In a recent case concerning propane gas kits used as an alternative fuel conversion system, the District of Massachusetts found that declaratory judgment jurisdiction exists, even though the parties in the case had entered into an extended covenant not to sue. The opinion reasoned that because the accused infringer, New England Gen-Connect, is presently making and selling the accused products and intends to continue doing so, and because the patent would be enforceable long after the covenant not to sue expires in 2021, there still exists uncertainty and reasonable apprehension as to whether Gen-Connect should continue to grow and expand its business and product line.
The Declaratory Judgment Act allows a party to seek a declaration from a federal court about its rights in a case of actual controversy. With respect to declaratory judgments, the Supreme Court has said that, “the question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of such immediacy and reality to warrant issuance of a declaratory judgment.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007).
In the present case, the patent owner US Carburetion sent a letter to Gen-Connect, alleging that Gen-Connect’s making, selling and offering for sale of a propane kit constituted infringement of a US Carb patent. In response, Gen-Connect filed a complaint with the district court seeking a declaration from the Court that Gen-Connect did not infringe and moreover, that the US Carb patent is invalid.
US Carb then moved to dismiss the complaint, arguing that the case was not ripe for a declaratory judgment as there was no reasonable apprehension of a lawsuit. US Carb argued in its motion that there was a covenant not to sue between the parties where US Carb promised not to bring suit prior to December 2017.
In ruling on the motion, the court denied US Carb’s motion to dismiss for lack of subject matter jurisdiction. The court analyzed US Carb’s threat letter and concluded that the letter gave rise to a case or controversy between the parties at least because it was not “absolutely clear” from US Carb’s covenant not to sue that US Carb “could not reasonably be expected” to resume its enforcement efforts, given the covenant’s limited duration.
The parties then appear to have entered into an “Extended Irrevocable Covenant Not to Sue,” extending the covenant not to sue to December 31, 2021. US Carb then renewed its motion to dismiss, arguing that because of the extended covenant, Gen-Connect has no reasonable apprehension of a lawsuit because any such lawsuit would have to be filed in 2022 and, “the mere slight possibility of a suit so many years in the future . . . is just too speculative and lacks immediacy . . .”
Nonetheless, the court denied the renewed motion to dismiss, finding that there was still declaratory judgment jurisdiction even in view of the extended convent not to sue. The opinion by Judge Talwani reasoned that Gen-Connect may have the intent to continue to manufacture and sell the accused product after the expiration of the covenant, and the patent would still be enforceable long after the expiration of the covenant. The opinion further noted that, “the extended covenant not to sue merely extends the period of uncertainty as to whether Gen-Connect should continue to grow and expand its current product line.”
In short, the court’s order reflects that declaratory judgments may still be ripe even where there is a covenant not to sue, where the covenant expires during the duration of the patent term. The “case or controversy” requirement for a declaratory judgment may be satisfied even for a lingering possibility of suit in the far future, where as here, the accused infringer was investing in and developing a product line that may still be viable in the far future.
The case is New England Gen-Connect, LLC v. US Carburetion, Inc., Civil Action No. 14-cv-13530 (D. Mass. Feb. 11, 2016), before Judge Indira Talwani. A copy of the order can be found here.