The Changing Tide of Declaratory Judgment Jurisdiction in Patent Cases

It has been just over two years since the U.S. Supreme Court changed the rules respecting when a party may bring a declaratory judgment action to challenge whether its activities infringe a patent of another, or whether the patent is valid or enforceable. See MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764 (2007). In a now famous footnote, the Court ruled that the then-longstanding “reasonable apprehension” test could not be harmonized with its own precedent, which required an examination of all circumstances. Id. at 774 n.11.

During the last two years, the Court of Appeals for the Federal Circuit has decided a series of cases that collectively explore what circumstances are sufficient, or insufficient, to establish declaratory judgment jurisdiction in the context of a patent dispute. Several of these decisions, which have put patentees at an increased risk for declaratory judgment lawsuits, are addressed below.

Background

Declaratory Judgment Act

The Declaratory Judgment Act provides that, “[i]n a case of actual controversy within its jurisdiction, ' any court of the United States ' may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. '2201(a). The “actual controversy” requirement requires an Article III case-or-controversy to confer jurisdiction upon the court in a declaratory judgment action.

Historically, in order determine whether a proper case-or-controversy exists in the context of a declaratory judgment action for patent non-infringement or invalidity, a potential infringer needed to satisfy a two-part test. First, the potential infringer needed to establish that a patentee had either expressly threatened it with litigation, or had taken other action that created a reasonable apprehension that it would face suit. Second, the declaratory judgment plaintiff needed to establish that its present activity could constitute an act of infringement, or at least that it had taken concrete steps with the intent to conduct such activity. See, e.g., Gen-Probe, Inc. v. Vysis, Inc., 359 F.3d 1376, 1380 (Fed. Cir. 2004).

MedImmune, Inc. v. Genentech, Inc.

In MedImmune, the Supreme Court addressed the issue of whether a patent licensee is required to terminate or breach its licensing agreement before seeking declaratory judgment that the patent is invalid, unenforceable, or not infringed. The Supreme Court started its analysis by reviewing its prior cases that address the case-or-controversy requirement with respect to declaratory judgment actions. In particular, the Court noted that its prior decisions had required that a dispute be “definite and concrete, touching the legal relations of parties having adverse legal interests,” “real and substantial,” and that “specific relief” be available. MedImmune, at 771 (internal citations omitted). In view of that jurisprudence, the Court instructed that the exercise of declaratory judgment jurisdiction requires that the facts alleged, “under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Id. (internal citation omitted).

In a footnote to its decision, the Court considered the Federal Circuit's well-established reasonable apprehension test, and whether that test could be harmonized with the Court's all circumstances test:

Even if Altvater [v. Freeman, 319 U.S. 359 (1943)] could be distinguished as an “injunction” case, it would still contradict the Federal Circuit's “reasonable apprehension of suit” test (or, in its evolved form, the “reasonable apprehension of imminent suit” test, Teva Pharm. USA, Inc. v. Pfizer, Inc., 395 F.3d 1324, 1333 (2005)). A licensee who pays royalties under compulsion of an injunction has no more apprehension of imminent harm than a licensee who pays royalties for fear of treble damages and an injunction fatal to his business. The reasonable-apprehension-of-suit test also conflicts with our decisions in Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273 (1941), where jurisdiction obtained even though the collision-victim defendant could not have sued the declaratory-judgment plaintiff-insurer without first obtaining a judgment against the insured; and Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239 (1937), where jurisdiction obtained even though the very reason the insurer sought declaratory relief was that the insured had given no indication that he would file suit. It is also in tension with Cardinal Chemical Co. v. Morton Int'l, Inc., 508 U.S. 83, 98 (1993), which held that appellate affirmance of a judgment of non-infringement, eliminating any apprehension of suit, does not moot a declaratory judgment counterclaim of patent invalidity. Id. at 774 n.11.

SanDisk Corp. v. STMicroelectronics, Inc.

SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372 (Fed. Cir. 2007), decided less than three months after MedImmune, provided the Federal Circuit with an opportunity to both acknowledge that MedImmune had overruled its reasonable apprehension test, as well as apply the all circumstances test. In SanDisk, the court faced the issue of whether the patentee's conduct during licensing negotiations met the case-or-controversy requirement, even though the patentee unequivocally stated that it had no intent to sue.

