IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Civil Action No. I 1-cv-025 I 9-WYD-MJW

TELECOMMUNICATIONS SYSTEMS, INC., a Maryland company,

Plaintiff,

v.

TRACBEAM. L.L.C.. a Colorado limited liability company,

Defendant.

Defendant TracBeam, L.L.C.’s

Motion to Dismiss Under Fed. R. Civ. P. 12(b)(1)

Case 1:11-cv-02519-WYD-MJW Document 6 Filed 10/24/11 USDC Colorado Page 1 of 21
Table of Contents

1. Introduction .1

IT. Facts .2

ITT. Argument 3

A. TCS has failed to allege a case or controversy surrounding direct

or indirect infringement by TCS 3

1. There is no justiciable controversy as to whether TCS

directly infringes 4

2. There is no justiciable controversy that TCS indirectly infringes 7

B. The indemnification demands to TCS from Sprint and MetroPCS

are insufficient to confer standing on TCS 11

TV. Conclusion 15

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Table of Authorities

Cases

ABB Inc. v. Cooper Indus., LLC, 635 F.3d 1345 (Fed. Cir. 2011) 5. 11, 12

Arris Group, Inc. British Teleco,nms. PLC, 639 F.3d 1368 (Fed. Cir. 2011) 1.2.4, 11

Arrowhead Industrial Water, Inc. v. Ecolochem, Inc., 846 F.2d 731 (Fed. Cir. 1988) 13

Ashcrojiv. Iqbal, 129 S. Ct. 1937 (U.S. 2009) 9

Baker Hughes OflJield Operations, Inc. v. Reedhycalog UK Ltd.,

2008 U.S. Dist. Lexis 9323 (D. Utah Feb. 5, 2008) 6

Bell AtL Corp. v. Twornhly. 550 U.S. 544 (U.S. 2007) 7

Binford v. United States, 436 F.3d 1252 (10th Cir. 2006) 14

City ofAurora v. PS Sys., 2008 U.S. Dist. Lexis 82053 (D. Cob. Sept. 19, 2008) 6

Global-Tech Appliances, Inc. i& SEBS.A., 131 5. Ct. 2060 (2011) 9

Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358 (Fed. Cir. 2009) 5

Medlmmune, Inc. v Centocor, Inc., 409 F.3d 1376 (Fed. Cir. 2005) 4

Medlmmune, Inc. v. Genentech, Inc., 549 U.S. 118(2007) 1,2,4,5

MetroPCS Wireless, Inc. v. Telecommunication Systems, Inc.,

1:09-cv-00601-WDQ (D. Md.) 2, 11, 13, 14

MetropPCS Wireless Inc. v. Telecomms. Sys.,

2009 U.S. Dist. Lexis 97884 (D. Md. Oct. 19, 2009) 14

Microchip Tech. Inc. v. Chamberlain Group, 441 F.3d 936 (Fed. Cir. 2006) 2

Micron Tech., Inc. v. Mosaid Techs., Inc., 518 F.3d 897 (Fed. Cir. 2008) 6

)Vat’l Coupling Co. v. Press-Seal Gasket Corp., 323 F.2d 629 (7th Cir. 1963) 10

Nippon Elec. Glass Co., Ltd. v. Sheldon, 489 F. Supp. 119 (S.D.N.Y. 1980) 10

Ours Tech., Inc. i’. Data Drive Thru, Inc 645 F. Supp. 2d 830 (N.D. Cal. 2009) 12

Pace v. Swerdlow, Civ. No. 06-4157, 519 F.3d 1067 (10th Cir. 2008) 14

II

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Fowertech Tech. Inc. v. Tessera, Inc.,

2011 U.S. App. Lexis 19951 (Fed. Cir. Sept. 30. 2011) 10

Sticker Indus. Supply Coip. v Blaw-Knox Co., 367 F.2d 744 (7th Cir. 1966) 9

Rules

Fed. R. Civ. P. 12 2, 15

Statutes

35U.S.C.271 7

‘‘I

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I. Introduction

The Court should dismiss this action under Federal Rule of Civil Procedure 12(b)(1)

because plaintiff Telecommunication Systems, Inc. (“TCS”) lacks standing to bring its

declaratory-judgment action for a determination of non-infringement and invalidity of patents

owned by TracBeam, L.L.C. (“TracBeam”). None of TCS’s allegations—whether alone or in

combination—enables ICS to carry its burden of demonstrating a “substantial controversy,

between parties having adverse legal interests, of sufficient immediacy and reality to warrant the

issuance of a declaratory judgment.” Arris Group, Inc. v. British Telecotnrns. PLC, 639 F.3d

1368, 1373 (Fed. Cir. 2011) (quoting Medlmmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127

(2007)).

