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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 1 of 18
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`T-REX PROPERTY AB,
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`Defendant.
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`PLAINTIFF BROADSIGN INTERNATIONAL, LLC’S
`MEMORANDUM OF LAW IN OPPOSITION
`TO DEFENDANT T-REX PROPERTY AB’S
`MOTION TO DISMISS THE AMENDED COMPLAINT
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`Alfred R. Fabricant (AF8255)
`Lawrence C. Drucker (LD9423)
`BROWN RUDNICK LLP
`7 Times Square
`New York, NY 10036
`Telephone: (212) 209-4800
`Facsimile: (212) 209-4801
`afabricant@brownrudnick.com
`ldrucker@brownrudnick.com
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`Attorneys for Plaintiff
`BroadSign International, LLC
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`Civil Action No.: 1:16-cv-04586 (LTS)
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`JURY TRIAL REQUESTED
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`BROADSIGN INTERNATIONAL, LLC,
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`Plaintiff,
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`v.
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 2 of 18
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`TABLE OF CONTENTS
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`I. INTRODUCTION .......................................................................................................... 1
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`II. STATEMENT OF THE FACTS ................................................................................... 4
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`III. LEGAL STANDARDS ................................................................................................. 5
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`IV. ARGUMENT ................................................................................................................ 7
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`A.
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`B.
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`T-Rex and BroadSign are Engaged in an Actual, Direct
`Dispute ............................................................................................................7
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`An Actual Controversy Arises from T-Rex's Suits Against BroadSign’s
`Customers Accusing BroadSign's Products of Infringement ........................10
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`1. BroadSign Has Been Subject to Claims for Indemnification
`From its Customers .......................................................................................10
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`2. BroadSign is Subject to a Claim of Indirect Infringement by T-Rex ...........11
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`C.
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`If BroadSign's Allegations are Deemed Insufficient,
`Leave to Amend Should be Granted .............................................................12
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`VI. CONCLUSION .......................................................................................................... 12
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`i
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 3 of 18
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`TABLE OF AUTHORITIES
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`Page(s)
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`Cases
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`ABB Ins. v. Cooper Indus., LLC,
`635 F. 3d 1345 (Fed. Cir. 2011)..................................................................................... 8, 11
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`Arkema Inc. v. Honeywell International, Inc.,
`706 F. 3d 1351 (Fed. Cir. 2013).................................................................................. passim
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`Arris Grp., Inc. v. British Telecommunications PLC,
`639 F.3d 1368 (Fed. Cir. 2011)............................................................................................ 9
`
`Ass'n for Molecular Pathology v. U.S. Patent & Trademark Office,
`689 F.3d 1303 (Fed. Cir. 2012), aff'd .................................................................................. 7
`
`Cedars–Sinai Med. Ctr. v. Watkins,
`11 F.3d 1573 (Fed.Cir.1993)................................................................................................ 6
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`Diamonds.net LLC v. Idex Online, Ltd.,
`590 F. Supp. 2d 593 (S.D.N.Y. 2008).................................................................................. 7
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`Frederick Goldman, Inc. v. W.,
`No. 06-CV-3413-LTS-RLE, 2007 WL 1989291 (S.D.N.Y. July 6, 2007) ........................ 10
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`Golden Trade, S.r.L. v. Jordache,
`143 F.R.D. 504 (S.D. N.Y. 1992) ...................................................................................... 11
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`Hon Hai Precision Indus. Co. v. Wi-LAN, Inc.,
`12-cv-7900-SAS, 2013 WL 2322675 (S.D.N.Y. May 28, 2013) ...................................... 12
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`MedImmune Ass'n for Molecular Pathology v. Myriad Genetics, Inc.,
`133 S. Ct. 2107, 186 L. Ed. 2d 124 (2013) .......................................................................... 7
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`MedImmune Inc. v. Genentech Inc.,
`549 U.S. 118 (2007) ......................................................................................................... 6, 8
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`Micron Tech., Inc. v. Mosaid Techs., Inc.,
`518 F.3d 897 (Fed. Cir. 2008).......................................................................................... 6, 8
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`Microsoft Corp. v. Datatern, Inc.,
`755 F. 3d 899 (Fed. Cir. 2014)........................................................................................... 10
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`SanDisk Corp. v. STMicroelectronics, Inc.,
`480 F.3d 1372 (Fed. Cir. 2007).................................................................................... 6, 7, 8
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`Sony Elecs., Inc. v. Guardian Media Techs., Ltd.,
