Avoiding Declaratory Judgment Jurisdiction

Patentees now proceed with caution when approaching a potential licensee. The Supreme Court’s 2007 MedImmune v. Genentech decision broadened the availability of declaratory judgment actions even when the potential licensee has no apprehension of suit. In a recent IP Today [$$$] article, Kristen Doyle provides five tips to help patentees avoid declaratory judgment jurisdiction:

  1. File suit prior to sending a demand letter. (The suit typically need not be pursued for 3-4 months).
  2. Send bland demand letters that avoid infringement allegations, threats of litigation, or even for licensing fees and that are signed by non-lawyers. Doyle could find not post-MedImmune decision that finds DJ jurisdiction based only on a letter that merely identified a patent and stated that the patent was available for licensing.
  3. Establish a definite negotiation period.
  4. Ask for a confidentiality agreement when negotiating.
  5. File the litigation in the “most logical venue.”

49 thoughts on “Avoiding Declaratory Judgment Jurisdiction

  1. Or you could, you know, only go after actual infringers who wouldn’t be able to show that they have no need to license your patent…

    But I guess that isn’t very profitable, huh? I mean, God forbid that the people you threaten to sue be able to point out that you have no business suing them in the first place, right? It’s like listening to you guys whine that inequitable conduct is too easy to prove because you’re so afraid of someone pointing out that you didn’t really invent your invention, you actually duplicated work someone published 20 years ago and you didn’t even know it because you had only looked at musty old patents, rather than spending 5 minutes with an internet search engine.

    And yet people here wonder why so many people dislike NPEs and the lawyers who found them…

  2. “Don’t make, use or sell anything in that district.”

    Microsoft, IBM, Intel, Apple, Samsung, Toshiba, Sony, et al. all decide to cut all contacts with a particular judicial district? Wildly remote, but I’m having fun imagining the consequences.

  3. “File the litigation in the “most logical venue.””

    A logical venue is one where the defendant makes, uses or SELLS an infringing product.

    Don’t like a particular district? Don’t make, use or sell anything in that district. It’s that simple folks.

  4. But how can one willfully infringe during a period of good faith negotiations, particularly under circumstances where the parties agree that they will not sue each other?

    It probably depends on what exactly the parties agreed to. If they simply agreed to defer suing each other unless/until negotiations break down, that might not be a license and practicing the claimed invention would arguably be willful infringement. If they agreed to a temporary license or covenant not to sue for practicing the patent during the negotiation, that’s probably not infringement of any kind.

  5. Willful infringement is often viewed as an all or nothing proposition. But how can one willfully infringe during a period of good faith negotiations, particularly under circumstances where the parties agree that they will not sue each other?

  6. As a generalized IP Strategy, this is just one option, not right in all cases, but certainly the best way to proceed in many.

    Need to file an infringem,ent complaint with TEETH? Contact me please, at your service.

    Big Mean [ and proud of it ] Patent Troll since my days as CEO of E-data Corporation.

  7. “My client has a patent, we think you infringe. If you will agree to negotiate for fixed period then we will identify the client, the patent and the infringement, and make a license proposal. Otherwise we will sue you.”

    I like it. But I think I’d advise my client to decline. I don’t think giving up legal rights in exchange for something of unknown value is generally a good idea. Kind of reminds me of “Let’s Make A Deal,” but with a less benevolent host. I’d have to think about it, though.

    Do you have any experience with that letter?

  8. “Willfulness does not require that the patentee provide any notice.”

    That’s true, but how many allegations of willful infringement are based on anything more than notice provided by the patentee?

  9. Willfulness does not require that the patentee provide any notice.

    No, but willfulness does require notice, which can be provided by the patentee.

    You’re conflating a necessary condition and a sufficient condition.

  10. “notice” that triggers willfulness”

    As Uncle Jed said in The Big Chicken “Ain’t no such thing.” Willfulness does not require that the patentee provide any notice.

  11. Professor Brooks had the right cite (to HP v Accolade) but was subtle about its holding. The gist of the case is that there is DJ jurisdiction when an NPE has any contact with a potential licensee.

    Not much discussion here yet about “3. Establish a definite negotiation period.” This is worth a try, and maybe eventually it will become the normal mode of doing business. Basic technique: counsel for licensor sends letter to licensee which says “My client has a patent, we think you infringe. If you will agree to negotiate for fixed period then we will identify the client, the patent and the infringement, and make a license proposal. Otherwise we will sue you.” The agreement also says that after the fixed period expires, the licensor gets a few days to sue before the licensee can DJ.

    This makes economic sense, but when it is done these days it looks so strange that most lawyers automatically reject it. We professionals will be doing the public a service by promoting it. It also helps move the deal to the non-litigation situation urged by Mike Barclay.

  12. “Has anyone on here looked at this yet???”

    Actually, Michael Brooks discussed this case a few posts ago. It’s a fascinating case – the court says that it might be possible to write a letter that identifies the writer’s patent and the recipient’s product but does not trigger DJ jurisdiction. However, the actual correspondence at issue did trigger DJ jurisdiction.

