Open Lcr.Com, Inc. v. Rates Technology, Inc.

• Decision Date: 31 August 2000
• Docket Number: No. Civ.A. 00-WY-631-CB.,Civ.A. 00-WY-631-CB.
• Citation: 112 F.Supp.2d 1223
• Parties: OPEN LCR.COM, INC., a Delaware corporation, Sharp Corporation, a foreign corporation, and Sharp Electronics Corporation, a New York corporation, Plaintiffs, v. RATES TECHNOLOGY, INC., a New York corporation, Defendant.
• Court: U.S. District Court — District of Colorado

Page 1223

112 F.Supp.2d 1223

OPEN LCR.COM, INC., a Delaware corporation, Sharp Corporation, a foreign corporation, and Sharp Electronics Corporation, a New York corporation, Plaintiffs, v. RATES TECHNOLOGY, INC., a New York corporation, Defendant.

No. Civ.A. 00-WY-631-CB.

United States District Court, D. Colorado.

August 31, 2000.

Tucker K. Trautman, Dorsey & Whitney, Denver, CO, for plaintiff.

James Hicks, David Warren, Arnold & Porter, Denver, CO, for defendant.

ORDER DENYING DEFENDANT'S MOTIONS TO DISMISS

BRIMMER, District Judge.

Plaintiffs OpenLCR.com, Inc., Sharp Corporation, and Sharp Electronics Corporation bring this action against Rates Technology, Inc. ("RTI") seeking a declaration of noninfringement and/or unenforceability and invalidity of various patents held by RTI. Plaintiffs' Amended Complaint also alleges attempted monopolization in violation of 15 U.S.C. § 2, and state law causes of action for intentional interference with contractual relations and prospective business advantage. The Court exercises jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331, 1337, 1338, 1367, and 2201(a).

Currently pending before the Court are two separate motions to dismiss by RTI. The first seeks dismissal for lack of personal jurisdiction, improper venue, insufficiency of process, and insufficiency of service of process pursuant to Rules 12(b)(2), (3), (4), and (5) of the Federal Rules of Civil Procedure. RTI's second motion seeks dismissal of Plaintiffs' antitrust and state law causes of action pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Having considered the parties' briefs and oral arguments, and being fully advised in the premises, the Court hereby FINDS and ORDERS as follows:

Background

OpenLCR is a Colorado corporation that develops and implements a technology known as least cost routing ("LCR") used in telephonic devices such as fax machines and telephones. LCR automatically selects the least expensive long-distance rate each time the user makes a long-distance telephone call. Sharp Electronics Corporation, a wholly owned subsidiary of the multinational Sharp Corporation, is engaged in, among other things, the manufacture and sale of fax machines. Defendant RTI, a Delaware corporation¹ with its principal place of business in Hauppauge, New York, owns several patents relating to LCR technology.

According to allegations in the Amended Complaint, as early as 1987 one of OpenLCR's founders participated in the invention of a technology for routing calls from a telephone device to selected low-cost carriers. This technology, known as "Alpha-LCR," employs algorithms, loaded into a telephonic device, which pre-determine the routing of calls to selected carriers whose rate is lower for the day and time of each outgoing call. Alpha-LCR technology has been used commercially in Japan since approximately 1990. Sharp Corporation began using the technology in telephones it sold in Japan beginning in August 1992.

In October 1978, Gerald J. Weinberger, now president of RTI, received U.S.Patent No. 4,122,308 (the "'308 Patent") broadly disclosing LCR technology to be used with telephone devices. The '308 Patent expired in October 1995. In August 1994, as the protection period on the '308 Patent neared its end, Weinberger filed two more narrow patent applications on LCR technology. Although Weinberger cited the '308 Patent technology in both applications, he did not disclose the Alpha-LCR technology to the United States Patent Office. On or about June 13, 1995, the Patent Office issued U.S.Patent No. 5,425,085 entitled "Least Cost Routing Device For Separate Connection Into Phone Line" in the name of Weinberger and another individual as the inventors (the "'085 Patent"). On May 21, 1996, the Patent Office issued U.S.Patent No. 5,519,769 entitled "Method And System For Updating A Call Waiting Database" in the name of Weinberger and another individual as the inventors (the "'769 Patent"). The '085 Patent discloses and claims a specific LCR device to be used between a telephone and the local telephone network — i.e., between the telephone and the wall jack. The '769 Patent discloses and claims a specific method for updating, when necessary, LCR billing rate parameters in a rating device. RTI is the assignee of both the '085 and '769 Patents.

In October 1999, OpenLCR contracted with Sharp to develop and market facsimile machines using OpenLCR's expanded version of the Alpha-LCR technology previously used in Japan. OpenLCR entered into a similar agreement with Casio Communications, Inc. (Casio) in January 2000. Casio intended to use OpenLCR's Alpha-LCR technology in an upcoming line of cordless telephones and answering machines.

