Case 1:13-cv SS Document 1 Filed 09/11/13 Page 1 of 10 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION

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1 Case 1:13-cv SS Document 1 Filed 09/11/13 Page 1 of 10 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION CROSSROADS SYSTEMS, INC., Plaintiff, CIVIL ACTION NO. 1:13-CV-800 v. JURY DEMANDED DOT HILL SYSTEMS CORP., Defendant. PLAINTIFF CROSSROADS SYSTEMS, INC. S ORIGINAL COMPLAINT Plaintiff Crossroads Systems, Inc. ( Crossroads ) alleges as follows: THE PARTIES 1. This is an action for breach of contract under the laws of the state of Delaware and, in addition to or in the alternative to the breach of contract claim, patent infringement under 35 U.S.C. 271 et seq. 2. Plaintiff Crossroads is a corporation incorporated under the laws of the State of Delaware and has its principal place of business at North MoPac Expressway, Austin, Texas Upon information and belief, Defendant Dot Hill Systems Corp. ( Dot Hill or Defendant ) is a Delaware Corporation with a principal place of business of 1351 South Sunset St., Longmont, CO JURISDICTION AND VENUE 4. This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C and 1367 because all claims in this action arise under the patent laws of the United 1

2 Case 1:13-cv SS Document 1 Filed 09/11/13 Page 2 of 10 States, including 35 U.S.C. 271, or are so related to such claims as to form part of the same case or controversy. 5. Dot Hill is subject to personal jurisdiction and venue in this in this district under 28 U.S.C and Upon information and belief, Defendant has established minimum contacts with this forum such that the exercise of jurisdiction over Defendant would not offend traditional notions of fair play and substantial justice. 6. Defendant has irrevocably waived any objections to the jurisdiction and venue of this Court and has agreed to the jurisdiction and venue of this Court. The Parties Litigation History 7. On July 23, 2002, United States Patent No. 6,425,035 (the 035 Patent ) was duly and legally issued. A true and correct copy of the 035 Patent is attached hereto as Exhibit A. Crossroads is the assignee and the owner of all right, title, and interest in and to the 035 Patent. The 035 Patent is entitled to a presumption of validity. 8. On October 17, 2003, Crossroads filed suit against Dot Hill alleging infringement of United States Patent Nos. 5,941,972 (the 972 Patent ) and 6,425,035 ( the 035 Patent ) in the case captioned: Civil Action No. 1:03-cv SS, Crossroads Systems (Texas), Inc., a Texas Corporation v. Dot Hill Systems Corporation, a Delaware Corporation ( Dot Hill I ). 9. On or about June 2006, Dot Hill and Crossroads executed a written settlement agreement effective June 27, 2006 in settlement of Dot Hill I. 10. Dot Hill breached the June 2006 settlement agreement and on July 24, 2006, Crossroads filed suit against Dot Hill alleging breach of the settlement agreement in the case captioned Civil Action No. 1:06-cv SS, Crossroads Systems (Texas), Inc. v. Dot Hill Systems Corporation ( Dot Hill II ). 2

3 Case 1:13-cv SS Document 1 Filed 09/11/13 Page 3 of On or about October 5, 2006, Dot Hill and Crossroads executed a second written settlement agreement (the License Agreement ) effective June 27, 2006 in settlement of Dot Hill II. Attached hereto as Exhibit B is a true and correct copy of the License Agreement. The License Agreement Between Crossroads and Dot Hill 12. The License Agreement states [s]ubject to actual receipt by Crossroads of payment as set forth in Paragraph 5 of this Agreement, Crossroads hereby grants to Dot Hill a non-exclusive, personal, non-sublicensable, non-transferable, non-assignable (except as provided herein), indivisible, worldwide, royalty-bearing license under the 972 Patent Family to make, have made (for Dot Hill only), use, lease, license, design, develop, distribute, market, sell, offer for sale, export, import and otherwise dispose of Licensed Products, as well as to make, use or perform any method or process claimed in the 972 Patent Family after the Effective Date. 13. Paragraph 5 of the License Agreement requires Dot Hill to pay a running royalty on its sale of Licensed Products. Paragraph 5 of the License Agreement further requires Dot Hill to maintain records in sufficient detail to enable the royalties due and payable under the License Agreement to be readily determined. 14. The License Agreement defines Licensed Products, in part, as a product that is covered by any claim of any patent in the 972 Patent Family. 15. The License Agreement defines 972 Patent Family to expressly include the 035 Patent, among others. 16. In August 2011 and in accordance with paragraph 5.6 of the License Agreement, Crossroads conducted an audit of Dot Hill that covered the years 2006 through During the audit, it was determined that Dot Hill had failed to make royalty payments in accordance with the License Agreement with respect to products that Dot Hill 3

