Free Reply Brief - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE BANK OF AMERICA, N.A. Plaintiff v. SIP ASSETS, LLC AND EVERY PENNY COUNTS, INC. Defendants ) ) ) ) ) ) ) )

C.A. NO. 07-159 GMS

EVERY PENNY COUNTS, INC.'S REPLY BRIEF IN SUPPORT OF ITS MOTION TO DISMISS, TRANSFER VENUE OR STAY David L. Finger (DE Bar ID #2556) Finger & Slanina, LLC One Commerce Center 1201 Orange Street, Suite 725 Wilmington, DE 19801-1155 (302) 884-6766 Attorney for Defendant Every Penny Counts, Inc. and PHELPS DUNBAR LLP Harvey S. Kauget (FL Bar ID #116254) Karl J. Brandes (FL Bar ID #0329797) Brent B. Barriere (LA Bar ID #2818) David L. Patrón (LA Bar ID #22566) Harry M. Barton (LA Bar ID #29751) 100 South Ashley Drive Suite 1900 Tampa, Florida 33602-5311 (813) 472-7550 Of Counsel for Defendant Every Penny Counts, Inc. DATED: June 1, 2007

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TABLE OF CONTENTS Page

I.

PRELIMINARY STATEMENT ..............................................................................................1

II. ARGUMENT............................................................................................................................4 A. MedImmune, et al. do not Control this Court's Determination of Subject Matter Jurisdiction Over SIP ....................................................................................................4 B. SIP's Representations Through its Pleadings Foreclose its Ability to Assert a Claim Against BANA with Respect to the '191 Patent.........................................................7 C. The First Filed Rule Applies and Warrants Dismissal, Stay or Transfer of this Action Regardless of SIP's Presence in this Suit...............................................................9 D. BANA Misrepresents the Reasons for the Florida Court's Progress to Date.................10

III. CONCLUSION.......................................................................................................................12

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TABLE OF AUTHORITIES CASES Amana Refrigeration, Inc. v. Quad Lux, Inc., 172 F.3d 852 (Fed. Cir. 1999) .............................................................................................................................4 British Telecomms. v. McDonnell Douglas Corp., No. C-93-0677 MHP, 1993 WL 149860, Patel, J. (N.D. Cal. May 3, 1993) ...................................................9 Citigroup v. Citiholding Co., 97 F.Supp.2d 549 (S.D.N.Y. 2000) .....................................9 Com 21, Inc. v. Hybrid Patents, Inc. (In re Com 21, Inc.), 357 B.R. 802 (Bankr. N.D. Cal. 2006) ................................................................................................9 Cross Bow Tech, Inc. v. Y.H. Tech, Inc., No. C03-04360, 2007 WL 174422, Illston, J. (N.D. Cal. Jan. 22, 2007) ...............................................................7 Gen-Probe, Inc. v. Vysis, Inc., 359 F.3d 1376 (Fed. Cir. 2004) ..........................................5 MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764 (2007)..................................... passim Merck & Co., Inc. v. Apotex, Inc., No. 06-230-GMS, 2007 WL 1407453, Sleet, J. (D. Del. May 21, 2007) ...................................................................2, 3, 4, 6, 7 Sandisk Corporation v. STMicroelectronics, Inc., 480 F.3d 1372 (Fed. Cir. 2007) ......................................................................................................2, 4, 5, 6, 7 Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054 (Fed. Cir. 1995) .................................................................................................................... passim Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuticals Corporation, 482 F.3d 1330 (Fed. Cir. 2007)................................................2, 4, 6, 7, 8 Yamaha Motor Co., No. 518, 1997 WL 575861, Laurie, J. (Fed. Cir. Aug. 27, 1997) ........................................................................................................................4

