Judge Joseph J. Farnan, Jr. recently granted a motion filed by Defendant WebXchange Inc. (“WedXchange”) to dismiss the Complaint for Declaratory Judgment of Plaintiff Microsoft Corporation (“Microsoft”) because of lack of subject matter jurisdiction after concluding that no case or controversy existed between the parties sufficient to confer subject matter jurisdiction. I’ve attached a copy of the Court’s opinion (PDF).

By way of background, Microsoft filed its complaint seeking a declaratory judgment that its actions in connection with Microsoft MapPoint Web Services (“MapPoint”) and Microsoft Virtual Earth Web Services (“Virtual Earth”) did not infringe any of WebXchange’s patents-in-suit, and also, that the patents-in-suit were invalid and unenforceable.

WebXchange has three related patent infringement actions pending in this District against customers of Microsoft that used Microsoft’s Visual Studio software to create some of the products that WebXchange accused of infringement.  Microsoft had previously filed a declaratory judgment action against WebXchange in the United States District Court for the Northern District of California.  In that case, WebXchange moved for dismissal, arguing that the Court lacked subject matter jurisdiction because there was no actual case or controversy between the parties.

WebXchange’s motion was granted with leave given to Microsoft to file an amended complaint and Microsoft was advised to “plead its best case.”  Microsoft eventually ultimately withdrew its motion for leave to file an amended complaint in that action and filed its complaint for declaratory judgment in the United States District Court of Delaware four months later.  WebXchange filed its motion to dismiss Microsoft’s complaint for declaratory judgment in this District based again on lack of subject matter jurisdiction.

The Court, via Judge Farnan, found that none of the controversies between the parties cited by Microsoft were sufficient to confer subject matter jurisdiction.  First, the Court concluded that no controversy exists because of WebXchange’s allegations that Microsoft customers’ use of MapPoint and Virtual Earth constitute infringement of the patents-in-suit.  The Court noted that “Microsoft does not allege even one instance of WebXchange accusing infringement based on the use of Virtual Earth.”

Second, the Court concluded that no controversy exists by virtue of WebXchange’s infringement suits against Microsoft customers who use MapPoint.  The Court found that this action was distinguishable from the facts in WS Packaging Group, Inc. v. Global Commerce Group, LLC, 505 F. Supp. 2d 561 (E.D. Wis. 2007).  In doing so, the Court noted that there is no indication that WebXchange is intentionally engaging in scare-the-customer tactics, or using Microsoft’s customers as proxies to apply pressure to Microsoft.  Moreover, the Court noted that, even if the defendants in the related cases are ultimately found to have infringed WebXchange’s patents-in-suit, that does not necessitate a finding that Microsoft itself infringed by its MapPoint and Virtual Earth programs.

Third, the Court concluded that the alleged damage caused by the related cases to Microsoft’s relations with its customers did not create a controversy between the parties.  The Court noted that, to date, WebXchange had only accused three of Microsoft’s customers of infringement and, in the Court’s view, that was insufficient to prove that WebXchange is causing actual injury to Microsoft’s business relationships.

Finally, the Court concluded that WebXchange’s conduct did not create an imminent future threat to Microsoft, and WebXchange’s failure to covenant not to sue Microsoft did not create an actual controversy by itself.  Accordingly, the Court granted WebXchange’s motion to dismiss and dismissed Microsoft’s Complaint for Declaratory Judgment based on lack of subject matter jurisdiction.