The opinion of the court was delivered by: WILLIAM PAULEY, District Judge
Plaintiffs MasterCard International Inc. and MasterCard
International, LLC (collectively, "MasterCard") bring this action
for a declaratory judgment of non-infringement and invalidity of
defendant Lexcel Solutions Inc.'s ("Lexcel's") patents for an
electronic funds transfer network test system, U.S. Patent No.
6,129,271, and U.S. Patent No. 6,336,590. Lexcel moves to dismiss
this action pursuant to Fed.R.Civ.P. 12(b)(1) for lack of
subject matter jurisdiction, and alternatively moves to transfer
this action to the District of Arizona, pursuant to
28 U.S.C. § 1404(a). For the reasons stated below, Lexcel's motion to dismiss
is denied, and its motion to transfer venue is granted.
This action stems from the deterioration of a relationship
between parties to a software license agreement. Lexcel sells and
licenses software called "financial transaction network testing and simulation software" to test financial
transaction systems, such as electronic funds transfer systems.
(Compl. ¶ 8.) MasterCard operates financial transaction networks
and supplies testing and simulation software to its member
financial institutions to allow them to verify that their systems
will operate with MasterCard's financial transaction networks.
(Compl. ¶¶ 9-10.) Until April 2003, MasterCard licensed this
testing and simulation software from outside vendors, including
Lexcel. (Compl. ¶ 11.) In collaboration with another vendor,
MasterCard is developing network testing and simulation software
for distribution to its associated financial institutions.
(Compl. ¶ 15; Supplemental Declaration of Simon Dix, dated
November 24, 2003 ("Dix Decl. II.") ¶¶ 2-5.) As a result, Lexcel
filed suit against MasterCard in the District of Arizona on July
29, 2003, (the "Arizona Action") claiming breach of contract,
misappropriation of trade secrets, unfair competition, copyright
infringement and breach of fiduciary duty. (Compl. ¶ 12;
Declaration of Nathan Dunn, dated Oct. 30, 2002 ("Dunn Decl.")
Ex. F: Lexcel Arizona Complaint.) The Arizona Action concerns the
same technology and products at issue here. (Transcript of Oral
Argument, dated December 5, 2003 ("Tr.") at 11; Compl. ¶ 12; Dunn
Decl. Ex. F.) Specifically, Lexcel alleges in the Arizona Action
that MasterCard improperly accessed the confidential source code
of Lexcel's financial network testing software. (Dunn Decl. Ex. F ¶¶ 11-18, 23, 25, 34, 37, 40, 43.) On August
15, 2003, MasterCard answered and counterclaimed for breach of a
license agreement in that action. (Dunn Decl. Ex. C: MasterCard
Arizona Answer and Counterclaim.)
On September 4, 2003, Lexcel's counsel advised MasterCard's
counsel in the context of a compromise negotiation that Lexcel
might have a claim for patent infringement against MasterCard for
"infringement that may occur in the future or that may have
already occurred." (Compl. ¶ 13; Dunn Decl. Ex. B at 2.) Further,
during an "in-person meeting between MasterCard and Lexcel
personnel subsequent to the filing of the Arizona Action, Lexcel
personnel allegedly told MasterCard that Lexcel owned at least
two government-issued U.S. patents, and suggested that the
existence of those patents would prevent MasterCard from pursuing
alternate sourcing of network testing and/or simulator software
other than from Lexcel without facing a lawsuit from Lexcel."
(Compl. ¶ 14.)
MasterCard filed this action on September 12, 2003, alleging
that it is entitled to a declaratory judgment of patent
non-infringement and invalidity, and a finding that Lexcel's
patents are unenforceable because: (a) both MasterCard and Visa
publically used their own versions of financial transaction
network testing or simulation software before Lexcel applied for
its patents; and (b) Lexcel intentionally failed to disclose prior art to the United States Patent and Trademark Office
("PTO") during prosecution. (Compl. ¶¶ 17-39.) The underlying
facts of the parties' dispute are nearly identical to those of
the Arizona Action. (Dunn Decl. Ex. F ¶¶ 11-18; Compl. ¶¶ 8-16.)
