Federal Circuit Denies Declaratory Jurisdiction When Patentee had not “Seen or Evaluated” Product

Panavise Products v. National Products (Fed. Cir. 2009)(nonprecedential)

Panavise and NPI are competitors in the suction-cup market. NPI owns US Patent No. 6,666,420 and has attempted to enforce its patent via litigation against various entities, including Tomtom, Tesla, JVC, Vision Tech, and others.

Although NPI had not directed any communication toward Panavise, the manufacturer still wanted to clear any potential cloud over its products. As such, Panavise sued NPI for a declaratory judgment that the patent was invalid, unenforceable, and not infringed. The California district court, however, dismissed the case – finding no case or controversy.

On appeal, the Federal Circuit reviewed the issue de novo, but easily affirmed. Quoting its own recent decision in Prasco v. Medicis, the court noted that the “controversy must be based on a real and immediate injury or threat of future injury that is caused by the defendants.” (emphasis in original).

Here, NPI indicated that it had not “seen or evaluated” the Panavise product prior to the lawsuit and there was no evidence that the patent in any way “restrained” the activities of Panavise. “Under settled law, Panavise must present factual proof that such threat is real and immediate. Panavise failed to meet this threshold burden.”

The Court was careful to avoid additional bright-line rules (that would be proscribed by MedImmune). Thus, the opinion notes that declaratory judgment jurisdiction could exist – in certain circumstances – even when there is no direct communication between the patentee and a DJ plaintiff.

21 thoughts on “Federal Circuit Denies Declaratory Jurisdiction When Patentee had not “Seen or Evaluated” Product

  1. “Extremely frivolous. Sanctionably frivolous”

    As frivolous as the idea the Mooney knows a thing about what he’s talking about.

    “I don’t see the connection”

    Big surprise…

  2. Steve: “How “frivolous” can an appeal, that takes a court 6 pages to support, be?”

    Extremely frivolous. Sanctionably frivolous.

    “If the court thought it needed to explain its reasoning, then I would think there is a good defense to the charge of frivolous.”

    I don’t see the connection.

  3. I too found the sanctions denial and related commentary noteworthy. I read that as a shot across the bow of the appellant’s lawyers’ boat.

  4. Don’t get me wrong, I think this appeal was crazy.

    However, I would think that the court’s comments on sanctions would have been a bigger threat if this case was summarily affirmed.

    How “frivolous” can an appeal, that takes a court 6 pages to support, be? If the court thought it needed to explain its reasoning, then I would think there is a good defense to the charge of frivolous.

  5. I think the ridiculous constructive notice construct for articles of manufacture provided for in the marking rules is only applicable as a potential limitation on damages.

  6. “NPI … has attempted to enforce its patent via litigation against various entities”

    As the Federal Circuit alluded to, under the relaxed standard in Medimmune and progeny, it may be possibly to establish D.J. jurisdiction on the above quoted fact and a reasonable apprehension that, by making its product, Panavise would be put in a position to run afoul of NPI’s claims. The problem for Panavise here, as I see it, is that unilaterally filing a D.J. action without a specific allegation on the part of the patentee amounts to an admission of infringement.

  7. Thanks all. Asking for a licence, while having the option to squeeze the patent owner with worry about a petition for re-exam. That seems reasonable, even though the issue is about claim interpretation rather than validity. I just assume that the “substantial new issue” hurdle can be overcome.

  8. Max: I like hypos as much as the next lawyer, but I have a hard time with yours. Whole factory hinged on one ambiguous claim? No design arounds possible? No alternative non-infringing technology? Tom Clancy has more realistic plots.

    Taking it on its face: Steve’s suggestion of reexam is an excellent way to deal with such issues and one I wish I had included in my original post. I know it isn’t meant to deal with ambiguous claim terms, but if the claim is that ambiguous then there must be some art that could reign it in. The bar isn’t that high to get the PTO to take a second look. Quality review working for you!

    Failing that I would approach the patentee for a license. $1B is still a lot of money, even after the bail-outs.

  9. One potentially good outcome from this case is that it should be harder to get an injunction assuming Panavise’s fears are realized. Furthermore, the laches clock has started.

  10. Thanks Keith. Sorry I didn’t make myself more clear. I was musing on a hypothetical in which the costs of coming to market are immense. The English courts expect a generics manufacturer, for example, to “clear the way” by ascertaining with the patent owner that the patent owner is not going to move for interlocutory injunctive relief. If generics doesn’t do this, it may well find itself enjoined, even before trial. Now I daresay there are special procedures (ANDA)? for pharma, but what about, say, a new 1billion dollar facility for making metal sheet, from metal ore, and a competitor with an issued claim, probably valid, but with an ambiguous scope that you think you ought to be held not to infringe? Approach patent owner? Or not?

  11. Max:”What then can the wise competitor do to “clear the way” and minimise risk, before going into production?”

    1. Put together a very good analysis on why the patent should be invalid or unenforceable.

    2. Have a patent attorney work with the design team to ensure that the product does not infringe the claims of the patent. Even if you really believe in your work on #1 you should still have a non-infringing alternative to fall back on.

    3. Fire counsel who recommended the current strategy.

    We are talking about a suction cup. The tooling would be less than the cost of a decent appellate brief. Other sunk costs in launching a product are likely not much more than the cost of this case plus appeal. As described so far, this was poorly played from both a legal and business point of view.

  12. Max,

    This wasn’t even a close case. Note the Federal Circuit’s comment regarding imposing sanctions for a “frivolous appeal;”

    NPI files a motion for sanctions under Fed. R. App. P. 38. We deny NPI’s motion. Although the appeal can be viewed as very weak from both a factual and a legal stand point, we do not agree that it rises to the level of frivolousness. At the same time, we do note that this appeal approaches wasting the court’s time and unduly delaying more deserving litigants.

    What the DJ plaintiff here was looking for was an “advisory opinion” courts. That’s not going to happen under U.S. jurisprudence. And it’s pretty clear from the above statement the DJ plaintiff was very close to being in the “sanction” zone.

  13. “Wouldn’t this be like suing an automobile owner before the chance occurrence that the driver hits me?”

    No.

  14. Wouldn’t this be like suing an automobile owner before the chance occurrence that the driver hits me?

  15. The costs of tooling up for production, then executing a market launch, are immense and the patent owner is lurking, just waiting till the expense has been committed, before pouncing, with the argument that he couldn’t move any earlier because he didn’t know what the product was. What then can the wise competitor do to “clear the way” and minimise risk, before going into production?

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