Declaratory Judgment Jurisdiction Found Even Though The Patentee Avoided Words Such As “Litigation” and “infringement”

Hewlett-Packard Co. v. Acceleron LLC, No. 2009-1283 (Fed. Cir. Dec. 4, 2009):

Holding:

Although a communication from a patentee to another party, merely identifying its patent and the other party’s product line, without more, is insufficient to create declaratory judgment jurisdiction, conduct that can be reasonably inferred as demonstrating intent to enforce a patent can. Slip op. at 5, 7.

Relevant Facts:

Acceleron acquired U.S. Patent No. 6,948,021, and shortly after that, it contacted HP specifically identifying the ’021 patent and HP’s product line, but its correspondence with HP did not contain language threatening to sue for infringement or demand a license. HP proposed a 120-day stand-still period, for which Acceleron rejected. HP filed the DJ action, and Acceleron moved to dismiss the case for lack of DJ jurisdiction. The district court granted Acceleron’s motion and the Federal Circuit reversed.

Comments:

The Federal Circuit recognized that there is no bright-line rule for analyzing DJ jurisdiction, but the facts of this particular case, when viewed objectively and in totality, including a patentee’s affirmative step of twice contacting a potential infringer directly, making an implied assertion of its rights in a patent, mentioning a specific product, and the disagreement from the potential infringer, could create DJ jurisdiction. Slip op. at 8-9.

It appears that after MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007), to safely avoid a DJ action, all the patentee can do is to merely identify its patent and the other party’s product line, without more, in the first communication, and then request a confidentiality agreement for the future discussions.

The lowering of the standard for filing a DJ action, however, is not economical for the patentees and potential infringers alike. In some situations, the potential infringers may not pay sufficient attention to the matter if the patentee merely identifies its patent and the product line, and ignore the patentee’s initial communications. If the patentee uses stronger languages, the potential infringer could now run to the court to file a DJ action. Consequently, this may force more and more patentees to sue first, and then negotiate a license in the future. As a result, this may increase transaction costs for the parties and the burden for the court system, especially if the parties could resolve the disputes without resorting to the court.

Practically, it may have two consequences. First, for a small stake case, especially where the cost of litigating the case outweighs the value of the case, the parties will negotiate regardless of the language used in the correspondence. Second, for a high stake case, the patentee can only identify the patent and the other party’s product line in its initial correspondence. If the other party ignores, file a lawsuit first. If the other party responds, request a confidentiality agreement and then negotiate a license.