Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 1 of 25
`
`Page|D #: 829
`
`CYAN EXHIBIT 1038
`
`IN THE UNITED STATES DISTRICT COURT
`
`FOR THE DISTRICT OF HAWAII
`
`CYANOTECH CORPORATION,
`
`Plaintiff,
`
`vs.
`
`) CIVIL NO. l2-00352 JMS-RLP
`)
`) ORDER GRANTING DEFENDANTS ’
`) MOTION TO DISMISS
`
`U.S. NUTRACEUTICALS, LLC,
`
`d/b/a/ VALENSA INTERNATIONAL,
`AND THE UNIVERSITY OF
`
`ILLINOIS,
`
`Defendants.
`
`¥/¥/¥/¥/¥/¥/¥/¥/¥/
`
`ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS
`
`I. INTRODUCTION
`
`In this action, Plaintiff Cyanotech Corporation (“Cyanotech”) seeks a
`
`declaration of non-infringement or invalidity of a patent licensed to Defendant U.S.
`
`Nutraceuticals, LLC, d/b/a Valensa International (“Valensa”), and owned by the
`
`University of Illinois (the “University”) (collectively “Defendants”). Defendants
`
`move to dismiss, contending that the University has Eleventh Amendment
`
`immunity, and that the court lacks personal jurisdiction over both Defendants. And
`
`because the University is a required party to this action as an owner of the patent,
`
`Defendants argue that the action must be dismissed under Federal Rules of Civil
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 2 of 25
`
`Page|D #: 830
`
`Procedure l2(b)(7) and l9(b).
`
`The court GRANTS Defendants’ Motion. The University indeed has
`
`Eleventh Amendment immunity and is a party whose joinder is not feasible under
`
`Rule l9(a).1 Applying Rule l9(b), because the action cannot proceed without the
`
`University, the court DISMISSES the action without prejudice to Cyanotech
`
`asserting its claims in a parallel patent infringement action pending against it in the
`
`U.S. District Court for the Middle District of Florida. See US. Nutraceuticals LLC
`
`V. Cyanotech Corp, No. 5:12-cv-3660C-lOTBS (M.D. Fla. June 29, 2012) (the
`
`“parallel action”).
`
`A.
`
`Factual Backgr0und2
`
`II. BACKGROUND
`
`Among other products, Cyanotech develops a microalgae in Kailua-
`
`Kona, Hawaii that contains astaxanthin, an antioxidant that is claimed to have a
`
`wide variety of human health benefits. See, e. g., Doc. No. l, Compl. W l & 13
`
`1 Because the suit is dismissed under Federal Rules of Civil Procedure l2(b)(7) and 19,
`the court need not reach whether personal jurisdiction exists as to the University or as to Co-
`Defendant U.S. Nutraceuticals, LLC, d/b/a Valensa International (“Valensa”). Accordingly, the
`the Ex Parte Motion for Leave to File Supplemental Material, Doc. No. 46; and the Ex Parte
`Motion to File Under Seal, Doc. No. 47, are both DENIED as MOOT.
`
`2 Given that the court need not reach personal jurisdiction issues, this factual background
`focuses on describing the basic allegations of the merits of the dispute, and the facts related to
`whether the University is a required party under Rule 19. That is, the court does not set forth
`much of the background related to Valensa’s and the University’s contacts (or lack of contacts)
`with the Hawaii forum that might be otherwise be relevant to a personal jurisdiction analysis.
`
`2
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 3 of 25
`
`Page|D #: 831
`
`(alleging that astaxanthin “is a natural product long known for its ability to
`
`neutralize free radicals, thereby promoting eye health, reducing sunburn, and
`
`reducing other types of photic damage”). Cyanotech supplies this microalgae in an
`
`algal biomass to Valensa under a November 2, 2007 Biomass Supply Agreement.
`
`Doc. No. 37-4, Pl.’s Ex. 11, Doc. No. 10-2, Moerk Decl. (July 30, 2012) 1] 8.
`
`Valensa in turn extracts the astaxanthin from the biomass and -- in part utilizing its
`
`rights under U.S. Patent No. 5,527,533 (the ‘“533 Patent” or the “Tso Patent”) --
`
`develops and sells ingredients or formulations to others who package, distribute,
`
`and sell retail health-related products. Doc. No. 39-1, Moerk Decl. (Jan. 9, 2013)
`
`1] 4, Doc. No. l, Compl. 1] 4. In particular, the ‘533 Patent relates to a method of
`
`using astaxanthin for “retarding and ameliorating central nervous system and eye
`
`diseases.” Doc. No. 1-1, ‘533 Patent at 7.
