Free Opening Brief in Support - District Court of Delaware - Delaware

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE LIVEPERSON, INC., Plaintiff v. NEXTCARD, LLC and MARSHALL CREDIT STRATEGIES, LLC, Defendants. ) ) ) ) ) ) Civil Action No. 08-062 (GMS) ) ) ) ) )

OPENING BRIEF OF DEFENDANT MARSHALL CREDIT STRATEGIES, LLC IN SUPPORT OF ITS MOTION TO DISMISS

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 Donald Puckett State Bar No. 24013358 Brent N. Bumgardner State Bar. No. 00795272 The Ware Firm 1701 North Market Street Suite 330 Dallas, Texas 75202-2088 (214)744-5000 Attorneys for Defendant Marshall Credit Strategies, LLC Dated: April 7, 2008

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TABLE OF CONTENTS

NATURE AND STAGE OF THE PROCEEDING.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SUMMARY OF ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 I. MCS IS NOT A PROPER PARTY TO THIS LAWSUIT AND MUST BE DISMISSED .......................................................................4 THIS COURT LACKS PERSONAL JURISDICTION OVER MCS. . . . . . . . . . . . . . . . . 5 A. B. PERSONAL JURISDICTION EVIDENCE AND STANDARDS. . . . . . . . . . . . . 5 MCS'S CONTACTS WITH DELAWARE DO NOT GIVE RISE TO SPECIFIC JURISDICTION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 MCS IS NOT SUBJECT TO GENERAL JURISDICTION IN DELAWARE. . . 11

II.

C. III.

LIVEPERSON'S DECLARATORY ACTION CANNOT BE MAINTAINED BECAUSE THERE IS NO "ACTUAL CONTROVERSY" BETWEEN LIVEPERSON AND MCS.12

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

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TABLE OF AUTHORITIES Cases Breckenridge Pharmaceuticals, Inc. v. Metabolite Lab's, Inc., 444 F.3d 1356 (Fed. Cir. 2006). . 5 Electronics For Imaging, Inc. v. Coyle, 340 F.3d 1344 (Fed. Cir. 2003). . . . . . . . . . . . . . . . . . . . 5 EMS-American Grilon, Inc. v. EMS-Chemie AG, C.A. No. 89-2190, 1989 WL 230919, Barry, J. (D.N.J. Oct. 3, 1989). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408 (1984). . . . . . . . . . . . . . . . . . 11 MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764 (2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 O'Connor v. Sandy Lane Hotel Co., 496 F.3d 312 (3d Cir 2007). . . . . . . . . . . . . . . . . . . . . . . . 6, 8 Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998). . . . . . 6, 8, 9 Silent Drive, Inc. v. Strong Industries, Inc., 326 F.3d 1194 (Fed. Cir. 2003). . . . . . . . . . . . . . . . 10 Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuticals Corp., 482 F.3d 1330 (Fed. Cir 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Other authorities 35 U.S.C. §271(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

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NATURE AND STAGE OF THE PROCEEDING On January 29, 2008, plaintiff LivePerson Inc. ("LivePerson") filed the present action against NextCard, LLC ("NextCard") and Marshall Credit Strategies, LLC ("MCS"). Liveperson filed an Amended Complaint on March 18, 2008. On March 24, 2008, the Court approved a Stipulation to Extend Time for filing a response to the Amended Complaint. On April 7, 2008, MCS filed a motion to dismiss the Amended Complaint. This is MCS' opening brief in support of its motion to dismiss.

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SUMMARY OF ARGUMENT 1. MCS has no ownership interest in the Patents-In-Suit. This is stated on the face of

LivePerson's complaint, and is verified by the affidavit proof attached hereto. MCS has assigned all of its former interest in and to the Patents-In-Suit to Defendant NextCard, LLC. MCS therefore is not a proper party to this lawsuit. 2. This Court lacks personal jurisdiction over MCS. MCS's only connection with

Delaware is the fact that MCS purchased the Patents-In-Suit out of a Delaware bankruptcy. LivePerson's lawsuit, however, seeks an adjudication of the substantive scope of the patents' claims, and the validity of the patents themselves. Thus, this lawsuit has only the most tangential connection to MCS's Delaware contacts. Personal jurisdiction is not proper because LivePerson's claims do not "arise out of or relate to" MCS's contacts with Delaware, as required for specific jurisdiction. 3. This case must be dismissed because there is no "actual controversy" between