    Since this case seems to say that suggesting that your patent is “relevant” to my product is enough to trigger a controversy, I still don’t see how you draft a letter that puts me on notice without triggering DJ jurisdiction.

    My understanding is that the “notice” that triggers willfulness is similar to the “actual notice” required under 35 USC 287. Mr. Brooks cites Gart v. Logitech; that case clearly says that “actual notice” requires conveying a belief that a product infringes. That will certainly trigger DJ jurisdiction.

    I haven’t read the Doyle article ($$$), which I’m sure has great advice for ways to reduce the likelihood that a recipient of your letter files a DJ action. But I’m waiting to be convinced that there’s a magic formula for the “dear infringer” letter that will let you have your (willful infringement) cake and eat it (avoid DJ jurisdiction), too.

  13. That would work too.

    I was thinking of some “unilateral” action that either party could take to prevent a lawsuit.

  14. If a PO waives damages during a period of negotiation and further states that he will not sue, there is no DJ jurisdiction.

    Similarly, if the “infringer” pays the requested running royalty during a period of negotiation, the PO cannot sue.

    How about if both parties agree not to sue each other during the negotiation?

  15. We need a new statute or case law along the lines of the following:

    If a PO waives damages during a period of negotiation and further states that he will not sue, there is no DJ jurisdiction.

    Similarly, if the “infringer” pays the requested running royalty during a period of negotiation, the PO cannot sue.

    There may be wrinkles cause the the SOL, but this seems sensible.

    Comments?

  16. “Non-sequitur of the Year”

    Mooney, you weren’t even following your own thread. Let me re-create the salient parts.

    me: “Mooney, er I mean “IANAE” you are tipping your hand again with your blustering about “forum shopping” as if it was a bad word. Besides, I thought guys like you LOVED shopping.”

    you (posing as IANAE): “Besides, I thought guys like you LOVED shopping.

    Oh, I get it. Because you think I’m an examiner and examiners are so overpaid.”

    me: “I don’t think you’re an examiner; I think you’re gay…”

    Hope that helps…

  17. What Doyle suggests for avoiding a DJ action points out how unrealistic SCOTUS was in MedImmune. MedImmune stands the “case or controversy” requirement on its head. In fact, this decision has so poisoned furture patent licensing negotiations that it’s about nigh impossible to conduct them without significant risk of a DJ action, no matter how “bland” the initial inquiry letter is.

  18. IANMTG I don’t think you’re an examiner; I think you’re gay…

    Non-sequitur of the Year nominee. And it’s only February!

  19. Whether to file first and/or self-initiate a re-exam, and when to offer a license, are all worthwhile debates, but didn’t we (60 comments worth) hash through the DJ topic back in December 2009?
    link to patentlyo.com
    Perhaps to trip the second Read factor in the face of In re Seagate Tech., LLC, or at least to attempt to open communications, the non-practicing patent owner might consider sending a communication:

    Letters that specifically identify a product and offer a license for that product constitute actual notice. Gart v. Logitech, Inc., 254 F.3d 1334, 1345–46 (Fed. Cir. 2001)

    In a post-MedImmune world, the drafter is mindful that:

    “[W]here a patentee asserts rights under a patent [] based on certain identified ongoing or planned activity of another party, and [] where that party contends that it has the right to engage in the accused activity without a license, an Article III case or controversy will arise…” SanDisk Corp v. STMicroelectronics, Inc., 480 F.3d 1372, 1380-81 (Fed. Cir. 2007).

    and that:

    “[A] communication from a patent owner to another party, merely identifying its patent and the other party’s product line, without MORE, cannot establish adverse legal interest between the parties, let alone the existence of a ‘definite and concrete’ dispute.”
    Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358 (Fed. Cir. 2009)(quoting MedImmune) (emphasis added)

    Then (bringing us back to December 2009 post), the “more” was refined in HP v. Acceleron for the non-practicing patent owner, e.g., the manner of the communications and the circumstances of the parties.

  20. I don’t think you’re an examiner; I think you’re gay…

    Call me gay all you want, I still won’t get behind you on this.

  21. Leopold, yes, that is what I am suggesting. Settlements of litigation can be excluded under Rule 408. I’m not saying that licenses that result from litigation settlements will always be excluded, but that at least that problem could come up.

  22. “The latter can sometimes be excluded from evidence in subsequent suits under FRE 408.”

    Michael, I’m not sure I follow you. Are you suggesting that Rule 408 will keep a settlement agreement from a prior lawsuit out of a current suit against a different party? That doesn’t sound correct to me…

  23. >>I think you’re gay

    Stop that. We had to stamp out the racist comments and now anti-gay. Please stop this.

  24. “You shouldn’t be asserting your patent if you don’t intend to take it to court, because what are you going to do if the licensee tells you to go to hell?”

    Ensure that I go to he ll by killing him? Then renegotiate with his successor after having made my point?

    I mean I’m just throwin’ ideas out that seem to be in line with what the “licensee” (aka extortionee?) meant.

