The Hon. Roger Thomas Benitez of the U.S. District Court for the Southern District of California found that Lowenstein client ChowNow properly removed a patent dispute case, originally filed against it in California state court by Ameranth, Inc., to the Southern District of California. Finding that the court had federal question jurisdiction over all of the claims, counterclaims, and defenses in this jurisdictionally complex case, Judge Benitez denied Ameranth’s motion to remand the dispute back to state court. The court also denied Ameranth’s motion to dismiss ChowNow’s counterclaims.
ChowNow is an online and mobile food ordering company offering food and beverage ordering technology systems and services to local restaurants throughout the United States. The company providesrestaurants with Software as a Service tools to help them grow their business by allowing them to process an unlimited number of customer orders through their own websites and mobile applications for a fixed monthly cost.
In 2012, Amaranth first brought claims of patent infringement against ChowNow; the claims were ultimately resolved through a settlement agreement that required ChowNow to license a family of patents from Ameranth in exchange for royalty payments. In this current matter, Amaranth claimed that Chownow failed to meet its royalty obligations as set forth in that agreement and thus was in breach of their patent license agreement.
The district court agreed with ChowNow’s position that royalty obligations to Amaranth were contingent upon ChowNow practicing the licensed patents within their designated field of use as specified in the parties’ license agreement. The court also found that Ameranth was not entitled to collect any allegedly due unpaid royalties unless it could prove both that its patents were valid and that ChowNow practiced those patents within the designated fields of use while the agreement was still in effect.
In finding that the license agreement terminated by its own terms in 2018, the court found that the majority of Ameranth’s unpaid royalty claims against ChowNow were rendered moot.
In a significant victory for our client, the court further held that ChowNow is not barred from bringing counterclaims alleging noninfringement and invalidity of the Ameranth patents and that those claims are not barred by Ameranth’s covenant not to sue. Ameranth’s motion to dismiss additional counterclaims brought by ChowNow regarding the unenforceability of the Ameranth patents and antitrust claims related to patent misuse were also denied.
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