Opinion
Civil Action 21-cv-02900-NYW-STV
10-27-2022
POPSOCKETS LLC, Plaintiff, v. FLYGRIP, INC., Defendant.
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Scott T. Varholak United States Magistrate Judge
This matter is before the Court on Defendant's Motion to Dismiss or, in the Alternative, to Transfer [#11] (the “Motion”), which has been referred to this Court [#19]. This Court has carefully considered the Motion and related briefing, the entire case file, and the applicable case law, and has determined that neither oral argument nor an evidentiary hearing would materially assist in the disposition of the Motion. For the following reasons, this Court respectfully RECOMMENDS that the Motion be DENIED.
The facts in this background section are drawn from the allegations in PopSockets' Complaint [#1], the documents attached to and incorporated by reference in the Complaint, filings in related cases of which the Court may take judicial notice, and the evidence submitted by the parties in connection with the Motion. To the extent the Motion seeks dismissal based upon a lack of subject matter jurisdiction and/or failure to state a claim, the Court considers only the well-pleaded allegations in the Complaint, which the Court accepts as true for purposes of resolving the Motion, the documents attached to or referenced in the Complaint, and facts of which the Court may take judicial notice. To the extent the Motion seeks dismissal based upon a lack of personal jurisdiction over Defendant, the Court considers the evidence submitted by the parties in connection with the Motion and also accepts the well-pleaded facts in the complaint “as true to the extent they are uncontroverted by the defendant's affidavits.” Wenz v. Memery Crystal, 55 F.3d 1503, 1505 (10th Cir. 1995).
A. Factual Background
This is a declaratory judgment action in which Plaintiff PopSockets, LLC (“PopSockets”) seeks a declaration that it does not infringe certain patents held by Defendant Flygrip, Inc. (“Flygrip”). See generally [#1] PopSockets is a Colorado company with its principal place of business in Boulder, Colorado. [Id. at ¶ 2] Flygrip is a New York corporation with its headquarters in Farmingdale, New York. [Id. at ¶ 3] PopSockets and Flygrip both appear to produce and sell handheld device grips for mobile devices. [##1, ¶ 15; 1-5, ¶¶ 10-13; 1-9; 1-11]
In February 2019, the CEO and founder of PopSockets, David Barnett, reached out to the founder of Flygrip, Michael Karmatz, to inquire about the potential purchase of one of Flygrip's patents. [#39-1 at 2-3] The parties submitted numerous emails spanning the period February 2019 through December 2020 in which representatives of PopSockets and representatives of Flygrip appear, at various times, to have discussed by telephone and email the potential sale or license of one or more Flygrip patents to PopSockets. [See ##32; 36-1; 39-1] The last such communication is an email from a representative of Flygrip to a representative of PopSockets dated December 17, 2020, in which the representative of Flygrip inquired as to whether PopSockets would be interested in “revisit[ing]” one of the prior offers to purchase the patent(s). [#32 at 18] There is no indication in the record that PopSockets ever responded to this inquiry. See [##32; 36-1; 39-1]
The specific patent(s) are not identified in the communications provided to the Court. [See #32, 39-1]
On October 12, 2021, attorney Robert D. Katz of Katz PLLC in Dallas, Texas, sent a letter (the “Enforcement Letter”) on behalf of Flygrip to PopSockets in Boulder, Colorado. [#1, ¶ 13; #1-7 at 2-3] In the Enforcement Letter, Mr. Katz stated that he represents Flygrip “in the enforcement of its intellectual property rights” and indicated that Flygrip is the assignee of the following four United States Patents: (1) Patent No. 8,844,098 (the “'098 Patent”), (2) Patent No. 10,406,671 (the “'671 Patent”), (3) Patent No. 10,800,024 (the “'024 Patent”), and (4) Patent No. 10,953,535 (the “'535 Patent”) (referred to collectively as the “Patents-in-Suit”). [##1, ¶ 14; 1-7 at 3] The Enforcement Letter stated that it had come to Flygrip's attention that PopSockets “is selling (directly or indirectly), advertising, offering for sale, or importing in the United States handheld device grips that infringe one or more of Flygrip's patents, either directly or indirectly through inducement or contributorily.” [##1, ¶ 15; 1-7 at 3] The Enforcement Letter further indicated-“by way of example only”-that PopSockets' “line of PopGrip products, and related products that incorporate the pull-out PopGrip design” may infringe claim 2 of the '024 Patent. [##1, ¶ 15; 1-7 at 3] The Enforcement Letter suggested that PopSockets “may wish to have its patent counsel examine the patents to determine whether [PopSockets] would like to take a non-exclusive license to the patents” and requested that PopSockets “advise [Flygrip] whether it is willing to engage . . . in discussions regarding the amount of renumeration appropriate to remedy PopSockets's use of the patents.” [##1, ¶¶ 15-16; 1-7 at 3]
On the same date, Mr. Katz sent a similar letter on behalf of Flygrip to Otter Products LLC (“Otter Products”) in Fort Collins, Colorado. [#1, ¶ 17; #1-8 at 5] The letter to Otter Products identified the same Patents-in-Suit and indicated that it had come to Flygrip's attention that Otter Products “is selling (directly or indirectly), advertising, offering for sale, or importing into the United States handheld device grips that infringe one or more of Flygrip's patents, either directly or indirectly through inducement or contributorily.” [##1, ¶¶ 17-19; 1-8 at 5] “[B]y way of example only,” Flygrip identified Otter Products' “line of Otterbox with Pop[S]ockets products, and related products, that incorporate the pull-out grip design” and indicated that such products may infringe claim 2 of the '024 Patent. [##1, ¶¶ 17-19; 1-8 at 5]
PopSockets' complaint alleges, upon information and belief, that Otter Products is a Colorado Company with its principal place of business in Fort Collins, Colorado. [#1, ¶ 18]
On October 18, 2021, Flygrip sued Amazon.com, Inc. (“Amazon”) for infringement of the '024 Patent and the '098 Patent in the United States District Court for the Western District of Texas, Waco Division (the “Waco Division”)-Flygrip, Inc. v. Amazon.com, Inc., No. 6:21-cv-01081-ADA (W.D. Tex. 2021) (the “Amazon Action”). [##1, ¶¶ 20-21; 1-5] Flygrip's Complaint in the Amazon Action identified the following as “[e]xamples of products accused of infringement (the ‘Exemplary Products'):” (1) PopSockets' “line of PopGrip (and related) products” (the “PopSockets Products”), (2) the “line of SpinPop products” (the “Quest Products”) from Quest USA Corp. (“Quest”), (3) the “OtterBox Otter+PopSocket line of handheld device cases” (the “OtterBox Products”), and (4) the “line of FlipOut handheld device grips” (the “Nite Ize Products”) from Nite Ize, Inc. (“Nite Ize”). [##1, ¶¶ 22, 31, 36; 1-5, ¶ 14] More specifically, Flygrip alleged that Amazon:
(1) “has directly infringed and continues to directly infringe . . . one or more claims, including at least claim 2 of the '024 Patent . . . because Amazon makes, uses, offers for sale, sells, and/or imports certain products, including . . . at least [the Otterbox Products]” [#1-5, ¶ 18];
(2) “has indirectly infringed and continues to indirectly infringe at least claim 2 of the '024 Patent . . . as to at least the [PopSockets Products] and the [Quest Products]” [##1, ¶ 23; 1-5, ¶ 23];
(3) “has indirectly infringed and continues to indirectly infringe the '024 Patent . . . by selling or offering to sell in the United States, or importing into the United States, the [PopSockets Products] and the Quest Products with knowledge that they are especially designed or adapted to operate in a manner that infringes that patent” and that “the infringing aspects of the Pop[S]ockets Products and the Quest Products can be used only in a manner that infringes the ‘024 Patent and thus have no substantial non-infringing uses” [##1, ¶ 25-29; 1-5, ¶ 24];
(4) “has directly infringed and continues to directly infringe . . . one or more claims, including at least claim 1 of the '098 Patent . . . because Amazon makes, uses, offers for sale, sells, and/or imports certain products, including . . . at least [the Nite Ize Products]” [#1-5, ¶ 30]; and
(5)“has indirectly infringed and continues to indirectly infringe at least claim 1 of the '098 Patent . . . as to at least [the Nite Ize Products]” [id. at ¶ 31].
Flygrip's Complaint in the Amazon Action attached exemplary charts comparing the asserted claims of the '024 Patent to exemplars of the Otterbox Products, the PopSockets Products, and the Quest Products and comparing the asserted claims of the '098 Patent to exemplars of the Nite Ize Products. [##1, ¶¶ 30, 33; 1-5 at ¶¶ 19, 25, 32; 1-9; 1-10]
On October 18, 2021, Flygrip also filed a lawsuit against Walmart Inc. for infringement of the '024 Patent and the '098 Patent in the Waco Division-Flygrip, Inc. v. Walmart, Inc., No. 6:21-cv-01082-ADA (W.D. Tex. 2021) (the “Walmart Action”). [##1, ¶¶ 38-39; 1-6] Flygrip's Complaint in the Walmart Action identifies the following as “[e]xamples of products accused of infringement (the ‘Exemplary Products')”: (1) the [PopSockets Products] (2) the Quest Products, (3) the OtterBox Products, and (4) the “line of Grip'z handheld device grips” (the “Merkury Products”) from Merkury Innovations LLC (“Merkury”). [##1, ¶ 40, 49; 1-6, ¶ 14] More specifically, Flygrip alleged that Walmart:
(1) “has directly infringed and continues to directly infringe . . . one or more claims, including at least claim 2 of the '024 Patent . . . because Walmart makes, uses, offers for sale, sells, and/or imports certain products, including . . . at least the [Otterbox Products]” [##1-6 at ¶ 18];
(2) “has indirectly infringed and continues to indirectly infringe at least claim 2 of the '024 Patent . . . as to at least the [PopSockets Products] and the [Quest Products]” [##1, ¶ 41; 1-6 at ¶ 23];
(3) “has indirectly infringed and continues to indirectly infringe the '024 Patent . . . by selling or offering to sell in the United States, or importing into the United States, the [PopSockets Products] and the Quest Products with knowledge that they are especially designed or adapted to operate in a manner that infringes that patent” and that “the infringing aspects of the [PopSockets Products] and the Quest Products can be used only in a manner that infringes the '024 Patent and thus have no substantial non-infringing uses” [##1, ¶¶ 43-47; 1-6, ¶ 24];
(4) “has directly infringed and continues to directly infringe . . . one or more claims, including at least claim 1 of the '098 Patent . . . because Walmart makes, uses, offers for sale, sells, and/or imports certain products, including . . . at least [the Merkury Products]” [#1-6 at ¶ 30]; and
(5) “has indirectly infringed and continues to indirectly infringe at least claim 1 of the '098 Patent . . . as to at least [the Merkury Products]” [id. at ¶ 31].
