Free Memorandum - District Court of Arizona - Arizona

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David P. Irmscher (Indiana State Bar No. 15026-02) John K. Henning (Indiana State Bar No. 25203-49) Baker & Daniels LLP 111 East Wayne Street, Suite 800 Fort Wayne, IN 46802 Telephone: 260-424-8000 Facsimile: 260-460-1700 Ray Harris (Arizona State Bar No. 007408) Paul Moore (Arizona State Bar No. 019912) Fennemore Craig 3003 North Central Avenue Suite 2600 Phoenix, AZ 85012-2913 Telephone: 602-916-5000 Facsimile: 602-916-5999 Attorneys for the defendant, Omron Corporation

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Hypercom Corporation, Plaintiff, vs. ) ) ) ) ) ) ) ) ) ) ) ) Cause No. CV04-0400 PHX PGR

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANT OMRON CORPORATION'S MOTION FOR SUMMARY JUDGMENT (Oral Argument Requested)

Omron Corporation, Defendant.
I.

INTRODUCTION: OMRON ASSIGNED ITS RIGHTS TO VERVE, A PATENT HOLDING COMPANY, TO GENERATE REVENUE. THERE IS NO EVIDENCE OF A CONSPIRACY TO HARASS AND EXTORT HYPERCOM. Omron is a Japanese corporation that develops and manufactures electronic and

sensory devices. Omron has owned several patents related to electronic cash registers and credit transaction payment systems. Verve is a patent holding company that does not manufacture or sell products. In 2003 and 2004, Omron assigned rights in these patents to

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Verve. As consideration for these rights, Verve granted Omron the right to receive a percentage of the licensing revenue generated by Verve (either through fees voluntarily paid by companies interested in using the patented technology, or through patent infringement litigation). Further, Omron retained the right to prevent Verve from filing patent infringement lawsuits against Omron's customers and business partners. Contrary to Hypercom's insinuations, the use of patent holding companies to generate revenue from patents is entirely lawful. Federal statutory law expressly

authorizes patent owners to assign rights to their patents. And neither statutory nor common law prevents owners from receiving a share of licensing revenues as consideration for the assignment. Moreover, such arrangements are common. Patent holding companies today account for a significant portion of patent litigation, and often exist solely to collect licensing revenues for acquired patents. This case involves nothing more. Without giving any credence to the legitimacy of Omron and Verve's contractual arrangement, Hypercom has filed this lawsuit, without factual or legal support, alleging that Omron conspired with Verve to "launch[] a campaign against Hypercom and others for the purpose of instituting costly and inconvenient litigation alleging multiple claims of patent infringement in order to secure 'settlements' that exact monetary tribute from Hypercom in order to stop Verve's harassment." SOF ¶ 2. However, after having the opportunity to conduct significant discovery, including written discovery and multiple depositions of Omron and Verve representatives, Hypercom has uncovered no evidence that Omron conspired with Verve. There is no testimonial evidence, no document, no letter, no e-mail, no note reflecting any Omron agreement to harass or extort Hypercom. Rather, the undisputed record reveals that through a series of assignments, Omron assigned its rights in various patents to Verve, Verve granted to Omron a non-exclusive license in those patents, and Omron was entitled

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to a percentage of any licensing revenue generated by Verve in enforcing the patents. Nothing about these assignments suggests that either party agreed to support frivolous lawsuits. There is no evidence that Omron controlled or participated in the patent

infringement cases brought by Verve against Hypercom. Further, Hypercom's arguments that there are other unwritten agreements or secret agreements lack any evidentiary support. To establish a civil conspiracy under Arizona law, Hypercom must prove by clear and convincing evidence that Omron and Verve agreed to commit a tort. The written agreements between Omron and Verve reveal neither illicit agreements nor an intent to commit a tort. And after significant discovery into the alleged conspiracy, Hypercom has uncovered no facts that would allow a reasonable jury to find a conspiracy agreement here. Accordingly, and as set forth more fully below, Omron is entitled to judgment as a matter of law.
II.

STATEMENT OF FACTS A. The First Assignment Agreement: Omron Assigns To Verve The '895 Patent Omron is a Japanese company that develops, markets, and manufactures certain

electronic and sensory devices in the United States.

