Plaintiff Cisco Systems, Inc. (“Cisco”) filed two declaratory judgment actions against Sprint seeking to invalidate six Sprint patents and seeking a declaration of non-infringement of seven Sprint patents. Cisco is a corporation organized and existing under the laws of the State of California, with its principal place of business in San Jose, California. Sprint is a limited partnership organized and existing under the laws of the State of Delaware, with its principal place of business in Overland Park, Kansas.
As explained by the district court, the Declaratory Judgment Act requires an actual controversy between the parties before a federal court may exercise jurisdiction. 28 U.S.C. § 2201(a). A plaintiff bringing an action for declaratory judgment must prove, by a preponderance of the evidence, that an actual controversy exists. See Shell Oil Co. v. Amoco Corp., 970 F.2d 885, 887 (Fed. Cir. 1992). An actual controversy exists where “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.” Medlmmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (quoting Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)). An “adverse legal interest” requires a dispute as to a legal right–“for example, an underlying legal cause of action that the declaratory defendant could have brought or threatened to bring.” Arris Grp., Inc. v. British Telecommunications PLC, 639 F.3d 1368, 1374 (Fed. Cir. 2011). This is not a bright-line test. See, e.g., Maryland Cas., 312 U.S. at 273; Sony Elecs., Inc. v. Guardian Media Techs., Ltd., 497 F.3d 1271, 1283 (Fed. Cir. 2007). The Supreme Court has acknowledged that this inquiry will necessarily be fact specific and must be made in consideration of all the relevant circumstances. See Medlmmune, 549 U.S. at 127.
The district court then analyzed whether Cisco had “met its burden to demonstrate that it is an adverse party to Sprint in an actual dispute over a legal cause of action that has immediate, real-world consequences. The question is whether Sprint’s litigation against Cisco’s customers satisfies this test.”
The district court noted there is no dispute that Sprint has asserted infringement against various Cisco customers based on their use of Cisco products. “The Federal Circuit has held, however, that suppliers have no right to bring a declaratory judgment action solely because their customers have been sued for direct infringement. Microsoft Corp. v. Data Tern, Inc., 755 F.3d 899, 904 (Fed. Cir. 2014). Unlike the facts reviewed in Arris and Microsoft, Cisco has not cited to any ‘allegations by the patentee or other record evidence that establish at least a reasonable potential that such a claim could be brought.’ Microsoft, 755 F.3d at 905. In Microsoft, for example, the patentee’s claim charts cited the suppliers’ product literature (indicative of inducement). Id. at 906. In Arris,1 the Court found that the patentee’s ‘extensive focus on Arris’ . . . products in its infringement contentions,’ along with the allegation that such products “were designed specifically for use under the DOCSIS and PacketCable standards for VoIP,’ was sufficient to support the ‘implicit assertion that the supplier has indirectly infringed the patent’ under 35 U.S.C. § 271(c) (contributory infringement). 639 F.3d at 1375, 1378.”
Cisco also argued that its customers’ demands for indemnification satisfy the jurisdictional requirements of the Declaratory Judgment Act. The district court found that, if Cisco “had an obligation to indemnify their customers, [it] would have standing to bring suit.” Microsoft, 755 F.3d at 904 (emphasis added). However, the Microsoft Court specifically rejected the attempt in that case to broaden its precedent by granting standing based on customer requests without regard to the merits of such requests.
Finally, the district court concluded that “Sprint’s aggressive licensing and litigation strategies – even in the face of this court’s invalidating various of Sprint’s patents – the prospect of continued litigation against Cisco customers, without more, is insufficient to pass muster under the current legal regime.”
Accordingly, the district court granted the motion to dismiss.
Cisco Systems, Inc. v. Sprint Communications Co., LP, Case No. 15-431-SLR (D. Del. Feb. 2016)
The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. For more information about this case, contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.