`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`BROADSIGN INTERNATIONAL, LLC,
`
`Plaintiff,
`
`v.
`
`T-REX PROPERTY, AB,
`
`Defendant.
`
`Civil Action No.: 1:16-cv-04586 (LTS)
`
`DEFENDANT T-REX PROPERTY, AB’S MEMORANDUM OF LAW IN
`OPPOSITION TO PLAINTIFF BROADSIGN INTERNATIONAL, LLC’S
`MOTION FOR LEAVE TO AMEND
`
`
`
`
`
`
`Steven R. Daniels (admitted pro hac vice)
`FARNEY DANIELS PC
`800 S. Austin Ave., Suite 200
`Georgetown, Texas 78626
`Tel: (512) 582-2828
`Fax: (512) 582-2829
`sdaniels@farneydaniels.com
`
`
`
`
`
`
`
`Attorneys for Defendant
`T-Rex Property, AB
`
`
`
`Case 1:16-cv-04586-LTS Document 48 Filed 02/14/18 Page 2 of 12
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`TABLE OF CONTENTS
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`I.
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`INTRODUCTION ................................................................................................................... 1
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`II. STATEMENT OF FACTS ...................................................................................................... 1
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`III. LEGAL STANDARD ............................................................................................................. 1
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`IV. ARGUMENT........................................................................................................................... 2
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`A.
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`B.
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`Amendment Would Be Futile Because T-Rex’s Lawsuits Against Other Suppliers
`Do Not Establish A Case Or Controversy Between T-Rex and BroadSign. .......... 2
`
`Amendment Would Be Futile Because T-Rex’s Lawsuits Against BroadSign’s
`Customers Do Not Establish A Case Or Controversy. ........................................... 4
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`1.
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`2.
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`BroadSign’s Proposed Second Amended Complaint Does Not Plead An
`Obligation To Indemnify Its Customers. .................................................... 4
`
`BroadSign’s Proposed Second Amended Complaint Does Not Adequately
`Plead Allegations of Indirect Infringement................................................. 5
`
`C.
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`Amendment Would Be Futile Because This Case is Moot ..................................... 7
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`V. CONCLUSION ....................................................................................................................... 8
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`
`ii
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`Case 1:16-cv-04586-LTS Document 48 Filed 02/14/18 Page 3 of 12
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`TABLE OF AUTHORITIES
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`
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`Page(s)
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`Cases
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`Arris Group v. British Telecomm,
`639 F.3d 1368 (Fed. Cir. 2011)..........................................................................................5, 6, 7
`
`Arrowhead Indus. Water, Inc. v. Ecolochem, Inc.,
`846 F. 2d 731 (Fed. Cir. 1988)...................................................................................................3
`
`Benitec Australia, Ltd. v. Nucleonics, Inc.,
`495 F. 3d 1340 (Fed. Cir. 2007).................................................................................................6
`
`Commil USA, LLC v. Cisco Systems, Inc.,
`135 S. Ct. 1920 (2015) ...............................................................................................................6
`
`Dougherty v. North Hempstead Zoning Bd. of Zoning Appeals,
`282 F.3d 83 (2nd Cir. 2002).......................................................................................................2
`
`Foman v. Davis,
`371 U.S. 178 (1962) ...................................................................................................................1
`
`Innovative Therapies, Inc. v. Kinetic Concepts, Inc.,
`599 F.3d 1377 (Fed Cir. 2010)...................................................................................................3
`
`Micron Technology, Inc. v. Mosaid Technologies, Inc.,
`518 F. 3d 897 (Fed. Cir. 2008)...............................................................................................3, 4
`
`Microsoft Corp. v. DataTern, Inc.,
`755 F.3d 899 (Fed. Cir. 2014)....................................................................................................5
`
`Statutes
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`35 U.S.C. § 271(c) ...........................................................................................................................5
`
`Other Authorities
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`Fed. R. Civ. P. 12(b) ........................................................................................................................2
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`Fed. R. Evid. 201(b)(2) ....................................................................................................................7
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`
`
`iii
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`Case 1:16-cv-04586-LTS Document 48 Filed 02/14/18 Page 4 of 12
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`Declaratory Judgment Defendant T-Rex Property, AB (“T-Rex”) hereby submits this
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`memorandum of law in opposition to Plaintiff BroadSign International, LLC’s Motion for Leave
`
`to Amend its Complaint (D.I. 42). A declaration of Steven R. Daniels accompanies this
`
`memorandum.