LivePerson and MCS. LivePerson's "actual controversy" allegations are made "on information and belief" and thus raise a red flag. LivePerson has not alleged or otherwise shown an actual connection between the claims NextCard, LLC (not MCS) has asserted in Texas and LivePerson's own products or services. NextCard, LLC's Texas complaint does not name LivePerson or otherwise accuse LivePerson's products of infringement. NextCard, LLC has not served infringement contentions in Texas accusing LivePerson of infringement. Neither MCS nor NextCard, LLC has ever accused LivePerson of infringement or offered to license the Patents-In-Suit to LivePerson. Indeed, neither MCS nor NextCard, LLC has ever communicated with LivePerson in any way. Thus, LivePerson's supposed controversy with MCS is based on speculation and surmise, and the case is not ripe for judicial resolution. 2

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STATEMENT OF FACTS LivePerson alleges that MCS purchased two patents, Patent Nos. 6,718,313 and 7,346,576 out of the bankruptcy proceedings in the U.S. District Court for the District of Delaware in the matter of NextCard, Inc., No. 02-13376-KJC. (Amended Complaint ¶¶6, 8), and then "purportedly assigned the rights in the `313 and `576 Patents to NextCard, LLC." (Amended Complaint ¶9). NextCard is controlled by Warbler Technologies, L.P., a Texas limited partnership that is controlled by CPMG, Inc. (Amended Complaint ¶9). LivePerson further alleges that NextCard has sued several individuals in the U.S. District Court for the Eastern District of Texas, claiming infringement of the `313 patent. (Amended Complaint ¶10). LivePerson further alleges that "[o]n information and belief, NextCard, LLC will accuse technology in the Texas Litigation made, used and/or sold by LivePerson, in particular, LivePerson's products which facilitate provision of online chat services...." (Amended Complaint ¶12).

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ARGUMENT I. MCS IS NOT A PROPER PARTY TO THIS LAWSUIT AND MUST BE DISMISSED. MCS has no current ownership interest in the Patents-In-Suit. This is set forth on the face of LivePerson's Amended Complaint. (Amended Complaint at ¶9, "On information and belief, on March 23, 2007 . . . MCS purportedly assigned the rights in the `313 and `576 Patents to NextCard, LLC"). This is confirmed by the affidavit proof attached hereto. (Traweek Aff. at ¶¶6-7). MCS has no interest in the NextCard Patents whatsoever. (Id.). LivePerson's Amended Complaint completely fails to set forth any basis for why MCS is a proper party to this lawsuit. Because MCS has divested itself of any ownership interest in the patents, and retains no other interest in the patents whatsoever, there is no actual controversy between LivePerson and MCS, and MCS must be dismissed as a party to this lawsuit. See EMSAmerican Grilon, Inc. v. EMS-Chemie AG, C.A. No. 89-2190, 1989 WL 230919, WL Op. at *1, Barry, J. (D.N.J. Oct. 3, 1989) ("when a party divests itself of all of its interest in a patent . . . that same party does not retain a sufficient stake in the outcome of an infringement controversy to require it to remain as a defendant to the action, and no case or controversy can be said to exist between the parties"). Accordingly, MCS must be immediately dismissed from this lawsuit.

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II.

THIS COURT LACKS PERSONAL JURISDICTION OVER MCS. A. PERSONAL JURISDICTION EVIDENCE AND STANDARDS.

The Court is familiar with the standards concerning personal jurisdiction, so MCS will not belabor the issue. In patent cases, personal jurisdiction must be determined according to the law of the Federal Circuit. See Breckenridge Pharmaceuticals, Inc. v. Metabolite Lab's, Inc., 444 F.3d 1356, 1361 (Fed. Cir. 2006). Once jurisdiction is challenged, the plaintiff bears the burden of coming forward with evidence supporting the Court's jurisdiction. See Electronics For Imaging, Inc. v. Coyle, 340 F.3d 1344, 1349 (Fed. Cir. 2003). If the district court does not hold an evidentiary hearing, the plaintiff must only establish a prima facie case of jurisdiction. See id. For proof, the plaintiff's

uncontradicted allegations from the complaint are taken as true, but the defendant may contradict those allegations with affidavit proof. See id. If the plaintiff also submits affidavit proof or other competent evidence, factual disputes in the evidentiary proof must be resolved in the plaintiff's favor. See id. A plaintiff may demonstrate the court's personal jurisdiction by showing either general jurisdiction or specific jurisdiction. See Breckenridge, 444 F.3d at 1360-61. B. MCS'S CONTACTS WITH DELAWARE DO NOT GIVE RISE TO SPECIFIC JURISDICTION.