4 Case 1:13-cv SS Document 1 Filed 09/11/13 Page 4 of 10 agrees are subject to the License Agreement (the Covered Products ) causing Dot Hill to be in material breach of the License Agreement. During the audit, it was further determined that Dot Hill failed to make royalty payments in accordance with the License Agreement with respect to products that fall within the claims of at least the 035 Patent (the Infringing Products ), causing Dot Hill to further materially breach the License Agreement. Dot Hill s failure to pay royalties on these Covered Products and Infringing Products represents a material breach by Dot Hill of the License Agreement. 18. During the audit, it was also determined that Dot Hill had failed to maintain records in the manner required by the License Agreement further causing Dot Hill to be in material breach of the License Agreement. Upon information and belief, the records Dot Hill has failed to maintain would show that Dot Hill failed to pay additional royalties due Crossroads under the License Agreement. 19. Crossroads notified Dot Hill of its failure to comply with the License Agreement, but Dot Hill did not cure its breaches. 20. Dot Hill s failure to fully make the royalty payments due Crossroads in accordance with the License Agreement was a breach of the License Agreement that Dot Hill did not cure. 21. Dot Hill s failure to maintain adequate records in accordance with the License Agreement was a breach of the License Agreement that Dot Hill did not cure. COUNT ONE BREACH OF CONTRACT 22. Crossroads incorporates paragraphs 1 21 by reference as if fully alleged herein. 23. The License Agreement is a valid, enforceable and subsisting contract between Crossroads and Dot Hill. 4

5 Case 1:13-cv SS Document 1 Filed 09/11/13 Page 5 of All conditions precedent to the relief Crossroads seeks herein have been performed, have occurred, or have been waived. 25. Crossroads complied with all terms and conditions of the License Agreement. 26. Neither Crossroads nor Dot Hill has terminated the License Agreement. 27. Dot Hill materially breached various sections of the License Agreement, including, but not limited to, sections 5.2 and 5.6, by among other things, failing to pay royalties on the Covered Products, failing to pay royalties on the Infringing Products, and failing to maintain records required by the License Agreement. 28. As a result of Dot Hill s material breach of the License Agreement, Crossroads has suffered damages in an as-yet-undetermined amount. Such damages shall include, without limitation, attorneys fees, court costs, other collection expenses (in accordance with paragraph 13.5 of the License Agreement), interest (in accordance with Paragraph 5.5 of the License Agreement) and the cost of Crossroads August 2011 audit, if the royalty payments paid by Dot Hill pursuant to this Agreement for any calendar year have been understated by more than five percent (5%) of the amount actually owed to Crossroads (in accordance with Paragraph 5.6 of the License Agreement). COUNT TWO PATENT INFRINGEMENT OF U.S. PATENT NO. 6,425, Crossroads incorporates paragraphs 1-28 by reference as if fully alleged herein. 30. In addition or in the alternative to Crossroads breach of contract claim, Defendant Dot Hill has directly infringed the 035 Patent. On information and belief, Defendant continues to directly infringe the 035 Patent. 31. Specifically, Defendant has directly infringed the 035 Patent by making, using, offering for sale, selling and/or importing into the United States certain of its products including 5

6 Case 1:13-cv SS Document 1 Filed 09/11/13 Page 6 of 10 at least the following products: 2332 Storage System; 2522 Storage System; 2532 Storage System; 2530 Storage System; 3430 Data Protection Solutions; 3520 Storage System; 3530 Storage System; 3720 Fibre Channel Array; 3730 Fibre Channel Array; 3930 Data Protection Solution; AJ752A: HP 2012sa Single Controller Modular Smart Array; AJ753A: HP 2012sa Dual Controller Modular Smart Array; AJ805A: HP 2312a G2 Dual Controller Modular Smart Array (LFF); AJ807A: HP 2324sa G2 Dual Controller Modular Smart Array (SFF); Sun StorEdge SE3510 FC Array; and Sun StorEdge SE3511 SATA Array. 32. Further, Defendant has been and now is indirectly infringing by way of inducing infringement of the 035 Patent with knowledge of the 035 Patent by making, offering for sale, selling, importing into the United States, marketing, supporting, providing product instruction and/or advertising certain of its products, including the 2332 Storage System; 2522 Storage System; 2532 Storage System; 2530 Storage System; 3430 Data Protection Solutions; 3520 Storage System; 3530 Storage System; 3720 Fibre Channel Array; 3730 Fibre Channel Array; 3930 Data Protection Solution; and Defendant knew that its actions were inducing end users to infringe the 035 Patent. 33. Further, upon information and belief, Defendant has been and now is indirectly infringing by way of inducing infringement of the 035 Patent with knowledge of the 035 Patent by making, offering for sale, selling, importing into the United States, marketing, supporting, providing product instruction and/or advertising certain of its products, including the AJ752A: HP 2012sa Single Controller Modular Smart Array; AJ753A: HP 2012sa Dual Controller Modular Smart Array; AJ805A: HP 2312a G2 Dual Controller Modular Smart Array (LFF); AJ807A: HP 2324sa G2 Dual Controller Modular Smart Array (SFF); Sun StorEdge SE3510 FC 6

