We will be discussing a case regarding the requirements for a case or controversy and another case regarding the effect of a stay as to the final judgment rule in our weekly SoCal IP Institute meeting on Monday, October 3, 2011. Brief synopses are presented below.

Powertech Technology, Inc. v. Tessera Inc., Case No. 2010-1489 (Fed. Cir. September 30, 2011) (attached).  Powertech Technology filed a declaratory judgment action of invalidity and noninfringement against Tessera in the Northern District of California.  Other suits between the parties were previously filed in the ITC and in the Eastern District of Texas.  In short, Tessera believed that Powertech, a Taiwanese semiconductor sub-contractor took part in a process that allegedly infringed a Tessera patent.  Powertech was a licensee of the Tessera patent, but its customers, some in the U.S., were not.  Powertech sought a declaratory judgment that its products did not infringe the patent and that the patent was invalid.  Tessera sought dismissal of the declaratory judgment action for lack of subject matter jurisdiction.  Tessera argued that the license between Powertech and Tessera required Powertech to pay a license for “technology” regardless of the validity or invalidity of the patent.  In addition, Tessera argued that Powertech was a licensee and, therefore, its products could not infringe.  Accordingly, under Tessara’s argument, there was no case or controversy to dispute.  The district court agreed and in addition stated sua sponte that the appropriate venue to hear the case, if a controversy existed, would be the then-pending Texas case.

On appeal, the Federal Circuit disagreed with each of the district court’s determinations.  First, the court pointed to MedImmune as standing for the proposition that a current licensee’s dispute regarding the license is a case or controversy sufficient to grant the district court subject matter jurisdiction.  Second, the court analyzed the license between the parties to a sufficient degree to determine that the only non-expired patent remaining under the license was the one for which Powertech sought declaratory judgment.  Even accepting Tessera’s argument that the license covered “technology,” the license would effectively expire upon the invalidity of the at-issue patent.  Finally, as to the appropriateness of the venue, the license itself had a venue-selection clause that stated disputes arising under the license should be resolved in “California.”  Accordingly, the Federal Circuit reversed in all respects.

Spread Spectrum Screening, LLC v. Eastman Kodak Co., Case No. 2011-1019 (Fed. Cir. September 26, 2011 (attached).  Spread Spectrum Screening LLC filed suit in the Northern District of Illinois against Eastman Kodak Company and four of Kodak’s customers alleging infringement of U.S. Patent No. 5,689,623. The district court granted Kodak’s motion to: (1) sever the claims against it from those against the other defendants; (2) stay the action against the Kodak Customers in Illinois; and (3) transfer the case against Kodak to the Western District of New York. The district court primarily granted the motion because Kodak’s clients were only added to the action in order to maintain venue.  S3 appealed from the portion of the order granting Kodak’s motion to stay the case against the Kodak Customers pending the outcome of its action against Kodak in New York.

S3 argued that the Federal Circuit had jurisdiction to hear the case on three bases.  First, S3 argued that the stay was an appealable final order.  Second, S3 argued that jurisdiction was proper under the customer suit exception and the first to file rule.  Finally, S3 argued that the stay was effectively an injunction against S3 from proceeding against the customer defendants.  The Federal Circuit disagreed with all arguments and dismissed the appeal as from a non-final judgment.

All are invited to join us in our discussion during the SoCal IP Institute meeting on Monday, October 3, 2011 at Noon in our Westlake Village office. This activity is approved for 1 hour of MCLE credit. If you will be joining us, please RSVP to Amanda Jones by 9 am Monday morning.