`
`The University owns the ‘533 Patent. Doc. No. l, Compl. 1] 5.
`
`Specifically, the ‘533 Patent lists its inventors as Mark O.M. Tso and Tim-Tak
`
`Lum, and its assignee as the Board of Trustees of the University of Illinois. Doc.
`
`No. 1-1, ‘533 Patent at 1. According to the Complaint, the University “is a public
`
`entity of the State of Illinois with its principal place of business in Chicago,
`
`Illinois.” Doc. No. l, Compl. 1] 3. In this regard, the University is “a body
`
`corporate and politic” under Illinois law, 110 Ill. Comp. Stat. § 305/ l, and is
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 4 of 25
`
`Page|D #: 832
`
`therefore “an arm of the state [of Illinois] for Eleventh Amendment purposes.”
`
`Ranyard V. Ba’. 0fRegents, 708 F.2d 1235, 1239 (7th Cir. 1983). In turn, the
`
`University licensed certain rights to the ‘533 Patent to La Haye Laboratories, Inc.
`
`(“La Haye”), Doc. No. 10-9, and La Haye’s interests were later assigned in their
`
`entirety to Valensa. Doc. No. 10-3, Kohlhepp Decl. 11 5. Not all rights were
`
`licensed -- for example, under the license agreement, the University “shall retain
`
`the right to practice the rights licensed .
`
`.
`
`. for its own non-commercial and
`
`research activities.” Doc. No. 10-9, Defs.’ Ex. A 11 2.3.
`
`A dispute arose in 2011 between Cyanotech and Valensa regarding
`
`Cyanotech’s own astaxanthin products such as “EyeAstin” and “BioAstin.” See,
`
`e. g., Doc. No. 1-2, Compl. Ex. B. Valensa contends that Cyanotech is infringing on
`
`Valensa’s rights in the ‘533 Patent when Cyanotech holds out to others that its
`
`astaxanthin products prevent photic damage to the eye or improve eye health. Id,
`
`Doc. No. 10-4, Compl. (parallel action) 11 24. On March 22, 2011, Valensa
`
`President Rudi Moerck sent an email to Brent Bailey and Gerry Cysewski of
`
`Cyanotech, explaining why Valensa believes “it is obvious” that Cyanotech is
`
`using Valensa’s “Tso Patent” “for the promotion of [Cyanotech’s] products to
`
`consumers and customers.” Doc. No. 1-2, Compl. Ex. B. In the email, Valensa
`
`asked Cyanotech to “cease and desist selling BioAstin to customers for eye health
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 5 of 25
`
`PagelD #: 833
`
`indications contained in the Tso patent, .
`
`.
`
`. cease selling and promoting EyeAstin
`
`using our IP, and .
`
`.
`
`. agree to pay [Valensa] a royalty fee retroactively for all sales
`
`of EyeAstin and BioAstin sold to customers making label or literature claims based
`
`on the Tso patent.” Id.
`
`On June 20, 2012, Cyanotech filed this action, asserting three Counts.
`
`First, it seeks, as to both Defendants, a declaratory judgment of non-infringement
`
`of the ‘533 Patent and for patent invalidity. Doc. No. 1, Compl. 1] 19. Citing the
`
`March 22, 2011 email from Valensa, the Complaint alleges that Cyanotech “has
`
`been repeatedly threatened by Valensa with having allegedly committed infringing
`
`conduct, and engaging in an allegedly infringing activity, causing reasonable
`
`apprehension that one or both Defendants will bring suit as Cyanotech’s activities
`
`continue.” Id. 1] 21. Cyanotech alleges that the ‘533 Patent is invalid and that
`
`“[Cyanotech’s] conduct and actions .
`
`.
`
`. fall outside the scope of the ‘533 Patent
`
`claims as amended during prosecution of the application and as finally issued by
`
`the U.S. Patent and Trademark Office.” Id. 1] 22. It also alleges that the University
`
`“is or may be a necessary party pursuant to Fed. R. Civ. P. Rule 19 as the United
`
`States Patent and Trademark Office lists [the University] as the assignee of the
`
`Patent-in-Suit thereby making it the last recorded owner[.]” Id. 1] 24.
`
`Counts Two and Three are state law claims directed only at Valensa.
