Copytele, Inc. v. E Ink Holdings, Inc., C–13–0378 EMC

962 F.Supp.2d 1130

CopyTele, Inc., Plaintiff,

v.E Ink Holdings, Inc., et al., Defendants.

No. C–13–0378 EMC

United States District Court, N.D. California.

July 9, 2013

Eric B. Fastiff, David Taylor Rudolph, Melissa Ann Gardner, Lieff, Cabraser, Heimann & Bernstein, LLP, 275 Battery Street, 29th Floor, San Francisco, CA 94111–3339, for Plaintiff.

Beatrice B. Nguyen, Crowell & Moring LLP, 275 Battery Street, 23rd Floor, San Francisco, CA 94111, Eric G.J. Kaviar, Gerald Bill Hrycyszyn, John Lewis Strand, Michael N. Rader, Wolf, Greenfield and Sacks, P.C., 600 Atlantic Avenue, Boston, MA 02210, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS FOR LACK OF STANDING

(Docket No. 38)

EDWARD M. CHEN, United States District Judge

Plaintiff CopyTele, Inc. has filed a patent infringement action against Defendants E Ink Holdings, Inc. and E Ink Corporation (collectively, “E Ink”). According to CopyTele, it is the sole owner of all rights, title, and interest in three patents (the '935 patent, the '810 patent, and the '488 patent), see Compl. ¶¶ 8–10, and E Ink has infringed on those patents. Currently pending before the Court is E Ink's motion to dismiss for lack of standing. In essence, E Ink contends that Copytele's lawsuit is premature because (1) it previously assigned all substantial rights to the patents at issue to a third-party exclusive licensee, AU Optronics Corp. (“AUO”); (2) it has not yet secured a judgment (in a related case, CopyTele, Inc. v. AU Optronics Corp., No. C–13–0380 EMC) that the assignment has been rescinded; and (3) even upon rescission CopyTele will have standing only to sue prospectively and not retroactively.

Having considered the parties' briefs, as well as the oral argument of counsel, the Court hereby GRANTS E Ink's motion but without prejudice pending the resolution of CopyTele's case against AUO.

I. FACTUAL & PROCEDURAL BACKGROUND

For purposes of the pending motion, the relevant facts are not so much contained within the complaint in this case as within the complaint in the related action, CopyTele, Inc. v. AU Optronics Corp., No. C–13–0380 EMC. For convenience, the Court shall hereinafter refer to the related case as the conspiracy case.

In the conspiracy case, CopyTele has filed suit against both E Ink and AUO. The relevant allegations are as follows.

CopyTele is a company with “a 30–year history of inventing, developing, and patenting pioneering display technologies.” No. C–13–0380 Compl. ¶ 23. It has patented certain display technologies, including electrophoretic display (“EPD”) technologies. See No. C–13–0380 Compl. ¶ 2. EPDs “are low voltage, high resolution, black-and-white displays that can be easily viewed in a variety of lighting conditions including bright sunlight.” No. C–13–0380 Compl. ¶ 23. They are used, inter alia, in eReaders with brand names such as “Kindle” and “Nook.” No. C–13–0380 Compl. ¶ 23.

“E Ink is the dominant, worldwide manufacturer and supplier of [EPDs], including those used in eReaders sold under the ‘Kindle’ and ‘Nook’ brand names.” No. C–13–0380 Compl. ¶ 28. “AUO is one of the world's largest manufacturers of flat panel LCD displays for televisions, computers, and tablets, including the Apple iPads.” No. C–13–0380 Compl. ¶ 26.

“In September 2010, AUO approached CopyTele about purchasing a subset of CopyTele's EPD Patents for $1.5 million.” No. C–13–0380 Compl. ¶ 29. CopyTele declined and proposed instead that the two companies work together to jointly develop EPD products. Accordingly, in May 2011, the parties entered into a contract, known as the EPD Agreement. See Compl., Ex. A (EPD Agreement).

A primary goal of the EPD Agreement “was for CopyTele and AUO to jointly develop EPD Products that would successfully compete with electrophoretic displays manufactured by E Ink.” No. C–13–0380 Compl. ¶¶ 4, 12. Key terms in the agreement include the following:

?CopyTele granted to AUO—as well as its subsidiaries—“an exclusive, worldwide license under [the EPD Patents] to make, have made, sell, offer for sale, [etc.] the Licensed Products, and also [to] sub-license the Licensed Patents, during the term of the Agreement [ i.e., until the last to expire of the Licensed Patents].” No. C–13–0380 Compl., Ex. A (EPD Agreement §§ 2.2, 5.1).

?AUO was given “the right at its discretion to commence, prosecute, compromise and settle any claim, action or proceeding for infringement (past or future), unfair competition, unauthorized use, misappropriation or violation of any of the [EPD Patents] by any unlicensed third party within the territory where the [EPD Patents] may be enforced.” No. C–13–0380 Compl., Ex. A (EPD Agreement § 3.1). The contract specified that “[i]t is the intent and agreement of the parties that this Agreement transfers to [AUO] the full exclusive rights and all substantial rights in the Licensed Patents such that Licensee shall be able to bring an Enforcement Proceeding in its own name, and that no rights have been maintained by [CopyTele] that would require [CopyTele] to be a named party to any Enforcement Proceeding.” No. C–13–0380 Compl., Ex. A (EPD Agreement § 3.1).