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I. PRELIMINARY STATEMENT Defendant Every Penny Counts, Inc. ("EPC") sets forth the nature and stage of the proceeding as of May 10, 2007 in its Opening Brief in Support of its Motion to Dismiss, Transfer Venue or Stay filed on that same date. (D.I. 16) ("EPC Opening Brief"). Plaintiff Bank of America, N.A. ("BANA") filed its Answering Brief in Opposition to EPC's Motion on May 24, 2007. Opposition. EPC maintains that the arguments set forth in its Opening Brief regarding the first filed rule and transfer under 28 U.S.C. §1404(a) effectively demonstrate EPC's entitlement to the relief sought herein and, pursuant to Local Rule 7.1.3(c)(2), will not burden this Court with a repetition of those assertions. EPC merely seeks to address certain arguments and/or mischaracterizations set forth in BANA's Opposition, namely (i) the assertion that MedImmune, et al. controls this Court's determination of EPC's entitlement to relief; (ii) BANA's argument that SIP Assets, LLC's ("SIP") representations to this Court, i.e., that it has no stake in ownership of the '191 patent and does not intend to assert a claim against BANA or Bank of America Corporation ("BAC") in relation to that patent, have no legal effect; and (iii) the notion that SIP's presence in his suit affects the application of the first filed rule. EPC also seeks to set forth more fully the facts surrounding the thirty (30) day extension and agreement related thereto which BANA selectively disclosed to the Court in its Opposition. (D.I. 19 at 18). BANA asserts that EPC relies on "bad law," i.e., Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054 (Fed. Cir. 1995), et al., to support its argument that SIP's representations to this Court eliminate the existence of a case or controversy between SIP and BANA. (D.I. 19 at 11-14). BANA claims that the Supreme Court's holding in (D.I. 19). EPC submits this Reply to BANA's

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MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764 (2007), along with the Federal Circuit opinions in Sandisk Corporation v. STMicroelectronics, Inc., 480 F.3d 1372 (Fed. Cir. 2007), and Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuticals Corporation, 482 F.3d 1330 (Fed. Cir. 2007), overrule the proposition for which EPC cites Super Sack. BANA plainly overstates the scope of these rulings. The holding in MedImmune does not begin to address the issue for which EPC cites Super Sack, et al. Similarly, Teva and Sandisk, while noting the abrogation of the "reasonable apprehension" standard, decline to extend the scope of their holdings -- as BANA seemingly sees fit to do -- to the rule of law established in Super Sack and its progeny. Absent an express statement by the courts that these opinions overrule Super Sack, the case remains valid law. Further, this Court has already applied Super Sack for the proposition cited herein subsequent to the issuance of these allegedly "controlling" opinions that BANA cites. See Merck & Co., Inc. v. Apotex, Inc., No. 06-230-GMS, 2007 WL 1407453, WL Op. at *3-4, Sleet, J. (D. Del. May 21, 2007) (order dismissing plaintiff's complaint). Clearly, Super Sack and its progeny support dismissal of SIP from this action due to lack of a case or controversy. BANA also attempts to attach significance to the wording of SIP's sworn and verified statement that it has no intention to sue BANA, now or at any time, for any claims related to the '191 patent. BANA asserts that this phrasing precludes the

applicability of Super Sack. (D.I. 19 at 13). This argument lacks merit. SIP also expressly states that it has no claim to ownership of the '191 patent. (D.I. 14 at 6). Given this fact, SIP's covenant not to sue cannot mirror the language of similar statements found to be dispositive in Super Sack and Merck. Indeed, SIP cannot make "promises" with

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regard to property in which it has no interest, i.e., the '191 patent. EPC argues that this unique set of facts presents a novel issue to this Court which the principles announced in Super Sack, et al. govern. EPC sets forth more fully below that the specific facts of this case warrant an application of Super Sack, et al. and a ruling that no case or controversy between BANA and SIP exists. EPC also addresses BANA's argument that SIP's presence in this action excepts the application of the first filed rule. In response to this contention, EPC refers to the argument made in EPC's Opening Brief, which BANA conveniently ignores, that the first filed rule provides that the ability to determine whether certain parties are necessary to a proceeding and whether the first filed court can obtain jurisdiction over those parties properly rests with that first filed court. (D.I. 16 at 19). In its attempt to avoid the application of the first filed rule, BANA also states that "EPC itself concedes" that the Florida litigation involves only a subset of the issues presented here. (D.I. 19 at 14). This is a blatant mischaracterization of a statement from EPC's Brief which BANA selectively quotes. 1 EPC takes exception to BANA's mischaracterization and asks that the Court give no weight to an argument advanced through such nefarious means. EPC submits that none of the arguments and mischaracterizations of fact set forth by BANA in its Opposition in an effort to remove the Court's focus from the controlling law of the first filed rule and Super Sack negate the arguments set forth in EPC's Brief.

