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Microsoft Corp. v. Datatern, Inc.

United States Court of Appeals, Federal Circuit

May 5, 2014

MICROSOFT CORPORATION, Plaintiff-Appellee,
v.
DATATERN, INC., Defendant-Appellant. SAP AG, AND SAP AMERICA, INC., Plaintiffs-Appellees,
v.
DATATERN, INC., Defendant-Appellant

Page 900

Appeal from the United States District Court for the Southern District of New York in No. 11-CV-2365, Judge Katherine B. Forrest. Appeal from the United States District Court for the Southern District of New York in No. 11-CV-2648, Judge Katherine B. Forrest.

EDWARD R. REINES, Weil Gotshal & Manges LLP, of Redwood Shores, California, argued for all plaintiffs-appellees. With him on the brief were ANDREW L. PERITO and EVAN N. BUDAJ. Of counsel on the brief were DAN GOETTLE, DALE M. HEIST and ALEKSANDER J. GORANIN, Woodcock Washburn, LLP, of Philadelphia, Pennsylvania.

ERIK PAUL BELT, McCarter & English, LLP, of Boston, Massachusetts, argued for defendant-appellant in case no. 2013-1184. With him on the brief was LEE CARL BROMBERG.

LEE CARK BROMBERG, McCarter & English, LLP, of Boston, Massachusetts, argued for defendant-appellant in case no. 2013-1185. With him on the brief was ERIK PAUL BELT.

Before PROST and MOORE, Circuit Judges.[1]

OPINION

Page 901

Moore, Circuit Judge.

Datatern, Inc. (Datatern) appeals from the district court's grant of summary judgment that certain Microsoft Corporation

Page 902

(Microsoft) and SAP AG and SAP America, Inc. (collectively, SAP) products do not infringe asserted claims of U.S. Patent Nos. 5,937,402 and 6,101,502 and challenges the scope of the district court's summary judgment grant to SAP. Datatern also challenges the court's denial of its motion to dismiss Microsoft's and SAP's (collectively, Appellees) declaratory judgment actions for lack of subject matter jurisdiction. We hold that the district court had jurisdiction over both Microsoft's and SAP's declaratory judgment challenges to the '502 patent and over SAP's challenge to the '402 patent, but not over Microsoft's challenge to '402 patent. We therefore affirm-in-part and reverse-in-part the court's denial of Datatern's motion to dismiss for lack of jurisdiction. We also affirm the grant of summary judgment to Microsoft with regard to the '502 patent, and affirm-in-part and reverse-in-part the grant of summary judgment to SAP.

Background

Prior to the cases at issue in this appeal, Datatern sued several Microsoft and SAP customers, alleging infringement of the '402 and/or '502 patents. Datatern sent these customers claim charts alleging infringement based on the customers' use of Microsoft's ADO.NET and SAP's BusinessObjects software. The claim charts extensively refer to Microsoft and SAP functionality. For example, claim charts alleging SAP's customers' infringement of the '402 and '502 patents cite to SAP-provided BusinessObjects user guides and documentation for each element of the representative claims. Similarly, claim charts alleging Microsoft's customers' infringement of the '502 patent cite to Microsoft-provided ADO.NET online documentation for each element of the representative claims. However, the '402 patent claim charts cite only to third-party-provided ( i.e., not Microsoft-provided) ADO.NET documentation for several claim limitations.

Several of the customers that had been sued by Datatern demanded indemnification from Appellees. After receiving the indemnification requests, a Microsoft representative contacted Datatern's CEO to discuss the ongoing customer lawsuits. During these discussions, the representative told Datatern's CEO that Microsoft had no obligation to defend or indemnify its customers, and the CEO told the representative that Datatern was not interested in suing Microsoft. SAP and Datatern did not discuss the customer lawsuits or the '402 and '502 patents prior to SAP's declaratory judgment complaint.

The cases at issue in this appeal were initiated when Appellees filed separate, and later consolidated, noninfringement and invalidity declaratory judgment actions against Datatern. Datatern moved to dismiss the complaints for lack of subject matter jurisdiction and filed conditional counterclaims for infringement of both the '402 and '502 patents. The district court denied Datatern's motion to dismiss. It found that the following facts weighed in favor of jurisdiction over the declaratory judgment actions: (1) the claim charts in the customer lawsuits; (2) the indemnification demands from Appellees' customers; (3) Datatern's conditional counterclaims; (4) Datatern's reference to Appellees' " infringement" in its proposed scheduling order; and (5) Datatern's refusal to grant Appellees a covenant not to sue. Microsoft Corp. v. Datatern, Inc., C.A. No. 11-cv-02365-KBF (S.D.N.Y. Mar. 5, 2012), ECF No. 70.

Following claim construction, Datatern conceded noninfringement based on the court's construction of several claim terms, and the court entered summary judgment. Datatern appeals.

Page 903

Discussion

I. Jurisdiction

Whether the district court had subject matter jurisdiction is a question we review de novo. Prasco, LLC v. Medicis Pharm. Corp., 537 F.3d 1329, 1335 (Fed. Cir. 2008). The threshold question for declaratory judgment jurisdiction is " whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between 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, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007) (citation omitted).

Datatern argues that the court lacked jurisdiction because Datatern never approached Appellees regarding a license, never accused Appellees of infringement, and indicated that it did not intend to sue Microsoft. Datatern asserts that Appellees' only alleged injury--the risk that they will lose customers--is remote and hypothetical. Datatern contends that because Appellees were not obligated to defend or indemnify these customers, they lack a sufficient legal interest to support jurisdiction.

Appellees respond that jurisdiction exists because Datatern's infringement claims against their customers are " based on" the customers' use of Appellees' products and thus impliedly assert indirect infringement against Appellees. They argue that under Arris Group, Inc. v. British Telecommunications PLC, 639 F.3d 1368, 1375 (Fed. Cir. 2011), declaratory judgment jurisdiction exists where a patentee accuses customers of direct infringement based on the use of the supplier's product, because such accusations establish that the patentee could have brought indirect infringement claims against the supplier. Appellees contend that the indemnification demands they have received from their customers support existence of a substantial controversy. They also argue that Datatern's aggressive litigation strategy--it has sued more than 100 entities for infringement of the '402 and '502 patents--supports the existence of a substantial controversy.

We hold that the district court had jurisdiction over Appellees' challenges to the '502 patent and over SAP's challenge to the '402 patent, but not over Microsoft's challenge to the '402 patent. We agree with Appellees that the claim charts in the customer suits strongly support the conclusion that the district court had jurisdiction. In Arris, we recognized that " where a patent holder accuses customers of direct infringement based on the sale or use of a supplier's equipment, the supplier has standing to commence a declaratory judgment action if . . . there is a controversy between the patentee and the supplier as to the supplier's liability for induced or contributory infringement based on the alleged acts of direct infringement by its customers." 639 F.3d at 1375 (emphasis added). We determined that declaratory judgment jurisdiction existed because the patentee's charges of infringement against the declaratory judgment plaintiff's customers carried an " implied assertion that [the declaratory judgment plaintiff] was committing contributory infringement, and [the patentee] repeatedly communicated this implicit accusation directly to [the declaratory judgment plaintiff] during the course of a protracted negotiation process." Id. at 1381. Notably, Arris ...


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