First, TCS alleges that there is ajusticiable controversy over TCS’s infringement of

TracBeam’s patents because “TracBeam sent a letter notif’ing TCS of its patent portfolio.”

(Compl. ¶ 12) That letter is the only interaction between TCS and TracBeam alleged in the

Complaint. But this six-sentence letter simply advertises TracBeam’s international patent

portfolio. There is no accusation that TCS infringes, no hint of litigation, no identification of any

of TCS’s products, services, or customers, and no suggestion of a legal dispute between

TracBeam and TCS.

Second, TCS alleges that there is ajusticiable controversy over TCS’s infringement of

TracBeam’s patents because TCS supplies location-based products and services to certain

defendants in a patent-infringement action by TracBeam in Texas. But controlling law holds that

a patent holder’s suit against a supplier’s customers does not, in and of itself confer standing

upon the supplier to sue the patent holder. Instead, there must exist separate, adverse actions by

the patent holder that specifically implicate the supplier (e.g., the patent holder’s identification of

1

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the supplier’s products in letters to customers). No such actions by TracBeam against TCS are

alleged here.

Third. TCS alleges that adverse legal interests exist between TCS and TracBeam because

certain defendants in the litigation in Texas who are TCS’s customers “have tendered

indemnification demands to TCS.” (Compl. ¶ 11) But while an indemnification demand may

create an adverse economic interest, an “adverse economic interest. is not a legally cognizable

interest sufficient to confer declaratory judgment jurisdiction.” Microchip Tech. Inc. v.

Chamberlain Group, 441 F.3d 936, 943 (Fed. Cir. 2006). For an adverse legal interest possibly

to exist, TCS would have to plead that it is legally obliged to honor the indemnification demands

arising specifically out of the litigation in Texas. TCS makes no such claim and, in the past,

TCS has vigorously disputed any legal obligation to indemnify MetroPCS for patent litigation

arising out of location-based technology. See MetroPCS Wireless, Inc. v. Telecommunications

Systems, Inc., WDQ-09-0601 (D. Md.).

In sum, there are no “adverse legal interests” between TCS and TracBeam “ofsufficient

immediacy and reality to warrant the issuance of a decLaratory judgment.” Arris Group, 639

F.3d at 1373 (quoting Medlminune. 549 U.S. at 127). TCS’s Complaint should therefore be

dismissed under Fed. R. Civ. P. 12(b)(1).

II. Facts

In February 2011, TracBeam filed suit in the United States District Court for the Eastern

District of Texas (6:ll-cv-0096) (‘texas Action”) for infringement of U.S. Patent Nos.

7,764,231 (“231 Patent”) and 7,525,484 (“484 Patent”). Defendants included six companies as

well as MetroPCS’ and Sprint. 2(Compl. ¶ 10) The ‘231 and ‘484 Patents contain detailed

“MetroPCS” collectively refers to MetroPCS Communications, Inc. and MetroPCS Wireless,

Inc.

2

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method and systems claims that focus on using hybrid location techniques to find the positions of

mobile stations. See Exhibits I & 2 to Compl.

HaintiffTCS is not a party to the Texas Action. (Compl. ¶ 9) But TCS asserts that it has

a connection to that litigation because TCS has sold products and services “for determining the

locations of wireless mobile devices” to MetroPCS and Sprint, who are defendants in the Texas

Action. (Id. ¶ 10) Moreover, at some unspecified time, MetroPCS and Sprint “tendered

indemnification demands to TCS.” (Id. ¶ 11) TCS has not asserted that it is legally obliged or

otherwise inclined to honor these indemnification demands.

The only’ alleged interaction between TracBeam and TCS is a letter that TracBeam sent in

August 2011 to TCS that described TracBeam’s “novel systems for determining the location of

mobile stations.” (Exhibit 3 to Compl.) The letter referenced “TracBeam’s patent portfolio,

including U.S Patent Nos. 6,249,252; 7,274,332; 7,298,327; 7,525,484; and 7,764,231” and

“Canadian Patent No. 2,265,875 and United Kingdom Patents 2,384,952; 2,405,292; 2,337,386;

2,354,387; and 2,354,129.” Id. The letter did not claim that TCS infringed any of TracBeam’s

patents, did not focus on the patents at issue in the Texas Action, made no demands of TCS, did

not identi& any products or customers of TCS, and did not mention any litigation.

