Otter Prods. v. Flygrip, Inc.
| Decision Date | 17 August 2022 |
| Docket Number | Civil Action 21-cv-03298-NYW-KLM |
| Parties | OTTER PRODUCTS, LLC, Plaintiff, v. FLYGRIP, INC., Defendant. |
| Court | U.S. District Court — District of Colorado |
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
This matter is before the Court on Defendant's Motion to Dismiss Plaintiff's Complaint [#16] (the “Motion”). Plaintiff filed a Response [#19] in opposition to the Motion [#16], and Defendant filed a Reply [#34]. The Motion [#16] has been referred to the undersigned pursuant to 28 U.S.C. § 636(b)(1) and D.C.COLO.LCivR 72.1. See [#58]. The Court has reviewed the Motion the Response, the Reply, the entire case file, and the applicable law, and is sufficiently advised in the premises. For the reasons set forth below, the Court respectfully RECOMMENDS that the Motion [#16] be DENIED.
This is an action for declaratory judgment that Plaintiff does not infringe U.S. Patent Nos. 8,844,098 (the “‘098 Patent”), 10,406,671 (the “‘671 Patent”), 10,800,024 (the “‘024 Patent”), or 10,953,535 (the “‘535 Patent”) (collectively, the “Patents-in-Suit”), which have been assigned to Defendant. Compl. [#1] ¶ 1. Plaintiff is a Colorado limited liability company with its principal place of business in Colorado, and at the time the Complaint [#1] was filed, Defendant was a New York corporation with its principal place of business in New York. Id. ¶¶ 2-3.[2] Defendant sells products within Colorado. Id. ¶ 6. Defendant's product line appears to include “handheld device grips.” See id. ¶¶ 15, 18.
In a letter dated October 12, 2021, Defendant's counsel asserted to Plaintiff that Plaintiff is infringing Defendant's patents. Id. ¶ 13. The letter identified Defendant as the assignee of all of the Patents-in-Suit and stated:
Id. ¶¶ 14-15; Pl.'s Ex. 8, Enforcement Letter from Defendant to Plaintiff [#1-8] (the “Enforcement Letter”) at 5.[3] Defendant sent a nearly identical letter to a separate Colorado company on October 12, 2021, asserting infringement of Defendant's patents. Compl. [#1] ¶¶ 17-18. Before sending these two enforcement letters, Defendant engaged in at least forty communications with Colorado entities since 2019. See id. ¶ 24; Pl.'s Ex. C, Summary of Defendant's Communications [#19-1] (the “Summary”); Pl.'s Ex. 13, Notice Letter from Defendant to Plaintiff [#1-13] (the “Notice Letter”); Pl.'s Ex. D, Emails Between Michael Karmatz and David Barnett [#19-2] (the “Emails”).[4]
On October 18, 2021, Defendant sued Amazon, Inc. for patent infringement in the United States District Court for the Western District of Texas (the “Amazon Suit”),[5] alleging that Amazon is infringing the ‘024 Patent in part by selling products made by Plaintiff. Compl. [#1] ¶¶ 19-23. On the same day, Defendant also sued Walmart, Inc. for patent infringement in the Western District of Texas (the “Walmart Suit”),[6] alleging that Walmart is infringing the ‘024 and ‘098 Patents in part by selling products made by Plaintiff. Id. ¶¶ 39-42.
Plaintiff asserts four counts seeking a declaratory judgment that: (1) Plaintiff does not infringe the . fees, costs, expenses, and a declaration that this case is “exceptional” under 35 U.S.C § 285. Id. at 14. After the Complaint [#1] was filed, Defendant offered Plaintiff a covenant against litigation regarding a limited number of Plaintiff's products. See Pl.'s Ex. I, Emails Between Joel Sayres and Robert Katz [#19-7] (the “Offered Covenant”) at 2.
In the present Motion [#16], Defendant seeks dismissal of the Complaint [#1] based on: (1) lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) and 28 U.S.C. § 2201(a), regarding three of the four patents in question; (2) lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2); and (3) failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6). Motion [#16] at 5, 18. Defendant further requests that the Court decline to exercise its discretionary jurisdiction over the Complaint [#1]. Id. at 5. In the event that the Court exercises its discretionary jurisdiction, Defendant requests the Court to stay, dismiss, or transfer this action under the first-to-file rule. Id. The Court considers each of Defendant's arguments in turn.
