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Judge Swain Finds Allegations in Customer Suits Support Supplier’s DJ Jurisdiction Action

On July 13, 2018, United States District Judge Laura Taylor Swain (S.D.N.Y.) granted a motion by Plaintiff— BroadSign International, LLC ("BroadSign") —for leave to file a Second Amended Complaint against Defendant T-Rex Property AB ("T-Rex"), seeking, inter alia, declaratory judgments of noninfringement and invalidity of U.S. Patent No. RE39,470, U.S. Patent No. 7,382,334, and U.S. Patent No. 6,430,603 (collectively, the "Patents-in-Suit").

BroadSign supplies hardware and software solutions to operators of networks of digital signs. T-Rex has sued several of BroadSign's customers that make, use, or sell digital signage systems, for direct patent infringement on one or more of the Patents-in-Suit.

On January 10, 2018, Judge Swain granted T-Rex's motion to dismiss BroadSign's First Amended Complaint, concluding that the allegations regarding T-Rex's suits against BroadSign's customers, contested requests for indemnification, and T-Rex's actions in connection with licensing discussions initiated by BroadSign did not constitute an "aggressive litigation strategy" sufficient to establish a "substantial controversy," as needed for declaratory judgement jurisdiction.  The court further concluded that BroadSign had failed to sufficiently plead it faced potential liability for contributory infringement.

On February 1, 2018, BroadSign moved for leave to file a Second Amended Complaint ("SAC"), which T-Rex opposed as futile.  In deciding the motion, Judge Swain first concluded BroadSign's new allegations regarding T-Rex's suits against its direct competitors remained insufficient to establish a substantial controversy based on "aggressive litigation strategy."  This is so, according to Judge Swain, because the products accused in those cases were not alleged to be sufficiently similar to BroadSign's.

Judge Swain, however, found that BroadSign's SAC did plead facts sufficient to show a real and substantial controversy resulting from BroadSign's potential liability for contributory infringement as to its customers.  As noted by Judge Swain, the SAC alleges BroadSign's products are built to order for customers who are the subject of T-Rex's prior lawsuits, and that those products are "especially designed for use" in the accused invention.  The SAC also alleges that BroadSign's future sales will be made with knowledge that these products function in a way that meets each limitation of at least one claim of each of the Patents-in-Suit—this allegation being based on BroadSign's knowledge of T-Rex's complaints in the customer lawsuits.  Finally, Judge Swain concluded that amendment would not be futile, because BroadSign's action is based on fear of suit irrespective of whether the customer litigations were ongoing.

Case: BroadSign Int'l, LLC v. T-Rex Prop. AB, 16-CV-04586-LTS-HBP, Dkt. No. 54 (S.D.N.Y. July 13, 2018).