Innovative Therapies, Inc. (ITI) v. Kinetic Concepts, Inc. (KCI) (Fed. Cir. 2010)
ITI is an upstart company formed by former KCI employees. Before launching their negative-pressure wound product (that would compete directly with KCI), ITI filed a declaratory judgment action arguing that KCI's patents were invalid. As of the time of the lawsuit, no one at KCI had seen or evaluated ITI's new product.
The district court dismissed the case for lack of subject matter jurisdiction. On appeal, the Federal Circuit affirmed – holding that no "actual controversy" existed between the parties at the time the complaint was filed.
In MedImmune v. Genentech, 549 U.S. 118 (2007), the Supreme Court broadened the scope of declaratory judgment jurisdiction and rejected the Federal Circuit's somewhat formalist test that required a reasonable apprehension of suit in order to establish jurisdiction. Rather, the Supreme Court held that the totality of the circumstances should be examined to determine the existence of "a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant relief." (quoting Maryland Casualty, 312 U.S. 271 (1941)).
Here, the DJ Plaintiff (ITI) argued that the actual controversy was evident based on three factors: (1) that ITI had obtained pre-marketing approval from the FDA based on representations that its product had the "same technological characteristics" as KCI's already approved device and that KCI new of that representation; (2) that KCI employees had indicated over the telephone that the company would react "aggressively" to competitive entry into the marketplace; and (3) that KCI has a history of using litigation to enforce its patent rights.
The Federal Circuit held that these facts were insufficient to create declaratory judgment jurisdiction. In particular, the representations to the FDA were not tied directly to KCI's patent rights and therefore did not create any actual controversy over those rights. The telephone conversations (initiated by ITI) were lacking because they were initiated by ITI (rather than by the patentee) and were directed to individuals who were not in "decision-making positions" or informed about the sub rosa purpose behind the conversations. Finally, while the patentee's enforcement history can contribute to DJ jurisdiction, that fact alone is insufficient for such jurisdiction.
Comment: The practical fight in this case is not about whether litigation will continue, but rather whether the litigation should be sited in Delaware (the choice of the alleged infringer) or in North Carolina (the choice of the patentee). Soon after ITI filed its DJ action in Delaware, KCI (the patentee) filed an infringement complaint in North Carolina. The Delaware case is out for now because the court did not have DJ Jurisdiction over the case when it was originally filed. ITI had also asked the North Carolina court to transfer its case to Delaware – that motion was denied.
Although the subsequent events (KCI's filing of a lawsuit) indicated the existence of an actual case or controversy, post-filing events cannot create jurisdiction even if the complaint is amended to encompass those events.