08/06/14

Microsoft v. DataTern: Basis for Declaratory Judgment Jurisdiction; Scope of Summary Judgment In Noninfringement Analysis

Category: Civil Procedure  

  

 By: Eric Paul Smith, Contributor

TitleMicrosoft Corp. v. DataTern, Inc., No. 2013-1184 (Fed. Cir. May 5, 2014).
Issue
[1] Whether "the district court had jurisdiction over . . . Microsoft's and SAP's declaratory judgment challenges to [U.S. Patent Nos. 5,937,402 and 6,101,502]."
Microsoft Corp., at *3.
[2] Whether the district court properly construed "the scope of the . . . summary judgment grant to SAP."
Id. at *3.
[3] Whether "the district court's grant of summary judgment that certain [Microsoft] and [SAP] products do not infringe [the '402 and '502 patents]" was proper.
Id. at *2-3.
Holding
"[T]he district court had jurisdiction over both Microsoft and SAP's declaratory judgment challenges to the '502 patent and over SAP's challenge to the '402 patent, but not over Microsoft's challenge to [the] '402 patent."
Id. at *3.
"[T]he district court erred in granting summary judgement of noninfringement to SAP for products other than BusinessObjects."
Id. at *21.
"[W]e affirm summary judgment of SAP's noninfringement of the '502 patent," id. at *18; "we affirm the district court's grant of summary judgment of noninfringement of the '502 patent to Microsoft," id. at *19; "we deny Microsoft’s declaratory judgment challenge to the ’402 patent on jurisdictional grounds and . . . our grant of summary judgment of noninfringement to SAP with regard to the ’402 patent does not require consideration of any claim construction issues, [therefore] we do not reach any of the ’402 patent claim construction issues in the Microsoft appeal," id. at 23 n.8.

 

 


Procedural History"DataTern appeals from the [United States District Court for the Southern District of New York]."
Microsoft Corp., at *2.
 
