The plaintiff, Shipping and Transit, LLC ("Plaintiff"), filed a patent infringement action against Defendant Neptune Cigars, Inc. ("Defendant"), for infringement of U.S. Patent Nos. 6,415,207 ("the '207 Patent") and 6,763,299 ("the '299 Patent"). The Defendant filed a motion to dismiss on the ground that the patents are directed to ineligible subject matter under 35 U.S.C. § 101.

Instead of opposing the motion to dismiss on the merits, the Plaintiff issued a covenant not to sue to the defendant. The Plaintiff then argued that the covenant not to sue removed any actual controversy between the parties and that the case should be dismissed based on a lack of subject matter jurisdiction.

The district court began by analyzing the issue in terms of Article III of the Constitution, which grants federal courts the authority to adjudicate "Cases" and "Controversies." Already, LLC v. Nike, Inc., --- U.S. ----, ----, 133 S.Ct. 721, 726, 184 L.Ed.2d 553 (2013). "[A]n 'actual controversy' must exist not only at the time the complaint is filed, but through all stages of the litigation." Id. "A case becomes moot-and therefore no longer a 'Case' or 'Controversy' for purposes of Article III-when the issues presented are no longer live or the parties lack a legally cognizable interest in the outcome." Id. (internal quotation marks omitted). To challenge the validity of a patent claim, an actual case or controversy must exist between the challenger and the patentee. See Aqua Marine Supply v. AIM Machining, Inc., 247 F.3d 1216, 1219 (Fed. Cir. 2001).

The district court then explained that the "Plaintiff has extended to Defendant a covenant not to sue that promises on behalf of itself and all future assignees of the patents not to assert any claims of infringement against Defendant, its affiliates, or assigns. The broad language of the covenant covers future, as well as past, activity and products. Plaintiff has disclaimed any patent infringement suit it could possibly bring against Defendant at this time, and Defendant has not asserted any intent to pursue activity that would expose it to any prospect of infringement liability."

Based on the language of the covenant not to sue, the district court concluded that "the covenant eliminates any case or controversy based on the patents-in-suit between the parties."

As a result, the district court dismissed the case for lack of subject matter jurisdiction.

Shipping and Transit, LLC v. Neptune Cigars, Inc., Case No. CV 16-03836-AG (SHSx) (C.D. Cal. Sept. 12, 2016)