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Jurisdiction for a DJ Patent Action Requires Sufficient Immediacy and Reality

September 25, 2012
Smyth, Jeffrey D.

Decision icon Decision

Last Month at the Federal Circuit - October 2012

Judges: Radar, Mayer (author), Schall

[Appealed from: W.D. Pa., Judge Fischer]

In Matthews International Corp. v. Biosafe Engineering, LLC, No. 12-1044 (Fed. Cir. Sept. 25, 2012), the Federal Circuit affirmed the district court’s determination that the dispute lacked sufficient immediacy and reality to support the exercise of DJ jurisdiction.

Matthews International Corporation (“Matthews”) manufactures and sells cremation equipment, caskets, and bronze memorials, including a Bio Cremation™ product that uses an “environmentally friendly” alkaline-hydrolysis process rather than incineration for cremation. Biosafe Engineering, LLC and Digestor, LLC (collectively “Biosafe”) hold several patents related to the application of alkaline hydrolysis to the disposal of various types of waste, including five method patents (“the Method Patents”) and one system patent (“the System Patent”).

Matthews filed suit against Biosafe, seeking a DJ of noninfringement, invalidity, and unenforceability of the Method Patents. Matthews later amended its complaint to include the System Patent. At the time of the amended complaint, Matthews had sold three Bio Cremation™ units, but none of them had been installed by its customers. Matthews’s suit also included state-law claims of trade libel, defamation, and tortious interference with contractual relations. The district court granted Biosafe’s motion to dismiss for lack of DJ jurisdiction and for failure to adequately plead the state-law claims. Matthews appealed.

On appeal, the Federal Circuit held that the trial court correctly concluded that Matthews’s dispute with Biosafe lacked the requisite immediacy and reality to support the exercise of DJ jurisdiction. The Court stated that “in determining whether a justiciable controversy is present, the analysis must be calibrated to the particular facts of each case, with the fundamental inquiry being ‘whether 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.’” Slip op. at 7-8 (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)).

Regarding “immediacy,” the Federal Circuit found that there was no evidence as to when, if ever, the Bio Cremation™ equipment would be used in a manner that could potentially infringe the Method Patents. The Court noted that none of the three units sold by Matthews had been installed, and that there were noninfringing uses of the equipment. “Until some specific and concrete evidence regarding how Matthews’ customers plan to use the cremation units is available, any judicial determination regarding whether such use would infringe the Method Patents would be premature.” Id. at 9-10.

The Federal Circuit likewise found that the dispute failed to meet the reality requirement for DJ jurisdiction. The Court reasoned that the Bio Cremation™ equipment could be operated using noninfringing processes, and that there was no indication that Matthews’s customers had settled upon a fixed protocol for using it. “Because Matthews’ technology is ‘fluid and indeterminate’ rather than ‘substantially fixed,’ its dispute with Biosafe lacks the requisite reality to support the exercise of declaratory judgment jurisdiction.” Id. at 12 (citing Cat Tech LLC v. TubeMaster, Inc., 528 F.3d 871, 882 (Fed. Cir. 2008)).

The Federal Circuit also held that the district court properly determined it had no jurisdiction over the System Patent. The Court explained that “because the trial court had no jurisdiction over the Method Patents at issue in Matthews’ original complaint, it was without authority to consider the System Patent which issued after that complaint was filed.” Id. at 13-14. “It has long been the case that the jurisdiction of the court depends upon the state of things at the time of the action brought.” Id. at 14 (quoting Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 570-71 (2004)).

Regarding the state-law claims, the Federal Circuit held that Matthews failed to plead the bad-faith element necessary to support its claims. “Even assuming arguendo that Biosafe made infringement allegations, . . . there is no evidence that such allegations were objectively baseless.” Id. at 14-15. The Court noted that the state-law claims would not have been ripe for review even if the required bad-faith element had been pleaded properly, because there was no specific evidence regarding the operating parameters for the Bio Cremation™ units.

Summary authored by Jeffrey D. Smyth, Esq.