Sensitron, Inc. v. Wallace

• Decision Date: 02 May 2007
• Docket Number: No. 2:06-CV-63 TS.,2:06-CV-63 TS.
• Parties: SENSITRON, INC., Plaintiff, v. Michael W. WALLACE, an individual, d/b/a Pure Imagination, Defendant.
• Court: U.S. District Court — District of Utah

504 F.Supp.2d 1180

SENSITRON, INC., Plaintiff, v. Michael W. WALLACE, an individual, d/b/a Pure Imagination, Defendant.

No. 2:06-CV-63 TS.

United States District Court, D. Utah, Central Division.

May 2, 2007.

Blaine J. Benard, J. Andrew Sjoblom, Thomas J. Rossa, Holme Roberts & Owen, Salt Lake City, UT, for Plaintiff.

Craig R. Rogers, Alexander C. Johnson, Jr., Hillary A. Brooks, Marger Johnson McCollom PC, Portland, OR, H. Dickson Burton, Krista W. Weber-Powell, Trask Britt PC, Salt Lake City, UT, for Defendant.

MEMORANDUM DECISION AND ORDER GRANTING PLAINTIFF'S MOTION TO DISMISS AND DENYING DEFENDANT'S MOTION TO BIFURCATE

STEWART, District Judge.

This matter is before the Court on Plaintiff's Motion to Dismiss and/or Strike Defendant's Counterclaims¹ and Defendant's Motion to Bifurcate Trial.²

I. INTRODUCTION

Plaintiff in this action, Sensitron, is a Utah corporation that makes sensor technology for various applications. In 1996, Plaintiff hired Defendant, doing business as Pure Imagination, to develop software-related toy products. On December 3, 1996, Defendant entered into a non-disclosure agreement with Plaintiff. Defendant later worked for Plaintiff on air bag deployment and seat-sensing technology ("the seat project"). Plaintiff supplied Defendant, who was located in Oregon, and later Washington State, with financial resources, employee support, and information. On March 3, 1999, Sensitron applied for, and on December 24, 2002, obtained, United States Patent 6,497,430 ("the '430 Patent") for technology developed in connection with the seat project. Also, while the facts are not clear from the memoranda, Sensitron apparently obtained U.S. Patent No. 6,015,163 (the "'163 Patent") in connection with the seat project.

On May 10, 2000, Defendant filed a patent application for technology allegedly developed in connection with the seat project. This application resulted in United States Patent No. 6,609,054 ("the '054 Patent"). On May 10, 2001, Defendant applied for patents worldwide under the Patent Cooperation Treaty ("PCT"). This application was published on November 15, 2001. The patent application and issuance list Defendant as sole inventor. Around August of 2000, the business relationship between Plaintiff and Defendant ended. It appears as though, at that time, the parties unsuccessfully attempted to negotiate ownership and inventorship issues related to work on the seat project. Several proposed agreements were drafted pursuant to these negotiations. On July 17, 2003, Defendant applied for another United States patent, serial no. 10/622,362 ("the '362 Application"). This application also lists Defendant as sole inventor. The parties subsequently failed to resolve the ownership and inventorship issues.

Plaintiff now brings a claim for correction of inventorship of the '054 Patent, as well as three state law claims, which include unjust enrichment,' breach of a nondisclosure agreement, and violation of the Utah Uniform Trade Secrets Act. Defendant counterclaims, seeking correction of inventorship of the '430 and the '163 Patent — more specifically, to name him as sole or joint inventor — and a declaration that these patents are invalid and unenforceable by Plaintiff.

Plaintiff now moves to dismiss or strike Defendant's counterclaims, arguing that there is no justiciable issue involving them. Defendant moves to bifurcate trial and trifurcate discovery. Having reviewed the memoranda, and heard oral argument, the Court rules as follows.

II. DISCUSSION

A. Plaintiff's Motion to Dismiss or Strike Defendant's Counterclaims

Plaintiff moves to dismiss and/or strike Defendant's claims and allegations regarding the validity and unenforceability of the '430 and '163 Patents ("Defendant's Counterclaim").³ Plaintiff argues that Defendant's Counterclaim for declaratory relief as to the invalidity of a patent is not justiciable. Plaintiff cites the Federal Circuit for the proposition that

In the domain of suits for declarations of patent rights and relationships, a two part test for determining justiciability has evolved ....