See EPC Brief at 12 "On April 25, 2007 Magistrate Judge Sherry Polster Chappelle issued a Case Management Scheduling Order setting an aggressive pace for the litigation of the issues raised in EPC's [Florida] Complaint, and the subset of those issues subsequently brought before this Court in BANA's action." (D.I. 16 at 12, emphasis added).

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Therefore, EPC remains entitled to the relief sought in its Motion to Dismiss, Stay or Transfer. II. ARGUMENT A.

MedImmune, et al. do not Control this Court's Determination of
Subject Matter Jurisdiction Over SIP.

BANA sets forth that EPC's argument regarding SIP not qualifying as a proper party relies on "bad law." EPC argues in its Opening Brief that SIP's disavowal of ownership of the '191 patent and the intent or ability to assert claims against BANA related to that patent removes any justiciable case or controversy between BANA and SIP from this action, and relies on Super Sack MFG Corp., 57 F.3d at 1058, Amana Refrigeration, Inc. v. Quad Lux, Inc., 172 F.3d 852, 855 (Fed. Cir. 1999), and In re Yamaha Motor Co., No. 518, 1997 WL 575861 WL Op. at *3, Laurie, J. (Fed. Cir. Aug. 27, 1997), to support this argument. BANA states in its Opposition that MedImmune, Teva Pharmaceuticals and Sandisk Corporation overrule the holdings of the cases cited by EPC. 2 This argument lacks merit because the holdings cited by BANA do not touch upon the effect of a promise not to sue on the existence of a case or controversy, nor do they expressly overrule ­ or even cite ­ Super Sack or the other cases relied on by EPC. Further, each of the cases cited by BANA are factually inapposite to the present situation. Finally, this Court continues to apply the relevant holding from Super Sack under the standard announced in MedImmune, Sandisk and Teva Pharmaceuticals. See Merck, WL Op. at *3-4 Clearly, the rule of Super Sack remains valid law.

EPC notes that despite BANA's repeated objection to what it refers to as EPC's "ruling" on SIP's Motion to Dismiss, BANA has no qualms with issuing its own "rulings" on behalf of the Federal Circuit Court of Appeals on an issue which has yet to be presented to that court, i.e., whether these holdings do in fact affect the rule of law set forth in Super Sack and its progeny.

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MedImmune involved a suit for declaratory judgment filed by a patent licensee against a licensor and the Supreme Court considered whether a case or controversy existed between these parties absent a breach of the licensing agreement at issue. The Court resolved that a case or controversy existed and held as follows: We hold that the petitioner was not required, insofar as Article III is concerned, to break or terminate its 1997 license agreement before seeking declaratory judgment in Federal Court that the underlying patent is invalid, unenforceable, or not infringed. MedImmune, 127 S. Ct. at 777. Although a footnote in this case discusses the tension between the Federal Circuit's "reasonable apprehension" standard and certain Supreme Court rulings, it does not expressly overrule cases applying that test. Indeed, the only opinion abrogated by the Supreme Court's ruling is MedImmune was Gen-Probe, Inc. v. Vysis, Inc., 359 F.3d 1376 (Fed. Cir. 2004). Id. at 768. Clearly, this case alone does not support BANA's contention that Super Sack is no longer good law. In Sandisk, the proceedings involved a declaratory judgment and infringement suit arising out of negotiations for cross-licensing agreements. The defendant in the declaratory judgment suit had presented the plaintiff with a document setting forth the defendant's analysis of the plaintiff's infringement on fourteen (14) of the defendant's patents. Sandisk, 480 F.3d at 1375-76. This action was accompanied by an oral, nonverified statement that the declaratory judgment defendant would not sue. In deciding that a case or controversy existed, the Federal Circuit stated that: We hold only that where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license, an Article III case or controversy will arise and the party need not risk a suit for infringement by engaging in

