Vertigo Media, Inc. v. Earbuds Inc.

MEMORANDUM ORDER

MARYELLEN NOREIKA UNITED STATES DISTRICT JUDGE

At Wilmington this 14th day of October 2021:

On January 29, 2021, Plaintiffs Vertigo Media, Inc. (“Vertigo”) and Remote Media LLC (“Remote”) (collectively “Plaintiffs”) sued Defendant Earbuds Inc. (“Defendant”) for infringement of claims 21, 26-28, and 31-32 of U.S. Patent No. 9, 549, 024 (“the '024 Patent”), claims 1-4 and 6-7 of U.S. Patent No. 10, 198, 777 (“the '777 Patent”), and claims 14 and 23 of U.S. Patent No. 10, 116, 616 (“the '616 Patent”). (D.I. 1). Plaintiffs amended their complaint on March 31, 2021. (D.I. 10). On April 14, 2021, Defendant moved to dismiss Plaintiffs' amended complaint for lack of standing. (D.I. 12). On April 21, 2021, Plaintiffs filed a Motion for Preliminary Injunction. (D.I. 14). On October 13, 2021, the Court heard oral argument on the motions. After careful review of all materials submitted by the parties, for the reasons set forth below, IT IS HEREBY ORDERED that Plaintiffs' motion (D.I. 14) is DENIED and Defendant's motion (D.I. 12) is GRANTED-IN-PART and DENIED-IN-PART.

I. BACKGROUND

It is difficult to broadcast music you do not own without transgressing United States copyright law. Each party to the present action offers a mobile phone application that provides a

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solution to this problem by permitting users to send music that is simultaneously synchronized with the audience's individual music streaming platform (Spotify, Apple Music, etc.) and played from audience members' devices. (D.I. 15). So, for example, if Boston Red Sox fans across the world were to use the parties' applications to listen to music together, the broadcaster could simply load Neil Diamond's Sweet Caroline on its music streaming platform, and the application would simultaneously trigger Sweet Caroline to be played on each audience member's respective music streaming platform. That way, the broadcaster and the audience are legally and simultaneously listening to the same song. The parties' applications also permit users to interact with each other as they listen to the music.

Defendant's product is a mobile phone application called EarBuds. Plaintiffs allege that EarBuds infringes the '024 Patent, the '616 Patent and the '777 Patent (collectively, “the Asserted Patents”). (D.I. 1, D.I. 10). The Asserted Patents are generally directed to an audio and social media routing and synchronizing system between two or more computers.

On May 20, 2020, Plaintiffs sent a cease and desist letter to Jason Fox, the founder of Earbuds, Inc. (D.I. 16 ¶ 2). After some communications back and forth (including several requests by Defendant for extensions of time to respond and Plaintiff's delivery of claim charts alleging infringement of the Asserted Patents), on July 28, 2020, Defendant responded, denying infringement. (Id. ¶ 12). On July 29, 2020, Plaintiffs sent Defendant's counsel a draft complaint for infringement of the Asserted Patents, as well as a draft non-disclosure agreement (“NDA”) to allow the parties to exchange confidential information. (Id. ¶ 13). By September 23, 2020, both parties had signed copies of the NDA. (Id. ¶ 17). On December 7, 2020, Plaintiffs sent Defendant a settlement demand, but after no response in more than a month, Plaintiffs filed suit against Defendant on January 29, 2021. (Id. ¶¶ 19-21). Plaintiffs filed their First Amended Complaint

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(“Complaint”) on March 31, 2021 (D.I. 10), and Defendant moved to dismiss that Complaint for lack of standing on April 14, 2021 (D.I. 12). One week later, Plaintiffs moved for a preliminary injunction seeking to enjoin the Defendant from offering, advertising, marketing, promoting, or otherwise furnishing its “EARBUDS™” product. (D.I. 14).

II. LEGAL STANDARDS

A. Motion to Dismiss

A motion to dismiss for lack of subject matter jurisdiction due to want of standing is properly brought under Rule 12(b)(1) of the Federal Rules of Civil Procedure. See Ballentine v. United States, 486 F.3d 806, 810 (3d Cir. 2007). A motion to dismiss for lack of statutory standing is brought under Rule 12(b)(6). See Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., 925 F.3d 1225, 1235 (Fed. Cir. 2019). Defendant's motion to dismiss implicates both rules, as Defendant challenges this Court's subject matter jurisdiction over the present action and alleges that Plaintiffs lack statutory standing.

