Declaratory judgment jurisdiction exists, sufficient corroboration of prior public use to invalidateSeptember 24, 2007

In a decision last week, the Federal Circuit upheld a district court's decision that a case or controversy existed providing subject matter jurisdiction and that the patent was invalid under 35 U.S.C. § 102(b) based on a public use more than a year before the patent's priority date. A licensee's decision to stop royalty payments combined with a threat to pursue legal action in response created a sufficient case or controversy support declaratory judgment jurisdiction.Further, there was sufficient corroboration that a public use occurred more than a year before the patent's priority date, between the testimony of several witnesses and various documents that presented a "coherent and convincing story."More detail of Adenta GmbH v. Am. Orthodontics Corp. after the jump.

This case relates to a patent directed to a type of orthodontic bracket affixed to teeth as a part of what are commonly referred to as "braces." The patent was assigned to OrthoArm, who brought a patent infringement suit against American Orthodontics ("American"), who manufactured and distributed braces for Adenta. That suit settled, and as a result of the settlement, OrthoArm assigned the patent to American and received a 4% royalty from American on sales of a bracket known as the "Time" bracket. American and Adenta entered into a royalty sharing agreement, and thereafter they each paid half of the royalties due to OrthoArm.Adenta later advised American that it would cease paying its half of the royalties because it believed the patent was invalid. American responded that such action would breach the agreement, and it would "pursue its available legal remedies to protect its rights," which prompted Adenta to file a declaratory judgment action seeking to invalidate the patent. OrthoArm intervened in the lawsuit, as the outcome would be determinative of its royalty stream. Eventually, the district court found declaratory judgment jurisdiction existed, and held that the patent was invalid based on a public disclosure of the invention more than a year before the patent's priority date.OrthoArm argued that because both American and Adenta would benefit if the patent were invalidated (by no longer having to pay OrthoArm royalties), they did not have "adverse legal interests." OrthoArm further argued that the fact American did not file a counterclaim to Adenta's declaratory judgment action also showed that the parties didn't really have adverse interests, but were instead acting in concert to remove their obligation to pay OrthoArm royalties.The Federal Circuit, however, agreed with the district court's determination that American's letter to Adenta created a "threat of an imminent patent infringement suit." The court reiterated that post-Medimmune, the standard for a case or controversy is no long a "reasonable apprehension of suit," rather than stated is that there is a "substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Here, because American "indicated its intent to assert its rights" under the patent, there was a "substantial controversy." As a result, there was subject matter jurisdiction.The court then reviewed the jury's conclusion of invalidity based on public use more than a year before the priority date of the patent. The jury heard witness testimony that the braces were displayed at a 1994 Florida trade show, which was more than a year before the priority date of the patent. Five witnesses testified that the brackets were displayed at the 1994 trade show. While three of these witnesses were related to either American or Adenta, the testimony was corroborated by various documents. The question here was not whether there was corroborating evidence, but rather whether the corroborating evidence was sufficient. This is judged under a "rule of reason" analysis.Applying this standard, the Federal Circuit was satisfied that there was sufficient corroboration. Between the testimony of uninterested witnesses, various letters, faxes and documents relating to the braces and their presence at the trade show in question. The court noted that the evidence in its entirety was sufficient for a jury to grant a verdict of invalidity. Accordingly, the judgment of invalidity was affirmed.To read the full decision in Adenta GmbH v. Am. Orthodontics Corp., click here.

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