`
`I.
`
`INTRODUCTION
`
`This Court properly dismissed BroadSign’s prior complaint, finding that BroadSign had
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`not pled facts establishing the existence of a “substantial controversy” between itself and T-Rex.
`
`D.I. 40 at 10. BroadSign’s motion for leave to amend should be denied as futile for two reasons:
`
`(1) it fails to adequately address the deficiencies the Court identified in its Order; and (2) any
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`controversy is now clearly moot because all of T-Rex’s cases against BroadSign’s customers
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`have been resolved.
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`II.
`
`STATEMENT OF FACTS
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`At the time that T-Rex’s motion to dismiss was being decided, by Defendant’s admission,
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`all but two of T-Rex’s cases against BroadSign’s customers had been resolved. D.I. 23 ¶ 24
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`(stating that “only the cases against Adaptive Micro Systems and ContextMedia Health are still
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`pending”). BroadSign’s proposed second amended complaint does not plead any new lawsuits
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`against BroadSign’s customers in the time since that motion was decided. D.I. 23 ¶ 24
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`(identifying seven lawsuits); D.I. 44-1 ¶ 29 (identifying “seven (7) BroadSign customers”).
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`Moreover, BroadSign fails to disclose that, since that time, T-Rex’s cases against those two
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`remaining BroadSign customers have now concluded. Daniels Decl. Exhs. A, B.
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`III. LEGAL STANDARD
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`“[U]ndue delay, bad faith or dilatory motive on the part of the movant, repeated failure to
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`cure deficiencies by amendments previously allowed, undue prejudice to the opposing party ...
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`[or] futility of amendment” are grounds for denying leave to amend. Foman v. Davis, 371 U.S.
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`
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`Case 1:16-cv-04586-LTS Document 48 Filed 02/14/18 Page 5 of 12
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`178, 182 (1962). An amendment to a pleading will be futile if a proposed claim could not
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`withstand a motion to dismiss pursuant to Rule 12(b). Dougherty v. North Hempstead Zoning
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`Bd. of Zoning Appeals, 282 F.3d 83, 88 (2nd Cir. 2002).
`
`IV. ARGUMENT
`A.
`
`Amendment Would Be Futile Because T-Rex’s Lawsuits Against Other
`Suppliers Do Not Establish A Case Or Controversy Between T-Rex and
`BroadSign.
`
`BroadSign argues that its proposed second amended complaint establishes a case or
`
`controversy because T-Rex has allegedly “filed complaints alleging patent infringement of the
`
`Patents-in-Suit against suppliers similarly-situated to BroadSign.” Pl.’s Mem. at 3-4; D.I. 41-1
`
`¶¶ 13-28. However, BroadSign’s argument fails for two reasons: (1) the proposed second
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`amended complaint fails to plead facts sufficient to establish that the other parties are actually
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`“suppliers similarly-situated to BroadSign”; and (2) the mere fact that T-Rex has previously filed
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`suits against some suppliers of unrelated products is insufficient to establish an “aggressive”
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`litigation campaign that would create reasonable apprehension that BroadSign is next.
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`First, BroadSign’s conclusory pleadings are insufficient to establish that T-Rex has
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`engaged in a litigation campaign against others similarly situated to BroadSign. By BroadSign’s
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`own admission, BroadSign is “in the business of providing digital out-of-home software and
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`solutions for digital signage and displays,” and in particular, “hardware and software solutions”
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`“built to order for its customers.” D.I. 44-1 ¶¶ 3, 46. By contrast, a vast majority of the alleged
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`suppliers identified by BroadSign were accused of infringement by operating a digital signage
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`network. D.I. 44-1 ¶¶ 14, 16-23, 25-26. But BroadSign does not allege, or point to any
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`allegation by T-Rex, that BroadSign is operating a digital signage network. This difference
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`strongly counsels against a finding of an immediate and real substantial controversy. As to the
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`remaining alleged suppliers, BroadSign fails to provide any specific facts that those suppliers are
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`2
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`Case 1:16-cv-04586-LTS Document 48 Filed 02/14/18 Page 6 of 12
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`“similarly situated” other than allegations that they offer digital signage products accused of
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`infringement by T-Rex Property. D.I. 44-1 ¶¶ 15, 24, 27-28. For example, BroadSign does not
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`contain any allegations that T-Rex has filed suit against others who provide “built to order”
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`digital signage solutions for customers. In short, BroadSign fails to allege facts that create the
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`reasonable implication T-Rex has engaged in an “aggressive enforcement strategy” against those
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`similarly situated to BroadSign.