ST, the patentee, sought to enter into a cross-licensing agreement with SanDisk, and provided a list of ST patents that “may be of interest” to SanDisk. During a license negotiation meeting, ST's representatives repeatedly referred to SanDisk's “alleged infringement” of ST's products as they presented infringement analyses, which mapped claim elements to aspects of specified SanDisk products. However, ST verbalized that it had “absolutely no plan whatsoever to sue SanDisk.” When post-meeting communications did not result in a cross-licensing agreement, SanDisk filed a declaratory judgment action of non-infringement and invalidity of the ST patents. The district court granted ST's motion to dismiss for lack of subject matter jurisdiction on the ground that a justiciable case-or-controversy did not exist because ST had told SanDisk that it did not intend to sue SanDisk for infringement. The Federal Circuit disagreed.

The Federal Circuit explained that jurisdiction requires some affirmative act by the patentee, “put[ting] the declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or abandoning that which he claims a right to do.” SanDisk, at 1381. Jurisdiction does not arise merely because a party believes that a patent owned by another poses a risk of infringement. Moreover, ST's statement that it would not sue SanDisk did not destroy jurisdiction in light of its threatening conduct. Applying the all circumstances test set forth in MedImmune, the court held that jurisdiction exists “where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license.” Id. Accordingly, ST's conduct, which evidenced that it was preparing and willing to enforce its patents, met the case-or-controversy requirement.

Federal Circuit Cases Decided After SanDisk

The Federal Circuit has faced a number of declaratory judgment actions since the rejection of the reasonable-apprehension-of-suit test. These cases provide guidance as to how the court may apply the all circumstances test to future disputes.

DJ Jurisdiction Exists As to Independent Claims After Enforcement of Dependent Claims.

In Honeywell Int'l Inc. v. Universal Avionics Sys. Corp., 488 F.3d 982 (Fed. Cir. 2007), the court considered whether a court maintains jurisdiction over non-asserted independent claims when dependent claims are in litigation. Honeywell, owner of five patents relating to an aircraft virtual “look ahead” terrain warning system, commenced an infringement action against Universal and Sandel. Honeywell subsequently represented to Universal and Sandel that it would pursue infringement of only two dependent claims, and withdrew the other originally asserted claims from its suit.

In its pre-MedImmune decision, the district court applied the reasonable apprehension test and held that the case-or-controversy requirement was met respecting Honeywell's withdrawn claims because Honeywell had refused to withdraw all of its claims. The court ultimately granted Universal and Sandel's motions for summary judgment of invalidity of the claims withdrawn by Honeywell. In its review, the Federal Circuit applied the all circumstances test, but nevertheless affirmed the district court's decision to retain jurisdiction over the withdrawn claims, holding that, where a patentee asserts dependent claims, the court has jurisdiction over the independent claims as well.

DJ Jurisdiction Does Not Arise from Future Threat of Litigation.

In Benitec Australia, Ltd. v. Nucleonics, Inc., 495 F.3d 1340 (Fed. Cir. 2007), Benitec sued Nucleonics for infringing its patent relating to RNA-based disease therapy. Nucleonics moved to dismiss the complaint, arguing that its allegedly infringing activities involve the development and submission of information to the U.S. Food and Drug Administration, and that the earliest that Nucleonics would be prepared to file a New Drug Application (“NDA”) to manufacture and market a new product would be six to eight years in the future, if ever, depending on its clinical trials. The district court, however, denied the motion.

Nucleonics later amended its answer to add declaratory relief counterclaims of invalidity and unenforceability based on alleged inventor fraud. When Benitec moved to dismiss its complaint without prejudice, the court granted the motion and dismissed Nucleonics's counterclaims for lack of jurisdiction. The Federal Circuit held, as Nucleonics itself asserted when it moved to dismiss the infringement claims, that developing and submitting information to the FDA, and the fact that Nucleonics may be subject to suit if it files an NDA in a few years, does not provide the requisite immediacy and reality for declaratory judgment.

DJ Jurisdiction Exists Where Patentee Gives Detailed Infringement Analysis During “Business Negotiations.”

In Sony Elecs., Inc. v. Guardian Media Techs., Ltd., 497 F.3d 1271 (Fed. Cir. 2007), Sony, Mitsubishi, Matsushita, and Thomson commenced declaratory judgment actions relating to Guardian's patents concerning technology for blocking the viewing of certain programs on televisions or other recorded medium. Guardian sent letters to each plaintiff stating that their products that featured parental control systems infringed Guardian's patents. The plaintiffs were provided with claim charts that listed each allegedly infringed claim and described on a limitation-by-limitation basis, the basis for Guardian's belief that the plaintiffs' products infringed the claims. However, Guardian was willing to negotiate a “business resolution” to the dispute. The district court granted Guardian's motion to dismiss, observing that Guardian did not expressly threaten to sue any of the plaintiffs for infringement, nor were its actions an implicit threat of immediate litigation.

