Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_04-cv-02000/USCOURTS-cand-4_04-cv-02000-46/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:1331 Fed. Question

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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 Island corporation,

Defendant.

 /

AND RELATED COUNTERCLAIMS.

 /

O2 MICRO INTERNATIONAL LIMITED, a

Cayman Islands corporation,

Plaintiff,

v.

MONOLITHIC POWER SYSTEMS, INC., a

California corporation, et al.,

Defendants.

 /

AND RELATED CROSS-CLAIMS AND

COUNTERCLAIMS.

 /

No. C 04-2000 CW

(consolidated with

No. C 06-2929 CW)

ORDER DENYING MPS &

HSING'S MOTION TO

DISMISS FOURTH

COUNT OF O2 MICRO'S

THIRD AMENDED

COMPLAINT FOR LACK

OF JURISDICTION

Case 4:04-cv-02000-CW Document 533 Filed 10/03/06 Page 1 of 9
United States District Court

For the Northern District of California

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Monolithic Power Systems, Inc. (MPS) and Michael Hsing move,

pursuant to Federal Rule of Civil Procedure 12(b)(1), to dismiss

the fourth count in O2 Micro International Limited's third amended

complaint for patent infringement and unfair competition. O2 Micro

opposes the motion. The matter was submitted on the papers. 

Having considered all the papers submitted by the parties, the

Court denies the motion. 

BACKGROUND

O2 Micro filed this suit in the Eastern District of Texas,

accusing MPS of infringing O2 Micro's U.S. Patent No. 6,804,129

(the '129 patent). O2 Micro amended its complaint, asserting that

other corporate entities, in addition to MPS, infringed the '129

patent and that some of those corporate entities also infringed O2

Micro's U.S. Patent No. 6,396,722 (the '722 patent) and its U.S.

Patent No. 6,259,614 (the '615 patent). These other corporate

entities include the manufacturer of MPS' alleged infringing

inverter controllers and MPS' customers. 

O2 Micro then amended its complaint a second time. It added

Defendant Hsing as an individual Defendant and alleged that he

infringed the '129 patent. In addition, the second amended

complaint includes a fourth cause of action for unfair competition

by Defendant Hsing and MPS.

Before this suit was transferred to this Court, MPS and

Defendant Hsing moved to dismiss the fourth count of the second

amended complaint for lack of subject matter jurisdiction. As of

the date of the transfer, the motion was still pending.

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On July 26, 2006, after the case was transferred, O2 Micro

filed its third amended complaint. The first count against all

Defendants, including MPS and Defendant Hsing, is for infringement

of the '129 patent. It accuses Defendants of direct infringement,

inducement and contributory infringement. The second and third

counts, for infringement of the '722 and '615 patents, are not

directed at MPS or Defendant Hsing. The fourth count against MPS

and Defendant Hsing is for unfair competition. It includes the

following allegations:

27. Upon information and belief, in addition to and in

furtherance of their acts of patent infringement, MPS and

Hsing unfairly compete against O2 Micro by engaging in

unlawful, unfair, and fraudulent practices in soliciting and

maintaining customers for electronics devices and computer

hardware, including integrated circuits that convert DC

voltage to AC voltage used in products such as flat panel

displays and notebook computers.

28. Upon information and belief, in addition to and in

furtherance of their acts of patent infringement, MPS and

Hsing have made agreements with certain employees of MPS's

customers to grant MPS stock options to those individuals, so

as to entice them to enter into and/or maintain a customer

relationship with MPS.

29. Upon information and belief, in addition to and in

furtherance of their acts of patent infringement, MPS and

Hsing have sold or caused to be sold MP1011A and MP1015

products in Taiwan in violation of court injunctions in

Taiwan, knowing that said products would be used in electronic

devices and computer hardware made, used, offered for sale or

sold in the United States.

30. Upon information and belief, in addition to and in

furtherance of their acts of patent infringement, MPS and

Hsing have solicited, and conspired and colluded with, one or

more companies to serve as second source suppliers of MPS

integrated circuits for converting DC voltage to AC voltage,

knowing and intending that said products would be used in

electronic devices and computer hardware made, used, offered

for sale or sold in the United States.

