Asetek Danmark A/S v. Shenzhen Apaltek Co., LTD.

• Court: District Court, N.D. California
• Decided: June 6, 2023
• Docket: 3:22-cv-06179
• Status: Unknown

Opinion

1 2 3 4 5 UNITED STATES DISTRICT COURT 6 NORTHERN DISTRICT OF CALIFORNIA 7 8 ASETEK DANMARK A/S, ORDER GRANTING MOTIONS TO DISMISS Plaintiff, 9 Case No. 22-cv-06179-WHO v. 10 Re: Dtk. No. 89 11 SHENZHEN APALTEK CO., LTD., et al., Defendants. 12 13 14 Case No. 23-cv-01079-WHO SHENZHEN APALTEK CO., LTD and 15 GUANGDONG APALTEK LIQUID COOLING TECHNOLOGY CO., LTD., Re: Dkt. No. 30 16 Plaintiffs, 17 v. 18 ASETEK DANMARK A/S, 19 Defendant. 20 Currently before me are motions to dismiss filed by Asetek’s Danmark A/S (“Asetek”) in 21 each of these two related actions.1 Shenzhen Apaltek Co., Ltd., a/k/a Shenzhen Ang Pai 22 Technology Co., Ltd. and Guangdong Apaltek Liquid Cooling Technology Co., Ltd., a/k/a 23 Guangdong Ang Pai Liquid Cooling Technology Co., Ltd., or Dongguan Apalcool (collectively, 24 “Apaltek”) are not prejudiced because Asetek has provided an expanded covenant not-to-sue in 25 addition to its dismissal of its affirmative claims with prejudice. For the reasons explained below, 26 27 1 I find these matters suitable for determination on the papers pursuant to Civil Local Rule 7-1(b) 1 both motions are GRANTED and the two related cases are DISMISSED with prejudice. 2 BACKGROUND 3 On May 14, 2021, Asetek’s Danmark A/S (“Asetek”) filed a complaint in the U.S. District 4 Court for the Western District of Texas (“WDTX”), alleging patent infringement and damages 5 against Apaltek. Case No. 22-06179-WHO, Dkt. No. 1 (“Asetek Compl.”).2 The WDTX 6 transferred the case to this District, and the case was opened here on October 24, 2022. On 7 February 28, 2023, during a status conference, Asetek advised me that it intended to file a motion 8 to dismiss with prejudice and I directed Asetek to file that motion within 30 days. Case. No. 22- 9 06179-WHO, Dkt. No. 88. 10 On March 10, 2023, Apaltek filed its own, declaratory relief action in this District against 11 Asetek, seeking a declaration that it did not infringe the four patents asserted against it in Asetek’s 12 complaint, plus five additional patents (U.S. Patent Nos. 9,733,681, 10,078,354, 10,613,601, 13 11,287,861, and 11,287,862). Case No. 23-01079-WHO, Dkt. No. 1 at 2 (“Apaltek Compl.”). 14 Apaltek’s request for declaratory relief was based primarily on the threat of future litigation. Id. at 15 4. 16 On March 31, 2023, Asetek filed its motion to voluntarily dismiss its affirmative complaint 17 with prejudice under Fed. R. Civ. P. 41(a)(2). Case No. 22-06179-WHO, Dkt. No. 89 (“Asetek’s 18 Mot. to Dismiss 22-06179 Case” or “22-06179 Mot.”). In support of its motion, Asetek attached a 19 copy of a covenant-not-to-sue that it sent to Apaltek’s counsel on February 17, 2023.3 22-06179 20 Mot., Ex. 2. Asetek argued that under Federal Rule of Civil Procedure 41(a)(2), it was entitled it 21 to voluntary dismissal as a matter of law. It also argued, in the alternative, that dismissal was 22 required as the covenant provided to Apaltek eliminated any justiciable controversy between the 23 2Asetek alleged the Apaltek defendants infringed the following patents: 8,240,362, 8,245,764, 24 10,078,355, and 10,599,196. Asetek’s Compl. at 1. These four patents will expire in January or May of 2025. See Declaration of Robert F. McCauley (Dkt. No. 89-2) at ¶ 5. 25 3 Asetek’s covenant states that Asetek “unconditionally and irrevocably covenants to refrain from 26 making any claim(s), or demand(s) against Apaltek Defendants or any of their customers, resellers, or distributors (collectively, the Covenanted Parties) for infringement of any claim . . . 27 [related] to U.S. Patents Nos.8,240,362; . . . 