VLSI Technology LLC v. Intel Corporation

Background

VLSI brought this patent-infringement case against Intel. Intel later asserted that it had a license and full release covering the patents. After VLSI dismissed its remaining infringement claims, the court ruled that Intel could not proceed to trial on the license as an affirmative defense because no live claims remained. The court then allowed Intel to amend its answer to add a standalone counterclaim asserting that it was licensed to use VLSI’s patents.

The counterclaim relied on a 2012 agreement between Intel and certain Finjan entities. The agreement granted Intel a perpetual, irrevocable license to Finjan’s patents. Section 11.4 required disputes and litigation concerning the agreement or its performance to be brought exclusively in the Delaware Court of Chancery or the United States District Court for the District of Delaware. Section 9.1 allowed Intel to plead the license as an affirmative defense in an infringement action and addressed claims involving prospective infringement.

Forum Selection Clause

VLSI argued that the agreement barred Intel from bringing a standalone license counterclaim in this court and that the counterclaim should be dismissed. Intel argued that Section 9.1 permitted the counterclaim here or, alternatively, that the court should transfer the case to Delaware.

The court interpreted the agreement under Delaware law. It held that Section 9.1 created a limited exception allowing Intel to plead the license as an affirmative defense in an infringement action regardless of where that action was filed. But Section 9.1 did not remove the venue limits in Section 11.4 for a standalone license claim or counterclaim. The court therefore held that Intel’s standalone counterclaim had to be brought in the Delaware Court of Chancery or the District of Delaware and could not be pleaded in this case.

The court considered both transfer under 28 U.S.C. § 1404 and dismissal under Federal Rule of Civil Procedure 12(b)(6). It chose dismissal, explaining that most other claims had been resolved or would not proceed, that the adjudicated claims were ready for appellate review after final judgment, and that transferring the entire case could burden another court with rulings from this six-year-old case. The court also declined to sever and transfer only the counterclaim.

Subject-Matter Jurisdiction

VLSI separately argued that the court lacked subject-matter jurisdiction because no live controversy remained. Intel argued that ongoing patent litigation and disputes in several forums, along with additional patents in VLSI’s portfolio, showed a real controversy.

The court rejected VLSI’s jurisdictional argument. It found a substantial controversy between the parties because VLSI had pursued infringement claims against Intel in several forums, the parties disputed whether Intel held a license, and the license allegedly covered the patent portfolio involved in that litigation. The court held that Intel’s counterclaim alleged facts supporting jurisdiction for declaratory relief.

Other Arguments and Disposition

VLSI also argued that Intel failed to state a claim and that the first-filed rule required transfer to the Western District of Texas. The court did not reach either argument because its forum-selection-clause ruling resolved the motion.

The court granted VLSI’s motion to dismiss Intel’s counterclaim that it was licensed to use VLSI’s patents. The dismissal was without prejudice to pleading the claim in the proper forum. The court stated that Intel remained free to assert the license as a defense in its ongoing Texas litigation, in a Delaware court with jurisdiction, or in another court—including this court—if there were live infringement claims.