Opinion
Civil Action No: MDL 1298; Ref., C.A. 99-3118, SECTION: "G"
November 3, 2000
MINUTE ENTRY
MEMORANDUM AND ORDER
Background
On October 13, 1999, the Panel on Multi-District Litigation transferred to this Court four related patent cases from the Northern District of Illinois, the Northern District of California, the District of Columbia, and the District of Delaware, pursuant to 28 U.S.C. § 1407. Each of the cases involve patents and licensing agreements pertaining to computer hard disk drives licensed by Papst Licensing, GmbH and Georg Papst ("Papst") to several hard disk drive manufacturers ("Non-Papst Parties") and their customers.
The first of the cases against the Papst parties was commenced in the District of Columbia by Minebea Co. Ltd., Precision Motors Deutsche Minebea, GmbH, and Nippon Miniature Bearing Corporation ("Minebea"). The Minebea parties, collectively, design, manufacture, market and sell motors and other parts for use in computer hard disk drives (HDDs). Papst licenses and enforces patents relating to motors, including motors used for computer HDDs. In its complaint, among other things, Minebea seeks a declaratory judgment concerning patent infringement claims raised by Papst against Minebea customers. Specifically, Minebea requests a declaratory judgment that its customers are not infringing the disputed Papst patents, for the reason(s) that the patents are invalid, misused, and/or exhausted. Further, Minebea complains that Papst engaged in inequitable conduct, and seeks a declaratory judgment of equitable estoppel against Papst.
Papst filed a motion to dismiss the declaratory judgment claims, arguing that Minebea failed to present an actual case or controversy. In the motion, Papst specifically limited itself to a "facial attack" on the allegations' legal sufficiency, stating that "the allegations of Minebea's Complaint are taken as true for the purpose of adjudicating a motion to dismiss."
Memorandum of Points and Authorities in Support of Defendant's Rule 12(b) Motion to Dismiss, p. 2.
On June 22, 1998, in a reported decision, Judge Stanley S. Harris of the District of Columbia held that Minebea's complaint adequately alleged an actual case or controversy as required under the Federal Declaratory Judgment Act, 28 U.S.C. § 2201 2202, because Minebea alleged:
Minebea Co., Ltd. v. Papst, et al, 13 F. Supp.2d 35).
1. That Papst notified Minebea customers of possible infringement claims due to their use of Minebea motors;
12. That Minebea has "express and implied contractual terms" with customers pursuant to which customers are making "express and implied demands for indemnification" due to Papst's infringement claims;
13. That Minebea "reasonably apprehend(s]" that it may be liable for indemnification with respect to the infringement claims by Papst.
Id., at p. 39.
Judge Harris found that Minebea had adequately alleged an actual controversy, and denied the motion to dismiss the declaratory judgment claims.
On March 21, 2000, almost two years after Judge Harris' decision, the Papst parties filed a motion for leave to file a 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, claiming that there was insufficient factual support for Minebea's jurisdictional allegations. Specifically, Papst alleged that Minebea had failed to provide evidence of indemnification agreements that were necessary to establish the existence of a case or controversy between Minebea and Papst. Papst distinguished its proposed motion from the motion previously ruled on by Judge Harris on the basis that the previous motion was a facial, rather than a factual attack.
On April 10, 2000, by Minute Entry, I ruled in favor of Papst, noting that district courts may inquire into the basis of subject matter jurisdiction "at any stage of the proceedings" on the basis of either a facial or factual attack on the complaint. Since Judge Harris determined jurisdiction solely on the facial validity of the allegations, I granted Papst's request to file a motion to dismiss on the basis of a lack of factual support for the allegations. Discussion of the Motion
See Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir. 1980).