The mere fact that MCS purchased the Patents-In-Suit out of a Delaware bankruptcy proceeding does not give the courts of Delaware personal jurisdiction over MCS with respect to all substantive patent disputes. MCS's contacts with Delaware are related to this lawsuit in only the most tangential way. Under the applicable Federal Circuit cases, there is no question that this Court

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lacks personal jurisdiction over MCS for purposes of this action for declaratory relief on substantive patent issues. See, e.g., Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355 (Fed. Cir. 1998) (holding that personal jurisdiction was not proper for a declaratory judgment action even where the patent holder had sent three letters regarding the patent to the plaintiff in the forum). LivePerson apparently believes that because MCS purchased the Patents-In-Suit in Delaware, Delaware courts have jurisdiction over MCS for any substantive dispute related to the patents. (Amended Complaint at ¶6). Counsel for Defendants is unaware of any case authority supporting LivePerson's position. Defendants respectfully contend that LivePerson is asking this Court to embrace a theory of personal jurisdiction that has never been recognized by any court. To determine whether the court has specific jurisdiction over a defendant, "a court must inquire whether the defendant has `purposefully directed his activities' at the forum state and, if so whether `the litigation results from alleged injuries that arise out of or relate to those activities.'" Breckenridge, 444 F.3d at 1361-62. "Then, to defeat jurisdiction, the burden of proof shifts to the defendant, which must `present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.'" Id. at 1362.1 In this case, the Court does not have specific jurisdiction over MCS because LivePerson's claims for declaratory relief do not "arise out of or relate to" MCS's contacts with Delaware. Although MCS purposefully directed a few limited activities toward Delaware (namely, its purchase of the NextCard Patents out of a Delaware bankruptcy estate), this lawsuit does not arise out of or relate to those contacts. If LivePerson were seeking a declaration disputing title to the NextCard
1

The Federal Circuit's articulation of the specific jurisdiction analysis largely mirrors the three-part inquiry articulated by the Third Circuit. See O'Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 316 (3d Cir 2007). 6

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Patents, asserting for example that the assignment out of Delaware bankruptcy court was invalid, then this hypothetical cause of action would arise out of or relate to NextCard's contacts with Delaware, and specific jurisdiction would arguably be proper. LivePerson's Amended Complaint, however, asserts something far different ­ claims for declaratory relief for patent invalidity and non-infringement. LivePerson's claim for a declaration regarding the validity of the Patents-In-Suit essentially seeks to overturn the decisions of a federal administrative agency, the U.S. Patent and Trademark Office, to issue the `313 and `576 patents in the first instance, and thus arises from the USPTO's administrative decision to allow the patent to issue. LivePerson's claim regarding infringement of these patents arises from its own making, using and selling of potentially infringing products. See Red Wing Shoe, 148 F.3d at 1360. Neither of these substantive patent claims arises from or is related to the mere fact that MCS happened to purchase the NextCard Patents from a Delaware bankruptcy estate. MCS's only contact with Delaware ­ the purchase of the patents -- is entirely incidental to LivePerson's substantive claims. Alternatively, if one views LivePerson's declaratory claims as arising out the facts that create LivePerson's apprehension of being sued for patent infringement,2 then those facts all occurred in Texas.3 LivePerson's Amended Complaint alleges, on information and belief, that NextCard LLC has accused LivePerson's technology of infringement in the Texas lawsuit. (Amended Complaint at ¶11-12). That is the only basis, if any, for LivePerson's apprehension of suit. But those facts

See, e.g. Red Wing Shoe, 145 F.3d at 1360 (holding that, for purposes of determining personal jurisdiction, a claim for declaratory relied on a patent may arise from or be related to "cease-and-desist" letters written by the patentee to the declaratory relief plaintiff in the forum).
3

2

As discussed in Section III below, MCS disputes that an actual controversy exists at all. 7

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cannot possibly create jurisdiction over MCS in Delaware for two reasons: (1) those acts occurred in Texas, not Delaware and (2) the Texas lawsuit was filed by NextCard, LLC, not MCS. Although Third Circuit authority is not binding in this case, the Third Circuit has recently discussed the tests applied by various courts to determine whether a cause of action "arises out of or relates to" the defendant's purposeful contacts with the forum. See O'Connor, 496 F.3d at 31823. Under the test articulated by the Third Circuit, a district court must look at whether the defendant's contacts with the forum are a "but-for cause" of the plaintiff's claims. Id. at 322. The "but-for cause" test, however, is over-inclusive. Id. Thus, if the "but-for cause" test is met, the district court must further look at whether the defendant's contacts with the forum are sufficiently related to the plaintiff's cause of action such that the exercise of jurisdiction would be reasonable. Id. at 322-23. The facts of this case clearly fail the Third Circuit's test. MCS's only contact with Delaware ­ the purchase of the NextCard Patents ­ is not a "but-for cause" of LivePerson's claims. Even absent MCS's purchase of the patents, LivePerson would have a potential declaratory judgment claim against MCS's predecessor-in-title for the exact same claims it asserts here. Thus, MCS's purchase of the patents is not a but-for-cause of LivePerson's claims. MCS's purchase of the patents effects who LivePerson can sue, but did not give rise to the cause of action itself. As explained above, LivePerson's substantive patent claims arise from the U.S. Patent and Trademark Office's decision to allow the patent to issue, and from LivePerson's own sale of potentially infringing products. Moreover, even if MCS's purchase of the patents is viewed as a "but-for cause" of the claims, the purchase of the patent is not sufficiently related to LivePerson's substantive patent claims to 8

