Finding that a covenant not to sue did not strip the district court of declaratory judgment jurisdiction, the U.S. Court of Appeals for the Federal Circuit reversed and remanded a district court’s dismissal of an action for lack of declaratory judgment jurisdiction. Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., Case No. 08-1050 (Fed. Cir., Feb. 13, 2009) (Newman, J.) (non-precedential).
In 2003, Revolution sued Aspex for patent infringement. The patented invention related to magnetically attached auxiliary eyeglasses. Aspex discontinued selling the allegedly infringing product and filed a counterclaim for non-infringement and invalidity of the patent. Several years later, Revolution filed a covenant not to sue Aspex for patent infringement, but the covenant only applied to past conduct. The district court held that the covenant not to sue “forever remove[d] the possibility that Aspex may be sued under the ’913 patent for Aspex products made, used, or sold on or before the filing” and concluded that the covenant was sufficient to remove any actual controversy in the present. Thus, the court claimed, it no longer had subject matter jurisdiction. Aspex claimed that an actual controversy continued to exist despite the covenant not to sue because it had the capability and intent to reintroduce the accused product into the marketplace and the covenant only applied to past infringement.
On appeal, the Court reiterated that MedImmune lowered the bar for declaratory judgment actions by imposing a totality of the circumstances approach for deciding whether there is an actual controversy. The Court said “[w]hether a covenant not to sue will divest the trial court of jurisdiction depends on what is covered by the covenant.” The Court then applied the MedImmune test and found that an actual controversy continued to exist because Aspex’s ability to reintroduce the accused product was not speculative. Thus, the dispute between the parties was definite, concrete, real and substantial because the covenant not to sue did not shield Aspex from liability for future infringement.
The Court held that by retaining the right to sue for future infringement, Revolution preserved this controversy at a level of “sufficient immediacy and reality to allow Aspex to pursue declaratory judgment relief.”
Practice Note: When can a potential infringer sue a patent holder, so as to gain an advantage by choosing a favorable forum? A mere covenant not to sue will no longer automatically remove jurisdiction from a court. An actual controversy will continue to exist if a party maintains the right to haul an alleged infringer into court. Thus, the substance of a covenant not to sue will be determinative.