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May 28, 2008

Reactor

TubeMaster makes custom catalyst reactors. Cat Tech asserted 6,905,660. Tubemaster counterclaimed for declaratory judgment (DJ). The district court granted summary judgment of non-infringement based upon claim construction, including DJ on non-accused configurations. Cat Tech appealed. A CAFC panel crafted crucial case law on declaratory judgment.

Cat Tech v. TubeMaster (CAFC 2007-1443)

Declaratory Judgment

The issue of whether the district court could issue a declaratory judgment of non-infringement for TubeMaster configurations that were not accused was taken up on appeal. The CAFC panel laid out its perspective on the current state of declaratory judgment: reflecting MedImmune, whether there is an actual controversy is "based on 'all the circumstances.'"

The Declaratory Judgment Act can prevent patent owners from "brandishing a Damoclean threat with a sheathed sword." Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 735 (Fed. Cir. 1988). Before declaratory relief was available, "competitors were 'victimized' by patent owners who engaged in 'extra-judicial patent enforcement with scare-the-customer-and-run tactics that infect[ed] the competitive environment of the business community with uncertainty and insecurity.'" Teva Pharms., 482 F.3d at 1336 n.2 (quoting Arrowhead, 846 F.2d at 735). The Declaratory Judgment Act, in relevant part, provides:

In a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, 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) (2000).

Passage of the Act was intended "to prevent avoidable damages from being incurred by a person uncertain of his rights and threatened with damage by delayed adjudication." Minn. Mining & Mfg. Co. v. Norton Co., 929 F.2d 670, 673 (Fed. Cir. 1991). The Act is not, however, an independent basis for jurisdiction. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72 (1950). Its remedy may lie only if the court has jurisdiction from some other source. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937); Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 943 (Fed. Cir. 1993).

The availability of declaratory relief is limited, moreover, by Article III of the Constitution, which restricts judicial power to the adjudication of "Cases" or "Controversies." U.S. Const. Art. III, § 2; see Aetna Life Ins., 300 U.S. at 240 (emphasizing that the Declaratory Judgment Act extends only "to controversies which are such in the constitutional sense"). Because of this case or controversy requirement, a court may not adjudicate "a difference or dispute of a hypothetical or abstract character" or "one that is academic or moot." Aetna Life Ins., 300 U.S. at 240.

There is, however, no facile, all-purpose standard to police the line between declaratory judgment actions which satisfy the case or controversy requirement and those that do not. See Teva Pharms., 482 F.3d at 1338-39; Arrowhead, 846 F.2d at 736. To the contrary, "[t]he difference between an abstract question and a 'controversy' contemplated by the Declaratory Judgment Act is necessarily one of degree, and it would be difficult, if it would be possible, to fashion a precise test for determining in every case whether there is such a controversy." Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). Accordingly, the analysis must be calibrated to the particular facts of each case, with the fundamental inquiry being "'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 the issuance of a declaratory judgment.'" MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 S.Ct. 764, 771 (2007) (quoting Md Cas. Co., 312 U.S. at 273).

Until recently, this court applied a two-prong test for determining the existence of declaratory judgment authority. See, e.g., Teva Pharms. USA, Inc. v. Pfizer Inc., 395 F.3d 1324, 1332 (Fed. Cir. 2005); Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1058 (Fed. Cir. 1995). But see Teva Pharms., 395 F.3d at 1339-42 (Mayer, J., dissenting) ("We have never said that the traditional two-part test must be satisfied in every instance to find a justiciable case or controversy."). The first prong examined whether conduct by the patentee created a "reasonable apprehension" of suit on the part of the declaratory judgment plaintiff. Super Sack, 57 F.3d at 1058. The second prong focused on the declaratory judgment plaintiff's conduct, and examined whether there had been "meaningful preparation" to conduct potentially infringing activity. Arrowhead, 846 F.2d at 736; DuPont Merck Pharm. Co. v. Bristol-Myers Squibb Co., 62 F.3d 1397, 1401 (Fed. Cir. 1995).

