Taurus Ip v. Daimlerchrysler Corp.

• Decision Date: 15 October 2007
• Docket Number: No. 07-C-158-C.,07-C-158-C.
• Citation: 519 F.Supp.2d 905
• Parties: TAURUS IP, LLC, Plaintiff, v. DAIMLERCHRYSLER CORPORATION, DaimlerChrysler Company, LLC and Mercedes-Benz USA, Inc., Defendants.<SMALL><SUP>1</SUP></SMALL> Mercedes-Benz USA, Inc and DaimlerChrysler Company, LLC, Third Party Plaintiffs, v. Taurus IP, LLC, Orion IP, LLC, Plutus IP, LLC, Constellation IP, LLC, Plutus IP Wisconsin, LLC and Erich Spangenberg, Third Party Defendants.<SMALL><SUP>2</SUP></SMALL>
• Court: U.S. District Court — Western District of Wisconsin

519 F.Supp.2d 905

TAURUS IP, LLC, Plaintiff, v. DAIMLERCHRYSLER CORPORATION, DaimlerChrysler Company, LLC and Mercedes-Benz USA, Inc., Defendants.¹

Mercedes-Benz USA, Inc and DaimlerChrysler Company, LLC, Third Party Plaintiffs, v. Taurus IP, LLC, Orion IP, LLC, Plutus IP, LLC, Constellation IP, LLC, Plutus IP Wisconsin, LLC and Erich Spangenberg, Third Party Defendants.²

No. 07-C-158-C.

United States District Court, W.D. Wisconsin.

October 15, 2007.

Allen A. Arntsen, Foley & Lardner, Daniel P. Bach, Lawton & Cates, S.C., Madison, WI, Mitchell G. Stockwell, Kilpatrick Stockton, LLP, Atlanta, GA, Robert S. Jones, Reinhart Boerner Van Deuren S.C., Milwaukee, WI, Kajeer Yar Attorney at Law, Tulsa, OK, for Defendants.

OPINION and ORDER

BARBARA B. CRABB, District Judge.

Plaintiff Taurus IP and third party defendants Orion IP, Plutus IP, Plutus IP Wisconsin and Constellation IP are limited liability companies known as nonpracticing entities, or NPEs. See, e.g., Jennifer Kahaulelio Gregory, The Troll Next Door, 6 J. Marshall Rev. Intell. Prop. L. 292 (Winter 2007); Blackberries and Barnyard: Patent Trolls and the Perils of Innovation, 82 Notre Dame L.Rev. 1809, 1810 n. 3 (June 2007). They do not manufacture products, but instead hold licenses to numerous patents, which they license and enforce against alleged infringers. All five companies are operated by third party defendant Erich Spangenberg.

In March 2007, plaintiff Taurus IP brought this lawsuit, contending that defendants DaimlerChrysler Corporation and Mercedes-Benz USA, Inc. have infringed a patent it holds, United States Patent No. 6,141,658 (the '658 patent). In response, defendants brought counterclaims against plaintiff and sued Orion IP, Constellation IP, Plutus IP, Plutus IP Wisconsin and Erich Spangenberg. Among their causes of action, defendants contend that the third party defendants breached the terms of a patent Licensing Agreement entered into by defendant DaimlerChrysler and a predecessor to third party defendant Orion IP (also named Orion IP, LLC) in 2006 and conspired to harm both defendants by hiding the '658 patent during settlement of a previous lawsuit in order to be able to bring the present suit. In addition, defendant DaimlerChrysler contends that the third party defendants fraudulently induced it to enter into a licensing agreement that it believed would protect it from lawsuits such as the present one.

Now before the court are a host of motions filed by third party defendants asking the court to dismiss defendants' amended counterclaims and third party complaints on the grounds that (1) the court lacks personal jurisdiction over the third party defendants other than Taurus IP and Plutus IP Wisconsin and (2) defendants have failed to state a claim for breach of contract, fraud or conspiracy. Defendants dispute the motions and move in the alternative for (1) additional discovery if the court concludes that they have not met their burden; or (2) dismissal of the case if personal jurisdiction is found to be lacking.

Many of defendants' contentions center on the relationship between Spangenberg, plaintiff and the other third party defendants that Spangenberg allegedly controls, which defendants allege are his "alter egos." Because I conclude that defendants have established that plaintiff and third party defendants Orion IP, Constellation IP and Plutus IP are alter egos of Spangenberg and vice versa for purposes of establishing personal jurisdiction and stating a claim under Rule 8, I conclude that defendants have made a prima facie showing that personal jurisdiction exists with respect to third party defendants and have stated a claim for breach of contract. Therefore, third party defendants' motions to dismiss for lack of personal jurisdiction, defendants' motions in the alternative for additional discovery or dismissal under 12(b)(7) and third party defendants' motions to dismiss for breach of contract will be denied. Defendants' civil conspiracy and fraudulent inducement claims will be dismissed for failure to state A claim.

