December 7, 2009

Federal Circuit Holds that Implied Assertions of Patent Rights are Sufficient to Give Rise to Declaratory Judgment Jurisdiction

Hewlett-Packard Co. v. Acceleron LLC, No. 2009-1283 (Fed. Cir. Dec. 4, 2009).

Federal Circuit reversed district court and held that declaratory judgment jurisdiction was present.  Upon viewing the facts objectively and in their totality, the Court found that Acceleron made implied assertions of its patent rights against HP’s Blade Server products and that HP disputed the assertions.  As a result, the Court held “that there is declaratory judgment jurisdiction arising from a ‘definite and concrete’ dispute between HP and Acceleron, parties having adverse legal interests.”  It was irrelevant that Acceleron did not explicitly assert its patent rights or threaten suit.   

Acceleron is a patent holding company based in Tyler, Texas and is the owner of U.S. Patent No. 6,948,021.  HP sued Acceleron in the U. S. District Court for the District of Delaware seeking declaratory judgment of non-infringement and invalidity of the ‘021 Patent.  The District Court granted Acceleron’s motion to dismiss for lack of declaratory judgment jurisdiction. 

Acceleron initiated contact with HP via a letter in which it identified itself as the owner of the ‘021 Patent, which Acceleron described as “relat[ing] to Blade Servers.”  Acceleron requested an “opportunity to discuss” the patent with HP, imposed a two-week deadline on HP to respond, and, as construed by the district court, requested that HP “not file suit” in the meantime.  In response, HP requested a 120 day period for the parties to discuss the issue, during which time neither party would file suit.  In its reply, Acceleron imposed a new two-week deadline for response to its original letter and stated that if HP did not respond, then Acceleron would understand that HP did not “have anything to say about the merits of this patent, or its relevance to [HP’s] Blade Server products.” 

Citing the Supreme Court’s decision in MedImmune, the Federal Circuit stated that a declaratory judgment plaintiff must show that the dispute is “definite and concrete, touching the legal relations of parties having adverse legal interests; and that it 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.”  MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007).  “Thus, a communication from a patent owner to another party, merely identifying its patent and the other party’s product line, without more, cannon establish adverse legal interests between the parties, let alone the existence of a ‘definite and concrete’ dispute.” 

Upon considering the “totality of the circumstances,” such as the fact that Acceleron is a non-competitor patent holding company that refused HP’s request for a mutual standstill, the Federal Circuit held that it was not unreasonable for HP to interpret Acceleron’s letters as “implicitly asserting” its rights under the ‘021 Patent.  Acceleron’s failure to explicitly assert its rights or threaten to sue for infringement was not relevant.

The Court found “disingenuous” Acceleron’s assertion that it wrote to simply suggest that HP incorporate the patented technology in its products or to attempt to sell the ‘021 Patent to HP.   

Acceleron argued that at the time of HP’s filing it could not have asserted its rights because it had yet to determine if HP was infringing.  The Court found this argument to be irrelevant because the test for declaratory judgment jurisdiction is objective.  “Thus, conduct that can be reasonably inferred as demonstrating intent to enforce a patent can create declaratory judgment jurisdiction.”

Acceleron also argued that HP’s letter demonstrated that it had yet to determine if its legal interests were adverse.  In response, the Court held that HP was not required to make a formal declaration of having an adverse legal interest and that regardless, HP’s suit was indicative of its belief that Acceleron was threatening to sue. 

In conclusion, the Federal Circuit explained that MedImmune has changed the requirements for declaratory judgment jurisdiction in patent cases:

[T]here is no bright-line rule for distinguishing those cases that satisfy the actual case-or-controversy requirement from those that do not.  See MedImmune, 549 U.S. at 127.  Our decision in this case undoubtedly marks a shift from past declaratory judgment cases.  However, MedImmune has altered the way in which the Declaratory Judgment Act applies to patent law cases, requiring that legal interests be evaluated in patent cases under the general criteria of the Act.  Our jurisprudence must consequently also evolve, and in this case the facts demonstrate adverse legal interests that warrant judicial resolution.