Cisco Systems, Inc. v. Alberta Telecommunications , 538 F. App'x 894 ( 2013 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
CISCO SYSTEMS, INC.,
Plaintiff-Appellant,
v.
ALBERTA TELECOMMUNICATIONS RESEARCH
CENTER, (doing business as TR Labs)
AND TR TECHNOLOGIES, INC.,
Defendants-Appellees.
______________________
2012-1687
______________________
Appeal from the United States District Court for the
Northern District of California in No. 12-CV-3293, Judge
Phyllis J. Hamilton.
______________________
Decided: August 29, 2013
______________________
WILLIAM F. LEE, Wilmer Cutler Pickering Hale and
Dorr, LLP, of Boston, Massachusetts, argued for plaintiff-
appellant. With him on the brief were LOUIS W. TOMPROS
and ANDREW J. DANFORD.
GEORGE C. SUMMERFIELD, Stadheim & Grear Ltd., of
Chicago, Illinois, argued for defendants-appellees. With
him on the brief was JOSEPH A. GREAR.
______________________
2 CISCO SYSTEMS, INC. v. ALBERTA TELECOMMUNICATIONS
Before RADER, Chief Judge, O’MALLEY, and WALLACH,
Circuit Judges.
O’MALLEY, Circuit Judge.
Cisco Systems, Inc. (“Cisco”) appeals from a final
judgment of the United States District Court for the
Northern District of California, dismissing its declaratory
judgment action for lack of subject matter jurisdiction.
For the reasons explained, we affirm the district court’s
finding of no jurisdiction.
BACKGROUND
Cisco develops and manufactures networking equip-
ment components used in telecommunications infrastruc-
tures. Cisco sells its products to national and regional
telecommunications providers, who use the products to
build telecommunication networks. Among other prod-
ucts, Cisco supplies its ONS 15454 multiservice platforms
and CRS routers, which are network components used to
deliver voice and data content. Alberta Telecommunica-
tions Research Centre, d/b/a TR Labs, is a Canadian non-
profit research consortium with universities, companies,
and government agencies as members. TR Technologies
Inc. (together with Alberta Telecommunications Research
Centre, “TR Labs”) is a Canadian corporation and the
exclusive licensee of patents owned by Telecommunica-
tions Research Laboratories. 1 Alberta Telecommunica-
tions Research Laboratories is the owner by assignment
of the TR Labs patents. The TR Labs patents are directed
1 The patents relevant to this appeal are U.S. Pa-
tent Nos.: 4,956,835 (“the ’835 patent”); 5,850,505 (“the
’505 patent”); 6,377,543 (“the ’543 patent”); 6,404,734
(“the ’734 patent”); 6,421,349 (“the ’349 patent”);
6,654,379 (“the ’379 patent); 6,914,880 (“the ’880 patent”);
and 7,260,059 (“the ’059 patent”) (collectively, “the TR
Labs patents”).
CISCO SYSTEMS, INC. v. ALBERTA TELECOMMUNICATIONS 3
to telecommunication networks and claim the networks
themselves (i.e., system claims) and methods performed
on the networks.
TR Labs has brought several lawsuits asserting the
TR Labs patents against various national and regional
telecommunications network providers; many are custom-
ers of Cisco. These lawsuits are currently pending in a
multi-district litigation in the District of New Jersey. The
consolidated cases include lawsuits against AT&T, Veri-
zon, and Comcast. There is another pending case against
seven defendants in the District of Colorado (“the Colora-
do case”). In some of the complaints served on these
network providers, TR Labs accused the defendants of
infringing the asserted patents “based on” the use of Cisco
products in their network systems. As those cases pro-
gressed, moreover, TR Labs provided claim charts to the
defendants which tie TR Labs’ infringement contentions
to the respective defendants’ use of Cisco products, identi-
fied by model number, and quote Cisco’s product litera-
ture to describe the allegedly infringing functionality
made possible by those Cisco products. In some of the
cases, TR Labs even identifies the Cisco components as
comprising “a Cisco MPLS network.”
In response to TR Labs’ actions against its customers,
Cisco filed an action in the Northern District of California
on June 26, 2012, seeking declaratory judgment of non-
infringement and invalidity of the TR Labs patents. TR
Labs moved to dismiss Cisco’s complaint for lack of sub-
ject matter jurisdiction, arguing that Cisco failed to allege
facts sufficient to establish that TR Labs had accused
Cisco itself of either direct or indirect infringement.
Before opposing TR Labs’ motion to dismiss, Cisco
sought a covenant not to sue. But, because Cisco sought
to include in those covenants a release of its customers in
addition to itself, the parties did not reach agreement.
Cisco thus opposed TR Labs’ motion to dismiss.
4 CISCO SYSTEMS, INC. v. ALBERTA TELECOMMUNICATIONS
The district court granted TR Labs’ motion to dismiss,
finding that Cisco failed to establish declaratory judgment
jurisdiction. Cisco Sys., Inc. v. Alberta Telecomms. Re-
search Ctr., 892 F. Supp. 2d 1226, 1228 (N.D. Cal. 2012)
After noting that Cisco conceded it could not base subject
matter jurisdiction on fears of a direct infringement claim
against it, the district court also found jurisdiction could
not be based on threatened claims of indirect infringe-
ment by Cisco. Id. at 1232.