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 6 of 25
`
`PagelD #: 834
`
`Count Two (which mentions threats made in “bad faith,” but does not specify a
`
`cause of action) alleges that certain claims of the ‘533 Patent, as its original patent
`
`application had sought, “were expressly rejected by the Patent Office in view of
`
`extensive prior art establishing the use of astaxanthin for eye health and other
`
`protective functions.” Id. 1] 29. It alleges that the scope of the ‘533 Patent was
`
`narrowed to claims “treating an individual suffering from .
`
`.
`
`. retinal disease or
`
`damage.” Id. Thus, Count Two alleges that
`
`In spite of the clear change to the scope of the patent
`claims, Valensa, in bad faith, has threatened Cyanotech,
`and on information and belief has threatened Cyanotech’s
`distributors and other parties, who supply astaxanthin as
`an ingredient in nutritional supplement formulations for
`use in eye health, with infringement of the ‘533 Patent[.]
`
`Id. 1] 31. Regardless of whether these allegations state a cause of action recognized
`
`by Hawaii State Courts, Count Two squarely implicates the meaning and scope of
`
`the ‘533 Patent.
`
`Similarly, Count Three asserts that Valensa “engaged in unfair
`
`methods of competition in violation of Hawaii Revised Statutes (“HRS”) § 480-2
`
`by engaging in a systematic pattern and practice of unlawful threats, intimidation
`
`and harassment of suppliers and sellers of astaxanthin products in Hawaii and
`
`elsewhere, including Cyanotech.” Id. 1] 36. Count Three alleges that Valensa’s
`
`claims of infringement are false: “[O]n multiple occasions in the years 2010 and
`
`6
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 7 of 25
`
`Page|D #: 835
`
`2011, Valensa’s authorized representatives .
`
`.
`
`. made materially false
`
`statements .
`
`.
`
`. that the use of astaxanthin products as a preventative measure to
`
`maintain eye health infringed the claims of the [‘533 Patent].” Id. 1] 37. Count
`
`Three further claims that “Valensa made similar false claims and threats to other
`
`producers, buyers and sellers of astaxanthin products for the purpose of unlawfully
`
`restricting competition” when it “knew or should have known that those statements
`
`were false.” Id. 1111 39-40. “Valensa made the foregoing statements with the intent
`
`to deceive, mislead, harass and intimidate Cyanotech and others in an effort to gain
`
`an unlawful and unfair competitive advantage.” Id.
`
`11 41. “Valensa’s conduct and
`
`unfair methods of competition was injurious to consumers in [Hawaii] by, among
`
`other things, limiting competition and increasing costs.” Id. 11 42. Thus, like Count
`
`Two, Count Three directly depends upon an interpretation of the validity of the
`
`‘533 Patent.
`
`On June 29, 2012 -- nine days after Cyanotech filed this action --
`
`Valensa and the University filed a parallel action in the Middle District of Florida,
`
`alleging that Cyanotech and Nutrex Hawaii, Inc. (a company affiliated with
`
`Cyanotech) infringed, and is continuing to infringe, the ‘533 Patent.3 Doc. No. 10-
`
`3 The parties dispute whether Cyanotech’s action was served on Defendants before
`Defendants filed the parallel action. See Doc. No. 10-1, Defs.’ Mot. at 5; Doc. No. 37-6, Lamon
`Aff. 1111 9-10. Ultimately, this dispute is irrelevant to disposition of this Motion.
`
`7
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 8 of 25
`
`Page|D #: 836
`
`5, Defs.’ Mot. Ex. 2, Compl. (parallel action) 111] 23-32. That is, the same primary
`
`dispute regarding the ‘533 Patent that is at issue in this action is also pending in the
`
`parallel action in the Middle District of Florida.
`
`B.
`
`Procedural Background
`
`Defendants filed this Motion to Dismiss on July 30, 2012, Doc. No.
`
`10, and the Motion was set for hearing on October 29, 2012. On October 5, 2012,
`
`Cyanotech sought to continue the hearing to permit limited jurisdictional discovery
`
`on the issue of personal jurisdiction. Doc. No. 28. The request for continuance
`
`was granted on October 10, 2012. Doc. No. 31. Cyanotech filed its Opposition to
`
`the Motion on January 2, 2013, Doc. No. 37, and Defendants filed a Reply on
`
`January 9, 2013. Doc. No. 39. The court heard the Motion on January 22, 2013.
`
`Supplemental Memoranda were filed on January 25, 2013. Doc. Nos. 44, 45.
`
`III. STANDARD OF REVIEW
`
`Under Rule 12(b)(7), an action may be dismissed for failure to join a
`
`required party under Rule 19.4 “To determine whether Rule 19 requires the joinder
`
`4 Federal Rule of Civil Procedure 19 provides, in pertinent part, as follows:
`(a) Persons Required to Be Joined if Feasible.