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make the exercise of jurisdiction in Delaware fair or reasonable. MCS did not avail itself of the privileges of doing business in Delaware in such a way as to make it reasonable for MCS to expect to be haled into court in Delaware on any substantive patent issue that arises in connection with the NextCard Patents. This latter point is further supported by the Federal Circuit's analysis of the "fair play and substantial justice" prong of the specific jurisdiction inquiry.4 In Red Wing Shoe Co., Inc., the patent holder was sued for declaratory relief in Minnesota. The patent holder had engaged in extensive correspondence with the plaintiff, sending three letters to Minnesota in which the patent holder accused the plaintiff of infringement and offered a non-exclusive license. 148 F.3d at 1357. The plaintiff filed an action for declaratory relief of non-infringement and invalidity. The Federal Circuit, however, found the district court lacked jurisdiction over the out-of-state patent holder based upon the "fair play and substantial justice" requirement for personal jurisdiction. Id. at 1360-61. The court held: Thus, even though cease-and-desist letters alone are often substantially related to the cause of action [for declaratory relief] (thus providing minimum contacts), the "minimum requirements inherent in the concept of `fair play and substantial justice' . . . defeat the reasonableness of jurisdiction." . . . Principles of fair play and substantial justice afford a patentee substantial latitude to inform
4

Even though the substantive considerations are similar, there is an important procedural difference between the Third Circuit's relatedness component of the "arise out of or related to" test and the "fair play and substantial justice" component of the specific jurisdiction analysis. The difference involves the burden of proof. The former test relates to the plaintiff's burden to demonstrate minimum contacts, and therefore it is the plaintiff's burden to demonstrate the relatedness between the jurisdictional contacts and the cause of action to show that the cause of action "arises from or relates to" the claims. See, e.g., Breckenridge, 444 F.3d at 1361-62. On the other hand, the "fair play and substantial justice" inquiry is relevant only after the plaintiff has demonstrated minimum contacts, and it then becomes the defendant's burden to show a "compelling case" that fair play and substantial justice factors weigh against the exercise of jurisdiction. Id. 9

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others of its patent rights without subjecting itself to jurisdiction in a foreign forum. A patentee should not subject itself to personal jurisdiction in a forum solely by informing a party who happens to be located there of suspected infringement. Grounding personal jurisdiction on such contacts alone would not comport with principles of fairness. Id. at 1360-61. This holding from Red Wing Shoe reflects "policy considerations unique to the patent context. . . . The patent system has national application. If infringement letters created jurisdiction, the patentee could be haled into court anywhere the letters were sent." Silent Drive, Inc. v. Strong Industries, Inc., 326 F.3d 1194, 1206 (Fed. Cir. 2003). If the patent holder's jurisdictional contacts were insufficient to support specific jurisdiction in Red Wing Shoe, then specific jurisdiction must also fail on the facts of this case. The connection between MCS's Delaware contacts and LivePerson's declaratory causes of action are much more attenuated. The fact that NextCard, Inc.'s bankruptcy was pending in Delaware, requiring MCS to purchase the patents out of a Delaware bankruptcy, bears no relation whatsoever to LivePerson's declaratory claims dealing with substantive patent issues. MCS respectfully submits that it would be error for this Court to make new law to hold that the mere purchase of a patent within a judicial district subjects the patent holder to jurisdiction within the forum for any declaratory cause of action involving substantive patent issues. For the reasons stated above, this would violate due process because: (1) the declaratory cause of action on substantive patent issues does not arise out of or relate to the jurisdictional contacts, and (2) this would not be consistent with fair play and substantial justice.

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C.

MCS IS NOT SUBJECT TO GENERAL JURISDICTION IN DELAWARE.

It goes without saying that MCS is not subject to general jurisdiction in Delaware. A defendant is subject to general jurisdiction only where its contacts with the forum are "continuous and systematic." See Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414-16 (1984). In this case, MCS's only contacts with Delaware involve the single event of purchasing the NextCard Patents. (Traweek Aff. at ¶¶8-10) Other than this single transaction, MCS has not engaged in any business in Delaware. (Id.). MCS does not have any offices, employees, real estate, or any other assets in Delaware. (Id. at ¶10). MCS has never derived any revenue from any activities in Delaware. (Id.). Given these facts, there is not doubt that MCS is not subject to general jurisdiction in Delaware.

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III.