31. Upon information and belief, MPS and Hsing's wrongful

conduct has cause O2 Micro injury by competition and

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restraining trade in the manufacture and sale of integrated

circuits for efficiently converting DC voltage to AC voltage,

diverting business from O2 Micro through the marketing,

distribution and sale of infringing products, and interfering

with O2 Micro's prospective business relationships.

32. MPS and Hsing's actions constitute unlawful unfair and

fraudulent practices in violation of the Cal. Bus. & Prof.

Code § 17200, et seq. Such unlawful practices offend the

policy and spirit of antitrust and unfair competition laws.

MPS and Defendant Hsing contend that the above allegations

provide no common factual nexus between O2 Micro's patent

infringement claim and its unfair competition claim. They request

that the Court dismiss O2 Micro's unfair competition claim based on

lack of jurisdiction.

LEGAL STANDARD

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). 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 West,

Inc. v. Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir. 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). In deciding a

Rule 12(b)(1) motion, the court assumes the truth of the

Case 4:04-cv-02000-CW Document 533 Filed 10/03/06 Page 4 of 9
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allegations in the complaint, unless controverted by undisputed

facts in the record. Roberts, 812 F.2d at 1177. An action should

not be dismissed for lack of subject matter jurisdiction without

giving the plaintiff an opportunity to amend unless it is clear

that the jurisdictional deficiency cannot be cured by amendment. 

May Dep’t Store v. Graphic Process Co., 637 F.2d 1211, 1216 (9th

Cir. 1980). 

DISCUSSION

O2 Micro's third amended complaint states that this Court has

original and supplemental jurisdiction over O2 Micro's unfair

competition claim pursuant to 28 U.S.C. § 1367 and 28 U.S.C.

§ 1338(b).

Under section 1367(a), a federal court has the power to hear

pendent State law claims where the federal and State claims are so

related as to form part of the same controversy under Article III. 

28 U.S.C. § 1367(a); United Mine Workers of Am. v. Gibbs, 383 U.S.

715, 725 (1966). Under both Ninth Circuit and Federal Circuit law,

the relatedness requirement of § 1367(a) is met if the claims

derive from a common nucleus of operative fact and, as such, would

ordinarily be expected to be tried in the same proceeding. See

Mars Inc. v. Kabushiki-Kaisha Nippon Conlux, 24 F.3d 1368, 1374

(Fed. Cir. 1994); Brady v. Brown, 51 F.3d 810, 816 (9th Cir.

1995). 

Section 1338(b) provides that "district courts shall have

original jurisdiction of any civil action asserting a claim of

unfair competition when joined with a substantial and related claim

under the copyright, patent, plant variety protection or trademark

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laws.” Courts have defined "related" to require that "at least

part of the proof in support of the pendent claim be common to the

federal claims." Mattel, Inc. v. Hyatt, 664 F.2d 757, 761 (9th

Cir. 1981); see also Verdegaal Bros., Inc. v. Union Oil Co. of

Cal., 750 F.2d 947 (Fed. Cir. 1984). Nonetheless, for a federal

court to exercise pendent jurisdiction under section 1338(b), there

must be "considerable overlap" between the factual bases underlying

the federal and State claims; indeed, such overlap must be

"apparent." Mattel, 664 F.2d at 760-61. In Mars, the Federal

Circuit explained that section 1338(b) permits joinder of a State

unfair competition claim with a federal patent infringement claim

to avoid “piecemeal litigation." 24 F.3d at 1372. 

Although the wording of these two sections differs, the

parties agree that to demonstrate that jurisdiction is proper under

either section 1367(a) or section 1338(b), O2 Micro must establish

that its unfair competition claim shares a "common nucleus of

operative fact" with its patent infringement claim. See, e.g.,

Waterloov Gutter Protection Sys. Co. v. Absolute Gutter Protection,

64 F. Supp. 2d 398, 404 (D. N.J. 1999) ("A patent claim is

'related' if it is derived from a common nucleus of operative

fact."). The parties dispute whether such a common nucleus of

operative fact exists. 