Before turning to the facts, a word regarding procedure is in order. When a party files a motion to dismiss for lack of personal jurisdiction, the court has two options. It may hold a hearing or issue a ruling based on the parties' written submissions. When the court holds an evidentiary hearing to determine jurisdiction, the plaintiff must establish jurisdiction by a preponderance of the evidence. Purdue Research Foundation v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir.2003); Hyatt International Corp. v. Coco, 302 F.3d 707, 713 (7th Cir.2002). However, when the district court rules on a defendant's motion to dismiss in reliance on the submission of written materials, without the benefit of an evidentiary hearing, the plaintiff "need only make out a prima facie case of personal jurisdiction." Id. In evaluating whether the prima facie standard has been satisfied, the plaintiff "is entitled to the resolution in its favor of all disputes concerning relevant facts presented in the record." Purdue Research Foundation, 338 F.3d at 782; RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1275 (7th Cir.1997). Because no hearing has been held on the parties' motions to dismiss for lack of personal jurisdiction, I have construed all facts regarding personal jurisdiction in favor of defendants, the nonmoving parties.

For purposes of ruling on the parties' motions to dismiss defendants' amended counterclaims and third party complaints against them under Fed.R.Civ.P. 12(b)(6), I have accepted as true the well-pleaded facts of the amended counterclaims and third party complaints and have drawn all inferences in favor of defendants.

Finally, without converting a motion to dismiss to one for summary judgment, I may consider not only the complaint but also any documents attached to the complaint and documents attached to the motion to dismiss if such documents are referred to in the complaint and are central to the plaintiff's claim. McCready v. eBay, Inc., 453 F.3d 882, 891 (7th Cir. 2006). In this case, defendants attach to their counterclaims and third party complaints a redacted version of the patent Licensing Agreement that is central to their claims. Third party defendants have submitted copies of the unredacted version of the Licensing Agreement, whose contents are not disputed by defendants. Thus, aside from the counterclaims and third party complaints, I also consider and draw from the unredacted Licensing Agreement.

From defendants' amended counterclaims and third party complaints and the Licensing Agreement entered into by defendant DaimlerChrysler and third party defendant Orion IP, I draw the following facts.

ALLEGATIONS OF FACT

A. Parties

Plaintiff Taurus IP, LLC is a limited liability company organized in Wisconsin. It is wholly owned by third party defendant Plutus IP Wisconsin, which is also its managing member.

Third party defendant Plutus IP Wisconsin, LLC is a limited liability company organized under the laws of Wisconsin, with its principal place of business in Monona, Wisconsin. Plutus IP Wisconsin was formed on April 4, 2007. Third party defendant Spangenberg is Plutus IP Wisconsin's managing member.

Third party defendant Orion IP, LLC is a limited liability company organized under the laws of Texas with its principal place of business in Marshall, Texas. Orion IP is the surviving entity of a merger between a Delaware limited liability company named Orion IP, LLC and a Texas limited liability company named Orion IP Texas, LLC. The Texas limited liability company survived and changed its name to Orion IP, LLC. The former Delaware limited liability company named Orion IP, LLC was a successor limited liability company to Orion IP Holdings, LLC, a limited liability company organized under the laws of Delaware.

Third party defendant Plutus IP, LLC is a limited liability company organized under the laws of Texas. It was formerly named Plutus IP Texas, LLC, which was the surviving entity of a merger between Plutus IP Holdings, LLC, organized under the laws of Delaware, and Plutus IP Texas, organized under the laws of Texas.

Third party defendant Constellation IP, LLC is a limited liability company organized under the laws of Texas with its principal place of business in Marshall, Texas: It was formed on February 6, 2006. Constellation IP is the successor limited liability company to Constellation IP Holdings, LLC, a former Texas limited liability company. Constellation IP owns one patent, which it is in the business of enforcing and licensing.

Third party defendant Erich Spangenberg is a resident of Texas. He serves as the managing member of plaintiff Taurus IP and third party defendants Plutus IP, Plutus IP Wisconsin, Orion IP and Constellation IP.

B. The Orion Companies

On January 6, 2004, a predecessor to third party defendant Orion IP with the same name was organized as a limited liability company under Delaware law. (To avoid confusion, I will call this entity "Orion IP Delaware.") Third party defendant Spangenberg executed an application for registration in California on Orion IP Delaware's behalf. On February 22, 2004, Orion IP Delaware acquired rights to three patents: United States Patent Nos. 5,615,342 (the '342 patent), 5,367,627 (the '627 patent) and 6,141,658 (the '658 patent).

On June 16, 2004, both Caelum IP, LLC and a company named Taurus IP, LLC were formed in Delaware. (The Taurus IP, LLC formed in Delaware is an entity separate from plaintiff Taurus IP, LLC, which was formed in Wisconsin. To avoid confusion, I call the non-plaintiff Taurus IP, LLC "Taurus IP Delaware.") On the same day, Taurus IP Delaware filed for a certificate of authority in Texas, representing that it was member-managed by a company called Plutus IP Holdings, LLC. Third party defendant Spangenberg executed an application for registration in Texas on behalf of Caelum IP.

On August 30, 2004, ...