`497 F.3d 1271 (Fed. Cir. 2007)............................................................................................ 8
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`ii
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 4 of 18
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`T-Rex Property AB v. Adaptive Micro Systems, LLC,
`Case No. 1:16-cv-05667 (N.D. Ill. May 27, 2016) .............................................................. 3
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`Winfield v. City of N.Y.,
`15-cv-5236-LTS-DCF, 2016 WL 6208564 (S.D.N.Y. Oct. 24, 2016) ................................ 5
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`Statutes
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`Uniform Commercial Code §2-312(3) ..................................................................................... 11
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`Other Authorities
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`Fed. R. Civ. P. 12 (b)(1)......................................................................................................... 1, 5
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`Fed. R. Civ. P. 15(a) ................................................................................................................ 12
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`iii
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 5 of 18
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` Plaintiff BroadSign International, LLC (“BroadSign” or "Plaintiff") submits this
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`memorandum of law in opposition to the motion by Defendant T-Rex Property AB (“T-Rex”
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`or "Defendant") to dismiss the Amended Complaint pursuant to Fed. R. Civ. P. 12 (b)(1)
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`(D.I. 15, D. I. 16). A declaration of BroadSign's outside patent consultant, Sandra
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`Beauchesne ("Beauchesne Decl."), accompanies this memorandum.
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`I.
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`INTRODUCTION
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`This is an action for a declaratory judgment of non-infringement and intervening
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`rights directed to three patents owned and/or controlled by T-Rex. T-Rex is a prolific non-
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`practicing entity that has the rights to a portfolio of patents in the field of digital signage.
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`Since 2012, T-Rex has filed at least 59 patent infringement cases against more than 80
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`companies, in 17 judicial districts throughout the United States. All of these cases allege
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`infringement of one or more of the following patents: U.S. Patent No. RE39, 470 (“the ’470
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`patent”); U.S. Patent No. 7,382,334 (“the ’334 patent”); and U.S. Patent No. 6,430,603 (“the
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`’603 patent”) (collectively, the “patents-in-suit”). BroadSign initiated this declaratory
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`judgment action because T-Rex has sued several of BroadSign's customers accusing the
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`products BroadSign sold to them of infringing the patents-in-suit and because direct
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`communications between BroadSign and T-Rex made it apparent that T-Rex is adverse to
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`BroadSign. T-Rex has demonstrated its intention to continue to accuse BroadSign's products
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`of infringement, has refused to provide BroadSign with a covenant not to sue and has
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`demanded that BroadSign take a license to protect itself and its customers from further suits.
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`In response, BroadSign brought this action so that its business can move forward without the
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`imminent and ever-present threat of litigation. It is difficult to imagine a case where a
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`supplier of accused products and a potential target of a non-practicing entity has a clearer
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`right to seek declaratory relief than BroadSign does here.
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`1
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 6 of 18
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`T-Rex's motion challenges BroadSign's standing to seek a declaratory judgment on
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`the grounds that there is no direct dispute between BroadSign and T-Rex, only between
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`BroadSign's customers and T-Rex. T-Rex argues that BroadSign cannot establish that it has
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`standing to seek a declaratory judgment on the basis of suits against BroadSign's customers
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`because BroadSign has not demonstrated that it has an obligation to indemnify the customers
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`T-Rex has sued, or that T-Rex has asserted a claim of indirect infringement against
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`BroadSign, based on the alleged direct infringement by BroadSign's customers (D. I. 15 at 3).
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`Not only does this argument run contrary to recent Federal Circuit precedent that supports
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`finding that a supplier has standing to seek a declaratory judgment under similar
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`circumstances, but T-Rex conveniently disregards the very obvious direct dispute between
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`itself and BroadSign, relegating the facts concerning the parties' direct, adversarial
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`communications to an unsupported, dismissive discussion at the end of its motion (D. I. 15 at
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`5).
