In a decision that continues the expansion of declaratory judgment jurisdiction in light of MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), the Federal Circuit has ruled that a patent holding company that brought a patent to the attention of a potential infringer and made an "implied" assertion of rights under the patent was subject to a declaratory judgment suit. The decision illustrates just how little interaction between a patentee and a potential licensee can support declaratory judgment jurisdiction, given the right circumstances. Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358 (Fed. Cir. 2009).
Acceleron, a patent holding company, contacted HP regarding a patent owned by Acceleron. Acceleron suggested the two companies meet to discuss the patent as it related to a line of HP "Blade Server" products. In an attempt to avoid triggering declaratory judgment jurisdiction, Accerleron's initial letter asked HP to agree that Acceleron had not "asserted any rights against any of [HP's] ongoing or planned activities, or otherwise created any actual case or controversy regarding the enclosed patent." HP responded by requesting that both parties agree not to file suit for 120 days to allow time for analysis. Acceleron rejected this offer and informed HP that unless HP accepted the terms of Acceleron's original letter within 15 days, Acceleron would assume that HP did "not have anything to say about the merits of this patent, or its relevance to [the HP] products." HP filed a declaratory judgment action two days before the expiration of the 15-day period imposed by Acceleron. The district court dismissed the case for lack of subject matter jurisdiction, and HP appealed.
Totality of Circumstances, Including Patentee's Status As A Licensing Company, Supports Interpretation Of Patentee's Conduct As "Implied" Assertion Of Patent Rights
Only three letters had been exchanged between the parties, and they did not directly address licensing, infringement, litigation or any of the patent claims. Nevertheless, the Federal Circuit, in an opinion by Chief Judge Michel, discerned the existence of a "definite and concrete dispute." The court acknowledged that "a communication from a patent owner to another party, merely identifying its patent and the other party's product line, without more, cannot establish [declaratory judgment jurisdiction]." However, the court found the "more" required for jurisdiction in the facts that (1) Acceleron was solely a licensing entity that did not practice its patents; (2) Acceleron rejected HP's request for a 120-day mutual standstill; and (3) Acceleron imposed a two-week deadline on HP and insisted that if HP did not respond to its original letter by the deadline, it 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." (emphasis by the court). According to the court, these facts constituted an implicit assertion of patent rights that established declaratory jurisdiction:
Acceleron argues that a patent owner may contact another party to suggest incorporating the patented technology into the other party's product, or to attempt to sell the patent to the other party. Given the circumstances of this case, such an assertion appears disingenuous. We do not doubt that such scenarios as presented by Acceleron occur, and perhaps quite frequently. However, we doubt that in those situations, the patent owners would assert a patent as "relevant" to the other party's specific product line, impose such a short deadline for a response, and insist the other party not file suit. As the district court correctly recognized, these factors "must be considered along with all the circumstances at bar." . . . We also agree with the district court that "the receipt of such correspondence from a non-competitor patent holding company. . . may invoke a different reaction than would a meet-and-discuss inquiry by a competitor, presumably with intellectual property of its own to place on the bargaining table." . . . Under the totality of the circumstances, therefore, it was not unreasonable for HP to interpret Acceleron's letters as implicitly asserting its rights under the '021 patent.
Later in its opinion, the court again cited Acceleron's status as a patent licensing company as supporting HP's interpretation of its actions as an implied assertion of patent rights: "Finally, we observe that Acceleron is solely a licensing entity, and without enforcement it receives no benefits from its patents. This adds significance to the fact that Acceleron refused HP's request for a mutual standstill. . . ."
Test Is Objective - Patentee's Subjective Intent Irrelevant
The court rejected Acceleron's argument that there could be no jurisdiction because it had not conducted an investigation of HP's Blade Servers and therefore had not formed a belief as to whether HP was in fact infringing. The patentee's subjective beliefs are irrelevant, the court explained, because the test for declaratory judgment jurisdiction in patent cases is objective. The correct inquiry is whether, from an objective standpoint, the patentee's conduct "can be reasonably inferred as demonstrating intent to enforce a patent":
Acceleron repeatedly emphasizes that "[a]t the time HP filed its complaint, Acceleron could not have asserted its rights in the '021 patent against HP because it had not even determined if it had a basis to assert the patent against HP." However, it is irrelevant whether Acceleron had conducted an adequate investigation or whether it subjectively believed HP was infringing. "The test [for declaratory judgment jurisdiction in patent cases], however stated, is objective. . . ." . . . "Indeed, it is the objective words and actions of the patentee that are controlling." . . . Thus, conduct that can be reasonably inferred as demonstrating intent to enforce a patent can create declaratory judgment jurisdiction.
Patentee's Affirmative Acts Are Critical To Declaratory Jurisdiction
The court reiterated its observation in SanDisk Corp. v. STMicroelectorniscs, Inc., 480 F.3d 1372, 1381 (Fed. Cir. 2007), that "declaratory judgment jurisdiction generally will not arise merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement, without some affirmative act by the patentee." In this case, however, Acceleron had taken affirmative steps which, considering the totality of the circumstances, established that a definite and concrete dispute existed:
The facts of this case, when viewed objectively and in totality, show that Acceleron took the affirmative step of twice contacting HP directly, making an implied assertion of its rights under the '021 patent against HP's Blade Server products, and HP disagreed. Therefore, we hold that there is declaratory judgment jurisdiction arising from a "definite and concrete" dispute between HP and Acceleron, parties having adverse legal interests.
Decision "Marks A Shift From Past Declaratory Judgment Cases"
The court acknowledged that its decision in this case "marks a shift from past declaratory judgment cases." It is now clear that an "implicit" assertion of patent rights against a specific product or product line may trigger declaratory judgment jurisdiction. Thus, before contacting a potential licensee, a patentee must now evaluate whether an objective observer could construe the contact as an implicit assertion of patent rights. Further, the nature of the patentee's business, e.g., whether it is a competitor of the prospective licensee or merely a holding company whose sole revenue comes from buying and then licensing patents, is now a factor in whether a given course of conduct constitutes such an implicit assertion.