Omron's patented technology

includes electronic relays, switches, timers and sensing devices, certain medical equipment, and onboard equipment for automobiles. SOF ¶ 4. Verve is a patent holding company, and does not make or sell any products. SOF ¶ 6. In 2003 and 2004, Omron entered into several agreements that assigned to Verve its rights, title and interest to more than 20 patents (collectively, "the Assignment Agreements").1 The first of the Assignment Agreements, Patent Assignment Agreement Between Omron Corporation And Verve, L.L.C., Agreement No. 081303 (the "First Assignment"),
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Omron assigned the patents to Verve because Omron had limited use for them, and patent licensing and enforcement was not a focal point of Omron's business. SOF ¶ 7.

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became effective on August 15, 2003. SOF ¶ 8. Under the First Assignment, Omron assigned to Verve its rights, title, and interest to U.S. Patent No. 4,678,895 ("the '895 Patent"), including accrued causes of action for patent infringement.2, 3 SOF ¶ 11. The First Assignment provides that: Verve has succeeded to all of OMRON's right, title, and standing . . . to institute and prosecute all suits and proceedings, and to take all actions that Verve, in its sole discretion, may deem necessary or proper to collect, assert, or enforce any claim, right, or title of any kind under the Patents. . . . SOF ¶ 14. At the same time, Verve "grant[ed] back to OMRON and OMRON's

customers/clients to be agreed upon by Verve and OMRON a non-exclusive, worldwide,
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irrevocable, perpetual, royalty-free, fully paid-up, license under the Patents to reproduce,
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make, have made, use, import, offer for sale and sell any products or services."4 SOF ¶ 15.

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The Second Assignment Agreement: Omron Assigns To Verve The '340 And '341 Patents

On October 14, 2003, Omron assigned to Verve two additional patents - U.S. Patent Nos. 4,562,340 ("the '340 Patent") and 4,562,341 ("the '341 Patent").5 SOF ¶ 18. The agreement, Patent Assignment Agreement Between Omron Corporation And Verve,
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L.L.C., Agreement No. 101403, (the "Second Assignment"), assigned the '340 and '341
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Patents under provisions almost identical to the First Assignment.
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The Second

Assignment conveyed to Verve Omron's rights, title, and interest in the '340 and '341
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The First Assignment also assigned U.S. Patent Number 4,630,200, but this patent is not at issue in this case. SOF ¶ 13. The '895 Patent covers technology for an electronic cash register and payment system. SOF ¶ 12. The First Assignment also required Verve "to use its best efforts to maximize the Collected Licensing Revenue generated from the Patents." SOF ¶ 16. Finally, the First Assignment required Verve to pay Omron a percentage of the "Collected Licensing Revenue," defined as all revenue generated by Verve from the sale, license, transfer or disposition of the '895 Patent. SOF ¶ 17. The '340 Patent covers technology for a terminal device for making credit transaction payments, and the '341 Patent covers technology for an electronic cash register. SOF ¶¶ 19-20.

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Patents, including its right to prosecute any patent infringement actions or otherwise enforce both patents, providing: Verve has succeeded to all of OMRON's right, title, and standing to receive all rights and benefits pertaining to the Patents, to institute and prosecute all suits and proceedings, and to take all actions that Verve, in its sole discretion, may deem necessary or proper to collect, assert, or enforce any claim, right, or title of any kind under the Patents, whether arising before or after the Effective Date. SOF ¶ 22. And, as with the First Assignment, Verve granted back to Omron and its customers and clients a "non-exclusive, worldwide, irrevocable, perpetual, royalty-free,

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fully paid-up license" for the '340 and '341 Patents.6 SOF ¶ 23.
C.

