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Magistrate Judge Burke Finds Lack of Personal, Subject Matter Jurisdiction Over Declaratory Judgment Defendants

In this case, the declaratory judgment plaintiff brought suit against two defendants seeking declarations of non-infringement and invalidity. The defendant and patentee moved to dismiss for lack of personal jurisdiction and subject matter jurisdiction. Fidelity Nat’l Information Services, Inc. v. Plano Encryption Techs., LLC, et al., C.A. No. 15-777-LPS-CJB, Report and Recommendation at 1-6 (D. Del. Apr. 25, 2016).

The first defendant, Plano Encryption Technologies (PET), is a Texas LLC, and the second, Koba Holdings, is a Delaware LLC. Accordingly, it was undisputed that Koba was subject to personal jurisdiction in the District of Delaware. The plaintiff asserted that PET was subject to jurisdiction through an alter ego theory because it had no real separate identify from Koba or that the association between Koba and PET “sound in . . . injustice or inequity.” Id. at 8-11. Judge Burke found, however, that there was “a notable lack of evidence from which the Court could” find alter ego liability. Id. at 10-11. Judge Burke therefore found that, “although the standard for [allowing] jurisdictional discovery is admittedly not high, [plaintiff’s] allegations fall short of the bar.” Id. As part of this analysis, Judge Burke rejected the argument that because Koba was the sole member of PET LLC, it subjected PET to jurisdiction, explaining that “Delaware law states that the presence in Delaware of a person with management authority over and out-of-state distinct jural entity will not itself subject that entity to jurisdiction unless ‘that presence is in connection with the affairs of the entity.’” Id. at 12-13.

Having found that PET should be dismissed for lack of personal jurisdiction, Judge Burke turned to whether there was subject matter jurisdiction over declaratory judgment claims against Koba. On this point, “it is not seriously disputed that there is no basis to find that a case or controversy exists (or could possibly exist) between [plaintiff] and Koba. The record is clear — according to facts asserted in FIS’s Complaint — that: (1) pursuant to the PTO’s records, PET (not Koba) is the assignee of the patents-in-suit; and (2) PET (not Koba) is the entity that has been attempting to license and enforce those patents. (D.I. 1 at iii! 13-14; see also Tr. at 94) As the assignee, PET alone has standing to sue for infringement of the patents; Koba would have no such standing. And so, there could be no actual or imminent injury to FIS caused by Koba that would give the Court declaratory judgment jurisdiction over any ‘rights and other legal relations’ that FIS might have with respect to Koba. It would be futile to argue otherwise. For these reasons, the Court also recommends that the Motion be granted as to Koba, pursuant to Rule 12(b)(l), due to a lack of subject matter jurisdiction.” Id. at 18-19.

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