Declaratory judgment can be a useful tactic for parties to proactively defend against anticipated patent infringement lawsuits in federal district courts. But how far in advance should parties be allowed to file declaratory judgments before abusing the remedy by bringing frivolous or hypothetical suits? The courts have attempted to balance this issue by limiting their jurisdiction to hearing declaratory judgments actions only in cases where an actual “case or controversy” or “reasonable apprehension” of suit exists.

In 2007, the Supreme Court decided a landmark case—MedImmune, Inc. v. Genentech, Inc.—that held a patent licensee subject to a currently enforceable and unexpired patent license may nevertheless file a declaratory judgment alleging the patent of the patent license was invalid and not infringed.¹ This decision completely overturned prior opinions of the Federal Circuit, which held that the existence of an active license agreement in good standing cannot show an “actual controversy” because the license “obliterates any reasonable apprehension of a lawsuit.”² The Supreme Court in MedImmune reasoned that a “substantial controversy” of “sufficient immediacy and reality” existed between the parties when “all circumstances” were considered, and the patent licensee should not be forced to stop making royalty payments and “expose himself to liability before [being allowed to] bring[] suit to challenge the basis” of the patent in question.³

The landmark decision in MedImmune effectively expanded the jurisdiction of the courts to hear declaratory judgments, but this raised a slew of new concerns. Where does the jurisdiction of courts to hear declaratory judgments end? Most importantly, are patent owners that were successful in negotiating a licensing agreement or obtaining an advantageous decision (whether in district court litigation or at the ITC) now on the hook to defend against declaratory judgments alleging patent invalidity or noninfringement that may come at any time?

Not many district court cases have explored these issues in recent years. In 1989, the Southern District of New York provided a scenario where sufficient “reasonable apprehension” of suit existed to support jurisdiction for a declaratory judgment of patent invalidity, even when an enforceable ITC exclusion order was in effect and no threat of any infringement suit existed. In Wolf v. Wagner Spray Tech Corp., the plaintiffs filed a declaratory judgment alleging patent invalidity when contemplating importing products into the United States in direct violation of an existing ITC exclusion order.⁴ The Southern District of New York held that “[i]n this case, plaintiffs have a reasonable apprehension that if they attempt to import the spray pump at issue into the United States, they will be subject to suit precisely because an exclusion order is in effect.”⁵ Thus, the existence of an enforceable ITC exclusion order not only failed to remove reasonable apprehension of a lawsuit, but rather provided the necessary “reasonable apprehension” for jurisdiction of a declaratory judgment when the plaintiff has “actually produced the accused device” or has “prepared to produce such a device.”⁶

Although the Wolf case is 35 years old, it has never been overturned⁷ and is consistent with the rationale in MedImmune because the plaintiff was not made to first violate the exclusion order before being able to challenge the validity of the patents in the exclusion order. The Southern District of New York further noted that the declaratory judgment is not an “impermissible attack on the ITC exclusion order” since the underlying ITC investigation concerned plaintiffs’ infringement rather than patent validity, which was presumed valid at the ITC without any evidence presented by the parties.⁸ This is also consistent with later Supreme Court decisions that a finding of noninfringement does not moot a declaratory judgment of patent invalidity per se, and vice versa.⁹

More recent cases have attempted to put more definitive boundaries on the courts’ jurisdiction to hear declaratory judgments. Although each case is fact specific, these decisions explore recurring issues that show there are several considerations in determining whether sufficient “case or controversy” exists for courts to have jurisdiction to hear declaratory judgments.

Situations sufficient for declaratory judgment jurisdiction

On one hand, courts have consistently held that the introduction of a redesign provides enough “case or controversy” for a declaratory judgment when such a redesign was not considered in the underlying ITC investigation. For example, in Academy, Ltd. V. A & J Manufacturing, LLC., the Southern District of Texas held that sufficient controversy existed for a declaratory judgment of a redesign that was not part of the underlying ITC investigation, and a stay of the related district court case did not negate this controversy.¹⁰ However, declaratory judgment plaintiffs must still prove that the redesign is definite and concrete rather than abstract or hypothetical in nature.¹¹

Courts have also consistently held that a patentee’s refusal to enter into an agreement not to sue or to withdraw claims with prejudice amounted to enough “reasonable apprehension” of suit to justify jurisdiction for a declaratory judgment. For example, in Knowles Electronics, LLC v. Analog Devices, Inc., the Northern District of Illinois held that sufficient controversy existed to support a plaintiff’s declaratory judgment of noninfringement and invalidity counterclaims, even though the patentee already withdrew the patent-at-issue from suit, specifically because the patentee “refused to dismiss its infringement claims with prejudice and therefore there is no certainty that [the patentee] will not seek to enforce [the patent at issue] in the future.”¹² As another example, in D2L Ltd. V. Blackboard, Inc., the District of Maryland held that the patentee created sufficient apprehension of suit when refusing to enter “a ‘standstill agreement’ […], under which neither party would sue on the [asserted patents] for 30 days after its issuance.”¹³

Situations insufficient for declaratory judgment jurisdiction

On the other hand, courts have consistently held that dismissing infringement claims, even counterclaims, with prejudice obliterates any reasonable apprehension of sufficiently immediate and real future controversy, thus mooting any related noninfringement claims and taking away the courts’ jurisdiction to hear related declaratory judgment claims.

For example, in Gen. Protecht Grp., Inc. v. Leviton Mfg. Co., plaintiff filed a declaratory judgment in the District of New Mexico, asserting claims of noninfringement and enforcement of covenant. Patent owner countered by asserting counterclaims of infringement. The court granted plaintiff’s claim for enforcement of covenant, and as a result, patent owner’s counterclaims of infringement were dismissed, with prejudice.¹⁴ Because the infringement claims were dismissed with prejudice, the court held that plaintiff had no “sufficiently immediate and real future controversy to warrant the issuance of a declaratory judgment.”¹⁵ The court further held that plaintiff’s fear of future lawsuits for future products is not an “actual controversy,” and jurisdiction for a court to hear a declaratory judgment action “cannot be based on a fear of litigation over future products” that were “not yet in existence.”¹⁶

In 2023, the Northern District of California further solidified the Leviton holding in QuickLogic Corp. v. Konda Techs., Inc. Here, plaintiff sought to assert a declaratory judgment of no patent infringement when the court had already dismissed the patent owner’s mirror image infringement counterclaims with prejudice for failure to state a claim.¹⁷ The court applied the “all circumstances” test established by MedImmune to find that “declaratory relief claims are moot when their mirror image counterclaims are dismissed with prejudice.”¹⁸

***

In sum, many fact-specific factors may affect whether federal courts will have jurisdiction to hear a declaratory judgment. If utilized correctly, declaratory judgment actions may be a useful tool for accused infringers with an actually produced or plans to produce accused device to challenge existing ITC exclusion orders without having to first violate the order. On the other hand, limits placed on the courts’ jurisdiction to hear declaratory judgments allow patent owners to prevent declaratory judgment plaintiffs from filing such actions by dismissing related claims of patent infringement at the district courts with prejudice.

ABOUT BAKER BOTTS L.L.P.
Baker Botts is an international law firm whose lawyers practice throughout a network of offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy, technology and life sciences sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit bakerbotts.com.