Authored by Ronald J Schutz of Robins Kaplan Miller & Ciresi LLP

The Federal Circuit says: “declaratory judgment jurisdiction,” even if the patent holder’s notice letter waltzes around

phrases like “infringement” or “assertion.” In Hewlett-Packard Company v. Acceleron LLC, the patent holder sent a letter that avoided using those phrases while still implying the possibility of litigation. The Federal Circuit said a patent holder cannot escape creating declaratory judgment jurisdiction simply by dodging certain words or phrases. Here, patent holder’s actions were “definite and concrete” enough to create a “substantial controversy.” Accordingly, the Federal Circuit reversed the district court’s determination that it lacked subject matter jurisdiction and remanded the claims for declarations of non-infringement and invalidity for further consideration — making it too late, presumably, for the patent holder to say “Let’s call the whole thing off.”

In Hewlett-Packard, a patent holding company owned the patent at issue. Within three months of acquiring the patent, the patent holder sent Hewlett-Packard a letter identifying certain HP products potentially impacted by its patent rights. The patent holder imposed a two-week deadline for execution of a letter agreeing, among other things, that Hewlett-Packard would not initiate litigation during negotiations. In response, Hewlett-Packard requested that the parties enter into a mutual no-litigation “standstill” agreement for 120 days. The patent holder refused and Hewlett-Packard filed its declaratory judgment action. Weighing the totality of the circumstances, the district court found that “the litigation was too speculative a prospect of support declaratory judgment jurisdiction.”

The Federal Circuit disagreed and specifically relied on MedImmune to reach its decision. While recognizing that the decision lowers the bar for what constitutes a justiciable controversy, the Federal Circuit said MedImmune nonetheless requires that a patent law declaratory judgment plaintiff demonstrate a dispute that is both “definite and concrete” and “real and substantial.” Not every fact pattern will rise to the necessary level of “a substantial controversy” and an objective review of the relevant facts is required. Necessary factors to be reviewed include consideration of whether the patent holder is a holding company or a competitor of the putative infringer, the patent holder’s history of enforcing the patent, the specific language used in any communications including their tone and implication and the status of relevant product lines and product plans. The Federal Circuit focused on the fact that the patent holder here was a patent holding company who, in response to the putative infringer’s answering letter, failed to agree to a confidentiality agreement or a mutual standstill of litigation that would have allowed the parties to engage in negotiations without litigation.

Either (or eye-ther), after Hewlett-Packard, regardless of what patent holders say, they most likely won’t be able to dance their way out of declaratory judgment jurisdiction if the reviewing court discerns an implied threat of litigation. Neither (nye-ther) should patent holders set overly burdensome conditions or precursors to further negotiations lest those demands become the evidence of a real dispute or controversy. Patent holders will also have to evaluate the use of “file, but not serve” rules in order to protect their chosen forum, but still engage in negotiation prior to full scale litigation.

Clearly, patent law declaratory judgment jurisprudence continues to evolve after MedImmune (leaving litigants on both side ample opportunities to argue that their unique facts should control). Still, no matter how you say it, after Hewlett-Packard, effectively initiating patent licensing negotiations while avoiding creating declaratory judgment jurisdiction remains patent law’s current hot potahto.