Pursuant to my ruling of April 10, 2000), Papst filed its Rule 12(b)(1) motion to dismiss Counts I, X, XI, XII, XIII, XIV and XVIII of Minebea's Second Amended and Supplemental Complaint. In these counts, Minebea seeks declaratory judgment on the following issues:
1. That its customers should be free to use the technology in Papst's patents in their HDDs, on the theory that the patents were exhausted by Papst's sale of the patents to Minebea(Count I);
2. That its customers should be free to use the technology in Papst's patents in their HDDs, on the basis that the Papst patents were licensed to Minebea (Count X);
3. That its customers' HDDs do not infringe certain Papst patents, and/or certain patents are invalid (Count XI and Count XII);
4. That Papst should be equitably estopped from asserting its patents against Minebea's customers, because of representations made by Papst to Minebea (Count XIII);
5. That the Papst patents should be unenforceable because of patent misuse (Count XIV); and
6. That the Papst patents should be unenforceable because of inequitable conduct (Count XVIII)
The basis of Papst's factual attack on Minebea's request for declaratory judgment is that: 1) Minebea cannot sue on behalf of any customers whom it has not agreed to indemnify; and 2) five of the HDD manufacturers that use Minebea motors have recently purchased licenses from Papst, precluding Minebea from suing on their behalf.
Minebea claims that it is not suing "on behalf" of its customers, but solely "on behalf" of itself, with merely ancillary benefit to its customers.
Papst and Minebea have stipulated to the truthfulness of the following facts, for all purpose of this lawsuit:
The facts listed do not constitute a complete list of all the stipulated facts submitted by the parties; the facts listed are those which I have deemed material to a resolution of the pending motion.
1. With respect to all patents-in-suit, HDD motors and customers, Minebea has a reasonable apprehension of indemnity liability to its customers, Quantum, Maxtor, Matsushita Kotobuki Electronics, Seagate, IBM, Western Digital, Nomai, and, to the extent related to Nomai HDDs, Xyratex and Myrica).
2. Minebea's customers, Quantum, Maxtor, Matsushita Kotobuki Electronics, Seagate, IBM, Western Digital Nomai, and Nomai's related companies, Xyratex and Myrica) have a reasonable apprehension of infringement liability.
3. Minebea's customers, Fujitsu, Toshiba, NEC, Hitachi and Hewlett-Packard had a reasonable apprehension of infringement liability with respect to claims of the patents in suit, until they entered into certain agreements referred to by the parties as the Papst License Agreements;
4. Insofar as the Papst License Agreements are concerned, the parties stipulate to numerous facts, some of which "facts" are better characterized as conclusions of law. The following are the stipulations I deem to be material to the disposition of the motion before me: [Sealed by Court]
E. The Minebea parties have proposed to each of its Motor Customers, Hewlett Packard, Maxtor, IBM, Fujitsu, NEC, Quantum, Toshiba, Seagate, Iomega, Samsung, Western Digital and Hitachi, that they enter into a tolling agreement pursuant to which the customer will refrain from taking any action against Minebea seeking indemnification for a period of time; the purpose of these proposed tolling agreements would be to delay resolution of indemnity issues while the Minebea-Papst lawsuit is pending. None of the companies have responded to the request for the tolling agreement;
F. Minebea has not agreed to waive defenses to indemnity demands, and has not paid any money directly to any customers;
G. Minebea has not been sued by any of its customers;
H. Finally, the parties have stipulated that if I determine that the enforceability or unenforceability of the license agreements is legally relevant to the existence of subject matter jurisdiction, then the motion shall be determined after further discovery or stipulation.
"Patents-in-suit" refer to all Papst patents to which Minebea claims a license or other right of use on behalf of itself and its customers, used in HDDs manufactured or sold by Minebea customers.
An HDD Motor, as stipulated to by the parties for the purpose of this lawsuit, is an electric motor designed for use to directly drive a hub and/or disk in a hard disk drive. An HDD motor may include 1) a hub for carrying a disk or 2) a base plate forming a portion of a clean chamber of a hard disk drive.
Minebea contends that it still has a reasonable apprehension of indemnity liability in connection with these customers, regardless of the agreements. This is one of the disputed facts to be resolved in this motion.
As a result of the licensing agreements entered into between Papst and some of Minebea's customers subsequent to the filing of the declaratory judgment action, I find it advisable to examine the merits of the plaintiff's challenge to subject matter jurisdiction as it relates to the claims concerning customers who have not entered into agreements with Papst, separately and independently of the challenge as it relates to claims concerning customers who have entered into the licensing agreements.