The Federal Circuit disagreed. According to the court, the dispute presented a justiciable case-or-controversy because of the parties' definite and concrete dispute involving adverse legal interests. Guardian communicated its position that certain specified products of the plaintiffs infringed Guardian's patents, provided detailed infringement analyses, and asserted that it was entitled to specified royalties. The plaintiffs, on the other hand, maintained that the asserted claims were invalid based on prior art references. The court also rejected an argument that Guardian's willingness to negotiate a business resolution divested the court of jurisdiction.

DJ Jurisdiction Exists Where Patentee States That It Will “Pursue Its Available Legal Remedies.”

Adenta GmbH v. OrthoArm, Inc., 501 F.3d 1364 (Fed. Cir. 2007), arose from a settlement agreement resulting from a previous litigation, where OrthoArm assigned to American Orthodontics a patent relating to orthodontic brackets. Because American manufactured and distributed brackets for Adenta, American and Adenta entered into a royalty sharing agreement. Adenta later notified American and OrthoArm that it believed that the patent at issue was invalid, and that Adenta would stop paying royalties. American responded with a letter stating that Adenta's failure to pay royalties would constitute a breach of their agreement, and that in event of such breach, American would “pursue its available legal remedies to protect its rights.” Adenta commenced declaratory judgment of invalidity and unenforceability, which proceeded to a jury verdict in favor of Adenta.

OrthoArm appealed, arguing that the lower court lacked subject matter jurisdiction on the ground that there was no reasonable apprehension of suit. The Federal Circuit found that a justiciable controversy existed because Adenta had asserted that it would not pay any further royalties based on its belief that the patent was invalid, and American had indicated its intent to assert its rights by pursuing its available legal remedies.

DJ Jurisdiction Exists Where Patentee Sues Competitors and Makes Aggressive Public Statements.

In Micron Tech. Inc. v. MOSAID Tech. Inc., 518 F.3d 897 (Fed. Cir. 2008), MOSAID sent three warning letters to Micron and strongly suggested that Micron take a MOSAID license. MOSAID had commenced infringement actions against Micron's competing DRAM manufacturers, and also issued public statements and announced in its annual reports that it planned to pursue an aggressive licensing strategy. Consequently, Micron sought declaratory judgment of non-infringement of 14 MOSAID patents. The district court granted MOSAID's motion to dismiss on the ground that MOSAID's conduct was insufficient to create a reasonable apprehension suit since MOSAID had not threatened Micron for four years, had not threatened Micron's customers, and had not made public comments that specified Micron by name.

The Federal Circuit reversed. MOSAID's threats, lawsuits against the other DRAM manufacturers, and public declaration of its aggressive litigation strategy amounted to a justiciable case-or-controversy. Moreover, the four-year lapse in MOSAID's threats to Micron did not eliminate jurisdiction because MOSAID was busy negotiating with the other DRAM manufacturers during that time.

DJ Jurisdiction Exists Where Patent Owner Impedes FDA Approval, Regardless of Covenant Not to Sue.

Caraco Pharm. Labs., Inc. v. Forest Labs., Inc., 527 F.3d 1278 (Fed. Cir. 2008), involved two Abbreviated New Drug Applications (“ANDA”) and so-called Paragraph IV certifications, which placed patent owner Forest Labs on notice that others would pursue generic forms of its patented drug notwithstanding two potentially applicable Forest Labs patents. In response to a first Paragraph IV certification by Ivax, Forest filed an action against Ivax for infringement of one of its two patents, the '712 patent, but left its second potentially applicable patent, the '941 patent, out of its suit, and ultimately obtained judgment that Ivax's drug infringed the '712 patent.

Caraco filed a subsequent Paragraph IV ANDA, and as it had done with Ivax, Forest responded by filing an action for infringement of only the '712 patent. Caraco then filed a separate declaratory judgment action of non-infringement of Forest's '941 patent. Forest granted Caraco an irrevocable covenant not to sue for infringement of the '941 patent, and the district court dismissed Caraco's declaratory judgment action for lack of subject matter jurisdiction.

On appeal, the Federal Circuit appeared to breathe new life into the reasonable apprehension test, reasoning that the test is one of many ways to satisfy the all circumstances test. The court held that Caraco met the standard for a justiciable case-or-controversy: because of the Hatch-Waxman framework, if Caraco's generic drug did not infringe Forest's '941 patent, Caraco was being excluded from its right to enter the generic drug market. Caraco would suffer a justiciable injury traceable to Forest's listing of its patents in the Orange Book, redressable by a declaration that the '941 patent is not infringed. In addition, the court held that Forest's covenant not to sue did not divest the court of jurisdiction; regardless of a NDA holder's covenant not to sue, a generic drug manufacturer cannot market its product without approval from the FDA.