Flygrip's Complaint in the Walmart Action attached exemplary charts comparing the asserted claims of the '024 Patent to exemplars of the Otterbox Products, the PopSockets Products, and the Quest Products and comparing the asserted claims of the '098 Patent to exemplars of the Merkury Products. [##1, ¶¶ 48, 50; 1-6, ¶¶ 19, 25, 32; 1-11; 1-12]
B. The Instant Lawsuit
On October 28, 2021, PopSockets initiated the instant lawsuit by filing a Complaint for Declaratory Judgment of Non-Infringement of the Patents-in-Suit (the “Complaint”). [#1] PopSockets seeks a declaration with respect to each of the four Patents-in-Suit that PopSockets “does not directly or indirectly infringe, nor has it directly or indirectly infringed, any claim of the [Patents-in-Suit], either literally or under the doctrine of equivalents.” [Id. at ¶¶ 60, 68, 76, 84]
On December 8, 2021, Otter Products filed a similar declaratory judgment action in this District against Flygrip. See Otter Products LLC v. Flygrip, Inc., No. 21-cv-03298-DDD-KLM (D. Colo. 2021) (the “Otter Products Action”). Otter Products also seeks a declaration with respect to each of the four Patents-in-Suit that Otter Products “does not directly or indirectly infringe, nor has it directly or indirectly infringed, any claim of the [Patents-in-Suit], either literally or under the doctrine of equivalents.” [#26-4, ¶¶ 61, 69, 77, 85; Otter Products Action, #1]
Flygrip filed this Motion to Dismiss (the “Motion”) raising various arguments for why the Complaint should either be dismissed, stayed, or transferred to the Waco Division. [#11] PopSockets filed a response in opposition to the Motion [#26], and Flygrip filed a reply in support of the Motion [#29]. With leave of the Court, PopSockets filed a sur-reply in further opposition of the Motion [#36] and Flygrip filed a supplemental brief in support of its Motion [#39]. The parties subsequently filed notices of supplemental authorities and information regarding a recently decided Federal Circuit opinion, subsequent developments in the Amazon Action and the Walmart Action, and a recommendation issued from the Magistrate Judge in the Otter Products Action. [##43; 45; 46; 48; 50]
The Magistrate Judge recommended that Flygrip's Motion to Dismiss filed in the Otter Products Action, asserting similar arguments as the instant Motion, be denied. [#50-1]
C. Subsequent Developments in the Amazon Action
On April 11, 2022, Flygrip filed an amended complaint in the Amazon Action, adding as a defendant Coghlan Family Enterprises LLC (“CFE”)-a Texas company that is a third-party seller on the Amazon.com website. [Amazon Action, #22, ¶ 3] The amended complaint also removed the Nite Ize Products from the list of exemplary products and abandoned Flygrip's claim for infringement of the '098 Patent. [See generally Amazon Action, #22] The Amended Complaint thus included a single claim for infringement of the '024 Patent and identified “the Pop[S]ockets LLC line of PopGrip (and related) products,” the Quest Products, and the OtterBox Products as examples of allegedly infringing products. [Id.]
The amended complaint also named ATX Overstock LLC-a Texas company that purchases surplus and overstock merchandise from major retailers, including Amazon- as a defendant [Amazon Action, #22, ¶ 4], but Flygrip subsequently dismissed ATX from the case before ATX had entered an appearance [Amazon Action, #42].
Flygrip has since filed a Second Amended Complaint for Patent Infringement in the Amazon Action, which added as an additional defendant Benjamin Tillinghast, a third-party seller on the Amazon.com website with a principal place of business in China Spring, Texas. [Amazon Action, #56]
In response to the Amended Complaint, Amazon filed a motion to transfer venue under 28 U.S.C. § 1404(a) or, alternatively, to stay (the “Amazon Motion”). [Amazon Action, #30] Amazon requested that the Amazon Action be transferred to this District in light of the two declaratory judgment actions brought in this District by manufacturers of the allegedly infringing products-i.e., this action and the Otter Products Action (collectively, the “Colorado Declaratory Judgment Actions”). [Id. at 11-20] In the alternative, Amazon requested that the Amazon Action be stayed until the Colorado Declaratory Judgment Actions are resolved pursuant to the customer suit exception to the first to file rule. [Id. at 20-21]
Amazon also filed a motion to sever and stay the claims against CFE pending resolution of the claims against Amazon. [Amazon Action, #28] In that motion, Amazon argued that the claims against CFE are “peripheral and secondary” to the claims Flygrip brought against Amazon and that CFE likely was added as a defendant solely in an attempt to prevent the Amazon Action from being transferred to the District of Colorado. [Id. at 5-6] The Waco Division court denied Amazon's motion to sever, finding that CFE “is a co-seller engaged in the same activities at the same level of the stream of commerce as Amazon” and that resolution of the claims against Amazon would not dispose of Flygrip's claims against CFE. [#45-1 at 6-9; Amazon Action, #53]
Amazon's Motion referred to the general rule that “[w]here suit is brought against a manufacturer and its customers, the action against the customers should be stayed pending resolution of the case against the manufacturer to promote judicial economy,” without express reference to the first to file rule or the “customer suit exception.” [Amazon Action, #30 at 20] (quoting GreatGigz Sols., LLC v. Costco Wholesale Corp., No. 6-21-CV-00807, 2022 WL 1037114, at *1 (W.D. Tex. Apr. 6, 2022). Because both parties in the instant case refer to this general rule as the “customer suit exception” to the first to file rule, the Court adopts that phrasing for purposes of this Recommendation. See [#11 at 13-15; #26 at 11-13]
On June 28, 2022, the Waco Division court issued an order denying the Amazon Motion. [#45-1; Amazon Action, #53] The court first found that Flygrip's claims against CFE should not be severed from Flygrip's claims against Amazon. See supra note 7. As a result, the court found that the Amazon Action could not be transferred to this District, because this District is not a proper venue for CFE. [#45-1 at 11] The court then determined that the Amazon Action should not be stayed pursuant to the customer-suit exception to the first-to-file rule, because Flygrip's claims against CFE (which did not agree to be bound by the outcome of the Colorado Declaratory Judgment Actions) and Flygrip's claims based upon the Quest Products “are not included in the [Colorado Declaratory Judgment Actions]” and thus “major issues of the case against Amazon will not be resolved in their entirety by the [Colorado Declaratory Judgment Actions].” [Id. at 14-15]
D. Subsequent Developments in the Walmart Action
On April 27, 2022, Walmart filed a Motion to Stay, or in the Alternative, to Transfer Venue in the Walmart Action (the “Walmart Motion”). [Walmart Action, #20] Walmart sought to have the Walmart Action stayed pending resolution of the Colorado Declaratory Judgment Actions pursuant to the customer suit exception to the first to file rule. [Id. at 8-10] In the alternative, Walmart requested that the Walmart Action be transferred to the District of Colorado pursuant to 28 U.S.C. § 1404(a). [Id. at 10-17] On June 29, 2022, the Waco Division court issued an order granting in part and denying in part the Walmart Motion. [#46-1; Walmart Action, #38] The court found that the customer-suit exception applied with regard to Flygrip's claims against Walmart involving the PopSockets Products and Otterbox Products, which are also at issue in the Colorado Declaratory Judgment Actions. [#46-1 at 6-8] Specifically, the court found that: (1) Walmart is a mere reseller of the products at issue; (2) Walmart agreed to be bound by the outcomes in the Colorado Declaratory Judgment Actions; and (3) PopSockets and Otter Products are the only source of the PopSockets and Otterbox Products at issue in the Walmart Action. [Id. at 6-7] The court further found, however, that PopSockets and Otter Products are not the source of the other two exemplary products at issue-the Quest Products and the Merkury Products-and that those products were not at issue in either of the Colorado Declaratory Judgment Actions. [#46-1 at 8] The court thus exercised its discretion to sever the infringement claims based on the PopSockets Products and Otterbox Products (which are at issue in the Colorado Declaratory Judgment Actions) from the infringement claims based on the Quest Products and Merkury Products (which are not). [Id.] The court stayed the Walmart Action as it related to the PopSockets Products and Otterbox Products pending resolution of the Colorado Declaratory Judgment Actions, but did not stay the severed claims based upon the Quest Products and Merkury Products. [Id.] The court denied the Walmart Motion to the extent it sought to transfer the Walmart Action to this District. [Id. at 8-20]
II. ANALYSIS
In the instant Motion, Flygrip raises the following five arguments: (1) the Complaint should be dismissed for lack of personal jurisdiction [#11 at 5-10]; (2) the Court should not exercise discretionary jurisdiction over this declaratory judgment action [id. at 10-12]; (3) the Court should stay, dismiss, or transfer this action under the first-to-file rule [id. at 13-15]; (4) the claims for declaratory judgment as to the '098 Patent (Count I), the '671 Patent (Count II), and the '535 Patent (Count IV) should be dismissed for lack of subject matter jurisdiction [id. at 15-17]; and (5) the Complaint should be dismissed for failure to state a claim [id. at 17-19]. The Court addresses each argument in turn.
A. Personal Jurisdiction
Pursuant to Federal Rule of Civil Procedure 12(b)(2), a party may move to dismiss the claims asserted against them for lack of personal jurisdiction. When a declaratory judgment action “involves only claims of patent noninfringement, ‘[the Court] appl[ies] Federal Circuit law because the jurisdictional issue is intimately involved with the substance of the patent laws.'” Xilinx, Inc. v. Papst Licensing GMBH & Co. KG, 848 F.3d 1346, 1352 (Fed. Cir. 2017) (quoting Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012, 1016 (Fed. Cir. 2009)). Where, as here, the Court resolves a personal jurisdiction question on the basis of the complaint, affidavits, and other written materials, the plaintiff “need only to make a prima facie showing that defendants are subject to personal jurisdiction.” Id. (quoting Avocent Huntsville Corp. v. Aten Int'l Co., 552 F.3d 1324, 1329 (Fed. Cir. 2008)). In the absence of an evidentiary hearing, the Court “accept[s] the uncontroverted allegations in the plaintiff's complaint as true and resolve[s] any factual conflicts in the affidavits in the plaintiff's favor.” Id. (quoting Avocent, 552 F.3d at 1329).