The district court did not find the claim charts TR
Labs served on Cisco’s customers determinative, finding it
impossible to tell if the Cisco components were mentioned
in those charts only as background information or “as
required parts of the accused networks.” Id. at 1233.
Ultimately, the district court found it difficult to tell from
the record whether a justiciable controversy yet existed
between Cisco and TR Labs.
The trial court then discounted the parties’ inability
to enter into a covenant not to sue because:
Finally, the parties’ inability to agree on a cove-
nant not to sue is not determinative of this issue.
It is true . . . that a patentee’s grant of a covenant
not to sue a supplier for infringement can elimi-
nate the supplier’s standing to bring a declaratory
judgment action. . . . However, the converse—that
because the parties were unable to agree on the
terms of a covenant not to sue, there must neces-
sarily be a justiciable controversy—is not neces-
sarily true, particularly if, as TR Labs claims
here, it was unwilling to agree to Cisco’s draft
proposal because such a covenant not to sue would
have essentially resulted in the elimination of TR
Labs’ ability to sue alleged infringers who also
happened to be Cisco’s customers.
Id.Cisco appeals that ruling to this court. We have ju-
risdiction under 28 U.S.C. § 1295(a)(1).
CISCO SYSTEMS, INC. v. ALBERTA TELECOMMUNICATIONS 5
DISCUSSION
We review a district court’s dismissal for lack of sub-
ject matter jurisdiction de novo. Powertech Tech. Inc. v.
Tessera, Inc., 660 F.3d 1301, 1306 (Fed. Cir. 2012). When
reviewing the decision, we must “accept[] as true all well-
pleaded allegations of fact, construed in the light most
favorable to the plaintiff.” Bradley v. Chiron Corp., 136
F.3d 1317, 1321-22 (Fed. Cir. 1998 (citing Scheuer v.
Rhodes, 416 U.S. 232, 236 (1974)). “The burden is on the
party claiming declaratory judgment jurisdiction to estab-
lish that such jurisdiction existed at the time the claim for
declaratory relief was filed.” Powertech Tech. Inc., 660
F.3d at 1306 (citing King Pharm., Inc. v. Eon Labs, Inc.,
616 F.3d 1267, 1282 (Fed. Cir. 2012); Benitec Austl., Ltd.
v. Necleonics, Inc., 495 F.3d 1340, 1344 (Fed. Cir. 2007)).
Under the Declaratory Judgment Act, “[i]n the case of
an actual controversy within its jurisdiction, . . . any court
of the United States, upon the filing of an appropriate
pleading, may declare the rights and other legal relations
of any interested party seeking such a declaration,
whether or not further relief is or could be sought.” 28
U.S.C. § 2201(a). In MedImmune, Inc. v. Genentech, Inc.,
the Supreme Court reiterated that the proper test for
whether a declaratory judgment action presents a justici-
able controversy is “whether the facts alleged, under all
the circumstances, show that there is a substantial con-
troversy, between parties having adverse legal interests,
of sufficient immediacy and reality to warrant the issu-
ance of a declaratory judgment.” 549 U.S. 118, 127 (2007)
(quoting Maryland Cas. Co. v. Pac. Coal & Oil Co., 312
U.S. 270, 273 (1941)).
Cisco relies on two of or our prior cases, Arkema Inc.
v. Honeywell International, Inc., 706 F.3d 1351 (Fed. Cir.
2013) and Arris Group, Inc. v. British Telecommunica-
tions PLC, 639 F.3d 1368 (Fed. Cir. 2011), to support its
claim that the district court erred when it dismissed
Cisco’s complaint. While a close call, we ultimately are
unpersuaded that either case justifies reversal here,
6 CISCO SYSTEMS, INC. v. ALBERTA TELECOMMUNICATIONS
particularly given the concessions counsel for TR Labs
made during the oral argument before this Court. See
Organic Seed Growers & Trade Ass’n v. Monsanto Co.,
718 F.3d 1350, 1358-59 (Fed. Cir. 2013) (“If we rely on
Monsanto’s representations to defeat the appellants’
declaratory judgment claims (as we do), those representa-
tions are binding as a matter of judicial estoppel. It is
well-established that a party who successfully argues one
position is estopped from later adopting a contrary posi-
tion in a case involving the same patent.”).
In Arkema, the district court refused to allow Arkema
to amend its declaratory judgment complaint to add
claims for newly-issued patents, finding no justiciable
controversy over those patents. 706 F.3d at 1353. We
reversed, holding that a justiciable controversy existed
between Arkema and the defendant on the new patents
based on Arkema’s plans to sell a product allegedly cov-
ered by those patents. Id. at 1353–54. The parties had a
history of litigation, both in the U.S. and abroad, sur-
rounding Arkema’s activities with the product allegedly
covered by the patents, both old and new. Id. at 1357.
