The Declaratory Judgment Act provides that where there is a "case of actual controversy" a district court can declare the rights of the parties.

The Federal Circuit, in Danisco v. Novozymes (March 2014), referred to the US Supreme Court explanation that "'the difference between an abstract question and a "controversy" contemplated by the Declaratory Judgment Act is necessarily one of degree, and it would be difficult, if it would be possible, to fashion a precise test for determining in every case whether there is such a controversy.'"

The Danisco facts were complex. Novozymes had a patent claim which it asserted interfered with Danisco's patent. Novozymes had asserted that its patent read on Danisco's products and Novozymes sought its patent because it believed that Danisco's products would infringe once the claim issued. Novozymes twice sued Danisco or its predecessors patent infringement regarding related products.

The district court dismissed Danisco's declaratory judgment action because Danisco filed the action on the day Novozymes's patent issued and, therefore, Novozymes could not have yet taken action to enforce its patent rights. The district court held that '"[w]hile matters such as a prior litigation history and statements made during prosecutions sometimes support a conclusion that an actual controversy exists, there is no precedent for finding jurisdiction based on such pre-patent issuance events alone . . . .'"

The Federal Circuit disagreed, stating that whether Novozymes accused Danisco of infringing an issued patent "is not dispositive of whether an actual controversy exists." According to the Federal Circuit, the Declaratory Judgment Act "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, and the Supreme Court has repeatedly found the existence of an actual case or controversy even in situations in which there was no indication that the declaratory judgment defendant was preparing to enforce its legal rights.

Accordingly, the question is whether, "under all the circumstances," "there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Thus, the "pattern of administrative challenges" is relevant in "analyzing the totality of the circumstances."

PRACTICE POINTER: Patent owner often want to send "cease and desist" letters to infringers. Danisco confirms that a patentee cannot avoid a declaratory judgment lawsuit, simply by omitting an accusation of infringement in a cease and desist letter. Further, infringers may argue Danisco that means that simple "notice" letters prior to patent issuance from a patent owner known to institute patent litigation may be a sufficient basis for declaratory relief - immediately upon patent issuance.

© Michael A. Shimokaji, 2014 The contents of this article represent the opinions of the author and not those of the author's law firm or clients

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