The Third Assignment Agreement: Omron Assigns To Verve Other Patents, And The Parties Amend The First And Second Assignments

On March 19, 2004, Omron and Verve entered into a third assignment agreement, Patent Assignment Agreement And License Agreement Between Omron Corporation And Verve, L.L.C., Agreement No. 031804 ("the Third Assignment").7 SOF ¶ 25. Under the Third Assignment, Omron assigned to Verve its right, title, and interest in 11 additional patents. SOF ¶ 28. Omron also granted to Verve an exclusive license to another 9 patents. SOF ¶ 29. Further, the Third Assignment amended and superseded certain provisions of the First and Second Assignments, under which the '895, '340, and '341 Patents originally had been assigned. SOF ¶ 30. Specifically, the Third Assignment clarified that: VERVE understands that OMRON'S license to [the patents] extends to OMRON's present customers and clients for the products and services they receive from OMRON. SOF ¶ 31 (emphasis added). The Third Assignment further clarified Omron's continuing
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Like the First Assignment, the Second Assignment also required Verve to maximize the Collected Licensing Revenue generated from the patents and pay Omron a percentage of the revenue generated by the sale, license, transfer or disposition of the '340 and '341 Patents. SOF ¶ 24. Mr. Galasso signed the Third Assignment on behalf of Verve on March 17, 2004, while Mr. Nakano signed on behalf of Omron on March 19, 2004. SOF ¶ 26.

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licensing rights: "OMRON is granted the right to sub-license and cross-license [the patents] to OMRON's present and future business partners and customers." SOF ¶ 32. To effectuate Omron's licensing rights, the Third Assignment included a "Right to Notice" provision which required Verve to notify Omron that it intended to contact, notice or file suit based on the patents assigned to Verve, and allowed Omron 30 days to determine whether the potential licensee was an Omron customer or client. 8 SOF ¶ 33. provision further clarified that: OMRON and VERVE agree and understand that prior to the effective date of this Agreement, VERVE has already provided OMRON the opportunity to determine whether certain potential licensees or parties were a present customer or client of OMRON and that VERVE has already contacted, notified or filed suit against such certain potential licensees or parties. SOF ¶ 34.
D.

This

The Addendum: Omron And Verve Amend The Third Assignment

On April 1, 2004, two weeks after executing the Third Assignment, Omron and Verve executed Addendum 1-033004 To Patent Assignment And License Agreement No. 031804 ("the Addendum"). SOF ¶ 36. The Addendum clarified the Third Assignment to expressly "grant OMRON the right to sub-license [the patents] to OMRON's present and future business partners and customers without limitation or waiver." SOF ¶ 38. More specifically, the Addendum provides: OMRON'S right to sub-license and cross-license applies also to those parties who are initially approved by OMRON under section 3.4 [of the Third Assignment], as well as those parties against whom VERVE has already filed suit. SOF ¶ 39. If Omron sought to sub- or cross-license a party that Verve had already sued for patent infringement, the Addendum required Omron to reimburse Verve "for all of its

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The Third Assignment also required Omron to provide to Verve, upon request, certain information related to the assigned patents: "OMRON shall deliver to VERVE non-confidential documentation pertaining to the ASSIGNED PATENTS and LICENSED PATENTS, including copies of non-confidential correspondence to or from potential licensees of the technology claimed in the ASSIGNED PATENTS and LICENSED PATENTS." SOF ¶ 35.

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reasonable third-party attorney fees, out-of-pocket costs and expert witness fees which VERVE has incurred in its attempts to obtain COLLECTED LICENSING REVENUE from the licensed party." SOF ¶ 40.
E.

Verve, As Assignee, Files Lawsuits To Enforce Assigned Patents Without Participation By Omron

On September 11, 2003, several weeks after Verve and Omron signed the First Assignment, Verve filed a lawsuit for infringement of the '895 Patent against Hypercom,
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Verifone, Inc., and Lipman USA, Inc., in the United States District Court for the Eastern
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District of Michigan ("the Michigan Action"). SOF ¶ 41. Verve alleged that Hypercom's
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"T7 Series Terminal" infringed the '895 Patent and that the "[d]efendants sell and offer to
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sell their infringing products in this judicial district and elsewhere in the United States."
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SOF ¶ 42. It is undisputed that Omron is not, and never has been, a party to the Michigan
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Action. And Omron has not participated in its prosecution by Verve. SOF ¶¶ 43, 60.
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On February 4, 2004, Verve filed a complaint against Hypercom in the U.S.
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District Court for the Western District of Texas ("the Texas Action"), alleging
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infringement of the '341 Patent. SOF ¶ 44. Verve also filed a complaint with the United
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States International Trade Commission on July 31, 2004 ("the ITC Action"), alleging that
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numerous defendants infringed another patent assigned to Verve by Omron. SOF ¶ 45. It
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is undisputed that Omron is not, and never has been, a party to the ITC or Texas Actions.
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Verve similarly prosecuted these lawsuits without participation by or coordination with
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Omron. SOF ¶ 46.
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F.

