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Declaratory judgment actions are common in intellectual property litigation, usually filed by an alleged infringer seeking a declaration of a patent’s invalidity or unenforceability, or a declaration of noninfringement. Recent case law has affected what actions and circumstances are considered sufficient to trigger the case-or-controversy requirement of Article III of the U.S. Constitution in intellectual property cases, as mandated by the Declaratory Judgment Act. 28 U.S.C. 2201-02. This article will briefly review the history of the current standard for declaratory judgment jurisdiction, and then examine specific behavior that may or may not give rise to such jurisdiction in intellectual property cases. The U.S. Supreme Court standard for the case-or-controversy requirement was set in the 1930s, when the court held that this requirement was satisfied only when a claim presented “a real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” Aetna Life Ins. Co. of Hartford, Conn. v. Haworth, 300 U.S. 227, 241 (1937). The Supreme Court elaborated further in Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 U.S. 270 (1941), in which the court, in allowing the declaratory judgment action to proceed, noted the difficulty of setting forth a precise test that could determine the existence of a controversy in every case, and opted instead to define the standard as “whether 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” relief. Id. at 273 (citing Aetna, 300 U.S. at 239-42). When the U.S. Court of Appeals for the Federal Circuit was created in the early 1980s, with exclusive jurisdiction over patent appeals, it originally followed the guidance of the Supreme Court regarding declaratory judgment actions. For example, in C.R. Bard Inc. v. Schwartz, 716 F.2d 874, 875 (Fed. Cir. 1983), Boris Schwartz sued C.R. Bard in state court, alleging breaches of a license agreement concerning a patent owned by Schwartz. C.R. Bard subsequently brought an action in federal court seeking a declaratory judgment of invalidity and unenforceability of Schwartz’s patent. The district court held that there was no justiciable controversy, as a licensee did not have a reasonable apprehension of suit while a license agreement was still in effect, and relied upon an affidavit submitted by Schwartz in his motion to dismiss that stated that he had no intention of terminating the license agreement or bringing an action for infringement. The Federal Circuit disagreed, finding that the “totality of the circumstances” warranted a finding that Article III jurisdiction existed. Id. at 880. In particular, the court noted that the suit brought by Schwartz in state court and Schwartz’s demand for future royalty payments could be interpreted as grounds for a reasonable apprehension of an infringement suit, and C.R. Bard’s cessation of royalty payments exposed it to the possibility of an infringement suit. Further, the court commented that other behaviors that could trigger a declaratory judgment included “actual or threatened suits against the declaratory plaintiff’s customers, lawsuits against manufacturers of similar products, and notices of infringement in trade journals.” Id. at 881 n.6 (citations omitted). The Federal Circuit again interpreted the case-or-controversy requirement in Windsurfing International Inc. v. AMF Inc., 828 F.2d 755 (Fed. Cir. 1987), a trademark infringement action. In Windsurfing, the Federal Circuit set forth a two-prong test, stating that a declaratory judgment plaintiff must have a “real and reasonable apprehension of litigation,” and “must have engaged in a course of conduct which brought it into adversarial conflict with the declaratory defendant.” Id. at 757-58. Here, because AMF had not actually used the mark it was accused of infringing, but rather “reasonably feared litigation if it began using [the mark] in connection with its products,” the court found no case or controversy, as the situation failed to satisfy the second prong of the test. The Federal Circuit continued to apply its two-prong “reasonable apprehension” test, which many viewed as the product of a protectionist attitude toward patent owners, until 2005. In 2005, the Federal Circuit raised the bar again for would-be declaratory plaintiffs in Teva Pharmaceuticals USA Inc. v. Pfizer Inc., 395 F.3d 1324 (Fed. Cir. 2005). In Teva, the Federal Circuit not only required “an explicit threat or other action by the patentee which creates a reasonable apprehension [of suit] on the part of the declaratory judgment plaintiff,” but also required that the threat of suit creating the reasonable apprehension must be imminent. Id. at 1332-33 (holding that the threat of suit was not immediate and the declaratory judgment suit could thus not be sustained). ‘MedImmune’ voids the test In early 2007, however, the Supreme Court challenged the Federal Circuit’s two-prong test for reasonable apprehension of imminent suit, set forth above, holding that the Federal Circuit’s standard was contradictory to the Supreme Court’s prior decisions. See MedImmune Inc. v. Genentech Inc., 127 S. Ct. 764, 774 (2007). The Federal Circuit had denied MedImmune’s declaratory judgment action for patent invalidity and noninfringement because it found that MedImmune, as a patent licensee that continued to make royalty payments under its licensing agreement, was not under reasonable apprehension of imminent suit by the patentee. The Supreme Court disagreed, relying on Aetna and Maryland Casualty, and stating that a dispute must be “definite and concrete, touching the legal relations of parties having adverse legal interests” and that it must be “real and substantial” and “admit of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.” Id. at 771. In essence, the Supreme Court found that the “reasonable apprehension of imminent suit” test adopted by the Federal Circuit conflicted with its previous decisions and, as such, was not applicable to declaratory judgment cases, whether patent or nonpatent. Shortly after the MedImmune decision, in March 2007, the Federal Circuit issued a decision that vacated a district court decision dismissing declaratory judgment claims for noninfringement and invalidity. SanDisk Corp. v. STMicroelectronics N.V., 480 F.3d 1372 (Fed. Cir. 2007), reh’g and reh’g en banc denied, No. 05-1300, 2007 U.S. App. Lexis 14506 (Fed. Cir. June 8, 2007). The Federal Circuit held that “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, an Article III case or controversy will arise and the party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of its legal rights.” 