Nexon Am., Inc. v. Uniloc 2017 LLC

NEXON AMERICA INC. Plaintiff, v. UNILOC 2017 LLC, UNILOC USA, INC., UNILOC LUXEMBOURG, S.A., Defendants.

Civil Action No. 19-1096-CFC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

June 5, 2020

Phillip Rovner, Jonathan Choa, POTTER ANDERSON & CORROON, LLP, Wilmington, Delaware; Allen Wang, David Hayes, Earl Mah, FENWICK & WEST LLP, San Francisco, California; Charlene Morrow, Min Wu, FENWICK & WEST LLP, Mountain View, California; Venessa Park-Thompson, FENWICK & WEST LLP, New York, New York

Counsel for Plaintiff

Brian Farnan, FARNAN LLP, Wilmington, Delaware; James Etheridge, ETHERIDGE LAW GROUP, Southlake, Texas

Counsel for Defendants

MEMORANDUM OPINION

June 5, 2020

Wilmington, Delaware

/s/_________

COLM F. CONNOLLY

UNITED STATES DISTRICT JUDGE

Nexon America, Inc. brought this declaratory judgment action against Uniloc 2017 LLC, Uniloc USA, Inc., and Uniloc Luxembourg, S.A. (collectively, Uniloc). D.I. 7. Nexon America seeks declarations of non-infringement, unpatentability, and invalidity of U.S. Patent Nos. 6,510,466 (the #466 patent), 6,728,766 (the #766 patent), 6,110,228 (the #228 patent), 6,564,229 (the #229 patent), 6,324,578 (the #578 patent), and 7,069,293 (the #293 patent). D.I. 7 at 1. Uniloc has moved to dismiss Nexon America's complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and under the first-filed rule. D.I. 9.

I. BACKGROUND

Nexon America is a Delaware corporation that "develops, among other things, multiplayer online roleplaying games." D.I. 7 ¶¶ 2, 16. Uniloc is a "patent-licensing company," D.I. 7 ¶ 17, and Uniloc 2017 holds all "substantial rights, title, and interest" in the asserted patents, D.I. 10 at 3.

In 2017, Uniloc entities¹ that did not include Uniloc 2017, brought two patent infringement lawsuits against Nexon America in the Eastern District ofTexas. D.I. 10 at 4-5; D.I. 14 at 2. In the first case, Uniloc USA, Inc. v. Nexon America, Inc., No. 2:17-cv-00281 (E.D. Tex.) (the 281 case), Uniloc entities asserted the #578, #293, #466, and #766 patents against Nexon America. D.I. 10 at 5; D.I. 14 at 6. The Uniloc entities voluntarily dismissed the 281 case, however, after the Eastern District of Texas in a separate case, determined that the asserted claims of the #466 and #766 patents were invalid. Uniloc USA, Inc. v. ADP, LLC, 279 F. Supp. 3d 736, 751 (E.D. Tex. 2017); D.I. 10 at 5-6; D.I. 14 at 6. The Federal Circuit later affirmed that invalidity decision. Uniloc USA, Inc. v. ADP, LLC, 772 F. App'x 890, 901, 902 (Fed. Cir. 2019). Other claims of the #466 and #766 patents remain live. D.I. 14 at 13; D.I. 19 at 4.

In the second case, Uniloc USA, Inc. v. Nexon America, Inc., No. 2:17-cv-00276 (E.D. Tex.) (the #276 case), Uniloc entities asserted the #228 and #229 patents against Nexon America. D.I. 10 at 4; D.I. 14 at 2, 6-7. The Eastern District of Texas dismissed the 276 case, however, after the Western District of Washington in a separate case invalidated the #228 and #229 patents, the Federal Circuit affirmed that invalidity decision, and Uniloc did not file a petition for writ of certiorari to the Supreme Court for the invalidity decision before its deadline for filing a petition passed. Uniloc USA Inc. v. Nexon America Inc., No. 2:17-cv-00277, D.I. 17; Uniloc USA, Inc. v. Big Fish Games, Inc., 320 F. Supp. 3d 1178, 1184, 1186 (W.D. Wash. 2018), aff'd, 777 F. App'x 517 (Fed. Cir. 2019); D.I. 19at 4.²

In 2019, Uniloc 2017 sued Nexon Japan and Nexon Korea in the Eastern District of Texas for infringement of the #578 and #293 patents in Uniloc 2017 LLC v. Nexon Co., No. 2:19-cv-0220 (E.D. Tex.) (the 220 case). D.I. 10 at 6; D.I. 14 at 8. In the 220 case, Uniloc 2017 accuses the software licensing and delivery system referred to as the "Nexon Launcher" of infringement. D.I. 10 at 6. The 220 case remains pending.