As Defendant points out, “[t]he Declaratory Judgment Act requires that a exist between the parties before a federal court may exercise jurisdiction.” Motion [#16] at 18 (citing 28 U.S.C. § 2201(a)). The Supreme Court has clarified that the controversy must be “substantial” and “of sufficient immediacy and reality to warrant” the issuance of a declaratory judgment. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (quoting Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)). “The burden is on the party claiming declaratory judgment jurisdiction . . . to establish that an Article III case or controversy exist[s] ....” Danisco U.S. Inc. v. Novozymes A/S, 744 F.3d 1325, 1329 (Fed. Cir. 2014).[7] “[I]n patent cases, the existence of a case or controversy must be evaluated on a claim-by-claim basis.” Streck, Inc. v. Rsch. & Diagnostic Sys., Inc., 665 F.3d 1269, 1281 (Fed. Cir. 2012) (citation omitted).
While “[a]ll of the circumstances are considered in determining the existence of a case or controversy[,]” the “controversy cannot be based on a fear of litigation over future products.” Ameranth, Inc. v. Domino's Pizza, LLC, 792 Fed.Appx. 780, 783 (Fed. Cir. 2019) (citing MedImmune, 549 U.S. at 127); Amana Refrigeration, Inc. v. Quadlux, Inc., 172 F.3d 852, 855 (Fed. Cir. 1999) (citation omitted).
Where a patentee issues communications related to patent infringement, a controversy may be established even where the patentee refrains from explicitly threatening litigation:
The purpose of a declaratory judgment action cannot be defeated simply by the stratagem of a correspondence that avoids the magic words such as ‘litigation' or ‘infringement.' Of course, if ‘a party has actually been charged with infringement of the patent, there is, necessarily, a case or controversy adequate to support [declaratory judgment] jurisdiction.' But it is implausible (especially after MedImmune and several post MedImmune decisions from this court) to expect that a competent lawyer drafting such correspondence for a patent owner would identify specific claims, present claim charts, and explicitly allege infringement.
Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1362 (Fed. Cir. 2009) (alteration in original; internal citations and quotations omitted).
In actions where a case or controversy is present, district courts are divested of subject matter jurisdiction where a patentee offers “a covenant not to sue for patent infringement” before a trial begins. See Dow Jones & Co., Inc. v. Ablaise Ltd., 606 F.3d 1338, 1346 (Fed. Cir. 2010) (citation omitted). However, “whether a covenant not to sue will divest the trial court of jurisdiction depends on what is covered by the covenant.” Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 556 F.3d 1294, 1297 (Fed. Cir. 2009). To extinguish a case or controversy, a covenant must bar litigation against alleged patent infringers for past, current, and future infringement by allegedly infringing products. See Dow Jones, 606 F.3d at 1347 n.2 ( that a covenant did not extinguish a controversy because “[t]he covenant did not preclude future infringement actions should [the plaintiff] recommence sales of the accused infringing device after the dismissal of the action”).
Defendant argues that the Court lacks subject matter jurisdiction over the ‘671, ‘098, and ‘535 Patents because Defendant has not asserted these patents against Plaintiff's products in the Amazon and Walmart Suits, and because Defendant's Enforcement Letter [#1-8] to Plaintiff only explicitly references the ‘024 Patent. Motion [#16] at 19. Defendant further appears to argue that the Court lacks subject matter jurisdiction because Defendant has offered a covenant barring future litigation against Plaintiff for infringement of the ‘671, ‘098, and ‘535 Patents. See Reply [#34] at 14 (citing Offered Covenant [#19-7]).[8] Plaintiff, on the other hand, argues that Defendant's Enforcement Letter [#1-8] to Plaintiff establishes a case or controversy, and thus subject matter jurisdiction over all of the Patents-in-Suit. Response [#19] at 18. The Court agrees with Plaintiff for the following reasons.
The Federal Circuit has made clear that explicit references to “infringement” or “litigation” are not necessary...
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