Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_04-cv-00529/USCOURTS-cand-4_04-cv-00529-0/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:271 Patent Infringement

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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

SHARPER IMAGE CORPORATION, a Delaware

corporation, and ZENION INDUSTRIES,

INC., a California corporation,

 Plaintiffs,

 v.

HONEYWELL INTERNATIONAL, INC., a

Delaware corporation, and KAZ, INC., a

New York corporation,

 Defendants.

 /

No. C 02-4860 CW

(Consolidated Case)

No. C 04-0529 CW

ORDER GRANTING

PLAINTIFFS’ MOTION

TO DISMISS

DEFENDANT KAZ’S

COUNTERCLAIMS FOR

LACK OF SUBJECT

MATTER JURISDICTION

Plaintiffs Sharper Image Corporation and Zenion Industries,

Inc. move to dismiss for lack of subject matter jurisdiction

Defendant Kaz, Inc.’s counterclaims for declaratory judgment of

patent non-infringement and invalidity. Kaz opposes the motion. 

The matter was taken under submission on the papers. Having

considered the parties’ papers, the Court GRANTS Plaintiffs’ motion

to dismiss Kaz’s counterclaims.

BACKGROUND

Sharper Image is the assignee of U.S. Patent Nos. 6,176,977

('977 patent) and 6,350,417 ('417 patent), and Zenion is the

assignee of U.S. Patent No. 4,789,801 ('801 patent). Plaintiffs

apply the technology described in the '977, '417 and '801 patents

in their Ionic Breeze Air Purifier product line. Sharper Image and

Zenion filed their original complaint on October 8, 2002, alleging

that Defendants Honeywell International, Inc. and Kaz had infringed

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the '977, '417 and '801 patents in developing their Environizer air

purifier product line. Sharper Image v. Honeywell & Kaz, C 02-4860

CW.

In February, 2004, Sharper Image filed a separate complaint

against Kaz alleging infringement of three additional patents. 

Sharper Image v. Kaz, C 04-0529 CW. The two lawsuits were

consolidated on April 1, 2004. On April 21, 2004, Plaintiffs filed

their consolidated amended complaint. On May 5, 2004, Honeywell

and Kaz answered the consolidated complaint separately, and each

asserted counterclaims for declaratory judgment of patent noninfringement and invalidity.

On May 16, 2005, Plaintiffs entered into a confidential

settlement agreement with Honeywell that, inter alia, included a

release from all claims in the lawsuit relating to the '977, '417

and '801 patents. On June 2, 2005, the Court approved a

stipulation of dismissal; all of Plaintiffs' claims against

Honeywell were dismissed with prejudice, and all of Plaintiffs'

claims against Kaz relating to the '977, '417 and '801 patents were

also dismissed with prejudice. In addition, all of Honeywell's

declaratory judgment counterclaims were dismissed with prejudice.

On June 27, 2005, Plaintiffs filed this motion to dismiss

Kaz's declaratory judgment counterclaims for patent noninfringement and invalidity relating to the '977, '417 and '801

patents.

LEGAL STANDARD

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

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

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Civ. P. 12(b)(1). 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), cert. denied, 488 U.S. 1006 (1989). 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 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

Plaintiffs argue that the Court lacks subject matter

jurisdiction over Kaz's counterclaims because, in light of the

settlement agreement and dismissal order, there is no case or

controversy relating to the '977, '417 and '801 patents. As

applied to declarations of patent rights and relationships, the

Federal Circuit has applied a two-pronged test to determine

declaratory justiciability: (1) action by the patentee that creates

reasonable apprehension on the part of the declaratory plaintiff

that it will face an infringement suit, and (2) present activity

that could constitute infringement or concrete steps taken with the

intent to conduct such activity. BP Chems. Ltd. v. Union Carbide

Corp., 4 F.3d 975, 978 (Fed. Cir. 1993). A patentee defending

against an action for a declaratory judgment can divest the

district court of subject matter jurisdiction by filing a covenant

not to assert the patents at issue against the putative infringer. 

Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1058

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(Fed. Cir. 1995).

Here, Plaintiffs’ claims against Kaz for infringement of the

'977, '417 and '801 patents have been dismissed with prejudice, and

under the terms of the settlement agreement Plaintiffs have granted

Kaz a release for its Environizer products from all claims relating

to the patents. Thus, Plaintiffs argue, Kaz has no reasonable

apprehension that it will face an infringement suit based upon any

of the formerly-accused products.

Kaz argues that it still has a reasonable apprehension that it

will face suit because it is obliged by contract to indemnify its

customer RadioShack against allegations of infringement for the

sale of Environizer products. Kaz notes that Plaintiffs have not

released RadioShack from claims relating to the '977, '417 and '801

patents. Kaz also argues that it is conceivable, even in light of

the settlement agreement and dismissal order, that Plaintiffs could

sue Kaz in the future for alleged infringement based upon a

different Kaz product. If that were to occur, Kaz contends, it may

be precluded from raising an invalidity defense if its

counterclaims were dismissed with prejudice here.

In its reply brief, Plaintiffs covenant not to sue any of

Kaz’s customers, including RadioShack, for infringement of the

'977, '417 and '801 patents in relation to sales of the accused

Environizer products. In Super Sack, the court ruled that a

covenant not to sue that was asserted in motion papers had the same

effect as a covenant signed by the company itself. 57 F.3d at

1059.

Kaz’s argument that it still has a reasonable apprehension of

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facing a future infringement lawsuit relating to the '977, '417 or

'801 patents is not well-taken. If Kaz is referring to products

that it has not yet manufactured, the Federal Circuit has already

rejected an identical argument: “The residual possibility of a

future infringement suit based on [] future acts is simply too

speculative a basis for jurisdiction over [a] counterclaim for

declaratory judgments of invalidity.” Super Sack, 57 F.3d at 1060. 

And, if Kaz is referring to products that it currently manufactures

but that are not accused in this action, dismissal of its

counterclaims for declaratory judgment will not have a preclusive

effect on its ability to assert any defense in a future action

accusing products that are not in suit here. See Foster v. Hallco

Mfg. Co., Inc., 947 F.2d 469, 479-80 (Fed. Cir. 1991).

For the foregoing reasons, Kaz has no reasonable apprehension

that it will face suit for infringement of the '977, '417 and '801

patents; thus, its counterclaims for declaratory judgment of patent

non-infringement and invalidity must be dismissed.

CONCLUSION

For the foregoing reasons, Plaintiffs' motion to dismiss

Defendant Kaz, Inc.’s counterclaims for declaratory judgment of

patent non-infringement and invalidity (Docket No. 336) is GRANTED. 

Kaz’s counterclaims are dismissed without prejudice.

This order resolves all issues in Sharper Image v. Honeywell &

Kaz, C 02-4860 CW. Thus, it is no longer necessary to consolidate

it with Sharper Image v. Kaz, C 04-0529 CW. The Clerk shall enter

judgment and close the file in Sharper Image v. Honeywell & Kaz, 

C 02-4860 CW. Sharper Image v. Kaz shall proceed under its

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original case number, C 04-0529 CW. The parties in Sharper Image

v. Kaz, C 04-0529 CW, shall appear for a case management conference

in this Court on Friday, March 3, 2006 at 1:30 p.m. The parties

shall file a joint case management statement no later than ten days

prior to the conference.

IT IS SO ORDERED.

Dated: 8/31/05

 

CLAUDIA WILKEN

United States District Judge

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