Nonetheless. TCS filed this action for declaratory judgment in September 2011, seeking

declarations of non-infringement and invalidity regarding the ‘231 and ‘484 Patents. (Compl.

Counts 1-4)

Ill. Argument

A. TCS has failed to allege a case or controversy surrounding direct or indirect

infringement by TCS.

2 “Sprint” collectively refers to Sprint Nextel Corporation, Sprint Spectrum L.P., Nextel of

California, Inc., Nextel Communications of the Mid-Atlantic, Inc., Nextel of New York, Inc.,

Nextel South Corp., Nextel of Texas, Inc., and Next West Corp.

3

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“An Article III case or controversy exists when ‘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.”

Arris Group, 639 F.3d at 1373 (quoting Met/Immune, 549 U.s. at 127 (some internal quotation

marks and citation omitted)). The relief requested must not be an “opinion advising what the

law would be upon a hypothetical state of facts.” 3Id.

TC5 bears the burden of proving that such a substantial controversy exists. See AriEs

Group, 639 F.3d at 1373 (“The burden is on the party claiming declaratory judgment jurisdiction

to establish that an Article III case or controversy existed at the time the claim for declaratory

relief was filed.”). In trying to satisfy this burden, TCS claims that its “products and services for

determining the locations of wireless mobile devices have not infringed and do not infringe,

either directly or indirectly, any valid claim of the ‘231 or ‘484 patents, either literally or under

the doctrine of equivalents.” (CompL ¶ 14) But TC5 has failed adequately to allege that

TracBeam takes a position contrary to that of TC5. Consequently, TC5 has failed to identify

adverse legal interests between TCS and TracBeam, whether regarding direct or indirect

infringement.

1. There is no justiciable controversy as to whether TCS directly infringes.

The only allegation that could potentially relate to a legal controversy of direct

infringement by TC5 is that “on August 30, 2011, TracBeam sent a letter notifying TCS of its

patent portfolio.” (Compi. ¶ 12) But that six-sentence letter did not create adverse legal interests,

of sufficient immediacy and reality, to confer standing upon TCS. In particular, in that letter:

“Whether an actual case or controversy exists so that a district court may entertain an action for

a declaratory judgment of non-infringement and/or invalidity is governed by Federal Circuit

law.” Medimmune, Inc. v. Centocor, Inc., 409 F.3d 1376, 1378 (Fed. Cir. 2005), rev’d on other

grounds, 549 U.S. 118 (2007).

4

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• There is no suggestion that TCS infringes any of TracBeam’s patents.

• TracBeam makes no requests or demands of TCS.

• TracBeam does not identify any specific products or services of TCS.

• TracBeam does not suggest that TCS needs to license the patents.

• There is no mention of a lawsuit against TCS or anyone else.

• TracBeam does not mention any of the defendants in the Texas Action or any customers

of ICS.

• TracBeam does not single out the patents asserted in the Texas Action. Instead, the letter

mentions eleven patents in the United States, Canada, and the U.K. as well as patents that

have yet to be issued (and which TCS could not possibly infringe). The Complaint

merely alleges that TracBeam’s letter “notified] TCS of its [TracBeam’s] patent

portfolio.” (Compl. ¶ 12).

• The letter was not sent by an attorney.

In addition, the Complaint does not allege any other communications at any point in time

between TCS and TracBeam beyond these six sentences.

The benign letter from TracBeam in which it publicizes its patent portfolio and takes no

position regarding TCS’s products or services is distinct from those communications that have

created an adverse legal interest sufficient to confer standing. Contrast Met/Immune, Inc. v.

Genenrech, Inc. 549 U.S. at 121 (letter alleged that respondent’s patent covered a specific

product produced by petitioner and that petitioner should begin paying royalties by a certain

date); ABB Inc. v, Cooper Indus., LLC, 635 F3d 1345, 1347 (Fed. Cir. 2011) (letters from patent

holder described company’s activities as “material breach” and put company “on notice that

[defendant] will vigorously defend its rights should [the manufacturer] attempt to make products

covered by one or more of [defendant’s] patents.”); Hewlett-Packard Co. v. Acceleron LLC, 587

F.3d 1358, 1363 (Fed. Cir. 2009) (letters from patent holder stating that its patents related to

specific products of plaintiff, imposing deadlines by which plaintiff should respond, and

indicating that a lack of response from plaintiff would be interpreted as a lack of interest in