DJ Jurisdiction Does Not Arise from Patent Marking or Unrelated Litigation.

In Prasco, LLC v. Medicis Pharm. Corp., No. 2007-1524 (Fed. Cir. Aug. 15, 2008), Prasco filed a declaratory judgment action against Medicis seeking a declaration that its generic benzoyl peroxide cleansing product did not infringe Medicis' patents covering a competing cleansing product. Prasco based jurisdiction on Medicis' marking of its products with the numbers of the patents at issue, as well as Medicis' prior infringement action against Prasco concerning an unrelated product and an unrelated patent. After Medicis moved to dismiss Prasco's complaint for lack of jurisdiction, Prasco sent Medicis a sample of its cleansing product, an ingredient list, and a request for a covenant not to sue under the patents at issue. Medicis responded with a one-sentence letter stating that it did not plan to withdraw its motion to dismiss. The district court granted the motion.

The Federal Circuit affirmed, holding that the dispute lacked the requisite immediacy and reality to create a justiciable controversy. The court explained that a justiciable case-or-controversy can exist without an apprehension of suit, but that case-or-controversy “must be based on a real and immediate injury or threat of future injury that is caused by the defendants ' an objective standard that cannot be met by a purely subjective or speculative fear of future harm.” Prasco, at *11. The court also provided examples of justiciable injury caused by the patentee: 1) creating a reasonable apprehension of suit, 2) demanding a right to royalties, or 3) creating a barrier to necessary regulatory approval. The court held that Prasco had suffered no such injury traceable to Medicis. Medicis' marking of products with patent numbers provided little evidence that it would enforce its patents. In addition, while prior litigious conduct may be a circumstance to consider, Medicis' single prior lawsuit concerning unrelated patents and products did not constitute a pattern of litigious conduct. Medicis' refusal to give assurances that it would not enforce its patent was also a circumstance to consider, but was not dispositive.

DJ Jurisdiction Does Not Exist Where ANDA Holder Is Prevented from Marketing a Non-infringing Product Because of Its Covenant Not to Sue.

Like Caraco, Janssen Pharmaceutica, N.V. v. Apotex, No. 2008-1062 (Fed. Cir. Sept. 4, 2008), also involved two ANDA applications and a covenant not to sue. Janssen held an approved NDA for Risperdal, which involved the listing of three patents in the FDA's Orange Book, one of which was soon to expire (the '663 Patent). Teva was the first ANDA applicant to file a so-called Paragraph III certification for the '663 Patent, and a Paragraph IV certification for Janssen's other two patents. Because Janssen did not sue for infringement of those two patents, the FDA would be able to approve Teva's product when the '663 Patent expired.

Apotex submitted a subsequent Paragraph IV ANDA for all three Janssen patents. In response, Janssen sued Apotex for infringement of only the '663 patent. Apotex stipulated to infringement and validity of the '663 patent, but brought declaratory judgment counterclaims of non-infringement for Janssen's other two patents. Janssen moved to dismiss, granted Apotex a covenant not to sue for infringement of its other two patents, and requested that Apotex withdraw its counterclaims. After Apotex refused, the district court granted Janssen's motion to dismiss.

On appeal, the Federal Circuit held that there was no justiciable case-or-controversy. In the absence of declaratory judgment, Teva, as the first ANDA filer, would be entitled to a 180-day exclusivity period after the expiration of the '663 patent. As such, Apotex could enter the market no sooner than 181 days after the '663 patent expired. In the alternative, if declaratory judgment were granted, Teva's exclusivity period would be triggered by a court judgment as to Apotex's other two patents, but Apotex would nevertheless be unable to market its product until the '663 patent expired because of its own stipulation; therefore, no justiciable case-or-controversy existed.

Conclusion

While the Federal Circuit appears to have recently drawn in the reins on jurisdiction in declaratory judgment actions in Prasco, the all circumstances test is nevertheless more relaxed in comparison with the reasonable apprehension test. Although Federal Circuit decisions subsequent to MedImmune and SanDisk offer guidance under certain fact patterns, those decisions on the whole show that this remains an unsettled area of law.

Paul A. Ragusa, a member of this newsletter's Board of Editors, is a member and Jennifer Lazo is a law clerk in the New York office of Baker Botts LLP. Ragusa practices intellectual property law with an emphasis on patent and related litigation.

