March 29, 2007
The United States Court of Appeals for the Federal Circuit appears to have expanded the scope of declaratory judgment jurisdiction in a patent infringement case. See SanDisk Corp. v. STMicroelectronics, Inc.
, 05-1300,
(Fed. Cir. Mar. 26, 2007)(slip opinion). The Federal Circuit stated that its “reasonable apprehension of suit test” has been rejected by the Supreme Court in MedImmune, Inc.
v. Genentech , Inc ., 127 S.Ct. 764 (2007).
Accordingly, in SanDisk , the Federal Circuit held that the demonstration of a “reasonable apprehension of suit” is not necessary in order to establish Article III jurisdiction under the Declaratory Judgment Act. SanDisk , at 13-15; see also 28 U.S.C. § 2201(a).
Article III of the Constitution limits the exercise of federal jurisdiction to “cases and controversies.” See SanDisk , at 9. Prior to its decision in SanDisk , the Federal Circuit employed a two-part test to determine if and when a case or controversy under the Declaratory Judgment Act arose. Id. at 11-12. “Under that test, the declaratory plaintiff [had to] establish both (1) a reasonable apprehension that it will face a patent infringement suit if it commences or continues the activity at issue, and (2) present activity by the declaratory plaintiff that could constitute infringement, or concrete steps taken by the plaintiff with the intent to conduct such activity.” Microchip
Technology Inc. v. Chamberlain Group Inc.
, 441 F.3d. 936, 942 (Fed. Cir. 2006). The Federal Circuit’s decision in
SanDisk is therefore a marked departure from precedent that, in potential, “will effect a sweeping change in our law regarding declaratory judgment jurisdiction.” SanDisk , at 5 (Bryson, J., concurring).
In SanDisk, the Federal Circuit almost exclusively draws from the recent Supreme Court decision in MedImmune .
There, the Supreme Court examined jurisdiction under the Declaratory Judgment Act in the patent context and held that a licensee in good standing need not breach a license agreement to establish jurisdiction as a declaratory judgment plaintiff. MedImmune , 127 S.Ct
at 777. The Supreme Court further expressed reservations about the Federal Circuit’s reasonable apprehension of suit test; in particular, it noted that the test “conflicts” with
Supreme Court precedent. Id. at 774 n.11.
Following a thorough review of MedImmune , the Federal Circuit concluded, “[t]he Supreme Court’s opinion . . . represents a rejection of our reasonable apprehension of suit test.” 1
SanDisk , at 13. Although it refused to define the outer bound of jurisdiction under the Declaratory Judgment Act, the Federal Circuit explained that jurisdiction may be found “where 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 license. . .” Id. at 14-15. Under these facts, a “party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of its legal rights.” Id.
at 15.
In SanDisk , the Federal Circuit found that jurisdiction existed because the patent holder “sought a right to a royalty under its patents based on specific, identified activity by SanDisk.” Id. at 17. Among other things, the patent holder:
• made on-going “infringement” allegations and demands for royalty payments;
1
The SanDisk parties did not dispute that the second prong of the Federal Circuit’s two-part test was met. Id. at 13 n.2.
The Federal Circuit noted: “We therefore leave to another day the effect of
MedImmune
, if any, on the second prong.”
Id.
w w w . b e l l b o y d . c o m ● C H I C A G O ● W A S H I N G T O N ● a t t o r n e y s @ b e l l b o y d . c o m

• conducted licensing negotiations, including infringement analyses by litigation experts 2 ;
• identified one or more patent claims that read on the accused products;
• made a detailed presentation, identifying on an element-by-element basis, the basis for infringement of specific claims;
• presented reverse engineering reports and diagrams showing a detailed infringement analysis.
( Id.
)
Based on the patent holder’s activities and its “preparedness and willingness to enforce its patent rights,” the
Federal Court rejected the patent holder’s claim that a promise not to sue rendered the controversy moot. Id. at
18-19. Accordingly, the Court vacated dismissal and remanded to the district court for further proceedings.
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20.
Id.
at
Judge Bryson, in concurrence with the majority, stated his belief that the Federal Circuit correctly applied
MedImmune , yet he expressed “reservations” about the potential consequences of the decision:
In practical application, the new test will not be confined to cases with facts similar to this one . If a patentee offers a license for a fee, the offer typically will be accompanied by a suggestion that the other party’s conduct is within the scope of the patentee’s patent rights, or it will be apparent that the patentee believes that to be the case. Offers to license a patent are not requests for gratuitous contributions to the patentee; the rationale underlying a license offer is the patentee’s express or implied suggestion that the other party’s current or planned conduct falls within the scope of the patent. Therefore, it would appear that under the court’s standard virtually any invitation to take a paid license relating to the prospective licensee’s activities would give rise to an Article III case or controversy if the prospective licensee elects to assert that its conduct does not fall within the scope of the patent. Indeed, as the court makes clear, even a representation by the patentee that it does not propose to file suit against the prospective licensee will not suffice to avoid the risk that the patentee will face a declaratory judgment action. ( Id. at 3)(emphasis added).
The Federal Circuit's decision in SanDisk eliminates the “reasonable apprehension of suit test” for determining declaratory judgment jurisdiction in a patent infringement case. And, while SanDisk appears to lower the threshold necessary to establish declaratory judgment jurisdiction, the exact implications of SanDisk and, more importantly MedImmune , remain to be seen in future district court and Federal Circuit cases.
Please click here to view the March 26, 2007 SanDisk opinion.
2
At the parties’ meeting, the patent holder requested that the discussions be treated as “settlement discussions” under
Federal Rule of Evidence 408.
Id. at 4. The Federal Circuit found that Rule 408 expressly relates to evidence of efforts toward compromising or attempting to compromise a claim in litigation, but “does not prevent [the parties] from relying on the licensing discussions and infringement study to support its claims.”
Id. at 4 n.1; see also
F
ED
.R.E
VID
. 408. The
Court suggested that to avoid the risk of a declaratory judgment action, the patent holder should have sought a “suitable confidentiality agreement.”
Id.
The Court did not explain how such an agreement would stave off litigation.
3
In SanDisk, the Federal Circuit explained that the district court had "conclud[ed] that even if it had subject matter jurisdiction over the instant claims, it would exercise its discretion and decline to decide them."
SanDisk
, at 19. The
Declaratory Judgment Act vests the district court with discretion to declare the rights of litigants, MedImmune , 127 S.Ct. at 776, but “there are boundaries to that discretion.”
SanDisk
, at 19. The Federal Circuit noted that the district court made its decision in light of the reasonable apprehension of suit test and without the benefit of MedImmune . “Given the change reflected in
MedImmune and our holding in this case, we discern little basis for the district court’s refusal to hear the case and expect that in the absence of additional facts, the case will be entertained on the merits on remand.” Id.
2

If you have any questions concerning the above, please contact Michael J. Abernathy (312-807-4257) or Alan L. Barry
(312-807-4438) in Bell, Boyd & Lloyd LLP’s Intellectual Property Group.
This publication has been prepared by the Intellectual Property Group of Bell, Boyd & Lloyd for clients and friends of the firm and is for information only. It is not a substitute for legal advice or individual analysis of a particular legal matter. Readers should not act without seeking professional legal counsel. Transmission and receipt of this publication does not create an attorney-client relationship.
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