Free Order on Motion to Dismiss Case/Lack of Jurisdiction - District Court of Arizona - Arizona

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

) ) Plaintiff, ) ) vs. ) ) Verve L.L.C. and Omron ) Corporation, ) ) Defendants. ) ____________________________)

Hypercom Corporation,

No. 04-CV-0400-PHX-PGR ORDER

Pending before the Court is Defendant Omron Corporation's Motion to Dismiss for Lack of Subject Matter Jurisdiction (Doc. 31). The Court now rules on the motion. I. INTRODUCTION In its First Amended Complaint, the Plaintiff Hypercom alleges that Verve, with the assistance and agreement of Omron, has launched a campaign against Hypercom and others for the purpose of instituting costly and inconvenient litigation alleging multiple claims of patent infringement. According to Hypercom, the purpose behind instituting these various patent infringement lawsuits is to secure settlements that extract monetary tribute from Hypercom in order to stop the harassment. Through this complaint, Hypercom seeks to obtain a declaratory judgment from this Court stating that the patents-in-suit are not infringed, that Hypercom is not liable for infringement of any of the patents-in-suit or any other patent asserted by Verve, that Verve and its attorneys and members be enjoined from filing further patent infringement suits against Hypercom, that Omron be enjoined from
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conspiring with Verve to file any further patent infringement suits against Hypercom, and that Plaintiff be awarded its actual and compensatory damages, punitive damages, and its attorneys' fees and costs. Omron filed the present Motion to Dismiss for Lack of Subject Matter Jurisdiction shortly after Hypercom amended its complaint to add Omron as a Defendant. It is Omron's position that Hypercom has failed to allege an actual controversy against it; therefore, the Court lacks jurisdiction over the claims asserted against Omron. II. LEGAL STANDARD AND ANALYSIS On a motion to dismiss under Rule 12(b)(1), the plaintiff's allegations must be taken as true unless the movant properly attacks the factual allegations contained in the complaint. See, e.g., St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989). To attack the factual allegations, the moving party must present affidavits or other evidence demonstrating the absence of jurisdiction. Id. Although the burden is on the plaintiff to establish that subject matter jurisdiction exists, that burden is met when the plaintiff pleads facts establishing such jurisdiction and the movant does not submit affidavits or any other evidence controverting those allegations. Id. In the case at hand, the Plaintiff alleges that Verve, in conspiracy with Omron, has instituted costly, purposefully inconvenient, and multiplicative litigation against it for the purpose of extorting money from Hypercom. Therefore, taking the allegations in the First Amended Complaint as true, as the Court is required to do for purposes of a motion to dismiss, an actual controversy does exist between Omron and Hypercom. In addition, where a complaint alleges that a conspiracy exists, and the movant fails to present affidavits or other evidence denying that it was a member of the conspiracy, the Court must accept the existence of the conspiracy for the purpose of ruling on the motion. Beltz Travel Service, Inc. v. International Air Transport, 620 F.2d 1360, 1366-65 (9th Cir. 1980). Such is the situation at hand. According to Hypercom, Defendant Verve, in conspiracy with Omron, has filed patent infringement actions against Hypercom in Michigan, Texas, and California. Because
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Hypercom's First Amended Complaint claims that these suits are a product of the conspiracy between Verve and Omron to extort money from Hypercom, an actual controversy exists between the parties and subject matter jurisdiction is present. Furthermore, Omron failed to controvert Hypercom's allegations with affidavits or other evidence; therefore, Hypercom's allegations, taken as true, establish subject matter jurisdiction over this controversy. In its motion, Omron relies on West Interactive Corp. v. First Data Resources, Inc., 972 F.2d 1295 (9th Cir. 1992), for the proposition that, for a court to have subject matter jurisdiction over a patent owner in a declaratory judgment action, the patent owner must have knowledge of the licensee's actions that establish a reasonable apprehension of suit. It is Omron's position that it has engaged in no conduct that could support a reasonable apprehension of litigation. However, Omron's reliance on West Interactive, in an effort to persuade the Court that subject matter jurisdiction is lacking, is misplaced. In West Interactive, the Ninth Circuit found that there was no case or controversy where a patent owner sought a declaratory judgment against the parent, First Data, of a company, Call Interactive, that threatened suit against the patent owner. Id. The court based its decision in part on the fact that the record contained no evidence which would justify attributing the subsidiary's conduct to the parent. Id. The present situation is distinguishable. Here, Hypercom has alleged that Omron not only knew of Verve's behavior, it conspired with Verve for the purpose of instigating patent infringement suits to extort money from Hypercom. This is more than a declaratory judgment action because a civil conspiracy has been alleged. Accordingly, IT IS ORDERED that Omron's Motion to Dismiss for Lack of Subject Matter Jurisdiction (Doc. 31) is DENIED. Dated this 9th day of August, 2005.

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