 
Legal Reasoning (Moore, Prost)
Background
Prior to the Cases at Issue"DataTern sued several Microsoft and SAP customers, alleging infringement of the ’402 and/or ’502 patents. DataTern sent these customers claim charts alleging infringement based on the customers’ use of Microsoft’s ADO.NET and SAP’s BusinessObjects software. The claim charts extensively refer to Microsoft and SAP functionality. . . . Several of the customers that had been sued by DataTern demanded indemnification from Appellees. After receiving the indemnification requests, a Microsoft representative contacted DataTern’s CEO to discuss the ongoing customer lawsuits. During these discussions, the representative told DataTern’s CEO that Microsoft had no obligation to defend or indemnify its customers, and the CEO told the representative that DataTern was not interested in suing Microsoft. SAP and DataTern did not discuss the customer lawsuits or the ’402 and ’502 patents prior to SAP’s declaratory judgment complaint."
Microsoft Corp., at *3-4.
In the Cases at Issue"The cases at issue in this appeal were initiated when Appellees filed separate, and later consolidated, noninfringement and invalidity declaratory judgment actions against DataTern. DataTern moved to dismiss the complaints for lack of subject matter jurisdiction and filed conditional counterclaims for infringement of both the ’402 and ’502 patents. The district court denied DataTern’s motion to dismiss. . . . Following claim construction, DataTern conceded noninfringement based on the court’s construction of several claim terms, and the court entered summary judgment."
Id. at *4.
[1] Jurisdiction
Legal Standard and Rule"Whether the district court had subject matter juris- diction is a question we review de novo. The threshold question for declaratory judgment jurisdiction is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment."
Microsoft Corp. at *5 (citations and internal quotation marks omitted).
Implied Contributory Infringement Strongly Supports Declaratory Judgment Jurisdiction"[W]here a patent holder accuses customers of direct infringement based on the sale or use of a supplier’s equipment, the supplier has standing to commence a declaratory judgment action if there is a controversy between the patentee and the supplier as to the supplier’s liability for induced or contributory infringement based on the alleged acts of direct infringement by its customers. We determined that declaratory judgment jurisdiction existed because the patentee’s charges of infringement against the declaratory judgment plaintiff’s customers carried an implied assertion that the declaratory judgment plaintiff was committing contributory infringement, and the patentee repeatedly communicated this implicit accusation directly to the declaratory judgment plaintiff during the course of a protracted negotiation process."
Id. at 6 (citations, internal quotation marks, and modification markings omitted).
An Obligation to Indemnify Would Show Declaratory Judgment Jurisdiction"If Appellees had an obligation to indemnify their customers, they would then have standing to bring suit. In that instance, Appellees would stand in the shoes of the customers and would be representing the interests of their customers because of their legal obligation to indemnify."
Id. at *7 (citations omitted).
Invalid Indemnification Requests Do Not Create Standing"[W]e decline Appellees’ request to hold that their customers’ indemnification requests, which they concede are not valid, alone can create standing and thus a basis for jurisdiction over Appellees’ declaratory judgment actions in the Southern District of New York. Importantly, even if there were such an obligation—to indemnify a customer already sued by the patentee in Texas—it would not justify what Appellees seek here. A case has already been filed against these customers in the Eastern District of Texas. Appellees cannot seek a declaration from a New York court on behalf of customers they must indemnify where a suit against these very same customers on all the same issues was already underway in a Texas court."
Id. at *7 (citations omitted).
Implied Induced Infringement Strongly Supports Declaratory Judgment Jurisdiction"To prove inducement of infringement, unlike direct infringement, the patentee must show that the accused inducer took an affirmative act to encourage infringement with the knowledge that the induced acts constitute patent infringement. Absent the knowledge and affirmative act of encouragement, no party could be charged with inducement. Thus, in determining whether there is a case or controversy of sufficient immediacy to establish declaratory judgment jurisdiction we look to the elements of the potential cause of action. . . . [T]o establish a substantial controversy regarding inducement, there must be allegations by the patentee or other record evidence that establish at least a reasonable potential that such a claim could be brought."