LIVEPERSON'S DECLARATORY ACTION CANNOT BE MAINTAINED BECAUSE THERE IS NO "ACTUAL CONTROVERSY" BETWEEN LIVEPERSON AND MCS. Federal courts only have jurisdiction to decide cases in which there is an "actual

controversy." See Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuticals Corp., 482 F.3d 1330, 1336 (Fed. Cir 2007). The "actual controversy" requirement necessitates that the party bringing suit have standing and that the issue presented to the court be ripe for judicial determination. Id. at 1337. Federal courts are prohibited from issuing advisory opinions. Id. at 1337-38. "Although there can be a fine line between declaratory judgments and advisory opinions, the Supreme Court maintains the necessity of avoiding issuing advisory opinions based upon hypothetical facts." Id. at 1338. "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." MedImmune, Inc. v. Genentech, Inc., 127 S.Ct. 764, 771 (2006). 5 In this case, LivePerson's complaint does not allege facts necessary to show that it has standing to bring this action for declaratory relief. LivePerson alleges "On information and belief, NextCard, LLC has accused technology in the Texas Litigation made, used and/or sold by LivePerson, in particular, LivePerson's Timpani product line . . . ." (Amended Complaint at ¶11, emphasis added). LivePerson further alleges: "On information and belief, NextCard, LLC has threatened defendants in the Texas Litigation with infringement of the `576 Patent . . . ." (Id.,

5

The MedImmune case effectively overruled the Federal Circuit's previous "reasonableapprehension-of-suit" test for determining when an actual controversy exists for a declaratory judgment action. See Teva, 482 F.3d at 1338-39 (finding that MedImmune overruled prior Federal Circuit authority). 12

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emphasis added). LivePerson further alleges: "On information and belief, NextCard, LLC will accuse technology in the Texas Litigation made, used and/or sold by LivePerson, in particular, LivePerson's products which facilitate provision of online chat services . . . ." (Amended Complaint at ¶12). The fact that LivePerson is required to allege its "actual controversy" allegations "on information and belief" should be a red flag to the Court that this dispute is not presently ripe for judicial resolution. LivePerson is not even certain that NextCard has accused methods and systems of infringement that have any connection with LivePerson's software. This is because NextCard, LLC's Texas Complaint and Amended Complaints do not name LivePerson as a party, and they do not mention LivePerson's product offerings in any way. (Bateman Aff. at ¶19 and attached Texas Complaints). NextCard, LLC has not yet served infringement contentions in the Texas lawsuit, and thus it has not articulated the particular manner in which it alleges that each named defendant infringes the Patents-In-Suit. (Id. at ¶20). NextCard, LLC has not yet had the opportunity to inspect the software implemented by each of the named defendants, or otherwise to take discovery regarding their software, and thus NextCard, LLC has no basis to know, one way or the other, whether LivePerson supplies software to the defendants that NextCard, LLC will accuse of infringement. (Id.). Moreover, neither MCS nor NextCard, LLC have ever communicated with LivePerson in any way. (Traweek Aff. at ¶21; Bateman Aff. at ¶18). Neither MCS nor NextCard, LLC has ever directly accused LivePerson of infringing the Patents-In-Suit, or offered a license to LivePerson. (Id.) Neither MCS nor NextCard, LLC has ever communicated to any third party that LivePerson has

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infringed the Patents-In-Suit. (Id.) LivePerson therefore has no reasonable apprehension that NextCard, LLC is likely to file an imminent lawsuit for patent infringement against LivePerson. LivePerson alleges that the "Texas Litigation has placed a cloud over LivePerson's technology" and that the Texas lawsuit "is likely to cause confusion in the marketplace" and "cloud LivePerson's ability to provide hassle-free service to its customers . . . ." (Amended Complaint at ¶14). In light of the foregoing, however, this is pure speculation and surmise. LivePerson has failed to plead a connection between its own products and services and the allegations set forth in NextCard, LLC's Texas Complaint.6 Absent that connection, there is no "actual controversy" between MCS and NextCard, LLC, on the one hand, and LivePerson on the other hand. Accordingly, this case must be dismissed.

6

Even if LivePerson supplies the software used by the defendants in the Texas lawsuit to carry out the steps of the patent claims, this does not in itself mean that LivePerson has infringed the claims. Under 35 U.S.C. §271(a), a person infringes a patent if the person "makes, uses, offers to sell, or sells" a patented invention. Thus, unless LivePerson has a basis to believe it has itself carried out the steps of the method claims, or has assembled the components of the apparatus claims, than there is no actual controversy. 14