In patent-related cases such as this, “[d]etermining whether jurisdiction exists over an out-of-state defendant involves two inquires: whether a forum state's long-arm statute permits service of process and whether assertion of personal jurisdiction violates due process.” Trimble Inc. v. PerDiemCo LLC, 997 F.3d 1147, 1152 (Fed. Cir. 2021) (quotations omitted). Because “Colorado's long-arm statute . . . confers the maximum jurisdiction permissible consistent with the Due Process Clause . . . the first, statutory, inquiry effectively collapses into the second, constitutional, analysis.” Dudnikov v. Chalk & Vermilion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th Cir. 2008).
“The Fourteenth Amendment's Due Process Clause limits a state court's power to exercise jurisdiction over a defendant.” Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 141 S.Ct. 1017, 1024 (2021). More specifically, “a tribunal's authority depends on the defendant's having such ‘contacts' with the forum State that ‘the maintenance of the suit' is ‘reasonable, in the context of our federal system of government,' and ‘does not offend traditional notions of fair play and substantial justice.'” Id. (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316-17 (1945)). “In giving content to that formulation, the [United States Supreme] Court has long focused on the nature and extent of ‘the defendant's relationship to the forum State.'” Id. (quoting Bristol-Myers Squibb Co. v. Superior Court of Cal., 137 S.Ct. 1773, 1779 (2017)). Based upon these principles, the Supreme Court has “recogniz[ed] two kinds of personal jurisdiction: general (sometimes called all-purpose) jurisdiction and specific (sometimes called case-linked) jurisdiction.” Id. (quoting Goodyear Dunlop Tires Operations, S. A. v. Brown, 564 U.S. 915, 919 (2011)). For purposes of this Motion, PopSockets argues only for the application of specific personal jurisdiction. [#26 at 3-9]
In a footnote, PopSockets contends that “[t]he Complaint sufficiently pleads that the Court has general jurisdiction as well, but [the opposition brief] focuses on specific personal jurisdiction.” [#26 at 4 n.1] This conclusory reference in a footnote is insufficient to meet Plaintiffs' burden of demonstrating that general jurisdiction exists. See OMI Holdings, Inc. v. Royal Ins. Co., 149 F.3d 1086, 1091 (10th Cir. 1998) (“The Plaintiff bears the burden of establishing personal jurisdiction over the defendant.” (quotation omitted)); United States v. Hardman, 297 F.3d 1116, 1131 (10th Cir. 2002) (en banc) (“Arguments raised in a perfunctory manner, such as in a footnote, are waived.”); Gale v. City & Cnty. of Denver, 962 F.3d 1189, 1194 (10th Cir. 2020) (“Failure to raise an issue in the district court generally constitutes waiver.” (quotation omitted)).
“[D]ue process requires only that in order to subject a defendant to a judgment in personam, if he be not present within the territory of the forum, he have certain minimum contacts with it such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” Int'l Shoe, 326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). “The first ‘minimum contacts' prong of the due process inquiry focuses on whether the defendant ‘has purposefully directed his activities at residents of the forum and the litigation results from alleged injuries that arise out of or relate to those activities.'” Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1360 (Fed. Cir. 2001) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)). “The second prong of ‘fair play and substantial justice' gives the defendant an opportunity to ‘present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.'” Id. (quoting Burger King, 471 U.S. at 476-77).
Based on these principles, the Federal Circuit has established “a three-factor test to determine whether asserting [specific personal] jurisdiction over an out-of-state defendant comports with due process,” referred to by the parties as the “Inamed factors.” Id. (citing Akro Corp. v. Luker, 45 F.3d 1541, 1545-46 (Fed. Cir. 1995)); [##11 at 7; 26 at 3-4]. “The three factors are: (1) whether the defendant ‘purposefully directed' its activities at residents of the forum; (2) whether the claim ‘arises out of or relates to' the defendant's activities with the forum; and (3) whether assertion of personal jurisdiction is ‘reasonable and fair.'” Id. (quoting Akro Corp., 45 F.3d at 1545). “The first two factors correspond with the ‘minimum contacts' prong of the International Shoe analysis, and the third factor corresponds with the ‘fair play and substantial justice' prong of the analysis.” Id. (quoting Akro Corp., 45 F.3d at 1545). The plaintiff has the burden of proving the first two factors and, if satisfied, the burden then shifts to the defendant to “‘present a compelling case that the presence of some other considerations would render jurisdiction unreasonable' under the five-factor test articulated by the Supreme Court in Burger King.” Breckenridge Pharm., Inc. v. Metabolite Labs., Inc., 444 F.3d 1356, 1363 (Fed. Cir. 2006) (quoting Burger King, 471 U.S. at 477).
In Burger King, the Supreme Court explained that “[o]nce it has been decided that a defendant purposefully established minimum contacts within the forum State, these contacts may be considered in light of other factors to determine whether the assertion of personal jurisdiction would comport with fair play and substantial justice” and identified the following five factors that the court should consider: “the burden on the defendant, the forum State's interest in adjudicating the dispute, the plaintiff's interest in obtaining convenient and effective relief, the interstate judicial system's interest in obtaining the most efficient resolution of controversies, and the shared interest of the several States in furthering fundamental substantive social policies.” 471 U.S. at 476-77 (quotations omitted).
The Court begins by considering whether Flygrip's contacts with Colorado satisfy the two “minimum contact” factors of the analysis. Flygrip's Enforcement Letters suffice to establish minimum contacts. Flygrip does not appear to dispute that its letters were purposefully directed at Colorado residents, or that this suit arose out of those letters. [See ##29 at 4; 39 at 4-5] Instead, Flygrip argues that the Enforcement Letters are the only relevant contacts for this analysis, and that these alone do not suffice to establish personal jurisdiction. [##11 at 4-6; #29 at 3-5; #39 at 4-5] But, to the extent that Flygrip seeks to challenge its minimum contacts with Colorado through these arguments, Flygrip is incorrect. Federal Circuit precedent dictates that letters such as these sent to the forum are sufficient to satisfy the first two Inamed factors and thereby establish the defendant's minimum contacts with the forum. See, e.g., Jack Henry & Assocs., Inc. v. Plano Encryption Techs. LLC, 910 F.3d 1199, 1204 (Fed. Cir. 2018) (“[T]he sending of a [cease-and-desist] letter that forms the basis for the claim may be sufficient to establish minimum contacts.”); New World Int'l, Inc. v. Ford Glob. Techs., LLC, 859 F.3d 1032, 1037 (Fed. Cir. 2017) (“This court has acknowledged that the defendant purposefully directs his activities at residents of the forum when the defendant sends a cease and desist letter to a potential plaintiff in that particular forum. And a subsequent declaratory judgment action by that potential plaintiff ‘arises out of or relates to' the defendant's activity-namely, the cease and desist letter.”); Silent Drive, Inc. v. Strong Indus., Inc., 326 F.3d 1194, 1202 (Fed. Cir. 2003) (explaining that letters threatening suit for patent infringement “are ‘purposefully directed' at the forum and the declaratory judgment action ‘arises out of' the letters”); Red Wing Shoe, 148 F.3d at 1360 (“[C]ease-and-desist letters alone are often substantially related to the cause of action (thus providing minimum contacts).”).
Here, Flygrip indisputably “purposefully directed” these Enforcement Letters at Colorado residents. And this suit-wherein PopSockets seeks a declaration that its products do not infringe the Patents-in-Suit-certainly arose out of the Enforcement Letters, which accused PopSockets of “infring[ing] one or more of [the Patents-in-Suit]” and offered a path forward to “remedy PopSocket's use of the [Patents-in-Suit].” [#1-7 at 3] Thus, the first two Inamed factors are satisfied.
Having concluded that the first two Inamed factors are satisfied, the Court next considers whether the exercise of personal jurisdiction in this case would be “reasonable and fair” under Inamed factor three. Since PopSockets has satisfied its burden of establishing the first two factors, the burden under factor three shifts to Flygrip to “present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.” Burger King, 471 U.S. at 477. The Federal Circuit has instructed that, in the context of a declaratory action arising out of an infringement letter, one such “consideration” is the policy recognized in Red Wing Shoe-that “[p]rinciples of fair play and substantial justice afford a patentee sufficient latitude to inform others of its patent rights without subjecting itself to jurisdiction in a foreign forum.” 148 F.3d at 1360-61; see also Apple Inc. v. Zipit Wireless, Inc., 30 F.4th 1368, 1377 (Fed. Cir. 2022) (“Under our precedent (as well as that of our sister courts), this policy [behind Red Wing Shoe] must be considered in determining whether the exercise of jurisdiction would be reasonable and fair.” (emphasis added)). Traditionally, the Federal Circuit has held that “[f]or the exercise of personal jurisdiction to comport with fair play and substantial justice, there must be ‘other activities' directed at the forum and related to the cause of action besides the letters threatening an infringement suit.” Avocent, 552 F.3d at 1333 (quoting Silent Drive, 326 F.3d at 1202) (emphasis removed); see also Autogenomics, Inc. v. Oxford Gene Tech. Ltd., 566 F.3d 1012, 1021 (Fed. Cir. 2009) (“We therefore conclude that the district court does not have specific personal jurisdiction over Oxford because Autogenomics has failed to allege sufficient activities ‘relat[ing] to the validity and enforceability of the patent' in addition to the cease-and-desist communications.” (quoting Avocent, 522 F.3d at 1336)); Breckenridge Pharm., 444 F.3d at 1363 (“The district court correctly stated this court's law that personal jurisdiction may not be exercised constitutionally when the defendant's contact with the forum state is limited to cease and desist letters, without more.” (quotation omitted)); Red Wing Shoe, 148 F.3d at 1360 (“[T]his court has stated that, without more, [cease and desist] letters are not sufficient to satisfy the requirements of Due Process in declaratory judgment actions.”).
