Videoshare, LLC v. YouTube, LLC

VideoShare’s covenant not to sue YouTube for infringement of its patent divested the court of subject matter jurisdiction over YouTube’s counterclaim for a declaratory judgment of patent invalidity.

Opinion (Wolf): VideoShare, LLC ("VideoShare") sued YouTube, LLC ("YouTube") alleging that YouTube infringed VideoShare’s Pat. No 7,987,492, which is directed toward shared video streams that permit a user to upload a video and multiple users to view the video without downloading the complete file. YouTube filed a reply and counterclaimed for a declaratory judgment that the ‘492 patent was invalid. VideoShare then moved to dismiss the case, arguing that it had made a covenant not to sue YouTube (or any other Google properties) for infringement of the ‘492 patent and that that covenant removed any controversy between itself and YouTube. YouTube opposed the motion. Once a reply and counterclaims have been filed, a case can only be dismissed by court order. Where dismissal would be with prejudice and would not impact third parties, denial of the motion is rarely appropriate. However, once counterclaims have been filed dismissal is only appropriate if the counterclaims can be adjudicated in an independent action. Subject matter jurisdiction for declaratory judgments of patent invalidity, however, is dependant on the existence of a substantial controversy between the parties. Where a covenant not to sue for patent infringement exists, it divests the court of subject matter jurisdiction over claims that a patent is invalid. Accordingly, because VideoShare had covenanted not to sue YouTube based on the ‘492 patent the district court lacked subject matter jurisdiction over YouTube’s counterclaim and it, therefore, GRANTED VideoShare’s motion to dismiss.