Id. at *8-9 (citations and internal quotation marks omitted).
Jurisdiction for SAP's Suit on the '402 and '502 Patents"The claim charts provided to the SAP customers allege direct infringement of the ’402 and ’502 patents based on SAP’s customers’ use of BusinessObjects. Moreover, these claim charts cite to SAP-provided user guides and documentation for each claim element. In other words, DataTern’s claim charts show that SAP provides its customers with the necessary components to infringe the ’402 and ’502 patents as well as the instruction manuals for using the components in an infringing manner. Providing instructions to use a product in an infringing manner is evidence of the required mental state for inducing infringement. Considering these instructions in view of the rest of the evidence on record, we conclude that SAP has established that there existed a substantial controversy regarding whether SAP induces infringement. We thus affirm the district court’s conclusion that declaratory judgment jurisdiction exists for SAP’s suit on the ’402 and ’502 patents."
Id. at *9 (citations omitted).
Jurisdiction for Microsoft's Suit on the '502 Patent"The claim charts cite to Microsoft-provided online documentation for each limitation of the ’502 patent’s representative claims. Thus, these claim charts can be read to allege that Microsoft is encouraging the exact use which DataTern asserts amount to direct infringement. This record evidence supports Microsoft’s claim that there is a substan- tial controversy regarding inducement. Under the totality of the circumstances, we conclude that Microsoft established declaratory judgment jurisdiction for its suit on the ’502 patent."
Id. at *9-10.
Jurisdiction for Microsoft's Suit on the '402 Patent"The ’402 patent claim charts as they relate to Microsoft’s customers . . . cite exclusively to third-party—not Microsoft- provided—documentation for several key claim limitations. [T]hese claim charts . . . do not impliedly assert that Microsoft induced that infringement. Nothing in the record suggests that Microsoft encouraged the acts accused of direct infringement, and simply selling a product capable of being used in an infringing manner is not sufficient to create a substantial controversy regarding inducement. The ’402 patent claim charts likewise do not impliedly assert contributory infringement against Microsoft. . . . [O]ur review of the record does not uncover any evidence that Microsoft’s ADO.NET is not suitable for substantial noninfringing uses, or that Microsoft knew that it was especially made or adapted for use in an infringement of DataTern’s patents."
Id. at *10.
Other Circumstances Regarding Jurisdiction for Microsoft's Suit on the '402 Patent"[O]ther circumstances that may have other- wise supported jurisdiction over Microsoft’s declaratory judgment challenge of the ’402 patent are not present in this case. . . . Here, . . . the only time DataTern and Microsoft communicated, DataTern assured Microsoft that it did not intend to sue Microsoft. . . . [W]e also note that DataTern’s litigation strategy appears to involve suing software users, not software suppliers. And there is no record evidence that Microsoft encouraged the acts that DataTern argues amount to direct infringement by its customers in the Texas actions. This cuts against Microsoft’s arguments that they might somehow be next or that litigiousness against direct infringers alone ought to create a substantial controversy regarding inducement."
Id. at *11-12 (citations omitted).
[2] Summary Judgment of Noninfringement of the '502 Patent
Background of the Invention"The ’502 patent is directed to interfacing an object- oriented application with a relational database. An object-oriented application cannot easily interface with a relational database because of the structural differences between the objects in the application and the tables in the database. To solve this problem, the ’502 patent discloses creating 'interface objects' that act as intermediaries between the object-oriented application and the relational database. To create the interface objects, the ’502 patent discloses selecting an 'object model,' generating a mapping between the database schema and the object model, and creating the interface object from that mapping."
Microsoft Corp., at *13-14 (citations omitted).
Representative Claim 1A method for interfacing an object oriented software application with a relational database, comprising the steps of:

selecting an object model;

generating a map of at least some relationships between schema in the database and the selected object model;

employing the map to create at least one interface object associated with an object corresponding to a class associated with the object oriented software application; and

utilizing a runtime engine which invokes said at least one interface object with the object oriented application to access data from the relational database.
DataTern's Concessions"DataTern agreed that SAP’s BusinessObjects does not infringe the asserted claims if 'object model' requires 'object classes' . . . ." Id. at *14-15. "DataTern also conceded that Microsoft does not in- fringe the asserted ’502 patent claims if 'object model' must include classes."
Id. at *18.
"Object Model" Requires Classes"The plain and ordinary meaning of 'object model' requires classes. All of the evidence on record supports this understanding of the plain and ordinary meaning. SAP’s expert opined that the 'object model' was a well-known term of art and was understood to include a 'collection of classes.' Even the inventor of the ’502 patent testified, contrary to DataTern’s assertions, that an object model, in general and in the context of the ’502 patent, includes a 'set of classes.' . . . DataTern’s expert . . . never proposed a construction for 'object model' or otherwise challenged the definitions set forth by SAP’s expert and the ’502 patent inventor. DataTern’s predecessor, FireStar, also previously argued that object model of the ’502 patent should be construed to require 'a set of classes.' The specification confirms that the inventors of the ’502 patent did not deviate from the plain and ordinary meaning of object model, which includes classes."
Id. at *16 (citations omitted).
The Parties' Stipulations Do Not Alter the Construction"The parties stipulated that classes include both attributes and behaviors. DataTern argues that the sole embodiment of an object model in the patent only uses attributes, not behaviors. Therefore, DataTern argues that 'object model' should not be construed to require classes. We disagree. As discussed, the plain and ordinary meaning of object model requires a set of classes. The only embodiment in the patent discloses an object model with classes and attributes of those classes. While DataTern agreed to, and is bound by virtue of its stipulation to, a narrower construction of classes than that required by the ’502 patent, that does not change the correct construction of object model."
Id. at *17-18 (citations omitted).
SAP's Noninfringement"Because DataTern stipulated that SAP does not infringe based on the district court’s determination that an object model must include classes, we affirm summary judgment of SAP’s noninfringement of the ’502 patent."
Id. at *18.
Microsoft's Noninfringement"[B]ecause we are affirming the district court’s determination that an 'object model' must include 'classes,' and because DataTern conceded Microsoft’s noninfringement based on the requirement of 'classes,' we affirm the district court’s grant of summary judgment of noninfringement of the ’502 patent to Microsoft."
Id. at *19 (in spite of the holding regarding Microsoft's improper incorporation by reference of SAP's arguments).
Microsoft's Improper Incorporation by Reference (Does Not Affect Holding of Noninfringement)"Microsoft does not make any of its own claim construction arguments regarding the ’502 patent. It instead purports to incorporate by reference SAP’s claim construction arguments. Because the Microsoft and SAP appeals are not consolidated, this case does not fall under Fed. R. App. P. 28(i), which authorizes incorporation of co-party briefing only in the case of consolidated appeals. We also note that incorporating SAP’s arguments, as Microsoft attempts to do, would allow the Microsoft brief to exceed our court’s allowable word count by 3,025 words. It would be fundamentally unfair to allow a party to use incorporation to exceed word count. We hold that incorporation of co-party briefing is only allowed in consolidated cases as explained in Fed. R. App. P. 28(i) and that such incorporation cannot be used to exceed word count. The incorpo- rated material counts against the litigants’ word count in exactly the same manner as if it had been expressly included in the brief."
Id. at *18-19 (citations omitted).
[3] Scope of Summary Judgment to SAP
Scope of the District Court's Order"[T]he district court’s order granting summary judgment of noninfringement to SAP encompassed the ’402 patent and all SAP products that were or could have been accused of infringing the ’402 patent."
Microsoft Corp., at *19 (citations and internal quotation marks omitted).
'402 Patent Properly Included"We hold that the district court correctly included the ’402 patent in its summary judgment order. The court had declaratory judgment jurisdiction over SAP’s noninfringement challenge to the ’402 patent based, in part, on DataTern’s implied assertions of SAP’s indirect infringement of the ’402 patent evidenced in the claim charts provided in the customer suits."
Id. at *20.
Scope of Declaratory Judgment Limited to Products Fairly at Issue"Declaratory judgment jurisdiction must be determined on a product-by-product basis. The claim charts from the customer suits impliedly asserted indirect infringement based on the use of BusinessObjects, not any other SAP product. While SAP’s complaint and DataTern’s counterclaims invoked SAP products generally, broad pleadings alone do not define the scope of judgment when only a subset of those issues were litigated. Here, only BusinessObjects was fairly at issue, and the district court’s judgment could not have extended beyond BusinessObjects. We thus affirm-in-part and reverse-in-part the grant of summary judgment to SAP, and remand with orders that the district court modify the summary judgment order to cover only BusinessObjects."
Id. at *21 (citations omitted).
Conclusion
Summary of the Holdings"[1] We affirm the district court’s denial of DataTern’s motion to dismiss Microsoft’s declaratory judgment challenge of the ’502 patent and affirm the grant of summary judgment to Microsoft with regard to the ’502 patent. [2] We reverse the court’s denial of DataTern’s motion to dismiss Microsoft’s declaratory judgment challenge of the ’402 patent and remand with orders that the district court dismiss Microsoft’s declaratory judgment challenge of the ’402 patent. [3] We affirm the court’s denial of DataTern’s motion to dismiss for lack of jurisdiction SAP’s challenges to both the ’402 and ’502 patents. [4] We also affirm-in-part and reverse-in-part the grant of summary judgment to SAP, and remand with orders that the district court modify the summary judgment order to cover only BusinessObjects."
Microsoft Corp., at *21-22.
 
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