8,245,764 dated November 8, 2021[,]” and 8,240,362; 1 parties under the Supreme Court’s decision in Already, LLC, v. Nike, Inc., 568 U.S. 85, 90–91 2 (2013). Asetek explained that it provided the covenant and moved for voluntary dismissal in an 3 effort to avoid further litigation costs in light of an adverse ruling regarding some of the same 4 patents in this case, issued on September 11, 2022, by the Honorable Edward M. Chen in Asetek 5 Danmark A/S v. CoolIT Systems Inc., et. al., Case No. 19-00410-EMC (“CoolIT case”). See 22- 6 06179 Mot. at 2. 7 On April 3, 2023, Asetek filed a motion to dismiss Apaltek’s declaratory relief action. It 8 argued that Apaltek’s declaratory judgment claim should be dismissed for lack of service under 9 Federal Rule of Civil Procedure 12(b)(5) and because its covenant-not-to-sue Apaltek mooted any 10 justiciable action in that case. Case No. 23-01079-WHO, Dkt. No. 11 (“Asetek Mot. to Dismiss 11 23-01079 Case” or “23-01079 Mot. 1”). 12 On April 14, 2023, Apaltek filed an opposition to Asetek’s voluntary motion to dismiss in 13 Case No. 22-06179, contending that the case should not be dismissed unless dismissal is with 14 prejudice and unless dismissal included a judgment of non-infringement in Apaltek’s favor. Case 15 No. 22-cv-06179-WHO, Dkt No. 92 (“Apaltek’s 22-06179 Oppo.”) at 1. Apaltek asserts that it is 16 entitled to a judgment of non-infringement to foreclose the possibility of future lawsuits regarding 17 Asetek’s patent families. Id. 18 On April 17, 2023, Apaltek filed a First Amended Complaint for declaratory judgement in 19 Case No. 23-01079 and an opposition to Asetek’s motion to dismiss. Case No. 23-01079-WHO, 20 Dkt. 22 (“Apaltek’s FAC” or “FAC”); Dkt. No. 23 (“Apaltek’s 23-01079 Oppo. 1). In its FAC, 21 Apaltek added allegations regarding Judge Chen’s decision in CoolIT. Apaltek FAC ¶¶ 7, 20. In 22 its opposition, Apaltek argued that the motion was mooted by its filing of the FAC, and also 23 maintained that there was still an “actual and justiciable controversy” between the parties 24 supporting its claim for declaratory judgment, because it was not clear that the dismissal of 25 Asetek’s affirmative action adequately shielded Apaltek from the “cloud of threatened litigation.” 26 Apaltek’s 23-01079 Oppo. 1 at 2. 27 On April 21, 2023, Asetek filed a reply in support of its voluntary dismissal, attaching a 1 litigation.4 Case No. 22-06179-WHO, Dkt. No. 94 (“Asetek’s 22-06179 Reply”). On April 28, 2 2023, Apaltek objected to Asetek’s reply and its inclusion of a revised covenant-not-to-sue, and 3 sought leave to file a sur-reply. Case No. 22-06179-WHO, Dkt. No. 95 (“Apaltek’s Objection and 4 Mot. for Leave to File Sur-Reply” or “Proposed Sur-Reply”). In its proposed sur-reply, Apaltek 5 argues that, under Civ. L. R. 7-3(d)(1), Asetek’s revised covenant is improper because Asetek did 6 not have leave of court to submit additional evidence and because the covenant itself would not 7 extinguish the controversy in the original case. Proposed Sur-Reply, Ex. A at 1. Apaltek states 8 that dismissal without a judgment in their favor is unwarranted because they remain open to future 9 litigation as the covenant would not run with the patents (i.e., Asatek could simply sell the patents 10 and Apaltek would be at risk again). Id. 11 On May 1, 2023, Asetek filed a new motion to dismiss Apaltek’s FAC. It alleged that 12 Apaltek failed to properly serve the declaratory relief action and (reiterating an argument raised in 13 the previous opposition) that under Already, LLC., the revised covenant eliminates any justiciable 14 controversy. Case No. 23-01079-WHO, Dkt. No. 30 (“Asetek Mot. to Dismiss FAC 23-01079 15 Case” or “23-1079 Mot. 2”). 16 On May 15, 2023, Apaltek filed its opposition to the motion to dismiss the FAC in its 17 declaratory relief action, arguing that “Apaltek remains under a cloud of threatened litigation” 18 given that the revised covenant failed to expressly state that Apaltek’s products “no longer 19 infringe” and because Asetek’s covenant would not run with the patents. Case No. 23-01079- 20 WHO, Dkt. No. 31 at 1 (“Apaltek’s 23-01079 Oppo. 2”). On May 22, 2023, Asetek filed a Reply 21 in support of its motion to dismiss Apaltek’s FAC in the declaratory relief action, arguing that the 22 revised covenant is sufficient to moot the controversy. Case No. 23-01079-WHO, Dkt. No. 33 23 (“Asetek’s 23-1079 Reply”). 