Case 1:16-cv-04586-LTS Document 40 Filed 01/10/18 Page 1 of 11
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`BROADSIGN INTERNATIONAL, LLC,
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`T-REX PROPERTY AB,
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`-------------------------------------------------------x
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`Plaintiff,
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`Defendant.
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`No. 16 CV 04586-LTS
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`MEMORANDUM OPINION AND ORDER
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`Plaintiff BroadSign International, Inc. (“Plaintiff” or “BroadSign”) brings this
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`action against Defendant T-Rex Property AB (“Defendant” or “T-Rex”), seeking a declaratory
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`judgment of non-infringement of U.S. Patent No. RE39,470 (“the ‘470 patent”), U.S. Patent No.
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`7,382,334 (“the ‘334 patent”), and U.S. Patent No. 6,420,603 (“the ‘603 patent”) (collectively,
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`the “Patents-in-Suit”), as well as a declaratory judgment that BroadSign has intervening rights
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`with respect to the ‘470 patent.
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`The Court has jurisdiction of this action pursuant to 35 U.S.C. §§ 271, et seq., and
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`28 U.S.C. §§ 1331, 1338, 2201, and 2202.
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`Defendant moves pursuant to Federal Rule of Civil Procedure 12(b)(1) to dismiss
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`each of Plaintiff’s claims for lack of subject matter jurisdiction. T-Rex asserts that there is no
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`case or controversy between BroadSign and T-Rex.
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`The Court has reviewed thoroughly all of the parties’ submissions and arguments.
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`For the following reasons, the motion to dismiss is granted.
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`BROADSIGN MOTION TO DISMISS
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`VERSION JANUARY 10, 2018
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`1
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`Case 1:16-cv-04586-LTS Document 40 Filed 01/10/18 Page 2 of 11
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`BACKGROUND
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`The following recitation of facts is drawn from the Amended Complaint (Docket
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`Entry No. 10, Amended Complaint (“Am. Compl.”)), and from affidavits and exhibits submitted
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`by both parties in connection with this motion practice.1
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`Plaintiff supplies “hardware and software solutions to operators of networks of
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`digital displays.” (Am. Compl. ¶ 10.) Defendant is the “assignee and owner of the right, title,
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`and interest in and to the Patents-in-Suit,” which concern the control and coordination of digital
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`displays. (Am. Compl. ¶¶ 8, 9.) Over the last several years, T-Rex has sued “at least five” of
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`BroadSign’s customers, which are various entities that make, use, or sell complete digital
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`signage systems, “for [direct] patent infringement on one or more of the Patents-In-Suit.” (Am.
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`Compl. ¶ 11.) As a result, Plaintiff has received “numerous requests for indemnification” from
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`its customers, who have identified provisions of their respective license agreements that support
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`their requests. (Declaration of Sandra Beauchesne in Opp’n to Def.’s Mot. to Dismiss
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`(“Beauchesne Decl.”), Docket Entry No. 23, ¶¶ 13, 20, Ex. D, I, J.)
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`On June 21, 2016, BroadSign contacted T-Rex to request a meeting with T-Rex to
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`discuss a potential business agreement after T-Rex had initiated lawsuits against BroadSign’s
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`customers. (Beauchesne Decl. ¶ 15.) In those lawsuits, T-Rex identified as allegedly directly
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`infringing products which were, at least in part, sold and delivered by BroadSign.2
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`1
`“‘[W]here jurisdictional facts are placed in dispute, the court has the power and
`obligation to decide issues of fact by reference to evidence outside the pleadings, such as
`affidavits,’ in which case ‘the party asserting subject matter jurisdiction has the burden of
`proving by a preponderance of the evidence that it exists.’” Winfield v. City of New
`York, No. 15CV5236-LTS-DCF, 2016 WL 6208564, at *3 (S.D.N.Y. Oct. 24, 2016)
`(citations omitted).