In MedImmune, the Supreme Court rejected the first prong of our declaratory judgment standard, concluding that the "reasonable apprehension of suit test" was unduly restrictive. 127 S.Ct. at 770-77. The Court explained that whether a declaratory judgment action contains an Article III controversy must be determined based on "all the circumstances," not merely on whether the declaratory judgment plaintiff is under a reasonable apprehension of suit.1 Id. at 771-77.


1 The declaratory judgment plaintiff in MedImmune was a patent licensee who sought a declaratory judgment of non-infringement, patent invalidity and patent unenforceability. The licensee, however, continued to pay royalties under its license agreement with the patent owner and therefore had no "reasonable apprehension" of suit. 127 S.Ct. at 772. The Supreme Court determined that the case presented a justiciable controversy, specifically rejecting the notion that Article III jurisdiction is defeated when a declaratory judgment plaintiff voluntarily stops or avoids the allegedly infringing activity. Id. at 772-74. The Court made clear that "[t]he dilemma posed by . . . putting the challenger to the choice between abandoning his rights or risking prosecution . . . is 'a dilemma that it was the very purpose of the Declaratory Judgment Act to ameliorate.'" Id. at 773 (quoting Abbott Labs. v. Gardner, 387 U.S. 136, 152 (1967)).


In the wake of MedImmune, several opinions of this court have reshaped the contours of the first prong of our declaratory judgment jurisprudence. See e.g., Caraco Pharm. Labs., Ltd. v. Forest Labs., Inc., No. 2007-1404, 2008 U.S. App. LEXIS 6838 (Fed. Cir. Apr. 1, 2008); Micron Tech., Inc. v. Mosaid Techs., Inc., No. 2007-1080, 2008 U.S. App. LEXIS 4387 (Fed. Cir. Feb. 29, 2008); Adenta GmbH v. OrthoArm, Inc., 501 F.3d 1364 (Fed. Cir. 2007); Sony Elecs., Inc. v. Guardian Media Techs., Ltd., 497 F.3d 1271 (Fed. Cir. 2007); Teva Pharms. USA, Inc. v. Novartis Pharms. Corp., 482 F.3d 1330 (Fed. Cir. 2007); SanDisk Corp. v. STMicroelectonics, Inc., 480 F.3d 1372, 1380 (Fed. Cir. 2007). The present dispute, however, involves the second rather than the first prong of our declaratory judgment test.2 This court has yet to fully consider MedImmune's impact on this prong.3 See SanDisk, 480 F.3d at 1380 n.2 ("We . . . leave to another day the effect of MedImmune, if any, on the second prong.").


2 The first prong of our pre-MedImmune declaratory judgment test is not at issue here because there is no dispute that it was met. Summary Judgment Decision, slip op. at 5. Cat Tech "sued TubeMaster for infringement and [sought] a declaratory judgment that TubeMaster's use of its OLE'™ loading devices infringes the '660 patent." Id. at 2-3; see also Cat Tech's Opposition to TubeMaster's Motion for Partial Summary Judgment 7 n.5 (Feb. 12, 2007) (stating that the reasonable apprehension of suit prong "is not disputed in the present litigation"). "If defendant has expressly charged a current activity of the plaintiff as an infringement, there is clearly an actual controversy, certainty has rendered apprehension irrelevant, and one need say no more." Arrowhead, 846 F.2d at 736.

3 Benitec Austl., Ltd. v. Nucleonics, Inc., 495 F.3d 1340, 1343-44 (Fed. Cir. 2007), a decision issued after MedImmune, determined that a dispute was not "of sufficient immediacy and reality" to warrant declaratory relief, but did not directly address the continued viability of the second prong of this court's pre-MedImmune test.


