Customer Letter Characterizing Competitor’s Patent as Invalid Not Enough to Create Declaratory Judgment Jurisdiction

Addressing a host of patent invalidity issues, as well as infringement of method patents by imported products, the U.S. Court of Appeals for the Federal Circuit found that an accused infringer failed to satisfy the heavy (clear and convincing) burden necessary to invalidate a competitor’s patent and also concluded that letters to the competitor’s customers alleging patent invalidity were not sufficient to create a justiciable case or controversy for declaratory judgment.  Creative Compounds v. Starmark Labs, Case No. 10-1445 (Fed. Cir., June 24, 2011) (Linn, J.)

Starmark and Creative are competitors in the creatine market.  The U.S. Patent and Trademark Office (USPTO) issued patents to each party at about the same time.  Soon after, Creative mailed letters to members of the nutrition industry that its patent was prior art to Starmark’s patent.  Creative filed suit against Starmark seeking a declaration that Starmark’s patent was invalid and not infringed. Starmark answered by asserting infringement of its patent by Creative and invalidity of Creative’s patent. The district court granted Starmark’s motion for summary judgment on all counts and denied Creative’s motions to amend.  Creative appealed.

The Federal Circuit rejected Creative’s numerous invalidity arguments as to Starmark’s patent, finding that the district court had correctly applied the clear and convincing evidence standard necessary to prove invalidity.  The Court held that Creative had failed to show that the patents of the respective parties were co-pending interfering patents with conflicting subject matter or that the present action arose under the interference statute, §291.  The Federal Circuit also concluded that Creative failed to satisfy its burden of proving prior conception and diligence in reducing to practice of its invention so as to invalidate Starmark’s patent under §102(g)(2) because its evidence consisted solely of an e-mail about Creative’s allegedly patented method that failed to disclose the method itself.  In addition, the Federal Circuit concluded that there was insufficient evidence to establish invalidity under §102(f) based on Creative’s theory that Starmark derived its claimed invention from the Creative inventor because Creative relied solely on uncorroborated inventor testimony.  Finally, the Federal Circuit rejected Creative’s argument that Starmark’s patent was invalid under §102(e) because the invention was published in a previous application.  The court rejected Creative’s §102(e) argument largely because creative failed to provide testimony from one skilled in the art identifying each claim element in the prior art application and explaining how each claim element is disclosed in the published application.

As to infringement of Starmark’s patent, Creative denied infringement of Starmark’s method claims, but the Federal Circuit affirmed the district court’s application of the §271(g) exception coupled with the rebuttable presumption (under §295) that an imported product was made from the patented process if the court finds “(1) that a substantial likelihood exists that the product was made by the patented process, and (2) that the plaintiff has made a reasonable effort to determine the process actually used in the production of the product and was unable to so determine.”  The Court found that the burden was properly shifted to Creative to show specific evidence that its accused process did not infringe.  The Federal Circuit affirmed summary judgment of infringement because Creative presented no evidence of non-infringement. 

As for the issue of declaratory-judgment jurisdiction, the Court agreed with Creative’s argument that because Creative had never accused Starmark of infringing its patent there is no case or controversy between Creative and Starmark and thus no subject-matter jurisdiction.  While Creative did send letters to Starmark’s customers, no letters were sent to Starmark and thus Starmark only had an economic interest in clarifying its customers’ rights under Creative’s patents, which is insufficient to create a justifiable case or controversy.  Therefore, the Federal Circuit overturned the district court’s grant of summary judgment of invalidity of Creative’s patent.