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`For example, in an action against Health Media Network (“HMN”), T-Rex did not
`identify BroadSign by name in the complaint, but “HMN’s counsel advised BroadSign
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`BROADSIGN MOTION TO DISMISS
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`VERSION JANUARY 10, 2018
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`Case 1:16-cv-04586-LTS Document 40 Filed 01/10/18 Page 3 of 11
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`BroadSign asserts that the parties have “had direct discussions and in-person
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`meetings in which T-Rex has demanded that BroadSign take a license to the [P]atents-in-[S]uit”
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`to stop T-Rex’s suits against BroadSign’s customers. (Am. Compl. ¶ 15.) On June 28, 2016,
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`BroadSign’s President and CEO, as well as its outside patent consultant, traveled to Sweden and
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`met with T-Rex’s principals. (Beauchesne Decl. ¶ 15.) No agreement was reached during that
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`meeting. (Id.) The parties continued communicating via email, phone, and Skype throughout
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`the following weeks. (Declaration of Mats Hylin in Supp. of Mot. to Dismiss (“Hylin Decl.”),
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`Docket Entry No. 27, ¶¶ 11-14.) While the negotiations were ongoing in late June 2016, but
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`before the parties had reached any agreement that T-Rex would not initiate suit against any
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`additional BroadSign customers, T-Rex informed BroadSign that it had sued another of
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`BroadSign’s customers. (Hylin Decl. Exhibit C.) The parties continued their discussions after
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`this notification.
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`On July 9, 2016, T-Rex sent a draft license agreement to BroadSign, under which,
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`“in exchange for an undetermined payment by BroadSign, T-Rex would give BroadSign a fully
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`paid[-]up[,] non-exclusive license to practice [the Patents-In-Suit],” as well as “‘all other Patents
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`that are now owned or controlled by T-Rex on the United States and Canada . . .’,” and which
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`would protect BroadSign’s customers “to the extent they operate digital display systems
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`consisting of BroadSign’s products.” (Beauchesne Decl. ¶ 16 (citing Exhibit P, Docket Entry
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`that’ HMN’s [allegedly infringing] platform for its digital advertising network is the
`software that it has licensed from BroadSign.’” (Beauchesne Decl. ¶ 7.) In its suit
`against JCDecaux, T-Rex specifically alleges that BroadSign’s “Showscreens,” the
`“Mallscape network,” “digital billboards,” and “digital airport advertising network,
`including the Prestige network” infringe each of the three Patents-In-Suit. (Beauchesne
`Decl. ¶ 9.) BroadSign sold the hardware and software comprising these products to
`JCDecaux. (Id.)
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`BROADSIGN MOTION TO DISMISS
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`VERSION JANUARY 10, 2018
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`No. 23-43).) The accompanying email stated that T-Rex was “[amenable] to receiving edits and
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`input from BroadSign concerning the licensing agreement.” (Hylin Decl., ¶ 15.) Plaintiff asserts
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`Defendant sent that agreement “without prior discussion [between the parties] of a license.”
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`(Beauchesne Decl. ¶ 16.) T-Rex alleges that BroadSign requested the draft agreement and that
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`BroadSign’s CEO threatened to sue T-Rex. (Hylin Decl. ¶¶ 3, 10.) Plaintiff proffers that
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`BroadSign interpreted the proposed license agreement as a “demand[] by T-Rex that BroadSign
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`take a license to the [P]atents-in-[S]uit to prevent [the initiation of] further patent infringement
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`actions against BroadSign’s customers.” (Am. Compl. ¶ 16.) Plaintiff allegedly considered the
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`proposed license agreement, “coupled with” the news of a[n additional,] recently-filed patent
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`infringement action against yet another BroadSign customer3, to be “a veiled threat that if
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`BroadSign did not take a license, T-Rex would continue to sue BroadSign's customers and
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`perhaps BroadSign itself.” (Beauchesne Decl. ¶¶ 17-18.)
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`BroadSign communicated its dissatisfaction with this course of events in a July
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`17, 2016, email, to which T-Rex responded, apologizing for potential misunderstandings and
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`seeking further “constructive dialogue.” (Hylin Decl. ¶ 16, Ex. F.) Communications between
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`the parties ended shortly thereafter. (Hylin Decl. ¶ 16.) BroadSign filed this action for
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`declaratory judgment on September 15, 2016.
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`3
`Since the parties first initiated their discussions on June 21, 2016, T-Rex has sued at least
`two additional BroadSign customers, bringing the total number of suits to seven.
`(Beauchesne Decl. ¶ 4.)
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`BROADSIGN MOTION TO DISMISS
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`VERSION JANUARY 10, 2018
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`Motion to Dismiss Standard
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`DISCUSSION
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`Federal Rule of Civil Procedure 12(b)(1) authorizes dismissal of a complaint for
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`lack of subject matter jurisdiction “when the district court lacks the statutory or constitutional
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`power to adjudicate it.” Arar v. Ashcroft, 532 F.3d 157, 168 (2d Cir. 2008) (vacated on other
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`grounds) (internal citations and quotation marks omitted). “The Court’s first inquiry must be
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`whether it has the constitutional or statutory authority to adjudicate a case. If there is no subject
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`matter jurisdiction, the Court lacks power to consider the action further.” ICOS Vision Sys.
