IP News

Federal Circuit Adds Transfer Analysis to Declaratory Judgment Jurisdiction

In Micron Tech., Inc. v. Mosaid Techs., Inc., 2007-1080 (Fed. Cir. Feb. 29, 2008), the Federal Circuit reversed and remanded the Northern District of California's dismissal of Micron's declaratory judgment action, holding that a real case and controversy existed between the parties and that the district court should have considered the 'convenience factors' found in a 28 U.S.C. '1404(a) transfer analysis before exercising its discretionary powers to dismiss the action. Micron is one of four major dynamic random access memory chip (DRAM) manufacturers, while Mosaid is an owner of a number of DRAM patents, many of which it licenses to the DRAM producers. Between June 2001 and July 2002, Mosaid sent several strongly worded letters to Micron, and other DRAM manufacturers, suggesting that it license Mosaid's technology. After none of the major DRAM manufacturers took licenses, Mosaid began enforcing its patents in court. By April 6, 2005 Mosaid had sued, and subsequently settled with, all of the major DRAM manufacturers except Micron. After each settlement and license agreement, Mosaid issued public statements that it intended to pursue an aggressive strategy against the remaining DRAM manufacturers. On July 24, 2005, Micron filed a declaratory action in the Northern District of California seeking a declaration of noninfringement of 14 Mosaid patents. The very next day, Mosaid filed an infringement action against Micron in the Eastern District of Texas, which, after an amendment to the complaint, involved ten patents and three defendants in addition to Micron. However, it did not involve six patents for which Micron sought declaratory relief.

Pursuant to a motion by Mosaid, the Northern District of California dismissed the declaratory action, finding no reasonable apprehension of suit. The district court also held that even if subject matter jurisdiction were established, it would exercise its discretion and still decline to hear the case.

The Federal Circuit reversed, holding that the district court incorrectly applied the 'reasonable apprehension of suit' test, which had been rejected by the Supreme Court in MedImmune Inc. v. Genentech Inc., 127 S. Ct. 764 (2007). Rather, the Federal Circuit found that jurisdiction existed based upon: 1) Mosaid's prior suits against other DRAM manufacturers; 2) Mosaid's publicly acknowledged aggressive litigation strategy; and 3) Mosaid's prior threats directed towards Micron.

Further, the Federal Circuit held that the district court abused its discretion in dismissing the declaratory action on discretionary grounds. Specifically, the appellate court rejected as inappropriate the district court's bases for dismissal, which included: 1) that the action was 'tenuous at best'; 2) that the Texas suit was 'broader' than the California declaratory action; and 3) that because the cases were filed just one day apart, the California court was no more invested in the case than the Texas court. Instead, the Federal Circuit held that when the competing actions are filed almost simultaneously, a district court should apply the convenience factors of 28 U.S.C. '1404(a) when considering its discretionary power to dismiss a declaratory judgment action. The court reasoned that in light of the newly understood legal environment surrounding declaratory judgment jurisdiction, consideration of these factors would reduce the incentive for a race to the courthouse because both parties will realize that the case will be heard by or transferred to the most convenient or suitable forum. Applying these considerations, the Federal Circuit ruled that the California court was the more appropriate forum because it was the jurisdiction of the first filed action, each party did business in both California and Texas, neither court was more favorable with regard to the availability of witnesses, and there was no ongoing litigation in Texas requiring consolidation.

Second Circuit Declines to Require Past Trademark Infringer to Keep Safe Distance

In PRL USA Holdings, Inc. v. United States Polo Ass'n, Inc., 06-3691 (2d Cir. March 4, 2008), the Second Circuit held that the district court did not err in refusing to give the jury an instruction that a prior adjudicated infringer will be held to a higher standard of conduct.

Plaintiff PRL, holder of a famous mark on Ralph Lauren clothing (a logo showing in silhouette a mounted polo player with polo mallet raised), had brought suit against the U.S. Polo Association ('USPA') and its licensee, Jordache, Ltd, alleging that four logos used by the defendants on a clothing line infringed the Ralph Lauren polo player logo. After a jury finding of no infringement with regard to three of defendants' logos, PRL appealed the district court's refusal to instruct the jury that USPA (which was admittedly a past intentional infringer of plaintiff's marks) was required to keep a 'safe distance' and was 'held to a higher standard of conduct with respect to adoption of a new mark than would have been applied in the first instance.'