`(1) Required Party. A person who is subject to service of process
`and whose joinder will not deprive the court of subject-matter
`jurisdiction must be joined as a party if:
`(A) in that person’s absence, the court cannot accord
`complete relief among existing parties; or
`
`(continued...)
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 9 of 25
`
`Page|D #: 837
`
`of additional parties, the court may consider evidence outside the pleadings.”
`
`Aliviado V. Kimoto, 2012 WL 2974225, at *2 (D. Haw. July 19, 2012) (citing
`
`McShan V. Sherrill, 283 F.2d 462, 464 (9th Cir. 1960) (other citation omitted)); see
`
`also Davis Cos. v. Emerald Casino, Inc, 268 F.3d 477, 480 n.4 (7th Cir. 2001)
`
`(“In ruling on a dismissal for lack of joinder of an indispensable party, a court may
`
`go outside the pleadings and look to extrinsic evidence”) (citations omitted).
`
`“Since joinder [under Rule 19] is an issue not unique to patent law,”
`
`4(. . continued)
`
`(B) that person claims an interest relating to the subject of
`the action and is so situated that disposing of the action in
`the person’s absence may:
`(i) as a practical matter impair or impede the
`person’s ability to protect the interest; or
`(ii) leave an existing party subject to a substantial
`risk of incurring double, multiple, or otherwise
`inconsistent obligations because of the interest.
`
`(b) When Joinder Is Not Feasible. If a person who is required to
`be joined if feasible cannot be joined, the court must determine
`whether, in equity and good conscience, the action should proceed
`among the existing parties or should be dismissed. The factors for
`the court to consider include:
`
`(1) the extent to which a judgment rendered in the person’s
`absence might prejudice that person or the existing parties;
`(2) the extent to which any prejudice could be lessened or avoided
`by:
`
`(A) protective provisions in the judgment;
`(B) shaping the relief; or
`(C) other measures;
`(3) whether a judgment rendered in the person’s absence would be
`adequate; and
`(4) whether the plaintiff would have an adequate remedy if the
`action were dismissed for nonjoinder.
`
`9
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 10 of 25
`838
`
`PagelD #:
`
`the court applies Ninth Circuit law, rather than Federal Circuit law, in analyzing
`
`Rule 19. A123 Sys., Inc. v. Hydro—Quebec, 626 F.3d 1213, 1220 (Fed. Cir. 2010).
`
`Determining whether to dismiss an action under Rule 19 is a three-step process.
`
`EEOC V. Peabody W. Coal Co., 610 F.3d 1070, 1078 (9th Cir. 2010) (“Peabody
`
`HI”) (citing EEOC v. Peabody W Coal. Co., 410 F.3d 774, 779 (9th Cir. 2005)
`
`(“Peabody II’’)). “First, the court must determine whether a nonparty should be
`
`joined under Rule l9(a),” Id. (quoting Peabody H, 410 F.3d at 779).5 If a
`
`nonparty meets the requirements of Rule l9(a), “the second stage is for the court to
`
`determine whether it is feasible to order that the absentee be joined.” Id ‘“Finally,
`
`if joinder is not feasible, the court must determine at the third stage whether the
`
`case can proceed without the absentee’ or whether the action must be dismissed.”
`
`Peabody III, 610 F.3d at 1078 (quoting Peabody H, 400 F.3d at 779). The case
`
`cannot proceed if the party is one who
`
`not only [has] an interest in the controversy, but [has] an
`interest of such a nature that a final decree cannot be
`
`made without either affecting that interest, or leaving the
`controversy in such a condition that its final termination
`may be wholly inconsistent with equity and good
`conscience.
`
`5 Previously, courts used the term “necessary” to describe such persons, Peabody II, 410
`F.3d at 779, but Rule 19(a) now refers to whether a party is “required.”
`
`10
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 11 of 25
`839
`
`PagelD #:
`
`Id (quoting Shields V. Barrow, 58 U.S. 130, 139 (l855)).6
`
`IV. DISCUSSION
`
`Defendants contend that the University must be dismissed because it
`
`has Eleventh Amendment immunity, and the University is a required party whose
`
`joinder is not feasible under Rule l9(b). The court analyzes each step in turn.
`
`A.
