United States District Court, D. Delaware
FRAUNHOFER-GESELLSCHAFT ZUR FORDERUNG DER ANGEWANDTEN FORSCHUNG E.V., Plaintiff,
SIRUS XM RADIO INC., Defendants.
REPORT AND RECOMMENDATION
R. Fallon, UNITED STATES MAGISTRATE JUDGE
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.
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
March 4, 1998, Fraunhofer entered into an exclusive license
agreement 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)
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") 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.,
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)
November 4, 2010, Fraunhofer filed a proof of
claim 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,
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. As a result, the MCM License was rejected
as of August 12, 2012. (Id.)
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)
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).
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 ...