5

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dialogue regarding the patents); Micron Tech., Inc. 1’. Mosaid Techs., Inc., 518 F.3d 897, 899-

900 (Fed. Cir. 2008) (patent holder (1) “sent a warning letter strongly suggesting that Micron

should license its technology” in June 2001 (2) “sent follow-up letters” in December 2001,

March 2002, and July 2002, (3) sued three of the four companies that manufactured the accused

product (Micron was the fourth company and the only one not yet sued), and (4) publicly stated

that it intended to continue litigation); City ofAurora v. FSS’ys., 2008 U.S. Dist. Lexis 82053, at

*26 (D. Cob. Sept. 19, 2008) (communications that if plaintiff rejected defendant’s licensing

offer, defendant would be “forced to litigate” and that, “in the event of litigation,” plaintiff risked

considerable damages). 4

Nonetheless, TCS’s Complaint alleges that, when considered in context, TracBeam’s

letter is more substantial than its words because TracBeam notified certain defendants in the

Texas Action of TracBeam’s patents “over ten years before they matured into issued patents.”

(Compl. ¶ 13) According to the Complaint, this constitutes a “pattern of notification and

subsequent initiation of a lawsuit” surrounding direct infringement that results in a controversy

of “sufficient immediacy and reality to warrant declaratory relief” Id.

But according to TCS’s own allegations, “over ten years” transpired between

(1) TracBeam’s communications to certain defendants in the Texas Action, and (2) litigation

against those defendants. (Compl. ¶ 13) The Complaint in the Texas Action more specifically

indicates that TracBeam communicated with three defendants regarding its patent applications in

1997 or 1998—thirteen years before a lawsuit was filed. (Texas Action, Am. Compl. ¶J 25, 32,

For an example of a case where communications from a patent holder were insufficient to

confer standing upon the recipient of the communications, see Baker Hughes OilJIeld

Operations, Inc. v. Reedhycalog Uf( Ltd., 2008 U.S. Dist. Lexis 9323, at *7*g (D. Utah Feb. 5,

2008) (finding no subject-matter jurisdiction because “Iw]hile ReedHycalog had mailed several

letters notifying Baker Hughes of issued and pending patents, these letters did not indicate that

ReedHycalog had taken a position regarding infringement by Baker Hughes..”).

6

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36 (attached as Exhibit A)) Furthermore, there are no allegations (either by TCS or in

TracBeam’s complaint in the Texas Action) that TracBeam ever contacted the remaining

defendants in the Texas Action prior to filing suit. Consequently, TCS’s allegations do not

indicate a relevant pattern by TracBeam; to the contrary, TCS’s allegations indicate notification

to only some of the defendants in the Texas Action with no litigation for over ten years.

Accordingly, TCS’s own allegations indicate that there is no immediacy to any alleged dispute?

Consequently, TCS’s allegations indicate that there is no legal dispute surrounding direct

infringement of any immediacy that would warrant declaratory relief.

2. There is no justiciable controversy that TCS indirectly infringes.

To give rise to contributory infringement, the supplier’s actions must satisfy the

following statutory requirements: (a) the supplier’s product was used to commit acts of direct

infringement; (b) the product’s use constituted “a material part of the invention;” (c) the supplier

knew its product was “especially made or especially adapted for use in an infringement” of the

patent; and (d) the product is “not a staple article or commodity of commerce suitable for

substantial noninfringing use.” 35 U.S.C. § 27 1(c). While TCS need not allege that it is a

contributory infringer, there is no credible, specific allegation that TCS’s products or services

constitute any part, let alone a “material part.” of the accused methods or systems, or any

TCS’s Complaint further alleges “[o]n information and belief’ that “TracBeam initiated a

lawsuit against Cellco, Sprint, and AT&T when they refused to take a license to the patents.”

(J 13). To the extent that TCS is alleging that TracBeam filed suit against Celico, Sprint, and

AT&T soon after those companies declined a license, this is an implausible allegation and must

be disregarded. It posits a scenario where TracBeam asked each of these companies to take a

license over 10 years ago, each of the Cellco, Sprint, and AT&T then took over a decade to

ponder their respective decisions, that TracBeam waited over a decade for each of their refusals,

that each suddenly woke up and presented to TracBeam their decision to decline a license, and

only upon receiving their formal refusals more than a decade after making its offer did

TracBeam decide to file suit. The Court should not accept this allegation in the Complaint

because it “stops short of the line between possibility and plausibility.” Be1IAIL Corp. v.