1. The Minebea Customers who have no Agreements with Papst Licensing
Papst and Minebea have stipulated that twelve companies have purchased motors from Minebea and incorporated them into hard disk drives. Of those twelve companies, seven have not entered into licensing agreements with Papst. These companies, collectively referred to as the "Customers," are Quantum, Maxtor, Matsushita Kotobuki Electronics ("MKE"), Seagate/Conner, IBM, Western Digital, and Nomai/Xyratex/Myrica ("Nomai").
Judge Harris' ruling on June 22, 1998 that Minebea's complaint adequately alleges an actual case or controversy is the law of this case. In April, 2000, when Papst initially filed its motion and supporting memorandum, it conceded that it was not requesting that I "reconsider whether the mere allegation of an indemnity obligation can create a case or controversy." Rather, Papst contended that since Judge Harris was only asked to resolve a "facial" attack, he was never required to consider "whether valid indemnity obligations actually existed." Papst complained that Minebea did not identify any of its alleged customers in its Second Amended and Supplemental Complaint, nor did it allege that it was "in fact linked by an actual indemnity agreement with any identified customers regarding any identified hard disk drive Papst Licensing has charged with infringement." Papst goes on to argue that Minebea has to prove that demands have been made for indemnification, and that Minebea has agreed to indemnify its customers.
See discussion, pp. 2-3, supra.
Papst Memorandum, p. 4.
Id.
Id., pp. 5-6.
Id., at p. 7.
It appears that many of Papst's concerns have been resolved since the initial filing. For example, Papst has stipulated that the now identified customers have notified Minebea of patent infringement claims raised by Papst with respect to many of the patents-in-suit, and Minebea has reasonable apprehension that Papst will assert each of the patents-in-suit against the customers. Further, the parties have stipulated that Minebea has reasonable apprehension of its liability for indemnification of these customers with respect to such infringement claims, based upon the contractual terms with the customers and the express and implied demands for indemnification by these customers. The parties have further stipulated that Minebea has not agreed to waive its potential defenses against the asserted indemnity obligations, and has requested that the customers agree to delay further discussions or litigation on the indemnity issues until completion of the pending litigation between Minebea and Papst. Although not one of the customers has signed or agreed to sign such a tolling agreement, neither has any customer initiated a lawsuit against Minebea for indemnification. Thus, the sole disputed issue appears to be whether Minebea must unconditionally accept the indemnity obligations in order to factually prove the existence of an "actual controversy."
Minebea claims this argument adds an additional element to the elements held by Judge Harris to meet the "actual controversy" requirement, and this may be correct. If so, requiring such a finding would violate the requirement that I follow the "law of the case" as set forth by Judge Harris. Nevertheless, I will analyze Papst's argument on this point upon the basis that it is asserting that acceptance of the indemnity obligation is a fact that must exist in order to find that Minebea has a contractual obligation of indemnification to its customers.
A declaratory judgment action may be brought to resolve an "actual controversy." 28 U.S.C. § 2201. The meaning and scope of the term "actual controversy" has been examined in numerous cases. Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891 (5th Cir. 2000). Declaratory judgments are typically sought before a completed "injury-in-fact" has occurred, but still must be limited to the resolution of an "actual controversy." Orix, at p. 895; United Transportation Union v. Foster, 205 F.3d 851 (5th Cir. 2000). The Supreme Court has described an "actual controversy" as one which must be ". . . definite and concrete, touching the legal relations of parties having adverse legal interests. . . . It must be a real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." Aetna Life Insurance Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 240-241, 57 S.Ct. 461, 464, 81 L.Ed. 617, 621 (1937).