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`At the time BroadSign commenced this action, at least five of BroadSign's customers
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`had been sued by T-Rex, accused of infringing the patents-in-suit. In each of those cases, T-
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`Rex's accusations were directed toward BroadSign's products, in some instances by name,
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`and in other instances, by describing products that only BroadSign provided to those
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`customers. Since that time, T-Rex sued at least two more of BroadSign's customers, bringing
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`the total to seven. T-Rex's aggressive litigation strategy has harmed BroadSign's
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`relationships with its customers and placed a cloud over its ability to do business, with
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`prospective customers having legitimate concerns that they will be T-Rex's next targets if
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`they buy digital advertising products from BroadSign. Faced with this ongoing and persistent
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`threat to its business, BroadSign requested a meeting with T-Rex to discuss a possible
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`business arrangement. In June 2016, BroadSign's President and CEO, Burr Smith, and its
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`outside patent consultant, Sandra Beauchesne, traveled to Sweden and met with T-Rex's
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`2
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 7 of 18
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`principals, where they presented T-Rex with prior art they believe invalidates T-Rex's
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`patents. Rather than reach an amicable agreement, a short time later and unsolicited by
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`BroadSign, T-Rex sent BroadSign a draft of a license agreement covering the patents-in-suit
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`and sued another of BroadSign's customers. The message to BroadSign was clear: agree to
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`T-Rex's terms or more of BroadSign's customers, and BroadSign itself, would be sued.
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`Even putting aside these direct licensing demands made by T-Rex to BroadSign,
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`standing to seek a declaratory judgment for non-infringement separately exists based on T-
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`Rex's suits against BroadSign's customers, several of whom have already contacted
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`BroadSign demanding indemnification. Even as to those that have not yet done so, the UCC
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`may impose on BroadSign an obligation to indemnify its customers. Alternatively,
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`BroadSign has standing to seek a declaratory judgment because it is clearly exposed to claims
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`of indirect infringement. T-Rex has asserted claims of direct infringement against seven of
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`BroadSign's customers, many of whom have contacted BroadSign and advised it that it is
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`their use of BroadSign's products that is the basis for T-Rex's claims.1 In its motion, T-Rex
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`claims that it has not sued anyone for indirect infringement alone (D.I. 15 at 5),
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`disingenuously suggesting that there is no risk to a supplier such as BroadSign. But T-Rex
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`has sued at least three suppliers of digital advertising products and has entered into license
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`agreements with at least two of these suppliers, in addition to least two other suppliers
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`wishing to protect their customers. Moreover, T-Rex has not offered BroadSign a covenant
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`not to sue. The fact that T-Rex, for its own tactical reasons, has not yet chosen to assert
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`claims directly against BroadSign is irrelevant. For these reasons and those set forth in
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`greater detail below, T-Rex's motion to dismiss should be denied.
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` 1
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` In at least one of the actions, T-Rex Property AB v. Adaptive Micro Systems, LLC, Case No. 1:16-cv-05667
`(N.D. Ill. May 27, 2016), T-Rex has served infringement contentions that BroadSign believes identify
`BroadSign's products as the accused products. BroadSign is unable to see those contentions because T-Rex has
`designated them "Confidential - Attorneys Eyes Only" under the protective order entered in that case.
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`3
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 8 of 18
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`II.
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`STATEMENT OF THE FACTS2
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`BroadSign is a supplier of digital signage solutions including cloud-based solutions to
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`customers such as operators of networks of digital displays. Beauchesne Decl., ¶2.
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`BroadSign provides hardware and software to enable its customers to operate digital signage
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`in settings such as airports, shopping malls, elevators and other public spaces. The signage is
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`controlled by a server that allows the content to be changed by the customers remotely, from
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`a central source. Beauchesne Decl., ¶16.
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`T-Rex is a non-practicing entity founded in 2003 by Mats Hylin, Mats Dahlgren and
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`Fredrik Persson, based in Stocksund, Sweden. T-Rex manufactures nothing, nor does it sell
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`products or services. T-Rex acquired a portfolio of patents for outdoor advertising products
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`in countries including the United States and Canada, at least 3 of which are U.S. patents.
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`(D.I. 10 at ¶4). T-Rex has been suing companies that use a computer to control digital signs.
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`Since 2012, T-Rex has filed more than 59 patent infringement cases to enforce the patents-in-
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`suit, in approximately 17 districts throughout the United States, four such cases in this
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`District alone. Dkt. 10 at ¶6; Beauchesne Decl., ¶3. Since November, 2015, T-Rex has sued
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`seven of BroadSign's customers: ContextMedia Health, LLC; Admirable, LLC; Health
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`Media Network, LLC; Adaptive Micro Systems, LLC; JC Decaux North America, Inc.; Blue
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`Outdoor, LLC; and Adspace Netwroks, Inc.. T-Rex has settled five of those cases; only the
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`cases against Adaptive Micro Systems and ContextMedia Health are still pending.