There must be both (1) an explicit threat or other action by the patentee, which creates a reasonable apprehension on the part of the declaratory plaintiff that it will face an infringement suit, and (2) present activity which could constitute infringement or concrete steps taken with the intent to conduct such activity.⁴

Plaintiff argues that Defendant has not alleged that there is any indication that he faces an infringement suit, or that there is any present activity which could constitute infringement.

Defendant asserts that the Supreme Court — in the recent case of MedImmune, Inc. v. Genentech, Inc.⁵ — has addressed the issue of justiciability in a declaratory judgment action for patent invalidity and unenforceability in the absence of reasonable apprehension of an infringement suit. Defendant argues that all that is required for justiciability in this context is "a substantial controversy between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment."⁶

Defendant further contends that this case fits within these parameters because: his request is brought within ongoing litigation; Plaintiff is not being dragged into unwanted litigation but is "trolling for investor opportunities by bringing time-barred claims against a former co-venturer;" and because Plaintiff has referenced its patents to support its inventorship claim to Defendant's patent. Defendant also argues that justiciability is supported by the "interweaving of the inventorship" of the various patents. Finally, Defendant argues that the rule set forth by Plaintiff applies only in the context of infringement litigation, as opposed to actions to correct inventorship.

Plaintiff replies that the MedImmune decision does not apply because its holding is limited to whether the Declaratory Judgment Act "requires a patent licensee to terminate or be in breach of its license agreement before it can seek a declaratory judgement that the underlying patent is invalid, unenforceable, or not infringed."⁷ Plaintiff argues that, as there is no license involved in this action, the Federal Circuit's test applies.

Significantly, in the recent period following the parties' filings, the Federal Circuit itself has recognized that, its two-part "reasonable apprehension" test was overruled by the Supreme Court's decision in MedImmune.⁸ Contrary to Plaintiffs contention, the application of MedImmune's reasoning has not been exclusively limited to the particular factual scenario of that case — in other words, to cases which only involve patent licenses.⁹ Accordingly based on the current state of the case law, the Court proceeds with the understanding that the standard of justiciability set forth in the MedImmune decision does apply in this case.

The sole requirement for federal court jurisdiction under Article III of the Constitution and the Declaratory Judgment Act is an "actual controversy."¹⁰ An actual controversy may be demonstrated "by showing under `all the circumstances' an actual or imminent injury caused by the defendant that can be redressed by judicial relief and that is of `sufficient immediacy and reality to warrant the issuance of [, in the context of a declaratory judgment action,] a declaratory judgment.'"¹¹

An "actual controversy" requires only that a dispute be "`definite and concrete, touching the legal relations of parties having adverse legal interests'; and that it be `real and substantial' and admi[t] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical set of facts.'"¹²

The traditional elements for such include standing, ripeness, and an injury-in-fact, with the latter being the most determinative.¹³ "In order to demonstrate that a case or controversy exists to meet the Article III standing requirement when a plaintiff is seeking injunctive or declaratory relief, a plaintiff must allege facts from which it appears there is a substantial likelihood that he will suffer injury in the future."¹⁴

The Federal Circuit has characterized the Supreme Court's rejection of its "reasonable apprehension" test as broadening the scope of injuries-in-fact which meet the "actual controversy" requirements of Article III and, therefore, the Declaratory Judgment Act.¹⁵ However, despite this broadened scope, in the context of declaratory judgment actions seeking invalidity or non-infringement of patents, it appears that neither MedImmune, nor the cases that follow it, have given any indication that an injury-in-fact may exist absent (a) any activity by the seeking party which could be identified as potential current or future infringement, or (b) some form of ongoing injury — such as the compulsory payment of royalties under a license — which, if removed, could result in potential current or future infringement.

For example, in MedImmune, the Supreme Court found that an injury existed where a licensee had a choice to either "pay[] royalties under compulsion of an injunction" or face an infringement suit.¹⁶ In Teva Pharm. v. Novartis Pharm. Corp., the Federal Circuit found an injury where plaintiff — after filing an Abbreviated New Drug Application ("ANDA") with the FDA — subsequently faced an infringement suit as to one patent, and an ongoing threat of infringement litigation as to several other patents because "the very act of submitting an ANDA is an act of infringement."¹⁷ Finally, in SanDisk Corp v. STMicroelectronics NV, the Federal Circuit found an injury where, after several pre-suit meetings between the patent-holding parties where infringement analyses were shared and licensing discussed, one party subsequently brought an infringement action relating to one patent, and sought declaratory judgment of noninfringement on several more of the other party's...