The Court recognizes that some Federal Circuit caselaw analyzes this “other activities” issue under the “minimum contacts” prong of personal jurisdiction. See, e.g., Inamed, 249 F.3d at 1361 (“In short, beyond the sending of an infringement letter, [o]ther activities are required in order for a patentee to be subject to personal jurisdiction in the forum. We thus consider whether there were ‘other activities' sufficient to meet the ‘minimum contacts' requirement of International Shoe.” (citation and quotation omitted)). However, both the earliest and the most recent Federal Circuit case to discuss this issue at length have analyzed it under the “reasonableness” prong of the analysis. See Red Wing Shoe, 148 F.3d at 1360-61; Apple, Inc. 30 F.4th at 1378-79. That is the analytic approach that the Court follows, but the Court does not fault Flygrip to the extent that it presents this argument with its “minimum contacts” briefing.
In addition to the Enforcement Letters, PopSockets relies on: (1) the sale of Flygrip's products in Colorado; (2) Flygrip's lawsuits filed against national retailers that sell products in Colorado; and (3) Flygrip's communications with PopSockets regarding the license or sale of Flygrip's patents. [##26 at 4-5; 36 at 3-4] In determining the relevance of some “other activity” undertaken by the defendant-patentee in a declaratory judgment suit, the Federal Circuit has held that the “other activity” must “arise[] out of or relate[] to the activities of the defendant patentee in enforcing the patent or patents in suit.” Avocent, 552 F.3d at 1332 (emphasis added).
Under this analysis, the alleged sale of Flygrip's products in the forum is not relevant to this declaratory judgment action. “What the patentee makes, uses, offers to sell, sells, or imports is of no real relevance to the enforcement or defense of a patent, because ‘the federal patent laws do not create any affirmative right to make, use, or sell anything.'” Id. at 1335 (quoting Leatherman Tool Grp. Inc. v. Cooper Indus., Inc., 131 F.3d 1011, 1015 (Fed.Cir.1997)). Thus, “[w]hile . . . undertakings that impose enforcement obligations on a patentee or its licensee reflect the kind of ‘other activities' that support specific personal jurisdiction in a declaratory judgment action, the defendant patentee's own commercialization activity does not.” Id. at 1335.
PopSockets argues that this clear instruction was invalidated by the Federal Circuit's statement that “the Supreme Court's recent decision in Ford has established that a broad set of a defendant's contacts with a forum are relevant to the minimum contacts analysis.” Trimble, 997 F.3d at 1156; [##26 at 5; 36 at 3-4] In Ford, the Supreme Court held that Ford's product sales in the forum state subjected it to personal jurisdiction when one of its products malfunctioned there. 141 S.Ct. at 1027. Because Ford had “systematically served a market in [the forum states] for the very vehicles that the plaintiffs allege malfunctioned and injured them in those States,” the Court determined that these sales created “a strong ‘relationship among the defendant, the forum, and the litigation'- the ‘essential foundation' of specific jurisdiction.” Id. at 1028 (quoting Helicopteros Nacionales de Colombia, S. A. v. Hall, 466 U.S. 408, 414 (1984)). That is, in litigation revolving around the product itself, extensive sales of that very same product may sufficiently connect the defendant to both the forum and the litigation.
The Federal Circuit has long recognized as much. See Avocent, 552 F.3d at 1332 (“In the ordinary patent infringement suit, the claim asserted by the patentee plaintiff is that some act of making, using, offering to sell, selling, or importing products or services by the defendant constitutes an infringement of the presumptively valid patent named in suit. Thus, for purposes of specific jurisdiction, the jurisdictional inquiry is relatively easily discerned from the nature and extent of the commercialization of the accused products or services by the defendant in the forum. In such litigation, the claim both ‘arises out of' and ‘relates to' the defendant's alleged manufacturing, using, or selling of the claimed invention.” (citations omitted)). In contrast, “an action for declaratory judgment of non-infringement, invalidity, and/or unenforceability . . . neither directly arises out of nor relates to the making, using, offering to sell, selling, or importing of arguably infringing products in the forum . . . .” Id. Indeed, in Trimble itself the Federal Circuit did not consider product sales. See 997 F.3d at 1156-57. It instead recognized the contextual differences between a product-liability tort case and a declaratory judgment action, and held that “just as sales of similar vehicles and the presence of dealerships in a forum can support personal jurisdiction in the tort context, so too can nonexclusive patent licenses in this case.” Id. at 1156 (emphases added).
PopSockets next briefly argues that Flygrip's “accus[ation against] multiple Colorado companies of infringing its patents” is an “other way” that Flygrip has availed itself of Colorado beyond the infringement letters. [#26 at 5] PopSockets is presumably referring to Flygrip's lawsuits filed in Texas. These lawsuits were not filed against Colorado companies, but simply against companies that have a presence in Colorado. [See Amazon Action, #1, ¶ 2 (identifying Amazon as a Delaware Corporation headquartered in Washington); Walmart Action, #1, ¶ 2 (identifying Walmart as a Delaware Corporation headquartered in Arkansas)]. In addition, these lawsuits were filed outside of the forum. [##1-5; 1-6] Under Federal Circuit precedent, “enforcement activities taking place outside the forum state do not give rise to personal jurisdiction in the forum . . . .” Radio Sys. Corp. v. Accession, Inc., 638 F.3d 785, 792 (Fed. Cir. 2011) (rejecting an argument based on 9th and 10th Circuit precedent that out-of-state enforcement activities may support personal jurisdiction if they are nevertheless targeted at a forum resident); cf. Apple, Inc., 30 F.4th at 1380 (considering the fact that defendant patentee sued plaintiff in a different forum, but only for the purpose of reviving the relevance of earlier in-forum contacts, not as a separate relevant contact). These out-of-forum lawsuits against non-forum residents do not constitute a relevant enforcement-related contact with Colorado.
Finally, PopSockets cites a number of written records showing almost two-years' worth of communications sent into Colorado by Flygrip regarding the license or sale of the Patents-in-Suit, sent before the Enforcement Letters. [##32; 36 at 3; 36-1; 39-1] Flygrip argues that these communications are not relevant for three reasons: (1) the cited communications involved the sale of Flygrip's patent, not a licensing agreement, and sale discussions do not relate to the enforcement or defense of the patent; (2) the cited communications were not initiated by Flygrip and therefore do not constitute Flygrip “reaching into” Colorado; and (3) the cited communications had terminated before the filing of this action. [#39 at 3-5] The Court addresses each argument in turn.
Flygrip also argues that the evidence offered in PopSockets' sur-reply should not be considered because it is “outside of the pleadings, unsupported by affidavit, and PopSockets has not established the material as competent evidence.” [#39 at 2] However, the Complaint alleges that “Flygrip and/or its principals have also directed their activities into this District by attempting to sell patents to Colorado residents,” [#1, ¶ 6] and the Court may consider “the parties' affidavits and other written materials” in ruling on a Rule 12(b)(2) Motion, Taylor v. Phelan, 912 F.2d 429, 431 (10th Cir. 1990). Flygrip provides no authority to the contrary.
The Court first sees no difference for the purposes of this analysis between a patentee attempting to license or attempting to sell the relevant patents to forum residents. Unlike the sale of the product, focused efforts to sell the patents themselves to the plaintiff does relate to the patentee's ability or obligation to enforce or defend the actual patents. Thus, in Apple, Inc., the Federal Circuit credited the defendant patentee's “multiple communications to Apple in California,” including discussions regarding “the prospect of Apple licensing or purchasing the patents-in-suit.” 30 F.4th at 1376 (emphasis added). Indeed, the court indicated that patent sale negotiations may hold more weight in a personal jurisdiction analysis than attempts to license the patent, “not[ing] that Zipit's communications with Apple arguably went further [than licensing communications], extending over the course of several years and reaching beyond license negotiations to include the sale of its patents.” Id. at 1380.
In any event, the negotiations between Flygrip and PopSockets did contemplate “purchasing or licensing” the Patents-in-Suit. [#32 at 19] Moreover, the parties also discussed equity and license-back arrangements in the event of a sale [id. at 2-7], making this “much more akin to ‘an arms-length negotiation in anticipation of a long-term continuing business relationship,' over which a district court may exercise jurisdiction.” Trimble, 997 F.3d at 1157 (quoting Red Wing Shoe, 148 F.3d at 1361). Thus, the Court concludes that the negotiations between Flygrip and PopSockets pertaining to the Patents-in-Suit fall within the “broad set of [Flygrip's] contacts with [Colorado]” that the Federal Circuit has recently instructed are relevant to a personal jurisdiction analysis. Id. at 1156.
Next, the negotiations did not have to be initiated by Flygrip in order to constitute a relevant contact. Flygrip appears to advocate for a rule that negotiations initiated by the forum resident can never support personal jurisdiction. [#39 at 2-3] However, the reality of business negotiations-where parties frequently respond to offers with counteroffers, and reopen negotiations initiated by the other party-precludes such a rule. This is especially true in the context of a fact-intensive personal jurisdiction analysis, where “Supreme Court precedent . . . has made clear that jurisdictional inquiries cannot rest on such bright-line rules-there are no ‘talismanic jurisdictional formulas.'” Apple, Inc., 30 F.4th at 1378 (quoting Burger King, 471 U.S. at 485). The record in this case supports this analysis. To be sure, PopSockets appears to have initiated the negotiation process. [See #39-1 at 2] But Flygrip made multiple counteroffers over the course of the extended negotiation process, and after an initial round of negotiation failed it was Flygrip that reopened negotiation discussions. [#32 at 2-7, 18-19] The fact that PopSockets sent the first email does not make Flygrip's continued negotiations irrelevant. See Trimble, 997 F.3d at 1155 (“[A] defendant's ‘negotiation efforts, although accomplished through telephone and mail' from outside the forum, ‘can still be considered as activities “purposefully directed” at residents of [the forum].'” (quoting Inamed, 249 F.3d at 1362).