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`Beauchesne Decl., ¶4.
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`T-Rex’s business model is to target end users of digital signage, rather than suppliers,
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`who are fewer in number but have a greater incentive to fight T-Rex. (Dkt. 10 at ¶9).
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`However, T-Rex has sued at least three suppliers including Prismview, LLC, Quality
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`Systems Technology, Inc., and Time-O-Matic, LLC d/b/a Watchfire with which T-Rex
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` 2
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` Because the facts relevant to this motion are set forth more fully in the Amended Complaint (D.I. 10) and the
`accompanying Beauchesne Declaration, only a brief synopsis is provided here.
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`4
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 9 of 18
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`subsequently settled, and has entered into license agreements with other suppliers including
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`Daktronics and Formetco, that protect those suppliers' customers from suit by T-Rex.
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`Beauchesne Decl., ¶14, Exhs. K, L and M.3
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`On June 21, 2016, BroadSign contacted T-Rex to discuss a business arrangement
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`under which T-Rex would stop suing and threatening suit against BroadSign’s customers.
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`Specifically, BroadSign had located prior art that it believes invalidates the patents-in-suit
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`and thought that based upon the strength of that art it could persuade T-Rex to stop suing its
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`customers. On June 28, 2016, BroadSign's President and CEO, Burr Smith, and its outside
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`patent advisor, Sandra Beauchesne, traveled to Sweden and met with T-Rex's principal, Mats
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`Hylin. No agreement was reached at that meeting. Beauchesne Decl., ¶15. On July 11,
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`2016, T-Rex filed an action against ContextMedia Health, one of BroadSign's customers,
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`accusing BroadSign's products of infringing the patents-in-suit. Beauchesne Decl., ¶5, Exh.
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`A. On July 16, 2016, without any prior discussion or warning, T-Rex sent a draft license
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`agreement to BroadSign, insisting that BroadSign take a license to the patents-in-suit in order
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`to protect BroadSign and its customers from future lawsuits. Beauchesne Decl., ¶16; Exh. P.
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`T-Rex remains a threat to BroadSign and its customers.
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`III. LEGAL STANDARDS
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` "In deciding a motion to dismiss under Rule 12(b)(1), a court 'must take all
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`uncontroverted facts in the complaint as true, and draw all reasonable inferences in favor of
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`the party asserting jurisdiction,' but where jurisdictional facts are placed in dispute, the court
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`has the power and obligation to decide issues of fact by reference to evidence outside the
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`pleadings, such as affidavits, in which case the party asserting subject matter jurisdiction has
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`the burden of proving by a preponderance of the evidence that it exists." Winfield v. City of
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`N.Y., 15-cv-5236-LTS-DCF, 2016 WL 6208564, at *3 (S.D.N.Y. Oct. 24, 2016) (citations
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` 3
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` Public records indicate that T-Rex's case against supplier Quality Systems Technology, Inc., Case No. 1:16-cv-
`6942 (N.D. Ill. July 1, 2016), concluded with a default judgment entered against the defendant.
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`5
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 10 of 18
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`omitted). In resolving a motion based on jurisdictional facts, “a court is not restricted to the
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`face of the pleadings, but may review evidence extrinsic to the pleadings . . . .” Cedars–Sinai
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`Med. Ctr. v. Watkins, 11 F.3d 1573, 1584 (Fed.Cir.1993).
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`The purpose behind the Declaratory Judgment Act is to “clear the air by suing for a
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`judgment that would settle the conflict of interests” when “a patent owner . . . attempts extra-
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`judicial patent enforcement with scare-the-customer-and-run tactics that infect the
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`competitive environment of the business community with uncertainty and insecurity. . . .”