Twombly, 550 U.S. 544, 557 (U.S. 2007).

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allegation that could be used to infer that TCS might satisfy any of the statutory requirements for

contributory infringement. Nor is there any allegation that anyone else, such as Sprint or

MetroPCS, has asserted that what TCS sells would satisfy these statutory requirements (e.g., an

assertion by Sprint that a component supplied by TCS lacks a substantial, non-infringing use).

TCS’s allegations regarding similarities between (1) its products and services and (2) the

‘231 and ‘484 Patents are based upon generalities regarding TCS’s business and the patents, and

those generalities fail to satisfy basic pleading requirements. The patents’ claims specifically

describe hybrid, wireless location technologies, which may use a combination, for example, of

UPS, cell-tower fix, triangulation, and/or time difference of arrival. 6 See Exhibits 1 & 2 to

Compl. But there is no allegation that TCS’s products or services are dependent on hybrid

6 For example, claim 1 of the ‘231 Patent provides as follows:

“A method for locating each terrestrial mobile station of a plurality of terrestrial mobile stations,

M, wherein said method uses wireless signal measurements obtained from one or more

transmissions between said terrestrial mobile station M and one or more of a plurality of

terrestrial communication stations, each terrestrial communication capable of at least one of:

wirelessly detecting said terrestrial mobile station M, and wirelessly being detected by said

terrestrial mobile stations M, comprising:

for each of the mobile stations M perform the following steps by computational machinery:

receiving first and second location related information, respectively, from computational

machinery performing first and second mobile station location estimation determiners, wherein

said location estimation determiners provide different geographical indications of an unknown

location of said mobile station M when said location estimation determiners are supplied with

corresponding input data obtained using wireless signal measurements obtained by transmissions

between said mobile station M and the communication stations;

wherein, when available, the first location related information includes at least a first

geographical indication for a location of the mobile station M;

wherein, when available, the second location related information includes at least a second

geographical indication for the location of the mobile station M;

wherein for locating the mobile station M in at least one location, said second geographical

indication for M is obtained and is dependent upon a delay time of a signal from at least one nonterrestrial wireless transmitter, not supported on the Earth’s surface, to M for determining a

spatial range for M; and

outputting a resulting location estimate of the mobile station M, a determination of said resulting

location estimate is dependent upon at least one of (a) and (b) following: (a) a first value

obtained from said first location related information, and (b) a second value obtained from said

second location related information.” Exhibit 1-3 to Compl. at 170-71.

8

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wireless location techniques. Instead, the Complaint merely alleges that (I) TCS is a “vendor for

products and services for determining the locations of wireless mobile devices” to MetroPCS and

Sprint, and (2) the Texas Action focuses on “products and services for determining the locations

of wireless mobile devices.” (Compl. ¶ 10) These vague allegations regarding the connection

between TCS’s business and the Texas Action fall short of basic pleading requirements and fail

to implicate TCS in the Texas Action. See Ashcroji v. Jqbal, 129 S. Ct. 1937, 1949 (U.S. 2009)

(“Nor does a complaint suffice if it tenders naked assertions devoid of further factual

enhancement.” (internal quotation marks and brackets omitted)). 7

Furthermore, a patent holder’s lawsuit against a supplier’s customers does not, in and of

itself, create an implication of indirect infringement against the supplier; instead, there must be

additional activity by the patent holder that creates a “controversy between the patentee and the

supplier as to the supplier’s liability for induced or contributory infringement based on the

alleged acts of direct infringement by its customers.” Arris Group, 639 F.3d at 1375.

In those cases where courts have held that a supplier has standing after a patent holder

has sued the supplier’s customers, the patent holder has directly implicated the supplier. For

example, in Arris Group, the Federal Circuit used the following cases as examples in which “an

implicit assertion of indirect infringement by a supplier may arise” after accusations of direct

infringement have been leveled against the supplier’s customers: “Sticker Indus. Supply Coip. v.

Blaw-Knox Co., 367 F.2d 744, 747 (7th Cir. 1966) (where declaratory plaintiffs product

allegedly was not a staple item of commerce and patent holder had informed plaintiffs customers

ISor does the Complaint suggest a controversy over induced infringement, as TCS has not

alleged that there is a controversy over whether it induced acts of patent infringement and also

either that(1) it had knowledge that any induced acts constituted patent infringement, or (2) it

was willfully blind towards patent infringement of Sprint or MetroPCS. See Global-Tech

Appliances, Inc. v. S’EB S.A., 131 S. Ct. 2060, 2070 (2011).

