IP Law Alert : Intellectual Property Lawyers & Attorneys : Gibbons Law Firm : Copyrights, Patent Infringement, Unfair Competition

Several months later on July 31, 2012, while the Ohio case was stayed and the ‘087 patent reexamination was in progress, DATATRAK’s ‘294 patent issued as a continuation of its ‘087 patent. That same day, Medidata filed a Declaratory Judgment Action in the District of New Jersey pursuant to 28 U.S.C. §§ 2201, seeking declarations that it did not infringe the ‘294 patent and that the ‘294 patent was invalid on various statutory grounds. DATATRAK responded by filing a motion to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction. (DATATRAK also filed a motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim, and alternatively moved to transfer the action to the Northern District of Ohio under 28 U.S.C. § 1404. Only DATATRAK’s first basis -- its Rule 12(b)(1) argument -- is germane to this article.)

Judge Martini’s opinion set forth the standard for determining Article III jurisdiction by the District Court, based on the seminal decision in MedImmune Inc. v. Genentech, Inc., 549 U.S. 118 (2007), namely, “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.” Id. at 127 (quotation omitted). The Court went on to note that under MedImmune’s “all the circumstances” benchmark, the Court should consider facts such as the prior litigation history between the parties on related patents; and the declaratory judgment defendant’s indication about protecting its patent rights against the declaratory judgment plaintiff.

Applying this framework to the facts before him, Judge Martini found it indisputable that DATATRAK sued Medidata in the Northern District of Ohio based on alleged infringement of the related ’087 patent; that after that case was stayed pending reexamination of the ‘087 patent, DATATRAK stated publicly its intent to resume its vigorous prosecution against Medidata once the stay was lifted; and that the ‘294 patent issued after that and it relates to the same subject matter and technology as the ‘087 patent. Accordingly, and based on the totality of the circumstances, the Court found the existence of an actual case or controversy sufficient to confer Article III jurisdiction, and dismissed DATATRAK’s motion to dismiss.

This decision once again highlights the jurisdictional interplay between (i) asserted and (ii) non-asserted, but related patents. For parties looking to assert similar declaratory judgment claims or hoping to rebut the same, careful attention should be made to the public record, including court dockets and SEC filings, for evidence of the patent holder’s intent to enforce its rights.

Todd M. Nosher is an Associate in the Gibbons Intellectual Property Department. Ralph A. Dengler, a Director in the Gibbons Intellectual Property Department, co-authored this post.

An important takeaway for IP practitioners is that validity challenges to trademark rights asserted in litigation may be rendered moot if the owner grants a broad covenant not to sue. However, doing so -- as the Court noted -- “may be a risky long-term strategy for a trademark holder,” since it will adversely impact its ability to enforce its trademark rights.

We previously reported on the decisions leading up to the grant of certiorari as well as the oral argument before the high court.

Jillian A. Centanni is an Associate in the Gibbons Intellectual Property Department. Ralph A. Dengler, a Director in the Gibbons Intellectual Property Department, co-authored this post. 

Nike’s attorney urged the Court that the covenant obviated any injury to Yums arising from the registration. He argued that Yums had failed to show that it had plans to produce any shoes that would not be covered by Nike's covenant not-to-sue. However, he admitted that, if Yums had plans to produce the exact shoe covered by Nike's registration, sufficient harm would be present for the federal court to have continuing Article III jurisdiction.

The justices asked a number of questions, including whether any covenant not-to-sue could ever suffice in a trademark action if the underlying registration remained valid. Justices Breyer and Sotomayor both noted that the record did not affirmatively show that Yums had plans to develop an exact replica of the Nike shoe at issue. However, Yums’ attorney reminded the court that the record was not fully developed in the district court proceeding, and urged that the procedural posture of the case is analogous to that of a summary judgment, where all reasonable inferences should be drawn in Yums' favor, as the non-moving party.

The Supreme Court is expected to hand down its decision prior to June 30, 2013. Gibbons will continue to monitor developments in this case.

Catherine M. Clayton is a Director in the Gibbons Intellectual Property Department.

The Public Patent Foundation’s amicus curiae brief focuses on patent law issues, and ultimately sides with Yums. The heart of its argument is that undeserved registrations harm the public because they “can be used to threaten and impede otherwise permissible, socially desirable, conduct.”

Gibbons will continue to monitor developments in this case, and its impact on Federal Court jurisdiction.

Catherine M. Clayton is a Director in the Gibbons Intellectual Property Department. Jillian A. Centanni, an Associate in the Gibbons Intellectual Property Department, co-authored this post.

Yums further argues that Nike failed to carry its “heavy burden” of showing mootness, and notes that the lower court’s decision is inconsistent with “the strong federal policy favoring the full and free use of ideas in the public domain,” citing to Lear, Inc. v. Adkins, 395 U.S. 653, 674 (1969) (the seminal case invalidating “licensee estoppel,” that is, the notion that a patent licensee is estopped from challenging the validity of the underlying patent); as well as prior Supreme Court precedent rejecting restrictions on a litigants’ ability to challenge in federal court “the validity of claimed rights to exclude use of design and utilitarian conceptions.”

Gibbons will continue to monitor developments in this case, and its impact on federal court jurisdiction.

Catherine M. Clayton is a Director in the Gibbons Intellectual Property Department. Owen J. McKeon, a Director in the Gibbons Intellectual Property Department, and Ralph A. Dengler, Counsel to the Gibbons Intellectual Property Department, co-authored this post.

In the patent context, a patent holder can divest a Federal Court of Article III jurisdiction over a defendant’s counterclaim for declaratory judgment of patent invalidity by covenanting not to sue. This verity was based on, e.g., Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1059-60 (Fed. Cir. 1995), and its progeny. More recently, however, the Federal Circuit has considered abandoning this Super Sack rule, as urged in a dissent by Judge Dyk. See Benitec Australia, Ltd. v. Nucleonics, Inc., 497 F.3d 1340, 1350-55 (Fed. Cir. 2007) (Dyk, J., dissenting). The decision also will potentially resolve a perceived split on the issue between the Second and Ninth Circuits.

If the Supreme Court agrees with the Yums Petitioners, the so-called “Super Sack covenant” would no longer be operative, potentially making it more difficult for patent owners to withdraw their patents once in litigation.

Practitioners should keep a careful eye out for this decision, and consider its ramifications for clients on both sides of the negotiations table.

Ralph A. Dengler is Counsel to the Gibbons Intellectual Property Department. Owen J. McKeon, a Director in the Gibbons Intellectual Property Department, co-authored this post.