The Delicate Declaratory Judgment Dance

Delicate Declaratory Judgement3M Company v. Avery Dennison Corp., No. 2011–1339 (Fed. Cir. Mar. 26, 2012) (Chief Judge Rader and Judges Lourie and Linn)

When is a threat of patent infringement not a threat? If a patent owner makes too much noise, the target may file a declaratory judgment action to get to court first (and get to choose the venue). But suppose a patent owner wants to offer a license without running that risk? What can you say without opening yourself to a lawsuit?

Turns out, not much.

Avery and 3M have a long history of suing each other for patent infringement. This case involves two Avery patents (the “Heenan patents”). According to 3M, Avery’s Chief IP Counsel called his counterpart at 3M and said that one line of 3M’s products “may infringe” the Heenan patents and that “licenses are available.” 3M alleged that a couple of days later, it declined the license offer. Avery’s counsel promised to send claim charts showing why 3M’s product might infringe, but he never did. At some later point, 3M offered to settle the case in exchange for a covenant not to sue, but Avery never responded.

Those alleged facts are 3M’s primary basis for its declaratory judgment. The district court said that even if they were true, they weren’t enough; it dismissed the action for lack of subject matter jurisdiction.

The Federal Circuit disagreed. It said that using “may infringe” combined with the statement that licenses “are available” and the promise to send claim charts was enough to create declaratory judgment jurisdiction. The court also noted that this was a conversation between two decision makers. If true, these facts would be enough to create declaratory judgment jurisdiction.

The district court never did any fact-finding, however, so the Federal Circuit vacated and remanded back to the district court to determine whether 3M’s allegations were true.

This decision doesn’t leave patent owners with much room to approach potential licensees without risking a declaratory judgment action. It’s hard to avoid mentioning the possibility of a license or indicating possible infringement. And claim charts are the standard way of showing your position. It’s tough to see how to dance around this successfully.

What do you think? Is there any way to have a licensing program without being exposed to declaratory judgment actions?

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