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`Micron Tech., Inc. v. Mosaid Techs., Inc., 518 F.3d 897, 902 (Fed. Cir. 2008) (internal
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`citation omitted). In MedImmune Inc. v. Genentech Inc., 549 U.S. 118 (2007), the Supreme
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`Court made it easier to establish standing to bring a declaratory judgment action, abandoning
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`the "reasonable apprehension of suit" test in favor of a less demanding standard. In
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`MedImmune, the Court held that a “case or controversy” exists when “the facts alleged, under
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`all the circumstances, show that there is a substantial controversy, between parties having
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`adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a
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`declaratory judgment.” Id. at 127. The dispute must be “definite and concrete, touching the
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`legal relations of parties having adverse legal interests,” such that the dispute is “real and
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`substantial” and “admi[ts] of specific relief through a decree of a conclusive character, as
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`distinguished from an opinion advising what the law would be upon a hypothetical state of
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`facts.” Id. (internal quotation marks and citation omitted).
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`The Federal Circuit has applied the MedImmune standard and ruled that “[w]here a
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`patentee asserts rights under a patent based on certain identified ongoing or planned activity
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`of another party, and where that party contends that it has the right to engage in the accused
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`activity without license, . . . a case or controversy will arise and the party need not risk a suit
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`for infringement by engaging in the identified activity before seeking a declaration of its
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`legal rights." SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1381 (Fed. Cir.
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`6
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 11 of 18
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`2007). While declaratory judgment jurisdiction generally requires “some affirmative act by
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`the patentee,” jurisdiction also arises “where the patentee takes a position that puts the
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`declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or
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`abandoning that which he claims a right to do.” Id. at 1380-1381. See also Arkema Inc. v.
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`Honeywell International, Inc., 706 F. 3d 1351, 1356-57 (Fed. Cir. 2013). This Court has
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`followed this precedent, stating that, “[T]he trend is to find an actual controversy, at least
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`where the declaratory judgment plaintiff's product arguably practices a patent and the
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`patentee has given some indication it will enforce its rights.” Diamonds.net LLC v. Idex
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`Online, Ltd., 590 F. Supp. 2d 593, 598 (S.D.N.Y. 2008). T-Rex's acts directed against
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`BroadSign and its customers are more than sufficient to give BroadSign the right to seek
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`declaratory relief under these standards.
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`IV. ARGUMENT
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`A.
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`T-Rex and BroadSign are Engaged in an Actual, Direct Dispute
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`BroadSign's assertion that it has standing to seek a declaratory judgment is not based
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`solely on its position as a supplier whose customers have been sued, as T-Rex contends.
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`BroadSign and T-Rex have adverse interests and an actual and substantial controversy
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`sufficient to give BroadSign the right to seek a declaratory judgment.
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`Declaratory judgment jurisdiction exists when a patent owner makes an offer or
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`demands that plaintiff take a license and the plaintiff at least prepares to undertake potentially
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`infringing activities. Ass'n for Molecular Pathology v. U.S. Patent & Trademark Office, 689
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`F.3d 1303, 1323 (Fed. Cir. 2012), aff'd in part, rev'd on other grounds in Ass'n for Molecular
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`Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 186 L. Ed. 2d 124 (2013) (reversed on
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`other grounds). The U.S. Supreme Court has found that these facts are sufficient to warrant
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`declaratory judgment jurisdiction under MedImmune. Ass'n for Molecular Pathology v.
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`Myriad Genetics, Inc., 133 S. Ct. 2107, 2116, 186 L. Ed. 2d 124 (2013) ("[W]e find that,
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`7
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 12 of 18
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`under the Court's decision in MedImmune, Inc. v. Genentech, Inc., Dr. Ostrer has alleged
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`sufficient facts 'under all the circumstances, [to] show that there is a substantial controversy,
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`between parties having adverse legal interests, of sufficient immediacy and reality to warrant
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`the issuance of a declaratory judgment."). See also, SanDisk, 480 F.3d at 1380-1381; Sony
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`Elecs., Inc. v. Guardian Media Techs., Ltd., 497 F.3d 1271, 1285-1286 (Fed. Cir. 2007)
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`(reversing dismissal and finding an actual controversy when “the parties had taken adverse
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`legal positions” during negotiations as to the plaintiff’s “right to engage in those activities
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`without a license” and when the plaintiff was not seeking “an opinion advising what the law
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`would be upon a hypothetical state of facts”); Micron Tech., Inc. v. Mosaid Techs., Inc., 518
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`F.3d 897, 901 (Fed. Cir. 2008) (finding that an actual controversy arose from the patentee’s
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`threatening letters, the patentee’s litigation activity against competitors, and the patentee’s
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`intent to continue an aggressive litigation strategy). The Federal Circuit has held that a
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`specific threat of an infringement action is not required to establish declaratory judgment
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`jurisdiction. Arkema Inc., 706 F.3d at 1357, citing ABB Ins. v. Cooper Indus., LLC, 635 F. 3d
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`1345, 1348 (Fed. Cir. 2011).
