Droplets, Inc. v. Yahoo! Inc.
4:12-cv-03733
N.D. Cal.Nov 19, 2019Background
- Droplets, Inc. sued Yahoo! Inc. for alleged infringement of the ’745 patent over certain web applications (Accused Products).
- During a multi-year PTO stay, Yahoo sold its operating business and transferred IP and related assets to Oath, Inc. and Oath Holdings Inc.; Yahoo later reorganized as Altaba.
- Yahoo moved to substitute Oath as defendant and for summary judgment; both motions were denied by the Court.
- Oath then moved to intervene as a defendant to file a declaratory judgment of non-infringement and to defend the Accused Products; Droplets opposed.
- The Court found Oath could not intervene as of right under Rule 24(a)(2) because it failed to rebut the presumption that Yahoo would adequately represent Oath’s interests.
- The Court granted permissive intervention under Rule 24(b), concluding jurisdiction exists, the motion was timely, common issues of law and fact exist, intervention would aid efficiency and not unduly prejudice the parties; Oath may file its complaint in intervention within seven days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Intervention as of right under Rule 24(a)(2) | Oath lacks timely, protectable interest and failed to justify intervention as of right | Oath argues it has a protectable interest in the Accused Products and will be impaired if excluded | Denied — Oath failed to satisfy the adequacy-of-representation prong and thus cannot intervene as of right |
| Adequacy of representation by Yahoo | Droplets: Yahoo will adequately defend; no need for Oath | Oath: Yahoo lacks access to proprietary code/docs and is dissolving, so cannot adequately represent Oath | Held for Droplets/Yahoo — presumption of adequate representation stands; Oath made no compelling showing to rebut it |
| Permissive intervention under Rule 24(b) (timeliness, jurisdiction, common issues, prejudice) | Oath’s motion is untimely and lacks independent jurisdiction; intervention could prejudice or delay | Oath: federal-question jurisdiction exists, motion is timely given stay and asset transfers, common issues of infringement/validity, and intervention is efficient | Granted — Court found federal-question jurisdiction applies, motion timely, common issues exist, no undue prejudice, and intervention promotes efficiency |
| Declaratory judgment justiciability (actual controversy) | Droplets: no actual controversy with Oath; Oath may be licensed so no imminent suit | Oath: owns liabilities/exposure for Accused Products and has economic interest making controversy real | Held for Oath — Court found Oath’s economic stake and the circumstances suffice to create an actual controversy for declaratory relief |
Key Cases Cited
- Freedom from Religion Found., Inc. v. Geithner, 644 F.3d 836 (9th Cir.) (sets intervention-as-of-right framework and factors)
- California ex rel. Lockyer v. United States, 450 F.3d 436 (9th Cir.) (articulates Rule 24(a)(2) standards)
- Perry v. Proposition 8 Official Proponents, 587 F.3d 947 (9th Cir.) (presumption of adequate representation and how to rebut it)
- United States v. Alisal Water Corp., 370 F.3d 915 (9th Cir.) (broad, practical interpretation of intervention standards)
- Sw. Ctr. for Biological Diversity v. Berg, 268 F.3d 810 (9th Cir.) (treat supporting allegations as true absent sham)
- Arakaki v. Cayetano, 324 F.3d 1078 (9th Cir.) (factors for assessing adequacy of representation)
- League of United Latin Am. Citizens v. Wilson, 131 F.3d 1297 (9th Cir.) (timeliness factors for permissive intervention)
- Teva Pharm. USA, Inc. v. Novartis Pharm. Corp., 482 F.3d 1330 (Fed. Cir.) (two-part test for actual controversy in patent declaratory judgments)
- MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (U.S.) (standards for justiciable declaratory judgment controversies)
- Caraco Pharm. Labs., Ltd. v. Forest Labs., Inc., 527 F.3d 1278 (Fed. Cir.) (economic stake can satisfy actual controversy requirement)