We conclude that although MedImmune articulated a "more lenient legal standard" for the availability of declaratory judgment relief in patent cases, Micron Tech., 2008 U.S. App. LEXIS 4387 at *12, the issue of whether there has been meaningful preparation to conduct potentially infringing activity remains an important element in the totality of circumstances which must be considered in determining whether a declaratory judgment is appropriate. See Teva Pharms., 482 F.3d at 1339 (MedImmune requires that a court look at "all the circumstances" to determine whether a justiciable Article III controversy exists.). If a declaratory judgment plaintiff has not taken significant, concrete steps to conduct infringing activity, the dispute is neither "immediate" nor "real" and the requirements for justiciability have not been met. See Lang v. Pac. Marine & Supply Co., 895 F.2d 761, 764 (Fed Cir. 1990) (emphasizing that the test for justiciability "looks to the accused infringer's conduct and ensures that the controversy is sufficiently real and substantial").

A. Immediacy

A party may not "obtain a declaratory judgment merely because it would like an advisory opinion on whether it would be liable for patent infringement if it were to initiate some merely contemplated activity." Arrowhead, 846 F.2d at 736. Thus, although a party need not have engaged in the actual manufacture or sale of a potentially infringing product to obtain a declaratory judgment of non-infringement, there must be a showing of "meaningful preparation" for making or using that product. Id.; DuPont Merck Pharm., 62 F.3d at 1401; see also BP Chems. Ltd v. Union Carbide Corp., 4 F.3d 975, 978 (Fed. Cir. 1993) (requiring "present activity which could constitute infringement or concrete steps taken with the intent to conduct such activity"); Goodyear Tire & Rubber, Co. v. Releasomers, Inc., 824 F.2d 953, 955-56 (Fed. Cir. 1987) (requiring that the plaintiff "actually have either produced the device or have prepared to produce that device"). In general, the greater the length of time before potentially infringing activity is expected to occur, "the more likely the case lacks the requisite immediacy." Sierra Applied Scis., Inc. v. Advanced Energy Indus., Inc., 363 F.3d 1361, 1379 (Fed. Cir. 2004).

TubeMaster had designs on infringing as soon as it received an order. The possibility of infringement was imminent. Then there is the issue of "reality," that a plan of potential infringement comes to fruition. TubeMaster met that test, its technology "substantially fixed."

B. Reality

In the context of patent litigation, the reality requirement is often related to the extent to which the technology in question is "substantially fixed" as opposed to "fluid and indeterminate" at the time declaratory relief is sought. Sierra, 363 F.3d at 1379. Accordingly, "[t]he greater the variability of the subject of a declaratory-judgment suit, particularly as to its potentially infringing features, the greater the chance that the court's judgment will be purely advisory, detached from the eventual, actual content of that subject--in short, detached from eventual reality." Id.; see also Int'l Harvester Co. v. Deere & Co., 623 F.2d 1207, 1216 (7th Cir. 1980) ("Our concern is not that the [product in question] will never be produced, but rather that because of the relatively early stage of its development, the design which is before us now may not be the design which is ultimately produced and marketed.").

In Telectronics, we affirmed a dismissal of a declaratory judgment action where clinical trials of the accused device had just begun and "[t]here was no certainty that the device when approved [by the FDA] would be the same device that began clinical trials." 982 F.2d at 1525-27. Likewise, in Sierra we found that jurisdictional reality requirements were not met where development of the power supply in question was "at an early stage" and its design was "fluid and indeterminate" when the complaint was filed. 363 F.3d at 1379-80. In Benitec, we also found no declaratory judgment basis where the declaratory plaintiff had only a "vaguely defined" plan to expand into animal husbandry and veterinary products and the technology in question was still in a "nascent" stage. 495 F.3d at 1349.