  25. Unless a company is completely insane, they will negotiate first, not sue.

    If they’re serious about negotiating, they might sue first (just as a patentee might sue first) to plant their flag in their forum of choice. Y’know, just to be able to say that this is where the case will be tried if the other party doesn’t agree to their terms.

  26. For future licensing purposes, a license entered into as a result of voluntary negotiations is often more valuable than a license entered into to settle pending litigation. The latter can sometimes be excluded from evidence in subsequent suits under FRE 408. If a patent owner wants to have a number of licenses to help prove the patent’s value in subsequent lawsuits (e.g. for secondary considerations of non-obviousness or for showing what is a reasonable royalty), then filing suit first could be a bad idea.

  27. The more you think about it, the more it seems reasonable that if a company has a propensity to file DJ actions, it makes a lot of sense for the patentee to file first before sending the letter.

    But I think the better policy for patentee’s is to put people on sufficient notice of infringement such that damages begin to accrue, but at the same time offer to negotiate reasonable terms. Unless a company is completely insane, they will negotiate first, not sue.

  28. If you file suit but don’t serve during the service process, be rest-assured that the accused infringer will then DJ you.

    I think the idea is that if you file suit first you can “be rest-assured” to get the forum of your choice. Since clearly the expense of litigation is inevitable anyway once the accused infringer is prepared to force the issue. Maybe he’ll even be less likely to force the issue if he can’t get the case tried by a jury of rednecks who don’t quite trust foreign plaintiffs.

  29. “File suit prior to sending a demand letter. (The suit typically need not be pursued for 3-4 months).”

    I understand this rationale, but don’t agree with it. If you file suit but don’t serve during the service process, be rest-assured that the accused infringer will then DJ you.

    You can put the competition on notice without invoking DJ jurisdiction. There have been cases that discussed this exact point.

  30. Besides, I thought guys like you LOVED shopping.

    Oh, I get it. Because you think I’m an examiner and examiners are so overpaid.

    Funny.

  31. Mooney, er I mean “IANAE” you are tipping your hand again with your blustering about “forum shopping” as if it was a bad word. Besides, I thought guys like you LOVED shopping.

  32. “You shouldn’t be asserting your patent if you don’t intend to take it to court”

    has de facto become

    “File suit prior to sending a demand letter.”

  33. You forgot: Be a foreign patentee with no commercial contact in the U.S., then send a scathing demand letter.

  34. ATTN: Mr. Writer, Esq.

    Dear Sir,

    Kindly find attached a list of seven-digit numbers I thought your client might enjoy. No particular reason, just heard he likes lists.

    Will be in touch,

    E.

  35. I don’t think it’s possible to draft a letter that is sufficient notice to trigger willfulness but is not sufficient to trigger DJ jurisdiction.

    This article is all about how best to do just that. I agree that any middle ground would be vanishingly thin, but people are trying and will be arguing the point in court someday.

    The real problem here isn’t DJ, it’s forum shopping. You shouldn’t be asserting your patent if you don’t intend to take it to court, because what are you going to do if the licensee tells you to go to hell?

  36. Yes, such a letter should be treated like junk mail. An offer that need not be evaluated. Throw them out.

  37. “It’s kind of silly that a patentee can send you a letter that makes you a willful infringer without even telling you what you’re doing wrong (even though he probably has some idea), and you can’t even ask a court to settle the question.”

    Are you sure that this is possible? It seems to me that an “objectively reasonable apprehension of litigation” would be triggered before you reach the level where you are acting “despite an objectively high likelihood that your actions constitute infringement of a valid patent.”

    I don’t think it’s possible to draft a letter that is sufficient notice to trigger willfulness but is not sufficient to trigger DJ jurisdiction.

  38. Should be able to get DJ jurisdiction just for them being so obnoxious as to send you such a letter.

  39. Send bland demand letters that avoid infringement allegations, threats of litigation, or even for licensing fees and that are signed by non-lawyers.

    I don’t know what anyone expects to gain from this practice, other than treble damages when they eventually sue. It sounds like an awful way to get a license.

    I’m sure it won’t be long (on a judicial timescale) before some recipient of such a letter argues that the patentee-created risk of treble damages in contemplation of litigation is reason enough to give DJ jurisdiction. For all we know, the Supremes might decide that’s good policy.

    It’s kind of silly that a patentee can send you a letter that makes you a willful infringer without even telling you what you’re doing wrong (even though he probably has some idea), and you can’t even ask a court to settle the question.

  40. I can see it now: here is a letter Mr. outside counsel will you please look through and see what they may be talking about. We don’t mind paying for days of your time.

    The definite period of negotiation sounds interesting.

  41. “File suit prior to sending a demand letter”

    What a wonderful system we have today !!!
    Sue before attempting to negotiate…

    “letter that merely identified a patent and stated that the patent was available for licensing”

    Yeah, right

    And the infringer’s counsel is supposed to know which feature of which product reads on which patent claim…
    cmon, there are hundreds of technolgies implemented in dozens of different products by a large corporate infringer potentially violating several of a few dozen patent claims written in hard-to-read-much-less-to-understand legalese

    You gotta be kidding

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