On December 3, 2003, two days before oral argument on this
motion, this Court received notice from Lexcel that it moved to
amend its complaint in the Arizona Action to add, inter alia, a
"conditional" patent infringement claim. (Lexcel Supplemental
Submission, dated December 3, 2003; Joint Status Letter to the
Court, dated May 14, 2004 ("Joint Letter") at 2.) On May 28,
2004, the Arizona federal district court denied Lexcel's motion
to amend its complaint to include a "conditional proposed count"
of patent infringement because: (1) Lexcel's conditional
amendment failed to satisfy the standards of Fed.R.Civ.P.
Rule 8; and (2) Lexcel's conditional request failed to demonstrate
that an actual case or controversy existed. Lexcel Solutions,
Inc. v. MasterCard, Inc., CV-03-1454-PHX-JAT (D. Ariz. May 28,
I. Rule 12(b)(1) Standards
On a Rule 12(b) motion to dismiss, this Court generally must
accept the factual allegations contained in the complaint as
true, and draw all reasonable inferences in favor of the non-movant; it should not dismiss the complaint "unless it
appears beyond doubt that the plaintiff can prove no set of facts
in support of his claim which would entitle him to relief."
Conley v. Gibson, 355 U.S. 41, 45-46 (1957); accord
Leatherman v. Tarrant County Narcotics Intelligence &
Coordination Unit, 507 U.S. 163, 164, 113 S.Ct. 1160, 1161
(1993) (noting that factual allegations in the complaint must be
accepted as true on motion to dismiss); Press v. Quick & Reilly,
Inc., 218 F.3d 121, 128 (2d Cir. 2000) (same). In order to avoid
dismissal, a plaintiff must assert a cognizable claim and allege
facts that, if true, would support such a claim. Boddie v.
Schnieder, 105 F.3d 857, 860 (2d Cir. 1997).
Under a Rule 12(b)(1) challenge to a court's subject matter
jurisdiction, the disputed jurisdictional fact issues may be
resolved by referring to evidence outside of the pleadings, such
as affidavits, and if necessary, an evidentiary hearing. See
Phifer v. City of New York, 289 F.3d 49, 55 (2d Cir. 2002);
Zappia Middle East Constr. Co. v. Emirate of Abu Dhabi,
215 F.3d 247, 253 (2d Cir. 2000).
II. Declaratory Judgment Act
MasterCard asserts subject matter jurisdiction pursuant to the
Declaratory Judgment Act, 28 U.S.C. § 2201 (2003) and the federal
patent laws, pursuant to 28 U.S.C. § 1338(a) (2003). (Compl. ¶ 5.) Lexcel argues that this Court should dismiss the
complaint for lack of subject matter jurisdiction, pursuant to
Fed.R.Civ.P. 12(b)(1) because an actual controversy does not
exist. Interpreting the Declaratory Judgment Act,
28 U.S.C. § 2201, the Federal Circuit has established a two-pronged test to
determine if there is a justiciable controversy in a declaratory
judgment action concerning patent law. A declaratory judgment
plaintiff must show that, as of the time the complaint was filed:
(1) the defendant's conduct "created on the part of plaintiff a
reasonable apprehension that the defendant [would] initiate
suit"; and (2) the plaintiff either produced or had taken steps
to produce the accused device. Arrowhead Indus. Water, Inc. v.
Ecolochem, Inc., 846 F.2d 731, 736 (Fed. Cir. 1988); Shell Oil
Co. v. Amoco Corp., 270 F.2d 885, 888 (Fed. Cir. 1992).
A plaintiff may establish an objective reasonable apprehension
of suit through evidence of a defendant's express charge of
infringement or through a totality of the circumstances.
Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83, 96
(1993); Shell Oil, 270 F.2d at 888; Arrowhead, 846 F.2d at
734-36. "To invoke the court's declaratory judgment jurisdiction,
a plaintiff must show `more than the nervous state of mind of a
possible infringer,' but does not have to show that the patentee
is `poised on the courthouse steps.'" Vanguard Research, Inc. v.
PEAT, Inc., 304 F.3d 1249, 1255-56 (Fed. Cir. 2002) (citations omitted). ...