Creating Consequence-Free Cease and Desist Letters

A letter sent by a patentee to a suspected infringer can create a “case or controversy” if it contains even the slightest hint of an accusation of infringement. This is particularly true as the standards for creating subject matter jurisdiction have loosened considerably in the last five years, following the U.S. Supreme Court’s decision in MedImmune v. Genentech, 549 U.S. 118 (2007). MedImmune rejected a prior test that required “a reasonable apprehension of suit” in favor of a more lenient test that simply looks to where there exists “a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant relief.”

Since MedImmune, patentees have been wary of sending cease and desist letters for fear that such letters will create a “substantial controversy” and subject the patentees to a declaratory judgment suit in a forum of the accused infringer’s choosing. To avoid creating subject matter jurisdiction for a declaratory judgment suit, patentees have adopted a variety of defensive tactics, including:

• Filing but not serving a complaint (thus locking in the patentee’s choice of forum but delaying active litigation) before sending a cease and desist letter or initiating licensing discussions with a suspected infringer.
• Sending a watered-down “patent notice” letter to a suspected infringer that deliberately avoids any and all references to infringement, cessation of infringing activity, and/or the need for a license.
• Carefully choreographing an approach to a suspected infringer, so as to extract an agreement not to use anything said by the patentee as a basis for a declaratory judgment suit before engaging in any substantive communications.

In their efforts to finesse the creation of a “case or controversy,” patentees often overlook the unique restrictions on personal jurisdiction articulated by the Federal Circuit in connection with declaratory judgment actions. As this case law departs significantly from the personal jurisdiction case law associated with infringement actions generally, recipients of cease and desist letters may also overlook this case law in evaluating how to respond.

In patent infringement suits filed by the patentee, courts have exercised personal jurisdiction over defendants based only on their sale of accused products within the forum state. In declaratory judgment actions, however, the Federal Circuit has consistently held that the sending of a cease and desist letter does not, by itself, subject the sender to personal jurisdiction in the accused infringer’s home state even when coupled with sales of the patentee’s product in the forum state. Avocent Huntsville Corp. v. Aten Int’l. Co. (2009).

In the context of a declaratory judgment suit, courts will consider “only enforcement or defense effort related to the patent” to determine whether there are minimum contacts sufficient to confer specific personal jurisdiction over the patentee. To support specific jurisdiction, the patentee’s “enforcement or defense effort” must be more significant than simply sending a cease and desist letter. For example, the Federal Circuit has found that prior lawsuits against other infringers within a forum state are sufficient to subject a patentee to specific personal jurisdiction in a declaratory judgment suit. Viam v. Iowa Export-Import Trading Co. (1996).

Importantly, the patentee’s own commercialization efforts are generally not considered in evaluating specific personal jurisdiction. Short of granting an exclusive license within the forum state (which has been found sufficient to create specific personal jurisdiction), even widespread commercialization efforts are insufficient to support specific personal jurisdiction in a declaratory judgment suit. Sales of the patentee’s products within a forum state thus do not, by themselves, support jurisdiction. Nor do licensing activities that do not result in an exclusive license. In Red Wing Shoe v. Hockerson-Halberstadt (1998), for example, the Federal Circuit found no personal jurisdiction despite the fact that the patentee had 34 nonexclusive licensees selling patented products in the forum.

For patentees, the Federal Circuit’s stringent requirements for personal jurisdiction suggest that in many cases, a wary approach to potential infringers may be unnecessary. Unless the potential infringer resides in a forum where the patentee is subject to general personal jurisdiction (which requires “continuous and systematic” contacts), there is relatively little chance the patentee would be subject to specific personal jurisdiction in a declaratory judgment suit. Under the current state of the law, many patentees have the freedom to vigorously assert their rights in notice letters sent to alleged infringers without fear of being dragged into a declaratory judgment suit in an unfavorable jurisdiction. Accordingly, patentees seeking to enforce their patent rights while avoiding declaratory judgment suits should:

• Determine whether they are subject to general personal jurisdiction in the potential infringer’s home state.
• Consider vigorously asserting their patent rights in notice letters sent to an alleged infringer, if they are not subject to general personal jurisdiction.
• Keep in mind that if they sue to enforce their patents in one jurisdiction, they may later be subject to a declaratory judgment suit in that same jurisdiction.