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the identified activity before seeking a declaration of its legal rights. 480 F.3d at 1381. This holding clearly does not touch upon the rule of law announced in Super Sack and the facts of the case further demonstrate its inapplicability to the present situation. Here, not only has SIP not conducted the level of investigation undergone by the defendant in Sandisk, SIP has expressly stated and verified through an affidavit that it does not own the '191 patent and that it does not intend to sue BANA for any claims arising out of that patent. In Teva Pharmaceuticals, a competitor of a patent holder filed an abbreviated new drug application ("ANDA") and the patent holder sued for infringement of one of the five patents disclosed in the ANDA. The competitor in turn filed a suit for declaratory judgment challenging the validity or infringement with respect to the remaining four disclosed patents. 482 F.3d at 1334-36. Prior to deciding that these facts 3 gave rise to a case or controversy, the Federal Circuit noted that the "reasonable apprehension" test had been overruled by MedImmune. 482 F.3d at 1339. Noticeably absent from this holding is any mention of Super Sack or its progeny. Further, the case is factually inapposite because SIP has not sued BANA on any patent related to the '191 patent and has expressly disavowed its ownership of that patent and ability to sue BANA for claims related thereto. Clearly, the Federal Circuit opinions cited by BANA do not support the contention that Super Sack and its progeny are "bad law." Finally, this Court applied Super Sack subsequent to the publication of the decisions cited by BANA in Merck & Co., Inc. v. Apotex, Inc., No. 06-230-GMS, 2007 See Teva Pharmaceuticals, 482 F.3d at 1341 ("In light of [defendant]'s pending suit on the same ANDA, the threat of litigation is a present injury creating justiciable controversy").
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WL 1407453, WL Op. at *3-4, Sleet, J. (D. Del. May 21, 2007). In Merck, this Court had to determine whether a patent holder's covenant not to sue removed the existence of a case or controversy from a declaratory judgment action. After discussing MedImmune, Sandisk and Teva Pharmaceuticals, the Court cited Super Sack for the same proposition contained within EPC's Brief and stated that: Merck's covenant not to sue removes any cause for concern that Appotex could be held liable for infringement of the patents in suit. See Super Sack, 57 F.3d at 1059. Moreover, "'[i]t is well established that a trial court may be divested or deprived of subject matter jurisdiction over a particular patent claim that the patentee covenants not to assert an infringement claim against a punitive infringer." 4 Id. at *4. Clearly, the law still holds that a party's promise not sue removes a justiciable case or controversy from an action for declaratory judgment. BANA's argument to the contrary wholly lacks merit. B. SIP'S Representations Through its Pleadings Foreclose its Ability to Assert a Claim Against BANA with Respect to the '191 Patent.

BANA also argues that even if Super Sack is good law, it does not apply to the present situation. BANA asserts two arguments as to why SIP's statements, which have been verified by an affidavit, do not constitute a promise not to sue within the meaning of Super Sack. BANA argues that SIP merely avows its lack of intention to sue BANA under the '191 patent and that SIP reserves the rights and privileges that arose during the time it was a licensee of EPC. (D.I. 19, 13). These arguments are without merit. First, BANA's summary of SIP's reservation of right selectively quotes SIP's Motion to Dismiss

Quote from Cross Bow Tech, Inc. v. Y.H. Tech, Inc., No. C03-04360, 2007 WL 174422, WL Op. at *2, Illston, J. (N.D. Cal. Jan. 22, 2007).