Finally, the amount of time that passed between the final negotiation communication and this declaratory judgment action does not impact the relevance of Flygrip's communications. As the Federal Circuit recently explained, a patentee may “reignite[] the parties' contacts by filing suit for patent infringement” in another forum. Apple, Inc., 30 F.4th at 1380. This is because the patentee may “reasonably forsee[] that [the alleged infringer] would respond in kind by filing a declaratory judgment claim, and that it would do so in its home state . . . given [the patentee's] earlier contacts with the forum state.” Id. Apple, Inc. involved a four-year lapse between the last contact and the filing of the declaratory judgment action. Id. Less than a quarter of that time elapsed in this case. [See #36-1 at 2 (listing Flygrip's final communication (before the Enforcement Letter) on December 17, 2020); #1 (PopSockets' complaint, filed on October 28, 2021)]. While PopSockets is not a party to the Amazon or Walmart Suits, Flygrip's allegations in those suits specifically identify PopSockets' products as “exemplary products” that infringe its patents. [##1-5, ¶ 14; 1-6, ¶ 14] Therefore, to the extent that Flygrip's communications with PopSockets had become “outdated,” the Court finds the litigation initiated by Flygrip in the Western District of Texas revived the relevance of Flygrip's previous communications into Colorado as they relate to personal jurisdiction. See Apple, Inc., 30 F.4th at 1380. Thus, the Court finds that Flygrip's relevant contacts with Colorado with regard to this declaratory judgment action rest on more than just the two Enforcement Letters.
Thus, under a traditional “other activities” analysis, the exercise of personal jurisdiction over Flygrip would not be barred as unreasonable under Inamed factor three. Moreover, as the Federal Circuit has recently clarified, the existence of “other activities” is not dispositive. While the policy in favor of promoting settlement and clarification of rights must be considered, the court has recently stepped back from requiring such “other activities,” and has most recently explained that “there is no general rule that demand letters can never create specific personal jurisdiction.” Id. at 1377 (quoting Trimble Inc., 997 F.3d at 1152). Instead, the court in Apple Inc. explained that “this policy cannot control the inquiry-it must be considered together with the other Burger King factors, consistent with the Supreme Court's ‘directive to “consider a variety of interests” in assessing whether jurisdiction would be fair.'” Id. at 1378 (quoting Jack Henry, 910 F.3d at 1206). Accordingly, the Court considers the Burger King factors.
(1) The burden on the defendant. Flygrip's preferred forum for this case is Waco, Texas. [#11 at 11] Flygrip, a New York company, gives the Court no reason to believe that litigating in Colorado imposes a greater burden than litigating in Texas. See Trimble, 997 F.3d at 1157-58 (holding that there was no undue burden on a small company located in Washington, D.C., to litigate in California instead of its preferred venue of Texas or Iowa). The Court finds that factor 1 counsels in favor of exercising personal jurisdiction in this case.
(2) The forum state's interest in adjudicating the dispute. PopSockets is a Colorado company. [#1, ¶ 2] As such, “[Colorado] has ‘definite and well-defined interests in commerce and scientific development,' and ‘[Colorado] has a substantial interest in protecting its residents from unwarranted claims of patent infringement.'” Trimble, 997 F.3d at 1158 (quoting Xilinx, 848 F.3d at 1356). Flygrip does not dispute this. The Court finds that factor 2 counsels in favor of exercising personal jurisdiction in this case.
(3) The plaintiff's interest in obtaining convenient and effective relief. PopSockets, a Colorado company, “indisputably has an interest in protecting itself from patent infringement by obtaining relief ‘from a nearby federal court' in its home forum.” Xilinx, 848 F.3d at 1355 (quoting Breckenridge Pharm., 444 F.3d at 1367-68). Flygrip does not dispute this. The Court finds that factor 3 counsels in favor of exercising personal jurisdiction in this case.
(4) The interstate judicial system's interest in obtaining the most efficient resolution of controversies. The settlement-promoting policy identified by the Federal Circuit in Red Wing Shoe “‘squarely invokes' the fourth Burger King factor.” Apple, Inc., 30 F.4th at 1380 (quoting Red Wing Shoe, 148 F.3d at 1361). Thus, Flygrip's notice of alleged infringement to PopSockets and its attempts to settle the dispute outside of court weighs in Flygrip's favor. However, as discussed above, there are other relevant communications beyond the Enforcement Letters in this case. In addition, the Red Wing Shoe policy is not the only relevant consideration under this factor. Less than a week after mailing the Enforcement Letters, Flygrip brought the Amazon and Walmart Suits, alleging that these retailers are infringing Flygrip's patents by selling PopSockets' products. [##1-5; 1-6] The benefit gained by allowing Flygrip to pursue out-of-court settlement of this dispute is undercut by Flygrip's immediate legal action against PopSockets' retailers over selling PopSockets' products. The Court also notes that “there is nothing preventing the parties from reaching a settlement while this case is pending in the [District of Colorado].” Trimble, 997 F.3d at 1159. Moreover, the Waco Division has stayed the Walmart Suit as it relates to PopSockets' products, pending the resolution of the present litigation before the Court. [#46-1 at 19] This development supports resolution of the present litigation, which would require the exercise of personal jurisdiction over Flygrip. Accordingly, the Court finds that factor 4 counsels slightly in favor of exercising personal jurisdiction in this case.
While the Amazon Suit has not been stayed, at least one defendant, Amazon, has agreed to be bound by this present litigation. See [##26-3; 45-1 at 13; 46-1 at 7 n.1]
(5) The shared interest of the several states in furthering fundamental substantive social policies. “[T]here does not appear to be any conflict between the interests of [Colorado] and any other state, because the same body of federal patent law would govern the patent [non]infringement claim irrespective of the forum.” Trimble, 997 F.3d at 1159 (quoting Xilinx, 848 F.3d at 1356). Flygrip does not dispute this. The Court finds that factor 5 counsels in favor of exercising personal jurisdiction in this case.
Application of the Burger King factors thus supports the exercise of personal jurisdiction. Because PopSockets has met its burden to establish Flygrip's minimum contacts with Colorado, the burden rests on Flygrip to make “a compelling case that the presence of some other considerations would render jurisdiction unreasonable.” Burger King, 471 U.S. at 477. Flygrip has failed to meet this burden. Therefore, the Court RECOMMENDS that the Motion be DENIED as it relates to personal jurisdiction.
B. Discretionary Declaratory Judgment Jurisdiction
The Supreme Court has made clear that the exercise of jurisdiction over a declaratory judgment action is at the “sound discretion” of district courts:
[T]here is . . . nothing automatic or obligatory about the assumption of jurisdiction by a federal court to hear a declaratory judgment action . . . . By the Declaratory Judgment Act, Congress sought to place a remedial arrow in the district court's quiver; it created an opportunity, rather than a duty, to grant a new form of relief to qualifying litigants. Consistent with the nonobligatory nature of the remedy, a district court is authorized, in the
sound exercise of its discretion, to stay or dismiss an action seeking a declaratory judgment before trial.Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995) (internal citations and quotations omitted). Flygrip primarily argues that this Court should decline to exercise its discretionary jurisdiction on the basis that the Amazon and Walmart Suits filed in the Western District Texas would resolve more issues. [##11 at 11-12; 29 at 7-8]
Flygrip also briefly argues that “Flygrip's acts of enforcing its patent against retailers should not be part of the Court's analysis” on this issue. [#29 at 7] Flygrip is incorrect that the Amazon and Walmart suits should not be part of this analysis. Indeed, Flygrip's entire argument in favor of a discretionary dismissal depends on the existence of those suits. [##11 at 11-12; 29 at 7-8] And Flygrip's sole legal precedent supporting its argument that these suits should not be considered in this analysis, Microchip Technology Inc. v. Chamberlain Group, Inc., concerned a district court's subject matter jurisdiction- not its discretionary jurisdiction. 441 F.3d 936, 943 (Fed. Cir. 2006) (holding that “an economic interest alone . . . cannot form the basis of an ‘actual controversy' under the Declaratory Judgment Act”). In any event, the proposition that Flygrip cites MicrochipTech. for-that an economic interest alone with no underlying legal cause of action or other “legal risk” cannot create an “actual controversy” under the Declaratory Judgment Act-was disapproved of by the Supreme Court in MedImmune, Inc. v. Genetech, Inc., 549 U.S. 118, 132 n.11 (2007) (“The reasonable-apprehension-of-suit test . . . conflicts with [multiple Supreme Court precedents].”).
“[T]he ‘question whether to accept or decline jurisdiction in an action for a declaration of patent rights in view of a later-filed suit for patent infringement impacts [the Federal Circuit's] mandate to promote national uniformity in patent practice.'” Commc'ns Test Design, Inc. v. Contec, LLC, 952 F.3d 1356, 1362 (Fed. Cir. 2020) (quoting Elecs. for Imaging, Inc. v. Coyle, 394 F.3d 1341, 1345 (Fed. Cir. 2005)). “Because [this] is an issue that falls within [the Federal Circuit's] exclusive subject matter jurisdiction, ‘[the Federal Circuit does] not defer to the procedural rules of other circuits.'” Id. (quoting Serco Servs. Co., L.P. v. Kelley Co., Inc., 51 F.3d 1037, 1038 (Fed. Cir. 1995)).
The Federal Circuit has explained that “as long as a district court ‘acts in accordance with the purposes of the Declaratory Judgment Act and the principles of sound judicial administration, [it] has broad discretion to refuse to entertain a declaratory judgment action.'” Mitek Sys., Inc. v. United Servs. Auto. Ass'n, 34 F.4th 1334, 1347 (Fed. Cir. 2022) (quoting EMC Corp. v. Norand Corp., 89 F.3d 807, 813-14 (Fed. Cir. 1996)). But, “[t]here must be well-founded reasons for declining to entertain a declaratory judgment action.” Id. (quoting Capo, Inc. v. Dioptics Medical Products, 387 F.3d 1352, 1355 (Fed. Cir. 2004)).
