Judge Stark Denies Motion to Dismiss State Law Claims Related to Patent Ownership Dispute, Grants Dismissal of Declaratory Judgment Counterclaim

Judge Stark recently considered two interesting motions to dismiss claims and counterclaims. The motions were filed in a case concerning whether certain patents were part of a business transaction several years ago and whether S3 Graphics or ATI Technologies now owns those patents. Each party sought declaratory judgment that it was the rightful owner of the disputed patents, and S3 Graphics asserted state law tort claims of slander of title, conversion, and unfair competition. S3 Graphics Co., Ltd. v. ATI Techs. ULC, et al., C.A. No. 11-1298-LPS, Memo. Order at 1-3 (D. Del. Feb. 11, 2014).

ATI moved to dismiss S3 Graphics’ state law tort claims as preempted by federal patent law and barred by the Noerr-Pennington doctrine. Judge Stark found that the state law claims were not preempted because “[n]o conflicts exist between federal patent law and anything contained in S3G’s state law claims” because the state law claims do “not seek imposition of liability upon AMD/ATI for improperly publicizing patents they own, but instead alleges that these Defendants have falsely and in bad faith ‘laid claim to patents they do not own, or hold any other interest in.’” Id. at 3-4. Judge Stark continued, “[n]or are S3G Ltd.’s state law tort claims barred by the Noerr-Pennington doctrine” because of Walker Process fraud. Under the Walker Process fraud doctrine, ATI Technologies would not be immune from state law liability arising from assertion of patent rights under Noerr-Pennington if ATI Technologies engaged in “knowing and willful fraud” in the procurement of a patent. Judge Stark found that “S3G Ltd. adequately alleges each of the elements of the Walker Process fraud to application of Noerr-Pennington immunity, making Defendant’s reliance on that immunity unavailing as a basis for dismissing S3G Ltd.’s state law tort claims.” Id. at 5-6. Judge Stark, therefore, denied the motion to dismiss.

S3 Graphics also moved to dismiss for lack of declaratory judgment jurisdiction over ATI Technologies’ counterclaim. Because the counterclaim sought a declaratory judgment that S3 Graphics “lacks any ownership interest in the Disputed Patents” and S3 Graphics had “not asserted any ownership interest in the patents and admits that it lacks any ownership interest in the patents,” Judge Stark found that there was no actual controversy sufficient to warrant a declaratory judgment. Id. at 7. Accordingly, Judge Stark granted the motion to dismiss the declaratory judgment counterclaim.

S3 Graphics Co., Ltd. v. ATI Techs. ULC, et al., C.A. No. 11-1298-LPS (D. Del. Feb. 11, 2014).

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