The patentee acknowledged, moreover, that there were no
substantial non-infringing uses for the coolant within the
industry which Arkema planned to operate (i.e., the
automobile industry). Id. at 1358.
In Arris, we also found jurisdiction over a declaratory
judgment action because an actual controversy existed
between the parties. 639 F.3d at 1371. British Telecom-
munications (“BT”) accused Arris customers of infringing
its patents by using Arris’ products. Id. There was
substantial communication between BT, the customers,
and Arris regarding BT’s theories of infringement against
both Arris and its customers before the declaratory judg-
ment action was filed. Id. at 1372. Additionally, the
customers had demanded “that Arris ‘defend, indemnify
and hold harmless [the customer] from [BT’s] assertions
of infringement.’” Id. Based on this activity, we found
CISCO SYSTEMS, INC. v. ALBERTA TELECOMMUNICATIONS 7
that an actual controversy warranting declaratory judg-
ment jurisdiction existed.
The facts in this case fit neither the facts in Arkema
nor those in Arris and otherwise fail to give rise to a
current justiciable controversy between TR Labs and
Cisco.
As an initial matter, at oral argument, Cisco’s counsel
conceded that its products were not identified in claim
charts relating to two of the eight patents at issue, the
’505 and ’543 patents. Oral Argument at 8:20-8:55; 9:30-
9:45; 27:46-29:15, Cisco Sys., Inc. v. Alberta Telecomms.
Research Ctr., 2012-1687, available at http://www.
cafc.uscourts.gov/oral-argument-recordings/search/audio.
html. 2 Since the reference to Cisco’s products in certain of
the claim charts is the primary basis upon which Cisco
premises its alleged fear that an infringement claim
might be asserted against it, the absence of any reference
to Cisco products in the charts relating to the ’505 and
’543 patents greatly undercuts Cisco’s claim that a con-
troversy exists as to those patents.
Also at oral argument, TR Labs’ counsel conceded that
TR Labs has “no basis for suing [Cisco] either for direct or
indirect infringement.” Id. at 24:20-24:26. TR Labs
further conceded that there are substantial non-infringing
uses of Cisco’s products, a point Cisco does not dispute.
Id. at 17:20-18:50. Given this reality, TR Labs could not
assert a claim of contributory infringement against Cisco
under 35 U.S.C. § 271(c). See Ricoh Co. v. Quanta Com-
2 Cisco’s counsel actually pointed to the ’379 patent,
rather than the ’505 patent, but that appears to have been
a mistake, albeit an understandable one. There were
actually no claim charts submitted in connection with the
’379 patent. It was the ’505 and ’543 patents where the
claim charts were submitted, but were void of any refer-
ence to Cisco.
8 CISCO SYSTEMS, INC. v. ALBERTA TELECOMMUNICATIONS
puter, Inc., 550 F.3d 1325, 1337 (Fed. Cir. 2008) (“The
language of the statute incorporates the core notion that
one who sells a component especially designed for use in a
patented invention may be liable as a contributory in-
fringer, provided that the component is not a staple
article of commerce suitable for substantial noninfringing
use.”). These facts clearly distinguish the facts here from
those at issue in Arkema.
Additionally, unlike in Arris, there were no protracted
discussions between Cisco and TR Labs regarding Cisco’s
potential liability before filing the declaratory judgment
action. And, unlike in Arris, Cisco has never asserted
that it has indemnity obligations for any liability its
customers might incur. Indeed, when asked about in-
demnity agreements directly during oral argument,
Cisco’s counsel could not point to any such agreement,
promise, or obligation. Oral Argument at 3:45-5:35.
Finally, TR Labs has expressly offered to give Cisco a
covenant not to sue Cisco for infringement of any of the
asserted patents. As noted above, TR Labs’ counsel stated
that TR Labs has “no basis for suing [Cisco] either for
direct or indirect infringement” and “we were happy” to
give Cisco a covenant not to sue. Id. at 24:20-24:35. It is
understandable that Cisco may have an interest in saving
its customers from infringement contentions premised,
even in part, on their use of Cisco products. In the cir-
cumstances presented here, that interest is simply insuf-
ficient to give rise to a current, justiciable case or
controversy upon which federal declaratory judgment
jurisdiction may be predicated. 3
3 Notably, Cisco has not sought to intervene in any
of the actions against its customers. Oral Argument at
0:25-0:40.
CISCO SYSTEMS, INC. v. ALBERTA TELECOMMUNICATIONS 9
CONCLUSION
TR Labs’ concession that it is willing to grant Cisco an
unqualified covenant not to sue, TR Labs’ concession that
it has no basis for asserting direct or indirect infringe-
ment claims against Cisco, including the parties’ agree-
ment that Cisco’s products have substantial non-
infringing uses, and Cisco’s failure to identify any obliga-
tion to indemnify or defend its customers distinguish this
action from others in which this Court has found declara-
tory judgment jurisdiction and support the district court’s
finding that it lacked the same. We therefore affirm the
district court ruling.
AFFIRMED