ABB v. Cooper (CAFC 2010-1227) precedential

After signing the settlement, ABB began outsourcing the manufacture of BIOTEMP to Dow Chemicals ("Dow"). ABB also contracted to indemnify Dow against claims of infringement by Cooper. On June 12, 2009, Cooper wrote to both ABB and Dow concerning Dow's manufacture of BIOTEMP for ABB. In its letter to ABB, Cooper took the position that ABB's rights under the "have made" provision of the settlement agreement "do not include the right of third parties such as Dow to manufacture BIOTEMP." J.A. 20. "Therefore," it continued, "any attempt by ABB to outsource the manufacture of BIOTEMP to any entity other than an ABB Related Company . . . would be a material breach, and Cooper will act vigorously to protect its rights in that event." Id. Similarly, Cooper wrote to Dow: "We wish to formally put Dow on notice that Cooper will vigorously defend its rights should Dow attempt to make products covered by one or more of Cooper's patents." J.A. 23.

That kind of talk not only stinks up the joint, it'll get you slapped with a DJ. And so it did.

Cooper slickly pointed out ABB's DJ deficiency: ABB hadn't stated a federal claim, having only raised a state law contract issue. Case dismissed for presenting "no federal question...."

On to appeal, starting with a plea about Article III.

Cooper first asserts that subject matter jurisdiction does not exist because there was no actual controversy surrounding infringement but instead a dispute about contract interpretation. An Article III case or controversy exists when "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. Genetech, Inc., 549 U.S. 118, 127 (2007) (quoting Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941)). MedImmune rejected our prior, more stringent standard insofar as it included a requirement of a "reasonable apprehension of imminent suit." Id. at 132 n.11; see also SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1378-80 (Fed. Cir. 2007) (recognizing MedImmune's rejection of the reasonable apprehension test); Teva Pharm. USA, Inc. v. Novartis Pharm. Corp., 482 F.3d 1330, 1338-39 (Fed. Cir. 2007) (same).

A patent holder making a threat is a DJ best bet.

Thus, a specific threat of infringement litigation by the patentee is not required to establish jurisdiction, and a "declaratory judgment action cannot be defeated simply by the stratagem of a correspondence that avoids magic words such as 'litigation' or 'infringement.'" HewlettPackard Co. v. Acceleron LLC, 587 F.3d 1358, 1362 (Fed. Cir. 2009). Cooper's argument that the controversy must be judged based on the actually threatened litigation is an impermissible attempt to revive the "reasonable apprehension of imminent suit" test rejected by the Supreme Court in MedImmune.

In MedImmune, the Supreme Court held that statements similar to Cooper's created a case or controversy sufficient to establish declaratory judgment jurisdiction. See 549 U.S. at 121-22.

Federal subject matter jurisdiction for declaratory judgment actions involves a look in a mirror of roles: in patent cases, jurisdiction depends upon an assessment of the viability of a hypothetical assertion by a patent holder.

In determining whether there is federal subject matter jurisdiction for declaratory judgment actions: "[I]t is the character of the threatened action, and not of the defense, which will determine whether there is federal-question jurisdiction in the District Court." Pub. Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 248 (1952).5 In other words, the court examines the declaratory defendant's hypothetical wellpleaded complaint to determine if subject matter jurisdiction exists. See Franchise Tax Bd., 463 U.S. at 16, 19 (citing Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72 (1950)); see also Speedco, Inc. v. Estes, 853 F.2d 909, 912 (Fed. Cir. 1988) (applying, under Skelly Oil, "the well-pleaded complaint rule not to the declaratory judgment complaint, but to the action that the declaratory defendant would have brought"). Thus, for declaratory judgment suits, the character of the action is judged based on the declaratory judgment defendant's hypothetical complaint. See Wycoff, 344 U.S. at 248; Speedco, 853 F.2d at 912. When the declaratory defendant's hypothetical suit arises under federal law, "[w]hat is litigated in such a situation is 'the precise issue which could have been litigated in federal court in a coercive action brought by' the declaratory defendant." Lowe v. Ingalls Shipbuilding, 723 F.2d 1173, 1179 (5th Cir. 1984) (quoting Wright, Miller & Kane, Federal Practice and Procedure § 2767 at 740). We have repeatedly recognized this rule. See, e.g., Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1578 (Fed. Cir. 1993).

Because the actual controversy in this case is over infringement, the declaratory defendant's hypothetical coercive complaint here is a patent infringement suit. It is well-established that a claim for infringement arises under federal law.

In other words, a poorly plead declaratory judgment action does not eviscerate jurisdiction for patent cases.

Reversed.