Both parties apply the Tenth Circuit's five-factor test for discretionary dismissal of declaratory judgment actions, as laid out in St. Paul Fire & Marine Ins. Co. v. Runyon, 53 F.3d 1167, 1169 (10th Cir. 1995). [##11 at 11-12; 26 at 10] While the Court acknowledges that Federal Circuit precedent applies to this issue, it will proceed under the St. Paul factors, as these established factors may provide the types of “well-founded reasons” required by the Federal Circuit to sustain discretionary dismissal. These factors are:
[1] whether a declaratory action would settle the controversy; [2] whether it would serve a useful purpose in clarifying the legal relations at issue; [3] whether the declaratory remedy is being used merely for the purpose of “procedural fencing” or “to provide an arena for a race to res judicata”; [4] whether use of a declaratory action would increase friction between our federal and state courts and improperly encroach upon state jurisdiction;
and [5] whether there is an alternative remedy which is better or more effective.St. Paul Fire, 53 F.3d at 1169 (quoting State Farm Fire & Cas. Co. v. Mhoon, 31 F.3d 979, 983 (10th Cir. 1994)).
The first two factors-whether the declaratory action would settle the controversy and serve a useful purpose in clarifying the legal relations at issue-may be considered together. See Mid-Continent Cas. Co. v. Vill. at Deer Creek Homeowners Ass'n, Inc., 685 F.3d 977, 982 (10th Cir. 2012) (affirming a district court that considered the first two St. Paul Fire factors together). Flygrip argues that, because the Western District Suits involve products from other manufacturers besides PopSockets, this declaratory judgment action “would not settle the full scope of the controversies” in those suits. [#11 at 12] PopSockets responds that the correct test “is whether a declaratory action would settle the controversy in this case, not in the declaratory defendant's other cases or potential cases.” [#26 at 10 (emphasis in original)] (citing Owners Ins. Co. v. Keeton, 20-cv-02950-KLM, 2021 WL 5998526, at *5 (D. Colo. Dec. 20, 2021)).
In Keeton, the court did not address the effects of parallel litigation as PopSockets suggests. Rather, the court stated that “the absence of underlying litigation” did not weigh against exercising discretionary jurisdiction. See Keeton, 2021 WL 5998526, at *5 (emphasis added). As Flygrip points out, the Tenth Circuit has expressed disapproval of declaratory judgments that settle controversies in a “piecemeal approach.” See United States v. City of Las Cruces, 289 F.3d 1170, 1187 (10th Cir. 2002) (noting the “desirability of avoiding piecemeal adjudication”) (citation omitted). However, in City of Las Cruces, the Tenth Circuit considered a controversy over water rights with “thousands of water users” that could have asserted legal claims. Id. The present case is distinct in the limited number of manufacturers with interests in the relevant actions. [See #11 at 11-12 (identifying five other manufacturers besides PopSockets involved in the Waco Division litigation-one of which has also brought a declaratory judgment action in this District (Otterbox), one of which is no longer identified in the Walmart or Amazon Suits after Flygrip's amended complaint (Nite Ize), and one of which has never been identified in the Walmart or Amazon Suits (Bytech))]. Therefore, while the present case may not resolve every controversy in the Amazon and Walmart Suits, it would resolve a substantial portion of the controversies in those suits. The Court also notes that the relevant claims in the Walmart Suit have been severed and stayed pending the outcome of the Colorado Declaratory Judgment Actions, and that Amazon has agreed to be bound by the outcome of the Colorado Declaratory Judgment Actions. [##26-3; 45-1 at 13; 46-1 at 7 n.1, 19]
And although this declaratory judgment action would not settle all of the disputes in the Amazon and Walmart suits, neither does it seem that the Amazon and Walmart Suits would settle the full scope of the dispute in this declaratory judgment action. Flygrip itself represents to the Court that “in the [Amazon and Walmart Suits], Flygrip did not assert [either the ‘671 patent, the ‘098 patent, or the ‘535 patent] in connection with any of PopSockets' products.” [#11 at 17] However, as discussed below, there is a proper case or controversy between the parties regarding these patents that is encompassed by this declaratory judgment action. Regardless of the outcomes in the Amazon and Walmart Suits, Flygrip could continue sending “threatening letters” and pursuing an “aggressive litigation strategy” against PopSockets and its customers relating to PopSockets' products. Micron Tech., Inc. v. Mosaid Techs., Inc., 518 F.3d 897, 901 (Fed. Cir. 2008). “The Declaratory Judgment Act exists precisely for situations such as this.” Id. at 902. Accordingly, the Court concludes that these first two factors are neutral.
The Court next considers whether this declaratory judgment action is being used merely “for the purpose of procedural fencing or to provide an arena for a race to res judicata.” St. Paul Fire, 53 F.3d at 1169 (quotation omitted). Flygrip argues that, in light of the more-inclusive Amazon and Walmart Suits, PopSockets “appears to be using this declaratory judgment action as a race to res judicata as to the single issue of infringement involving its products.” [#11 at 12] PopSockets counters that it is “simply trying to resolve once and for all whether its products infringe Flygrip's patents in a venue with a logical connection to the dispute.” [#26 at 10] The Court finds PopSockets' explanation to be logical. See Mid-Continent, 685 F.3d at 984-85 (affirming a district court's conclusion that adequate explanations for alleged instances of procedural fencing precluded the third St. Paul Fire factor from favoring any party). PopSockets filed this action in its home district, and the timing of PopSockets' filing does not suggest an attempt to engage in procedural fencing. Flygrip sent the Enforcement Letters on October 12, 2021, and filed the Amazon and Walmart suits less than a week later. [##1-5; 1-6; 1-7] PopSockets filed this declaratory judgment action on October 28, 2021-less than a month after receiving the Enforcement Letter. [#1]; cf. St. Paul Fire, 53 F.3d at 1170 (explaining that procedural fencing was a reasonable conclusion when the plaintiff waited three years to seek a declaration, filing a declaratory judgment action one day before the date that defendant had promised to file his state court contract action against plaintiff). Accordingly, the Court finds that this factor does not weigh against the exercise of discretionary jurisdiction.
Next, the Court considers whether the exercise of jurisdiction would increase friction between the federal and state courts, or otherwise encroach on state jurisdiction. St. Paul Fire, 53 F.3d at 1169. No state court is involved with this dispute, and the dispute revolves around federal patent law. Since this case would not increase friction between the federal and state courts or encroach on state court jurisdiction, the Court finds that this factor weighs in favor of exercising discretionary jurisdiction.
Finally, the Court considers whether there is a better or more effective alternative remedy. Id. Flygrip briefly contends that, as a better alternative remedy, PopSockets can simply intervene in the Amazon and Walmart Suits. [#11 at 12] A determination that intervention in another suit provides sufficient cause to dismiss a declaratory judgment action requires:
[an] analysis of various issues, such as (but not necessarily limited to): (1) whether [PopSockets] could intervene in such actions and under what circumstances, (2) whether intervention would provide [PopSockets] adequate relief from the harms the Declaratory Judgment Act recognizes as a basis for such relief, (3) the scope of what would have to be adjudicated in [PopSockets'] suit for a declaration of noninfringement on behalf of [PopSockets] and all of its customers and whether that scope could properly be limited to address unwieldiness, and (4) whether ultimately the intervention route is more effective or efficient than the declaratory-judgment route.Mitek Sys., 34 F.4th at 1347-48. Flygrip's one-sentence assertion is insufficient to provide a “well-founded reason” for a discretionary dismissal. Without more, the Court is unable to find that intervention in the Walmart and Amazon Suits is a better, or even feasible, alternative remedy. Thus, the Court does not find that there is a better or more effective alternative remedy, and weighs this factor in favor of the exercise of discretionary jurisdiction.
After considering the factors relied on by the parties, the Court determines that none provides a well-founded reason for a discretionary dismissal of PopSocket's declaratory judgment action. On balance, the St. Paul factors counsel in favor of retaining jurisdiction. Accordingly, the Court finds that the exercise of discretionary jurisdiction is warranted, and RECOMMENDS that the Motion be DENIED as it relates to discretionary jurisdiction.
C. First-to-File Rule
Flygrip next argues that this action should be stayed, dismissed, or transferred under the “first-to-file rule.” [##11 at 13-15; 29 at 8-10] Under the first-to-file rule, “[w]hen two actions that sufficiently overlap are filed in different federal district courts, one for infringement and the other for declaratory relief, the declaration judgment action, if filed later, generally is to be stayed, dismissed, or transferred to the forum of the infringement action.” Futurewei Techs., Inc. v. Acacia Research Corp., 737 F.3d 704, 708 (Fed. Cir. 2013) (citing Merial Ltd. v. Cipla Ltd., 681 F.3d 1283, 1299 (Fed. Cir. 2012). This rule “is not absolute; exceptions may be made if justified by ‘considerations of judicial and litigant economy, and the just and effective disposition of disputes.'” Id. (quoting Elecs. for Imaging, 394 F.3d at 1347).
One such exception is the “customer-suit exception.” Under this exception to the first-to-file rule, “[w]hen a patent owner files an infringement suit against a manufacturer's customer and the manufacturer then files an action of noninfringement or patent invalidity, the suit by the manufacturer generally take[s] precedence.” In re Nintendo, 756 F.3d 1363, 1365 (Fed. Cir. 2014). Put differently, “[t]he ‘customer-suit exception' is an exception to the first-to-file rule which favors the litigation of the subsequent case where the first suit filed is a direct infringement case against a customer who is a reseller of the accused goods and the second suit is a declaratory action brought by the manufacturer of the accused goods.” Two Moms & a Toy, LLC v. Int'l Playthings, LLC, No. 10-cv-02271-PAB-BNB, 2011 WL 5593178, at *4 (D. Colo. Nov. 17, 2011) (citation omitted). The justification for this exception is that, “because the manufacturer is the true defendant, it is presumed to have a ‘greater interest in defending its actions against charges of patent infringement.'” Id. (quoting Kahn v. General Motors Corp., 889 F.2d 1078, 1081 (Fed.Cir.1989)). Courts have looked at whether the customer is merely a reseller of the accused products, whether the customer has agreed to be bound by the outcome of the declaratory judgment action, and whether the manufacturer is the only source of the infringing products. See Pragmatus Telecom, LLC v. Advanced Store Co., Inc., No. 12-088-RGA, 2012 WL 2803695, at *3 (D. Del. 2012) (citing Tegic Commc'ns Corp. v. Bd. of Regents, 458 F.3d 1335, 1343 (Fed. Cir. 2006)); [##45-1 at 13-15; 46-1 at 6-8 (the Waco Division court applying these three factors in the Amazon and Walmart Suits)].