The Second Circuit rejected PRL's argument. The court reasoned that while 'safe distance' obligations have been imposed on adjudicated infringers and have been used in contempt proceedings, it was not appropriate in the case at hand where PRL alleged infringement of a new mark different from that previously found to have infringed. The court opined that the standard for trademark infringement is whether the mark is 'likely to cause confusion' and insertion of a 'safe distance' concept would change the standard of liability.

Federal Circuit Limits Section 121 Safe Harbor Provision

In Pfizer, Inc. v. Teva Pharms. USA, Inc., 2007-1271 (Fed. Cir. March 7, 2008), the Federal Circuit held that the protection afforded by 35 U.S.C. '121 to applications (or patents issued therefrom) filed as a result of a restriction requirement is limited to divisional applications.

Teva appealed, inter alia, a district court finding that it infringed U.S. Patent No. 5,750,068 ('the '068 patent'), arguing that the same was invalid for obviousness-type double patenting over U.S. Patent No. 5,563,165 ('the '165 patent'). The '068 patent was a continuation-in-part ('CIP') application claiming priority to an earlier filed application, Ser. No. 08/160,594 ('the '594 application'). During prosecution of the '594 application, the examiner issued a restriction requirement, which identified compound claims, composition claims, and method claims in the application as patentably distinct subject matter. In addition to prosecuting elected compound claims in the '594 application, Pfizer filed a series of continuation applications claiming priority to the '594 application directed to the non-elected subject matter. Specifically, Pfizer filed a divisional application, which issued as the '165 patent and also a CIP application, which ultimately issued as the '068 patent. The district court held that the '165 patent was not prior art to the '068 patent under 35 U.S.C. '121.

The Federal Circuit reversed, holding that because the '068 patent issued from a CIP application, and not a divisional application, the '165 patent could be used as a reference against the same. 35 U.S.C. '121 states in part that, 'A patent issuing on an application with respect to which a requirement for restriction under this section has been made, or on an application filed as a result of such a requirement, shall not be used as a reference ' against a divisional application or against the original application or any patent issued on either of them ' ' Pfizer argued that a CIP was merely an administrative term and that the application resulting in the '068 patent was, in effect, a 'divisional' for purposes of '121. The Federal Circuit disagreed, reasoning that '121was intended by Congress to prevent inequities requiring applicants to fight restriction requirements or risk rejection of the divisional application over the very same application from which the subsequent application was divided. The court reasoned that Congress specifically enacted '121 in response to this inequity, yet decided not to include CIPs within its reach.

Judge Denies Entry into Evidence of Ex Parte FTC Decision

In Hynix Semiconductor Inc. v. Rambus Inc., 00-20905 (N.D. Cal. Jan. 28, 2008) Judge Ronald Whyte of the Northern District of California denied plaintiffs' motion in limine to admit an opinion by the FTC into evidence.

Plaintiffs moved, pursuant to FRE 803(8)(c), to admit into evidence an opinion by the FTC in In the Matter of Rambus, Inc., on appeal at the time to the D.C. Circuit, reversing the ALJ's findings and ruling that Rambus had engaged in exclusionary conduct that significantly contributed to Rambus's acquisition of monopoly power.

As paraphrased by the court, FRE 803(8)(C) allows into evidence, 'Records, reports, statements, or data compilations, in any form, of public offices or agencies, setting forth ' (C) in civil actions and proceedings and against the Government in criminal cases, factual findings resulting from an investigation made pursuant to authority granted by law, unless the source of information or other circumstances indicate lack of trustworthiness.'

The court held that under Rule 803(8)(c), the FTC's opinion did not 'result from an investigation' and thus was not admissible pursuant to that exception to the hearsay rule. In doing so, the court first noted the established rule that another judge's findings of fact are not made pursuant to an investigation and thus are not admissible into evidence. Citing Nipper v. Snapes, 7 F.3d 415, 417-418 (1993). Although noting that some circuits have distinguished judicial and agency findings of fact, the court reasoned that the FTC opinion, which involved five commissioners of the Federal Trade Commission sitting in an appellate capacity reviewing the findings of fact and conclusions of law of an administrative law judge, was more akin to a judicial finding than an agency one.

The court, using the advisory committee notes to FRE 803(8)(C) as guidance, reasoned that timeliness of the findings are an important factor, and that a government agent checking out a scene might be an investigation contemplated by the rule, but not an appellate body considering a record four years after the complaint was filed.

Finally, the court declined to admit the opinion under FRE 403, voicing concern about the undue weight a jury would potentially accord to the FTC's liability opinion.

Matt Berkowitz is an associate in the New York office of Kenyon & Kenyon LLP.

