AT&T Corp. v. Voip-Pal.com, Inc.

Background

AT&T Corp., AT&T Services, Inc., and AT&T Mobility LLC sued VoIP-Pal.com, Inc. for a declaration that AT&T did not infringe U.S. Patent No. 10,218,606, known as the ’606 patent, and that the patent was invalid. The patent concerns a system for routing communications over Internet Protocol.

The case was part of a longer dispute. VoIP-Pal had previously sued AT&T over other patents, and the court had invalidated those patents under 35 U.S.C. § 101. The Federal Circuit affirmed those decisions. In April 2020, VoIP-Pal also sued AT&T in the Western District of Texas for allegedly infringing the ’606 patent. AT&T then filed this declaratory-judgment case in the Northern District of California.

The motion and the covenants not to sue

VoIP-Pal moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which allows dismissal for lack of subject-matter jurisdiction. VoIP-Pal argued that no live dispute remained because its motion included a covenant not to sue—an unconditional promise not to bring a patent-infringement lawsuit against AT&T based on specified products and services.

The original covenant covered AT&T’s current products and services and products and services used before the date of the covenant. In its reply, VoIP-Pal changed the wording to expressly cover AT&T’s past products and services. AT&T argued that the covenant still did not cover AT&T’s customers and did not bind future owners of the patent.

Court’s analysis

A federal court may hear a declaratory-judgment action only when there is an actual controversy: a substantial, immediate, and real dispute between parties with opposing legal interests. That dispute must continue throughout the case, not merely exist when the complaint is filed.

The court explained that a covenant not to sue can sometimes eliminate jurisdiction, but the patent holder has the difficult burden of showing that it could not reasonably be expected to resume enforcement efforts against the accused party. The court must consider all the circumstances, including the covenant’s wording and the parties’ litigation history.

The court found that a substantial controversy remained. VoIP-Pal had litigated patent-enforcement claims against AT&T since 2016. After the covenants were offered, VoIP-Pal filed another lawsuit against AT&T involving patents covering similar technology and the same accused products. The court also noted the circumstances in which VoIP-Pal offered the covenants, including that it did so when it was due to identify its asserted claims and infringement contentions in this case.

The court placed particular importance on the covenants’ failure to cover AT&T’s customers. VoIP-Pal had alleged in its Texas infringement case that AT&T’s customers directly infringed the ’606 patent. Because the reply covenant did not protect those customers, the court concluded that the parties’ legal interests remained adverse.

Disposition

The court held that neither covenant eliminated subject-matter jurisdiction and that VoIP-Pal had not met its burden of showing that it could not reasonably be expected to resume enforcement activity. The court therefore denied VoIP-Pal’s motion to dismiss. The ruling addressed jurisdiction only; it did not decide whether AT&T infringed the ’606 patent or whether the patent was valid.