When DJ and infringement suits both filed, transfer factors determine appropriate forumMarch 5, 2008

In a decision Friday, the Federal Circuit decided a case addressing the requirements for a declaratory judgment action post-MedImmune . The court reversed and remanded a district court’s decision that there was no declaratory judgment jurisdiction applying the pre-MedImmunereasonable apprehension of suit standard rejected by the Supreme Court. The Federal Circuit applied the MedImmunerequirement for a showing of “whether the facts alleged under all the circumstances show that there is a substantial controversy between parties having adverse legal interest of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” The Federal Circuit clarified further in stating that “all of the circumstances” most show a controversy. Here, there was no difficulty in finding a substantial controversy between the parties, as one day after the declaratory judgment suit was filed, a corresponding infringement suit was filed in another district court. In perhaps the most interesting aspect of the decision, the court noted that when both a declaratory judgment case and an infringement case have been filed, there really is no question as to whether the requirements for jurisdiction are met. Instead, the question is really one of whether the court where the declaratory judgment action is pending should exercise its discretion to hear the case, as the real issue is where the case will be litigated. Because of this, the Federal Circuit held that the relevant factors for a court to consider are the “convenience factors” considered in the context of transfer under § 1404(a). Here, these factors weighed in favor of the suit proceeding in the declaratory judgment forum, so it was an abuse of discretion by the district court to decline to hear the case.More detail of Micron Tech. Inc. v. Mosaid Techs., Inc. after the jump.  Mosaid owns several patents in the field of dynamic random access memory chips (DRAM) which it licenses to many of top producers in the industry. Micron, one of the four leading DRAM manufacturers was sent a warning letter in 2001 urging them to license to Mosaid’s patents. Throughout 2001 and 2002, Mosaid sent additional letters to Micron who refused to take a license from Mosaid.Mosaid then began an aggressive legal and public campaign to enforce its patents. Litigation ensued between Mosaid and other DRAM manufacturers, including Samsung, Hynix and Infineon. Micron identified itself as the next obvious target for Mosaid in its aggressive assertion of its patent portfolio as Mosaid had already settled with the three other leading DRAM manufacturers. As a result, Micron filed a declaratory judgment action in the Northern District of California seeking declaration of non-infringement of Mosaid’s patents. The next day, Mosaid filed an infringement action against Micron in the Eastern District of Texas asserting seven of its patents and naming additional defendants in the suit.Mosaid filed a motion to dismiss in the California action for lack of subject matter jurisdiction. The district court granted the motion finding no jurisdiction under the pre-MedImmune “reasonable apprehension of suit” test. Specifically, the district court held Mosaid’s pattern of “serial litigation” was insufficient to create reasonable apprehension of litigation against Micron, as there were no records of recent threats to Micron, its customers or public comments that mention Micron by name in the past four years prior to Micron’s filing of the declaratory judgment action. On appeal, the Federal Circuit reiterated the Supreme Court’s criticism of the reasonable apprehension of suit test and its conflict with several precedents and set forth the proper standard for jurisdiction of a declaratory judgment action as requiring:

That the dispute be definite and concrete, touching the legal relations having adverse legal interest and that it be real and substantial and admit of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.

The Federal Circuit had no difficulty in finding declaratory judgment jurisdiction between Micron and Mosaid. Beginning in 2001, Micron received several threats insisting it take a license from Mosaid. Additionally, Mosaid sued each of the other top three DRAM manufacturers. Although four years elapsed between the threats and the ultimate litigation between Mosaid and Micron, Mosaid was negotiating and litigating against other leading DRAM manufacturers during this time. Mosaid’s public statements and annual reports to stockholders also identified a clear intent to pursue aggressive litigation and to enforce its intellectual property portfolio. Although Micron was not specifically named in these public disclosures, as a leading DRAM manufacturer these statements created a real and substantial dispute between the parties. The court also noted that Mosaid’s suit against Micron in Texas one day after Micron filed the declaratory judgment action created circumstances where the parties are really disputing the location and the right to choose a forum in an inevitable suit, rather than whether declaratory judgment jurisdiction exists. As a result, the real dispute is not whether jurisdiction exists, but whether the California court should exercise its discretion to hear the case. In making the determination as to whether the exercise of discretion is appropriate, the court stated that the appropriate factors to consider are the “convenience” factors applicable to considering whether to transfer a case under 28 U.S.C. § 1404(a). As stated by the court: Instead of relying solely on considerations such as tenuousness of jurisdiction, broadness of case, and degree of vestment, as in this case, or automatically going with the first-filed action, the more appropriate analysis takes a count of the convenience factors under 28 U.S.C. § 1404(a). The court noted that the “convenience factors” include:

  • Which case was first filed
  • Convenience and availability of witnesses
  • Absence of jurisdiction over all necessary or desirable parties
  • Possibility of consolidation with related litigation

The court notes that these factors become more important as declaratory judgment jurisdiction has become more lenient, as potential defendants have greater incentive to race to file a declaratory judgment action in a convenient forum. Ultimately the trial court must consider the convenience and suitability of the competing forums as related to the underlying dispute. In this case, the Federal Circuit determined that the Northern District of California was the more appropriate forum for the dispute between Micron and Mosaid and any transfer to the Eastern District of Texas would be an abuse of discretion. While Micron is a Canadian company, its U.S. operations are based in the Northern District of California, and the record did not indicate that other factors favored the Texas forum. Therefore, the court reversed and remanded back to the district court with instructions to hear the case.To read the full decision in Micron Tech. Inc. v. Mosaid Techs., Inc., click here.

Patently-O provides this report on the case.

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