O2 Micro's unfair competition claim against MPS and Defendant

Hsing overlaps with its patent infringement claim. The third

amended complaint states that MPS and Defendant Hsing committed the

alleged acts of unfair competition "in furtherance of their acts of

patent infringement." O2 Micro points out that its patent

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infringement claim against MPS and Defendant Hsing is not just for

direct infringement; it also accuses them of inducement and

contributory infringement. O2 Micro explains that the basis of its

unfair competition claim is that Defendants MPS and Hsing engaged

in unlawful, unfair and fraudulent conduct as part of their ongoing

efforts to induce and contribute to infringement of O2 Micro's

patents by other companies and to ensure a continued presence in

the marketplace of their alleged infringing inverter controllers. 

Furthermore, it notes that "at least part" of the proof in support

of its unfair competition claim is common to its patent claim and

highlights its theory that MPS gave its customers' employees stock

option to persuade them to purchase MPS products known to infringe

O2 Micro's patents-in-suit. Mattel, 664 F.2d at 761. 

MPS and Defendant Hsing do not deny that the claims overlap,

but they argue that the overlap between O2 Micro's patent claim and

its State law claim is not substantial and therefore there is not a

common nucleus of operative facts. Their argument would be

persuasive if O2 Micro accused them only of direct infringement. 

As noted above, however, they are also accused of inducing and

contributing to the infringement of the '129 patent. MPS and

Defendant Hsing argue that MPS' stock options do not substantially

overlap with O2 Micro's inducement claim because the stock options

were granted primarily in the 2000-2002 time period and the '129

patent was issued at least two years after those grants. They

quote Verdegaal Brothers: "The court has difficulty in seeing an

overlap between the patent infringement claim and the

misappropriation of trade secrets claim since plaintiff alleges

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that the acts that constituted misappropriation of trade secrets

took place during the two years prior to plaintiff acquiring a

patent." 750 F.2d at 949. Here, however, O2 Micro does not allege

that all the stock option grants occurred before the '129 patent

issued, nor do MPS and Defendant Hsing assert that no stock options

were offered or granted after the '129 patent issued. MPS and

Defendant Hsing's argument that there is no substantial overlap

fails.

 MPS and Defendant Hsing's argument that the case law O2 Micro

cites does not support a finding of jurisdiction is stronger, but

it also fails. The cases O2 Micro cites involve fact patterns

different from those in this case and are distinguishable. The

cases MPS and Defendant Hsing cite, however, also involve different

facts and are easily distinguishable. Unlike in Verdegaal

Brothers, the overlap between the factual bases of the federal and

State claims is not minimal. Considering the case law as a whole,

the Court finds that O2 Micro establishes that its unfair

competition claim shares a "common nucleus of operative fact" with

its claim of inducement and contributory infringement, and, as

such, would be expected to be tried in the same proceeding.

Before the Court concludes that the unfair competition claim

should proceed in the same action as the patent claims, however, it

considers the Supreme Court's caution in Gibbs. See Verdegaal

Bros., 750 F.2d at 951 (noting that, in Gibbs, the Supreme Court

"sets forth a cautious approach to the exercise of pendent

jurisdiction"). The Supreme Court instructs that courts need not

exercise their power to hear a cause of action in which

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jurisdiction is found to exist: "It has consistently been

recognized that pendent jurisdiction is a doctrine of discretion,

not of plaintiff's right. Its justification lies in considerations

of judicial economy, convenience and fairness to litigants; if

these are not present a federal court should hesitate to exercise

jurisdiction over state claims." Gibbs, 383 U.S. at 726; see also

Verdegaal Bros., 750 F.2d at 951. The Court finds that these are

present and that it has jurisdiction over the State law claim. The

unfair competition claim will not be dismissed.

CONCLUSION

For the foregoing reasons, the Court DENIES MPS and Hsing's

Motion to Dismiss the Fourth Count of O2 Micro's Third Amended

Complaint.

IT IS SO ORDERED.

Dated: 10/3/06 

CLAUDIA WILKEN

United States District Judge

Case 4:04-cv-02000-CW Document 533 Filed 10/03/06 Page 9 of 9