The Federal Circuit recently continued its post-MedImmune development of declaratory judgment jurisdiction by issuing a decision that will make it easier for potential patent infringers to establish declaratory judgment jurisdiction. See Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358 (Fed. Cir. 2009), available at http://www.cafc.uscourts.gov/opinions/09-1283.pdf. The court acknowledged its decision "undoubtedly marks a shift from past declaratory judgment cases," id. at 1364.
In Acceleron, a lower court dismissed Hewlett-Packard's declaratory judgment complaint as "still too speculative a prospect to support declaratory judgment jurisdiction." 601 F. Supp. 2d 581, 589 (D. Del. 2009). The Federal Circuit reversed and remanded, because the totality of the circumstances showed "adverse legal interests that warrant judicial resolution." 587 F.3d at 1364.
The case centered on an exchange of three letters between Acceleron, a patent holding company, and Hewlett-Packard. In fall 2007, Acceleron wrote to Hewlett-Packard that it had recently acquired a patent that related to Hewlett-Packard's "Blade Servers" (apparently in reference to its BladeSystem® product). Acceleron requested "an opportunity to discuss this patent" with Hewlett-Packard, and demanded that the parties agree not to use any exchanged information for litigation purposes, including any claim that Acceleron "created any actual case or controversy." Id. at 1360. In closing, Acceleron imposed a two-week deadline for response, after which Acceleron would assume that Hewlett-Packard had "no interest in discussing this patent." Id.
In response, Hewlett-Packard expressed interest in learning more information "to conduct a complete and accurate assessment" but instead proposed a 120-day litigation standstill between the parties. Acceleron replied that Hewlett-Packard had no "basis for filing a declaratory judgment action," and that Acceleron's original letter provided "both parties appropriate protections to create a productive atmosphere." Id. at 1361. Acceleron reiterated its demand that Hewlett-Packard agree to its original terms or else it would understand that Hewlett-Packard was "not interested in discussing the patent." Id. Shortly thereafter, Hewlett-Packard filed suit in the District of Delaware seeking a declaratory judgment of non-infringement and invalidity. Acceleron filed a motion to dismiss for lack of subject matter jurisdiction.
In a decision issued post-MedImmune, the lower court granted Acceleron's motion to dismiss on the basis that its letters lacked several elements commonly needed to establish declaratory judgment jurisdiction: namely that the letters did not include "a statement of infringement, identification of specific claims, claim charts, prior pleadings or litigation history, or identification of other licensees." 601 F. Supp. 2d at 589. The lower court noted that Acceleron's failure to request a confidentiality agreement and to accept Hewlett-Packard's 120-day standstill proposal weighed in favor of finding jurisdiction, as did Acceleron's patent-holding business model. But under the totality of the circumstances, the lower court determined that Hewlett-Packard "jumped the gun" when it filed its complaint. Id.
The Federal Circuit reversed the lower court, ruling that jurisdiction was appropriate because 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." 587 F.3d at 1364. The court acknowledged that jurisdiction generally does not exist where a party merely learns of another's patent or perceives a risk of infringement, "without some affirmative act by the patentee." Id. Significantly, the court noted that Acceleron is "solely a licensing entity, and without enforcement it receives no benefits from its patents." Id.
Indeed the court was unmoved by Acceleron's arguments. First, the court rejected Acceleron's claim that it never explicitly asserted its patent rights, stating that "a declaratory judgment action cannot be defeated simply by a stratagem of a correspondence that avoids the magic words such as 'litigation' or 'infringement.'" Id. at 1362. The court noted that it is implausible "to expect that a competent lawyer . . . would identify specific claims, present claim charts, and explicitly allege infringement" in a preliminary letter to a possible infringer of its patent. Id.
Second, Acceleron's assertion that patent owners often contact other parties to propose intellectual property transactions unrelated to litigation was found to be “disingenuous.” Id. at 1363. Because Acceleron asserted its "patent as 'relevant' to the other party's specific product line, impose[d] such a short deadline for response, and insist[ed] the other party not file suit," Hewlett-Packard reasonably interpreted the letters as "implicitly asserting its rights under the '021 patent." Id.
Third, the court rejected Acceleron's assertion that it could not have filed suit against Hewlett-Packard because it had not determined any basis to do so at the time of the exchange. The court ruled that Acceleron's conduct could be "reasonably inferred as demonstrating intent to enforce." Id.
Acceleron is important for accused patent infringers who wish to dictate the forum and location of their inevitable suit. Those seeking to establish declaratory judgment jurisdiction may find Acceleron to be a welcome continuation of the relaxed standard post-MedImmune. On the other hand, patent owners must act prudently when drafting letters or other communications to potential infringers to avoid unintentionally exposing themselves to declaratory judgment jurisdiction in an undesirable forum. This is especially so where the patentee is a patent holding company.