Evidence that no preparations have been made to advertise or sell a potentially infringing device may, under certain circumstances, indicate that a dispute lacks the requisite immediacy. See Sierra, 363 F.3d at 1379 (considering the fact that there was no "existing or draft advertising literature" for the device in question in determining that the dispute was non-justiciable); Lang, 895 F.2d at 764-65 ("[T]he accused infringers had not distributed sales literature, prepared to solicit orders, or engaged in any activity indicating that the ship would soon be ready for sea."). MedImmune makes clear, however, that "all the circumstances" must be considered when making a justiciability determination. 127 S.Ct. at 771. Where, as here, there is cogent evidence that a declaratory plaintiff has made meaningful preparation to conduct potentially infringing activity, a showing that the plaintiff has prepared draft sales literature or otherwise disclosed its products to potential customers is not an indispensable prerequisite. See Interdynamics, 698 F.2d at 172 (sufficient that although the plaintiff "had not yet advertised or solicited orders for its proposed new product," there was significant evidence that the plaintiff intended to manufacture it).

If there is an actual controversy, a district court has discretionary authority.

C. District Court Discretion

Even assuming that the immediacy and reality prerequisites for declaratory judgment relief have been met, the district court's exercise of its declaratory judgment authority is discretionary. SanDisk, 480 F.3d at 1383; Cardinal Chem. Co. v. Morton, Int'l, Inc., 508 U.S. 83, 95 n.17 (1993). "When there is no actual controversy, the court has no discretion to decide the case. When there is an actual controversy and thus jurisdiction, the exercise of that jurisdiction is discretionary." Spectronics Corp. v. H.B. Fuller Co., 940 F.2d 631, 634 (Fed. Cir. 1991). In deciding whether to entertain a declaratory judgment request, a court must determine whether resolving the case serves the objectives for which the Declaratory Judgment Act was created. Capo, Inc. v. Dioptics Med. Prods., Inc., 387 F.3d 1352, 1355 (Fed. Cir. 2004); EMC Corp. v. Norand Corp., 89 F.3d 807, 813-14 (Fed. Cir. 1996).

A plaintiff need not "bet the farm, or . . . risk treble damages . . . before seeking a declaration of its actively contested legal rights." MedImmune, 127 S.Ct. at 775.

Claim Construction

One significant claim construction dispute was over the term "spacing," "used in common parlance and its meaning is not difficult to ascertain."

The appropriate starting point for claim construction "is always with the language of the asserted claim itself." Comark Commc'ns, Inc. v. Harris Corp., 156 F.3d 1182, 1186 (Fed. Cir. 1998); z4 Techs., Inc. v. Microsoft Corp., 507 F.3d 1340, 1348 (Fed. Cir. 2007). In general, words used in a claim are accorded their ordinary and customary meaning. Honeywell Int'l Inc. v. Universal Avionics Sys. Corp., 488 F.3d 982, 992 (Fed. Cir. 2007); Johnson Worldwide Assocs., Inc. v. Zebco Corp., 175 F.3d 985, 989 (Fed. Cir. 1999). "[T]he ordinary and customary meaning of a claim term is the meaning that the term would have to a person of ordinary skill in the art in question at the time of the invention." Phillips v. AWH Corp., 415 F.3d 1303, 1313 (Fed. Cir. 2005) (en banc). The record contains no persuasive evidence that the word "spacing" has a specially defined meaning in the field of art encompassed by the '660 patent. Thus, the ordinary and customary meaning attributed to this term by those of ordinary skill in this art at the time of invention "involves little more than the application of the widely accepted meaning of commonly understood words." Id. at 1314.

"Spacing" means the "fixing or arranging of spaces." Random House Webster's Unabridged Dictionary 1827 (2d ed. 2001); see also The Am. Heritage Dictionary of the English Language 1665 (4th ed. 2000) ("Spacing" is "the act of arranging with intervening spaces.").

Cat Tech has a "strained" construction. Simple trumps squirrelly most ever time.

Cat Tech argues that the article "a" in the phrase "a spacing" means that there need be only one space between plates that is narrower than a whole catalyst particle. Cat Tech's argument is little more than "semantic antics."

Affirmed.

Posted by Patent Hawk at May 28, 2008 9:18 PM | Declaratory Judgment