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DJ Action Requires More Than Apprehension of Customers Being Sued

March 15, 2006

Decision icon Decision

Last Month at the Federal Circuit - April 2006

Judges: Lourie (author), Rader, Linn

In Microchip Technology Inc. v. Chamberlain Group, Inc., No. 05-1339 (Fed. Cir. Mar. 15, 2006), the Federal Circuit vacated the district court’s decision granting SJ in favor of Microchip Technology Inc. (“Microchip”) and remanded the case for dismissal because of lack of jurisdiction.

Microchip manufactures microprocessors and sells its microprocessors to various entities, some of which make garage door openers (GDOs) that incorporate these microprocessors. The Chamberlain Group, Inc. (“Chamberlain”) is a manufacturer and seller of GDOs. Chamberlain is the owner of U.S. Patent No. 4,750,118 (“the ’118 patent”), and three reissues of this patent: U.S. Patent Re. 36,703 (“the ’703 patent”); U.S. Patent Re. 35,364 (“the ’364 patent”); and U.S. Patent Re. 37,986 (“the ’986 patent”). The claims of these patents are directed to GDOs. Chamberlain and Microchip had previously entered into a settlement agreement to end another patent lawsuit under which Chamberlain received a license under several of Microchip’s patents and Chamberlain agreed not to bring suit against Microchip or its affiliates for infringement of the ’118 and ’364 patents.

After Chamberlain initiated lawsuits against Microchip’s customers, Microchip filed a DJ action in district court that the ’364 and ’703 patents were invalid and/or unenforceable, that Microchip’s products did not infringe the ’364 or ’703 patents, and that Chamberlain could not enforce the ’364 and ’703 patents against Microchip’s customers. Chamberlain responded with a motion to dismiss for lack of jurisdiction. The district court concluded that it had jurisdiction and granted SJ in favor of Microchip. Chamberlain appealed.

The Federal Circuit agreed with Chamberlain that jurisdiction under the Declaratory Judgment Act was lacking. The Court noted that it had articulated a twopart test in Medimmune, Inc. v. Centocor, Inc., 409 F.3d 1376, 1379 (Fed. Cir. 2005), for determining jurisdiction, and that the first prong of the test required that the DJ plaintiff must establish a reasonable apprehension that it will face a patent suit if it commences or continues the activity at issue. The Court found that Microchip’s apprehension that Chamberlain might sue its GDO customers was not sufficient to meet the first prong of this test.

In reaching its decision, the Court found that some underlying legal cause of action would need to exist between Microchip and Chamberlain in order for Microchip to meet the first prong of the test. However, there was no cause of action that Chamberlain couldhave brought against Microchip since Microchip was never accused of infringing Chamberlain’s patents, no indemnification agreement existed between Microchip and its customers, nor was there any indication that Microchip was inducing or contributing to infringement by its customers. The Court found that, at most, Microchip had only an economic interest in clarifying its customers’ rights under Chamberlain’s patents so as to promote its own sales. Such an economic interest alone was insufficient for jurisdiction under the Declaratory Judgment Act. Thus, the Federal Circuit concluded that the district court lacked jurisdiction.