`
`Eleventh Amendment Immunity7
`
`The Eleventh Amendment provides that “[t]he Judicial power of the
`
`United States shall not be construed to extend to any suit in law or equity,
`
`commenced or prosecuted against one of the United States by Citizens of another
`
`6 Rule 19 was amended on December 1, 2007, eliminating Rule 19(b)’s former use of the
`term “indispensable” at this third step. This change, however, was stylistic only, and thus prior
`cases referencing “indispensable” parties remain good law. See Republic ofPhilippines v.
`Pimentel, 553 U.S. 851, 855-56 (2008) (stating that changes to Rule 19(b) were stylistic only);
`CP Solutions PTE, Ltd v. Gen. Elec. Co., 553 F.3d 156, 159 n.2 (2d Cir. 2009) (“There is no
`substantive difference between the present [Rule 19(b)] and the rule as applied .
`.
`. prior to the
`2007 amendment”); see also EEOC v. Peabody W. Coal Co., 610 F.3d 1070, 1077 (9th Cir.
`2010) (“Peabody 111”) (“Although the wording of Rule 19 has changed .
`.
`. its meaning remains
`the same”). Peabody [I] noted that
`[fjormer Rule 19(b) described the conclusion that an action should
`be dismissed for inability to join a Rule 19(a) party by carrying
`forward traditional terminology: “the absent person being thus
`regarded as indispensable.” “Indispensable” was used only to
`express a conclusion reached by applying the tests of Rule 19(b).
`It has been discarded as redundant.
`
`610 F.3d at 1077 n.1 (quoting Fed. R. Civ. P. 19 advisory committee’s note (2007)).
`
`7 “[Q]uestions of Eleventh Amendment immunity for patent infringement claims are
`reviewed under Federal Circuit law.” Pennington Seed Inc. v. Produce Exch. No. 299, 457 F.3d
`1334, 1338 (Fed. Cir. 2006) (citing Regents ofthe Univ. ofN.l\/I. v. Knight, 321 F.3d 1111, 1123-
`24 (Fed. Cir. 2003)).
`
`11
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 12 of 25
`840
`
`PagelD #:
`
`State, or by Citizens or Subjects of any Foreign State.” Under the Eleventh
`
`Amendment, states cannot be sued in federal court, whether by their own citizens
`
`or citizens of another state. Papasan v. Allain, 478 U.S_ 265, 275 (1986). This
`
`Eleventh Amendment bar also applies to federal actions brought against state
`
`agencies and instrumentalities. Shaw v. Cal. Dep ’t ofAlcoholic Beverage Control,
`
`788 F.2d 600, 603 (9th Cir. 1986), see also Tegic Commc ’ns Corp. v. Ba’. of
`
`Regents oftlze Univ. ofTexas Sys, 458 F.3d 1335, 1340 (Fed. Cir. 2006)
`
`(reiterating that an “arm of the state” such as the University of Texas System, is
`
`accorded Eleventh Amendment immunity). Moreover, “[t]he [Supreme] Court has
`
`confinned the applicability of Eleventh Amendment immunity to suits pertaining
`
`to violations of federal patent and trademark laws.” Tegic, 45 8 F.3d at 1340 (citing
`
`Fla. Prepaid Postsecondary Educ. Expense Ba’. v. College Sav. Bank, 527 U.S. 627
`
`(1999)), see also, e.g.,/1123, 626 F.3d at 1221.
`
`1.
`
`The University Has Eleventh Amendment Immunity
`
`“In Cannon v. University ofHealth Sciences/Chicago Medical School,
`
`710 F.2d 351 (7th Cir. 1983), the Seventh Circuit held that the [Board of Trustees
`
`of the University of Illinois] qualified as an ‘arm of the state’ for Eleventh
`
`Amendment purposes.” Pollak v. Ba’. ofTrs. oftlze Univ. ofIll., 2004 WL
`
`1470028, at *1 (ND. 111. June 30, 2004). And Cannon “has been consistently
`
`12
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 13 of 25
`841
`
`PagelD #:
`
`upheld by numerous decisions within the Seventh Circuit and its subservient
`
`district courts.” Ia’. (citing Kaimowitz v. Ba’. 0fTrs. oftne Univ. 0fIll., 951 F.2d
`
`765, 767 (7th Cir. 1991), Gosntasnby v. Ba’. 0fTrs. oftne Univ. 0fIlZ., 123 F.3d
`
`427 (7th Cir. 1997), and McMiZler v. Ba’. 0fTrs. oftne Univ. 0fIZZ., 275 F. Supp. 2d
`
`974, 979 (ND. Ill. 2003)). See also, e.g., Ranyara’, 708 F.2d at 1239 (“[T]he
`
`Board of Regents [of the University of Illinois] is an am of the state for Eleventh
`
`Amendment purposes”); Harper v. Univ. oflll. at Chicago, 1996 WL 288628, at
`
`*2 (ND. Ill. May 30, 1996) (“There can be no dispute that [the University of
`
`Illinois at Chicago] is an am of ‘the state’ for purposes of the Eleventh
`
`Amendment”) (numerous citations omitted). Thus, under this great weight of
`
`authority, this action is barred against the University in this court unless it waived
`
`its Eleventh Amendment immunity. See, e.g., Idaho v. Couer a’ ’AZene Tribe, 521
`
`U.S. 261, 267 (1997) (explaining that Eleventh Amendment is a waivable
`
`immunity from suit, not “a nonwaivable limit on the federal judiciary’s subject-
`
`matter jurisdiction”).