The enactment of the Declaratory Judgment Act has been welcomed by the Federal Circuit as a deterrent to the patent owner who engages in "scare-the-customer-and-run tactics that infect the competitive environment of the business community with uncertainty and insecurity."Arrowhead Industrial Water, Inc. v. Ecolochem, Inc., 846 F.2d 731 (Fed. Cir. 1988). According to the Federal Circuit:
Before the Act, competitors victimized by that tactic were no longer restricted to an in terrorem choice between the incurrence of a growing potential liability for patent infringement and abandonment of their enterprises; they could clear the air by suing for a judgment that would settle the conflict of interests. The sole requirement for jurisdiction under the Act is that the conflict be real and immediate, i.e., that there be a true, actual "controversy" required by the Act. Id., at p. 734 (citations omitted)
The Arrowhead court, acknowledging that the test used to evaluate complaints for declaratory judgments in patent cases has been. "variously stated," noted that the test requires "two core elements": (1) acts by the defendant that indicate an intent to enforce its patent; and (2) acts by the plaintiff that might subject it or its customers to suit for patent infringement. The court further opined that statements of the test are generally shaped by the facts of the case, since "most, if not all, 'tests' employed in the art of judging arise in a particular factual milieu. Hence, they must be read, applied and perhaps modified in light of the facts of subsequent cases." Id, at p. 735.
Defendant has failed to cite, nor has my research revealed, any case which specifically requires the plaintiff unconditionally to have accepted an indemnity obligation as a prerequisite to establishing an "actual controversy" for the purpose of pursuing a declaratory judgment action. However, whether a plaintiff in a declaratory judgment action has or has not accepted an indemnity obligation has been viewed by several courts as one of the factors to be considered with a multiplicity of others.
Defendant has cited Dow Chemical Co. v. Viskase Corp., 892 F. Supp. 991 (N.D. Ill. 1995) as support for its position, but I find that the case is clearly distinguishable and, in fact, supports the finding of an actual controversy in the case before me. The case is instructive on several significant points, meriting the following discussion.
In Dow Chemical, the declaratory judgment plaintiff (Dow) manufactured and sold various polymers to companies who used the polymers to create assorted end products, including thermoplastic films used in packaging. The defendant (Viskase) also made films used for the packaging of food. Pursuant to a settlement agreement terminating litigation between Viskase and one of Dow's customers (Cryovac), Cryovac was required to disclose to Viskase any new shrink film it produced, and Viskase then had to announce whether it considered such film to infringe on its patents.
Dow and its customer, Cryovac, worked together to develop a shrink film that they believed would not infringe Viskase's patents. However, Viskase claimed they did infringe its patents.
Another one of Dow's major film-making customers was ANC. After litigation between Viskase and ANC, Dow worked with ANC to produce shrink film that did not infringe on Viskase patents. Although Viskase had not claimed the film infringed on its patents, Dow believed that it would do so.
Several other customers had sought Dow's assistance to avoid infringement by designing new films. At least one customer sought indemnification from Dow against any charge of infringement made by Viskase.
The question to be resolved by the court was whether Viskase's threats against Dow's customers, and the customers' filmmaking activities, were sufficient to establish an actual controversy between Dow and Viskase.
On the issue of whether defendant could maintain a declaratory judgment action based upon the activities of its customers (who arguably directly infringed on the patents), the court noted that "in some instances the activities of a customer and the patentee's threat of suit against a customer can support jurisdiction over a manufacturer's declaratory judgment action."
Id, at p. 994; citing Arrowhead Industrial Water, Inc. v. Ecolochem, Inc., 846 F.2d 731 (Fed. Cir. 1988); International Harvester Co. v. Deere Co., 623 F.2d 1207 (7th Cir. 1980); Grafon Corp. v. Hausermann, 602 F.2d 781 (7th Cir. 1979); Field Container Co. v. Somerville Packaging Corp., 842 F. Supp. 338 (N.D.Ill. 1994).
The court, categorizing these cases as "customer suits," made the distinction between manufacturers of a potentially infringing product and manufacturers of the raw goods used by its customers to make a potentially infringing product:
In the typical customer suit, although the customer is the party threatened with a lawsuit, it is the manufacturer that makes the potentially infringing product; the customer merely sells that product without alteration, incorporates it in its own product, or employs it as part of a manufacturing process. Since the manufacturer in such cases is itself a potential infringer and the customer is merely using the manufacturer's product, a threat of suit against the customer "reasonably implies potential suit against the manufacturer." [citations omitted).
. . .
