Since the Supreme Court’s decision in MedImmune v. Genetech, the Federal Circuit has had to reshape the contours of declaratory judgment jurisdiction. The Supreme Court held that an Article III controversy exists where “there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” MedImmune, Inc. v. Genentech, Inc., 549 US 118, 127 (2007). Several recent Federal Circuit cases have addressed the issue of what a plaintiff must do in order to demonstrate an Article III controversy that can give rise to declaratory judgment jurisdiction.
In SanDisk v. STMicroelectronics, the Federal Circuit held 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.” SanDisk Corp. v. STMicroelectronics Inc., 480 F.3d 1372, 1381 (Fed. Cir. 2007). Accordingly, a declaratory judgment plaintiff does not need to engage in the allegedly infringing activity in order to establish an Article III controversy. The Federal Circuit’s decision in this case, however, did not provide a great deal of guidance with respect to what a plaintiff must do in order to demonstrate sufficient immediacy and reality to establish declaratory judgment jurisdiction.
In the subsequent Cat Tech v. Tubemaster case, the Federal Circuit held that a plaintiff must demonstrate that “there has been meaningful preparation to conduct potentially infringing activity.” Cat Tech LLC v. Tubemaster, Inc., 528 F.3d 871, 880 (Fed. Cir. 2008). “If a declaratory judgment plaintiff has not taken significant, concrete steps to conduct infringing activity, the dispute is neither ‘immediate’ nor ‘real’ and the requirements for justiciability have not been met.” Id. The Federal Circuit in this decision provided some further guidelines. With respect to immediacy, the court concluded that “the greater the length of time before potentially infringing activity is expected to occur, the more likely the case lacks the requisite immediacy.” Id, at 881. With respect to reality, the court held that “the greater the variability of the subject of a declaratory judgment suit, particularly as to its potentially infringing features, the greater the chance that the court’s judgment will be purely advisory, detached from the eventual, actual content of that subject—in short, detached from eventual reality.” Id, at 882.
Thus, the two principal questions for the declaratory judgment plaintiff appear to be: (1) how close is the plaintiff to engaging in the potentially infringing activity; and (2) is the technology in question “substantially fixed” as opposed to “fluid and indeterminate.” Id, at 881-882. In Cat Tech, the Federal Circuit resolved these two questions, holding that there was declaratory judgment jurisdiction because the plaintiff could “expeditiously solicit and fill orders” for its product once the threat of liability was lifted, and the product was “substantially fixed” because there were only four devices that were designed to cover all customer configurations. Id.
With that backdrop, the Federal Circuit provided further guidance regarding declaratory judgment jurisdiction in its recent decision in Matthews v. Biosafe Eng’g, LLC. 2012 WL 4354663 (Fed. Cir. Sept. 25, 2012). The technology at issue in the case could be operated under various configurations—some of which allegedly infringe the patents-in-suit and others which do not.
More specifically, in 2007, Biosafe acquired several patents related to waste disposal. Id, at *1. Shortly afterwards, Matthews began marketing a bio-cremation unit that used alkaline hydrolysis (rather than incineration) to cremate human remains. Id. In 2011, Matthews filed suit against Biosafe seeking a declaratory judgment of non-infringement, invalidity, and unenforceability of Biosafe’s patents.
In its amended complaint, Matthews alleged that in 2008, Biosafe’s president told a Matthews’ official that the sale of its bio-cremation unit would infringe Biosafe’s intellectual property. Id. In 2009, Biosafe sent Matthews a letter asserting that Matthews was distributing sales literature depicting one of Biosafe’s units, and that Biosafe could pursue a claim for patent infringement if it determined that the Matthews installation was “operated in a manner covered by any of Biosafe’s patents.” Id, at *2. Matthews also alleged in its amended complaint that Biosafe had engaged in a campaign in the marketplace to make accusations and threats to potential customers that Matthews’s equipment was infringing Biosafe’s patents. Id, at *2.
At the time it filed the amended complaint, Matthews had sold three of its bio-cremation units, but none of them had been installed by its customers. Id, at *1. The district court dismissed the amended complaint for lack of declaratory judgment jurisdiction. The court held that Matthews had not made “meaningful preparation” to conduct potentially infringing activity because the “parameters used in the operation of Matthews’ devices [were] not settled” and those devices could “be operated with parameters outside of the various ones specified” in Biosafe’s patents. Id, at *2. Matthews thus “lack[ed] the necessary reality to satisfy the constitutional requirements for declaratory judgment jurisdiction” because the potentially infringing features of the Matthews’ devices were “fluid and indeterminate.” Id, at *2.
The Federal Circuit upheld the district court’s decision because Matthews had not alleged the requisite immediacy and reality to support declaratory judgment jurisdiction. With respect to immediacy, the Federal Circuit noted that there was no evidence as to when the Matthews’ devices would be used in a manner that could potentially infringe Biosafe’s patents. Id, at *4. While Matthews had sold three units, none of them had been installed by its customers, and Matthews had not alleged any evidence that its customers planned to operate the units in a manner that infringed Biosafe’s patents. Id, at *4. The court noted that “it is unclear when, if ever, Matthews’ customers will use the [bio-cremation units] in a manner that could even arguably infringe [Biosafe’s] patents.” Id, at *5.
With respect to reality, the Federal Circuit noted that Matthews’ devices could be operated using numerous process parameters, some of which would not infringe Biosafe’s patents. Id, at *5. Moreover, Matthews had not provided any evidence on the configurations under which the units would likely be operated, and therefore it was impossible to determine whether such operations could potentially infringe Biosafe’s patents. Id. Accordingly, the Federal Circuit held that the dispute Matthews had with Biosafe did not satisfy the immediacy and reality required to support the exercise of declaratory judgment jurisdiction. Id, at *3.
The decision further confirms the Federal Circuit’s approach to declaratory judgment jurisdiction, along with the issues underlying that approach—i.e., the immediacy and the reality of the alleged infringing conduct. The decision also provides additional guideposts for what is a highly fact-intensive inquiry, and may provide some additional certainty to potential declaratory judgment plaintiffs moving forward.