Court Partially Dismisses Microsoft’s Complaint for Declaratory Judgment in Patent Suit

On Tuesday, United States District Judge Richard G. Andrews from the District of Delaware filed an opinion granting in part defendant SynKloud’s motion to dismiss. The motion came after Microsoft filed a complaint in January seeking declaratory judgment of non-infringement for eleven patents. SynKloud moved to dismiss the complaint for lack of subject matter jurisdiction and standing, as well as failure to state a claim.

SynKloud claimed that this court lacks subject matter jurisdiction “because Microsoft has not alleged any affirmative acts against it by SynKloud, Microsoft has not alleged any indemnity obligation to its customer – HP – that SynKloud has sued, Microsoft’s references to Adobe and Dropbox litigations unrelated to Microsoft’s products should be disregarded, and Microsoft has not alleged a dispute based on any infringement liability since it has asserted patents her not asserted by SynKloud against HP, Adobe, or Dropbox.”

The judge wrote that in declaratory judgment actions, the plaintiff must show that “‘a case of actual controversy’ exists to establish subject matter jurisdiction sufficient to maintain an action in federal court.” The court found that Microsft did not claim to indemnify HP. “As an initial matter, the transcript from the referenced teleconference reveals no acknowledgement to the Court that Microsoft had accepted an obligation to indemnify HP,” and in its complaint, Microsoft only claimed that HP is an original equipment manufacturer (OEM). The court noted that while “Microsoft argues in its briefing that it has ‘accepted an obligation to defend, and is currently defending HP against SynKloud’s infringement allegations.’” the the court found that “there is no case or controversy between the parties on the basis of indemnification.”

The court also considered whether there was controversy between Microsoft and SynKloud based on the purported third-party direct infringement based on SynKloud’s purported “litigation campaign” against Microsoft and several of its competitors. Microsoft asserted 11 patents for declaratory judgment, three of which SynKloud used in its action against HP. In an effort to show “that there is a case or controversy between Microsoft and Synkloud as to the additional eight patents, Microsoft alleges that SynKloud initiated a ‘litigation campaign’ against Microsoft competitors Adobe and Acrobat” with similar allegations to those against HP, thus allegedly creating “legal adversity.” However, the judge pointed out that “while they also incorporate other parties’ products, SynKloud’s claim charts show that Samsung, ASUS, and Dell’s use of Microsoft OneDrive are central to SynKloud’s infringement contentions.” The court concluded that “these circumstances do not indicate that there is a dispute…sufficient to constitute an Article III case or controversy.”

Moreover, for controversy based on infringement against Microsoft’s OEM, HP, the court stated that the claim charts do not imply that Microsoft contributorily infringed. The court also found the direct infringement claims involving third parties besides HP unavailing. The court stated that “Microsoft has failed to allege an actual controversy with respect to direct infringement” for specific patents-in-suit. Furthermore, the judge stated that there is not “an actual controversy between Microsoft and SynKloud as to induced infringement of the ’254 and ’526 patents,” but there is actual controversy for induced infringement for the ’225 patent because Microsoft “provided instructions on how to use OneDrive,” the allegedly infringing product. The court added that Microsoft “established declaratory judgment jurisdiction” for contributory infringement for the three HP patents because it satisfied the contributory infringement requirements.

The court also considered SynKloud’s allegations for failure to state a claim, asserting that Microsoft copies a claim limitation for each patent and, according to SynKloud, these claims are “vague and overbroad.” Specifically, Microsoft identified its OneDrive product for this claim. The judge claimed that since he determined “that Microsoft has adequately pled ‘no direct infringement,’ I think it has also adequately pled ‘no indirect infringement.’”

As a result, the court granted-in-part and denied-in part SynKloud’s motion to dismiss. All the claims were dismissed by the judge due to lack of jurisdiction, not for failure to state a claim.

Microsoft is represented by Sidley Austin. SynKloud is represented by Klehr Harrison Harvey Branzburg LLP and One LLP.