It has been just over two years since the U.S. Supreme Court changed the rules respecting when a party may bring a declaratory judgment action to challenge whether its activities infringe a patent of another, or whether the patent is valid or enforceable. See MedImmune, Inc. v. Genentech, Inc. , 127 S. Ct. 764 (2007). In a now famous footnote, the Court ruled that the then-longstanding “reasonable apprehension” test could not be harmonized with its own precedent, which required an examination of all circumstances. Id. at 774 n.11.

During the last two years, the Court of Appeals for the Federal Circuit has decided a series of cases that collectively explore what circumstances are sufficient, or insufficient, to establish declaratory judgment jurisdiction in the context of a patent dispute. Several of these decisions, which have put patentees at an increased risk for declaratory judgment lawsuits, are addressed below.

Background

Declaratory Judgment Act

The Declaratory Judgment Act provides that, “[i]n a case of actual controversy within its jurisdiction, ' any court of the United States ' may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. '2201(a). The “actual controversy” requirement requires an Article III case-or-controversy to confer jurisdiction upon the court in a declaratory judgment action.

Historically, in order determine whether a proper case-or-controversy exists in the context of a declaratory judgment action for patent non-infringement or invalidity, a potential infringer needed to satisfy a two-part test. First, the potential infringer needed to establish that a patentee had either expressly threatened it with litigation, or had taken other action that created a reasonable apprehension that it would face suit. Second, the declaratory judgment plaintiff needed to establish that its present activity could constitute an act of infringement, or at least that it had taken concrete steps with the intent to conduct such activity. See, e.g., Gen-Probe, Inc. v. Vysis, Inc. , 359 F.3d 1376, 1380 (Fed. Cir. 2004).

MedImmune, Inc. v. Genentech, Inc.

In MedImmune, the Supreme Court addressed the issue of whether a patent licensee is required to terminate or breach its licensing agreement before seeking declaratory judgment that the patent is invalid, unenforceable, or not infringed. The Supreme Court started its analysis by reviewing its prior cases that address the case-or-controversy requirement with respect to declaratory judgment actions. In particular, the Court noted that its prior decisions had required that a dispute be “definite and concrete, touching the legal relations of parties having adverse legal interests,” “real and substantial,” and that “specific relief” be available. MedImmune, at 771 (internal citations omitted). In view of that jurisprudence, the Court instructed that the exercise of declaratory judgment jurisdiction requires that the facts alleged, “under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Id. (internal citation omitted).

In a footnote to its decision, the Court considered the Federal Circuit's well-established reasonable apprehension test, and whether that test could be harmonized with the Court's all circumstances test:

Even if Altvater [v. Freeman , 319 U.S. 359 (1943)] could be distinguished as an “injunction” case, it would still contradict the Federal Circuit's “reasonable apprehension of suit” test (or, in its evolved form, the “reasonable apprehension of imminent suit” test, Teva Pharm. USA, Inc. v. Pfizer, Inc. , 395 F.3d 1324, 1333 (2005)). A licensee who pays royalties under compulsion of an injunction has no more apprehension of imminent harm than a licensee who pays royalties for fear of treble damages and an injunction fatal to his business. The reasonable-apprehension-of-suit test also conflicts with our decisions in Maryland Casualty Co. v. Pacific Coal & Oil Co. , 312 U.S. 270, 273 (1941), where jurisdiction obtained even though the collision-victim defendant could not have sued the declaratory-judgment plaintiff-insurer without first obtaining a judgment against the insured; and Aetna Life Ins. Co. v. Haworth , 300 U.S. 227, 239 (1937), where jurisdiction obtained even though the very reason the insurer sought declaratory relief was that the insured had given no indication that he would file suit. It is also in tension with Cardinal Chemical Co. v. Morton Int'l, Inc. , 508 U.S. 83, 98 (1993), which held that appellate affirmance of a judgment of non-infringement, eliminating any apprehension of suit, does not moot a declaratory judgment counterclaim of patent invalidity. Id. at 774 n.11.

SanDisk Corp. v. STMicroelectronics, Inc.

SanDisk Corp. v. STMicroelectronics, Inc. , 480 F.3d 1372 (Fed. Cir. 2007), decided less than three months after MedImmune, provided the Federal Circuit with an opportunity to both acknowledge that MedImmune had overruled its reasonable apprehension test, as well as apply the all circumstances test. In SanDisk, the court faced the issue of whether the patentee's conduct during licensing negotiations met the case-or-controversy requirement, even though the patentee unequivocally stated that it had no intent to sue.

