May 2010
Court Affirms Dismissal of a DJ Complaint Based on Absence of an Actual Controversy
| Judges: Michel, Newman (author), Prost |
| [Appealed from D. Del., Judge Robinson] |
In Innovative Therapies, Inc. v. Kinetic Concepts, Inc., No. 09-1085 (Fed. Cir. Apr. 1, 2010), the Federal Circuit affirmed the district court’s dismissal of Innovative Therapies, Inc.’s (“ITI”) DJ action against Kinetic Concepts, Inc. (“KCI”) based on an absence of an actual controversy within the contemplation of the Declaratory Judgment Act (“DJA”).
The five patents at issue, all owned by KCI or exclusively licensed to KCI, relate to medical devices for negative pressure wound therapy used in treatment of chronic wounds. ITI was established in 2006 by several former employees of KCI in conjunction with Dr. Paul Svedman, a surgeon in the field of negative pressure wound therapy.
ITI filed suit for DJ that the five patents are invalid and/or not infringed by a device that ITI planned to offer for sale called the Svedman Wound Treatment System. KCI moved to dismiss for lack of declaratory jurisdiction, which the district court granted. ITI appealed, arguing that a confluence of three factors, taken together, established the existence of a controversy of “sufficient immediacy and reality” to warrant declaratory jurisdiction under MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007). On appeal, the Federal Circuit addressed the three factors cited by ITI: (1) ITI’s representations to the FDA, (2) ITI’s phone calls to KCI executives, and (3) KCI’s patent enforcement history.
First, the Court considered ITI’s argument that, since it had obtained expedited premarketing approval of the Svedman device based on representations to the FDA that the device had the “same technological characteristics” as KCI’s previously approved wound therapy device and other FDA-approved devices that KCI had charged with infringement, this demonstrated the reasonableness of ITI’s belief that KCI would regard the Svedman device as infringing KCI’s patents. The Federal Circuit found that “[a]lthough ‘meaningful preparation’ to take infringing action may suffice for declaratory jurisdiction in some circumstances, see Cat Tech LLC v. Tubemaster, Inc., 528 F.3d 871, 881 (Fed. Cir. 2008), representations to a third person about ‘technological characteristics’ do not establish a justiciable controversy with the patentee.” Slip op. at 3-4. Further, the Court agreed with the district court that even if KCI knew of ITI’s representations to the FDA, this knowledge itself did not create a controversy within the contemplation of the DJA.
Next, the Federal Circuit addressed ITI’s argument that statements made by KCI employees during two phone conversations were sufficient to demonstrate the existence of a justiciable controversy. The first telephone call took place between ITI’s Chief Technology Officer, David Tumey, a former employee of KCI, and his former colleague, Michael Girouard, KCI’s Director of Marketing. During the call, Tumey described the Svedman device and asked Girouard to predict KCI’s response to its launch. Girouard responded: “KCI will act aggressively. You know that.” Id. at 4. The second call took place between Tumey and another former colleague, Michael Burke, Senior Vice President of Manufacturing at KCI. Again, Tumey described the Svedman device and asked Burke to predict KCI’s response to its launch. Tumey stated that Burke responded that KCI would “aggressively go after us . . . particularly if it isfoam-based.” Id. at 5 (alteration in original). In assessing these phone calls, the Court agreed with the district court, holding “that the indirection reflected in these conversations did not produce a controversy of such ‘immediacy and reality’ as to require the district court to accept declaratory jurisdiction.” Id. at 6 (citing SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1378 (Fed. Cir. 2007)).
“Although ‘meaningful preparation’ to take infringing action may suffice for declaratory jurisdiction in some circumstances, see Cat Tech LLC v. Tubemaster, Inc., 528 F.3d 871, 881 (Fed. Cir. 2008), representations to a third person about ‘technological characteristics’ do not establish a justiciable controversy with the patentee.” Slip op. at 3-4.
“Thus while prior litigation is a circumstance to be considered in assessing the totality of circumstances, the fact that KCI had filed infringement suits against other parties for other products does not, in the absence of any act directed toward ITI, meet the minimum standard discussed in MedImmune.” Id. at 7-8.
The Federal Circuit then considered KCI’s history of litigation to enforce its patents. Assessing this argument, the Court again agreed with the district court that MedImmune did not hold that a patent can always be challenged whenever it appears to pose a risk of infringement. The Federal Circuit explained that “while prior litigation is a circumstance to be considered in assessing the totality of circumstances, the fact that KCI had filed infringement suits against other parties for other products does not, in the absence of any act directed toward ITI, meet the minimum standard discussed in MedImmune.” Id. at 7-8.
The Federal Circuit next addressed events that occurred after ITI filed the DJ complaint but before the district court’s decision on the motion to dismiss, particularly KCI’s filing of a patent infringement suit against ITI and ITI’s subsequent filing of an Amended Complaint to include new counts for Lanham Act violations. The Court held “that ITI’s supplemental complaint did not establish an actual controversy at the time of the original pleading, and that jurisdiction based on subsequent events did not relate back to the filing date of the initial complaint.” Id. at 11.
The Federal Circuit then turned to whether the district court abused its discretion in dismissing the DJ action. The Court explained that based on the broad discretion afforded to district courts to administer the DJ practice, the district court did not abuse its discretion in dismissing ITI’s DJ complaint.
Last, the Federal Circuit rejected ITI’s argument that the convenience of the forum requires retaining the action in Delaware instead of in Texas or North Carolina where other related actions had been filed. The Court disagreed because ITI had not stated that any party had any significant business operations in Delaware, that any witness resided in Delaware, or that any conduct relevant to any aspect of the parties’ dispute occurred there.
