Sony Electronics & Mitsubishi Digital Electronics America & Thomson & Victor Company of Japan & Matsushita Electric Industrial v. Guardian Media Technologies (CAFC 2006-1363)
Background on the patents -
The [4,930,160] ’160 patent generally relates to methods and apparatuses for blocking the viewing of certain television programs. Similar to the ’160 patent, the [4,930,158] ’158 patent relates to methods and apparatuses for blocking the playing of certain programs recorded on a videotape or other medium. The patents describe a system in which users can selectively block the viewing or playing of programs that have particular program classification codes. Such a system can be used, for example, by parents wishing to prevent their children from viewing television programs designated unsuitable for children. Both patents were issued on May 29, 1990, both list Peter S. Vogel as the inventor, and both were assigned to Guardian in November 2003.
Guardian Media had pursued Sony with letters asserting infringement, and claim charts, for five years. Other companies garnered similar attentions. The reply had been the declaratory judgment motions, and requests for reexaminations for both patents in fall of 2005, which were granted.
The CAFC summarizes the situation: Sony et al said it had "reasonable apprehension that Guardian would file an infringement suit;" Guardian's notion that "an actual controversy (and thus jurisdiction) arises only after an express or implicit threat of litigation." -
The main question we must answer in this case is whether the facts show that there is an “actual controversy” between Guardian and each of the appellants within the meaning of the Declaratory Judgment Act, 28 U.S.C. § 2201(a). Because the relevant facts are undisputed, we review de novo the district court’s decision to dismiss the consolidated cases for lack of an actual controversy. SanDisk Corp v. STMicroelectronics, Inc., 480 F.3d 1372, 1377 (Fed. Cir. 2007); Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 735 (Fed. Cir. 1988).
Sony, Matsushita, JVC, and Mitsubishi (collectively, “appellants”) argue that the district court erroneously required each appellant to establish that it faced an express or implicit threat of immediate litigation. Appellants argue that the 1999 letters from Vogel, the previous owner of the ’158 and ’160 patents, amount to “express charge[s] of infringement,” which should be imputed to Guardian for purposes of determining whether there is an actual controversy. Citing Arrowhead, 846 F.2d at 736, appellants maintain that an express charge of infringement alone is sufficient to establish an actual controversy under the correct legal standard.
In addition, each of the appellants also argues that (while not required) it has demonstrated that the totality of the circumstances gave rise to a reasonable apprehension that Guardian would file an infringement suit against it. For example, Sony argues that the letters sent by Guardian in 2004 and 2005—including the detailed charts comparing certain claims of the ’158 and ’160 patents to representative Sony products—establish that Guardian “had reached a studied and considered determination” that Sony was infringing. Id. at 738. According to Sony, these letters thus demonstrate that Sony’s apprehension of suit was reasonable. Sony and the other appellants also point out that the negotiations between appellants and Guardian, to the extent any occurred, had ended by the time these suits were filed.
Guardian, on the other hand, argues that the district court properly dismissed each of the appellants’ complaints for lack of an actual controversy. According to Guardian, an actual controversy (and thus jurisdiction) arises only after an express or implicit threat of litigation by the patentee. Guardian points out that it never expressly threatened any of the appellants with an infringement suit.
The legal backdrop; most notably, that the Supreme Court refused to articulate a bright-line standard to adjudge controversy -
The Declaratory Judgment Act provides that, “[i]n a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). The phrase “case of actual controversy” “refers to the type of ‘Cases’ and ‘Controversies’ that are justiciable under Article III.” MedImmune, 127 S. Ct. at 771; Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240 (1937).
The Supreme Court has not articulated a bright-line rule for distinguishing those cases that satisfy the actual controversy requirement from those that do not. Indeed, it has stated that “[t]he difference between an abstract question and a ‘controversy’ contemplated by the Declaratory Judgment Act is necessarily one of degree, and it would be difficult, if it would be possible, to fashion a precise test for determining in every case whether there is such a controversy.” Md. Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). Instead of fashioning a precise test, the Supreme Court has required only that the dispute be “‘definite and concrete, touching the legal relations of parties having adverse legal interests’; and that it be ‘real and substantial’ and ‘admi[t] 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.’” MedImmune, 127 S. Ct. at 771 (quoting Aetna, 300 U.S. at 240-41). “Basically, the question in each case is whether the facts alleged, under all the circumstances, show 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.” Md. Cas., 312 U.S. at 273.
The CAFC had developed a clear standard, which the Supreme Court abrogated in MedImmune.
As a result, our post-MedImmune decisions, while not attempting to define the outer boundaries of declaratory judgment jurisdiction, have made clear that a declaratory judgment plaintiff does not need to establish a reasonable apprehension of a lawsuit in order to establish that there is an actual controversy between the parties. SanDisk, 480 F.3d at 1380-81; Teva, 482 F.3d at 1339.
[T]he Declaratory Judgment Act was intended to fix the problem that arises when the other side does not sue. See Minn. Mining & Mfg. Co. v. Norton Co., 929 F.2d 670, 673 (Fed. Cir. 1991) (“In promulgating the Declaratory Judgment Act, Congress intended to prevent avoidable damages from being incurred by a person uncertain of his rights and threatened with damage by delayed adjudication.”); Goodyear Tire & Rubber Co. v. Releasomers, Inc., 824 F.2d 953, 956 (Fed. Cir. 1987) (“[T]he purpose of the Declaratory Judgment Act . . . in patent cases is to provide the allegedly infringing party relief from uncertainty and delay regarding its legal rights.”)
The appeals court had no doubt of Sony's reasonable apprehension.
Applying the standard articulated by the Supreme Court, we think it is clear that, at the time that Sony filed its complaint, an actual controversy had arisen between Sony and Guardian within the meaning of the Declaratory Judgment Act. The dispute is, without a doubt, “definite and concrete, touching the legal relations of parties having adverse legal interests.” Aetna, 300 U.S. at 240-41.
Prior to Sony filing its complaint, the parties had taken adverse positions regarding whether Sony’s sale of products possessing parental rating control technology infringed any valid claims of the ’158 and ’160 patents.
In the words of the Supreme Court, the parties’ dispute “is manifestly susceptible of judicial determination. It calls, not for an advisory opinion upon a hypothetical basis, but for an adjudication of present right upon established facts.” Id. at 242.
Being a patient negotiator doesn't let a patent owner keep pounding regardless of what the other party wants, which most often is getting on with business, and quick resolution if so required.
In so holding, we reject Guardian’s suggestion that there can be no jurisdiction in the courts because it was at all times willing to negotiate a “business resolution” to the dispute. In SanDisk, we recognized that a patentee’s apparent continued willingness to engage in licensing negotiations does not prevent a plaintiff from maintaining a declaratory judgment suit. 480 F.3d at 1382. Accordingly, even if the parties’ interactions in this case could be characterized as “negotiations,” Sony was within its rights to terminate them when it determined that further negotiations would be unproductive. Id. Although Guardian may have wanted to negotiate with Sony, Sony was not required to negotiate with Guardian.
In short, because Guardian asserts that it is owed royalties based on specific past and ongoing activities by Sony, and because Sony contends that it has a right to engage in those activities without a license, there is an actual controversy between the parties within the meaning of the Declaratory Judgment Act. See id. at 1381 (“[At least] where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license, an Article III case or controversy will arise and the party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of its legal rights.”). The district court, therefore, erred in dismissing Sony’s complaint for lack of subject matter jurisdiction.
As went Sony, so the others.
Vacated and remanded.