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CONCLUSION WHEREFORE, for the foregoing reasons, the claims against MCS must be dismissed. MCS is not a proper party to this lawsuit because it retains no ownership interest in the Patents-In-Suit at all. Moreover, this Court lacks personal jurisdiction over MCS for purposes of LivePerson's declaratory claims seeking to resolve substantive patent issues. LivePerson's claims do not "arise out of or relate to" MCS's contacts with Delaware, because MCS's only contact with Delaware is the purchase of the patent. Furthermore, this case must be dismissed because there is no "actual controversy" between MCS and LivePerson. Dated: April 7, 2008 Respectfully submitted,

/s/ David L. Finger David L. Finger (No. 2556) Finger & Slanina, LLC One Commerce Center 1201 Orange Street, Suite 725 Wilmington, DE 19801-1155 (302) 884-6766 Donald Puckett State Bar No. 24013358 Brent N. Bumgardner State Bar. No. 00795272 The Ware Firm 1701 North Market Street Suite 330 Dallas, Texas 75202-2088 (214)744-5000 (214)744-5013 (Fax) Attorneys for Defendant Marshall Credit Strategies, LLC 15

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Not Reported in F.Supp. Not Reported in F.Supp., 1989 WL 230919 (D.N.J.), 15 U.S.P.Q.2d 1472 (Cite as: Not Reported in F.Supp.)

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EMS-American Grilon, Inc. v. DSM Resins, U.S., Inc. D.N.J.,1989. United States District Court, D. New Jersey. EMS-AMERICAN GRILON, INC, and EMS-Chemie AG, Plaintiffs, v. DSM RESINS, U.S., INC. and DSM Resins, B.V., Defendants. Civ. A. No. 89-2190 (MTB). Oct. 5, 1989. Carella, Byrne, Bain & Gilfillan, by John G. Gilfillan III, Roseland, N.J., for plaintiffs. Crummy, Del Deo, Dolan, Griffinger & Vecchione by Ira J. Hammer, Newark, N.J., for Defendant., DSM Resin U.S. Inc. ORDER BARRY, District Judge. *1 This matter having been opened to the Court on the motion of defendants DSM Resins U.S., Inc. (hereinafter "DSM/US" or "DSM Group"), and DSM Resins B.V., (hereinafter "DSM/BV" or "DSM Group"), for an order dismissing this declaratory judgment action or transfering it pursuant to 28 U.S.C. s. 1404(a) to the Columbia Division of the United States District Court for the District of South Carolina, and upon the separate motion of DSM/BV for an order dismissing the action as to it alone for lack of a case or controversy, and the Court having considered the papers and affidavits submitted by the parties in support and in opposition to the above motion pursuant to Fed.R.Civ.P. 78; and it appearing that plaintiffs EMS American Grilon, Inc. (hereinafter "EMS/American" or "EMS Group") and EMS Chemie AG (hereinafter "EMS/Chemie" or "EMS Group") filed this action seeking a declaration of non-infringement as to

United States Patent 4,147,737 (hereinafter "737 patent" or "patent 737") on May 17, 1989; and it appearing that EMS/American and EMS/Chemie filed this action after EMS/American received notice in a letter from counsel for DSM/US that DSM/ US would file suit in the United States District Court for the District of South Carolina, Columbia Division, against EMS/American and its affiliate companies unless EMS/American and its affiliate companies stopped infringing patent 737; see Declaration In Support of Motion To Dismiss Or, In The Alternative, Transfer (hereinafter "DSM Declaration") at Exh. C; and it appearing that DSM/US, believing that its patent was still being infringed, and not having received what it considered to be a proper response to its aforementioned letter, did in fact subsequently file a patent infringement suit in South Carolina on May 19, 1989, two days after the filing of the present declaratory action; see DSM Declaration at Exh. C; and it appearing that on May 22, 1989, EMS Group amended its complaint in the New Jersey declaratory judgment action to add DSM/BV, a private corporation organized under the laws of The Netherlands, as a party, and the Court addressing first the separate motion of DSM/BV to be dismissed from this action for lack of a case or controversy; and it appearing that, prior to the filing of the present declaratory judgment action naming DSM/BV as a party, DSM/BV transferred all right, title and interest to patent 737, together with the right to collect any past, present, or future damages for infringement, to DSM/US; see Declaration of Simon Dingemans In Support of Motion To Dismiss (hereinafter "Dingmans Declaration") at para. 8; Declaration of Carl G. Love In Support of Motion To Dismiss (hereinafter "Love Declaration") at

