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Attacking the Customer: Coercing Patent Infringers While Avoiding Exposure to DJ Actions

BY Patrick Fay
December 23, 2008

To avoid declaratory judgment actions, patent holders may opt to sue or threaten the purchasers of an allegedly infringing product, without threatening suit against the manufacturer. In effect, the patent holder coerces the manufacturing company to give up the right to manufacture or distribute the accused product by scaring off its customers. The Federal Circuit frowns on this type of activity, but certain decisions have left loopholes patent holders may exploit. At what point does this activity create grounds for a declaratory judgment action by the manufacturer?

Jurisdiction of DJ Actions

A declaratory judgment action may only be brought to resolve an “actual controversy” between “interested” parties. 28 USC '2201(a). For patent litigation, the Federal Circuit initially developed a two-part test to define “actual controversy.” The test required, first, that the patentee had made an explicit threat or action, creating a reasonable apprehension that the party seeking declaratory judgment would be sued, and second, that this party be currently taking action which could constitute infringement, or have taken concrete steps toward such action. BP Chemicals Ltd. v. Union Carbide Corp., 4 F.3d 975, 978 (Fed. Cir. 1993).

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