`
`2.
`
`The University Has Not Waived its Immunity
`
`In response to this overwhelming body of caselaw, Cyanotech points
`
`out that the Illinois Constitution has waived the state’s sovereign immunity “except
`
`as provided by the [Illinois] General Assembly.” Ill. Const. art. XIII, § 3. It then
`
`13
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 14 of 25
`842
`
`PagelD #:
`
`argues that, to the extent the Illinois legislature has provided for immunity, such
`
`immunity does not apply to declaratory relief actions. Doc. No. 37, Pl.’s Opp’n at
`
`19-20.
`
`But Cyanotech’s sole citation, City of Chicago v. Board of Trustees of
`
`the University ofIllinois, 689 N.E.2d 125 (Ill. App. 1997), only applies to certain
`
`types of actions in an Illinois state court.8 The Illinois Appellate Court did not --
`
`and could not in any binding manner -- address whether the University waived
`
`Eleventh Amendment immunity in a federal forum. Rather, as Defendants argue,
`
`ample authority confirms that Eleventh Amendment immunity applies to the patent
`
`invalidity issues raised by Cyanotech. See, e.g., FMC v. S. C. State Ports. Auth.,
`
`535 U.S. 743, 765 (2002) (“[S]overeign immunity applies regardless of whether a
`
`private plaintiff’s suit is for money damages or some other type of relief”),
`
`Steadfast Ins. Co. V. Agric. Ins. C0,, 507 F.3d 1250, 1252 (10th Cir. 2007)
`
`(“Eleventh Amendment immunity applies regardless of whether a plaintiff seeks
`
`declaratory or injunctive relief, or money damages”), Tegic, 458 F.3d at 1340
`
`(explaining that the Eleventh Amendment bars claims seeking declarations of
`
`patent invalidity against states).
`
`8 Defendants disagree that Illinois has waived immunity for declaratory relief actions in
`state courts. See Doc. No. 39, Defs.’ Reply at 4 n.2 (arguing that sovereign immunity applies to
`declaratory judgment actions in state court) (citing State Bldg. Venture v. 0 ’D0nnell, 239 Ill. 2d
`151, 164-65 (Ill. 2010)). The court need not reach this question of Illinois law.
`
`14
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 15 of 25
`843
`
`Page|D #:
`
`Moreover, although the University is a plaintiff in the parallel action
`
`(and thus Defendants admit that the University has waived Eleventh Amendment
`
`immunity in the Middle District of Florida), it has not waived such immunity in the
`
`District of Hawaii. See A123, 626 F.3d at 1219-20, Tegic, 458 F.3d at 1342-43. A
`
`“State’s constitutional interest in immunity encompasses not merely whether it
`
`may be sued, but where it may be sued.” Pennhurst State Sch. & Hosp. v.
`
`Halderman, 465 U.S. 89, 99 (1984). That is, under binding Federal Circuit
`
`precedent, Eleventh Amendment immunity in this context is venue specific. Tegtc,
`
`458 F.3d at 1342 (“We agree with the University that is filing [in the Western
`
`District of Texas] did not establish waiver [of Eleventh Amendment immunity] as
`
`to this separate action [in the Western District of Washington].”). There is no
`
`applicable waiver by the University of the Eleventh Amendment in this action.
`
`3.
`
`Ex parte Young Does Not Apply
`
`Cyanotech also seeks to invoke the narrow exception to Eleventh
`
`Amendment Immunity established in Ex parte Young, 209 U.S. 123 (1908), which
`
`is limited to prospective, injunctive relief to enjoin state officials from ongoing
`
`violations of federal law. See, e. g., Pehhhurst State Sch. & Hosp, 465 U.S. at 102-
`
`03. Ex parte Young, however, does not apply here.
