Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_07-cv-02363/USCOURTS-cand-4_07-cv-02363-12/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:2201 Declaratory Judgement

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

MONOLITHIC POWER SYSTEMS, INC., a

Delaware corporation,

Plaintiff,

v.

O2 MICRO INTERNATIONAL LIMITED, a

Cayman Islands corporation,

Defendant.

 /

No. C 07-2363 CW

ORDER DENYING

DEFENDANT’S MOTION

TO DISMISS 

Defendant O2 Micro International Limited moves to dismiss the

complaint of Plaintiff Monolithic Power Systems, Inc. (MPS),

arguing for a second time that the Court lacks jurisdiction. MPS

opposes the motion, contending that the Court has jurisdiction

under the Declaratory Judgment Act. The matter was taken under

submission on the papers. Having considered all of the papers

submitted by the parties, the Court denies O2 Micro’s motion. 

BACKGROUND

In this case, MPS seeks a declaration of its rights with

respect to O2 Micro’s U.S. Patent No. 6,804,129 (the ‘129 patent):

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 The ‘129 patent has the same specification as O2 Micro’s U.S.

Patent Nos. 6,259,615 (the ‘615 patent) and 6,396,722 (the ‘722

patent), both of which the U.S. Patent and Trademark Office

issued before issuing the ‘129 patent and both of which have been

involved in cases before the Court.

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it requests that the Court find that it does not infringe any valid

claim of the ‘129 patent and that the ‘129 patent is unenforceable

due to inequitable conduct. This case is the latest in a series of

actions before this Court between MPS and its competitor O2 Micro. 

For years, MPS and O2 Micro have accused each other of infringing

each other’s patents or of attempting to enforce patents that are

invalid and unenforceable. Thus, the Court is familiar with the

parties, the technology and the patent at issue.1

In 2004, after MPS filed a declaratory judgment action

concerning O2 Micro’s ‘722 patent in this Court, O2 Micro filed

suit against MPS in the Eastern District of Texas, alleging that

MPS infringed the ‘129 patent. O2 Micro filed the Texas action the

day that the ‘129 patent issued. The Eastern District of Texas

court transferred that action to this Court and the Court

consolidated the Texas action with the related ‘722 patent

litigation.

On October 11, 2006, after consolidating the two actions

involving O2 Micro’s patents, the Court dismissed with prejudice

O2 Micro’s ‘129 patent infringement claim against MPS pursuant to a

stipulated dismissal signed by the parties. The stipulation,

signed by the Court, provides:

O2 Micro covenants not to assert or reassert its ‘129 patent

against named defendants for infringement by MPS full bridge

inverter controllers (and products incorporating said

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controllers) made, used, imported, offered for sale or sold

previously or currently having product designations MP1010,

MP1010B, MP1011, MP1012, MP1013, MP1015, MP 1016, MP1018,

MP1022, MP1023, MP1024, MP1025, MP1026, MP1027, MP1029,

MP1030, MP1031, MP1032, MP1035 and MP1038, evaluation boards

EV0001, EV0002, EV0003, EV0004, EV0014, EV0017, EV0019,

EV0027, EV0031 and EV0037 incorporating certain of those

inverter controllers, Asustek products incorporating the

MP1010B, MP1011, MP1015 and/or MP1037 inverter controller

chips, and Compal’s products incorporating the MP101, MP1010B,

MP1015, MP1016, and/or MP1037 inverter chips.

The stipulation covers all of the MPS products that O2 Micro had

accused of infringing the ‘129 patent. 

After the Court signed this stipulation, MPS designed and

marketed new inverter controller products not previously accused of

infringing the ‘129 patent. These new products included a halfbridge inverter controller marketed as the MP1008 and a new fullbridge inverter controller marketed under the VION brand.

MPS brought the present lawsuit seeking a declaration that

these new products do not infringe the ‘129 patent. O2 Micro moved

to dismiss the complaint for lack of subject matter jurisdiction,

arguing that the earlier stipulation deprived the Court of subject

matter jurisdiction over the dispute. The Court denied the motion,

finding that there was an actual justiciable controversy between

the parties in light of their extensive litigation history and the

limited nature of the stipulation.

O2 has now proffered a covenant not to sue that differs in

some respects from the previous stipulation. It states:

O2 Micro covenants not to assert or reassert its ‘129

patent against MPS for infringement by MPS power inverter

controller products [model numbers of the sixteen power

inverter controller products specifically identified by

MPS] in the form currently in existence (and inverter

modules and end-user devices incorporating such inverter

controllers in a manner consistent with MPS’s reference

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diagrams produced in this litigation) made, used,

imported, offered for sale or sold by MPS. O2 Micro does

not intend this stipulation to apply to any other parties

besides MPS and does not intend this stipulation to have

preclusive effect (such as collateral estoppel or res

judicata) as to any issue or claim asserted in the future

except as expressly set forth herein.