Hypercom's Extensive Discovery Regarding The Alleged Conspiracy Between Omron And Verve

On February 25, 2004, Hypercom filed its Original Complaint For Declaratory Judgment against Verve (but not Omron), requesting a declaratory judgment that Hypercom has not infringed the '895, '340, and '341 Patents. SOF ¶ 47. Verve moved to dismiss Hypercom's complaint on the basis that the Court lacked personal jurisdiction

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over Verve. SOF ¶ 48. After a round of briefing on the personal jurisdiction issue, on July 12, 2004, Hypercom filed its First Amended Complaint ("Amended Complaint"), adding Omron as a defendant and alleging that Omron conspired with Verve to "launch[] a campaign against Hypercom and others for the purpose of instituting costly and inconvenient litigation alleging multiple claims of patent infringement in order to secure 'settlements' that exact monetary tribute from Hypercom in order to stop Verve's harassment." SOF ¶¶ 1-2. On July 26, 2004, Verve filed a motion to stay discovery pending the Court's ruling on the motion to dismiss for lack of personal jurisdiction. SOF ¶ 49. Hypercom responded to the motion to stay on August 12, 2004, and argued that Verve's motion to dismiss was moot because the Amended Complaint alleged conduct by Verve and Omron, i.e., the conspiracy, that harmed Hypercom in Arizona. SOF ¶ 50. Hypercom

alternatively argued that discovery, if permitted, would reveal that Omron conspired with Verve to "fil[e] lawsuits against Hypercom in distant and inconvenient forums for purposes of harassment." SOF ¶ 51. On December 20, 2004, the Court held that the parties could conduct limited discovery on the conspiracy allegations.9 SOF ¶ 52. Hypercom since has conducted extensive discovery regarding its conspiracy allegation. On January 4 and 5, 2005, Hypercom served Omron and Verve with numerous requests for production and interrogatories. SOF ¶ 54. On February 15, 2005, Hypercom served Verve with additional requests for production. Id. For its part, Omron provided
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The scope of discovery authorized by the Court was as follows: Hypercom contends that if it is able to move forward with discovery regarding the jurisdictional issue, it will no doubt discover facts sufficient for this Court's exercise of personal jurisdiction over Verve. Specifically, Hypercom contends that the discovery will show that a conspiracy exists between Verve, its Texas attorneys and Defendant Omron to extort money from Hypercom with frivolous patent infringement claims and by filing multiple lawsuits against Hypercom in distant inconvenient forums. According to Hypercom, discovery will reveal that a number of the actions in furtherance of this conspiracy occurred in Arizona.

SOF ¶ 53.

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full and timely responses to Hypercom's discovery requests, including hundreds of pages of documents regarding all Assignment Agreements and related communications between Omron and Verve. Id. On March 2 and 3, 2005, Hypercom deposed a Rule 30(b)(6) corporate representative from Omron, Tetsuyuki Nakano. The topics noticed by

Hypercom for Mr. Nakano's deposition included, among others, every patent assigned by Omron to Verve and all agreements, written or otherwise, between Omron and Verve. SOF ¶ 55. On March 10 and 11, 2005, Hypercom deposed the two principals of Verve, Raymond Galasso and Kevin Imes. SOF ¶ 56.
III.

LEGAL ARGUMENT
A.