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`Second, even if the Court finds that BroadSign adequately plead facts showing the
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`existence that T-Rex has previously filed suits against similarly situated suppliers of unrelated
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`products, that is insufficient to establish an “aggressive” litigation campaign that would
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`reasonably cause BroadSign to believe that it is next. Innovative Therapies, Inc. v. Kinetic
`
`Concepts, Inc., 599 F.3d 1377, 1382 (Fed Cir. 2010) (“[T]he fact that [a patentee] had filed
`
`infringement suits against other parties for other products does not, in the absence of any act
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`directed toward [the declaratory judgment plaintiff], meet the minimum standard discussed in
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`MedImmune.”). Indeed, in cases applying the “aggressive” litigation inquiry, the courts relied on
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`facts much stronger than the mere fact of prior litigation against others similarly situated.
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`Instead those cases involved overt conduct directed to the declaratory judgment plaintiff. For
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`example, in Arrowhead, the Court relied on the patent owner’s “submission to the federal court
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`in [another] case of a proposal that the court find [the declaratory judgment plaintiff] an
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`infringer.” Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F. 2d 731, 737 (Fed. Cir.
`
`1988). In Micron, the patent owner issued threatening letters to the declaratory judgment
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`plaintiff, engaged in a litigation campaign by only suing memory suppliers, and had sued all of
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`the major memory suppliers other than Micron, and had issued public statements that it planned
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`on continuing its “aggressive licensing strategy.” Micron Technology, Inc. v. Mosaid
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`3
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`
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`Case 1:16-cv-04586-LTS Document 48 Filed 02/14/18 Page 7 of 12
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`Technologies, Inc., 518 F. 3d 897, 899 (Fed. Cir. 2008). By contrast, BroadSign’s proposed
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`second amended complaint does not identify any threatening statements or other conduct by T-
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`Rex relating to BroadSign. Indeed, as distinguished from Micron, T-Rex’s decision to sue the
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`operators of digital signage systems or networks, including those which use BroadSign
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`technology, strongly demonstrates that T-Rex does not have imminent plans to assert its patents
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`against BroadSign itself.
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`B.
`
`Amendment Would Be Futile Because T-Rex’s Lawsuits Against
`BroadSign’s Customers Do Not Establish A Case Or Controversy.
`
`As this Court noted in its Order on T-Rex’s motion to dismiss, “[a] defendant’s suits
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`against a plaintiff’s customers are insufficient by themselves to establish a case or controversy
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`between the supplier-plaintiff and the patent holder-defendant.” D.I. 40 at 7 (citing Microsoft
`
`Corp. v. DataTern, Inc., 755 F.3d 899, 904 (Fed. Cir. 2014)). However, as this Court noted,
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`there are two exceptions to this rule: “[s]uits against a supplier’s customers may support
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`jurisdiction if either (a) the supplier is obligated to indemnify its customers from infringement
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`liability, or (b) there is a controversy between the patentee and the supplier as to the supplier’s
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`liability for induced contributory infringement based on the alleged acts of direct infringement
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`by its customers.” Id. (citing Arris Group v. British Telecomm, 639 F.3d 1368, 1375 (Fed. Cir.
`
`2011)). Because BroadSign’s proposed second amended complaint fails to colorably plead
`
`claims establishing either of those exceptions, BroadSign’s motion to amend should be denied as
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`futile.
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`1.
`
`BroadSign’s Proposed Second Amended Complaint Does Not Plead
`An Obligation To Indemnify Its Customers.
`
`As this Court noted in its order on T-Rex’s motion to dismiss, “‘requests for
`
`indemnification,’ without an allegation of Plaintiff’s ‘obligation to indemnify, do not create
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`jurisdiction.’” D.I. 40 at 9 (citing Microsoft Corp. v. DataTern, Inc., 755 F.3d 899, 904 (Fed.