II. LEGAL STANDARDS

A. Declaratory Judgment Jurisdiction

For a federal court to have subject matter jurisdiction over a declaratory judgment action, an actual case or controversy must exist. U.S. Const. art. III, § 2, cl. 1; 22 U.S.C. § 2201. "[T]here is no bright-line rule for determining whether [a declaratory judgment] action satisfies the case or controversy requirement." Streck, Inc. v. Research & Diagnostic Sys., Inc., 665 F.3d 1269, 1282 (Fed. Cir. 2012).³ Instead, the party seeking a declaratory judgment must show that the factsalleged, "under all the circumstances, show that there is a substantial controversy, between the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007).

A "party seeking a declaratory judgment must establish that jurisdiction existed at the time the claim for declaratory relief was filed and that it has continued since." Streck, 665 F.3d at 1282.

B. The First-Filed Rule

Even when declaratory judgment jurisdiction exists, a district court retains discretion to decline to hear the case. Micron Tech., Inc. v. Mosaid Techs., Inc., 518 F.3d 897, 903 (Fed. Cir. 2008); see also 28 U.S.C. § 2201(a) ("In a case of actual controversy within its jurisdiction . . . any court . . . may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." (emphasis added)). The Federal Circuit "prefer[s]" that district courts decline to hear a declaratory judgment action if a "first-filed case" involves the same subject matter as the declaratory judgmentaction.⁴ Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 937 (Fed. Cir. 1993), abrogated on other grounds by Wilton v. Seven Falls Co., 515 U.S. 277 (1995). Thus, under Federal Circuit law, district courts should generally favor the forum of the first-filed case "unless considerations of judicial and litigant economy and the just and effective disposition of disputes, require otherwise." Id. Such considerations may include "the convenience and availability of witnesses, or absence of jurisdiction over all necessary or desirable parties, or the possibility of consolidation with related litigation, or considerations relating to the real party in interest." Id.

III. DISCUSSION

Uniloc argues that Nexon America's entire complaint should be dismissed for lack of subject matter jurisdiction because no case or controversy exists between the parties. D.I. 10 at 1. Uniloc also contends that "Nexon America's claims involving the [#]578, and [#]293 patents should be dismissed . . . under the first-filed case rule" because Uniloc has already asserted those patents against Nexon Korea and Nexon Japan in the 220 case.⁵ D.I. 10 at 9.

A. The #466 and #766 patents

Uniloc argues that Nexon America's claims involving the #466 and #766 patents should be dismissed for lack of a case or controversy "because, at the time Nexon America filed its declaratory judgment complaint, the claims of the [#]466 and [#]766 patents that had been asserted against Nexon America [in the 281 case] had been held invalid by the district court in an opinion affirmed by the Federal Circuit." D.I. 10 at 9. Nexon America counters that a case or controversy exists because other claims of the #466 and #766 patents remain live and it "is entitled to pursue this action until such a time as either these patents are disposed of in their entirety, or Uniloc covenants not to assert the remaining claims." D.I. 14 at 13. I agree with Nexon America.

The Federal Circuit has held that "[i]f a party has actually been charged with infringement of [a] patent, there is, necessarily, a case or controversy adequate to support jurisdiction at that time." Benitec Australia, Ltd. v. Nucleonics, Inc., 495 F.3d 1340, 1344 (Fed. Cir. 2007) (emphasis removed) (alterations and citation omitted). Moreover, the Federal Circuit has found declaratory judgment jurisdiction where the defendant had "engaged in a course of conduct that show[ed] a preparedness and willingness to enforce its patent rights." SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1383 (Fed. Cir. 2007).

Here, Uniloc has previously charged Nexon America with infringement ofthe #466 and #766 patents and Uniloc's behavior has shown a willingness to further assert its rights in those patents. Uniloc asserted the #466 and #766 patents against Nexon America in the 281 case in 2017. Although Uniloc terminated that case, it has not covenanted not to assert the remaining claims of those patents against Nexon America. Uniloc has also recently sued Nexon America for infringement of other patents in multiple cases. Uniloc has thus demonstrated a willingness to assert its patents against Nexon America through multiple simultaneous lawsuits. Nexon America can reasonably suspect that Uniloc may assert the remaining claims of the #466 and #766 patents against it, and declaratory judgment jurisdiction exists for those claims.

B. The #228 and #229 patents

Because the Western District of Washington invalidated the #228 and #229 patents, the Federal Circuit affirmed that decision, and Uniloc did not file a petition for writ of certiorari to the Supreme Court before its deadline to file a petition passed, I will dismiss Nexon America's claims as to those two patents.

C. The #578 and #293 patents

Uniloc argues that Nexon America's claims based on the #578 and #293 patents "should be dismissed for lack of jurisdiction and under the first-to-file rule." D.I. 10 at 9.

1. Declaratory Judgment Jurisdiction

Uniloc argues first that no case or controversy exists between it and Nexon America because, after dismissing the 281 case in which Uniloc had asserted the #578 and #293 patents, Uniloc re-filed its suit for infringement of the #578 and #293 patents against Nexon Japan and Nexon Korea, not Nexon America, evidencing an intent to pursue those entities only. D.I. 10 at 9. I disagree. Uniloc has already charged Nexon America with infringement of these patents in the 281 case...