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MINDS-EYE-VIEW, INC. v. INTERACTIVE PICTURES CORP.

March 22, 1999

MINDS-EYE-VIEW, INC. AND FORD OXAAL, PLAINTIFFS,
v.
INTERACTIVE PICTURES CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Kahn, District Judge.

DECISION AND ORDER

In their First Amendment Complaint ("Amended Complaint"), Plaintiffs Minds-Eye-View, Inc. ("MEV") and Ford Oxaal ("Oxaal"), the President of MEV, allege six claims against Defendant Interactive Pictures Corporation ("IPIX") arising out of alleged misuse of trade secrets which Plaintiffs provided to the Defendant. The claims, in order, are (1) breach of contract, (2) misappropriation of trade secrets, (3) breach of confidence, (4) fraud in the inducement, (5) misrepresentation and (6) a claim pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, requesting a declaration that one of the Defendant's patents is invalid and/or that title to the patent is held by the Plaintiffs.

Presently pending before this Court is the motion by Defendant IPIX for an order pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6) dismissing Count VI, the declaratory judgment claim, or in the alternative staying proceedings with respect to this claim pending arbitration. Defendant also moves for an order staying proceedings with respect to Counts I through V. Because the requirements for jurisdiction over a declaratory judgment action are not present, Defendant's motion to dismiss is granted. Defendant's motion seeking a stay of the proceedings with respect to Counts I-V is referred to the Magistrate Judge for disposition.

I. Background

For purposes of deciding Defendant's motion to dismiss Count VI, the Court accepts the allegations of the First Amended Complaint as true. Plaintiff MEV is a company engaged in the development and marketing of full-surround imaging technology. Around December of 1994, Oxaal, who is both President of MEV and inventor of much or all of the MEV technology at issue, entered into discussions with representatives of TeleRobotics International, Inc. ("TRI"), the predecessor corporation of IPIX, regarding a proposed joint venture to develop certain products using MEV's full-surround imaging technology and TRI's interactive technology. However, in a letter dated December 28, 1994, Oxaal stated that before discussions regarding a joint venture could move beyond the preliminary stage, TRI would have to enter into a Confidentiality Agreement covering any of MEV's trade secrets that might be revealed in the course of the negotiations. On December 28, 1994, the parties entered into a Confidentiality Agreement. In reliance on the agreement, Oxaal revealed details of MEV's full-surround imagery generation and manipulation technology.

Subsequently, TRI filed U.S. Patent Application, Serial No. 08/494, 599, which Plaintiffs allege covered subject matter expressly identified in the Confidentiality Agreement as Plaintiffs' trade secrets. Oxaal was not identified as the inventor on TRI's patent application. TRI's successor in interest, Defendant IPIX, later abandoned this patent application in favor of a Continuation-in-Part Application, Serial No. 08/516,629, which was filed on August 18, 1995 and issued as U.S. Patent No. 5,764,276 (hereinafter "Patent '276"). Plaintiffs allege that the subject matter of Patent '276 also includes trade secrets of the Plaintiffs that were identified in the Confidentiality Agreement.

In the sixth cause of action of their Amendment Complaint, Plaintiffs seek a declaratory judgment pursuant to 28 U.S.C. § 2201(a) holding Patent '276 to be invalid or else declaring Plaintiffs to be owners of title over the patent.

II. Discussion

Defendant seeks dismissal of the declaratory judgment claim on the grounds that this Court lacks subject matter jurisdiction. "For a district court to have jurisdiction over a declaratory judgment action, there must be an `actual controversy'". Hunter Douglas, Inc. v. Harmonic Design, Inc., 153 F.3d 1318, 1326 (Fed.Cir. 1998) (quoting 28 U.S.C. § 2201(a)). This requirement is identical to the constitutional requirement of Article III that there be a case or controversy. Id.