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`Here, BroadSign and T-Rex have had ongoing communications that establish their
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`adverse interests. BroadSign and T-Rex had a face to face meeting and T-Rex followed up
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`by filing a subsequent law suit against an additional customer of BroadSign. In that law suit,
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`as in the prior suits, T-Rex accused BroadSign's products of infringing. Less than one week
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`later, T-Rex sent BroadSign a form of license agreement that would protect BroadSign and
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`its customers from further patent infringement suits by T-Rex. Beauchesne Decl., ¶16. T-
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`Rex's producing a form of license, threatening enforcement of specific patents, and attacking
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`BroadSign's customers constitute more than sufficient affirmative acts to entitle BroadSign to
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`seek a declaratory judgment. T-Rex has put BroadSign in a position where it must either
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`immediately stop selling its products or risk additional patent infringement suits.
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`8
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 13 of 18
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`T-Rex offers only unsupported statements to create the impression that these acts
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`were something other than a thinly veiled attempt to pressure BroadSign into agreeing to take
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`a license. While BroadSign did request the meeting, the purpose was to engage in
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`discussions to reach a business arrangement and avoid potential issues between them. It is for
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`this reason that BroadSign came to the meeting with prior art references it believed invalidate
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`the patents-in-suit. Beauchesne Decl., ¶15. Contrary to T-Rex's version of events -- in the
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`form of argument without evidentiary support -- BroadSign did not request a license or
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`indicate that it wanted to enter into such an arrangement with T-Rex. Id. After the meeting,
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`T-Rex sent BroadSign its form of license, unsolicited, with the clear message as confirmed in
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`Mats Hylin's July 17, 2016 e-mail, that BroadSign would have to agree to take a license and
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`pay T-Rex or risk continued suits against its customers and against BroadSign itself.
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`Beauchesne Decl., Exh. Q. T-Rex never offered BroadSign a covenant not to sue, asserting
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`rather that it believes BroadSign may be infringing and that T-Rex reserved the right to sue
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`BroadSign if it did not agree to take a license.
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`Sidestepping the obvious dispute between T-Rex and BroadSign, T-Rex attempts to
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`shift the focus of its motion by arguing that BroadSign relies only on the claims against its
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`customers to establish declaratory judgment jurisdiction, and that BroadSign has failed to
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`meet the requirements under Arris Grp., Inc. v. British Telecommunications PLC, 639 F.3d
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`1368, 1375 (Fed. Cir. 2011). Not only is this not BroadSign's position, but T-Rex relies on
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`an overly narrow reading of Arris, arguing that declaratory judgment standing only exists for
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`the supplier where its customers have been sued and the supplier is obligated to indemnify or
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`there is a possibility that the supplier may be liable for induced or contributory infringement.
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`This has been squarely rejected by the Federal Circuit in Arkema Inc., in which the Federal
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`Circuit held that, "Arris did not set forth an overarching test for a supplier's standing to seek a
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`declaratory judgment regarding its potential indirect infringement liability; rather, it
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 14 of 18
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`identified circumstances that have been held sufficient (rather than necessary) for declaratory
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`judgment jurisdiction. Arkema Inc., 706 F.3d at 1357. As described above, the adversarial
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`communications between T-Rex and BroadSign are sufficient to permit BroadSign to seek a
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`declaratory judgment here. For these reasons alone, T-Rex's motion should be denied.
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`B.
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`An Actual Controversy Arises from T-Rex's Suits Against BroadSign’s
`Customers Accusing BroadSign's Products of Infringement
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`
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`Even if BroadSign was relying solely on its status as a supplier of customers that have
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`been accused of infringing, which it is not, BroadSign meets the test to establish the right to
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`seek a declaratory judgment.
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`1.
