Magistrate Judge Burke recently issued a report and recommendation, recommending that a Defendant’s motion to dismiss be granted in part in the basis of lack of subject matter jurisdiction and failure to adequately plead a declaratory judgment claim of indirect non-infringement. The Defendant, patentee Zond, had originally filed a patent infringement action against two TSMC entities in the District of Massachusetts. That case was administratively closed due to pending inter partes review proceedings. Zond later sent an infringement notice letter to TSMC, at which point TSMC commenced this declaratory judgment action against Zond in the District of Delaware. Zond filed a motion to dismiss for lack of subject matter jurisdiction, for failure to state a claim, and pursuant to the Declaratory Judgment Act. TSMC Tech., Inc., et al. v. Zond, LLC, C.A. No. 14-721-LPS-CJB, Report and Recommendation at 1-4 (D. Del. Jan. 8, 2015).
Judge Burke first accepted Zond’s facial challenge to subject matter jurisdiction as to one of the plaintiffs, finding that there was no declaratory judgment jurisdiction as to that particular plaintiff, which was hardly addressed in the complaint. Id. at 6-10. The plaintiff brought its complaint on behalf of three TSMC entities, including one entity (“TTI”) that was not a party to the Massachusetts action and that Zond did not name in its infringmenet notice letter. As Judge Burke explained, “The Complaint contains very few allegations related to TTI. In fact, the only allegation that specifically mentions TTI comes in the paragraph in which Plaintiffs list TTI’s state of incorporation and the location of its place of business. It is also notable that when the Complaint begins to discuss the existence of a legal controversy between certain TSMC entities and Zond, TTI’s name is conspicuously absent from those paragraphs.” Id. at 7. Indeed, Judge Burke found that the “lack of any allegation that Zond has engaged in pre-Complaint communications with TTI, while not dispositive in and of itself, provides strong indication that there is no subject matter jurisdiction here.” Id. at 8.
Next, Judge Burke granted in part the motion to dismiss declaratory judgment claims of non-infringement on 12(b)(6) grounds. As to direct non-infringement, Judge Burke found that it “is clear from the Complaint that Plaintiffs have identified ‘the same accused products and processes that Zond is accusing in the [First TSMC Massachusetts Action,]’ and it is also clear as to the general categories of products and processes that were at issue there. For these reasons, the instant allegations are sufficient to satisfy Form 18’s low bar.” Id. at 10-13. As to indirect non-infringement, which requires a pleading that meets the requirements of Twombly and Iqbal, however, Judge Burke found that the Plaintiffs had not provided factual allegations that would show a lack of any type of indirect infringement. Id. at 13-16. As the Court described the complaint, “Plaintiffs’ allegations of indirect non-infringement are extremely sparse, to the point of almost being non-existent. . . . Indeed, the counts are so sparse that they do not even recite the wording of the elements of contributory or induced infringement (let alone facts that assertedly demonstrate that these elements have been placed at issue or otherwise cannot be satisfied here).” Id. at 14. “In the end, Plaintiffs are seeking a declaration of indirect non-infringement without identifying ‘allegations by the patentee or other record evidence that establish at least a reasonable potential that such a claim could be brought.’” Id. at 15.
Finally, Zond argued that the Court should decline to exercise jurisdiction because the case had been filed contrary to the purposes of the Declaratory Judgment Act. Judge Burke, however, did not recommend dismissal of the case on this basis for the same reasons explained in his previous report and recommendation on a motion to enjoin and motion to transfer. Id. at 16.
Accordingly, Judge Burke recommended dismissal, without prejudice and with leave to amend, of all claims made by TTI for lack of subject matter jurisdiction and dismissal of all indirect non-infringement claims, but recommended denial of the motion in all other respects. Id. at 17.