On March 26, 2007, in SanDisk Corp. v. STMicroelectronics, Inc., the Court of Appeals for the Federal Circuit, in response to recent remarks by the U.S. Supreme Court, rewrote the rules of when a declaratory judgment action could be commenced in a patent context. Under the new test, it will be much easier for such an action to be instituted.

The Federal Circuit’s old test required the plaintiff to show that it had a “reasonable apprehension of suit.” This standard would not be satisfied if the patentee merely brought the patent to the other party’s attention. However, earlier this year, the Supreme Court in Medimmune, Inc. v. Genentech, Inc., addressed and rejected the reasonable apprehension test in the context of a patent license. In so doing, it set the test as showing that there is a “substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Now, in SanDisk, the Federal Circuit has applied the Supreme Court’s standard in a non-license, initial negotiation context. While declining to define the “outer boundaries of declaratory judgment jurisdiction,” the Federal Circuit held in SanDisk that “where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license, an Article III case or controversy will arise and the party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of its legal rights.”

Applying this test, the Federal Circuit found that declaratory judgment jurisdiction did in fact exist under the SanDisk facts, which included not only a detailed presentation by patentee STMicroelectronics that certain of SanDisk’s products infringed, but also a declaration by the principal ST negotiator that “ST has absolutely no plan whatsoever to sue SanDisk.”

The concurring opinion in SanDisk characterized the new rule adopted by the Federal Circuit as effecting a “sweeping change in our law regarding declaratory judgment jurisdiction.” It noted, correctly it would seem, that there is now “no practical stopping point short of allowing declaratory judgment actions in virtually any case in which the recipient of an invitation to take a patent license elects to dispute the need for a license and then to sue the patentee.”