480 F.3d at 1381. In SanDisk, STMicroelectronics, the patent owner, sought a right to royalty under its patents based on specific, identified activities of SanDisk. In particular, ST made a thorough and detailed infringement analysis, detailing each element of the claims of its patents that were infringed by certain identified SanDisk products. The analysis repeatedly referred to SanDisk’s ongoing infringement, SanDisk’s need to license ST’s patents and ST’s right to a royalty. SanDisk maintained that its product did not infringe. The court held that such conditions created a “substantial controversy between the parties having adverse legal interest, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment,” and even a statement by a patent owner that it would not sue did not negate the substantial controversy that was created by the patent owner’s actions. Id. at 1376, 1382-3 (quoting Maryland Casualty, 312 U.S. at 273). ‘Sony’ lists actionable behavior In a similar post- MedImmune decision, the Federal Circuit further elaborated on what conditions would trigger a declaratory judgment action. In Sony Elecs. Inc. v. Guardian Media Techs. Ltd., 497 F.3d 1271, 1274-1281 (Fed. Cir. 2007), decided several months after SanDisk, the Federal Circuit identified certain behavior by the patent owner that gave rise to a justiciable case or controversy, despite the patent owner’s expressed willingness to continue to engage in licensing negotiations. Such behavior included: • Sending e-mails and letters that reference the “infringement” of the declaratory plaintiff. • Identifying specific patent claims that were infringed by the declaratory plaintiff’s products. • Presenting evidence showing use of the patented technology by the declaratory plaintiff. • Providing claim charts detailing the infringement on a limitation-by-limitation basis. • Sending a letter presenting licensing options, identifying royalties allegedly owed, and citing to a specific royalty rate awarded by a court on corresponding technology. • Sending similar correspondence to several other parties. In overruling the district court, which granted the defendant’s motion to dismiss, based on its finding that the defendant had not expressly threatened to sue and none of its actions or correspondence amounted to an “implicit threat of immediate litigation,” the Federal Circuit held that the behavior of the defendant created a situation that put “the declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or abandoning that which he claims a right to do.” Id. at 1281, 1284 (citing SanDisk, 430 F.3d at 1381). Thus, this behavior gave rise to declaratory judgment jurisdiction. In its decision, the court specifically rejected Guardian’s claim that because it was at all times willing to continue to negotiate, there could be no justiciable controversy. Since MedImmune and SanDisk, several district courts have found declaratory judgment jurisdiction in the circumstances of intellectual property infringement cases that would not have been a basis for jurisdiction under the old Federal Circuit “reasonable apprehension of imminent suit” test. The subsequent district court decisions indicate that even letters that do not explicitly make claims of infringement are enough to support declaratory judgment jurisdiction in certain circumstances. See Echostar Satellite LLC v. Finisar Corp., 515 F. Supp. 2d 447, 449, 452 (D. Del. 2007) (holding that a letter coupled with a press release after a successful infringement suit against another defendant gave rise to an actual case or controversy); see also Thomson Instrument Co. v. Biotage A.B., No. 06cv02305, 2007 WL 1989626, at *3 (S.D. Calif. July 3, 2007) (finding declaratory judgment jurisdiction even though the letter sent by the declaratory defendant did not use the word “infringe” in connection with the patents identified in the letter); HSI IP Inc. v. Champion Window Mfg. & Supply Co., 510 F. Supp. 2d 948, 956 (M.D. Fla. 2007) (finding jurisdiction when a letter to the declaratory plaintiff made an implicit threat of litigation and the declaratory defendant had filed cancellation petitions in the TTAB against the declaratory plaintiff’s trademark registrations). The district courts have also found that letters sent by a patent owner directly to a competitor’s customers referencing claims of infringement can be the basis of an actual case or controversy. Frederick Goldman Inc. v. West, No. 06 Civ. 3413, 2007 WL 1989291, at *3 (S.D.N.Y. July 6, 2007). Avoiding declaratory actions So what should an intellectual property owner do to avoid establishing a case or controversy giving rise to declaratory judgment jurisdiction? It should be very careful in wording notice or cease-and-desist letters. Any use of the word “infringe” is likely to provide a ground for a justiciable controversy, and the identification of specific claims that are infringed, or specific products that infringe, is more likely than not to create a justiciable controversy. The IP owner should carefully consider whether it wishes to immediately propose a license agreement to the other party, as a demand for royalties has been found sufficient to support declaratory judgment jurisdiction. However, under current case law, it appears that merely bringing a patent or trademark to the attention of the other party without accusations of infringement or suggestion of entering a license or requesting royalties is unlikely to rise to the level of an affirmative act as required by SanDisk. Indeed, SanDisk suggests that entering into an appropriate confidentiality agreement could potentially be a way to avoid the possibility of a declaratory judgment action. See SanDisk, 480 F.3d at 1375 n.1. Accordingly, it would seem that correspondence seeking such an agreement would not trigger jurisdiction unless the correspondence contained allegations of infringement or other assertions of the party’s patent rights. The Supreme Court’s decision in MedImmune did not set forth a bright-line rule as to what conduct would clearly avoid declaratory judgment jurisdiction. However, an examination of subsequent case law suggests that there are certain actions and behavior that should be avoided to eliminate the possibility of declaratory judgment jurisdiction. To avoid facing declaratory judgment suits, patent owners must be very careful in what they say and do. Lara A. Holzman is counsel to, and Sarah Chih-Jen Hsia and Srilu M. Ravi are associates in, the New York office of Atlanta-based Alston & Bird. They concentrate their practices in the areas of intellectual property litigation and prosecution.

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