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`Corp., N.V. v. Scanner Techs. Corp., 699 F. Supp. 2d 664, 668 (S.D.N.Y. 2010) (citation
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`omitted).
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`In reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure
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`12(b)(1), “the court must take all facts alleged in the complaint as true and draw all reasonable
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`inferences in favor of plaintiff.” Morrison v. National Australia Bank Ltd., 547 F.3d 167, 170
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`(2d Cir. 2008) (quoting Natural Res. Def. Council v. Johnson, 461 F.3d 164, 171 (2d Cir. 2006)).
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`However, “[a] plaintiff asserting subject matter jurisdiction has the burden of proving by a
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`preponderance of the evidence that it exists,” Morrison, 547 F.3d at 170 (quoting Makarova v.
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`United States, 201 F.3d 110, 113 (2d Cir. 2000)), and such a showing may not be “made by
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`drawing from the pleadings inferences favorable to the party asserting” subject matter
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`jurisdiction. Morrison, 547 F.3d at 170 (quoting APWU v. Potter, 343 F.3d 619 623 (2d Cir.
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`2000)). In determining whether subject matter jurisdiction of the claims exists, the court “may
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`consider evidence outside the pleadings.” Morrison, 547 F.3d at 170.
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`BROADSIGN MOTION TO DISMISS
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`VERSION JANUARY 10, 2018
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`Case 1:16-cv-04586-LTS Document 40 Filed 01/10/18 Page 6 of 11
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`Declaratory Judgment Jurisdiction
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`Declaratory relief is “intended to … settle legal rights and remove uncertainty and
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`insecurity from legal relationships without awaiting a violation of the right or a disturbance of
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`the relationships.” Nat’l Union Fire Ins. Co. of Pittsburgh v. Int’l Wire Group, Inc., No. 02 Civ.
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`10338, 2003 WL 21277114, at *4, 2003 U.S. Dist. LEXIS 9193, at *4 (S.D.N.Y. June 2, 2003)
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`(citations and internal quotation marks omitted). When establishing declaratory judgment
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`subject matter jurisdiction, “the question in each case is whether the facts alleged, under all the
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`circumstances, show that there is a substantial controversy, between parties having adverse legal
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`interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”
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`MedImmune Inc. v. Genentech Inc., 549 U.S. 118, 127 (2007) (citations and quotation marks
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`omitted). MedImmune effectively “lower[ed] the bar for a plaintiff to bring a declaratory
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`judgment action in a patent dispute” from the previous “reasonable apprehension test.” ICOS
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`Vision Sys. Corp., N.V. v. Scanner Techs. Corp., 699 F. Supp. 2d 664, 668 (S.D.N.Y. 2010).
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`Still, a patentee must “affirmatively engage in ‘conduct that can be reasonably inferred as
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`demonstrating intent to enforce a patent’” in order for a declaratory judgment plaintiff to
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`establish jurisdiction. Id. (quoting Hewlett–Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1363
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`(Fed. Cir. 2009)).
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`There is no bright-line rule for whether a dispute is “a case of actual controversy”
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`between parties as required by the Declaratory Judgment Act. Prasco LLC v. Medicis Pharm.
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`Corp., 537 F.3d 1329, 1336 (Fed. Cir. 2008). When considering whether a direct, “substantial
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`controversy” in a patent dispute exists “consider[ing] all of the circumstances,” courts have
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`weighed: “whether there has been prior litigation between the parties or brought by the defendant
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`on related technology, whether the defendant has refused to sign a covenant not to sue or stay
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`BROADSIGN MOTION TO DISMISS
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`VERSION JANUARY 10, 2018
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`Case 1:16-cv-04586-LTS Document 40 Filed 01/10/18 Page 7 of 11
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`litigation, and whether the defendant has made a direct or implied threat to assert its rights
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`against the declaratory judgment plaintiff.” ICOS Vision Sys. Corp., N.V. v. Scanner Techs.
