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Princeton Digital Image Corp. v. Harmonix Music Systems Inc.

United States District Court, D. Delaware

January 19, 2017

PRINCETON DIGITAL IMAGE CORPORATION, Plaintiff/Counterclaim-Defendant,
v.
KONAMI DIGITAL ENTERTAINMENT INC., HARMONIX MUSIC SYSTEMS, INC. and ELECTRONIC ARTS, INC., Defendants/Counterclaim-Plaintiffs.

          REPORT AND RECOMMENDATION

          CHRISTOPHER J. BURKE UNITED STATES MAGISTRATE JUDGE.

         In this patent action filed by Plaintiff and Counterclaim-Defendant Princeton Digital Image Corporation ("PDIC") against Defendants and Counterclaim-Plaintiffs Konami Digital Entertainment Inc. ("Konami"), Harmonix Music Systems, Inc. ("Harmonix") and Electronic Arts, Inc. ("EA") (collectively, "Defendants"), PDIC alleges that Defendants directly and indirectly infringe United States Patent No. 5, 513, 129 (the '"129 patent"). Presently before the Court is PDIC's motion to dismiss Harmonix and EA's counterclaims for a declaratory judgment of invalidity and noninfringement pursuant to Federal Rule of Civil Procedure 12(b)(6) (the "Motion"). (D.I. 101) For the reasons set out below, the Court recommends that the District Court GRANT-IN-PART and DENY-IN-PART the Motion.

         I. BACKGROUND

         PDIC is the owner, by assignment, of the '129 patent. (D.I. 94 at ¶ 10) The '129 patent, entitled "Method and System for Controlling Computer-Generated Virtual Environment in Response to Audio Signals[, ]" relates generally to virtual reality ("VR") computer systems controlled by music or control tracks created from music. ('129 patent, col. 1:8-l 8; see also D.I. 94 at ¶ 25)[1] The '129 patent has 23 claims, ('129 patent, cols. 29:1-30:65), though (as will be further explained below) only dependent claims 14, 19 and 20 remain at issue in this case.

         PDIC filed this action on November 13, 2012. (D.I. 1) It also filed a related action (in which it also asserts the '129 patent) against Ubisoft Entertainment SA ("Ubisoft SA") and Ubisoft Inc. ("Ubisoft Inc., " and collectively with Ubisoft SA, "Ubisoft"), on February 27, 2013. (Civil Action No. 13-335-LPS-CJB ("the Ubisoft Action"), D.I. I)[2]

         As the cases began to move forward, Defendants filed multiple petitions for inter partes review ("IPR") with respect to the '129 patent. On November 15, 2013, for example, Harmonix filed a petition with the United States Patent and Trademark Office (the "PTO") for IPR of claims 1, 5-6, 8-13, 15-19, and 21-23 of the'129 patent. (D.I. 118, ex. 3 at 5-71)[3] In the petition, Harmonix argued that the claims were invalid in light of three prior art references ("Fallacaro, " "Pimentel" and "Pocock-Williams").[4] On May 9, 2014, the PTO's Patent Trial and Appeal Board ("PTAB") instituted review only on claims 10, 11, 22 and 23 (the "Harmonix '155 IPR"). (Id., ex. 3 at 213-34) Thus, inter alia, the PTAB determined that it was not persuaded that there was a reasonable likelihood that the petitioner would prevail in showing that claim 19 was unpatentable, and did not institute review on that claim. (Id., ex. 3 at 233)

         On April 15, 2014, Ubisofit SA filed a second petition for IPR, seeking review of all claims of the '129 patent (that is, claims 1-23); Ubisoft SA requested review of the claims over combinations of five references that were different than the ones cited in the Harmonix '155 IPR ("Tsumura, " "Lytle, " "Adachi, " "Williams, " and "Thalmann"). (Id., ex. 4 at 8-72)[5] On October 17, 2014, the PTAB instituted review of claims 1-13, 15-18 and 21-23 (the "Ubisoft '635 IPR"). (Id., ex. 4 at 152-77) Thus, the PTAB determined that it was not persuaded that there was a reasonable likelihood that the petitioner would prevail in showing that claims 14, 19 or 20 were unpatentable, and did not institute review on those three claims. (Id., ex. 4 at 162, 171, 175)