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Not Reported in F.Supp. Not Reported in F.Supp., 1989 WL 230919 (D.N.J.), 15 U.S.P.Q.2d 1472 (Cite as: Not Reported in F.Supp.) Exh. B; and it being the opinion of the Court that when a party divests itself of all of its interest in a patent, as DSM/BV has done here, that same party does not retain a sufficient stake in the outcome of an infringement controversy to require it to remain as a defendant to the action, and that no case or controversy can be said to exist between the parties. See Proctor & Gamble Co. v. Kimberly-Clark Corp., 684 F.Supp. 1403, 1407 (N.D.Tex.1987); Irving Air Chute Co. v. Switlik Parachute & E. Co., 26 F.Supp. 329 (D.N.J.1939).FN1 ; and *2 the Court now addressing the motion of DSM Group to transfer this action to the Columbia Division of the District Court for the District of South Carolina; and it appearing that subject matter jurisdiction, personal jurisdiction, and venue for the present declaratory judgment action brought by EMS Group would be proper as to the remaining defendant DSM/US in South Carolina; FN2 and although it is the opinion of the Court that the "first to file" rule regarding concurrent federal proceedings generally presents a sound rule of judicial administration that should not be deviated from without a showing of special circumstances, Berkshire Intern Corp. v. Marquez, 69 F.R.D. 583, 586 (E.D.Pa.1976); accord, West Gulf Maritime Ass'n v. ILA Deep Sea Local 24, 751 F.2d 721, 728 (5th Cir.1985), the Court is also of the opinion that when it appears-as it does in this case-that the Declaratory Judgment Act has been used as a procedural "fencing device" to secure delay or choose a forum other than that in which the action would normally be heard, see American Automobile Insurance Co. v. Freundt, 103 F.2d 613, 617 (7th Cir.1939), it is proper for the Court to dismiss or transfer the action to the forum in which the subsequently filed infringement suit is pending; see Tempco Elec. Heater Corp. v. Omega Engineering, 819 F.2d 746 (7th Cir.1987); American Griener Electronic, Inc. v. Establishments Henry-Le Paute,

S.A., 174 F.Supp. 918 (D.D.C.1959); Technical Tape Corp. v. Minnesota Mining & Mfg. Co., 135 F.Supp. 505 (S.D.N.Y.1955) (Tempco, Griener and Technical all dismissing declaratory judgment actions filed before infringement actions by patentees); FN3 and it being the opinion of the Court that ease of access to the sources of proof and convenience to witnesses all militate in favor of transferring this action to South Carolina where plaintiff EMS/ America's headquarters are located and where EMS/America apparently does virtually all of its United States business; see DSM Declaration, Exh. F (Dun & Bradstreet report dated April 10, 1989, identifying EMS/American as having a single factory in Sumter, South Carolina); FN4 It is on this 5th day of October, 1989, ORDERED, that DSM/BV's motion to dismiss for lack of a case or controversy is hereby granted; and it is further ORDERED, that the motion to transfer the remainder of this action to the Columbia Division of the United States District Court for the District of South Carolina is hereby granted. FN1. The case or controversy requirement found in Article III of the United States Constitution is reflected in the language of the Declaratory Judgment Act, 28 U.S.C. s. 2201, which allows a district court to declare the rights and obligations of any interested parties "in a case of actual controversy". Id. As the Supreme Court has noted in this regard, "a controversy" may be said to exist under the Declaratory Judgment Act when "the facts alleged ... 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". See Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273

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Not Reported in F.Supp. Not Reported in F.Supp., 1989 WL 230919 (D.N.J.), 15 U.S.P.Q.2d 1472 (Cite as: Not Reported in F.Supp.) (1941). In a case seeking a declaratory judgment of a patent's invalidity or noninfringement, the actual controversy requirement is satisfied when a purported patent owner's conduct has created a "reasonable apprehension" on the part of the plaintiff "that it will face an infringement suit if it commences or continues the activity in question". See Jervis B. Webb Co. v. Southern Systems, Inc., 742 F.2d 1388, 1398-1399 (Fed.Cir.1984); Indium Corp. of America v. Semi-Alloys, Inc., 781 F.2d 879, 883 (Fed.Cir.1985). On the facts of the present case, EMS Group had no reasonable expectation of being sued by DSM/BV. The letter informing EMS American of DSM/US's intention to bring suit in South Carolina and its attached draft complaint made it quite clear that DSM/US had full rights to patent 737. See Memorandum In Support of Motion to Dismiss by Defendant DSM Resins BV (hereinafter "DSM/BV Movant Brief I") at 4-5. The Court further finds no merit in EMS Groups' assertion that DSM/BV is the alter ego of DSM/US, and that DSM/BV controls this United States litigation from its headquarters in Holland. Thus, although EMS Group asserts that it will be "irreparably damaged" by the elimination of DSM/BV as a party, inasmuch as EMS Group asserts that DSM/BV "may" retain an interest in the patent and "upon information and belief" still retains a substantial interest in DSM/US, see Plaintiff's Opposition Brief at 35-36, the Court has found no evidence of any such connection, and in fact is persuaded that DSM/BV holds no equity interest in DSM/US and that DSM/ US is the sole owner of the rights attached to patent 737. See Second Declaration of Glenn Hoffman (hereinafter "Hoffman Declaration II") at paras. 3, 4. On this point, the reasoning in Proctor & Gamble is particularly helpful. In that case, the original