`
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`4
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`Case 1:16-cv-04586-LTS Document 48 Filed 02/14/18 Page 8 of 12
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`Cir. 2014)). However, BroadSign’s proposed second amended complaint still does not concede
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`that it has an obligation to indemnify its customers. Rather, BroadSign again merely alleges that
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`its customers “have . . . demanded indemnification from BroadSign.” D.I. 44-1 ¶ 44; see also
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`D.I. 23 (Beauchesne Decl.), Exh. D (“We write to inquire whether BroadSign intends to
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`indemnify HMN in the T-Rex matter pursuant to the license agreement between BroadSign and
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`HMN.”); Exh. I (“JCDecaux hereby provides notice that it seeks indemnification from
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`BroadSign”); and Exh. J (providing “notice of a potential obligation to indemnify.”) (emphasis
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`added). As this Court’s order and the caselaw make clear, a customer’s request for
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`indemnification by itself does not create standing and therefore does not provide a basis for
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`jurisdiction over BroadSign’s declaratory judgment action. Microsoft, 755 F.3d at 904.
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`2.
`
`BroadSign’s Proposed Second Amended Complaint Does Not
`Adequately Plead Allegations of Indirect Infringement.
`
`In its order on the motion to dismiss, this Court found that BroadSign’s prior complaint
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`failed to plead that BroadSign “knew its product was especially made or especially adapted for
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`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.” D.I. 40 at 10 (citing Arris
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`Group v. British Telecomm, 639 F.3d 1368, 1376 (Fed. Cir. 2011)). BroadSign’s motion to
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`amend is futile because its proposed second amended complaint fails to adequately address those
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`deficiencies.
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`As to whether BroadSign “knew its product was especially made or especially adapted
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`for use in an infringement,” BroadSign misapplies the relevant legal standard, instead arguing
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`that it has “alleged that it has knowledge that its products are especially made or especially
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`adapted for use in providing the functionality that T-Rex accuses of infringement.” Pl.’s Mem.
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`at 7 (emphasis added); D.I. 44-1 ¶ 42. But that is not the standard for contributory infringement
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`5
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`Case 1:16-cv-04586-LTS Document 48 Filed 02/14/18 Page 9 of 12
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`(35 U.S.C. § 271(c)), nor is it the standard set forth by the Federal Circuit in the Arris case.
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`Rather, the standard is whether “the supplier knew its product was ‘especially made or especially
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`adapted for use in an infringement’ of the patent.” Arris Group v. British Telecomm, 639 F.3d
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`1368, 1376 (Fed. Cir. 2011). As a component of that knowledge requirement, at the time of the
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`sale constituting contributory infringement, the contributory infringer must have “knowledge of
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`the patent in suit and knowledge of patent infringement.” Commil USA, LLC v. Cisco Systems,
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`Inc., 135 S. Ct. 1920, 1926 (2015).
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`Although BroadSign’s proposed second amended complaint alleges that T-Rex has
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`accused “functionalities implemented by BroadSign’s own software solutions” of infringement
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`(Pl.’s Mem. at 6; D.I. 44-1 ¶¶ 32-41), BroadSign’s motion fails to meaningfully address the
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`knowledge requirement. That is, BroadSign’s proposed second amended complaint fails to
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`allege that, at the time that the alleged act of contributory infringement occurred, BroadSign
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`knew of the patent or that its sale constituted patent infringement. Indeed, BroadSign cannot
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`allege that T-Rex’s amended complaint in ContextMedia provided it with the requisite
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`knowledge because it was filed after this case was filed. D.I. 44-1 ¶ 32 (referring to amended
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`complaint in ContextMedia filed on July 11, 2016); D.I. 1 (original complaint in this case filed
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`on June 16, 2016); Benitec Australia, Ltd. v. Nucleonics, Inc., 495 F. 3d 1340, 1344 (Fed. Cir.
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`2007) (“The burden is on the party claiming declaratory judgment jurisdiction to establish that
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`such jurisdiction existed at the time the claim for declaratory relief was filed and that it has
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`continued since.”). Moreover, BroadSign certainly fails to allege that T-Rex’s allegations
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`against BroadSign’s customers constituted an “implicit assertion” that BroadSign had sold
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`products knowing of the Patents-In-Suit and the infringement thereof. See Arris Group, 639
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`F.3d at 1375-76.