`
`Initially, Cyanotech recognizes that its Complaint fails to state a claim
`
`15
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 16 of 25
`844
`
`Page|D #:
`
`seeking relief under Ex parte Young. Doc. No. 45, Pl.’s Supp. Mem. at 8. The
`
`Complaint does not seek only prospective injunctive relief against the University,
`
`and does not name any University official as a Defendant -- much less an
`
`individual state official who is allegedly violating federal law. See Pennington
`
`Seed, Inc., v. Produce Exch. No. 299, 457 F.3d 1334, 1342-43 (Fed. Cir. 2006)
`
`(requiring a “nexus between the violation of federal law and the individual accused
`
`of violating that law”). In fact, Cyanotech admits that it does not know who that
`
`official might be, but instead “will seek leave to amend to name all pertinent
`
`University officials,” once it “obtain[s] them in further discovery.” Doc. No. 45,
`
`Pl.’s Supp. Mem. at 5. Thus, the only question is whether the dismissal of the
`
`University should be without prejudice -- that is, with leave to amend to allow
`
`Cyanotech to attempt to state a claim under Ex parte Young against a proper
`
`University official. But, after careful consideration, the court concludes that
`
`further amendment to seek relief under Ex parte Young would be futile. See, e. g.,
`
`Johnson v. Buckley, 356 F.3d 1067, 1077 (9th Cir. 2004) (“Futility alone can
`
`justify the denial of a motion to amend”), Cultor Corp. v. A.E. Staley Mfg. Co.,
`
`224 F.3d 1328, 1333 (Fed. Cir. 2000) (“Futility was apparent, and is adequate
`
`grounds for the denial of leave to amend”).
`
`Cyanotech’s suit seeks a declaration under 28 U.S.C. § 2201 of non-
`
`16
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 17 of 25
`845
`
`PagelD #:
`
`infringement. In this regard, rather than seeking prospective injunctive relief to
`
`enjoin an ongoing violation of federal law, in a sense it seeks the opposite -- a
`
`declaration that there is no ongoing violation of federal law (by Cyanotech). And
`
`although Cyanotech also seeks a declaration of patent invalidity, such relief is also
`
`not an assertion of an ongoing violation of federal law for which it could seek
`
`prospective relief to enjoin further violations. As Defendants point out, an issued
`
`patent is presumed to be valid. See 35 U.S.C. § 282(a) (“A patent shall be
`
`presumed valid. .
`
`.
`
`. The burden of establishing invalidity of a patent or any claim
`
`thereof shall rest on the party asserting such invalidity”). Unless and until the
`
`‘5 33 Patent is determined to be invalid, there cannot be an ongoing violation of
`
`federal law for the University, which retains significant interests in its patent, to
`
`allow Valensa (a licensee) to enforce that presumptively valid patent.9
`
`Cyanotech also concedes that no Federal Circuit or district court has
`
`ever applied Ex parte Young to a declaratory relief action seeking a declaration of
`
`non-infringement or patent invalidity. Doc. No. 45, Pl.’s Supp. Mem. at 7. It
`
`relies, instead, on “additional views” (z'.e., not the actual Federal Circuit opinion) of
`
`9 Cyanotech points to Pennington Seed’s statement that “continuing prospective
`violations of a federal patent right by state officials may be enjoined by federal courts under the
`Ex parte Young doctrine.” 457 F.3d at 1341. Cyanotech, however, is not alleging that the
`University (or an official of the University) is violating a Cyanotech patent. Rather, this
`declaratory relief action seeks just that -- a declaration that Cyanotech is not violating federal
`law.
`
`17
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 18 of 25
`846
`
`PagelD #:
`
`Judge Newman in Xecham Int’! Inc. v. Univ. ofTexas, 382 F.3d 1324, 1333 (Fed.
`
`Cir. 2004), for the proposition that Ex parte Young is the only means of achieving
`
`“fundamental fairness” in patent disputes involving state agencies. Doc. No. 45,
`
`Pl.’s Supp. Mem. at 7. In circular fashion, it asks this court to allow a challenge
`
`based on Ex parte Young because “the facts of the instant declaratory judgment
`
`action confonn perfectly to all requirements for application of the Ex Parte Young
`
`doctrine once the pleadings are amended[.]” Doc. No. 45, Pl.’s Supp. Mem. at 8
`
`(emphasis added). But, for the reasons explained above, the Complaint cannot be
`
`so amended.