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`BroadSign Has Been Subject to Claims for Indemnification
`From its Customers
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`This Court has found that an actual controversy exists between a supplier and a
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`patentee when a customer has received correspondence from the patentee identifying an
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`infringing product and stating an intention to enforce its intellectual property against an un-
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`named supplier. Frederick Goldman, Inc. v. W., No. 06-CV-3413-LTS-RLE, 2007 WL
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`1989291, at *3 (S.D.N.Y. July 6, 2007) (denying a patentee-defendant’s motion to dismiss a
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`supplier-plaintiff’s declaratory judgment action). Here, BroadSign's customers have been
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`more than threatened by T-Rex; T-Rex has filed actions against them accusing them of
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`infringing the patents-in-suit by reason of their use of BroadSign's products, and those
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`customers have, in turn, demanded indemnification from Broadsign. Beauchesne Decl. Exhs.
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`D, I and J. Accordingly, BroadSign is entitled to seek a declaratory judgment against T-Rex.
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`Microsoft Corp. v. Datatern, Inc., 755 F. 3d 899 (Fed. Cir. 2014), cited by T-Rex
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`does not require a different result. In Microsoft, one of the reasons standing was found to be
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`lacking was that the declaratory judgment plaintiff/supplier had flatly denied that it had any
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`obligation to indemnify its customers. Id. at 902, 904. In contrast, here, BroadSign is not
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`seeking to assert declaratory judgment based solely on these indemnification requests, nor is
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 15 of 18
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`there any evidence that BroadSign has refused to indemnify its customers. Moreover, even
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`if BroadSign's customers had not made specific demands for indemnification, as they have,
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`BroadSign would have declaratory judgment standing because it is at risk of being held liable
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`to its customers for indemnification under Uniform Commercial Code (“UCC”) section 2-
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`312(3). See e.g., Golden Trade, S.r.L. v. Jordache, 143 F.R.D. 504, 507 (S.D. N.Y. 1992)
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`(granting leave to amend to add third-party customer’s claims for indemnification and
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`finding that “Under the terms of section 2-312(3), [the supplier] may be liable for the jeans it
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`manufactured and sold to [customer], and its liability may include consequential damages,
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`such as damages to be paid for infringement of patent, and possibly the costs of such
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`litigation.”). BroadSign clearly satisfies this test to establish declaratory judgment
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`jurisdiction.
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`2.
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`BroadSign is Subject to a Claim of Indirect Infringement by T-Rex
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`T-Rex argues in the alternative that BroadSign does not have declaratory judgment
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`standing based on a possible claim of indirect infringement, relying on the self-serving
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`statement that it “has never asserted the patents-in-suit against any supplier similarly situated
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`to BroadSign; nor has T-Rex ever sued any company solely for indirect infringement.” D. I.
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`15 at 2 and 4-5. T-Rex thus attempts to create the misleading impression that BroadSign will
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`never be accused of infringement by T-Rex, but T-Rex has asserted the patents-in-suit
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`against at least three other suppliers, and extracted settlements from two of those suppliers
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`who wished to protect their customers. Beauchesne Decl. ¶14. Moreover, the Federal
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`Circuit has held that declaratory judgment jurisdiction resulting from a potential claim of
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`indirect infringement does not require that a patent holder make specific accusations against
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`either the potential direct infringers or indirect infringers. Arkema, 706 F.3d at 1357; see
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`also ABB Inc, 635 F.3d at 1348 (“A specific threat of infringement litigation by the patentee
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`is not required to establish jurisdiction.”). Thus, the mere fact that T-Rex has not yet decided
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`Case 1:16-cv-04586-LTS Document 21 Filed 01/31/17 Page 16 of 18
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`to accuse BroadSign of indirect infringement or that it has not made prior accusations of only
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`indirect infringement does not negate BroadSign's standing to assert declaratory judgment
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`jurisdiction based on the potential that a claim of indirect infringement can be asserted
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`against it, nor does it make the threat BroadSign faces from T-Rex any less real. For this
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`reason as well, T-Rex's motion should be denied.
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`C.
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`If BroadSign's Allegations are Deemed Insufficient,
`Leave to Amend Should be Granted
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`T-Rex argues that BroadSign's Amended Complaint contains insufficient allegations
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`to support declaratory judgment standing. D. I. 15 at 3-4. Should the Court require further
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`detail in the allegations of the Amended Complaint to support declaratory judgment standing,
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`BroadSign requests leave to file a Second Amended Complaint addressing any purported
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`deficiencies. Fed. R. Civ. P. 15(a) provides that leave to amend a complaint “shall be freely
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`given when justice so requires.” Whether to permit a plaintiff to amend its complaint