9

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that unlicensed use of plaintiffs product would infringe its method patent, Article III case or

controversy existed because plaintiff ‘had good reason to fear that it might be liable for

contributory infringement”); Nat’! Coupling Ca v. Press-Seal Gasket Corp., 323 F.2d 629, 630,

632-33 (7th Cir. 1963) (actual controversy existed regarding indirect infringement where

defendant ‘charged contributory infringement” by sending plaintiffs customer a letter alleging

that plaintiffs gasket product, when installed on concrete pipe, infringed defendant’s claimed

‘Gasket and Pipe End Construction for Bell and Spigot Pipe’ device); Nippon Elec. Glass Co.,

Ltd. v, Sheldon, 489 F. Supp. 119, 122 (S.D.N.Y. 1980) (‘Once defendant accused Sony and

Panasonic of direct infringement due to their use of plaintiffs product, plaintiff had reason to

fear that it could be sued as a contributory infringer.” Arris Group, 639 F.3d at 1375-76 n.6 & 7

(emphases added). In each of the preceding cases, the patent holder had specifically implicated

the supplier when targeting the customers.

Recent cases from the Federal Circuit further illustrate that a supplier’s standing against a

patent holder requires more than a patent holder’s lawsuit against the supplier’s customers. See,

e.g., Powertech Tech. Inc. v. Tessera, Inc., 2011 U.S. App. Lexis 19951, at *7*8, *15 (Fed. Cir.

Sept. 30, 2011) (holding that Powertech had standing to pursue declaratory judgment against

patent holder where (1) patent holder licensed its technology to Powertech, but (2) patent holder

declared in actions before federal court and International Trade Commission against Powertech’s

customers that license with Powertech was invalid (and that, by implication, sales of patented

tecimology by Powertech were infringing) due to Powertech’s alleged failure to pay appropriate

royalties); Arris Group, 639 F.3d at 1381 (“BT’s infringement accusations against Cable One

carried the implied assertion that Arris was committing contributory infringement, and BT

repeatedly comnmnicated this implicit accusation directly to Arris during the course of a

10

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protracted negotiation process.”) 8;ABB Inc. v. Cooper Indus., LLC. 635 F.3d at 1346-47 (holding

that company ABB Inc. had standing to pursue declaratory judgment against patent holder where

(1) patent holder had previously sued ABB for manufacturing infringing dielectric fluid, and

(2) after settlement between patent holder and ABB, ABB outsourced the manufacture of

dielectric fluid to third party and patent holder then wrote to both ABB and third party that

outsourcing was a “material breach” of the settlement and that patent holder would “vigorously

defend its rights”).

In contrast to the above cases, there is no allegation that TracBearn has directly

implicated TCS. For example, there is no allegation that TracBeam: offered a license to TCS,

mentioned TCS in any litigation, or suggested to TCS, TCS’s customers, or anyone else that TCS

infringes TracBeam’s patents. The only alleged interaction between TCS and TracBeam is a sixsentence letter from TracBeam in which TracBeam describes its international patent portfolio.

(Compl. ¶ 12 and Ex. 3) For the reasons discussed above (see III(A)(l)), that benign letter does

not create adverse legal interests.

Consequently, TCS’s status as a vendor to certain defendants in the Texas Action is

inadequate to create adverse legal interests of immediacy and reality between TCS and

TracBeam. 9

8 In Arris Group, the defendant’s communications with plaintiff included defendant’s 118-page

infringement presentation that specifically and repeatedly identified plaintiffs equipment

(including identifying brand names and/or model numbers of plaintiffs products on at least 26

cages and copying literature from plaintiffs website). Id. at 1372.

To borrow TCS’s own words from another case (discussed below at 111(B)): If”[t]he Texas

Plaintiffs ...believed that TCS’s products or services infringed their patents, they could, and

undoubtedly would, have sued TCS directly.” (MetropPc’S Wireless, Inc. v. TC’S. WDQ-09-

060 1, Memo. in Support of Defendant’s Motion to Dismiss at 5 (D. Md.)(D.I. 16) (attached as

Exhibit D).

11

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B. The indemnification demands to TCS from Sprint and MetroPCS are insufficient to

confer standing on TCS.