24 25 26 4 In an effort to address Apaltek’s concerns over future litigation, the expanded covenant included 27 protections for Apaltek from suit by Asatek’s “affiliates,” expanded the coverage to all nine 1 LEGAL STANDARD 2 I. FED. R. CIV. P. 41(A)(2) 3 Federal Rule of Civil Procedure 41 provides: 4 (a)Voluntary Dismissal. . . . 5 (2) By Court Order; Effect. Except as provided in Rule 41(a)(1), an action may be dismissed at the plaintiff's request only by court order, 6 on terms that the court considers proper. If a defendant has pleaded a counterclaim before being served with the plaintiff's motion to 7 dismiss, the action may be dismissed over the defendant's objection only if the counterclaim can remain pending for independent 8 adjudication. Unless the order states otherwise, a dismissal under this paragraph (2) is without prejudice. 9 Fed. R. Civ. P. 41(a)(2). 10 Under Fed. R. Civ. P 41(a)(2), “any action may be dismissed at the plaintiff’s request only 11 by court order.” The Ninth Circuit has held that the district courts have sound discretion to 12 exercise an order granting dismissal and such an order would “not [be] subject to reversal” absent 13 abuse of discretion. Sams v. Beech Aircraft Corp., 625 F.2d 273, 277 (9th Cir. 1980). 14 “A district court should grant a motion for voluntary dismissal under Rule 41(a)(2) unless 15 a defendant can show that it will suffer some plain legal prejudice as a result.” Smith v. Leches, 16 263 F.3d 972, 975 (9th Cir. 2001). “[T]he threat of future litigation which causes uncertainty is 17 insufficient to establish plain legal prejudice.” Westlands Water District v. United States, 100 18 F.3d 94, 96 (9th Cir. 1996). In addition, “expense incurred in defending against a lawsuit does not 19 amount to legal prejudice.” Id. at 97. 20 II. ARTICLE III “ACTUAL” CONTROVERSY 21 “A case becomes moot—and therefore no longer a ‘Case’ or ‘Controversy’ for purposes of 22 Article III—‘when the issues presented are no longer “live” or the parties lack a legally cognizable 23 interest in the outcome.’” Already, LLC., 568 U.S. at 726–27 (quoting Murphy v. Hunt, 455 U.S. 24 478, 481 (1982)). Where a plaintiff has issued a covenant-not-to-sue, a “case is moot if the court, 25 considering the covenant’s language and the plaintiff’s anticipated future activities, is satisfied that 26 it is ‘absolutely clear’ that the allegedly unlawful conduct cannot reasonably be expected to recur.” 27 Id. at 729. 1 Moreover, for a district court to maintain subject matter jurisdiction, the Supreme Court 2 has “held that an ‘actual controversy’ must exist not only ‘at the time of the complaint is filed,’ but 3 through ‘all stages’ of litigation. Id. at 726 (quoting Alvarez v. Smith, 558 U.S. 87, 92 (2009)). 4 DISCUSSION 5 I. ASETEK’S MOTION FOR VOLUNTARY DISMISSAL OF CASE NO. 22-CV- 06179 6 Apaltek has not shown that it will face plain legal prejudice if this case is dismissed with 7 prejudice. Smith, 263 F.3d at 975; Westlands Water District, 100 F.3d at 96–97. While Apaltek 8 contends that I should not dismiss without an order finding non-infringement of all nine Asatek 9 patents, it fails to provide any sound legal basis for that request. Apaltek argues that it is entitled 10 to an express order of non-infringement because the threat of future litigation associated with these 11 actions supports foreclosing any suit over Asetek’s patents in the future. But the Ninth Circuit has 12 explained that “the threat of future litigation which causes uncertainty is insufficient to establish 13 plain legal prejudice.” Westlands Water District, 100 F.3d at 96. Apaltek’s concern over future 14 litigation cannot justify denying Asatek’s motion for voluntary dismissal. 