Federal Circuit Adds Transfer Analysis to Declaratory Judgment Jurisdiction

In Micron Tech., Inc. v. Mosaid Techs., Inc., 2007-1080 (Fed. Cir. Feb. 29, 2008), the Federal Circuit reversed and remanded the Northern District of California's dismissal of Micron's declaratory judgment action, holding that a real case and controversy existed between the parties and that the district court should have considered the 'convenience factors' found in a 28 U.S.C. '1404(a) transfer analysis before exercising its discretionary powers to dismiss the action. Micron is one of four major dynamic random access memory chip (DRAM) manufacturers, while Mosaid is an owner of a number of DRAM patents, many of which it licenses to the DRAM producers. Between June 2001 and July 2002, Mosaid sent several strongly worded letters to Micron, and other DRAM manufacturers, suggesting that it license Mosaid's technology. After none of the major DRAM manufacturers took licenses, Mosaid began enforcing its patents in court. By April 6, 2005 Mosaid had sued, and subsequently settled with, all of the major DRAM manufacturers except Micron. After each settlement and license agreement, Mosaid issued public statements that it intended to pursue an aggressive strategy against the remaining DRAM manufacturers. On July 24, 2005, Micron filed a declaratory action in the Northern District of California seeking a declaration of noninfringement of 14 Mosaid patents. The very next day, Mosaid filed an infringement action against Micron in the Eastern District of Texas, which, after an amendment to the complaint, involved ten patents and three defendants in addition to Micron. However, it did not involve six patents for which Micron sought declaratory relief.

Pursuant to a motion by Mosaid, the Northern District of California dismissed the declaratory action, finding no reasonable apprehension of suit. The district court also held that even if subject matter jurisdiction were established, it would exercise its discretion and still decline to hear the case.

The Federal Circuit reversed, holding that the district court incorrectly applied the 'reasonable apprehension of suit' test, which had been rejected by the Supreme Court in MedImmune Inc. v. Genentech Inc. , 127 S. Ct. 764 (2007). Rather, the Federal Circuit found that jurisdiction existed based upon: 1) Mosaid's prior suits against other DRAM manufacturers; 2) Mosaid's publicly acknowledged aggressive litigation strategy; and 3) Mosaid's prior threats directed towards Micron.

Further, the Federal Circuit held that the district court abused its discretion in dismissing the declaratory action on discretionary grounds. Specifically, the appellate court rejected as inappropriate the district court's bases for dismissal, which included: 1) that the action was 'tenuous at best'; 2) that the Texas suit was 'broader' than the California declaratory action; and 3) that because the cases were filed just one day apart, the California court was no more invested in the case than the Texas court. Instead, the Federal Circuit held that when the competing actions are filed almost simultaneously, a district court should apply the convenience factors of 28 U.S.C. '1404(a) when considering its discretionary power to dismiss a declaratory judgment action. The court reasoned that in light of the newly understood legal environment surrounding declaratory judgment jurisdiction, consideration of these factors would reduce the incentive for a race to the courthouse because both parties will realize that the case will be heard by or transferred to the most convenient or suitable forum. Applying these considerations, the Federal Circuit ruled that the California court was the more appropriate forum because it was the jurisdiction of the first filed action, each party did business in both California and Texas, neither court was more favorable with regard to the availability of witnesses, and there was no ongoing litigation in Texas requiring consolidation.

Second Circuit Declines to Require Past Trademark Infringer to Keep Safe Distance

In PRL USA Holdings, Inc. v. United States Polo Ass'n, Inc., 06-3691 (2d Cir. March 4, 2008), the Second Circuit held that the district court did not err in refusing to give the jury an instruction that a prior adjudicated infringer will be held to a higher standard of conduct.

Plaintiff PRL, holder of a famous mark on Ralph Lauren clothing (a logo showing in silhouette a mounted polo player with polo mallet raised), had brought suit against the U.S. Polo Association ('USPA') and its licensee, Jordache, Ltd, alleging that four logos used by the defendants on a clothing line infringed the Ralph Lauren polo player logo. After a jury finding of no infringement with regard to three of defendants' logos, PRL appealed the district court's refusal to instruct the jury that USPA (which was admittedly a past intentional infringer of plaintiff's marks) was required to keep a 'safe distance' and was 'held to a higher standard of conduct with respect to adoption of a new mark than would have been applied in the first instance.'