owner of a patent moved to dismiss counterclaims filed against it in an infringement action. The district court ruled that the original owner-who had assigned all of its rights to the named plaintiff-was not a necessary or indispensible party to the infringement action. As the district court noted, "Having completely divested itself of all rights under the [ ] patent, [the original owner] cannot be forced to remain in this suit as an indispensible party under Rule 19, Fed.R.Civ.P.". Proctor & Gamble, 684 F.supp. at 1403. See further, Afros S.A. v. Krauss-Maffei Corp., 624 F.Supp. 464, 466 (D.Del.1985). FN2. Subject matter jurisdiction would exist under 28 U.S.C. s. 1338(a), which provides a district court with jurisdiction over patent infringement claims. See Beacon Photo Service Inc. v. Acricite Co., Inc., 204 U.S.P.Q. 137, 138 (E.D.N.Y.1978). Venue would be proper under 28 U.S.C. s. 1391(b), which permits a declaratory judgment action to proceed in a district in which the claim arose. In particular, the right to a declaratory judgment as to the validity of a patent arises when a potential infringer is threatened with litigation and cannot compel the patentee to proceed; see Uniroyal, Inc. v. Sperberg, 63 F.R.D. 55, 59 (S.D.N.Y.1973); Beacon Photo Service, 204 U.S.P.Q. at 138-139. As DSM Group has persuasively argued in its brief, the claim relating to the present declaratory judgment action arose where EMS/American received the defendant's allegations of infringement, that is, in South Carolina where EMS/American received DSM/US's letter claiming patent infringement. See Memorandum in Support of Defendants' Motion to Dismiss Or, In the Alternative, Transfer (hereinafter "DSM Movant Brief") at 8. Personal jurisdiction also appears to be proper over

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Not Reported in F.Supp. Not Reported in F.Supp., 1989 WL 230919 (D.N.J.), 15 U.S.P.Q.2d 1472 (Cite as: Not Reported in F.Supp.) DSM under the South Carolina long arm statute governing business transactions. Id. at 9. See Chromium Industries, Inc. v. Miror Polishing & Plating Co., Inc., 193 U.S.P.Q. 158, 161 (N.D.Ill.1976) (sending notices of infringement into a jurisdiction constitutes the transaction of business). FN3. It is EMS Group's assertion that it cannot reasonably be said that its action in filing the declaratory judgment suit in New Jersey was "preemptive". EMS Group maintains that it took action only after the DSM letter deadline for filing against it had passed. EMS Group assets that, had it wanted to preempt DSM, it would have filed its declaratory judgment action before the DSM deadline. See Plaintiff's Opposition Brief at 22. Regardless of this fact, the Court notes that EMS Group, by its own statement, took this action in response to the threatened suit from DSM, which suit, however delayed, was predictable in its arrival. Id. at 23. EMS Group affiliates had been sued in Europe on a related action, and it was foreseeable that the American companies would enter into litigation as well. FN4. The Court notes that EMS Group has selected a forum it does not call home. In such a situation, the deference usually given to plaintiff's choice of forum is reduced. See Hardaway Constructors, Inc. v. Conesco Industries, Ltd., 583 F.Supp. 617, 620 (D.N.J.1983). While EMS Group maintains that New Jersey was an especially appropriate forum as a place for retrieving information from DSM/BV, see Plaintiff's Opposition Brief at 8-9, in light of the Court's disposition of DSM/BV's motion to dismiss, these concerns have become inapposite. Further, it appears, as noted, that EMS Group has substantial ties to South Carolina. Specifically, EMS/America acts

as an agent in South Carolina for EMS/ Chemie. See DSM Declaration at Exh. H. An excerpt from the 24th Annual Report 1986/87 for EMS Chemie Holding AG, a parent company to EMS Groups' American operations, summarizes the close nexus that the EMS Group holds with South Carolina: "EMS-GRILON HOLDING Inc., in Wilmington Delaware, USA, owns 100% of the stock of EMS-AMERICAN GRILON inc., Sumter, South Carolina./ The production plant in Sumter, which went on stream in early 1982, produces the same engineering plastics as EMS-CHEMIE AG in Switzerland. EMS benefits from its status as a domestic producer in the United States." See Second Declaration by Carl G. Love (hereinafter "Love Declaration II") at Exh. Q. It is thus clear that it is South Carolina and not New Jersey which is the appropriate forum. D.N.J.,1989. EMS-American Grilon, Inc. v. DSM Resins, U.S., Inc. Not Reported in F.Supp., 1989 WL 230919 (D.N.J.), 15 U.S.P.Q.2d 1472 END OF DOCUMENT

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