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`6
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`Case 1:16-cv-04586-LTS Document 48 Filed 02/14/18 Page 10 of 12
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`As to the requirement that “the [software] is not a staple article or commodity of
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`commerce suitable for substantial noninfringing use,” BroadSign’s new complaint merely adds
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`the cursory allegation that “BroadSign’s hardware and software solutions . . . are built to order
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`for its customers.” Pl.’s Mem. at 7; D.I. 44-1 ¶ 46. But the Arris test requires that BroadSign
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`plead facts showing that the patent owner’s allegations against customers are sufficient to
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`constitute “an implicit assertion that the supplier has indirectly infringed the patent.” Arris
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`Group, 639 F.3d at 1375-76. Thus, as demonstrated in Arris, the focus is on the statements made
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`by the patent owner—and whether they constitute an “implicit assertion that the supplier has
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`indirectly infringed the patent”—not facts which BroadSign can independently allege. See Arris
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`Group, 639 F.3d at 1378 (finding element (d) satisfied because the patent owner had alleged
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`“alleges that Arris' CMTSs and E-MTAs were designed specifically for use under the DOCSIS
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`and PacketCable standards for VoIP”). Here, unlike Arris, BroadSign points to no statement by
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`T-Rex alleging or implying that BroadSign’s products are not a staple article or commodity of
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`commerce capable of substantial non-infringing use.
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`Because BroadSign’s proposed second amended complaint fails to cure the deficiencies
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`identified by the Court in its order on the motion to dismiss, leave to amend should be denied as
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`futile.
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`C.
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`Amendment Would Be Futile Because This Case is Moot
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`As noted above, an additional basis for denying leave to amend is the fact that,
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`subsequent to the briefing on T-Rex’s motion to dismiss, all of T-Rex’s litigation against
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`BroadSign’s customers has been resolved. Daniels Decl. Exhs. A, B1; D.I. 23 ¶ 24; D.I. 44-1 ¶
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`29. Therefore, BroadSign cannot point to anymore ongoing or imminent conduct that is in
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`1 Because these documents are publicly filed and available on PACER, this Court can take
`judicial notice of them. See Fed. R. Evid. 201(b)(2).
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`
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`7
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`Case 1:16-cv-04586-LTS Document 48 Filed 02/14/18 Page 11 of 12
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`anyway related to BroadSign. Moreover, it is appropriate to consider these post-filing
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`developments because BroadSign’s proposed second amended complaint itself relies on post-
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`filing conduct. D.I. 44-1 ¶¶ 4, 16-21, 32 (citing to events in late June and July of 2016).
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`Accordingly, because any potential controversy relating to litigation against BroadSign’s
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`customers is now moot, amendment should be denied as futile.
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`V.
`
`CONCLUSION
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`BroadSign’s motion to amend should be denied as futile because BroadSign’s proposed
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`second amended complaint still fails to establish a case or controversy between BroadSign and
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`T-Rex, and, in any event, any alleged controversy is now moot because T-Rex’s cases against
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`BroadSign’s customers have now concluded.
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`Dated: February 14, 2018
`
`Respectfully submitted,
`
`
`
`/s/ Steven R. Daniels
`Steven R. Daniels (admitted pro hac vice)
`FARNEY DANIELS PC
`800 S. Austin Ave., Suite 200
`Georgetown, Texas 78626
`Tel: (512) 582-2828
`Fax: (512) 582-2829
`sdaniels@farneydaniels.com
`
`Attorneys for Defendant
`T-Rex Property, AB
`
`
`
`
`
`
`8
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`Case 1:16-cv-04586-LTS Document 48 Filed 02/14/18 Page 12 of 12
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`CERTIFICATE OF SERVICE
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`I hereby certify that on February 14, 2018, I electronically filed the foregoing filing with
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`the Clerk of Court using the CM/ECF system which will send notification of such filing via
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`electronic mail to all counsel of record.
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`
`
`
`
`/s/ Steven R. Daniels
`Steven R. Daniels
`
`
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`9
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`