The Second Circuit rejected PRL's argument. The court reasoned that while 'safe distance' obligations have been imposed on adjudicated infringers and have been used in contempt proceedings, it was not appropriate in the case at hand where PRL alleged infringement of a new mark different from that previously found to have infringed. The court opined that the standard for trademark infringement is whether the mark is 'likely to cause confusion' and insertion of a 'safe distance' concept would change the standard of liability.

Federal Circuit Limits Section 121 Safe Harbor Provision

In Pfizer, Inc. v. Teva Pharms. USA, Inc., 2007-1271 (Fed. Cir. March 7, 2008), the Federal Circuit held that the protection afforded by 35 U.S.C. '121 to applications (or patents issued therefrom) filed as a result of a restriction requirement is limited to divisional applications.

Teva appealed, inter alia, a district court finding that it infringed U.S. Patent No. 5,750,068 ('the '068 patent'), arguing that the same was invalid for obviousness-type double patenting over U.S. Patent No. 5,563,165 ('the '165 patent'). The '068 patent was a continuation-in-part ('CIP') application claiming priority to an earlier filed application, Ser. No. 08/160,594 ('the '594 application'). During prosecution of the '594 application, the examiner issued a restriction requirement, which identified compound claims, composition claims, and method claims in the application as patentably distinct subject matter. In addition to prosecuting elected compound claims in the '594 application, Pfizer filed a series of continuation applications claiming priority to the '594 application directed to the non-elected subject matter. Specifically, Pfizer filed a divisional application, which issued as the '165 patent and also a CIP application, which ultimately issued as the '068 patent. The district court held that the '165 patent was not prior art to the '068 patent under 35 U.S.C. '121.

The Federal Circuit reversed, holding that because the '068 patent issued from a CIP application, and not a divisional application, the '165 patent could be used as a reference against the same. 35 U.S.C. '121 states in part that, 'A patent issuing on an application with respect to which a requirement for restriction under this section has been made, or on an application filed as a result of such a requirement, shall not be used as a reference ' against a divisional application or against the original application or any patent issued on either of them ' ' Pfizer argued that a CIP was merely an administrative term and that the application resulting in the '068 patent was, in effect, a 'divisional' for purposes of '121. The Federal Circuit disagreed, reasoning that '121was intended by Congress to prevent inequities requiring applicants to fight restriction requirements or risk rejection of the divisional application over the very same application from which the subsequent application was divided. The court reasoned that Congress specifically enacted '121 in response to this inequity, yet decided not to include CIPs within its reach.

Judge Denies Entry into Evidence of Ex Parte FTC Decision

In Hynix Semiconductor Inc. v. Rambus Inc., 00-20905 (N.D. Cal. Jan. 28, 2008) Judge Ronald Whyte of the Northern District of California denied plaintiffs' motion in limine to admit an opinion by the FTC into evidence.

Plaintiffs moved, pursuant to FRE 803(8)(c), to admit into evidence an opinion by the FTC in In the Matter of Rambus, Inc., on appeal at the time to the D.C. Circuit, reversing the ALJ's findings and ruling that Rambus had engaged in exclusionary conduct that significantly contributed to Rambus's acquisition of monopoly power.

As paraphrased by the court, FRE 803(8)(C) allows into evidence, 'Records, reports, statements, or data compilations, in any form, of public offices or agencies, setting forth ' (C) in civil actions and proceedings and against the Government in criminal cases, factual findings resulting from an investigation made pursuant to authority granted by law, unless the source of information or other circumstances indicate lack of trustworthiness.'

The court held that under Rule 803(8)(c), the FTC's opinion did not 'result from an investigation' and thus was not admissible pursuant to that exception to the hearsay rule. In doing so, the court first noted the established rule that another judge's findings of fact are not made pursuant to an investigation and thus are not admissible into evidence. Citing Nipper v. Snapes , 7 F.3d 415, 417-418 (1993). Although noting that some circuits have distinguished judicial and agency findings of fact, the court reasoned that the FTC opinion, which involved five commissioners of the Federal Trade Commission sitting in an appellate capacity reviewing the findings of fact and conclusions of law of an administrative law judge, was more akin to a judicial finding than an agency one.

The court, using the advisory committee notes to FRE 803(8)(C) as guidance, reasoned that timeliness of the findings are an important factor, and that a government agent checking out a scene might be an investigation contemplated by the rule, but not an appellate body considering a record four years after the complaint was filed.

Finally, the court declined to admit the opinion under FRE 403, voicing concern about the undue weight a jury would potentially accord to the FTC's liability opinion.

Matt Berkowitz is an associate in the New York office of Kenyon & Kenyon LLP.