No Case or Controversy in Declaratory Judgment Against Patentee Who Sued Manufacturer’s Customers
Friday, November 1, 2013

In a non-precedential opinion addressing declaratory judgment jurisdiction, the U.S. Court of Appeals for the Federal Circuit affirmed a district court’s ruling that it lacked subject-matter jurisdiction over a declaratory judgment action by a manufacturer, finding that the manufacturer could not show that the patentee ever threatened or alleged direct or indirect infringement by the manufacturer.  Cisco Systems, Inc. v. Alberta Telecommunications Research Center, Case No. 12-1687 (Fed. Cir., Aug. 29, 2013) (O’Malley, J) (non-precedential). 

Cisco develops and manufacturers networking equipment used in telecommunications infrastructure.  Alberta Telecommunications Research Center, doing business as TR Labs, brought suit against various telecommunication network providers, many of which are Cisco customers.  In its complaints, TR Labs accused Cisco’s customers of infringing patents based on the use of Cisco products.  TR Labs provided infringement claim charts that identified use of Cisco products.  In order to protect its customers, Cisco sued TR Labs, seeking a declaratory judgment of non-infringement and invalidity of TR Lab’s patents. 

TR Labs moved to dismiss Cisco’s complaint for lack of subject-matter jurisdiction, arguing that Cisco failed to establish that TR Labs had accused Cisco itself of either direct or indirect infringement.   Prior to opposing the motion , Cisco sought  a covenant not to sue and a release for Cisco customers from TR Labs.  While TR Labs agreed to grant Cisco a covenant, no agreement was reached because TR Labs would not agree to release Cisco’s customers.  After the district court granted TR Lab’s motion to dismiss, Cisco appealed.

The Federal Circuit affirmed, reasoning that while  Cisco may have an interest in saving its customers from infringement allegations based on the use of its products, the interest presented here was insufficient to give rise to a current, justiciable case or controversy.  The Court recognized the concession by TR Labs that it had no basis for suing Cisco either for direct or indirect infringement, and that TR Labs offered Cisco a covenant not to sue.

The Federal Circuit distinguished these facts from Arkema and Arris, where it found declaratory judgment jurisdiction.  The Court noted that in Arkema the parties had a history of litigation of the products allegedly covered by the asserted patents, both in the United States and abroad, and, moreover, the patentee acknowledged that there were no non-infringing uses for the accused products.  In Arris, the Court found an actual controversy existed between the parties because there were substantial communications regarding alleged infringement theories before the declaratory judgment action was filed.  In this case, there were no protracted discussions between Cisco and its customers and Cisco has never asserted, nor could it point to any such agreements, that it has any indemnity obligations for its customers. 

Practice Note:  If a manufacturer desires to seek declaratory judgment against patents being asserted against its customers, it must find a basis beyond just that its products are identified in the complaint and in infringement contentions.

 

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