A supplier’s indemnification of customers accused of patent infringement does not, in

and of itself, create a legal interest adverse to the patent holder. This is because “[w]ithout an

underlying legal cause of action, any adverse economic interest that the declaratory plaintiff may

have against the declaratory defendant is not a legally cognizable interest sufficient to confer

declaratory judgment jurisdiction.” Microchip Tech., 441 F.3d at 943. For example, in Ours

Tech., Inc. v. Data Drive Thru, Inc., plaintiff OTT had agreed to indemnify four of its customers

who were defendants in a patent suit, though not pursuant to a formal indemnification agreement.

The court held that OTT lacked standing to pursue a declaratory-judgment action against the

patent holder DDT “[bjecause OTT’s interest in indemnifying these U.S. retailers, as best the

court can discern. is to preserve its customer base, DDT is correct that OTI’s interest in this

action is largely—if not exclusively—economic.” 645 F. Supp. 2d 830, 840 (ND. Cal. 2009)

Accordingly, mere requets for indemnification or even actual indemnification of customers is

not sufficient to create an adverse legal interest.

To be relevant to the question of standing, an indemnification agreement must give rise to

a legal obligation to indemnify the customer in the litigation by the patent holder. See Arris

Group, 639 F.3d at 1375 (“We have recognized that, where a patent holder accuses customers of

direct infringement based on the sale or use of a supplier’s equipment, the supplier has standing

to commence a declaratory judgment action if... the supplier is obligated to indemnify its

customers from infringement liability....”). In support of this statement in Arris Group, the

Federal Circuit cited cases where indemnification agreements unquestionably applied to the

patent litigation at issue. For example, in ABB Inc. i Cooper Indus., LLC. an outsourcing

company agreed to indemnify a manufacturer for claims of infringement brought specifically by

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the patent holder. 635 F.3d 1345, 1347 (Fed. Cir. 2011) (“After signing the settlement, ABB

began outsourcing the manufacture of BIOTEMP to Dow Chemicals... .ABB also contracted to

indemnify Dow against claims of infringement by Cooper.”). Likewise, in Arrowhead Industrial

Water, Inc. v. Ecolochem, Inc., 846 F.2d 73 1 (Fed. Cir. 1988), overruled on other grounds by

Medlmmine, 549 U.S. at 127, a customer requested that its supplier provide an indemnification

agreement against potential claims by the patent holder, who had recently threatened the

customer with litigation. Id. at 733. 737. These cases indicate that the legal obligation required

to confer standing upon an indemnifier requires more than the existence of a broadly worded

indemnification agreement that may not be applicable to the litigation at issue.

In this case, TCS has not even alleged an adverse economic interest because there is no

allegation that TCS will honor the indemnification demands from MetroPCS and Sprint. Nor is

there any allegation that TCS is required to indemnify MetroPCS or Sprint under any authority.

For example, there is no allegation of indemnification agreements between TCS and either

MetroPCS or Sprint. See Microchip Tech., 441 F.3d at 944 (“Microchip has not produced any

agreement indemnifying a customer against infringement of the patents-in-suit. Thus, Microchip

has no legal right to ‘clear the air.”).

TCS’s prior statements in federal court emphasize that barebone allegations regarding

indemnification demands are too speculative to confer standing. In response to a prior

indemnification demand from MetroPCS arising out of patent litigation in the Eastern District of

Texas involving location-based technology for cell phones, TCS took the position that its

indemnification agreement with MetroPCS did not apply to MetroPCS’s dispute with the patent

holder. This prompted MetroPCS to seek a declaratory judgment against TCS .MetroPCS

Wireless, Inc. v. Telecommunication Systems, Inc., 1 :09-cv-0060 1 -WDQ (D. Md.) (“Maryland

Action”) Compl. ¶J 5-6 (D.I. 1) (attached as Exhibit B) (“MetroPCS’ claims arise out of TCS’

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failure to defend, indemni’ and hold harmless MetroPCS. . . .The Federal Plaintiffs’ core

allegation in the Federal Court Action is that MetroPCS infringes Federal Plaintiffs’ patents

through MetroPCS’ use of LBS service and technology ).‘° In denying the applicability of its

indemnification agreement with MetroPCS, TCS denied that is provided relevant location-based

services or technology to MetroPCS or that MetroPCS used any relevant TCS location-based

technology or equipment to provide services to its customers. Maryland Action, Answer ¶ 9

(D.I. 25) (attached as Exhibit C). Instead, TCS claimed that MetroPCS “uses the services and

technology of a competitor.” Id. ¶ 9.

