judgment action, StemCells filed an action against Neuralstem in the United States District for the Northern District of California (the "California action"), alleging infringement of both the '418 and '505 Patents. On May 9, 2008, StemCells amended its complaint to include two California state law causes of action: (1) violation of California Business and Professions Code Section 17200; and (2) violation of California common law trade libel.

Thereafter, on May 13, 2008, Neuralstem filed an amended declaratory judgment complaint in this Court, seeking a finding of no infringement of StemCells' '418 Patent, and a finding that Neuralstem is not in violation of the California laws. On May 30, 3008, Neuralstem filed a motion to dismiss in the California action, based on the first-to-file rule and, alternatively, sought to transfer that action to this Court. On July 1, 2008, the California court denied Neuralstem's motion and deferred to this Court to decide the appropriate forum.

STANDARD OF REVIEW

I. Subject Matter Jurisdiction, Fed. R.Civ.P. 12(b)(1)

Motions to dismiss for lack of subject matter jurisdiction are governed by Fed. R.Civ.P. 12(b)(1). The plaintiff bears the burden of proving that subject matter jurisdiction properly exists in the federal court. See Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir.1999). In a 12(b)(1) motion, the court "may consider evidence outside the pleadings" to help determine whether it has jurisdiction over the case before it. Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.1991); see also Evans, 166 F.3d at 647. The court should grant the 12(b)(1) motion "only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Richmond, 945 F.2d at 768.

II. Personal Jurisdiction, Fed.R.Civ.P. 12(b)(2)

Under Federal Rule of Civil Procedure 12(b)(2), the party asserting personal jurisdiction has the burden to prove the existence of a ground for jurisdiction by a preponderance of the evidence. Mylan Laboratories, Inc. v. Akzo, N.V., 2 F.3d 56, 60 (4th Cir.1993). When a court addresses the question of jurisdiction based only on the pleadings, the allegations in the complaint, the motion papers, and any supporting legal memoranda, without an evidentiary hearing, the burden is on the plaintiff to make a prima facie showing of a sufficient basis for jurisdiction. Id.; see also New Wellington Fin. Corp. v. Flagship Resort Dev. Corp., 416 F.3d 290, 294 (4th Cir. 2005). In determining whether the plaintiff has proven a prima facie case of personal jurisdiction, the court "must draw all reasonable inferences arising from the proof, and resolve all factual disputes, in the plaintiff's favor." Mylan, 2 F.3d at 60; see also Dring v. Sullivan, 423 F.Supp.2d 540, 543 (D.Md.2006).

DISCUSSION

I. Subject Matter Jurisdiction Under the Declaratory Judgment Act

Defendants argue that the Court lacks subject matter jurisdiction over Neuralstem's request for declaratory relief because there was not an "actual controversy" at the time the declaratory judgment action was filed.

The Declaratory Judgment Act provides, in pertinent part, that "[i]n a case of actual controversy within its jurisdiction ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. . . ." 28 U.S.C. § 2201(a). "The `actual controversy' requirement of the Declaratory Judgment Act is rooted in Article III of the Constitution, which provides for federal jurisdiction over only `cases and controversies.'" Micron Tech., Inc. v. Mosaid Techs., Inc., 518 F.3d 897, 901 (Fed. Cir.2008).

Having recently examined the "actual controversy" requirement under the Declaratory Judgment Act in the context of a patent license dispute, and finding that the requirement is compatible with Article III's "case and controversy" requirement, the Supreme Court stated that "the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Medlmmune, Inc. v. Genentech, Inc., 549 U.S. 118, ___, 127 S.Ct. 764, 771, 166 L.Ed.2d 604 (2007). In light of the Supreme Court's decision in Medlmmune, the Federal Circuit has abandoned its twopart—"reasonable apprehension of suit" test—previously used to determine whether an actual controversy existed under the Declaratory Judgment Act.³ See SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1380 (Fed.Cir.2007) ("The Supreme Court's opinion in Medlmmune represents a rejection of our reasonable apprehension of suit test."). The court adopted "the now more lenient legal standard" set forth in Medlmmune, which seemingly "facilitates or enhances the availability of declaratory judgment jurisdiction in patent cases." Micron, 518 F.3d at 902.⁴ Under the "more lenient" standard, a plaintiff need only show, in short, that "all of the circumstances" establish a "substantial controversy." Id. at 901.

Neuralstem argues that there is an "actual controversy" that justifies the filing of the present action for declaratory relief as to the '505 patent.

First, Neuralstem argues that Stem-Cells' public statements and actions establish a controversy. After the USPTO issued the '505 patent to Neurospheres, StemCells, the exclusive licensee of the '505 patent, issued a press release on April 23, 2008, stating that they "are confident that any third party wishing to commercialize neural stem cells as potential therapeutics or to use them as drug screening tools will have to seek a license from [StemCells] irrespective of how they derive the cells." (Pl.Opp.Br., Ex. G.) Although this public statement did not mention Neuralstem by name, Neuralstem maintains that Defendants were "unmistakenly threatening" Neuralstem by using "code words" linked to previous...