April 25, 2015
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The Federal Circuit Finds Declaratory Judgment Jurisdiction Exists Only with Immediacy and Reality
Addressing the standard for declaratory judgment jurisdiction, the U.S. Court of Appeals for the Federal Circuit affirmed a lower court’s dismissal of claims for declaratory and injunctive relief, concluding that the claims lacked immediacy and reality. Matthews Int’l Corp. v. Biosafe Engineering, LLC and Digestor, LLC, Case No. 12-1044 (Fed. Cir., Sept. 25, 2012) (Mayer, J.).
The case was initiated by Matthews, a company that marketed cremation products, including an environmentally friendly alternative to incineration that utilized an alkaline hydrolysis process to cremate human remains. Matthews filed suit against Biosafe, the owner of patents related to the application of alkaline hydrolysis to disposal of medical waste and hazardous materials. Prior to the lawsuit, the parties engaged in a telephone conversation and exchanged three letters regarding vague assertions by Biosafe that Matthews’ product would infringe Biosafe’s intellectual property.
Matthews filed suit seeking a declaratory judgment of non-infringement, invalidity and unenforceability of method patents owned by Biosafe. Matthews also asserted state-law claims of trade libel, defamation and tortious interference with contractual relations. About a month later, a patent directed to a system issued to Biosafe. Matthews thereafter filed an amended complaint, adding a request for a similar declaratory judgment for the newly issued system patent.
Biosafe moved to dismiss the amended complaint for lack of declaratory judgment jurisdiction and failure to adequately plead state-law claims. The lower court dismissed the patent claims, finding a lack of the necessary immediacy and reality to satisfy declaratory judgment jurisdiction. The lower court also dismissed the state-law claims for failure to plead bad faith. Matthews appealed.
The Federal Circuit affirmed. Addressing the method patents, the Federal Circuit found that Matthews’ claims lacked both immediacy and reality. The Court noted that Matthews had sold only three units to customers and that the units had not been installed. The Court further noted that the equipment was capable of being used with a variety operating parameters, such as temperature, pressure and pH, some of which would not infringe the claims of the method patents. Matthews failed, however, to allege facts regarding whether its customers would operate the equipment in an infringing manner, and, if so, when such alleged conduct would occur.
The Federal Circuit found that Matthews’ dispute with Biosafe was too remote and speculative to support the exercise of declaratory judgment jurisdiction. The Court stated that, until some specific and concrete evidence regarding how customers planned to use the equipment was available, any judicial determination regarding whether such use would infringe the method patents would be premature.
Based on the finding that the lower court lacked jurisdiction over the method patents, the Federal Circuit found that the lower court was without jurisdiction over the system patent as well. Absent predicate jurisdiction based on the method patents, the lower court had no authority to exercise jurisdiction over the system patent that had not yet issued as of the filing of the original complaint.
Finally, the Federal Circuit affirmed the lower court’s dismissal of the state-law claims. The Federal Circuit found that Matthews failed to allege the bad-faith element of the causes of action, and, in any event, even if bad faith had been alleged, Matthews’ state claims would not be ripe for review until more particularized evidence became available about the operation of the equipment.