Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-04752/USCOURTS-cand-3_06-cv-04752-5/pdf.json

Parties Involved:
American Honda Motor Co., Inc.
Counter-claimant
The Coast Distribution System, Inc.
Counter-claimant

Document Text:

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

AMERICAN HONDA MOTOR CO., INC.,

Plaintiff,

 v.

 THE COAST DISTRIBUTION SYSTEM,

INC.,

Defendant.

 /

No. C 06-04752 JSW

ORDER DENYING AMERICAN

HONDA MOTOR CO., INC.’S

MOTION TO DISMISS

INTRODUCTION

This matter comes before the Court upon consideration of the motion to dismiss

pursuant to Federal Rule of Civil Procedure 12(b)(1) filed by Plaintiff American Honda Motor

Co., Inc. (“Honda”). Having considered the parties’ pleadings, relevant legal authority, and

having had the benefit of oral argument, the Court HEREBY DENIES Honda’s motion.

FACTUAL AND PROCEDURAL BACKGROUND

Honda is the exclusive licensee of U.S. Patent Nos. 5,857,441 (the “‘441 Patent”),

6,738,468 (“the ‘468 Patent”), 5,706,769 (the “‘769 Patent”), 6,250,273 (the “‘273 Patent”), and

6,439,215 (the “‘215 Patent”). 

On April 28, 2006, Honda sent a letter to Defendant, The Coast Distribution System, Inc.

(“Coast”), in which it advised Coast that, in addition to automobiles, “Honda runs businesses of 

a wide variety of other consumer products, including generators,” and that these generators were

protected by a series of patents. (Complaint, Ex. A.) In that letter, Honda specifically 

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referenced the ‘441, ‘468, ‘215, ‘769, and ‘273 Patents. (Id.) Honda also notified Coast that:

It has come to our attention that your company operates a website on

which it assists in offering to sell customers within the United States

generators, specifically KIPOR generator models 1000Ti/2000Ti/3000Ti. 

These KIPOR generators appear to be covered by each of the patents

mentioned above. ...

We request that you take immediate action to address this matter, either by

removing the above-referenced KIPOR generators from your online

catalog, physical catalog, physical stores and all other means by which you

sell or offer for such generators within the United States, or by explaining

to us why you believe the generators are not covered by the above patents.

We expect your prompt reply in this matter. In the meantime, if you have

any questions or concern, please do not hesitate to contact us so that we

can discuss this matter in more detail, if necessary in person.

Please understand that Honda respects the intellectual property rights of

others and expects others to respect intellectual property rights.

(Id. (italics added, underscore in original).)

Coast distributes, among other parts and accessories, electrical generators. 

(Declaration of Dennis Castagnola (“Castagnola Decl.”), ¶ 2.) One of Coast’s suppliers

for electrical generators is Wuxi Kipor Power Co., Ltd. (“Kipor”). (Id., ¶ 3.) Coast is

Kipor’s exclusive distributor for the United States market. However, Kipor also sells

electrical generators to other distributors in foreign markets. (Id.)

In March 2006, Coast learned from Kipor that Honda had sued one of Kipor’s

Italian distributors for patent infringement and unfair competition. (Id., ¶ 4; see also

Declaration of Peter E. Hueser in Support of Coast’s Opposition (“Heuser Decl.”), ¶ 2, Ex.

A.) In that lawsuit, Honda asserted European patents that correspond to the ‘468 and ‘769

Patents, and in which Honda identified as infringing products Kipor models 1000Ti,

2000Ti, and 3000Ti. (Castagnola Decl., ¶ 4; Heuser Decl., ¶ 2.)

On May 19, 2006, Coast responded to Honda’s April 28 letter and advised that it

was reviewing Honda’s assertions and would respond “in due course.” (Declaration of

Eric Cha in Support of Honda’s Motion to Dismiss (“Cha Decl.”), Ex. D.) On June 2,

2006, Coast sent another letter to Honda, in which it advised that Coast “does not offer

Kipor’s 3000Ti generator. Although Coast has offered a KGE3000Ti generator, that

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generator actually corresponds to Kipor’s 3500Ti generator (which has a power rating of

3000kW).” (Cha Decl., Ex. E.) Coast asked that Honda “verify that [its] concerns relate

to the Kipor 3000Ti generator (not the Kipor 3500Ti generator offered by Coast under

model no. KGE3000Ti).” (Id.)

