District Court’s Dismissal of DJ Action Reversed Because “Reasonable Apprehension of Suit” Test Overruled by MedImmune
February 29, 2008
Last Month at the Federal Circuit - March 2008
Judges: Newman, Rader (author), Dyk
[Appealed from: N.D. Cal., Judge Fogel]
In Micron Technology, Inc. v. MOSAID Technologies, Inc., No. 07-1080 (Fed. Cir. Feb. 29, 2008), the Federal Circuit reversed and remanded the district court’s dismissal for lack of subject matter jurisdiction because the district court relied on a doctrine rejected by the Supreme Court in MedImmune Inc. v. Genentech Inc., 127 S. Ct. 764 (2007). The panel held that because the district court failed to evaluate the “relevant convenience factors,” it would be an abuse of discretion to transfer the action.
Micron Technology, Inc. (“Micron”), Samsung Electronics Company Ltd. (“Samsung”), Hynix Semiconductor Inc. (“Hynix”), and Infineon Technologies of North America (“Infineon”) account for more than 75% of worldwide DRAM sales. MOSAID Technologies, Inc. (“MOSAID”) owns several patents in the field of DRAM chips, which it licenses to the main producers. MOSAID sent warning letters to Micron and the other DRAM manufacturers in 2001. None of the four major DRAM manufacturers took licenses, and MOSAID began enforcing its patents in court. Over the next four years, MOSAID litigated and settled with Samsung, Infineon, and then Hynix.
Micron then filed a DJ action in the Northern District of California against MOSAID seeking a declaration of noninfringement of fourteen of MOSAID’s patents in anticipation of being the next target. The next day, MOSAID filed an infringement action against Micron in the Eastern District of Texas eventually asserting ten patents and naming two additional defendants. The California court eventually dismissed the MOSAID case for lack of subject matter jurisdiction under the “reasonable apprehension of suit” test and stated that even if subject matter jurisdiction were established, it would still exercise its discretion and decline to hear the case. The district court cited to the following three factors for its decision: the record of no threats against Micron for the last four years, no threats to Micron’s customers, and no public comments from MOSAID that mentioned Micron by name.
On appeal, the Federal Circuit noted that the recently decided Supreme Court opinion in MedImmune sets forth the correct standard for jurisdiction over a DJ action. In place of the “reasonable apprehension of suit” test, the Supreme Court adopted a more lenient standard where “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 [DJ].” Slip op. at 5 (quoting MedImmune, 127 S. Ct. at 771). The record must show an actual controversy between the parties.
The Federal Circuit reasoned that the dispute between Micron and MOSAID is an actual controversy within the purview of DJ jurisdiction. To come to this conclusion, the Federal Circuit noted that Micron received several threats itself and watched as MOSAID sued each of the other leading DRAM manufacturers while making public statements confirming its intent to continue an aggressive litigation strategy. Further, the fact that MOSAID filed suit in Texas one day after Micron filed in California showed that the “parties in this dispute are really just contesting the location and right to choose the forum for their inevitable suit.” Id. at 6. The Court also stated that the objective of the DJ Act is to provide the allegedly infringing party relief from uncertainty and delay regarding its legal rights.
According to the Court, this objective would best be met by allowing the case to be heard in California, rather than by deferring to the forum of the later-filed suit. The Federal Circuit rejected the district court’s discretionary dismissal of the case on insufficient grounds because the original determination was based on the now-defunct “reasonable apprehension of suit” test. Further, the Court gave little weight to the district court’s reliance on the second-filed infringement action being broader (naming additional defendants and additional patents) than the first-filed DJ action. The Court found this reason for transfer unpersuasive because it would allow a patent holder to manipulate jurisdiction by simply adding another defendant or a few additional claims to a later-filed infringement suit.
“Instead of relying solely on considerations such as tenuousness of jurisdiction, broadness of case, and degree of vestment, as in this case, or automatically going with the first filed action, the more appropriate analysis takes account of the convenience factors under 28 U.S.C. § 1404(a).” Id. at 10-11. While the district court did not reach a decision on the concurrently filed motion to transfer, the Federal Circuit stated on the facts of this case that the transfer analysis essentially mirrors the considerations that govern whether the California court could decline to hear the case. The factors for such an analysis include the convenience and availability of parties and witnesses, the interest of justice, the party’s intention to preempt another infringement suit, and the possibility of consolidation with related litigation. The general rule also favors the forum of the first-filed action, whether or not it is a DJ action.
Relying on these factors, the Court briefly noted that both Micron and MOSAID conducted business in both California and Texas, there was no favorability over the availability of witnesses or jurisdiction over parties, and there was ongoing litigation requiring consolidation. Therefore, the jurisdiction of the first-filed DJ action appeared to be the more convenient forum for both parties. Accordingly, the Court reversed the SJ and remanded the case to the district court.