On the other hand, where the manufacturer's product does not infringe the patent in question but its customers use the product to make an infringing device, courts typically hold that the manufacturer lacks any reasonable apprehension of suit for direct infringement, even if the customers are being threatened with legal action. . . . In other words, the customer suit cases show that a manufacturer can establish jurisdiction based on a threat of suit against its customer only when the manufacturer is itself involved in infringing the patent and the customer is "merely a conduit for the manufacturer." [emplasis supplied]; [citing Viking Injector Co. v. Chemtron, Inc., WL 625543 (M.D.Pa. 1994)]
Id., at pp. 994-995.
Since Dow only manufactured the polymers which did not infringe that were used in its customers products which arguably infringed, Dow could not establish an actual controversy. However, in the case before me, the hard disk drive motor manufactured and sold by Minebea to its customers for incorporation into hard disk drives constitutes the infringing product. Under Dow and the cases cited therein, an actual controversy exists between Minebea and Papst.
Minebea submitted an affidavit from Arthur Wagner, Ph.D in Electrical Engineering, who has "devoted most of [his] career to engineering, design and research of hard disk drive technology." His affidavit, together with the video animation provided in connection therewith, support this position.
It is true, as argued by Papst, that the Dow court found that the mere fact that one of Dow's customers had actually sought indemnification was not enough to establish jurisdiction, since Dow had not agreed to indemnify the customer. However, it is clear from the above discussion that had Dow, like Minebea, been the manufacturer of a potentially infringing product, rather than just of the raw product used in its customer's products, the court would have found jurisdiction. Acceptance of an indemnity obligation may be enough to establish jurisdiction; however, this does not make the converse true, that is, that a lack of acceptance of an indemnity demand precludes the existence of an actual controversy that would establish jurisdiction.
See Kessler v. Eldred, 206 U.S. 285, 289, 27 S.Ct. 611, 613 (1907), which held "leaving entirely out of view any rights which [the manufacturer] Kessler's customers have or may have, it is Kessler's right that those customers should . . . be let alone by Eldred. . . ."
Joseph Bancroft Sons Co. v. Spunize Co. of America, 268 F.2d 522 (2d Cir. 1959); Wallace Tiernan Inc. v. General Electric Co., 291 F. Supp. 217 (S.D.N.Y. 1968). Interestingly, in Bancroft, the court found an actual controversy because there was a provision in the license agreement between the declaratory judgment plaintiff and the customer that obligated the plaintiff to pay attorney fees and costs of the customer in the event of an infringement suit. The plaintiff had not intervened in the suit or given advice to the customer's attorneys (i.e., failure to accept the indemnity obligation) did not negate the existence of an actual controversy between the plaintiff and the patentee.
I find that the stipulated facts clearly meet the evidentiary burden required by the Arrowhead test. Minebea, while typically reserving to itself any defenses which it may have to the indemnity obligations set forth in the agreements between it and its customers, has attempted to reassure its customers that a favorable result of the pending litigation will inure to their benefit, and has requested they refrain from pursuing claims against it until resolution of the Papst suit. None of the customers have executed the tolling agreements submitted to them. Minebea's belief in its potential indemnification obligation to its motor customers is apparently both real and reasonable.
Papst's motion to dismiss the declaratory judgment actions as concerning these customers is denied.
2. The Minebea customers who have licensing agreements with Papst
Since the commencement of this litigation, Papst has negotiated and entered into licensing agreements with the following Minebea motor customers: Toshiba, Samsung, Fujitsu, Hitachi, NEC, Calluna, and HP. Papst contends that any declaratory judgment regarding hard disk drives made or sold by these companies would be an advisory opinion, since these companies are now licensees, not "infringers."
I find Papst's argument perplexing, in light of its stipulation that none of the licensing agreements preclude Minebea customers from asserting indemnity obligations against Minebea. Nevertheless, I will discuss the individual circumstances of each licensed customer in order to provide the parties with a full analysis of my reasoning.
Toshiba
Papst and Minebea have stipulated that, prior to entering into the licensing agreement with Papst, Toshiba had a reasonable apprehension of infringement liability with respect to the patents in suit. Further, Minebea had a reasonable apprehension of indemnity liability, based upon the terms and conditions of the Basic Agreement on Materials Transactions between Toshiba and NMB, one of the Minebea parties. The issue is whether Minebea still has a reasonable apprehension of indemnity liability in connection with Toshiba, in light of the licensing agreement entered into between Toshiba and Papst.