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`Corp., 699 F. Supp. 2d 664, 667 (S.D.N.Y. 2010). Courts have also considered the nature and
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`extent of communication between the parties and a patentee’s aggressive enforcement strategy,
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`even in the absence of direct threats. See Arris Group v. British Telecomm., 639 F.3d 1368,
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`1378 (Fed. Cir. 2011); Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 737–38
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`(Fed. Cir. 1988). Courts, however, may be skeptical that a patentee’s litigation enforcement
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`strategy is in fact “aggressive” if it “appears to involve suing . . . users, not . . . suppliers.” See
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`Microsoft Corp. v. DataTern, Inc., 755 F.3d 899, 906-07 (Fed. Cir. 2014)
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`A defendant’s suits against a plaintiff’s customers are insufficient by themselves
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`to establish a case or controversy between the supplier-plaintiff and the patent holder-defendant.
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`See Microsoft, 755 F.3d at 904. Suits against a supplier’s customers may support jurisdiction if
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`either “(a) the supplier is obligated to indemnify its customers from infringement liability, or (b)
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`there is a controversy between the patentee and the supplier as to the supplier’s liability for
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`induced contributory infringement based on the alleged acts of direct infringement by its
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`customers.” Arris Group, 639 F.3d at 1375. Customer requests for indemnification, without an
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`obligation to indemnify, do not suffice to support jurisdiction, however. See Microsoft, 755 F.3d
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`at 904. The elements of contributory infringement require that “a patent holder must show . . .
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`that (a) the supplier’s product was used to commit acts of direct infringement; (b) the product’s
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`use constituted a material part of the invention; (c) the supplier knew its product was especially
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`made or especially adapted for use in an infringement of the patent; and (d) the product is not a
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`staple article or commodity of commerce suitable for substantial noninfringing use.” Arris
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`Group, 639 F.3d at 1376 (quotation marks and citations omitted).
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`BROADSIGN MOTION TO DISMISS
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`VERSION JANUARY 10, 2018
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`Whether the Jurisdictional Standard Is Met Here
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`Plaintiff asserts that it initiated this action both “because T-Rex has sued several
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`of [its] customers[,] accusing the products BroadSign sold to them of infringing the [P]atents-in-
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`[S]uit and because direct communications between BroadSign and T-Rex made it apparent that
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`T-Rex is adverse to BroadSign.” (Pl. Opp. Br., Docket Entry No. 21, at 1.) Defendant asserts
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`that Plaintiff “fails to identify a direct dispute between it[self] and T-Rex,” also fails to “assert
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`that it is obligated to indemnify its customers,” and “does not adequately allege that BroadSign
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`may be liable for induced or contributory infringement based on its customers’ direct
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`infringement.” (Def. Opening Br., Docket Entry No. 15, at 3.)
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`The Court, having reviewed the parties’ proffers and arguments, finds that, even
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`“tak[ing] all facts alleged in the complaint as true and draw[ing] all reasonable inferences in
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`favor of plaintiff,” Plaintiff has not met its “burden of proving by a preponderance of the
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`evidence that [subject matter jurisdiction] exists.”4 See Morrison, 547 F.3d at 170. Plaintiff has
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`failed to “show that there is a substantial controversy, between [itself and Defendant]” and that
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`they are “parties having adverse legal interests, of sufficient immediacy and reality to warrant the
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`issuance of a declaratory judgment.” See MedImmune, 549 U.S. at 127.
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`First, Plaintiff fails to adequately plead that there is a direct, “substantial
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`controversy” here. Plaintiff does not allege in the Amended Complaint nor assert in its motion
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`papers that there has been “prior litigation between the parties or brought by the defendant on
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`The Court recognizes that a court is empowered to resolve disputed material issues of fact
`in addressing a motion to dismiss a complaint for lack of subject matter jurisdiction, and
`that the parties’ versions of the events relevant to this dispute conflict in significant ways.
`However, because, as explained below, Plaintiff’s proffers are insufficient to support
`jurisdiction even if they are taken as true, no material factual conflicts need be addressed
`to resolve this motion practice.
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`BROADSIGN MOTION TO DISMISS
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`VERSION JANUARY 10, 2018
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`Case 1:16-cv-04586-LTS Document 40 Filed 01/10/18 Page 9 of 11
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`related technology” against Plaintiff. See ICOS Vision Sys. Corp., N.V, 699 F. Supp. 2d at 667.
