Foreign Patent Litigation Not Sufficient to Create Article III Case or Controversy

On September 15, 2017, the Federal Circuit issued a precedential decision concluding that two parties’ engagement in litigation in a foreign country is not sufficient to confer jurisdiction for declaratory judgment purposes in the United States.

In Allied Mineral Products, Inc. v. Osmi, Inc., et al., the Federal Circuit upheld the United States District Court for the Southern District of Florida’s ruling that a manufacturer’s declaratory judgment action seeking to preemptively invalidate a patent should be dismissed since the patent owner (“Stellar”) made no attempts to enforce its United States patent against the manufacturer (“Allied”). No. 2016-2641, slip op. at 2 (Fed. Cir. September 15, 2017).In June 2015, Stellar sent notice letters to Allied’s Mexican distributors accusing them of infringing Stellar’s Mexican Patent No. 279757 (the “Mexican Patent”). Id. Allied manufactures the products accused of infringement in the United States, which are then sold in Mexico by Allied’s distributors. Id. Allied sells the same product in the United States. Id. Stellar subsequently filed suit in Mexico alleging infringement of claim 16 of the Mexican Patent. “Claim 16 of the Mexican Patent is a Spanish translation of claim 16 of [United States Patent No. 7,503,974]” (the “’974 Patent”). Id. at 3.

Allied then filed suit in the United States seeking declaratory judgment of non-infringement and invalidity, among others claims. Id. The district court dismissed finding the record “devoid of any allegations that Stellar has done anything to give Allied a reasonable belief that Stellar intends to enforce its ’974 Patent in the United States.” Id.

On appeal, the Federal Circuit did not find that a case or controversy exists, stating that “[d]eclaratory judgment jurisdiction requires some affirmative act by the patentee.” Id. at 4. Here, “[a]ll of Stellar’s conduct has been directed towards Allied’s customers . . ., unrelated Mexican entities, and that contact was limited to Stellar’s Mexican Patent and potentially infringing acts in Mexico.” Id. “Stellar took no actions directed at Allied, no actions with regard to its’974 patent, and no actions under U.S. patent laws.” Id.

The Court “noted that a manufacturer has standing to bring a declaratory action if: (1) the manufacturer is obligated to indemnify its [U.S.] customers in the event of a [U.S.] infringement suit; or (2) there is a controversy between the patentee and the manufacturer as to the manufacturer’s liability for induced or contributory infringement based on acts of direct infringement by the customers [in the U.S.].” Id. at 6. However, neither of these circumstances exists in the current situation. Id. at 7. Regardless of the “business position” Allied finds itself in, “fear of a future infringement suit is insufficient to confer jurisdiction.” Id.

Other Notable Decisions – Week Ending September 15, 2017

Idemitsu Kosan Co., Ltd., v. SFC Co. Ltd., No. 2016-2721 (Fed. Cir. Sept. 15, 2017) (precedential): In Idemitsu, the Federal Circuit affirmed the Patent Trial and Appeal Board’s finding that Idemitsu’s patent directed toward a “electroluminescense device” was obvious. The patentee took issue with the timeliness of Petitioner’s arguments made regarding one of the prior art references. The Federal Circuit rejected this argument stating that the timing of the argument was “simply the by-product of one party necessarily getting the last word.” Particularly, “Idemitsu is the party that first raised th[e] issue” by arguing the reference taught away from the invention and Petitioner “simply countered, as it was entitled to do. To the extent Idemitsu suggests that the board could not reach a counterargument because it was not preemptively addressed by the petition or institution decision, Idemitsu is plainly mistaken.”

First Data Corporation, et al. v. Inselberg, et al., Nos. 2016-2677, 2016-2696 (Fed. Cir. Sept. 15, 2017) (precedential): In First Data, the Federal Circuit affirmed the United State District Court for the District of New Jersey’s dismissal of two federal cases based on a finding of no federal cause of action. The Federal Circuit agreed with the district court’s conclusion that determining whether an assignment involving a security interest in a portfolio of patents is invalid is a state law issue and must be decided first before an infringement action or declaratory judgment action can be brought in federal court. “[T]he district court did not have jurisdiction over the infringement claim because until ownership is restored in the assignor, there can be no act of infringement by the assignee.” Therefore, “an infringement dispute between these parties is not ripe.”

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