         On November 17, 2014, Harmonix and Konami filed a third petition for IPR (the "Konami/Harmonix '271 IPR"), which included a request for review of claims 14, 19 and 20, along with a corresponding motion seeking joinder of that proceeding with the Ubisoft IPR. (Id., ex. 5 at 2-103) In addition to petitioning on the same grounds as did Ubisoft SA, Konami and Harmonix presented new challenges that had not been presented by Ubisoft SA: a challenge to claims 19 and 20 based on Lytle, and a challenge to claims 14, 19 and 20 based on Adachi and Tsumura. (Id.) On June 2, 2015, the PTAB denied the request for joinder and denied IPR review on procedural grounds. (Id., ex. 5 at 271-90) More specifically, the PTAB concluded that Konami and Harmonix had presented "no persuasive argument or evidence to explain why the grounds of unpatentability asserted in the Petition could not have been asserted in the [Harmonix] '155 IPR[, ]" noted that joinder would increase the cost, time and effort that would need to be expended by PDIC in the Ubisoft '635 IPR, and explained that Konami and Harmonix had not shown that joinder would "promote efficient resolution of the unpatentability issues without substantially affecting the schedule for the [Ubisoft] '635 IPR." (Id., ex. 5 at 289) For those reasons, the PTAB "decline[d] to exercise [its] jurisdiction under 35 U.S.C. § 315(c) to authorize joinder" and denied the motion for joinder. (Id.) And since the petition for IPR was filed more than one year after Harmonix was served with the Complaint in the instant case, absent joinder, the Konami/Harmonix '271 IPR petition was time-barred. (Id., ex. 5 at 277-78) Therefore, the PTAB stated that "exercising our discretion under 35 U.S.C. § 314(a) and 37 C.F.R. § 42.108(b), we decline to institute an [IPR] in the instant proceeding." (Id., ex. 5 at 278)

         In the Harmonix '155 IPR proceeding, the PTAB ultimately issued a Final Written Decision on May 6, 2015, holding that claims 10, 11, 22 and 23 are invalid. (Id., ex. 3 at 386-415) In the Ubisoft '635 IPR, the PTAB issued a Final Written Decision on October 16, 2015, holding that claims 1-13, 15-18 and 21-23 are invalid. (Id., ex. 4 at 384-428) PDIC did not appeal either of these Final Written Decisions. Thus, the effect of the PTAB's Final Written Decisions was to leave only three dependent claims of the patent (claims 14, 19 and 20) still valid.

         After the Court lifted a stay of this case and the Ubisoft Action in January 2016, PDIC filed the now-operative complaint in this case, the Third Amended Complaint ("TAC"). In the TAC, PDIC alleged that Harmonix, Konami and EA infringe claims 14, 19 and 20 of the '129 patent by their development, testing, use, publication, and/or distribution of: (1) the Karaoke Revolution, Dance Dance Revolution, and Rock Band video game series; (2) peripheral devices to be used with the games; and (3) playable song tracks for use with the games. (D.I. 94)

         Thereafter, on March 7, 2016, Harmonix and EA filed an Answer to the TAC, which included two Counterclaims: a First Counterclaim seeking a declaratory judgment of invalidity of the patent-in-suit and a Second Counterclaim seeking a declaratory judgment of noninfringement of the patent. (D.I. 97 at 22-26) The First Counterclaim sought a declaration that claim 14 was invalid as obvious over at least Adachi and Tsumura, and that claims 19 and 20 were invalid as anticipated at least over Lytle; the counterclaim noted that the "PTAB has not issued any decision" that claim 14 or claims 19 and 20 were invalid on these grounds. (Id. at 24-25, at ¶¶ 16-17, 23-24) The Second Counterclaim asserted that "Harmonix and EA have not infringed and are not infringing, either directly or indirectly, nor have the[y] contributed to or induced infringement by others, of any valid claim of the '129 patent, either literally or under the doctrine of equivalents." (Id. at 26, at ¶ 29)

         PDIC filed the instant Motion on March 31, 2016. (D.I. 101) Briefing on the Motion was completed on April 28, 2016. (D.I. 106)

         II. STANDARD OF REVIEW

         The sufficiency of pleadings for non-fraud cases is governed by Federal Rule of Civil Procedure 8, which requires "a short and plain statement of the claim showing that the pleader is entitled to relief[.]" Fed.R.Civ.P. 8(a)(2). Courts use the same standard in ruling on a motion to dismiss a counterclaim under Rule 12(b)(6) as they do in assessing a claim in a complaint. See Idenix Pharms., Inc. v. Gilead Scis., Inc., Civil Action No. 13-1987-LPS, 2014 WL 4222902, at *5 (D. Del. Aug. 25, 2014); Tyco Fire Prods. LP v. Victaulic Co., 777 F.Supp.2d 893, 898-99 (E.D. Pa. 2011) (citing cases).

         When presented with a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court conducts a two-part analysis. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). First, the court separates the factual and legal elements of a claim, accepting "all of the complaint's well-pleaded facts as true, but [] disregard[ing] any legal conclusions." Id. at 210- II. Second, the court determines "whether the facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for relief" Id. at 211 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Bell Ail. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). In assessing the plausibility of a claim, the court must "construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Fowler, 578 F.3d at 210 (quoting Phillips v. Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)).

         III. ...


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