Su Dec. ¶ 7 (brackets in original). The products referred to in

the covenant are the sixteen products that MPS has identified in

discovery as being the subject of its request for a declaratory

judgment.

O2 Micro contends that the covenant eliminates any controversy

between the parties, and therefore requests that the Court dismiss

the case for lack of subject matter jurisdiction. O2 Micro argues

in the alternative that, even if the Court has jurisdiction over

the case, it should decline to exercise such jurisdiction.

LEGAL STANDARD

 Subject matter jurisdiction is a threshold issue which goes to

the power of the court to hear the case. Federal subject matter

jurisdiction must exist at the time the action is commenced. 

Morongo Band of Mission Indians v. Cal. State Bd. of Equalization,

858 F.2d 1376, 1380 (9th Cir. 1988). A federal court is presumed

to lack subject matter jurisdiction until the contrary

affirmatively appears. Stock W., Inc. v. Confederated Tribes, 873

F.2d 1221, 1225 (9th Cir. 1989). 

Dismissal is appropriate under Rule 12(b)(1) when the district

court lacks subject matter jurisdiction over the claim. Fed. R.

Civ. P. 12(b)(1). A Rule 12(b)(1) motion may either attack the

sufficiency of the pleadings to establish federal jurisdiction, or

allege an actual lack of jurisdiction which exists despite the

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formal sufficiency of the complaint. Thornhill Publ’g Co. v. Gen.

Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979); Roberts v.

Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987). 

DISCUSSION

The Declaratory Judgment Act, in accordance with Article III

of the Constitution, requires an “actual controversy” before the

Court “may declare the rights and other legal relations of any

interested party seeking such declaration.” 28 U.S.C. § 2201(a). 

Until relatively recently, the Federal Circuit required that, in

order to prove an actual controversy, a plaintiff had to establish

that the defendant’s conduct created an objectively “reasonable

apprehension” that the defendant would initiate suit imminently if

the plaintiff continued the allegedly infringing activity. See

Teva Pharms. USA, Inc. v. Novartis Pharms. Corp., 482 F.3d 1330,

1334-36 (Fed. Cir. 2007). 

In MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 S.

Ct. 764 (2007), however, the Supreme Court noted that the Federal

Circuit’s “reasonable apprehension of imminent suit” test

conflicted with several cases in which the Supreme Court had found

that a declaratory judgment plaintiff had a justiciable

controversy. 127 S. Ct. at 774 n.11. The Supreme Court instructed

that, although there is no bright-line rule for distinguishing

cases that satisfy the actual controversy requirement from those

that do not, all that is required is:

that the dispute be definite and concrete, touching the

legal relations of parties having adverse legal

interests; and that it be real and substantial and admit

of specific relief through a decree of a conclusive

character, as distinguished from an opinion advising what

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the law would be upon a hypothetical state of facts.

. . . Basically, 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.

Id. at 771 (citations and internal quotation marks omitted).

Following MedImmune, the Federal Circuit recognized that the

Supreme Court did not approve of its reasonable apprehension of

imminent suit test. SanDisk Corp. v. STMicroelectronics, Inc., 480

F.3d 1372, 1380 (Fed. Cir. 2007); Teva, 482 F.3d at 1340. The

Federal Circuit discarded its “reasonable apprehension” requirement

and adopted MedImmune’s “all circumstances” test. Teva, 482 F.3d

at 1339 (“[W]e follow MedImmune’s teaching to look at ‘all the

circumstances’ . . . to determine whether Teva has a justiciable

Article III controversy.”). Under the new test, “Article III

jurisdiction may be met where the patentee takes a position that

puts the declaratory judgment plaintiff in the position of either

pursuing arguably illegal behavior or abandoning that which he

claims a right to do.” SanDisk, 480 F.3d at 1381. As one district

court has noted, this change in the law with respect to the nowdefunct “reasonable apprehension” requirement has “in effect

lower[ed] the bar for a plaintiff to bring a declaratory judgment

action in a patent dispute.” Frederick Goldman, Inc. v. West, 2007

WL 1989291, at *3 (S.D.N.Y.).

O2 Micro contends that, even under the Federal Circuit’s

revised standard, there is no actual controversy and, therefore, no

jurisdiction over MPS’s declaratory judgment claims. It focuses on

the fact that it has now proffered a covenant not to sue which

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2O2 Micro cites Microchip Technology Inc. v. Chamberlain

Group, Inc., 441 F.3d 936 (Fed. Cir. 2006), for the proposition

that a lawsuit by a declaratory judgment defendant against the

customers of the declaratory judgment plaintiff creates only an

“adverse economic interest” between the parties and is not

sufficient to confer jurisdiction absent a potential legal cause of

action by the defendant against the plaintiff itself. Microchip

Tech., however, was decided under the now-defunct reasonableapprehension-of-imminent-suit test, and thus its applicability must

be considered in light of MedImmune’s all-circumstances test. The

Court finds that, under MedImmune, it must consider the potential

for lawsuits against MPS’s customers when determining whether an

actual controversy exists. In addition, unlike here, the defendant

in Microchip Tech. had never accused the plaintiff of infringing

the patents-in-suit.