In this case, Flygrip does not dispute that Amazon and Walmart are anything more than resellers. This weighs in favor of applying the customer-suit exception. Tegic, 458 F.3d at 1343; Teleconference Sys. v. Proctor & Gamble Pharm., Inc., 676 F.Supp.2d 321, 327 (D. Del. 2009). And both Amazon and Walmart have agreed to be bound by the Colorado Declaratory Judgment Actions. [See ##26-3; 45-1 at 13-15; 46-1 at 6-8 & n.1] Flygrip argues that these agreements are inconsequential, as Flygrip's claims in those actions only allege indirect infringement of PopSockets' products. [#29 at 9] First, the Court notes that Flygrip has alleged direct infringement, and that the direct infringement claims do not appear to be limited to non-PopSockets products. [##1-5, ¶ 18-19; 1-6, ¶ 18-19 (alleging direct infringement for the sale of “certain products, including within this District, at least the [Otterbox Products],” and noting that the referenced claim charts are “illustrative . . . and should not be construed as limiting”]. Moreover, Flygrip's indirect infringement claims against Walmart and Amazon (as they relate to PopSockets products) appear to be premised on PopSockets' direct infringement of Flygrip's patents. [##1-5, ¶¶ 14, 24; 1-6, ¶¶ 14, 24 (citing PopSockets' products as “[e]xamples of products accused of infringement,” and alleging that PopSockets' products “are especially designed or adapted to operate in a manner that infringes [the ‘024 Patent],” “are not suitable for substantial non-infringing use,” and “can be used only in a manner that infringes the ‘024 Patent”)]; see also Dynacore Holdings Corp. v. U.S. Philips Corp., 363 F.3d 1263, 1272 (Fed. Cir. 2004) (“Indirect infringement . . . can only arise in the presence of direct infringement, though the direct infringer is typically someone other than the defendant accused of indirect infringement.”). Thus, whether PopSockets' products infringe Flygrip's patents is a “major issue” in the Amazon and Walmart Suits. Spread Spectrum Screening LLC v. Eastman Kodak Co., 657 F.3d 1349, 1358 (Fed. Cir. 2011) (“[T]he manufacturer's [later-filed] case need only have the potential to resolve the ‘major issues' concerning the claims against the customer-not every issue-in order to justify a stay of the customer suits.” (quoting Katz, 909 F.2d at 1464)). Accordingly, the Court finds that the agreements by Amazon and Walmart to be bound by the outcome of this declaratory judgment action are relevant to this analysis and weigh in favor of applying the customer-suit exception.
Finally, the Court considers whether the manufacturer is the only source of the infringing products. To begin, Flygrip is correct that the relevant inquiry under this factor is whether the manufacturer (here, PopSockets) is the only source of products “in the ‘customer' litigation” (here, the Walmart and Amazon Suits). [#29 at 8]; see Katz v. Siegler, 909 F.2d 1459, 1463 (Fed. Cir. 1990) (in evaluating the customer-suit exception the “primary question is whether the issues and parties are such that the disposition of one case would be dispositive of the other”); Tegic, 458 F.3d at 1343 (declining to apply the customer-suit exception in part because the manufacturer who brought the later-filed declaratory action was “not the only source of the [products] alleged to infringe” in the underlying customer suit). And Flygrip is also correct that the Walmart and Amazon Suits involve products sourced by manufacturers other than PopSockets and Otterbox, the two plaintiff-manufacturers in the Colorado Declaratory Judgment Actions. However, subsequent developments add complexity to this consideration.
The Waco Division court has considered the customer-suit exception as it applies to both the Walmart Suit and the Amazon Suit. [#45-1 at 12-15; 46-1 at 6-8] In regard to the Walmart Suit, the court determined that the customer-suit exception applied to the claims relating to PopSockets and Otterbox products. [#46-1 at 6-8] It therefore severed and stayed those claims pending resolution of the Colorado Declaratory Judgment Actions, while allowing the claims relating to the Quest Products and the Merkury Products to proceed. [Id. at 8] So, in the Walmart Suit, PopSockets and Otterbox are the only manufacturers of the products for the portion of the suit that is stayed pending the resolution of the Colorado Declaratory Judgment Action. This weighs in favor of applying the customer-suit exception. However, the Waco Division court declined to apply the customer-suit exception to any part of the Amazon Suit, based in part on the fact that Amazon's co-defendant in that suit did not agree to be bound by the Colorado Declaratory Judgment Actions. [##45-1 at 12-15; 46-1 at 7 n.1] So, the Amazon Suit is proceeding as a whole against both PopSockets and Otterbox, as well as other manufacturers with no declaratory judgment actions pending in this District. This weighs against applying the customer-suit exception.
Considering all of the circumstances surrounding this litigation, the Court finds that the customer-suit exception applies, and that this case should not be stayed, dismissed, or transferred in light of the first-filed Amazon and Walmart Suits. Two of the factors weigh in favor of proceeding with PopSockets' declaratory judgment action, and the third factor is unclear considering the conflicting outcomes in the Amazon and Walmart Suits. The Waco Division court explicitly applied the customer-suit exception to stay the relevant claims in the Walmart Suit pending resolution of this declaratory judgment action. [#46-1] Staying this action in deference to the Amazon Suit, in which PopSockets is not a party and which would not necessarily resolve the issues in this declaratory judgment action, would not only delay the adjudication of this action but also of the stayed claims in the Walmart Action. To be sure, one proceeding that resolves all issues in all proceedings is preferrable-regardless of the potential for a speedier resolution. See In re Nitro Fluids L.L.C., 978 F.3d 1308, 1312 (Fed. Cir. 2020) (“Because the first-to-file rule places a premium on the importance of allowing one court to resolve substantially overlapping cases, the court was wrong to replace that preference with its own views on the importance of speed of resolution.”). However, that preferred outcome does not appear possible under these circumstances, and the Court concludes that Flygrip's proposal to stay, dismiss, or transfer this action is no more efficient than allowing it to proceed in this District. Accordingly, the Court RECOMMENDS that the Motion be DENIED as it relates to the first-to-file rule.
Flygrip argues that this case should be transferred pursuant to 28 U.S.C. § 1631, which authorizes the transfer of a case based on lack of jurisdiction. [##11 at 15; 29 at 9-10] Since the Court concludes that it has jurisdiction over this action, is also concludes that transfer under Section 1631 is not warranted.
D. Subject Matter Jurisdiction
Dismissal pursuant to Federal Rule of Civil Procedure 12(b)(1) is appropriate for any claim over which the Court lacks subject matter jurisdiction. Rule 12(b)(1) challenges are generally presented in one of two forms: “[t]he moving party may (1) facially attack the complaint's allegations as to the existence of subject matter jurisdiction, or (2) go beyond allegations contained in the complaint by presenting evidence to challenge the factual basis upon which subject matter jurisdiction rests.” Merrill Lynch Bus. Fin. Servs., Inc. v. Nudell, 363 F.3d 1072, 1074 (10th Cir.2004) (quoting Maestas v. Lujan, 351 F.3d 1001, 1013 (10th Cir.2003)). When reviewing a facial attack on subject matter jurisdiction, the Court “presume[s] all of the allegations contained in the [operative] complaint to be true.” Ruiz v. McDonnell, 299 F.3d 1173, 1180 (10th Cir. 2002). Dismissal under Rule 12(b)(1) is not a judgment on the merits of a plaintiff's case, but only a determination that the court lacks authority to adjudicate the matter. See Castaneda v. INS, 23 F.3d 1576, 1580 (10th Cir. 1994) (recognizing federal courts are courts of limited jurisdiction and may only exercise jurisdiction when specifically authorized to do so).
“Article III of the Constitution limits federal courts to deciding ‘Cases' and ‘Controversies,'” and thus “an actual controversy must exist not only at the time the complaint is filed, but through all stages of the litigation.” Kingdomware Techs., Inc. v. United States, 136 S.Ct. 1969, 1975 (2016) (quotation omitted). Pursuant to the Declaratory Judgment Act, “[i]n a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). The Supreme Court has “explained that the phrase ‘case of actual controversy' in the Act refers to the type of ‘Cases' and ‘Controversies' that are justiciable under Article III.” MedImmune, Inc. v. Genetech, Inc., 549 U.S. 118, 127 (2007). “Basically, the question in each case 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.” Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). “[A] party seeking a declaratory judgment has the burden of establishing the existence of an actual case or controversy.” Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83, 95 (1993).
“[I]n patent cases, the existence of a case or controversy must be evaluated on a claim-by-claim basis.” Streck, Inc. v. Research & Diagnostic Sys., Inc., 665 F.3d 1269, 1281 (Fed. Cir. 2012) (citation omitted). “All of the circumstances are considered in determining the existence of a case or controversy.” Ameranth, Inc. v. Domino's Pizza, LLC, 792 Fed.Appx. 780, 783 (Fed. Cir. 2019). And while the “controversy cannot be based on a fear of litigation over future products,” Amana Refrigeration, Inc. v. Quadlux, Inc., 172 F.3d 852, 855 (Fed. Cir. 1999), a controversy may be established in cases where the patentee refrains from explicitly threatening litigation. See Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1362 (Fed. Cir. 2009) (“The purpose of a declaratory judgment action cannot be defeated simply by the stratagem of a correspondence that avoids the magic words such as ‘litigation' or ‘infringement.'”).
In this case, Flygrip argues that the Court lacks subject matter jurisdiction over the claims relating to the ‘671, ‘098, and ‘535 Patents because Flygrip has not asserted these patents against PopSockets' products in the Amazon and Walmart Suits, and because Flygrip's Enforcement Letter only “identified” these patents but did not “provide[] an explicit reference” to PopSockets' alleged infringement of these patents. [#11 at 17] Flygrip also argues that the Court lacks subject matter jurisdiction because Defendant has offered PopSockets a release as to past infringement for the ‘671, ‘098, and ‘535 Patents. [#29 at 10-11]
The Court finds that PopSockets' claims for declaratory judgment sufficiently state a “case” or “controversy” and thus that the Court has subject matter jurisdiction over each claim. The Federal Circuit has made clear that explicit references to “infringement” or “litigation” are not necessary to establish a case or controversy. See Hewlett-Packard, 587 F.3d at 1362. The Federal Circuit has further identified cases or controversies arising from communications less menacing than a formal writing such as that in the present case. For example, in 3M Co. v. Avery Dennison Corp., 673 F.3d 1372 (Fed. Cir. 2012), the communications at issue involved phone calls from a patentee to a manufacturer stating that: (1) some of the manufacturer's products “may infringe” a patentee's patents and that “licenses are available,” and (2) the patentee would provide the manufacturer with claim charts, but never did so. Id. at 1375. The Federal Circuit held that these communications were “sufficient to constitute a case or controversy” between the patentee and the manufacturer. Id. at 1379.