In response to Coast’s June 2 letter, Honda sent another letter dated June 23, 2006,

in which it stated:

The Kipor generators which were the subject of our earlier correspondence

and which we wish to bring to your attention are any Kipor generators

covered by Honda’s five US patents and are particularly those having kV

values of 1000, 2000, and 2600, which we understand to correspond to the

Kipor model designations KGE1000, KGE2000, and KGE2600 (now, but

formerly, KGE3000).

As to KGE3000 (now, but formerly KGE3500), we are currently

investigating its detailed structure to determine whether it is covered by

Honda’s five U.S. patents.

In any event, in view of Kipor’s changes to its product designations, we do

not wish to be restricted to particular models and specifically reserve the

right to address other Kipor models sold by Coast Distribution in the

future.

In the meantime, please give us comments on KGE1000, KGE2000, and

KGE2600 (now, but formerly KGE3000), as soon as possible.

(Cha Decl., Ex. F (emphasis added).)

On July 6, 2006, Coast responded to Honda and advised that “there still appears to

be some confusion regarding the model designators specified in your letters. To our

understanding, Kipor has not changed its product designations. Furthermore, we are

unaware of any Kipor generator with a model number KGE2600.” (Cha Decl., Ex. G.) 

Coast provided Honda with a list of the model numbers used by Coast and Kipor. Coast

did, however, note that it offered products corresponding to Kipor’s KGE1000Ti,

KGE2000Ti, and KGE3500Ti generators, the latter of which was sold by Coast under

product no. KGE3000Ti. (Id.) Coast also advised Honda that it intended to discontinue

sales of the Kipor KGE1000Ti and KGE2000Ti generators. Coast explained that “[t]his

decision is made to resolve this issue, without conceding any infringement of the identified

Honda patents, or conceding the validity of such patents.” (Id.) Coast also advised Honda

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Because the question presented to the Court is whether an actual controversy

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existed at the time Coast filed its counterclaims, Honda’s actions before the ITC are pertinent

to the resolution of that question.

Honda initially moved to dismiss Count V of Coast’s counterclaim, which 2

pertains to the ‘215 Patent, but withdrew its motion and amended its reply to Coast’s

counterclaim to include an affirmative claim for infringement of the ‘215 Patent. (See

Docket Nos. 25, 26.)

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that, with respect to the ongoing investigation of Kipor’s KGE3500Ti generator (Coast

KGE3000Ti generator), Coast believed it to be “clearly outside the scope of the Honda

patents. Coast thus plans to continue to sell this generator.” (Id.) Coast concluded its’

letter by asking Honda to contact it if it had any questions, but that “[o]therwise, we will

consider this matter resolved.” (Id.)

On August 7, 2006, Honda filed the instant lawsuit against Coast for infringement

of the ‘441 and ‘468 Patents. (Complaint, ¶¶ 8-17.) Coast sought, and obtained, an

extension of time in which to respond to the Complaint until October 3, 2006.

On September 19, 2006, Honda filed a complaint with the International Trade

Commission (“ITC”), in which it sought an injunction to prevent Kipor from importing

Kipor generators bearing model nos. 1000Ti, 2000Ti, and 3000Ti, and asserted that those

models infringed the ‘769 and ‘273 Patents. (Cha Decl, Ex. H.) Coast is referenced in the

ITC Complaint as Kipor’s sole U.S. distributor. (Id. at pp. 4, 14.)1

On October 3, 2006, Coast filed its Answer and asserted counterclaims against

Honda by which it seeks a declaratory judgment of non-infringement and invalidity on the

‘441, ‘468, ‘769, ‘273 and ‘215 Patents pursuant to 28 U.S.C. §§ 2201, 2202. Honda

moves to dismiss Coast’s counterclaims on the ‘769 and ‘273 Patents, on the ground that

the Court lacks subject matter jurisdiction to hear these claims.

