Demand Letter without Accusing a Particular Product Creates DJ Jurisdiction

Asia Vital v. Asetek Danmark (Fed. Cir. 2016),

Article III Federal Courts only have jurisdiction over caess where a substantial and current controversy exists between the parties.  in 2014, Asia Vital (AVC) sued Asetek in E.D. Virginia – asking the district court for a declaratory judgment of non-infringement of the claims of Asetek’s U.S. Patent Nos. 8,240,362 and 8,245,764. The district court dismissed the case for lack of subject matter jurisdiction — finding no substantial controversy.  On appeal, however, the Federal Circuit has reversed that opinion – finding a substantial controversy.

The Asetek patents cover liquid cooling systems used to cool integrated circuits (such as those on a computer).  Over the past several years, Asetek has sued several competitors for infringing the patents including CoolIT and Cooler Master. In 2014, Asetek sent AVC a letter accusing the company of infringing — however the letter mistakenly accuesd AVC of manufacturing the Liqmax 120s (it does not). After some letters back-and-forth, Asetek eventually sent a letter that it “believes that AVC is likely selling other infringing products in the United States.”  After an unsuccessful meeting, AVC filed its declaratory judgment action.  The question is whether these facts are sufficient to show an actual controversy between the parties.

The leading precedent actual-controversy precedent for patent cases is the Supreme Court’s 2007 decision in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) In MedImmune, the Court explained the test as “whether 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 ongoing principle is that the controversy must be based upon a “real and immediate injury or threat of future injury that is caused by the [DJ] defendants.”

In the patent context, the court has held that jurisdiction does not arise merely based upon learning of the existence of a patent or by a perception of a risk of infringement unless there is an affirmative act by the patentee.

Here, the Federal Circuit found ample evidence of action by the patentee. The one missing element was the lack of evidence that Asetek directed its accusations toward AVC’s actual products (the K9 and K7 products).  The court noted the lack of product specific accusation, but still found Asetek’s actions “sufficient to conclude that a substantial controversy between the parties existed at the time of the complaint.”  The court writes:

Asetek relies heavily on the fact that it never referenced AVC’s particular products or product line as potentially infringing, and, in fact, did not even know of AVC’s products at the time of the complaint. . . . The question of jurisdiction does not turn on Asetek’s knowledge of the specific AVC products or whether Asetek specifically alleged that the K7 and K9 products infringed the asserted patents; instead, the question is whether, under all the circumstances, Asetek’s actions can be reasonably inferred as demonstrating intent to enforce a patent.

Id. (internal citations omitted).




15 thoughts on “Demand Letter without Accusing a Particular Product Creates DJ Jurisdiction

  1. 8

    link to

    The Federal Circuit affirmed the District Court decision disqualifying litigation counsel and dismissing a complaint without prejudice. The case involves one Charlotte Rutherford – hired by the defendant Schlumberger in 2006 as senior counsel in their intellectual property department, rising to Deputy General Counsel for Intellectual Property. In that capacity, she was involved in the so-called Goldstar project that involved the patentable aspects of Petrel, Schlumberger’s software platform for three-dimensional visualization, mapping and reservoir modeling of oil wells. One competitor’s product analyzed was Austin’s Geo-modeling recon software that was subject to US patent number 7,986,319 – the patent that was the basis for the suit against Schlumberger.

    In 2013, Ms. Rutherford left Schlumberger, and joined Acacia as Senior Vice President and Associate General Counsel. In that capacity, she met with the inventors of the ‘319 patent, recommended its acquisition and its use to sue Schlumberger. She participated in a telephone call with Collins, Edmonds, Pogorzelski, Schlather and Tower, (“CEP”). One of her employees and CEP prepared a memo recommending the acquisition of the ‘319 patent and discussed Schlumberger as a potential target. This Rutherford approved. The patent was acquired and lawsuit brought. Upon motion by Schlumberger, Rutherford was found to be in conflict of interest with her former client, was presumed to have confidential information, was presumed to have disclosed that confidential information to both Acacia and to the outside counsel CEP. Because the complaint was drafted based upon presumed confidential information, not only was CEP disqualified, but the lawsuit was also dismissed.

    In a concurring opinion, Judge Wallach had the following comments:

    WALLACH, Circuit Judge, concurring.