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and blatantly misrepresents the statement made by SIP in its motion. 5 This reservation of rights does not preserve the existence of a case or controversy between SIP and BANA. Next, the representation of SIP with which BANA takes issue is the only logical promise SIP can make given the unique facts of this case. SIP asserts that it has no intention to bring any claims against BANA in connection with the '191 patent. (D.I. 14 at 1). Since SIP also admits that it does not own the '191 patent, this representation constitutes the most thorough assurance that SIP can possibly offer to BANA regarding the fact that it cannot sue BANA over the '191 patent. SIP's lack of ownership of the '191 patent prevents it from executing a formal covenant with regard to that patent. Thus, the statement, which has been verified, from SIP is as close to the statement found to eliminate the case or controversy in Super Sack as SIP can make under this novel factual scenario. EPC submits that, given these facts, the minor differences in the

representations here and in Super Sack do not affect that case's application and the propriety of the conclusion that no case or controversy exists. Indeed, the current

situation is more factually similar to Super Sack, et al. than Teva Pharmaceuticals or Sandisk because, as noted above, SIP has not engaged in any activity or investigation related to suing BANA over this patent and has expressly disclaimed its intention to do so. Under these facts, Super Sack, rather than the cases cited by BANA, controls the case or controversy issue and mandates dismissal of SIP from this action. C. The First Filed Rule Applies and Warrants Dismissal, Stay or Transfer of this Action Regardless of SIP's Presence in this Suit.

See SIP Motion at 1 n.1 ("SIP states that it has no `current' rights to the '191 patent and retains all rights and privileges that arose during that time it was a licensee of EPC. Those rights and privileges, however, do not relate to establishing the ownership and validity of the '191 patent and, in any event are not claims against BOA.") (D.I. 14 at 1, emphasis added).

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BANA's Opposition advances several reasons why it contends the first filed rule to be inapplicable. BANA's arguments in support of this contention mischaracterize EPC's filings to this Court in two respects. First, BANA states that "EPC only argues that venue isn't proper in Delaware if SIP is not a party to the action." (D.I. 19 at 7, emphasis added). Next, BANA claims that EPC concedes that the Florida action only contains a subset of the issues presented in this action. (D.I. 19 at 14). As established above, this latter summary of EPC's argument completely changes the meaning of EPC's pleading and deserves no consideration. The former statement also rings untrue because of an argument in EPC's Brief which BANA conveniently chooses to ignore. In EPC's

Opening Brief, it argues that SIP's presence in this action does not affect the determination of the first filed rule's application. (D.I. 16 at 18-19). EPC states that the first filed rule indicates that the necessity of a party to an action and the first filed court's potential jurisdiction over that party are issues that the first filed court should resolve. 6 Thus, BANA's arguments concerning the Florida court's ability to obtain jurisdiction of SIP and SIP's status as a necessary party do not affect the application of the first filed

6

EPC reiterates that argument here. See Com 21, Inc. v. Hybrid Patents, Inc. (In re Com 21, Inc.), 357 B.R. 802, 809 (Bankr. N.D. Cal. 2006) ("In light of the difference to be given to the first filed case, whether [third parties] can and should be joined in the [first filed] litigation are issues that, in the first instance, should be considered by the [first filed] district court"); Citigroup v. Citiholding Co., 97 F.Supp.2d 549, 556 n.4 (S.D.N.Y. 2000) ("Indeed, it is the court in which the first filed action was brought that should decide whether an exception to the first filed rule applies"); cf. British Telecomms. v. McDonnell Douglas Corp., No. C-93-0677 MHP, 1993 WL 149860, WL Op. at *4-5, Patel, J. (N.D. Cal. May 3, 2003) (staying second filed suit pending first filed court's resolution of whether third party was proper party and could be joined in the first filed suit, noting that it would be presumptuous for [the second filed] court to decline to apply the first to file rule when the [first filed] court whose jurisdiction is being challenged has not had an opportunity to fully consider the issue").

