Anything You Say Can Be Held Against You: Staying Out Of Court Just Got Harder for Patent Owners

 

By Meredith L. Ainbinder

 

P

atent owners interested in commencing licensing discussions with other market players have long wondered how much they can say about their patent rights and other parties’ activities without risking becoming defendants in declaratory judgment lawsuits. These suits, brought under the Declaratory Judgment Act, arise in the patent context when a party, rather than waiting to be sued for infringement, asks the court to decide that its activity does not infringe, or that a patent is not enforceable. 

These suits require some activity that shows the dispute is live, but the question is how much activity is necessary for a court to hold that litigation is a reasonable means for deciding the issues. Companies on the receiving end of communications that fall short of either accusing them of outright infringement or offering a license often wonder what they can do to protect themselves when they think patent owners are implicitly brandishing their patents as competitive weapons. 

The Federal Circuit recently weighed in again on this issue, with a brief opinion which confirmed there are no “magic words” a patent owner can use to avoid provoking declaratory judgment jurisdiction. Moreover, the decision established that a receiving party need cross a very low threshold to show that a patent owner has asserted a right sufficiently to allow that party to seek a declaratory judgment. 

In Hewlett Packard Co. v. Acceleron LLC, the Federal Circuit reversed a lower court’s decision that there was no “case or controversy” as required to maintain an action for a declaratory judgment. In so doing, the Federal Circuit agreed with HP that Acceleron was in fact asserting patent rights, citing such actions by Acceleron as sending HP a letter claiming that its patent related to HP’s product; imposing a short response deadline; failing to suggest a confidentiality agreement; and refusing to agree to HP’s requested mutual litigation standstill. 

This conduct, according to the Federal Circuit, satisfied the requirements for a live dispute. That Acceleron did not offer a license or claim there was any specific infringing conduct did not defeat jurisdiction. The Federal Circuit simply did not believe that Acceleron had any business interest in opening dialogue with HP other than to assert its patents.

HP’s rights arise from the Declaratory Judgment Act, which allows a party to bring a lawsuit if, as the U.S. Supreme Court restated in MedImmune, Inc. v. Genentech, Inc. (2007), “…the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”   

The Federal Circuit, in SanDisk Corp. v. STMicroelectronics, Inc. (2007), showed how the Act applies to patent cases, explaining that a court could exercise declaratory judgment jurisdiction “where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends it has the right to engage in the accused activity without license….” 

Using these guiding principles, the Federal Circuit aptly noted that companies today – because of a desire to dodge declaratory judgment suits – are simply unlikely to communicate clear infringement accusations or licensing offers. The Federal Circuit appeared concerned that skillful drafting by attorneys such as Acceleron’s could diminish a receiving party’s rights.

As a result of this decision, a company in HP’s position avoids a legal purgatory in which it believes it has a legal problem but cannot resolve it decisively because a patent owner has said little enough to stay out of court.

On the other hand, patent owners face continued uncertainty as to what kind of communication could trigger a lawsuit and continued reason to fear that they could find themselves not only litigating a patent suit sooner than they planned (if they planned such an undertaking at all) but doing so in a jurisdiction not of their choosing. 

If Acceleron’s conduct here was enough to sustain jurisdiction, the question becomes:Will patent owners shrink from any communications about their patents, even simply identifying a patent to another company? This question may remain unanswered for some time, but here, as elsewhere, the Federal Circuit has emphasized the importance of examining the specific factual circumstances of each case and allowing the law to evolve.

Innovators are well advised to stay tuned to how the courts apply this case going forward, particularly with respect to patent owners other than holding companies.