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`Even if T-Rex did “demand” that Plaintiff consider the license agreement it proposed “to prevent
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`[the initiation of] further patent infringement actions against BroadSign’s customers,” as Plaintiff
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`asserts, (see Am. Compl. ¶ 16), there is no indication of any discussion or threat of litigation
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`against Plaintiff. See ICOS Vision Sys. Corp., N.V., 699 F. Supp. 2d at 667. Nor, drawing all
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`reasonable inferences in favor of Plaintiff, do Defendant’s actions constitute an “aggressive
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`enforcement strategy” warranting a finding of subject matter jurisdiction here, as Defendant’s
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`strategy “appears to involve suing . . . users,” including BroadSign’s customers, “not . . .
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`suppliers,” such as BroadSign. See Microsoft Corp., 755 F.3d at 906-07.
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`Second, BroadSign fails to establish that a justiciable controversy between
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`Plaintiff and Defendant is framed by T-Rex’s suits against Plaintiff’s customers. Plaintiff does
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`not allege that it is obligated to indemnify its customers, despite its receipt of “numerous requests
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`for indemnification” from its customers in which the customers identified provisions of their
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`respective license agreements that support their requests. (Beauchesne Decl. ¶¶ 13, 20, Ex. D, I,
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`J.) Such “requests for indemnification,” without an allegation of Plaintiff’s “obligation to
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`indemnify, do not create jurisdiction.” See Microsoft, 755 F.3d at 904.
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`Moreover, BroadSign has not alleged facts sufficient to support a claim that
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`“there is a controversy between the” parties “as to [BroadSign’s] liability for induced
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`contributory infringement based on the alleged acts of direct infringement by its customers.” See
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`Arris Group, 639 F.3d at 1375. Taking the facts alleged in the light most favorable to Plaintiff
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`and without additional facts, BroadSign has sufficiently pled that T-Rex could establish the first
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`two elements of a contributory infringement cause of action—that BroadSign’s “product was
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`used to commit acts of direct infringement” by BroadSign’s customers and that the use of the
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`BROADSIGN MOTION TO DISMISS
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`VERSION JANUARY 10, 2018
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`product by BroadSign’s customers “constituted a material part of the invention.” See id. at 1376.
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`Plaintiff, however, has failed to allege facts indicating that T-Rex could establish the two
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`remaining elements of the cause of action, as nothing in the Amended Complaint or the proffered
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`averments suggests that BroadSign “knew its product was especially made or especially adapted
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`for use in an infringement of the [Patents-in-Suit]” or that “the [software] is not a staple article or
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`commodity of commerce suitable for substantial noninfringing use.” See id. Thus, T-Rex’s suits
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`against Plaintiff’s customers are insufficient to establish a case or controversy as to a potential
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`contributory infringement claim against Plaintiff BroadSign.
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`Despite T-Rex’s suits against BroadSign’s customers and the provision of a draft
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`licensing agreement, T-Rex’s alleged actions are not indicative of “adverse legal interests” as to
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`BroadSign. See MedImmune 549 U.S. at 127. Plaintiff has not shown that a “substantial
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`controversy” between itself and Defendant exists, and thus has not met its burden of proving by a
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`preponderance of the evidence that subject matter jurisdiction exists. See Morrison, 547 F.3d at
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`170; MedImmune 549 U.S. at 127.
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`For the foregoing reasons, T-Rex’s motion to dismiss the complaint for lack of
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`CONCLUSION
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`subject matter jurisdiction is granted.
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`Plaintiff may move for leave to file a further Amended Complaint. Any such
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`motion must be filed no later than 21 (twenty-one) days from the date of this Memorandum
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`Opinion and Order, (i.e., by January 31, 2018), and must be accompanied by a proposed Second
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`Amended Complaint, a blacklined comparison of the proposed Second Amended Complaint to
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`the Amended Complaint, showing all changes, and a memorandum of law. The motion will be
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`BROADSIGN MOTION TO DISMISS
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`VERSION JANUARY 10, 2018
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`briefed in accordance with the schedule set forth in S.D.N.Y. Local Civil Rule 6.1(b). Failure to
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`make such a timely motion, or the denial of the motion as futile, will result in dismissal of the
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`Amended Complaint in its entirety for lack of subject matter jurisdiction, without further
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`advance notice.
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`The pre-trial conference currently scheduled for January 12, 2018, at 10:45 a.m. is
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`adjourned sine die.
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`Docket Entry No. 14 is resolved.
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`SO ORDERED.
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`Dated: New York, New York
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`January 10, 2018
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` /s/ Laura Taylor Swain .
`LAURA TAYLOR SWAIN
`United States District Judge
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`BROADSIGN MOTION TO DISMISS
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`VERSION JANUARY 10, 2018
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`11
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