In Micron Tech. Inc. v. MOSAID Tech. Inc., 518 F.3d 897 (Fed. Cir. 2008), the Federal Circuit further explained the requirements for jurisdiction under the Declaratory Judgment Act in the wake of the Supreme Court’s decision in MedImmune, Inc. v. Genentech, Inc., 127 S. Ct. 764, 166 L. Ed. 2d 604 (2007). In MedImmune, the Supreme Court held that the “reasonable apprehension” test for declaratory judgment jurisdiction conflicted with Supreme Court precedent on the requirements for declaratory judgment jurisdiction. Following this decision, the Federal Circuit replaced the “reasonable apprehension” test with the “all circumstances” test. See SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372 (Fed. Cir. 2007); see also Teva Pharms. USA, Inc. v. Novartis Pharms. Corp., 482 F.3d 1330 (Fed. Cir. 2007). While the “reasonable apprehension” test required a threat of suit -- usually in the form of a “cease and desist” letter from a patent holder -- the “all circumstances” test just requires the circumstances to show a substantial controversy between parties of adverse legal interests of sufficient immediacy and reality. See Sony Elecs., Inc. v. Guardian Media Techs., Ltd., 497 F.3d 1271 (Fed. Cir. 2007) (denial of declaratory judgment jurisdiction was erroneous where patentee demanded royalties and alleged infringer contended it has the right to engage in such activities without a license).

In Micron, the declaratory judgment plaintiff is a major manufacturer of DRAM chips. Micron is one of four manufacturers who together account for 75% of worldwide DRAM chip sales. The defendant, MOSAID, owns several patents in the field of DRAM chips and has a policy to license the patents to manufacturers in the field. MOSAID sent warning letters to the DRAM chip manufacturers, including Micron, strongly suggesting that a license should be taken. MOSAID sent an initial warning letter to Micron in June of 2001 and followed-up with additional letters to Micron in December of 2001, March of 2002 and finally in July of 2002. However, none of the DRAM chip manufacturers took a license under the MOSAID patents.

Over the next few years, MOSAID filed suits (one by one) against the other DRAM chip manufacturers. Each time a DRAM chip manufacturer entered into a license agreement, MOSAID would issue a public statement “reiterating its intent to pursue its aggressive licensing strategy.” For example, in a 2005 annual report, MOSAID stated: “[w]ith approximately half the DRAM industry now under license, it is clear that our remaining strategy is to license the remaining DRAM manufacturers.” In a June 14, 2005 conference call with analysts MOSAID indicated that it would be unrelenting in its assertion of its patent portfolio. Press reports predicted that Micron would be the next obvious target for MOSAID since litigation with the other three DRAM chip manufacturers had settled.

Fearing that it was MOSAID’s next target, Micron filed a declaratory judgment action on July 24, 2005 in the Northern District of California. The next day MOSAID filed an action for patent infringement against Micron in the Eastern District of Texas.

MOSAID moved to dismiss Micron’s declaratory judgment action, arguing that the court lacked subject matter jurisdiction under either Article III of the U.S. Constitution or under the Declaratory Judgment Act (28 U.S.C. § 2201). The district court granted the motion, finding that there was no jurisdiction for a declaratory judgment under the “reasonable apprehension” test. The district court noted that Micron had received no threats from MOSAID in the past four years, MOSAID had not threatened Micron’s customers, and MOSAID did not make any public comments mentioning Micron. The district court found that there was no explicit threat or other action by MOSAID that created a reasonable apprehension of suit.

The Federal Circuit reversed and remanded. Utilizing the “all circumstances” test, the Federal Circuit held there was a real and substantial dispute between Micron and MOSAID. The Federal Circuit pointed to Micron receiving threatening letters in the past and Micron observing MOSAID’s continuing aggressive licensing behavior with its competitors. More notably, the Federal Circuit also relied on MOSAID’s recent public statements and annual reports, although none of them mentioned Micron by name, which demonstrated MOSAID’s continued intent to pursue an aggressive litigation strategy against the DRAM chip manufacturers. The Federal Circuit also rejected MOSAID’s assertion that no controversy existed since four years had passed since its last warning letter to Micron, particularly because during this interval MOSAID was busy litigating against the other DRAM chip manufacturers.

WHAT DOES THIS MEAN TO YOU?

As the phrase “all circumstances” suggests, any relevant conduct by a patent holder to enforce its patents may be used to show that a substantial controversy exists for declaratory judgment jurisdiction. Factors, such as recent public statements by the patent holder regarding licensing strategy, can supplement past activity to demonstrate the existence of a real and substantial controversy between the parties. As the Federal Circuit stated in Micron, “[w]hether intended or not, the now more lenient legal standard facilitates or enhances the availability of declaratory judgment jurisdiction in patent cases.”

For a patent holder, the “all circumstances” test means that the patent holder must proceed with caution in how it attempts to license its patents. Threats of litigation may very well be sufficient to demonstrate subject matter jurisdiction for a declaratory judgment.

For a potential defendant, on the other hand, Micron and the other Federal Circuit decisions open the door for demonstrating the existence of declaratory judgment jurisdiction. Under the “all circumstances” test, all activity by the patent holder, against others as wells as you, may be a basis for filing a declaratory judgment suit. Thus, a potential defendant is less likely to be at the whim of the patent holder who could previously artfully word demand letters to avoid triggering the basis for declaratory judgment jurisdiction under the “reasonable apprehension” test.