Exhibit One to the Affidavit of Ryusuke Mizukami, Senior Managing Director for Minebea.
On March 15, 1999, Papst and Toshiba entered into a contract entitled "License Agreement." [Sealed by Court}
Exhibit "A" submitted by Papst in support of this motion.
From the facts before me, it appears beyond dispute that Toshiba entered into the License Agreement with Papst in order to end Papst's threat of litigation and potential damage to Toshiba's business. Toshiba clearly explained its position to NMB in its letter dated June 9, 1997:
We too have worked to persuasively explain the matter in negotiations with the Papst side, but the Papst side continues to take a hard stance, and we have reached a point where we must contemplate a situation in which our company will be sued. If we are sued, the damages incurred by our HDD business will be incalculable, and if we are unable to obtain a resolution from your company, our company may be forced to resolve the matter. In that case, in view of the fact that it is a problem that occurred because of your product, we would want to have your company too [sic] assume the appropriate portion of the burden for our payment to Papst.
Exhibit 6 to the Affidavit of Ryusuke Mizukami.
It is evident that Minebea has a very reasonable apprehension that Toshiba will seek indemnity for all or part of the payment made to Papst pursuant to the License Agreement. Accordingly, Papst's motion to dismiss Minebea's declaratory judgment counts insofar as they concern Toshiba are denied.
This finding, however, does not imply that I have determined that Minebea has an indemnity obligation to Toshiba under the circumstances of this case; that remains to be determined at some later time. However, I do find the facts support a reasonable apprehension on the part of Minebea which is adequate to support the existence of an actual controversy.
Samsung Electronics Co. (SEC) and Calluna
Although Papst submitted as exhibits its licensing agreements with SEC and Calluna, Minebea has not identified these two entities as customers, nor has it introduced any exhibits reflecting any agreements or purchases between Minebea and either of them. Accordingly, I find that Minebea has not asserted a sufficient basis for declaratory judgment in connection with these companies.
Fujitsu
Prior to entering into the licensing agreement with Papst, Fujitsu had a reasonable apprehension of infringement liability with respect to the patents in suit. Further, Minebea had a reasonable apprehension of indemnity liability, based upon Article 33 of the Basic Agreement on Trading Commodities entered into between the parties, and upon paragraph 11 of the Fujitsu purchase orders. Once again, the issue is whether Minebea still has a reasonable apprehension of indemnity liability in connection with Fujitsu, in light of the licensing agreement entered into between Fujitsu and Papst.
Exhibit 17 of the Affidavit of Ryusuke Mizukami.
Exhibit 18 of the Affidavit of Ryusuke Mizukami.
On November 16, 1999, Papst and Fujitsu entered into a contract entitled "License Agreement." [Sealed by Court]
Minebea has submitted two letters from Fujitsu which Minebea contends constitutes "clear requests for indemnification from a customer." These letters, however, merely request information concerning certain Papst patents and "infringement matters." If there were further communications between Minebea and Fujitsu in which the issue of indemnification was discussed or even raised, they have not been provided to me. However, I note that on June 5, 1997, Minebea wrote to Fujitsu, advising that it was "most apprehensive" about Papst's infringement claims, and had filed a lawsuit against Papst on the basis that demanding royalties from Minebea's customers was "improper." It is evident from the context of the letter that Minebea had knowledge that Papst was requesting from Fujitsu a license agreement [Sealed by Court]. The letter concludes with the statement that the letter "is not an assertion that [Minebea] will indemnify the royalties . . . if [Minbea] loses the suit."
Exhibits 19 and 20 of Affidavit of Ryusuke Mizukami.
Exhibit 21 of Affidavit of Ryusuke Mizukami.
As discussed, I do not agree with Papst that the reservation by Minebea of its defenses to an indemnity claim precludes a declaratory judgment, particularly since there is a written agreement obligating Minebea to indemnify Fujitsu under circumstances that very well may exist in this case.
I find that these three letters, taken in the context of all of the facts and circumstances of this matter, support Minebea's contention that it has reasonable apprehension that Fujitsu may seek indemnification from it for the royalties it has paid to Papst under the License Agreement. Accordingly, Papst's motion to dismiss Minebea's declaratory judgment counts insofar as they concern Fujitsu will be denied.
