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IP Litigation

Allegation against non-indemnified customer raises declaratory judgment claim by supplier only if based on the supplier’s documents

April 11, 2014

IP Litigation

Allegation against non-indemnified customer raises declaratory judgment claim by supplier only if based on the supplier’s documents

April 11, 2014

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Fed. Cir. affirms-in-part and reverses-in-part on DJ jurisdiction, and affirms summary judgment of non-infringement for some products but vacates for others that were not the basis of the DJ suit.

Microsoft Corp. v. DataTern, Inc., __ F.3d __ (Fed. Cir. Apr. 4, 2014) (Rader (dissenting in part), Prost, MOORE) (S.D.N.Y.:  Forrest) (3 of 5 stars)

Declaratory Judgment Jurisdiction:  Microsoft and SAP DJ’d DataTern after it sued their customers for using their software.  The Fed Cir held that the customer suit did not confer jurisdiction where Microsoft and SAP had no indemnity obligation.  The question was whether they thought they could have a claim against them for indirect infringement:  (a) the patentee used SAP’s user guides in its claim charts for all limitations, “establish[ing] that there existed a substantial controversy regarding whether SAP induced infringement,” id. at  9; (b) the claim charts relied only on Microsoft documents for one patent (so there was Microsoft DJ jurisdiction for that) but not another (so no Microsoft DJ jurisdiction over that).  The analysis was not affected by post-complaint facts, including DataTern’s conditional counterclaims of infringement against Microsoft, or by Microsoft’s general concern about DataTern’s litigiousness where its strategy was to sue customers, not suppliers.

Summary Judgment of Non-Infringement:  Summary judgment of non-infringement on one patent was proper because the term “object model” had its plain meaning, which requires “object classes,” as evidenced by inventor testimony, SAP’s expert, and a proposed construction by the patentee’s predecessor.  The specification was consistent with this meaning—the “only depicted object model” included classes.  This construction did not exclude the preferred embodiment, despite the patentee’s argument based on a stipulation that narrowed the definition of “classes” than required by the patent—the stipulation did not change the correct construction of “object model.”  Summary judgment of non-infringement (for SAP) on the second patent was proper where the patentee never filed infringement contentions but did not give SAP a covenant not to sue.  But the Fed Cir narrowed the scope of the non-infringement judgment to a single SAP product where the patentee’s claim charts were limited to that product: “Declaratory judgment jurisdiction must be determined on a product-by-product basis.”  Slip op. at 21.

Dissent-in-part:  Chief Judge Rader believed Microsoft had DJ jurisdiction on the second patent as well.  Although recognizing the patentee would prefer “to keep Microsoft or other corporations on the sidelines while seeking numerous settlements with their customers who cannot afford the cost of a major lawsuit,” he would have permitted Microsoft to “step[] up to resolve this dispute in the most efficient manner.”  Dissent at 2.  He criticized the majority for using a “lone detail” within the patentee’s control—citing third-party, rather than Microsoft, documents in its customer infringement charts—to eliminate jurisdiction, while ignoring the rest of the totality of the circumstances.

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