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Implied Assertion of Patent Rights Sufficient to Give Rise to DJ Jurisdiction

December 04, 2009

Decision icon Decision

Last Month at the Federal Circuit - January 2010

Judges: Michel (author), Newman, Moore

[Appealed from: D. Del., Judge Robinson]

In Hewlett-Packard Co. v. Acceleron LLC, No. 09-1283 (Fed. Cir. Dec. 4, 2009), the Federal Circuit reversed the district court’s grant of patent holder’s motion to dismiss for lack of DJ jurisdiction.  The Court found DJ jurisdiction arising from a “definite and concrete” dispute between Hewlett-Packard Company (“HP”) and Acceleron LLC (“Acceleron”).

Acceleron, a patent holding company, acquired U.S. Patent No. 6,948,021 (“the ’021 patent”) on May 31, 2007.  On September 14, 2007, Acceleron wrote to HP identifying the ’021 patent as relating to HP’s Blade Server products and asking for an opportunity to discuss the patent.  Acceleron specifically asked HP to agree that “all information exchanged between the parties will not be used for any litigation purposes whatsoever, including but not limited to any claim that Acceleron has asserted any rights against any of [HP’s] ongoing or planned activities, or otherwise created any actual case or controversy regarding the enclosed patent.”  Slip op. at 2.  Acceleron gave HP fourteen days to respond to its letter.

In response, HP expressed an interest in learning more information about the ’021 patent in order to fully evaluate it.  HP agreed to not file a DJ action against Acceleron in exchange for Acceleron’s agreement to not file an action against HP during a 120-day period.  Acceleron responded by denying that HP had any basis for filing a DJ action.  Giving HP another fourteen days to agree to its previous letter, Acceleron stated that it would interpret HP’s failure to sign and return Acceleron’s previous letter to mean that HP had nothing to say about “the merits of this patent, or its relevance to [HP’s] Blade Server products.”  Id. at 2-3.

Upon receiving this letter, HP sought DJ of noninfringement and invalidity of the ’021 patent.  The district court granted Acceleron’s motion to dismiss the case for lack of subject matter jurisdiction, finding that litigation remained too speculative to support DJ jurisdiction.

On appeal, the Federal Circuit explained that DJ jurisdiction exists where alleged facts demonstrate a substantial controversy between parties with adverse legal interests.  Particularly in patent cases, DJ jurisdiction exists where a patentee asserts rights under a patent and where the alleged infringer asserts the right to engage in the accused activity without license. 

The Court disagreed with HP’s position that the letter from Acceleron identifying its patent and HP’s products sufficiently established their adverse legal interests.  The Court also rejected Acceleron’s argument that it never asserted its rights under the ’021 patent.  Noting that a party cannot avoid a DJ action simply by avoiding words such as “litigation” or “infringement,” the Court looked at the totality of the circumstances to determine if a case or controversy existed to support DJ jurisdiction.  Id. at 5-6.

After considering all relevant facts, the Court held that HP correctly interpreted Acceleron’s letters as implicitly asserting its rights under the ’021 patent.  First, although a patent owner may contact another party for legitimate business reasons, such was not the case here.  Second, Acceleron’s letters asserting the ’021 patent as “relevant” to HP’s specific product line, imposing a short fourteen-day deadline for a response, and insisting that HP not file suit reasonably demonstrated its intent to enforce the patent.  Id. at 7.  And finally, given Acceleron’s business model and its status as “solely a licensing entity,” the ’021 patent benefitted Acceleron only when enforced.  Id. at 8.  In a footnote, the Court commented on the lack of litigation history regarding the ’021 patent, emphasizing the short three and a half months that elapsed between Acceleron’s acquisition of the ’021 patent and the initiation of its contact with HP regarding that patent.

The Court also dismissed Acceleron’s argument that HP had not determined that its legal interests were adverse to Acceleron.  Acknowledging that in its letter, HP expressed an interest in obtaining more information from Acceleron to conduct an accurate assessment of the ’021 patent, the Court noted the possibility that HP had conducted a thorough investigation by the time it filed the DJ action.  Although not required to make a formal declaration of adverse legal interests, HP’s filing of the DJ suit sufficiently indicated its belief that Acceleron was threatening to assert its rights under the ’021 patent. 

The Court concluded by recognizing that the decision “in this case undoubtedly marks a shift from past declaratory judgment cases.”  Id. at 9.  The Court noted that the Supreme Court’s holding in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), has altered the way in which the DJ Act applies to patent law cases and that the Court’s jurisprudence must consequently also evolve.

Summary authored by Mukta Jhalani, Esq.