The Court of Appeals for Federal Circuit recently made clear that a patent holding company approaching a potential infringer, with even an innocuous letter, is vulnerable to a declaratory judgment suit. In Hewlett-Packard Company v. Acceleron LLC, 587 F.3d 1358, 92 U.S.P.Q.2d 1948 (Dec. 4, 2009), the Federal Circuit reversed a district court ruling that it lacked jurisdiction to hear a declaratory judgment suit. The defendant, Acceleron, is a patent holding company. Acceleron wrote to HP stating: I am writing to call your attention to the referenced patent. . . . This patent was recently acquired by Acceleron, and relates to Blade Servers. We would like an opportunity to discuss this patent with you. In order to provide a productive atmosphere in which we can do so, we ask that you agree that all information exchanged between the parties will not be used for any litigation purposes whatsoever, including but not limited to any claim that Acceleron has asserted any rights against any of your ongoing or planned activities, or otherwise created any actual case or controversy regarding the enclosed patent. Should you wish to engage in discussions regarding this patent with us, please return an executed copy of this letter to me in the enclosed stamped, self-addressed envelope. When we receive your acknowledgement, we will send you a package of information relating to this patent. I will look for your response by September 28, 2007, and if I do not hear from you by that time, I will assume you have no interest in discussing this patent. An attorney at HP responded: I have been evaluating the patent you sent and am interested to learn any further information you have so that I am able to conduct a complete and accurate assessment. HP shares your interest in creating a productive atmosphere for us to discuss the ’021 patent. Accordingly, in response to your request that HP not file a declaratory judgment action, HP would be willing to agree not to file such an action for a period of 120 days if Acceleron similarly will agree not to file an action against HP during the same 120 day period. If such a mutual standstill agreement is acceptable, please let me know and I will send you an agreement to that effect directly. Four days later the lawyer from Acceleron wrote back stating: I do not believe that HP has any basis for filing a declaratory judgment action, and I think that my letter provides both parties appropriate protections to create a productive atmosphere in which to discuss the ’021 patent. So, if you are interested in discussing this patent with us, please send me a signed copy of my previous letter to you by no later than October 19, 2007. If I do not receive [one] by then, I will understand that you are not interested in discussing this patent, and you do not have anything to say about the merits of this patent, or its relevance to your Blade Server products. The district court focused on the lack of a statement of infringement, identification of specific patent claims, claim charts, prior pleadings or litigation, or the identification of other licensees in the letters to HP to find that under the totality of the circumstances, at the time HP filed the suit, the litigation was “too speculative a prospect to support a declaratory judgment suit” and granted Acceleron’s motion to dismiss.Federal Circuit: Declaratory Relief Easy To Come By Against Patent Holding Company
The Federal Circuit reviewed the dismissal grant de novo. Declaratory relief jurisdiction is proper only if “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.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). In Acceleron , the Court admits that “[i]ntentionally or not, MedImmune may have lowered the bar for determining declaratory judgment jurisdiction in all patent cases; certainly it did so in the licensor-licensee context.” However, the court states that “a communication from a patent owner to another party, merely identifying its patent and the other party’s product line, without more” is insufficient to establish declaratory judgment jurisdiction.
In reversing the district court, the Federal Circuit stated “the facts of this case, when viewed objectively and in totality, show that Acceleron took the affirmative step of twice contacting HP directly, making an implied assertion of its rights under the ’021 patent against HP’s Blade Server products, and HP disagreed. The Court held that this created “a “definite and concrete” dispute between HP and Acceleron, parties having adverse legal interests” that was provided the district court with subject matter jurisdiction. The Federal Circuit took notice that “Acceleron is solely a licensing entity, and without enforcement it receives no benefits from its patents,” stating that “this adds significance to the fact that Acceleron refused HP’s request for a mutual standstill”.
As usual, the overall effect of the case is unclear. However, it does provide specific guidance on avoiding a declaratory relief action, i.e., simply send a letter that identifies the patent and the other party’s product line. Second, Acceleron appears to continue the Court’s efforts to rein in patent holding companies. While the Court’s holding is not specific in this regard, in a case where all other things are equal, an exploratory letter from a patent holding company that does not actually make the product at issue may well tip the balance in favor of declaratory relief, as opposed to an identical letter from a company that actually makes the product. If the patent holding company is not bluffing, it would be wise to file but not serve the complaint before sending a letter.
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