United States: Sufficient Controversy Exists For DJ Jurisdiction Where Patentee Had Accused DJ Plaintiff Of Misappropriating Same Technology In Related Litigation

In Arkema Inc. v. Honeywell International, Inc., No. 12-1308 (Fed. Cir. Feb. 5, 2013), the Federal Circuit held that the district court erred in its determination that there was no Article III case or controversy between the parties regarding the infringement and validity of the asserted patents. Accordingly, the Federal Circuit reversed the district court's denial of the plaintiffs' motion to supplement its complaint to add DJ claims with respect to the asserted patents.

Honeywell International, Inc. ("Honeywell") and plaintiffs Arkema Inc. and Arkema France (collectively "Arkema") compete in the manufacture and sale of automotive refrigerants, and have invested substantial resources in the manufacture of HFO-1234yf ("1234yf"), a refrigerant developed in response to new regulations in the European Union. Honeywell holds a number of patents directed to the refrigerant, including European Patent No. 1,716,216 ("the European patent") and U.S. Patent Nos. 7,279,451 ("the '451 patent") and 7,534,366 ("the '366 patent"). Honeywell sued Arkema in Germany for infringement of the European patent. In response, Arkema filed a DJ action in the United States over the '451 and '366 patents. While in discovery, Honeywell was granted U.S. Patent Nos. 8,033,120 ("the '120 patent") and 8,065,882 ("the '882 patent"). Both patents are directed to methods of using the refrigerant in automobile air conditioning systems. Arkema moved to supplement its complaint to seek DJ of noninfringement and invalidity as to the '120 and '882 patents, fearing liability under those patents arising from the sale of the refrigerant to U.S. automobile manufacturers. The district court denied Arkema's motion to supplement, finding that while there would be no undue prejudice to Honeywell if Arkema were permitted to supplement, the new claims did not present a "case or controversy" under Article III of the U.S. Constitution. Arkema appealed.

On appeal, the Federal Circuit reviewed the district court's conclusion that Arkema's supplemental claims were not justiciable. The Court explained that the proper test of when an action for DJ presents a justiciable controversy 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." Slip op. at 8 (citing MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)). The Court noted that "[o]n its face, [the case] is a quintessential example of a situation in which declaratory relief is warranted." Id. at 9. For example, the Court found that Arkema faced significant liability if it proceeded with its plans to enter into contracts and subsequently supply automobile manufacturers with the refrigerant. Honeywell made it clear that it would protect its patent rights against any such activity by Arkema, and in fact had already asserted its rights in the same technology in Europe. Thus, because Arkema was seeking a determination of a legal right under the method patents covering its own activities, the Court concluded that there was a controversy between Arkema and Honeywell as to the rights in the 1234yf refrigerant technology.

"Even under the now-discarded reasonable apprehension of suit test, it was well established that a sufficient controversy existed for declaratory judgment jurisdiction where the patentee had accused the declaratory judgment plaintiff of misappropriating the same technology in related litigation." Slip op. at 11 (footnote omitted).

The Court next addressed each of the district court's reasons for concluding that there was no justiciable controversy. First, the district court determined that "Arkema has neither alleged nor offered evidence that an Arkema customer has committed an act of direct infringement." Id. (citation omitted). The Federal Circuit explained that no specific infringing acts were necessary for DJ jurisdiction. It further explained that Honeywell need not have directly accused Arkema of potential indirect infringement. Rather, according to the Court, "a sufficient controversy existed for declaratory judgment jurisdiction where the patentee had accused the declaratory judgment plaintiff of misappropriating the same technology in related litigation." Id. at 11. Here, the Court concluded that Honeywell's accusing Arkema of infringing its rights with respect to 1234yf in litigation over the closely related '366 patent and the European patent claiming methods of using 1234yf created a sufficiently affirmative act on the part of the patentee for DJ purposes.

Second, the district court found that Arkema did not allege an adequate "specific planned activity" because the district court found that there were methods for using 1234yf in an automobile air conditioning system that would not infringe the '120 and '882 method patents. Id. at 12. The Federal Circuit, however, found that the evidence demonstrated that there were no noninfringing uses for 1234yf in automobile air conditioning systems and that Arkema admitted that any design employing 1234yf in an automobile would infringe the claims of the '120 and '882 patents. The Court found no question that Arkema would arguably be liable for induced infringement and thus concluded that the controversy was "sufficiently real" for purposes of DJ jurisdiction. Id. at 13.

Third, the district court found that any "threshold acts of direct infringement are not sufficiently immediate to create a justiciable controversy" because "the first predicted commercial launch of any product using [1234yf] is at least one year away." Id. (alteration in original) (citation omitted). The Federal Circuit disagreed. Because Arkema had already entered into long-term supply contracts, the Court concluded that Arkema presently had to either commit to contracts that could expose it to liability for indirect infringement or abandon its plans to supply 1234yf to automobile manufacturers in the United States. Accordingly, the Court concluded that Arkema's need for a DJ clarifying its rights was sufficiently immediate under Article III.

Finally, the district court concluded that Arkema had not satisfied the "'reality' requirement" under MedImmune because it had not demonstrated that the design of its customers' products was sufficiently fixed. Id. at 13-14. The Federal Circuit, however, found that Arkema had clear plans to sell 1234yf for use as the refrigerant component of heat transfer compositions for automobile air conditioning systems. The Court reiterated that there was no uncertainty about whether Arkema's product was going to be used in a way that might or might not have infringed Honeywell's rights. Accordingly, the Court concluded that the controversy between Honeywell and Arkema regarding the '120 and '882 patents was "of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Id. at 15 (quoting MedImmune, 549 U.S. at 127).

Judges: Dyk (author), Plager, O'Malley

[Appealed from E.D. Penn., Judge Yohn]

This article previously appeared in Last Month at the Federal Circuit, March 2013.

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