Here, Flygrip's Enforcement Letter first notified PopSockets that it came from counsel representing Flygrip “in the enforcement of its intellectual property rights.” [#1-7 at 3] It then identified the four patents at issue in this declaratory judgment action, collectively referring to them as “the ‘patents.'” Id. Flygrip informed PopSockets that some of its products “infringe one or more of Flygrip's patents.” Id. After providing a specific instance on infringement “by way of example only,” Flygrip invited PopSockets to consider “tak[ing] a non-exclusive license to the patents.” Id. Flygrip closed the letter by seeking to open a dialogue “regarding the amount of renumeration appropriate to remedy PopSockets's use of the patents.” Id. Less than a week after sending the letter, Flygrip sued PopSockets' customers for selling PopSockets' products. [##1-5; 1-6] Flygrip's explicit identification of all four Patents-in-Suit, allegation that PopSockets had “use[d] . . . the patents” (referring to the explicitly identified Patents-in-Suit), and immediate legal action against PopSockets' customers relating to some of these identified patents is sufficient to establish a “substantial” case or controversy “of sufficient immediacy and reality” for all of the Patents-in-Suit. MedImmune, 549 U.S. at 127.
Flygrip's offer to provide a past release to PopSockets for the ‘671, ‘098, and ‘535 patents does not alter this analysis. [#26-5 at 2] In actions where a case or controversy is present, district courts are divested of subject matter jurisdiction where a patentee offers “a covenant not to sue for patent infringement” before a trial begins. See Dow Jones & Co., Inc. v. Ablaise Ltd., 606 F.3d 1338, 1346 (Fed. Cir. 2010) (citation omitted). However, “[w]hether a covenant not to sue will divest the trial court of jurisdiction depends on what is covered by the covenant.” Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 556 F.3d 1294, 1297 (Fed. Cir. 2009). To extinguish a case or controversy, a covenant must bar litigation against alleged patent infringers for past, current, and future infringement by allegedly infringing products. Id. at 1297-1300; see also Dow Jones, 606 F.3d at 1347 n.2 (explaining that a covenant does not extinguish a controversy where “[t]he covenant d[oes] not preclude future infringement actions should [the plaintiff] recommence sales of the accused infringing device after the dismissal of the action”).
Flygrip's offered release only contemplates “a past release . . . subject to PopSockets having no involvement in the supply chain for [the products that Flygrip accused of infringement in the Amazon and Walmart Suits].” [#26-5 at 2] (emphasis added). It also explicitly refrains from granting a covenant not to sue regarding PopSockets' sale of current products besides “the PopGrip,” see id., despite the broad allegation in the Enforcement Letter that some of PopSockets' “handheld device grips,” with no limitation as to which ones, “infringe one or more of Flygrip's patents.” [#1-7 at 3]; see also [##1-5 at ¶ 14; 1-6 at ¶ 14] (listing “[t]he Pop[S]ockets LLC line of PopGrip (and related) products” as “[e]xamples of products accused of infringement”). Such a release does not “preclude future infringement actions should [PopSockets] recommence sales of the accused infringing [products],” and therefore is insufficient to extinguish the controversy between the parties. Dow Jones, 606 F.3d at 1347 n.2.
Accordingly, the Court finds that it has subject matter jurisdiction over all of PopSockets' claims, and RECOMMENDS that the Motion be DENIED as it relates to subject matter jurisdiction.
E. Failure to State a Claim
Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” In deciding a motion under Rule 12(b)(6), a court must “accept as true all well-pleaded factual allegations . . . and view these allegations in the light most favorable to the plaintiff.” Casanova v. Ulibarri, 595 F.3d 1120, 1124 (10th Cir. 2010) (quoting Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009)). Nonetheless, a plaintiff may not rely on mere labels or conclusions, “and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Plausibility refers “to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs ‘have not nudged their claims across the line from conceivable to plausible.'” Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (quoting Twombly, 550 U.S. at 570). “The burden is on the plaintiff to frame a ‘complaint with enough factual matter (taken as true) to suggest' that he or she is entitled to relief.” Id. (quoting Twombly, 550 U.S. at 556). The ultimate duty of the court is to “determine whether the complaint sufficiently alleges facts supporting all the elements necessary to establish an entitlement to relief under the legal theory proposed.” Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir. 2007). Courts applying these standards to a declaratory judgment action against a patentee have required that “the pleading . . . specify the products or conduct alleged not to infringe.” Xilinx, Inc. v. Invention Inv. Fund I LP, No. C 11-0671 SI, 2011 WL 3206686, at *6 (N.D. Cal. July 27, 2011) (citing Winstron Corp. v. Phillip M. Adams & Assocs., No. C-10-4458 EMC, 2011 WL 1654466, at *11 (N.D. Cal. Apr. 28, 2011) and Bender v. LG Elec. U.S.A., Inc., No. C 09-02114 JF, 2010 WL 889541, at *6 (N.D. Cal. Mar. 11, 2010); see also Microsoft Corp. v. SynKloud Techs., LLC, 484 F.Supp.3d 171, 188 (D. Del. 2020) (holding that a pleadings' identification of a specific category of technology-there, “cloud storage technology”-along with its identification of a specific product sufficed to put the patentee on notice of the products at issue).
In Microsoft Corp., Microsoft's complaint put “all of [the plaintiff's] products . . . at issue.” 484 F.Supp.3d at 187. However, the court determined that the complaint could be narrowed to revolve around, at most, “cloud storage technology.” Id. at 188. This was because the threat of infringement arose out of the Defendant's infringement suit regarding cloud storage technology, Microsoft's included claim charts identified its “non-exhaustive portfolio of cloud storage technology products,” and Microsoft specifically identified an exemplary product-OneDrive (a cloud storage technology). Id. at 187-88. The court distinguished cases holding that declaratory judgment pleadings lacked specificity on the grounds that the pleadings in those cases: “failed to identify any specific products,” id. (citing Winston Corp., 2011 WL 1654466, at *12); “consisted of two paragraphs containing ‘bald assertions, devoid of fact,'” id. (quoting PPS Data LLC v. Allscripts Healthcare Solutions Inc., 2012 WL 243346, at *4 (M.D. Fla. Jan. 25, 2012); and “claimed only that the patents failed ‘to comply with one or more of the requirements of the patent laws of the United States” without more, id. (quoting Xilinx, Inc., 2011 WL 3206686, at *6 (N.D. Cal. July 27, 2011)). Flygrip relies on these same cases distinguished by the court in Microsoft. [See #11 at 14]
Here, PopSockets' claims seek similarly broad declarations that “PopSockets and its products have not directly or indirectly infringed any claim of the [Patents-in-Suit], nor do so now.” [#1 at ¶¶ 56, 64, 72, 80] However, PopSockets' pleading also makes repeated reference to a specific product line-“PopGrips”-along with “related products.” [#1, ¶¶ 15, 22-23, 40-41] As in Microsoft Corp., this mirrors the threat of infringement to which PopSockets is responding. In its Enforcement Letter, Flygrip identified PopSockets' “handheld device grips” as the infringing products, only specifying, “by way of example only,” PopSockets' “line of PopGrip products, and related products that incorporate the pull-out PopGrip design. [#1-7 at 3] And in its infringement suits against Amazon and Walmart, Flygrip accuses “Pop[S]ockets LLC line of PopGrip (and related) products” of infringement. [##1-5, ¶ 14; 1-6, ¶ 14] PopSockets also included with the Complaint claim charts from those cases that specifically identify PopSockets' handhold grip technology. [##1-9; 1-11] Thus, the Court is persuaded by the reasoning in Microsoft Corp. that PopSockets' identification of an exemplary product line and “related products” sufficiently puts Flygrip on notice of the products and technology at issue in this case and provides the Court with manageable claims.
Therefore, the Court finds that PopSockets' allegations are sufficient to provide effective notice to Flygrip, and that PopSockets states legally cognizable claims. Accordingly, the Court RECOMMENDS that the Motion be DENIED as it relates to the legal sufficiency of PopSockets' claims.
III. CONCLUSION
For the foregoing reasons, this Court respectfully RECOMMENDS that the Motion to Dismiss [#12] be DENIED.
Within fourteen days after service of a copy of this Recommendation, any party may serve and file written objections to the magistrate judge's proposed findings of fact, legal conclusions, and recommendations with the Clerk of the United States District Court for the District of Colorado. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); Griego v. Padilla (In re Griego), 64 F.3d 580, 583 (10th Cir. 1995). A general objection that does not put the district court on notice of the basis for the objection will not preserve the objection for de novo review. “[A] party's objections to the magistrate judge's report and recommendation must be both timely and specific to preserve an issue for de novo review by the district court or for appellate review.” United States v. 2121 East 30th Street, 73 F.3d 1057, 1060 (10th Cir. 1996). Failure to make timely objections may bar de novo review by the district judge of the magistrate judge's proposed findings of fact, legal conclusions, and recommendations and will result in a waiver of the right to appeal from a judgment of the district court based on the proposed findings of fact, legal conclusions, and recommendations of the magistrate judge. See Vega v. Suthers, 195 F.3d 573, 579-80 (10th Cir. 1999) (holding that the district court's decision to review magistrate judge's recommendation de novo despite lack of an objection does not preclude application of “firm waiver rule”); Int'l Surplus Lines Ins. Co. v. Wyo. Coal Refining Sys., Inc., 52 F.3d 901, 904 (10th Cir. 1995) (finding that cross-claimant waived right to appeal certain portions of magistrate judge's order by failing to object to those portions); Ayala v. United States, 980 F.2d 1342, 1352 (10th Cir. 1992) (finding that plaintiffs waived their right to appeal the magistrate judge's ruling by failing to file objections). But see, Morales-Fernandez v. INS, 418 F.3d 1116, 1122 (10th Cir. 2005) (holding that firm waiver rule does not apply when the interests of justice require review).