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covers the products for which MPS seeks a declaration of noninfringement. But, as MPS points out, the covenant would not

prevent O2 Micro from suing MPS’s customers. If that were to

happen, MPS would face injury in the form of damage to its

relationships with its customers. In addition, MPS could be forced

to indemnify its customers for any losses they incur in an

infringement suit brought against them by O2 Micro. See WS

Packaging Group, Inc. v. Global Commerce Group, LLC, 505 F. Supp.

2d 561, 566 (E.D. Wis. 2007) (noting that, under the UCC, even a

customer without an indemnification contract may seek

indemnification from the seller if the patentee successfully sues

the customer for infringement). MPS’s interest in preventing such

a scenario is sufficient to demonstrate a controversy between the

parties. See id. (finding a justiciable controversy based on “the

injury that might arise from [the plaintiff’s] having to indemnify

customers” and “the loss of [the plaintiff’s] customer base and

reputation in these circumstances”).2

The history of litigation over the ‘129 patent demonstrates

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that a lawsuit by O2 Micro against MPS’s customers is more than a

theoretical possibility: Despite the stipulated dismissal of O2

Micro’s previous ‘129 patent claims against MPS, O2 Micro pursued

claims against an MPS customer in the Eastern District of Texas for

infringement of the ‘129 patent through its use of MPS products,

even though those products were listed in the stipulation. In

opposing the customer’s motion for summary judgment, O2 Micro

stated:

The Stipulated Dismissal does not confer on MPS the right

to practice the ‘129 patent or to sublicense its

customers to do so. Rather, it merely contains a promise

by O2 Micro not to sue MPS for infringing the ‘129 patent

with certain products. The fact that O2 Micro has agreed

not to sue MPS does not transform MPS’s products into

licensed products; rather, they remain infringing

products which others downstream may not use without

incurring liability for infringement. All that the

Stipulated Dismissal provides to MPS is personal immunity

from suit for these particular acts of infringement.

7/26/07 Brigham Dec. (Docket No. 23) Ex. 6 at 4. O2 Micro’s

proffered covenant here is even more explicit than the earlier

stipulation in preserving O2 Micro’s right to sue parties other

than MPS for infringement of the ‘129 patent.

O2 Micro has sued numerous parties, including MPS, accusing

them of infringing the ‘129 patent. Such suits indicate “an

assertion of rights and a willingness to pursue litigation”

regarding the patent-in-suit, Cingular Wireless v. Freedom

Wireless, Inc., 2007 WL 1876377, at *3 (D. Ariz.), and there is no

reason to believe that O2 Micro has decided to stop vigorously

enforcing its patent rights. See also Teva, 482 F.3d at 1344

(“[R]elated litigation involving the same technology and the same

parties is relevant in determining whether a justiciable

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declaratory judgment controversy exists on other related patents.”)

This is not to say that no covenant not to sue would be

sufficient to eliminate the controversy between the parties. But

such a covenant would have to be broad enough in scope to support

an objective determination that MPS’s interests would not be

prejudiced by failing to pursue this lawsuit. O2 Micro rejected an

offer by MPS to enter into a stipulated dismissal entailing a

covenant not to sue that would have extended to MPS’s direct and

indirect customers. Other aspects of the proposed stipulated

dismissal, such as a provision requiring O2 Micro to bring any

future action against MPS for infringement of the ‘129 patent in

the Northern District of California, go beyond what would be

required to deprive the Court of jurisdiction. Nonetheless, O2

Micro could have offered a covenant not to sue that extended to

suits against MPS’s customers. Its failure to do so further

suggests that a controversy continues to exist between the parties.

The Court concludes that, considering the totality of the

circumstances, “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, 127

S. Ct. at 772. Therefore, the Court has jurisdiction over MPS’s

declaratory judgment claims.

As for O2 Micro’s request that the Court decline to exercise

its jurisdiction, the Court previously denied this request, and

circumstances have not changed so as to warrant revisiting that

decision. For the reasons contained in the Court’s order denying

O2 Micro’s first motion to dismiss, it will exercise jurisdiction

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over this case.

CONCLUSION

For the foregoing reasons, O2 Micro’s motion to dismiss

(Docket No. 64) is DENIED. The hearing currently scheduled for

August 7, 2008 is VACATED.

IT IS SO ORDERED.

Dated: 8/6/08 

CLAUDIA WILKEN

United States District Judge

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