ST, the patentee, sought to enter into a cross-licensing agreement with SanDisk, and provided a list of ST patents that “may be of interest” to SanDisk. During a license negotiation meeting, ST's representatives repeatedly referred to SanDisk's “alleged infringement” of ST's products as they presented infringement analyses, which mapped claim elements to aspects of specified SanDisk products. However, ST verbalized that it had “absolutely no plan whatsoever to sue SanDisk.” When post-meeting communications did not result in a cross-licensing agreement, SanDisk filed a declaratory judgment action of non-infringement and invalidity of the ST patents. The district court granted ST's motion to dismiss for lack of subject matter jurisdiction on the ground that a justiciable case-or-controversy did not exist because ST had told SanDisk that it did not intend to sue SanDisk for infringement. The Federal Circuit disagreed.

The Federal Circuit explained that jurisdiction requires some affirmative act by the patentee, “put[ting] the declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or abandoning that which he claims a right to do.” SanDisk, at 1381. Jurisdiction does not arise merely because a party believes that a patent owned by another poses a risk of infringement. Moreover, ST's statement that it would not sue SanDisk did not destroy jurisdiction in light of its threatening conduct. Applying the all circumstances test set forth in MedImmune, the court held that jurisdiction exists “where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license.” Id. Accordingly, ST's conduct, which evidenced that it was preparing and willing to enforce its patents, met the case-or-controversy requirement.

Federal Circuit Cases Decided After SanDisk

The Federal Circuit has faced a number of declaratory judgment actions since the rejection of the reasonable-apprehension-of-suit test. These cases provide guidance as to how the court may apply the all circumstances test to future disputes.

DJ Jurisdiction Exists As to Independent Claims After Enforcement of Dependent Claims.

In Honeywell Int'l Inc. v. Universal Avionics Sys. Corp. , 488 F.3d 982 (Fed. Cir. 2007), the court considered whether a court maintains jurisdiction over non-asserted independent claims when dependent claims are in litigation. Honeywell, owner of five patents relating to an aircraft virtual “look ahead” terrain warning system, commenced an infringement action against Universal and Sandel. Honeywell subsequently represented to Universal and Sandel that it would pursue infringement of only two dependent claims, and withdrew the other originally asserted claims from its suit.

In its pre-MedImmune decision, the district court applied the reasonable apprehension test and held that the case-or-controversy requirement was met respecting Honeywell's withdrawn claims because Honeywell had refused to withdraw all of its claims. The court ultimately granted Universal and Sandel's motions for summary judgment of invalidity of the claims withdrawn by Honeywell. In its review, the Federal Circuit applied the all circumstances test, but nevertheless affirmed the district court's decision to retain jurisdiction over the withdrawn claims, holding that, where a patentee asserts dependent claims, the court has jurisdiction over the independent claims as well.

DJ Jurisdiction Does Not Arise from Future Threat of Litigation.

In Benitec Australia, Ltd. v. Nucleonics, Inc. , 495 F.3d 1340 (Fed. Cir. 2007), Benitec sued Nucleonics for infringing its patent relating to RNA-based disease therapy. Nucleonics moved to dismiss the complaint, arguing that its allegedly infringing activities involve the development and submission of information to the U.S. Food and Drug Administration, and that the earliest that Nucleonics would be prepared to file a New Drug Application (“NDA”) to manufacture and market a new product would be six to eight years in the future, if ever, depending on its clinical trials. The district court, however, denied the motion.

Nucleonics later amended its answer to add declaratory relief counterclaims of invalidity and unenforceability based on alleged inventor fraud. When Benitec moved to dismiss its complaint without prejudice, the court granted the motion and dismissed Nucleonics's counterclaims for lack of jurisdiction. The Federal Circuit held, as Nucleonics itself asserted when it moved to dismiss the infringement claims, that developing and submitting information to the FDA, and the fact that Nucleonics may be subject to suit if it files an NDA in a few years, does not provide the requisite immediacy and reality for declaratory judgment.

DJ Jurisdiction Exists Where Patentee Gives Detailed Infringement Analysis During “Business Negotiations.”

In Sony Elecs., Inc. v. Guardian Media Techs., Ltd. , 497 F.3d 1271 (Fed. Cir. 2007), Sony, Mitsubishi, Matsushita, and Thomson commenced declaratory judgment actions relating to Guardian's patents concerning technology for blocking the viewing of certain programs on televisions or other recorded medium. Guardian sent letters to each plaintiff stating that their products that featured parental control systems infringed Guardian's patents. The plaintiffs were provided with claim charts that listed each allegedly infringed claim and described on a limitation-by-limitation basis, the basis for Guardian's belief that the plaintiffs' products infringed the claims. However, Guardian was willing to negotiate a “business resolution” to the dispute. The district court granted Guardian's motion to dismiss, observing that Guardian did not expressly threaten to sue any of the plaintiffs for infringement, nor were its actions an implicit threat of immediate litigation.