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rule. EPC again urges that the first filed rule warrants dismissal, transfer or stay of this action. D. BANA Misrepresents the Reasons for the Florida Court's Progress to Date.

EPC must now clarify the facts surrounding the extension granted to EPC by BANA in this action and the agreement related thereto which BANA accuses EPC of violating. BANA blatantly misrepresents the facts by asserting that "the only reason why the Florida action is that far ahead of this one is because BANA voluntarily granted EPC a thirty (30) day extension of the deadline to respond to the Complaint." (D.I. 19 at 18). EPC notes that BANA fails to mention that EPC granted BANA a thirty (30) day extension for responding to the Florida suit. (See Ex. A, Defendants Motion for

Extension of Time of Thirty Days, ¶ 2). Given that both parties granted equal extensions in each of these actions, BANA's quoted statement is absolutely false and should carry no weight in the determination of the issues herein. Further, BANA's baseless accusation that EPC violated an agreement between the parties wholly lacks merit. As Exhibit "E" to BANA's Opposition demonstrates, EPC's counsel agreed "not to use the extension as a basis to argue for Florida over Delaware." Nowhere in EPC's Brief does it make mention of the thirty (30) day extension nor does EPC argue that this thirty (30) day extension is a remotely significant factor in the venue determination. Rather, the Florida court's Local Rules require that it maintain the aggressive schedule established in that action. This argument does not violate the agreement contained in Exhibit "E" to BANA's Opposition. Finally, EPC is loathe to have to clarify for the Court that its arguments do not constitute a criticism of this Court, contrary to BANA's contentious representation otherwise. EPC has full confidence in this Court's ability to resolve issues in patent cases, and merely

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seeks to preserve its chosen forum for litigation of this action through the dismissal, transfer or stay of this second filed suit.

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III.

CONCLUSION The arguments raised in BANA's Opposition do not change EPC's entitlement to

an order dismissing, transferring, or staying this action. The first filed rule plainly applies and vests this Court with discretion to grant EPC's motion and condones such a course of action. The presence of SIP in this suit does not affect this rule's dispositive applicability as no case or controversy exists with respect to SIP. Further, the rule provides that the Florida court must determine whether SIP belongs in the first filed suit. BANA's arguments do not contradict this point and EPC requests that this Court grant appropriate relief. WHEREFORE, for the foregoing reasons, as well as the reasons stated by EPC in its opening brief, EPC respectfully requests that this Court dismiss or transfer this action. In the event that the Court sees fit to grant neither of these remedies, EPC requests this Court stay this action until the Florida litigation reaches its conclusion.

Dated: June 1, 2007 Respectfully submitted,

/s/ David L. Finger__________________ David L. Finger (DE Bar ID #2556) Finger & Slanina, LLC One Commerce Center 1201 Orange Street, Suite 725 Wilmington, DE 19801-1155 (302) 884-6766 Attorney for Defendant Every Penny Counts, Inc. and

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PHELPS DUNBAR LLP Harvey S. Kauget (FL Bar ID #116254) Karl J. Brandes (FL Bar ID #0329797) Brent B. Barriere (LA Bar ID #2818) David L. Patron (LA Bar ID #22566) Harry M. Barton (LA Bar ID #29751) Of Counsel for Defendant Every Penny Counts, Inc.

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CERTIFICATE OF SERVICE I, David L. Finger, hereby certify that on this 1st day of June, 2007, I electronically filed the foregoing document with the Clerk of the Court using CM/ECF which will send electronic notification to the following counsel of record:

Richard L. Horwitz, Esq. Potter Anderson & Corroon, LLP 1313 N. Market St., Hercules Plaza, 6th Fl. P.O. Box 951 Wilmington, DE 19899-0951 Kurt M. Heyman, Esq. Proctor Heyman LLP 1116 West Street Wilmington, DE 19801

/s/ David L. Finger___________________ David L. Finger (DE Bar ID #2556) Finger & Slanina, LLC One Commerce Center 1201 Orange Street, Suite 725 Wilmington, DE 19801-1155 (302) 884-6766

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