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28 Because this is a patent case, the law of the Federal Circuit applies. See 3

MedImmune, Inc. v. Centocor, Inc., 409 F.3d 1376, 1378 (Fed. Cir. 2005).

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ANALYSIS

A. Legal Standards Applicable to Declaratory Relief Jurisdiction.

As the party seeking declaratory relief from the Court, Coast must demonstrate that

an actual controversy exists between it and Honda. See 28 U.S.C. § 2201; Intellectual

Property Devel., Inc. v. TCI Cablevision of California, Inc., 248 F.3d 1333, 1340 (Fed.

Cir. 2001). The Federal Circuit has established a two part test to resolve that issue in

patent suits. See, e.g., Fina Research S.A. v. Baroid Ltd., 141 F.3d 1479, 1481 (Fed. Cir.

1998). 

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First, the patentee must make an explicit threat or take other action that creates a

reasonable apprehension on the part of the party seeking declaratory relief that it will face

an infringement suit. See Gen-Probe v. Vysis, Inc., 359 F.3d 1376, 1380 (Fed. Cir. 2004)

(quoting BP Chems. Ltd. v. Union Carbide Corp., 4 F.3d 975, 978 (Fed. Cir. 1993)). A

court is required to evaluate the first prong of this test from an objective, rather than

subjective, perspective. See Shell Oil Co. v. Amoco, Corp., 970 F.2d 885, 887-88 (Fed.

Cir. 1992). Thus, a putative infringer reasonably may apprehend that suit is imminent

without an express charge of infringement, if the patentee engages in “subtler conduct,” so

long as “that conduct rises ‘to a level sufficient to indicate an intent [on the part of the

patentee] to enforce its patent,’ i.e. to initiate an infringement action.” EMC Corp. v.

Norand Corp., 89 F.3d 807, 811 (Fed. Cir. 1996) (quoting Shell Oil Co. v. Amoco, Corp.,

970 F.2d 885, 887 (Fed. Cir. 1992)); see also Arrowhead Indus. Water, Inc. v. Ecclochem,

846 F.2d 731, 733 (Fed. Cir. 1988).

Second, there must be “present activity which could constitute infringement or

concrete steps taken with the intent to conduct such activity.” EMC Corp., 89 F.3d at 811.

There is no dispute in this case that Coast would meet the second prong of this test. The

only issue is whether Coast had a reasonable apprehension that it would face an

infringement suit on the ‘769 and ‘273 Patents.

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B. Coast Has Established That It Had A Reasonable Apprehension of Suit As to

the ‘769 and ‘273 Patents.

Honda argues that its April 28 letter to Coast did not constitute an express charge

of infringement and that none of its subsequent actions would give rise to a reasonable

apprehension of suit. The Court disagrees. Considering the totality of circumstances,

Honda’s conduct is such that Coast could reasonably apprehend a lawsuit on the five

patents referenced in the April 28 letter. Honda initiated the contact with Coast and was

the first to suggest Coast might be engaging in conduct that infringed Honda’s patents. 

See EMC Corp., 89 F.3d at 812 (noting that fact that patentee approaches putative

infringer is fact that may support finding of reasonable apprehension of suit). 

In its April 28 letter, Honda referenced all five of its patents. Citing each of those

patents, Honda demanded that Coast take “immediate action” to address Honda’s

concerns, including “removing the above-referenced KIPOR generators from your online

catalog, physical stores, and all other means by which you sell or offer for such generators

within the United States.” (Cha Decl., Ex. C.) The letter concluded with the statement

that “Please understand that Honda respects the intellectual property rights of others and

expects others to respect intellectual property rights.” (Id.) While this letter may not state

explicitly that Honda would sue Coast, a veiled threat is present. See Arrowhead, 846

F.2d at 737 (noting that although patentee’s cease and desist letter “skillfully skirted an

express charge of infringement,” totality of the circumstances evidenced an intent to

enforce patent rights); see also GAF Building Materials Corp. v. Elk Corp. Of Dallas, 90

F.3d 479, 481-83 (Fed. Cir. 1996) (finding cease and desist letter in which patentee stated

the infringer’s activities would constitute infringement of a yet to be issued patent and in

which patentee demanded that the infringer cease all infringing activities would meet first

prong of Federal Circuit test, but for the fact that patent had not yet issued).