Omron Assigned Its Rights To The Patents To Verve In Accordance With Federal Law, And Such Assignments To Patent Holding Companies Are Recognized As Legitimate Business Practices For Generating Licensing Revenue

Federal law allows Omron, the patent owner, to assign its rights to the Patents: Applications for patent, patents, or any interest therein, shall be assignable in law by an instrument in writing. The applicant, patentee, or his assigns or legal representatives may in like manner grant and convey an exclusive right under his application for patent, or patents, to the whole or any specified part of the United States. 35 U.S.C. § 261 (1982) (emphasis added). In accordance with § 261, patent owners often assign their patents to patent holding companies in an effort to maximize revenues. See
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Xuan-Thao N. Nguyen, Holding Intellectual Property, 39 Ga. L. Rev. 1155, 1163 (2005);
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see also Robert A. Matthews, Jr., A Potential Hidden Cost Of A Patent-Holding
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Company: The Loss Of Lost-Profit Damages, 32 AIPLA Quarterly Journal 503, 504-06
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(Fall 2004) (discussing the benefits of assigning patents to separate patent-holding
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companies). Patent holding companies are companies that do not use, manufacture, or sell
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products covered by the patents they own. See Constance S. Huttner, et al., Proving
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Damages: Issues To Consider In Pursuing And Defending The Damages Case, Patents,
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Copyrights, Trademarks, and Literary Property Course Handbook Series, PLI Order No.
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6578, 841 PLI/Pat 871, 888 (Sept.-Nov. 2005). Instead of manufacturing or selling products, patent holding companies choose to exploit their rights through licensing and, if necessary, litigation. Id. "Thus, much of the offensive patent litigation . . . is brought by patent holding companies that have no [] products and exist solely to collect licensing revenues for patents that they have purchased from inventors." Ronald J. Mann, Do Patents Facilitate Financing In The Software Industry?, 83 Tex. L. Rev. 961, 1030 (2005). There are numerous legitimate business reasons for assigning patents to a holding company, one of which is to insulate the assigning company from involvement in litigation to enforce the patents. See Pamela S. Chestek, Control of Trademarks by the Intellectual Property Holding Company, 41 IDEA 1, 9 (2001); see also In re Express, Inc., DTA Nos. 812330, 812331, 812332 and 812334, 1995 WL 561501, *3 (N.Y. Dir. Tax App. Sept. 14, 1995) (noting that "the existence of a separate company to own the [intellectual property] also insured that the retail operations would not be dragged into such lawsuits, and would protect officers and directors of the retail operations from being harassed in litigations. . ."). In this case Verve is a patent holding company. SOF ¶ 6. Omron assigned its rights to patents to Verve. SOF ¶¶ 7-8, 18, 25, 36. The purpose of the assignments, per the terms of the written Assignment Assignments, was to generate revenue, a percentage of which Omron was contractually entitled to receive. SOF ¶¶ 16-17, 24. There is nothing wrong with this contractual arrangement. With this background in mind, Omron turns to the meritless conspiracy claims filed by Hypercom.
B.

Unrebutted Evidence Contradicts the Claim that Omron Conspired with Verve to File Frivolous Lawsuits Against Hypercom

The evidence that Omron did not participate in Verve's actions against Hypercom is uncontradicted. Omron's designated representative, its executive director Tetsuyuki
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Nakano, has affirmed that: (1) Omron did not participate in Verve's evaluation of potential
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infringement of the Omron-assigned patents; (2) in accordance with its contractual right, Omron only affirmed that Hypercom did not qualify as a business partner; and (3) Omron has not been involved, nor does it intend to become involved, in Verve's prosecution of any claim against Hypercom, including the ITC Action. SOF ¶¶ 57, 59-60. Similarly, Verve's principals, Raymond Galasso and/or Kevin Imes, testified in their depositions that: (1) Verve, rather than Omron, evaluated the Omron-assigned patents for potential infringement claims; (2) Verve did not coordinate any aspect of the infringement lawsuits with Omron; and (3) Verve did not inform Omron of its progress in prosecuting those suits. SOF ¶¶ 46, 58, 61. Nor is there evidence that Omron participated in Verve's evaluation of potential infringement of the Omron-assigned patents or that Omron participated in prosecuting claims for infringement of the assigned patents. Under Arizona law, a civil conspiracy requires "two or more people [to] agree to accomplish an unlawful purpose or to accomplish a lawful object by unlawful means, causing damages." Wells Fargo Bank v. Arizona Laborers, Teamsters and Cement

Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 498, 38 P.3d 12, 36 (2002) (internal citation omitted). Thus, "a claim for civil conspiracy must include an actual agreement, proven by clear and convincing evidence. . . . " Id. at 499, 38 P.3d at 37 (emphasis added). Where, as here, the record contains no evidence of a conspiratorial agreement, the defendant is entitled to judgment as a matter of law. See Estate of

Hernandez v. Flavio, 187 Ariz. 506, 512, 930 P.2d 1309, 1315 (1997) (en banc) (affirming summary judgment where plaintiffs' evidence had "insufficient probative value to warrant a finding by a reasonable jury" that the defendants entered a conspiratorial agreement); see generally Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (holding that "the clear-and-convincing standard of proof should be taken into account in ruling on summary judgment motions. . . ").

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Hypercom's Speculation About Undisclosed Conspiratorial Agreements Can Raise No Issue For Trial

Without direct evidence of a conspiracy, Hypercom has perpetuated this suit by speculating about shadow contracts and undisclosed agreements. This approach is

fruitless. After directing lengthy discovery to the alleged existence of a Verve-Omron conspiracy ? discovery including depositions of both Omron and Verve, and the exchange of documents reflecting Omron/Verve communications ­ Hypercom can show nothing more than Omron's pursuit of its rights and interests under the Assignments. The record contains no evidence that Omron assented to a campaign of frivolous and inconvenient lawsuits against Hypercom or anyone else.
1.

Alleged Communications Between Verve And Omron Offer No Direct Or Indirect Evidence Of Conspiracy

In its motion to compel the testimony of Omron's outside counsel, Hypercom presents several communications between Verve and Omron as evidence of an undisclosed conspiratorial agreement between them. Hypercom attempts to infer a

conspiracy, for example, from allegations that: (1) Omron was aware that Verve would file actions against Hypercom and with the International Trade Commission before it did; (2) Verve filed suit against Hypercom only six days after Omron assigned the patent to Verve; and (3) Omron's attorney suggested discussing "licensing strategy" with Verve. SOF ¶¶ 62-64. For several reasons, such "inferences" fail. First, the alleged conduct bears no logical relation to a Verve-Omron conspiracy. Nothing about Verve's pre-filing disclosure of any infringement actions to Omron could suggest they agreed to file frivolous lawsuits. Nor could the timing of Verve's actions or Omron's attempt to discuss undefined licensing strategies support a conspiracy claim. Hypercom can trace no inferential path from this conduct to any conclusion that Omron entered an assignment for the express purpose of profiting from a campaign of harassing

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litigation against non-infringers of the assigned patents. Nor could such conduct impugn testimonial evidence by Omron and Verve that the only agreements are those contained in the written Assignment Agreements, all of which have been disclosed. SOF ¶¶ 65-66. Second, the alleged communications are wholly consistent with the written assignments from Omron to Verve. Thus while Hypercom would cloak Verve's

communication of litigation targets with insinuation and suspicion, the Third Assignment itself provides a legitimate and non-collusive account of the parties' conduct. Under Section 3.4 of the Third Assignment, Verve provides Omron with a list of potential licensees, and the opportunity for Omron "to first determine within thirty (30) days after VERVE notifies OMRON whether a potential licensee is a present customer or client of OMRON prior to VERVE contacting, notifying, or filing suit against that potential licensee." SOF ¶ 33. Section 3.4 of the Third Assignment would thus explain any prefiling disclosure of Verve's ITC actions. It could not, however, suggest either that Omron directed Verve to file these actions, or that Omron was obligated to police Verve's conduct as its assignee. See generally In re Citric Acid Litigation, 191 F.3d 1090, 1104 (9th Cir. 1999) (noting that "evidence as consistent with legitimate behavior as illegal behavior cannot independently support an inference of conspiracy"). Verve's timing in filing the Michigan Action is equally consistent with the parties' rights under disclosed contracts. Once executed, the assignment authorized Verve to act alone. That Verve did so within a few weeks (or a few days, as Hypercom complains) may suggest it investigated potential infringers while negotiating to acquire the patent. But it cannot disclose anything about Omron's inclinations, much less that Omron had agreed to a campaign of frivolous litigation and harassment of non-infringers. Nor,

finally, does Omron's offer to discuss "licensing strategy" justify Hypercom's resort to secret agreements. Omron's financial interest in Verve licenses and Omron's right to prevent Verve from interfering with Omron licensees provide legitimate and sufficient

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reasons for Omron to discuss "licensing strategy."