7 Case 1:13-cv SS Document 1 Filed 09/11/13 Page 7 of 10 Array; and Sun StorEdge SE3511 SATA Array, and Defendant knew that its actions were inducing end users to infringe the 035 Patent. 34. Further, Defendant has been and now is indirectly infringing by way of contributing to the infringement by end users of the 035 Patent by selling, offering to sell and/or importing into the United States components, including the 2332 Storage System; 2522 Storage System; 2532 Storage System; 2530 Storage System; 3430 Data Protection Solutions; 3520 Storage System; 3530 Storage System; 3720 Fibre Channel Array; 3730 Fibre Channel Array; 3930 Data Protection Solution; AJ752A: HP 2012sa Single Controller Modular Smart Array; AJ753A: HP 2012sa Dual Controller Modular Smart Array; AJ805A: HP 2312a G2 Dual Controller Modular Smart Array (LFF); AJ807A: HP 2324sa G2 Dual Controller Modular Smart Array (SFF); Sun StorEdge SE3510 FC Array; and Sun StorEdge SE3511 SATA Array, knowing the components to be especially made or especially adapted for use in the infringement of the 035 Patent. Such components are not a staple article or commodity of commerce suitable for substantial non-infringing uses. 35. Defendant has been on constructive and/or actual notice of the 035 Patent since before this lawsuit and Defendant has not ceased its infringing activities. The infringement of the 035 Patent by Defendant has been and continues to be willful and deliberate. 36. Crossroads has been irreparably harmed by Defendant s acts of infringement of the 035 Patent, and will continue to be harmed unless and until Defendant s acts of infringement are enjoined and restrained by order of this Court. 37. As a result of the acts of infringement of the 035 Patent by Defendant, Crossroads has suffered and will continue to suffer damages in an amount to be proven at trial. ATTORNEYS FEES 38. Crossroads incorporates paragraphs 1-37 by reference as if fully alleged herein. 7

8 Case 1:13-cv SS Document 1 Filed 09/11/13 Page 8 of Crossroads has retained the undersigned counsel to represent it in this action and has agreed to pay the reasonable and necessary fees of these attorneys. Crossroads is also entitled to an award of reasonable attorneys fees in connection with its claim for breach of contract under the License Agreement, pursuant to the terms of the License Agreement. Crossroads is also entitled to an award of its attorneys fees in connection with its claim for patent infringement pursuant to patent law. PRAYER FOR RELIEF WHEREFORE, Plaintiff Crossroads Systems, Inc. respectfully requests the following relief: A. That Defendant Dot Hill has infringed the 035 Patent; B. That such infringement of the 035 Patent by Defendant has been willful; C. That Defendant accounts for and pays to Crossroads all damages caused by the infringement of the 035 Patent; D. That Crossroads receive enhanced damages from Defendant in the form of treble damages, pursuant to 35 U.S.C. 284 based on Defendant s willful infringement of the 035 Patent; E. That Crossroads be granted pre-judgment and post-judgment interest on the damages caused to it by reason of Defendant s infringement of the 035 Patent, including pre-judgment and post-judgment interest on any enhanced damages or attorneys fees award; F. That Defendant pay Crossroads all of Crossroads reasonable attorneys fees and expenses; G. That costs be awarded to Crossroads; 8

9 Case 1:13-cv SS Document 1 Filed 09/11/13 Page 9 of 10 H. That Defendant, its agents, employees, representatives, successors and assigns, and those acting in privity or in concert with it, be preliminary and permanently enjoined from further infringement of the 035 Patent; I. That this is an exceptional case under 35 U.S.C. 285 such that Crossroads should be awarded its attorneys fees; J. An award for damages caused by Dot Hill s breach of the License Agreement in an amount to be determined at trial; K. That Crossroads be granted its attorneys fees, court costs, other collection expenses (in accordance with paragraph 13.5 of the License Agreement), interest (in accordance with Paragraph 5.5 of the License Agreement) and the cost of the audit conducted by Crossroads (in accordance with Paragraph 5.6 of the License Agreement); and L. Such other and further relief at law or in equity as the Court deems just and proper. DEMAND FOR JURY TRIAL Crossroads hereby demands a trial by jury on all issues. 9

10 Case 1:13-cv SS Document 1 Filed 09/11/13 Page 10 of 10 Dated: September 11, 2013 Respectfully submitted, By: /s/ Elizabeth J. Brown Fore Steven Sprinkle Texas Bar No ssprinkle@sprinklelaw.com Elizabeth J. Brown Fore Texas Bar No ebrownfore@sprinklelaw.com SPRINKLE IP LAW GROUP, PC 1301 W. 25 th Street, Suite 408 Austin, Texas Telephone: Facsimile: John M. Guaragna Texas Bar No john.guaragna@dlapiper.com Aaron G. Fountain Texas Bar No aaron.fountain@dlapiper.com Courtney Stewart Texas Bar No courtney.stewart@dlapiper.com DLA PIPER LLP (US) 401 Congress Avenue, Suite 2500 Austin, TX Telephone: Facsimile: Sean Cunningham (pro hac vice) sean.cunningham@dlapiper.com Jesse Hindman (pro hac vice) jesse.hindman@dlapiper.com DLA PIPER LLP (US) 401 B Street San Diego, CA Telephone: Facsimile: ATTORNEYS FOR PLAINTIFF CROSSROADS SYSTEMS, INC. 10