Hitachi
Prior to the execution of the licensing agreement between Hitachi and Papst, Hitachi had a reasonable apprehension of infringement liability with respect to the patents in suit. Further, Minebea had a reasonable apprehension of indemnity liability, based upon Article 34 of the Basic Agreement between Hitachi and Minebea. Once again, the issue is whether Minebea's apprehension of indemnity liability remains reasonable, thereby creating an actual controversy, in light of the licensing agreement between Hitachi and Papst.
Exhibit 46 of Affidavit of Ryusuke Mizukami.
The March 4, 1999 License Agreement between Hitachi and Papst grants a license to Hitachi in connection with Licensed Patent Claims, as defined in the agreement. The consideration for the license [Sealed by Court]
Paragraph (1) of the agreement provides that Hitachi: [Sealed by Court]
Minebea has not produced any letters, affidavit testimony, or other documents reflecting an intent on the part of Hitachi, either before or after the execution of the license agreement, to seek indemnity from Minebea. [Sealed by Court] Further, based upon the contract between Hitachi and Minebea, Minebea would have had a reasonable apprehension of indemnity liability. Although it is a close question, I find [Sealed by Court] it reasonable to assume that Hitachi, like Toshiba and Fujitsu, felt compelled to make a pragmatic business decision to maintain their business during the pendency of the litigation, and may very well pursue recovery from Minebea for a portion or all of this payment. The fact that I have already found subject matter jurisdiction based upon an actual controversy between Minebea and several other customers strengthens the possibility that Hitachi, too, may seek indemnity for the payments it had made to Papst. Papst's motion to dismiss Minebea's declaratory judgment counts as to Hitachi are denied.
NEC
As with Minebea's other customers, prior to entering into the licensing agreement with Papst, NEC had a reasonable apprehension of infringement liability with respect to the patents in suit. Further, Minebea had a reasonable apprehension of indemnity liability, based upon Article 17 of the Basic Agreement with NEC and Article 15 of NEC'S purchase order.
Exhibit 22 of Affidavit of Ryusuke Mizukami.
Exhibit 23 of Affidavit of Ryusuke Mizukami.
On June 13, 1999, NEC and Papst entered into a License Agreement, pursuant to which NEC was granted a license in connection with the Licensed Patent Claims. [Sealed by Court] I find that an actual controversy still exists, under the same rationale applicable to the Hitachi matter. Papst's Motion to Dismiss the declaratory judgment counts insofar as they concern NEC is therefore denied.
Hewlett-packard Company ("HP")
On June 22, 1999, HP filed a complaint against Papst in the United States District Court for the District of Delaware, Civil Action No. 99-395 (the "Delaware Action"), seeking declaratory and other relief concerning patent infringement claims Papst had asserted against HP. The Delaware Action is one of the four action consolidated by the Judicial Panel on Multi-District Litigation and transferred to me for pre-trial proceedings.
In November, 1999, and again in February, 2000, Papst filed a counterclaim against HP, asserting patent infringement.
On April 4, 2000, HP and Papst completed the execution of a settlement agreement, pursuant to which the Delaware Action was dismissed, with full prejudice. Under the settlement, HP and its subsidiaries were granted a license by Papst for the patent rights, as defined in the agreement, [Sealed by Court]
Clearly, Minebea's reasonable apprehension of indemnity liability to HP survives this settlement and license agreement. Papst's motion to dismiss Minebea's declaratory judgment counts as to HP is denied.
Conclusion
As the manufacturer of the motors incorporating the patents in dispute, Minebea has a direct right to seek a declaratory judgment as to whether its customers who purchase these motors for use in HDDs are violating the Papst patents. It is not necessary that Minebea first unconditionally accept the indemnity obligations set forth in its agreements with its customers and asserted by its clients, before it may pursue its declaratory judgment claims. [Sealed by Court]
Accordingly,
Papst's 12(b)(1) motion to dismiss Minebea's declaratory judgment claims under Counts I, X, XI, XII, XIII, XIV and XVIII of the Second Amended and Supplemental Complaint is DENIED.