See SOF ¶¶ 16-17, 24, 31-34.

Evidence that Omron acted to protect its contractual interests simply cannot demonstrate any undisclosed, pre-existing agreement to a course of frivolous lawsuits by Verve. See generally Richards v. Neilsen Freight Lines, 810 F.2d 898, 904 (9th Cir. 1987) (holding, in the context of antitrust claim, that conduct "as consistent with permissible competitive behavior as with illegal conspiracy does not, without more, support an inference of conspiracy"). Hypercom has prosecuted this action by pointing to Omron's assertion of legitimate contract rights to conjure illegitimate ones. Under Rule 56, this is insufficient. See generally Matsushita Electric

Speculation cannot entitle Hypercom to a trial.

Industrial Co., Ltd., v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348 (1986) ("[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial") (internal quotations, citations omitted); Anderson, 477 U.S. at 252 (noting that the "mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient").
2.

Assignment Agreements Between Omron And Verve Cannot Support Hypercom's Conspiracy Theory

In addition to the parties' conduct under the agreements, Hypercom invokes the assignments themselves as proof of the alleged conspiracy. Hypercom has argued, for
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example, that the interests retained by Omron in the assigned patents "support[] the
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inference that Verve and Omron have, in fact, conspired to extort money from Hypercom .
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. . based on specious patent infringement claims." SOF ¶ 67. Such arguments confuse
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inference and innuendo.
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Neither the assignments themselves nor the limited rights

retained by Omron suggest any concerted activity. Indeed, as already discussed, the assignments at issue are expressly authorized by federal law. See 35 U.S.C. § 261.
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Assigning patents to patent holding companies for the purpose of generating revenue,
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whether the revenue is generated through licensing agreements freely negotiated with companies interested in utilizing a patent or through patent infringement lawsuits, is entirely legitimate, and there is no legal precedent holding otherwise. Hypercom further asserts that Verve received no consideration for additional rights granted to Omron in the Addendum, and concludes that "unwritten agreements or understandings between the co-conspirators [] have not been disclosed." SOF ¶ 68. The Addendum, however, recites the very consideration it allegedly lacks. In the Third

Assignment, Omron retained the right to receive 30 days' notice of potential Verve actions on the patents, and thus the ability to protect business partners and customers, to whom it could sub- or cross-license the patents. SOF ¶¶ 32-34. 10 The Addendum clarified

Omron's right to sub- or cross-license the patents to business partners and customers even after Verve had filed suit, but only in exchange for the duty to reimburse Verve's litigation costs.11 SOF ¶¶ 38-40. Verve, in essence, gave no more than it got. And even were Verve's motives oblique, they could not suggest a conspiracy. Under the most liberal construction of inference, Verve's after-the-fact grant of additional rights to Omron would not be evidence that Omron formed a covenant at any time to pursue baseless litigation with Verve. Compare Wells Fargo, 201 Ariz. at 499, 38 P.3d at 37 (affirming summary judgment in favor of defendant despite suspicious conduct where "evidence of an agreed upon conspiratorial arrangement [could not] rise to the clear and convincing level"). To avoid summary judgment, a plaintiff alleging a civil conspiracy must offer more than suspicious or unexplained conduct. Id. at 498-99, 38 P.2d at 36-37 (holding

suspicious conduct and knowing participation in action that substantially aids commission
10

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Specifically, Omron retained the right to receive 30 days' notice "of any potential licensee which VERVE intends to contact, notice or file suit against" and the right to "sub-license and cross-license [the patents] to [its] present and future business partners" (thus rendering moot a potential infringement action by Verve). SOF ¶¶ 33-34. This agreement, moreover, is consistent with the broader contractual interests of the parties as evidenced by the numerous assignment agreements themselves.