    I concur entirely with the majority’s opinion, but write
    to briefly address the honor of our profession as attorneys.
    In the law, as in life, it is best if one’s conduct is such that
    when accused of malefaction, the community responds as
    one that “Ms. or Mr. __________ simply doesn’t act that
    way.” The standard is always aspirational for we are
    human, but if we do not strive to reach it, then perhaps
    we ought to consider that the game’s not worth the candle.

    Ms. Rutherford’s conduct failed to meet minimal
    standards necessary to preserve public confidence in the
    legal system, and for that, she and others paid a price.
    That does not mean, however, that she should not, as a
    member of what is supposed to be an honorable profession,
    have held herself to a higher standard.

    1. 8.1

      That’s a lot of presumptions to make to tar that lady. I’m let down that the Fed Circ upheld it. Though they are right she should have gone further out of her way to disqualify herself from these proceedings, it’s a little much to make all those jumps they make.

      1. 8.1.1

        6, if this were a criminal trial, the proof of her disclosing confidential information to the litigation firm would be lacking. But this is not a criminal trial. It is rather a trial where the ethics of a lawyer are involved. Because of that there are presumptions in place that the attorney must be aware of in order that their conduct may be not only consistent with their ethical obligations, but appeared to be so as well.

        Which brings us to that well-known attorney running for president.

    1. 7.1

      6, I am convinced that the good lady action believed what she said. In fact, in some circles, liberal say this about all Republicans, not just some.

  2. 5

    Based on the facts here, I could go either way (somewhat), but really think the CAFC got it right this time.

  3. 4

    Sending infringement allegation threatening letters with zero infringement investigation is not an activity to be rewarded with impunity.

  4. 3

    This appears to be a well reasoned decision based on the particular facts. Thank you for sharing Dennis. The alternative fact scenario that may have yet to be decided would include the plaintiff sending notice with allegations of infringement of a particular patent by a generic class of product, coupled with clear knowlwdge by all parties that the recipient of that notice manufactures or sells a product within that generic class. E.g., wireless routers.

  5. 2

    What cinched it for me were the letters to the infringer’s customers stating that so and so infringer was selling infringing products.

    To support its allegation, AVC submitted a declaration from
    its Chief Corporation Officer, David Wang, stating:

    From discussions with representatives of two AVC
    customers, these representatives informed AVC
    that Asetek has expressed to them that AVC has
    infringed Asetek’s U.S. Patents, and that if these
    customers use AVC’s products, then lawsuit will
    follow. These customers are: Thermaltake (a Taiwanese company) and IBuyPower (a U.S. company).

    J.A. 213.2 Such threats constitute affirmative actions by
    Asetek to impede and frustrate AVC’s attempts to meaningfully
    participate in the liquid cooling market…

    1. 2.1

      “Guerilla-like . . . scare-the-customer-and-run tactics” as Judge Markey said. The court here applied the MedImmune framework, but it seems likely there would have been DJ jurisdiction even under the CAFC’s pre-MedImmune case law.

    2. 2.2

      There’s a lot of interesting questions about whether you create DJ jurisdiction simply by sending letters to customers without sending them to the supplier.

      1. 2.2.1

        For example, if the supplier is not liable for the infringement of the customer, even suing the customer for infringement would not give the supplier a right to intervene.


          That seems to be the case, but does not seem fair for a supplier that can show actual losses of its sales to infringement threatened or sued customers. However, an IPR may be available. IPRs seem to be an increasingly used supplier tactic in situations where a patent owner deliberately picks on customers too small to defend themselves while avoiding suing or threatening their supplier. Since the supplier was not sued the supplier does not have a one year deadline to file an IPR. However, it cannot be used to establish non-infringement, of course.

  6. 1


    The allowance given to clever lawyers to file lawsuits without a real controversy is even broader than this since Medimmune:in our case a few years back the Judge allowed DJ on several PATENTs never even mentioned in correspondence by the parties. Its part of the perpetual employment act to large defense firms courtesy of the SCOTUS and its willing accomplice, the CAFC. Its a scam because they get to milk/bilk more hours from their clients from challenging patents not an issue, while at the same time multiplying the proceedings to disadvantage smaller litigants.

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