`
`In short, because the University has not waived its Eleventh
`
`Amendment immunity in this federal court, and Ex parte Young does not apply, the
`
`University must be dismissed.
`
`B.
`
`Application of the Rule 19 Standard
`
`Without the presence of the University, Defendants argue that the
`
`entire action should be dismissed under Rule 19. The court applies the three-step
`
`analysis set forth in Peabody HI.
`
`1.
`
`The University Should be Joined
`
`The first question under Rule 19’s three-step analysis, is whether the
`
`University should be joined as a party. Peabody H], 610 F.3d at 1078.
`
`18
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 19 of 25
`847
`
`PagelD #:
`
`The University owns the ‘533 Patent. It has not licensed or assigned
`
`all its rights in the ‘533 Patent to Valensa, And if this action proceeds without the
`
`University’s presence, the University could lose some of its rights in the ‘533
`
`Patent without having participated in the suit. It would be compelled to waive its
`
`Eleventh Amendment immunity -- a waiver Congress sought to implement, but
`
`which Florida Prepaid held was unconstitutional. 527 U.S. at 648. In fact,
`
`Cyanotech’s Complaint itself cited Rule 19 in naming the University, alleging
`
`under traditional Rule 19 terminology that the University “is or may be a necessary
`
`party pursuant to [Rule 19] as .
`
`.
`
`. it is the last recorded owner of the [‘533 Patent]
`
`and on information and belief may have retained some ownership rights.” Doc.
`
`No. 1, Compl. 1] 24.
`
`Moreover, as to Counts Two and Three against Valensa, both of those
`
`state law Counts are grounded in whether Cyanotech is violating the ‘533 Patent --
`
`the court cannot address those Counts without first addressing the nature and scope
`
`of the ‘533 Patent. That is, even addressing only those Counts against Valensa, the
`
`University might well lose certain rights in its intellectual property without being
`
`present. See Dominant Semiconductors Sdn. Dnd v. OSRAM GmbH, 524 F.3d
`
`1254, 1259 (Fed. Cir. 2008) (“Jurisdiction under section 1338(a) extends to cases
`
`.
`
`.
`
`. in which a well-pleaded complaint establishes either that federal patent law
`
`19
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 20 of 25
`848
`
`PagelD #:
`
`creates the cause of action or that the plaintiff’s right to relief necessarily depends
`
`on resolution of a substantial question of federal patent law, in that patent law is a
`
`necessary element of one of the well-pleaded claims”) (quoting Biotechnology
`
`Indus. Org. v. Dist. ofColumbia, 496 F.3d 1362, 1367 (Fed. Cir. 2007) (internal
`
`quotation marks omitted)). The state-law claims are bound up with the federal
`
`patent issues. See Tiger Team Techs, Inc. v. Synesi Grp, 371 Fed. Appx. 90, 91,
`
`2010 WL 1439062, at *1 (Fed. Cir. Apr. 12, 2010) (“A theory of liability under the
`
`Minnesota Deceptive Trade Practices Act .
`
`.
`
`. is that Synesi disparaged TTT’s
`
`products by asserting claims of patent infringement against TTT. For TTT to
`
`prevail [on that count] it would need to prove that its products did not infringe
`
`Synesi’s patents”); Seaflex, Inc. V. Fall Protection Sys, Inc., 2007 WL 7239322
`
`(SD. Tex. Nov. 20, 2007) (dismissing and transferring both patent and state law
`
`unfair competition claims because the court lacked personal jurisdiction over the
`
`owner of the patent).
`
`Thus, at this first step, the court easily concludes that the University is
`
`a party who should be joined. See, e. g., AI 23, 626 F.3d at 1217 (“[A]n accused
`
`infringer must .
`
`.
`
`. join both the exclusive licensee and the patentee in a declaratory
`
`action because the patentee is a necessary party”) (citing Enzo APA & Son, Inc. v.
`
`Geapag/l.G., 134 F.3d 1090, 1094 (Fed. Cir. 1998)); see also Intellectual Prop.
`
`20
`
`

`
`Case 1:12—cv—OO352—JMS—RLP Document 49 Filed 02/07/13 Page 21 of 25
`849
`
`PagelD #:
`
`Dev., Inc. v. TC] Cablevision 0fCal. Inc., 248 F.3d 1333, 1347 (Fed. Cir. 2001)
`
`(“[A] patent owner should be joined, either voluntarily or involuntarily, in any
`
`patent infringement suit brought by an exclusive licensee having fewer than all
`
`substantial patent rights”).
`
`2.
`
`Joinde