Entropic Communications, LLC v. Cox Communications, Inc.
2:23-cv-01049
| C.D. Cal. | Nov 20, 2023Background:
- MaxLinear and Comcast entered a Vendor Service Agreement (VSA) on Aug. 1, 2020, containing a covenant not to sue Comcast for patent infringement except in the case of willful infringement.
- MaxLinear (or its subsidiary MaxLinear LLC) owned a portfolio of U.S. patents that were later assigned to Entropic Communications, LLC on March 31, 2021 (the Asserted Patents).
- Entropic sued Comcast in Feb. 2023 asserting infringement of the Asserted Patents; Comcast moved to dismiss for lack of subject-matter jurisdiction under Rule 12(b)(1) based on the VSA covenant and alternatively moved to dismiss willful-infringement allegations under Rule 12(b)(6).
- The Court found the covenant not to sue runs with the patents and therefore bound Entropic as assignee, but the covenant expressly carved out willful infringement claims.
- Because of that carveout, the Court retained jurisdiction over willful-infringement claims but concluded Entropic had not plausibly pleaded willfulness for any asserted patent.
- Result: Comcast’s motion to dismiss is GRANTED with leave to amend; Entropic was given a deadline to file an amended complaint (with redline) or risk dismissal with prejudice.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the covenant not to sue in the VSA runs with the patents and binds the assignee | Covenant limited to MaxLinear (and not to MaxLinear LLC as alleged), so assignee is not bound | Covenant encumbers patents and extends to affiliates and future assigns; it binds any assignee | Covenant runs with the patents and binds Entropic as assignee |
| Whether the covenant divests the court of subject-matter jurisdiction over Entropic’s claims | Covenant does not eliminate jurisdiction because VSA reserves right to sue for willful infringement | Covenant eliminates claims and thus jurisdiction over asserted patents | Court retains jurisdiction for willful-infringement claims because VSA carved them out |
| Scope/timing of the willful-infringement carveout (temporal, per-patent) | Carveout applies as a general condition; Entropic’s reading limits nothing | Comcast: passive phrasing limits carveout to pre-agreement willfulness and/or has narrow scope | Carveout applies during the term (not limited to pre-agreement) and operates on a per-patent basis |
| Whether Entropic plausibly pleaded willful infringement | Relies on a licensing letter listing many patents, prior litigation against other parties, industry awareness, and inventor/prosecution activity | Those allegations are conclusory and fail to show knowledge of specific patents and knowledge of infringement | Pleading is deficient: letters, other suits, general industry awareness, and prosecution activity do not plausibly show willfulness; dismissal with leave to amend |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing requirements for Article III)
- DaimlerChrysler Corp. v. Cuno, 547 U.S. 332 (plaintiff bears burden to demonstrate standing for each claim and relief)
- Leite v. Crane Co., 749 F.3d 1117 (distinguishing facial and factual Rule 12(b)(1) attacks)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (requirement for well-pleaded, plausible facts)
- Datatreasury Corp. v. Wells Fargo & Co., 522 F.3d 1368 (encumbrances run with patents)
- Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 556 F.3d 1294 (covenant scope controls jurisdictional effect)
- King Pharm., Inc. v. Eon Labs, Inc., 616 F.3d 1267 (reserved rights preserve jurisdiction)
- Arctic Cat Inc. v. Bombardier Recreational Prod. Inc., 876 F.3d 1350 (standard for pleading willful infringement)
- Funai Elec. Co. v. Daewoo Elecs. Corp., 616 F.3d 1357 (pre-suit notice must identify specific patents and accused products for willfulness)
- Gustafson, Inc. v. Intersystems Indus. Prod., Inc., 897 F.2d 508 (no willfulness without knowledge of patent)
- Hendrie v. Sayles, 98 U.S. 546 (nemo dat principle: assignee gets only what assignor possessed)
- Starr v. Baca, 652 F.3d 1202 (sufficient factual allegations required to state a claim)