Shortly after the public announcements of these business relationships, RTI, through Weinberger, began communicating with OpenLCR, the Sharp entities, and Casio claiming that OpenLCR's technology and products using that technology infringe on one or more claims of the '085 and '769 Patents. Plaintiffs responded to these communications by informing RTI that the OpenLCR's technology was based on the Alpha-LCR technology that had been in use in Japan since approximately 1988, well before Weinberger filed applications for the '085 and '769 Patents. Plaintiffs also made numerous requests for meetings with RTI to discuss issues relating to the alleged infringement and the validity of the RTI Patents in light of the earlier Alpha-LCR technology.

RTI refused to meet with Plaintiffs to discuss the validity of the '085 and '769 Patents, and threatened litigation unless OpenLCR agreed to enter into a license agreement. Over an approximately six-month period, from October 1999 through March 2000, Weinberger sent at least eight demand letters and made over fifty telephone calls to OpenLCR in Colorado. He threatened to "shut [OpenLCR's business down," bring a "$100 million" patent infringement lawsuit against OpenLCR in New York, and contact the Sharp entities and Casio, who Weinberger predicted would cease doing business with OpenLCR. (Gallenstein Aff. ¶ 6.) RTI also contacted Casio to explain its intent to sue OpenLCR and the Sharp parties, and to inform Casio that it too would be sued unless it agreed to enter into a license agreement with RTI.

On March 24, 2000, OpenLCR brought suit in this Court against RTI seeking a declaration of noninfringement and invalidity of the '085 and '769 Patents. Five days later, on March 29, 2000, RTI filed a patent infringement action against OpenLCR and the Sharp parties in the United States District Court for the Southern District of New York. On May 5, 2000, RTI voluntarily dismissed the New York lawsuit in its entirety and then refiled the case in the United States District Court for the Eastern District of New York. RTI's Amended Complaint in the Eastern District of New York alleges a single cause of action for infringement of the '085 and '769 Patents, and names as defendants Sharp Document & Network Systems of America, Sharp Electronics Corporation, Sharp Corporation, and Home Shopping Network, Inc.

On April 7, 2000, approximately one month before RTI dismissed and then refiled the New York lawsuit, OpenLCR, joined by the Sharp parties, filed an Amended Complaint in this action. In addition to the declaratory relief, the Amended Complaint accuses RTI of attempted monopolization of the market for LCR technology and products using that technology, intentional interference with the OpenLCR-Sharp contract, intentional interference with the OpenLCR-Casio contract, and intentional interference with prospective business advantage. The Amended Complaint alleges that RTI's actions disrupted OpenLCR's performance of the Sharp and Casio contracts and caused OpenLCR to suffer a loss of profits.

RTI now moves to dismiss Plaintiffs' Amended Complaint for lack of personal jurisdiction, improper venue, insufficient process, and insufficient service of process, and to dismiss the Sharp parties under the "first-to-file" rule. RTI also moves to dismiss Plaintiffs' antitrust and state law tort claims for failure to state a claim upon which relief can be granted. The Court shall address each motion in turn.

Analysis

A. Defendant's Motion to Dismiss Pursuant to Rules 12(b)(2), (3), (4) and (5), and the First-to-File Rule

1. Personal Jurisdiction

Plaintiffs bear the burden of establishing this Court's personal jurisdiction over RTI. See Kuenzle v. HTM Sport-Und Freizeitgerate AG, 102 F.3d 453, 456 (10th Cir.1996) (quoting Behagen v. Amateur Basketball Ass'n, 744 F.2d 731, 733 (10th Cir.1984)). Where, as in this case, the issue is decided before trial on the basis of affidavits and other papers, and without the benefit of an evidentiary hearing, a plaintiff need only make a prima facie showing of personal jurisdiction. Id.

The Federal Circuit has exclusive jurisdiction over appeals from the district courts involving claims arising under the patent laws. See 28 U.S.C.A. §§ 1295(a), 1338(a) (West 1993). In a patent case, when analyzing personal jurisdiction for purposes of federal due process, district courts apply the law of the Federal Circuit. See Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1358 (Fed.Cir.1998); Akro Corp. v. Luker, 45 F.3d 1541, 1544 (Fed.Cir.1995). "Personal jurisdiction over an out-of-state defendant is appropriate if the relevant state's long-arm statute permits the assertion of jurisdiction without violating federal due process." 3D Sys., Inc. v. Aarotech Labs., Inc., 160 F.3d 1373, 1376-77 (Fed.Cir.1998).

For the first step of the analysis, the Court turns to Colorado's long-arm statute, which establishes personal jurisdiction over defendants who, either in person or by an agent, engage in various activities within the state including the transaction of business and the commission of a tortious act. See Colo.Rev.Stat. § 13-1-124(1)(a) - (b) (1999). Under Colorado law, this...