The Federal Circuit disagreed. According to the court, the dispute presented a justiciable case-or-controversy because of the parties' definite and concrete dispute involving adverse legal interests. Guardian communicated its position that certain specified products of the plaintiffs infringed Guardian's patents, provided detailed infringement analyses, and asserted that it was entitled to specified royalties. The plaintiffs, on the other hand, maintained that the asserted claims were invalid based on prior art references. The court also rejected an argument that Guardian's willingness to negotiate a business resolution divested the court of jurisdiction.

DJ Jurisdiction Exists Where Patentee States That It Will “Pursue Its Available Legal Remedies.”

Adenta GmbH v. OrthoArm, Inc. , 501 F.3d 1364 (Fed. Cir. 2007), arose from a settlement agreement resulting from a previous litigation, where OrthoArm assigned to American Orthodontics a patent relating to orthodontic brackets. Because American manufactured and distributed brackets for Adenta, American and Adenta entered into a royalty sharing agreement. Adenta later notified American and OrthoArm that it believed that the patent at issue was invalid, and that Adenta would stop paying royalties. American responded with a letter stating that Adenta's failure to pay royalties would constitute a breach of their agreement, and that in event of such breach, American would “pursue its available legal remedies to protect its rights.” Adenta commenced declaratory judgment of invalidity and unenforceability, which proceeded to a jury verdict in favor of Adenta.

OrthoArm appealed, arguing that the lower court lacked subject matter jurisdiction on the ground that there was no reasonable apprehension of suit. The Federal Circuit found that a justiciable controversy existed because Adenta had asserted that it would not pay any further royalties based on its belief that the patent was invalid, and American had indicated its intent to assert its rights by pursuing its available legal remedies.

DJ Jurisdiction Exists Where Patentee Sues Competitors and Makes Aggressive Public Statements.

In Micron Tech. Inc. v. MOSAID Tech. Inc. , 518 F.3d 897 (Fed. Cir. 2008), MOSAID sent three warning letters to Micron and strongly suggested that Micron take a MOSAID license. MOSAID had commenced infringement actions against Micron's competing DRAM manufacturers, and also issued public statements and announced in its annual reports that it planned to pursue an aggressive licensing strategy. Consequently, Micron sought declaratory judgment of non-infringement of 14 MOSAID patents. The district court granted MOSAID's motion to dismiss on the ground that MOSAID's conduct was insufficient to create a reasonable apprehension suit since MOSAID had not threatened Micron for four years, had not threatened Micron's customers, and had not made public comments that specified Micron by name.

The Federal Circuit reversed. MOSAID's threats, lawsuits against the other DRAM manufacturers, and public declaration of its aggressive litigation strategy amounted to a justiciable case-or-controversy. Moreover, the four-year lapse in MOSAID's threats to Micron did not eliminate jurisdiction because MOSAID was busy negotiating with the other DRAM manufacturers during that time.

DJ Jurisdiction Exists Where Patent Owner Impedes FDA Approval, Regardless of Covenant Not to Sue.

Caraco Pharm. Labs., Inc. v. Forest Labs., Inc. , 527 F.3d 1278 (Fed. Cir. 2008), involved two Abbreviated New Drug Applications (“ANDA”) and so-called Paragraph IV certifications, which placed patent owner Forest Labs on notice that others would pursue generic forms of its patented drug notwithstanding two potentially applicable Forest Labs patents. In response to a first Paragraph IV certification by Ivax, Forest filed an action against Ivax for infringement of one of its two patents, the '712 patent, but left its second potentially applicable patent, the '941 patent, out of its suit, and ultimately obtained judgment that Ivax's drug infringed the '712 patent.

Caraco filed a subsequent Paragraph IV ANDA, and as it had done with Ivax, Forest responded by filing an action for infringement of only the '712 patent. Caraco then filed a separate declaratory judgment action of non-infringement of Forest's '941 patent. Forest granted Caraco an irrevocable covenant not to sue for infringement of the '941 patent, and the district court dismissed Caraco's declaratory judgment action for lack of subject matter jurisdiction.

On appeal, the Federal Circuit appeared to breathe new life into the reasonable apprehension test, reasoning that the test is one of many ways to satisfy the all circumstances test. The court held that Caraco met the standard for a justiciable case-or-controversy: because of the Hatch-Waxman framework, if Caraco's generic drug did not infringe Forest's '941 patent, Caraco was being excluded from its right to enter the generic drug market. Caraco would suffer a justiciable injury traceable to Forest's listing of its patents in the Orange Book, redressable by a declaration that the '941 patent is not infringed. In addition, the court held that Forest's covenant not to sue did not divest the court of jurisdiction; regardless of a NDA holder's covenant not to sue, a generic drug manufacturer cannot market its product without approval from the FDA.