?Each party agreed to an anti-assignment provision as follows. “Except as otherwise specifically provided in [the] Agreement, neither [the] Agreement nor any rights hereunder nor any [EPD Patents] may be assigned or otherwise transferred by any party ... including by way of sale of assets, merger or consolidation, without the prior written consent of the other party, provided that [AUO] may transfer[ ] its rights and obligations under this Agreement to a Subsidiary or affiliate without [Copytele's] consent.” No. C–13–0380 Compl., Ex. A (EPD Agreement § 6.3).

?The parties “will discuss and conclude a joint development agreement for the Subject EPD Products as soon as practicable after the Effective Date hereof and will make their best efforts to jointly develop the Subject EPD Products.” No. C–13–0380 Compl., Ex. A (EPD Agreement § 6.12).

In consideration for the license granted by CopyTele, AUO was to pay “a de minimis initial payment, considerable progress payments, and significant running royalties that were tied to the sales of the [jointly developed] EPD Products.” No. C–13–0380 Compl. ¶ 31. According to CopyTele, “[w]ithout the joint development commitment from AUO, CopyTele was unwilling to license or sell any of its EPD Patents to AUO.” No. C–13–0380 Compl. ¶ 29.

In its complaint, CopyTele maintains that AUO breached its “best efforts” obligations under the EPD Agreement. See No. C–13–0380 Compl. ¶¶ 40–46. Moreover, according to CopyTele, AUO never had any intention of using its “best efforts” to jointly develop EPD products. See No. C13–0380 Compl. ¶ 49. “Instead, AUO used the EPD Agreement as an excuse to obtain a license to the EPD Patents, which AUO intended to pass on to E Ink, in conjunction with and in exchange for the $50 million paid by E Ink to AUO in connection with the sale of SiPix [an AUO subsidiary] to E Ink.” ¹ No. C–13–0380 Compl. ¶ 49. E Ink desired to acquire SiPix not to obtain manufacturing capacity but rather to immunize itself from patent infringement actions (by acquiring SiPix's intellectual property) and avoid price wars. See No. C–13–0380 Compl. ¶¶ 58–59. According to CopyTele, “[s]hortly after the announced sale of SiPix to E Ink, and after receiving written notice form CopyTele of CopyTele's intent to terminate the EPD Agreement due to AUO's repeated failures to adhere to its ‘best efforts” obligations to jointly develop the EPD Products, with no notice to CopyTele, AUO surreptitiously purported to sublicense CopyTele's patented EPD Technologies to E Ink, again breaching AUO's obligations to CopyTele.” No. C–13–0380 Compl. ¶ 7. AUO received no consideration for the sublicense. See No. C–13–0380 Compl. ¶ 12. But see No. C–13–0380 Compl. ¶ 61 (alleging that AUO and E Ink entered into a cross-licensing agreement).

II. DISCUSSION

In its motion, E Ink contends that, as a result of the EPD Agreement, CopyTele does not have constitutional standing to prosecute this patent infringement action.

A. Legal Standard

Standing is a matter of subject matter jurisdiction. SeeBates v. UPS, 511 F.3d 974, 985 (9th Cir.2007) (en banc) (stating that Article III “[s]tanding is a threshold matter central to our subject matter jurisdiction”). A motion to dismiss on the basis of subject matter jurisdiction can be either a facial attack or a factual one. SeeWolfe v. Strankman, 392 F.3d 358, 362 (9th Cir.2004). Here, E Ink makes a facial attack. “In a facial attack, the challenger asserts that the allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction.” Safe Air v. Meyer, 373 F.3d 1035, 1039 (9th Cir.2004). A court may consider not only the allegations in the complaint in a facial attack but also documents attached to the complaint and judicially noticeable facts. SeeVita–Herb Nutriceuticals, Inc. v. Probiohealth, LLC, No. SACV 11–1463 DOC (MLGx), 2013 WL 1182992, at *2–3, 2013 U.S. Dist. LEXIS 40483, at *6 (C.D.Cal. Mar. 20, 2013); Pacific Coast Fed'n of Fishermen's Ass'ns v. United States DOI, No. 1:12–CV–01303–LJO–MJS, 929 F.Supp.2d 1039, 1045, 2013 WL 923407, at *3, 2013 U.S. Dist. LEXIS 32598, at *10 (E.D.Cal. Mar. 8, 2013) (concluding that a facial attack was being made because, “although the parties do reference documents subject to judicial notice and/or attached to the Complaint, Defendant does not offer any additional evidence in support of its jurisdictional arguments”); Bautista–Perez v. Holder, 681 F.Supp.2d 1083, 1086–87 (N.D.Cal.2009) (Henderson, J.) (stating that, in deciding a Rule 12(b)(1) motion, “a court must assume the facts alleged in the complaint to be true unless the allegations are controverted by exhibits attached to the complaint, matters subject to judicial notice, or documents necessarily relied on by the complaint and whose authenticity no party questions”).

B. Standing to Sue...