A party bringing a Rule 12(b)(1) motion may either bring a facial challenge, where the moving party asserts that the facts as alleged in the complaint do not establish standing, or a factual challenge, where the moving party disputes the complaint's jurisdictional facts. The Court finds Defendant's 12(b)(1) motion, filed before it filed an answer, to be a facial challenge.^[1] Defendant asserts that “the Amended Complaint fails to provide substantive allegations to plausibly suggest that either Vertigo or Remote has standing to assert any of the three patents in suit, ” not that any particular jurisdictional fact that they allege is false. (D.I. 21 at 6). “In reviewing a facial attack, the court must only consider the allegations of the complaint and documents referenced therein

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and attached thereto, in the light most favorable to the plaintiff.” Gould Electronics Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000). Thus, to decide the 12(b)(1) motion, the Court will take Plaintiffs' jurisdictional allegations as true and correct and view them in the light most favorable to Plaintiffs.

Defendant's allegations that Plaintiffs lack statutory standing was properly brought under Rule 12(b)(6). In ruling on a 12(b)(6) motion, the Court must accept all well-pleaded factual allegations as true and view them in the light most favorable to the non-moving party. See Mayer v. Belichick, 605 F.3d 223, 229 (3d Cir. 2010); see also Phillips v. Cnty. of Allegheny, 515 F.3d 224, 232-33 (3d Cir. 2008). Dismissal under Rule 12(b)(6) is only appropriate if the pleading does not contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). Thus, the Court must determine whether the Complaint contains factual allegations which, taken as true and viewed in the light most favorable to Plaintiffs, suggest that they possess statutory standing.

B. Motion for Preliminary Injunction

Preliminary injunctive relief is an “extraordinary” remedy appropriate only in “limited circumstances.” Kos Pharm., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004); see also Intel Corp. v. ULSI Sys. Tech., Inc., 995 F.2d 1566, 1568 (Fed. Cir. 1993) (“[A] preliminary injunction is a drastic and extraordinary remedy that is not to be routinely granted.”). A preliminary injunction may be granted only if the moving party shows (1) a likelihood of success on the merits, (2) irreparable harm if an injunction is not granted, (3) the balance of equities tips in favor of the moving party and (4) an injunction is in the public interest. Winter v. Nat. Res. Def. Council, Inc.,

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555 U.S. 7, 20 (2008); see also Osorio-Martinez v. Attorney Gen. United States of Am., 893 F.3d 153, 178 (3d Cir. 2018); Altana Pharma AG v. Teva Pharm. USA, Inc., 566 F.3d 999, 1005 (Fed. Cir. 2009). The Court cannot grant a preliminary injunction unless the moving party establishes both a likelihood of success on the merits and the existence of irreparable harm without the injunctive relief. Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1350 (Fed. Cir. 2001).

III. DISCUSSION

A. Defendant's Motion to Dismiss

Defendant asserts that the Complaint fails “to provide any allegations to demonstrate that either plaintiff has sufficient exclusionary rights to bring suit and seek relief as to any Asserted Patent, much less that both Plaintiffs can properly bring suit together with respect to each Asserted Patent.” (D.I. 13, ¶¶ 4-7) (emphasis omitted). The Court agrees in-part. With respect to the '777 and '616 Patents, Plaintiffs have not sufficiently alleged facts that establish Remote's constitutional or statutory standing. Paragraphs 6 and 7 of the Complaint assert that Vertigo is the owner of these patents by virtue of assignment from Remote. Both paragraphs include the Reel/Frame number that records the assignment. The document recording the assignment of both patents reveals that Remote assigned to Vertigo “100% of its right, title, and interest in the inventions and the Patent Applications / Patents.” USPTO Assignment Abstract of Title Database Reel/Frame No. 051340/0882. Because Plaintiffs have not alleged any facts demonstrating that Remote retained or currently possesses any exclusionary rights in the '777 and '666 Patents, the Court finds that Remote has no constitutional or statutory standing with respect to those patents.

As to Defendant's assertion that no plaintiff has constitutional standing with respect to any Asserted Patent because the Complaint does not include sufficient assertions of any of Plaintiff's

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exclusionary rights, however, the Court disagrees. True, the Complaint never affirmatively details the exclusionary rights, if any, that either Plaintiff possesses in any of the Asserted Patents. (See D.I. 10 ¶¶ 4-7). But at this stage of the litigation, the Court is satisfied that, taking the Plaintiffs' allegations as true and viewing the facts in the light most favorable to them, Plaintiffs need not recite specific “magic” words. With respect to the '024 Patent, Plaintiffs allege that Remote is the owner (and cite to a document showing that it owns the entire right,...