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Asia Vital Components Co., Ltd. v. Danmark

United States Court of Appeals, Federal Circuit

September 8, 2016

ASIA VITAL COMPONENTS CO., LTD., Plaintiff-Appellant
v.
ASETEK DANMARK A/S, Defendant-Appellee

         Appeal from the United States District Court for the Eastern District of Virginia in No. 1:14-cv-01293-LO-TCB, Judge Liam O'Grady.

          Andrew C. Aitken, Aitken Law Offices, Wheaton, MD, and Cameron H. Tousi, IP Law Leaders PLLC, Washington, DC, argued for plaintiff-appellant. Also represented by Raymond Ho.

          Robert F. McCauley, Finnegan, Henderson, Fara-bow, Garrett & Dunner, LLP, Palo Alto, CA, argued for defendant-appellee. Also represented by C. Brandon Rash, Washington, DC.

          Before Prost, Chief Judge, Linn and Taranto, Circuit Judges.

          Prost, Chief Judge.

         Asia Vital Components Co., Ltd. ("AVC") filed a declaratory judgment action against Asetek Danmark A/S ("Asetek") seeking a declaration that AVC did not infringe U.S. Patent Nos. 8, 240, 362 ("'362 patent") and 8, 245, 764 ("'764 patent") (collectively, "the asserted patents") and that those patents are invalid. The United States District Court for the Eastern District of Virginia dismissed the case for lack of subject matter jurisdiction, concluding that AVC's complaint did not plead sufficient facts to show that there is a substantial controversy between the parties. For the reasons stated below, we reverse the district court's ruling and remand for further proceedings.

         Background

         AVC is a Taiwanese corporation that manufactures cooling systems for integrated circuits. Asetek is the assignee of the '362 and '764 patents, which are generally directed toward liquid cooling systems that are used in connection with computers to cool integrated circuits.

         Beginning in 2012, Asetek brought lawsuits against other competitors that make and sell liquid cooling systems, alleging infringement of the '362 and '764 patents. In April 2014, Asetek sent AVC a letter accusing AVC of infringing the '362 and '764 patents. That letter, however, was based on Asetek's mistaken belief that AVC manufactured a particular product, the Liqmax 120s. In the letter, Asetek specifically referenced the Liqmax 120s product and provided an exemplary infringement claim chart for that product.

         In response, AVC told Asetek that it did not manufacture the Liqmax 120s. Nonetheless, AVC requested a meeting with Asetek "to discuss various related matters, " which AVC considered "of importance concerning future cooperation" with Asetek. J.A. 105. Asetek responded in an email dated August 2, 2014, that if AVC was not making the Liqmax 120s then there did not appear to be a reason to meet. Also in the email, Asetek referenced the fact that it had tried to cooperate with AVC previously "and the experience went very poorly and sowed distrust in Asetek for AVC." J.A. 207. Asetek further noted that it does not license its patents and said that "although that option may have previously been available to AVC when it was manufacturing Asetek's products, that option is no longer available to AVC (based in large part on AVC's prior behavior toward Asetek)." Id. Finally, Asetek stated,

Please be advised that Asetek believes that AVC is likely selling other infringing products in the United States. We are sure you are aware that Asetek enforced its IP, as it has in pending litigations against CoolIT and Cooler Master. Asetek has also been allowed a patent in the European Union with claims similar to the U.S. '362 and '764 patents, with priority in 2003, and also has similar claims pending in China.

Id.

         A meeting did ultimately take place between AVC and Asetek in August 2014. At the meeting, AVC expressed a desire to license the asserted patents, and Asetek initially declined. After further discussion, Asetek did offer AVC a license at a royalty rate of 16% or at a reduced rate if AVC would provide preferential pricing on components. AVC representatives at the meeting said they would consider that possibility and bring it to the attention of AVC management. There was no specific discussion of AVC products potentially infringing the asserted patents at the meeting.

         On September 30, 2014, AVC filed a complaint against Asetek alleging that AVC had designed and built liquid cooling products, identified as the K7 and K9 products, and seeking a declaration that its products did not infringe the '362 and '764 patents and that those patents are invalid. AVC contends that it had completed prototype products of the K7 and K9 products and that those products have a number of similarities to the CoolIT and Cooler Master products that Asetek did accuse of infringement. Asetek responds that it never accused the K7 or K9 products of infringement, and, in fact, contends it did not even know that those products existed before AVC's complaint.

         The district court agreed with Asetek and dismissed the complaint for lack of subject matter jurisdiction. The district court held that the "complaint does not plead sufficient facts to show that there is a substantial controversy under the totality of the circumstances." J.A. 2. The district court did not explain its reasons in the written decision, but instead referred to the reasons stated during a hearing the court held on the question of jurisdiction. At the hearing, the district court emphasized that there was never any discussion between the parties as to whether AVC's products were infringing and credited ...


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