Addressing for the first time the issue of whether a suit against a manufacturer’s customers in a foreign country for patent infringement creates a justiciable case or controversy sufficient for the manufacturer to bring a declaratory judgment action in the United States, the US Court of Appeals for the Federal Circuit upheld the district court’s grant of a patent owner’s motion to dismiss for lack of subject matter jurisdiction. Allied Mineral Products, Inc. v. Osmi, Inc., Case No. 16-2641 (Fed. Cir., Sept. 13, 2017) (Moore, J).
Stellar owns a Mexican patent and a US patent containing English-language versions of the claims in the Mexican patent. Stellar sued two of Allied’s distributors in Mexico alleging infringement of the claim of Stellar’s Mexican patent. Allied manufactures the products accused of infringement in the Mexican action, and sells the same products in the United States under a different brand name. After the Mexican litigation was filed, Allied filed a complaint against Osmi and Stellar in US district court seeking a declaratory judgment that Stellar’s US patent was invalid, unenforceable and not infringed.
The Declaratory Judgment Act confers subject matter jurisdiction where there is “a case of actual controversy.” The test for “case of actual controversy” requires a showing that, in view of all of the circumstances, “there is a substantial controversy, between parties having adverse legal interest, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” To satisfy this standard, the declaratory judgment plaintiff must establish “some affirmative act by the patentee.” Stellar moved to dismiss the declaratory judgment complaint for lack of subject matter jurisdiction. The district court granted the motion, concluding that Stellar’s actions in Mexico could not, “without further affirmative action by Stellar, create an actual controversy with Allied with regard to its US Patent.” Allied appealed.
The Federal Circuit concluded that there was no “affirmative act” sufficient to establish subject matter jurisdiction. The Court explained that “Stellar has not directed any actions towards Allied” or “litigated or threatened litigation in the United States or on its [US] patent.” Stellar’s actions abroad involved Allied’s customers, not Allied. Furthermore, the Court found that Stellar had not engaged with Allied when given the opportunity. For instance, the Court noted that prior to the Mexican action, Stellar sent notice letters to Allied customers, and Allied responded on their behalf. However, Stellar did not respond to Allied’s letters.
Allied countered that it had “been forced into an unwinnable business position; it can either continue to sell products in the United States knowing it may be the target of an infringement suit, or it can cease selling products it believes it has a right to sell.” While the Court acknowledged Allied’s plight, it explained that “fear of a future infringement suit is insufficient to confer jurisdiction.” Quoting Prasco v. Medicis Pharm. (IP Update, Vol. 11, No. 9), the Court explained that “[a]lthough we understand [the declaratory judgment plaintiff’s] desire to have a definitive answer on whether its products infringe defendants’ patents, were the district court to reach the merits of this case, it would merely be providing an advisory opinion. This is impermissible under Article III.”