DJ Jurisdiction Does Not Arise from Patent Marking or Unrelated Litigation.

In Prasco, LLC v. Medicis Pharm. Corp., No. 2007-1524 (Fed. Cir. Aug. 15, 2008), Prasco filed a declaratory judgment action against Medicis seeking a declaration that its generic benzoyl peroxide cleansing product did not infringe Medicis' patents covering a competing cleansing product. Prasco based jurisdiction on Medicis' marking of its products with the numbers of the patents at issue, as well as Medicis' prior infringement action against Prasco concerning an unrelated product and an unrelated patent. After Medicis moved to dismiss Prasco's complaint for lack of jurisdiction, Prasco sent Medicis a sample of its cleansing product, an ingredient list, and a request for a covenant not to sue under the patents at issue. Medicis responded with a one-sentence letter stating that it did not plan to withdraw its motion to dismiss. The district court granted the motion.

The Federal Circuit affirmed, holding that the dispute lacked the requisite immediacy and reality to create a justiciable controversy. The court explained that a justiciable case-or-controversy can exist without an apprehension of suit, but that case-or-controversy “must be based on a real and immediate injury or threat of future injury that is caused by the defendants ' an objective standard that cannot be met by a purely subjective or speculative fear of future harm.” Prasco, at *11. The court also provided examples of justiciable injury caused by the patentee: 1) creating a reasonable apprehension of suit, 2) demanding a right to royalties, or 3) creating a barrier to necessary regulatory approval. The court held that Prasco had suffered no such injury traceable to Medicis. Medicis' marking of products with patent numbers provided little evidence that it would enforce its patents. In addition, while prior litigious conduct may be a circumstance to consider, Medicis' single prior lawsuit concerning unrelated patents and products did not constitute a pattern of litigious conduct. Medicis' refusal to give assurances that it would not enforce its patent was also a circumstance to consider, but was not dispositive.

DJ Jurisdiction Does Not Exist Where ANDA Holder Is Prevented from Marketing a Non-infringing Product Because of Its Covenant Not to Sue.

Like Caraco, Janssen Pharmaceutica, N.V. v. Apotex, No. 2008-1062 (Fed. Cir. Sept. 4, 2008), also involved two ANDA applications and a covenant not to sue. Janssen held an approved NDA for Risperdal, which involved the listing of three patents in the FDA's Orange Book, one of which was soon to expire (the '663 Patent). Teva was the first ANDA applicant to file a so-called Paragraph III certification for the '663 Patent, and a Paragraph IV certification for Janssen's other two patents. Because Janssen did not sue for infringement of those two patents, the FDA would be able to approve Teva's product when the '663 Patent expired.

Apotex submitted a subsequent Paragraph IV ANDA for all three Janssen patents. In response, Janssen sued Apotex for infringement of only the '663 patent. Apotex stipulated to infringement and validity of the '663 patent, but brought declaratory judgment counterclaims of non-infringement for Janssen's other two patents. Janssen moved to dismiss, granted Apotex a covenant not to sue for infringement of its other two patents, and requested that Apotex withdraw its counterclaims. After Apotex refused, the district court granted Janssen's motion to dismiss.

On appeal, the Federal Circuit held that there was no justiciable case-or-controversy. In the absence of declaratory judgment, Teva, as the first ANDA filer, would be entitled to a 180-day exclusivity period after the expiration of the '663 patent. As such, Apotex could enter the market no sooner than 181 days after the '663 patent expired. In the alternative, if declaratory judgment were granted, Teva's exclusivity period would be triggered by a court judgment as to Apotex's other two patents, but Apotex would nevertheless be unable to market its product until the '663 patent expired because of its own stipulation; therefore, no justiciable case-or-controversy existed.

Conclusion

While the Federal Circuit appears to have recently drawn in the reins on jurisdiction in declaratory judgment actions in Prasco, the all circumstances test is nevertheless more relaxed in comparison with the reasonable apprehension test. Although Federal Circuit decisions subsequent to MedImmune and SanDisk offer guidance under certain fact patterns, those decisions on the whole show that this remains an unsettled area of law.

Paul A. Ragusa, a member of this newsletter's Board of Editors, is a member and Jennifer Lazo is a law clerk in the New York office of Baker Botts LLP. Ragusa practices intellectual property law with an emphasis on patent and related litigation.