11

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of tort insufficient to avert summary judgment on conspiracy claim).12 Hypercom offers less. Despite extensive discovery on the alleged conspiracy, Hypercom's claims begin and end with disclosed agreements that left Omron without any means of initiating or participating in litigation over the assigned patents, and without any duty to oversee the conduct of its assignee. A reasonable jury could not find a civil conspiracy on this record. Accordingly, Omron is entitled to judgment on Hypercom's conspiracy claims as a matter of law. See generally Fonda v. Gray, 707 F.2d 435, 439 (9th Cir. 1983) (affirming summary judgment where plaintiff did not produce evidence of a "meeting of the minds" to accomplish wrongful purpose).
D.

Omron Has Not Explicitly Threatened To Sue Hypercom, And Thus Hypercom's Declaratory Judgment Claims Fail For Lack Of SubjectMatter Jurisdiction

In addition to relief from the alleged conspiracy between Omron and Verve, Hypercom's complaint seeks "a declaration of noninfringement and/or invalidity" under 28 U.S.C. § 2201 with respect to the Omron-assigned patents. SOF ¶ 3. The Court's jurisdiction under section 2201(a), however, extends only to those cases in which there is an "actual controversy" between the parties. 28 U.S.C. § 2201(a). No controversy exists here. Omron has made no "explicit threat" against Hypercom, and has engaged in no conduct that could create any reasonable apprehension it would sue Hypercom for infringement. Id.; GAF Building Materials Corp. v. Elk Corp. of Dallas, 90 F.3d 479, 481 (Fed. Cir. 1996); see also Arrowhead Industrial Water, Inc. v. Ecolochem, Inc., 846 F. 2d 731, 736 (Fed. Cir. 1988) ("conduct . . . must be such as to indicate [the
12

In Wells Fargo, the Arizona Supreme Court found triable evidence that an "interim lender" bank aided and abetted the borrower-developer's fraud against the "permanent lender" by taking certain actions that made the borrower's financial condition appear healthier than it was. Wells Fargo, 201 Ariz. at 490, 38 P.3d at 28 (finding triable issue regarding aiding and abetting where interim lender failed to foreclose following borrower's default on a subsidiary loan, and failed to disclose falsity of borrower's financial statements to permanent lender before it assumed developer's loan under triparty agreement). Despite correspondence between the borrower and the bank that suggested a cooperative course of action would protect both their interests, the court did not find triable evidence of a civil conspiracy. Id.

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defendant's] intent to enforce its patent.") Accordingly, the Court lacks subject matter jurisdiction over Hypercom's declaratory relief claims, and those claims must be dismissed. West Interactive Corp. v. First Data Resources, Inc., 972 F.2d 1295, 1297 (Fed. Cir. 1992).
IV.

CONCLUSION In suing Omron for allegedly conspiring to litigate frivolous lawsuits, Hypercom

has prosecuted a baseless action of its own. For this and reasons set out above, Omron respectfully requests that it be granted judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (holding that in response to motion for summary judgment, the nonmovant must make a showing sufficient to establish any essential element for which she will bear the burden of proof at trial). Respectfully submitted this 18th day of November, 2005, FENNEMORE CRAIG By: s/Ray K. Harris Ray Harris Paul Moore 3003 North Central Avenue Suite 2600 Phoenix, AZ 85012-2913

BAKER & DANIELS LLP David P. Irmscher John K. Henning 111 Easy Wayne Street Suite 800 Fort Wayne, IN 46802 Attorneys for the defendant, Omron Corporation

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CERTIFICATE OF SERVICE I hereby certify that on November 18, 2005, I electronically transmitted the attached documents to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Sid Leach Michael K. Kelly SNELL & WILMER L.L.P. One Arizona Center 400 East Van Buren Phoenix, AZ 85004-2202

I hereby certify that on November 18, 2005, I served the attached document by mail on the following, who are not registered participants of the CM/ECF System: Peter Henry Schelstraete SCHELSTRAETE LAW OFFICE 1949 East Broadway Suite 107 Tempe, AZ 85282-0001 Christopher S. Walton, Esq. Gregory S. Donahue, Esq. SIMON, GALASSO & FRANTZ, PLC 115 Wild Basin Road Suite 107 Austin, TX 78703

/s/ Julia Lawson
21
PHX/RHARRIS/1734745.1/12623.001

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