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Fraunhofer-Gesellschaft Zur Forderung Der Angewandten Forschung E.V. v. Sirus XM Radio Inc.

United States District Court, D. Delaware

March 29, 2018

FRAUNHOFER-GESELLSCHAFT ZUR FORDERUNG DER ANGEWANDTEN FORSCHUNG E.V., Plaintiff,
v.
SIRUS XM RADIO INC., Defendants.

          REPORT AND RECOMMENDATION

          Sherry R. Fallon, UNITED STATES MAGISTRATE JUDGE

         I. INTRODUCTION

         Presently before the court in this patent infringement action is a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6) (D.I. 10), a motion to stay pending resolution of the motion to dismiss (D.I. 17), and a motion to stay pending inter partes review of the patents-in-suit (D.I. 131), filed by defendant Sirius XM Radio Inc. ("SXM"). For the following reasons, I recommend that the court grant the motion to dismiss, and deny the motions to stay as moot.

         II. BACKGROUND

         Plaintiff Fraunhofer-Gesellschaft Zur F6rderung der angewandten Forschung e.V. ("Fraunhofer") is an applied research organization in Europe, encompassing over sixty institutes and research units which develop real-world innovations in the fields of health, communications, security, transportation, and energy for both privately and publicly funded projects. (D.I. 1 at ¶ 1) In 1996, Fraunhofer developed patented technology related to multicarrier modulation (the "MCM technologies") for use in satellite radio broadcasting. (Id. at ¶¶ 4, 20) MCM is a method of transmitting data by splitting it into several components and sending each of the components over separate carrier signals. (Id. at ¶ 4)

         On March 4, 1998, Fraunhofer entered into an exclusive license agreement[1] with WorldSpace International Network Inc. ("WorldSpace") to license all patents for MCM technologies (the "MCM License"). (Id. at ¶ 21; D.I. 12, Ex. 1) Fraunhofer subsequently obtained U.S. Patent Nos. 6, 314, 289 ("the '289 patent"), 6, 931, 084 ("the '1084 patent"), 6, 993, 084 ("the '3084 patent"), and 7, 061, 997 ("the '997 patent") (collectively, the "patents-in-suit"), which relate to MCM technologies and are covered by the MCM License. (D.I. 1 at ¶ 21) Thereafter, on July 24, 1998, WorldSpace granted a sublicense under the MCM License to American Mobile Radio Corporation, which was renamed as XM Satellite Radio, Inc. ("XM Satellite"). (Id. at ¶ 22; D.I. 12, Ex. 3 at § 2) A June 7, 1999 amendment to the sublicense executed between WorldSpace and XM Satellite specified that the license granted to XM Satellite was "an irrevocable license." (D.I. 12, Ex. 4 at § 3) XM Satellite used the sublicensed technology to develop its Digital Audio Radio Services System (the "XM DARS System"). (D.I. 1 at ¶ 22) In 2008, XM Satellite merged with Sirius Satellite Radio to form SXM. (Id. at ¶ 26)

         On October 17, 2008, WorldSpace filed a voluntary petition under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. (Id. at ¶ 27) On June 18, 2009, the debtors filed a motion for approval of a settlement agreement (the "Settlement Agreement")[2] to terminate certain contracts between the parties and to pay the debtors a sum to fully satisfy the current and future payment obligations owed under the sublicense agreement. (D.I. 12, Ex. 5) The bankruptcy court approved the Settlement Agreement on July 13, 2009. (Id., Ex. 6)

         During a sale hearing on June 1, 2010, the bankruptcy court approved an agreement between WorldSpace, Fraunhofer, and Yazmi, a potential buyer of WorldSpace's assets, providing for the final disposition of WorldSpace's rights under three agreements and unambiguously rejecting the MCM License. (D.I. 1 at ¶ 27; 8/15/17 Tr. at 11:2-14) Because Fraunhofer and Yazmi never entered into a new agreement regarding the MCM License, the MCM License remained rejected. (D.I. 1 at¶ 27 n.l; 8/15/17 Tr. at 11:15-12:2)

         On November 4, 2010, Fraunhofer filed a proof of claim[3] against WorldSpace in the amount of €16, 024.57 for fees incurred under § 4.2 of the MCM License between May 31, 2009 and June 2, 2010. (D.I. 21, Ex. C)

         On June 12, 2012, the chapter 11 bankruptcy proceeding was converted to a chapter 7 proceeding, following which the Trustee had sixty days to assume executory contracts and unexpired leases. (D.I. 1 at ¶ 28) The Trustee did not assume the MCM License.[4] As a result, the MCM License was rejected as of August 12, 2012. (Id.)

         In October 2015, Fraunhofer informed SXM that it was infringing the patents-in-suit, and SXM claimed that it had the authority to continue using the MCM technologies. (Id. at ¶ 30)

         III. LEGAL STANDARD

         Rule 12(b)(6) permits a party to move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When considering a Rule 12(b)(6) motion to dismiss, the court must accept as true all factual allegations in the complaint and view them in the light most favorable to the plaintiff. Umland v. Planco Fin. Servs., 542 F.3d 59, 64 (3d Cir. 2008).

         To state a claim upon which relief can be granted pursuant to Rule 12(b)(6), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). Although detailed factual allegations are not required, the complaint must set forth sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." BellAtl Corp. v. Twombfy,550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). A claim is facially plausible when the factual allegations allow the court to ...


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