In a recent ruling on a motion to dismiss for lack of subject matter jurisdiction between Dow Corning Semiconductor Solutions, LLC (www.dowcorning.com) and Cree, Inc. (www.cree.com), the U.S. District Judge Thomas L. Ludington GRANTED the motion and dismissed the complaint for declaratory judgment on the grounds that no actual controversy existed.
“Both Dow Corning Semiconductor Solutions, LLC (Dow Corning) and Cree, Inc. (Cree) are engaged in manufacturing electronic-grade silicon carbide (SiC), which is a high-performance semiconductor material incorporated into a broad range of lighting, power, and communication devices. Given their increased efficiency over traditional silicon parts, the demand for high-quality SiC materials is growing rapidly worldwide.
Cree owns numerous patents related to the creation of SiC materials. In 2010, Cree decided to begin licensing to other companies, including Dow Corning. The proposal was simple: Cree would receive an initial payment, a royalty payment for the licensee-company’s sales, and the SiC market would continue to expand as more companies produced SiC components. This, in turn, would encourage further growth in the market, and Cree would benefit as a result.
Between October 2010 and September 2011, Dow Corning and Cree discussed the possibility of Dow Corning licensing some of Cree’s intellectual property. Cree claims it was simply marketing a licensing program to Dow Corning for its silicon carbide materials patents. Dow Corning concluded that the licensing program was being offered only as an alternative to patent infringement litigation, and decided the best defense was a good offense. Accordingly, Dow Corning filed a declaratory judgment complaint against Cree on September 27, 2011. Dow Corning sought a determination that three of Cree’s patents — U.S. Patent No. 7,314,520; U.S. Patent No. 7,314,521; and U.S. Patent No. 7,294,324 (collectively, the Patents)—were invalid, and that regardless of their validity, Dow Corning had not infringed upon them.
The Declaratory Judgment Act provides:
In a case of actual controversy within its jurisdiction … any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such a declaration, whether or not further relief is or could be sought.
28 U.S.C. § 2201.”
Dow Corning suggested seven issues, that when combined indicated that there was an actual controversy to warrant declaratory judgment jurisdiction, including Cree’s annual reports, press releases, semiconductor materials litigation history, and the initial communications broaching the subject with Dow that identified key Dow Products. Dow believed Cree’s licensing proposal and payment structure were non-negotiable and final for patents that Dow had no interest in. Cree countered with evidence to support that Cree had sent the same licensing information to multiple companies, and had approached Dow with a licensing and not a litigious intent.”
Ultimately, the discovery depositions of the Defendant’s representatives confirmed that no actual controversy existed. Cree’s representatives unequivocally testified infringement litigation was not a possibility. Although Cree had previously enforced its patents through litigation, those actions did not concern the patents it attempted to license to Dow Corning. Cree’s correspondence and presentation to Dow Corning were generic communications sent to other in the industry, and lacked a specific basis for concluding that Dow Corning’s products infringed.
Thus, the court held that “Cree’s actions did not reasonably foreshadow litigation, and granted its motion to dismiss.”