15 Apaltek also argues that if dismissal is granted, it should be entered with an express 16 finding that Apaltek was the prevailing party, to preserve its right to recover costs and move for 17 attorney fees. Apaltek’s Oppo. 1 at 1–2. Asetek does not dispute that Apaltek can move for costs 18 after the case is dismissed. Asetek’s 22-06179 Reply at 2. Once this case is dismissed, if Apaltek 19 believes it has grounds to file a motion for attorney fees, it may do so. 20 Asetek’s motion for voluntary dismissal with prejudice is GRANTED. 21 II. ASETEK’S MOTION TO DISMISS CASE NO. 23-01079 22 23 As the Supreme Court has explained, where a plaintiff has issued a covenant-not-to-sue, a 24 “case is moot if the court, considering the covenant’s language and the plaintiff’s anticipated 25 future activities, is satisfied that it is ‘absolutely clear’ that the allegedly unlawful conduct cannot 26 reasonably be expected to recur.” Already, LLC., 568 U.S. at 94. Asetek issued a revised 27 covenant-not-to-sue that expressly states: Asetek Danmark A/S its Affiliates unconditionally and irrevocably covenant[s] to refrain 1 from making any claim(s) or demand(s) against the Apaltek Defendants or any of their 2 Affiliates, customers, resellers, or distributors for infringement. Asetek’s Reply 1 Ex. 3. I am satisfied that it is absolutely clear that the allegedly unlawful 3 conduct cannot reasonably be expected to recur, and the case is moot. 4 In Already, LLC., Nike, Inc. (“Nike”) sought to voluntarily dismiss its claims with 5 prejudice under Fed. R. Civ. P. 41(a)(2) after issuing a covenant-not-to-sue to the alleged 6 infringer. 568 U.S. at 89. Already, LLC. (“Already”) opposed dismissal, arguing that the 7 covenant had not fully mooted the controversy. Id. Already introduced evidence, including an 8 affidavit from its president, claiming that it planned to develop and market more products that 9 could potentially infringe and three affidavits of investors who said they would not invest in the 10 company unless the Nike trademarks were invalidated. Id. But the Supreme Court found that the 11 case was mooted by the covenant: Nike met its burden of showing that “the covenant 12 [encompassed] all of [the] allegedly unlawful conduct” challenged in its complaint and Already, 13 despite introducing affidavits in support of its opposition, “had failed to indicate it would [engage] 14 in . . . or [had] sufficiently concrete plans to engage in activities that [were] not covered by the 15 covenant.” Id. at 94. 16 Apaltek opposes Asetek’s motion for an almost identical reason as Already did. Like 17 Already, Apaltek fails to produce any evidence to show the case would not be mooted under the 18 current covenant. See generally Apaltek’s 23-01079 Oppo. 2. It does not show that it plans to 19 engage in further activities that would not be covered by the covenant. Under Already, LLC., 20 Asetek has met its burden of demonstrating that the covenant’s breadth moots the case while 21 Apaltek has failed on its burden of showing that it “has concrete plans to engage in activities not 22 covered by the covenant.” Already, LLC., 568 U.S. at 94. Given the covenant, Judge Chen’s 23 order in CoolIT (that Asetek’s admits was unfavorable to its patents), and the expiration of 24 Asetek’s patents asserted in its affirmative case in 2025, it appears “absolutely clear” that there is 25 no justiciable controversy between the parties. Already, LLC., 568 U.S. at 95. 26 Accordingly, Asetek’s motion to dismiss Apaltek’s FAC seeking declaratory relief and 27 1 CONCLUSION 2 For the reasons discussed above, the motions to dismiss are GRANTED and both cases 3 are DISMISSED WITH PREJUDICE. 4 IT IS SO ORDERED. 5 Dated: June 6, 2023 \ 7 William H. Orrick 8 United States District Judge 9 10 11 a 12

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