TCS further explained that “a central issue that will [be] vetted in the Texas Litigation is

how the Texas Plaintiffs allege MetroPCS infringes their patents. Until this is clear, there is no

way to determine whether the Texas Plaintiffs allege that it is MetroPCS’s ‘use’ of TCS products

and services that are doing the infringing and, thus, whether the indemnification provision is

triggered.” Maryland Action, Reply in Support of Motion to Dismiss at 5 (DI. 18) (attached as

Exhibit D). TCS emphasized that it “did not sign on to be MetroPCS’s insurer of last resort.”

Id., Memo. in Support of Defendant’s Motion to Dismiss at 4-5 (DI. 16) (attached as Exhibit E).

The district court largely agreed with TCS’s reasoning and dismissed MetroPCS’s claims for

indemnification and contribution as premature.’ MetropPCS Wireless, Inc. v. Telecomins. Sys.,

‘° Although matters outside the pleadings are presented with this Motion, TracBeam is not

requesting that the motion be converted to a Motion for Summary Judgment pursuant to 1II(A)(2)

of the Court’s Practice Standards. The outside matters that are presented are public court filings

of which the Court can take judicial notice in ruling upon a motion to dismiss. See Face V:

Swerdlow, Civ. No. 06-4157, 519 F.3d 1067, 1072 (10th Cir. 2008) (finding that on motion to

dismiss for failure to state a claim, district court could take judicial notice of materials in state

courts file without converting motion into one for summary judgment); Binford v. United States,

436 F.3d 1252, 1256 n.7 (10th Cir. 2006) (stating that in resolving a motion to dismiss, the

district court is entitled to take judicial notice of matters in the public record).

MetroPCS subsequently dismissed the claim left standing by the Court—MetroPCS’s claim

that TCS had a duty to defend MetroPCS in the Texas litigation (including controlling

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2009 U.S. Dist. Lexis 97884, at *12 (D. Md. Oct. 19, 2009).

This history emphasizes that an indemnification demand need not create adverse legal

interests between the potential indemnifier and the patent holder. In the Maryland Action, the

patent holder did not have interests adverse to TCS; instead, the patent holder’s failure to sue

TCS reinforced TCS’s position against MetroPCS. See Exhibit E at 5 n.5 (“The Texas Plaintiffs

do not seem to fear litigation; if they believed that TCS’s products or services infringed their

patents, they could, and undoubtedly would, have sued TCS directly.”).

Accordingly, Sprint’s and MetroPCS’s indemnification demands to TCS are inadequate

to confer standing upon TCS.

IV. Conclusion

For the reasons discussed above, TCS has failed to carry its burden of establishing the

existence of an Article III case or controversy. The Court should therefore dismiss this action for

lack of subject-matter jurisdiction under Fed. R. Civ. P. 12(b)(l).

MetroPCS’s defense). See Maryland Action, id. at 14; Notice of Dismissal, (DI. 82) (attached

as Exhibit F).

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Dated: October 24, 2011 Respectfully submitted.

By: Is! Jonathan Gottfried

Gregory S. Dovel

CA State Bar No. 135387

Email: gregdovellaw.com

Jonathan Gottfried

NY State Bar No. 4269163

Email: rick@dovellaw.com

DOVEL & LUNER, LLP

201 Santa Monica Blvd., Suite 600

Santa Monica, CA 90401

Telephone: 310-656-7066

Facsimile: 310-657-7069

By: Is! Tracy L. Ashmore

ROBINSON, WATERS &

O’DORISIO, P.C.

1099 18th Street, Suite 2600

Denver, Colorado 80202-1926

Telephone: (303) 297-2600

Facsimile: (303) 297-2750

tashmore@rwolaw.com

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Case 1:11-cv-02519-WYD-MJW Document 6 Filed 10/24/11 USDC Colorado Page 20 of 21
CERTIFICATE OF SERVICE

I hereby certify that on the 24th day of October 2011, a true and correct copy of the

foregoing MOTION TO DISMISS was duly filed via the CM/ECF system and served

electronically and/or via U.S. Mail, postage prepaid, addressed to the following:

Victor M. Morales

McElroy, Deutsch, Mulvaney & Carpenter, LLP

5613 DTC Parkway, Suite 1100

P.O. Box 4467

Greenwood Village, CO 80 155-4467

Edward A. Penninglon

Stephanie D. Scruggs

Sid V. Pandit

Murphy & King

Professional Corporation

1055 Thomas Jefferson Street, Suite 400

Washington, D.C. 20007

s/ Kristi Kellow

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