To determine whether there is an actual controversy in declaratory judgment actions involving allegations of patent noninfringement, invalidity, or unenforceability, the courts apply a two-step inquiry: "There must be both (1) an explicit threat or other action by the patentee, which creates a reasonable apprehension on the part of the declaratory plaintiff that it will face an infringement suit, and (2) present activity which could constitute infringement or concrete steps taken with the intent to conduct such activity." Fina Research v. Baroid Limited, 141 F.3d 1479, 1481 (Fed.Cir. 1998) (citation and internal quotations omitted). In this inquiry, the first prong looks to the patentholder's conduct, the second to that of the declaratory judgment plaintiff. Hunter Douglas, Inc., 153 F.3d at 1326. The burden of proving the existence of an actual controversy is on the party bringing the declaratory judgment action. See Shell Oil Co. v. Amoco Corp., 970 F.2d 885, 887 (Fed.Cir. 1992); Indium Corp. of America v. Semi-Alloys, Inc., 781 F.2d 879, 883 (Fed.Cir. 1985).

Turning to whether the first prong is satisfied, Plaintiffs point to a number of facts which they argue demonstrate that they have a "reasonable apprehension" that Defendant will initiate an infringement suit against them. First, they allege that they have several allowed or pending patents which overlap the claim coverage of the Defendant's '276 patent. Second, they point to a recent press release by the Defendant allegedly posted on its Internet website after Defendant won a favorable judgment in a patent infringement suit which it brought against another party, Infinite Pictures, Inc. See Dkt. No. 20, Ex. A.*fn1 Plaintiffs point in particular to the following statements in the release:

  "This is the first court test of our patent portfolio
  and the jury has stated loud and clear that IPIX
  technology is pioneering, unique, and protected,"
  said Jim Phillips, CEO of Interactive Pictures. "A
  judicially tested and vindicated portfolio makes
  Interactive Pictures a much stronger company and
  gives us a tremendous advantage in penetrating new
  markets and growing our company."

Id. The release further stated that "[a]s a result of the decision, Interactive Pictures is now the only company in the United States with the rights to use a wide-angle fisheye lens to create immersive photographs." Id. Plaintiffs argue that this press release contains an implicit threat of litigation against all potential competitors. Finally, Plaintiffs argue that reasonable apprehension is further supported by the fact that Plaintiffs have informed IPIX of their intentions to enter "the marketplace" in a cease-and-desist letter directing the Defendant not to use any technology owned by the Plaintiffs.

The press release provides some evidence that the Defendant would bring suit to enforce its patents where it believed that those patents have been infringed. However, a patent owner's willingness and capacity to enforce its patent rights, while pertinent to a reasonable apprehension inquiry, is not conclusive. West Interactive Corp. v. First Data Resources, 972 F.2d 1295, 1298 (Fed.Cir. 1992). There can, in general, be no reasonable apprehension of suit where the patent holder has not indicated any opinion with regard to whether the actual plaintiff who seeks the declaratory judgment has itself infringed a relevant patent. Cf. Scholle Corp. v. Blackhawk Molding Co., Inc., 133 F.3d 1469, 1472 n. 1 (Fed. Cir. 1998) (holding that a party who simply states that it is unwilling to offer an infringement opinion does not create reasonable apprehension of suit). Thus, evidence that a patent holder will bring suit where it perceives its patent to be infringed has been held to create a reasonable apprehension of suit where additional conduct by the patent holder indicated that it specifically found the declaratory judgment plaintiff's conduct to be infringing or where the product produced by the plaintiff was identical to the product involved in the prior litigation. See Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 737 (Fed.Cir. 1988) (finding plaintiff had a reasonable apprehension where defendant had previously brought a suit against a third-party to enforce a patent, and where defendant had sent letter to plaintiff indicating intent to enforce its patent against plaintiff by litigation); Dupont Merck Pharmaceutical v. Bristol-Myers Squibb, 62 F.3d 1397, 1401 (Fed. Cir. 1995) (finding that maker of generic heart drug based on defendant's patent had reasonable apprehension where defendant had previously sued other generic drug companies attempting to produce the same drug and where defendant had sent plaintiff a letter relating to defendant's patent). It is undisputed that Defendant IPIX has made no charge or suggestion to the ...


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