April 2014
Preissuance Conduct and History of Related Litigation Establish DJ Jurisdiction on Just-Issued Patent
| Judges: Lourie (author), Prost, O’Malley |
| [Appealed from N.D. Cal., Magistrate Judge Seeborg] |
In Danisco US Inc. v. Novozymes A/S, No. 13-1214 (Fed. Cir. Mar. 11, 2014), the Federal Circuit reversed the district court’s dismissal of a DJ action filed by Danisco US Inc. (“Danisco”) against Novozymes A/S and Novozymes North America, Inc. (collectively “Novozymes”) for lack of subject matter jurisdiction, holding that the totality of the circumstances established a justiciable controversy under the Declaratory Judgment Act.
Competitors Danisco and Novozymes develop and supply Rapid Starch Liquefaction (“RSL”) products, which are industrial enzymes used for converting corn and other plant-based material into ethanol. Danisco and Novozymes both have patents that claim enzymes genetically modified to improve the liquefaction process, and since about 2001, Novozymes has sued Danisco for patent infringement related to RSL products numerous times. The modified enzyme in Danisco’s products is covered by Danisco’s U.S. Patent No. 8,084,240 (“the ’240 patent”), which issued on December 27, 2011. Shortly after the PTO issued a Notice of Allowance for the ’240 patent, Novozymes amended one of its then-pending applications to claim the same genetically modified enzyme as claimed in Danisco’s ’240 patent and requested an interference. The examiner rejected Novozymes’s interference request. After the ’240 patent issued, Novozymes filed a request for continued examination and again requested an interference, which the examiner again rejected. Novozymes then filed public comments to the PTO, once more representing that the enzyme claimed in Danisco’s ’240 patent fell within the scope of its amended claim. Novozymes’s application later issued as U.S. Patent No. 8,252,573 (“the ’573 patent”).
Upon issuance of the ’573 patent, Danisco filed a DJ action against Novozymes claiming noninfringement by its RSL products (Count 1), invalidity of the ’573 patent (Count 2), and priority of the ’240 patent over the ’573 patent (Count 3). Novozymes moved to dismiss Danisco’s complaint for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1). The district court granted the motion, finding that since Danisco filed its complaint on the day the ’573 patent issued, the action “was filed prior to the time Novozymes took, or even could have taken, any affirmative action to enforce its patent rights,” and “there is no precedent for finding jurisdiction based on such pre-patent issuance events alone.” Slip op. at 5 (quoting Danisco US Inc. v. Novozymes A/S, No. 12-4502, 2013 WL 2351723, at *1-2 (N.D. Cal. Jan. 8, 2013)). The district court also dismissed Count 3 of Danisco’s complaint, finding that Danisco’s claim for priority was unripe in the absence of the primary noninfringement and invalidity DJ claims. Danisco appealed.
“[W]e have never held that ‘pre-issuance conduct’ cannot constitute an affirmative act, nor have we held that the only affirmative acts sufficient to create justiciable controversies are ‘implied or express enforcement
threat[s].’” Slip op. at 10 (second alteration in original) (quoting Danisco US Inc. v. Novozymes A/S, No. 12-4502, 2013 WL 2351723, at *3-4 (N.D. Cal. Jan. 8, 2013)).
The Federal Circuit reversed, holding that there existed at the time Danisco filed its DJ complaint a case of actual controversy, i.e., a definite and concrete patent dispute between the parties, sufficient to establish DJ jurisdiction under the Declaratory Judgment Act and Article III of the U.S. Constitution. According to the Court, “Article III does not mandate that the declaratory judgment defendant have threatened litigation or otherwise taken action to enforce its rights before a justiciable controversy can arise.” Id. at 7. Rather, the Court relied on the fact that Novozymes had described the ’573 patent’s sole claim as interfering with Danisco’s ’240 patent and had insisted on multiple occasions that its claim read on Danisco’s claimed modified enzyme, the enzyme in Danisco’s RSL products, while Danisco had taken an entirely opposite legal position. The Court also relied on the fact that Novozymes had twice sued Danisco for patent infringement on related products, and that the parties were likely to continue to be at war over such patents for the foreseeable future. Moreover, the Court noted, Novozymes had never withdrawn its allegation that Danisco’s enzyme is encompassed by the ’573 patent, nor offered any assurance, such as with a covenant not to sue, that it would not accuse Danisco of infringement in the future.
The Federal Circuit held that just as a history of patent litigation between the same parties involving related products, technologies, and patents may weigh in favor of subject matter jurisdiction, a pattern of administrative challenges regarding such patents may also be considered. The Court refused to establish a bright-line distinction between pre- and postissuance conduct, explaining that such a distinction would be irreconcilable with the Supreme Court’s flexible “totality of the circumstances” test and rejection of technical bright-line rules in the context of justiciability. The Court further noted that such a bright-line rule would be inconsistent with the Court’s own precedent, which did not hold that preissuance conduct cannot be an affirmative act or that an affirmative act is required to create a justiciable controversy.
Taken together, the Federal Circuit concluded that Novozymes’s activities demonstrated a preparedness and willingness to enforce its patent rights. Under the totality of the circumstances, Novozyme’s posturing put Danisco in the position of either pursuing arguably illegal behavior (i.e., infringement) or abandoning that which it claims a right to do (i.e., make and sell its RSL products), precisely the type of situation the Declaratory Judgment Act was intended to remedy. Accordingly, the Court reversed the district court’s dismissal of Counts 1 and 2 of Danisco’s complaint for lack of subject matter jurisdiction, vacated the dismissal of Count 3 of Danisco’s complaint for priority since expressly premised on the erroneous dismissal of Danisco’s noninfringement and invalidity claims, and remanded for further proceedings.