It is true that the parties continued to correspond about Honda’s concerns. 

However, none of Honda’s later correspondence to Coast suggests that Honda had

satisfied its concerns with respect to the ‘769 and ‘273 patents. (Cha Decl., Exs. D-F.) 

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Further, in its June 2 letter to Coast, Honda expressly stated that the Kipor generators with

which it was concerned were “ any Kipor generators covered by Honda’s five US patents.”

(Cha Decl., Ex. E.) Honda also stated that “in view of Kipor’s changes to its product

designations, we do not wish to be restricted to particular models and specifically reserve

the right to address other Kipor models sold by Coast Distribution in the future.” (Id.) 

Looking at this correspondence from an objective perspective, Coast reasonably could

conclude that Honda had not eliminated the ‘769 and ‘273 Patents as potential subjects of

an infringement suit. Although the Court must focus on the facts in existence at the time

Coast filed the declaratory relief claims, the Court notes that Honda did subsequently

amend its response to the counterclaim to assert the ‘215 Patent, in conformance with this

previous reservation of rights. Nor is Honda’s argument that it has not asserted the ‘769

and ‘273 Patents against Coast persuasive, because “a patentee’s present intentions do not

control whether a case or controversy exists.” Vanguard Research, Inc. v. PEAT, Inc., 304

F.3d 1249, 1254-55 (Fed. Cir. 2002) (reversing district court’s dismissal for lack of

jurisdiction although patentee had stated its intention not to sue on patent raised in

declaratory relief action). This fact may bear on whether the Court should exercise its

discretion to accept jurisdiction, however Honda’s current intentions do not defeat whether

jurisdiction existed in the first instance. 

Coast also provides evidence that it was aware of Honda’s actions abroad against

Kipor’s customers on corresponding European patents before it received Honda’s April 28

letter. Moreover, before Coast was required to answer the instant complaint, it learned

that Honda filed the ITC action against Kipor, in which Honda asserted the ‘769 and ‘273

Patents and noted that Kipor’s only supplier within the United States is Coast. In addition,

the accused products in the ITC action correspond to the accused products in the instant

action and to the products identified in the letters to Coast. Thus, these other lawsuits also

evidence Honda’s willingness to protect technology covered by these patents. See, e.g.,

Plumtree Softward, Inc. v. Datamize, LLC, __ F.3d __, 2006 WL 3703180 at *5 (Fed. Cir.

2006) (lawsuit against other entities in another judicial district on patents at issue evidence

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that patentee engaged “‘in a course of conduct that show[ed] a willing ness to protect [its]

technology) (brackets in original); Arrowhead, 846 F.2d at 737 (infringement lawsuit

against third party can be used to show evidence of intent and willingness to enforce patent

rights). 

Finally, rather than accept Coast’s invitation to contact it, if Honda had further

questions about Coast’s products, Honda remained silent for a month and then filed the

instant lawsuit. Accordingly, considering the totality of the circumstances, the Court

concludes that Coast has met its burden to show that the Court has jurisdiction over

counterclaims related to the ‘769 and ‘273 Patents. The Court has also considered

Honda’s arguments as to why it should, in the exercise of its discretion, decline to accept

jurisdiction, but finds no basis for doing so.

Accordingly, for the reasons set forth herein, Honda’s motion to dismiss is

DENIED. The case management conference set for January 26, 2007, remains on calendar

and the parties’ joint case management statement is due on January 19, 2007. 

IT IS SO ORDERED.

Dated: January 5, 2007 

JEFFREY S. WHITE

UNITED STATES DISTRICT JUDGE

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