Covenant Not to Sue for Patent Infringement Before Verdict Divests DJ Subject Matter Jurisdiction

Dow Jones & Co. v. Ablaise Ltd., No. 2009-1524 (Fed. Cir. May 28, 2010).

Holding:

A patentee’s covenant not to sue for any acts of future infringement of a patent before verdict extinguishes any current or future case or controversy between the parties, and divests the district court of subject matter jurisdiction. Slip op. at 19.

Relevant Facts:

Dow Jones filed a declaratory judgment (DJ) action in a district court. After the Markman hearing, Ablaise offered Dow Jones a covenant not to sue on one patent. Dow Jones demanded the covenant to include Dow Jones’ parent company, which Ablaise refused. The district court denied Ablaise’s motion to dismiss the invalidity claim with respect to the patent based on the covenant. Ablaise appealed. The Federal Circuit reversed as to this issue (but affirmed the district court’s grant of summary judgment that the asserted claims of another patent are invalid as obvious).
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Comments:

The Court noted that “[s]ubject matter jurisdiction is a threshold requirement for a court’s power to exercise jurisdiction over a case, and no amount of ‘prudential reasons’ or perceived increases in efficiency, however sound, can empower a federal court to hear a case where there is no extant case or controversy.” Slip op. at 19.

If the covenant not to sue was not offered by the patentee until after the jury had determined that the patent was not infringed, however, the post-verdict covenant does not divest the court’s DJ jurisdiction, because that controversy had already been resolved by the jury's verdict. Id. at 15.