03/12/2014

Danisco v. Novozymes: OK to File DJ Action Challenging Patent on Day of Issuance In light of Litigious Conduct


Category: Civil Procedure  
 
 
 
By: Jesus Hernandez, Blog Editor/Contributor 
 
TitleDanisco US Inc. v. Novozymes A/S, No. 2013-1214 (March 11, 2014).
IssueThe district court […] dismissed Danisco’s declaratory judgment claims [for lack of subject matter jurisdiction], holding as a matter of law that the facts as alleged did not create a justiciable Article III case or controversy as to Counts 1 and 2. […] The court acknowledged that Novozymes’s ’573 patent presented a substantial risk to Danisco, but found that a justiciable controversy did not exist because Danisco had challenged Novozymes’s ’573 patent on the day that it issued, and thus that Danisco’s action “was filed prior to the time Novozymes took, or even could have taken, any affirmative action to enforce its patent rights.” […]
Danisco US Inc. at *5 (internal citations omitted, text added).
Holding[B]ecause a totality of the circumstances shows that Novozymes’s posturing [(e.g., litigious conduct since 2001)] put Danisco in a position of either pursuing arguably illegal behavior, i.e., infringement, or abandoning that which it claims a right to do, i.e., make and sell the RSL products that are the embodiments of its ’240 patent, we conclude that the district court erred as a matter of law in dismissing Counts 1 and 2 of Danisco’s complaint for lack of subject matter jurisdiction. […]
Id. at *12 (internal citations omitted).
 
Procedural HistoryDanisco US Inc. (“Danisco”) appeals from the decision of the United States District Court for the Northern District of California dismissing Danisco’s declaratory judgment action against Novozymes A/S and Novozymes North America, Inc. (collectively “Novozymes”) for lack of subject matter jurisdiction.
Danisco US Inc. at *2 (internal citations omitted).
 
 
 
Legal Reasoning (Lourie, Prost, O’Malley)
Facts
Litigious ConductSince about 2001, Novozymes has sued Danisco or Danisco’s predecessors in interest for infringement numerous times.
Danisco US Inc. at *2.
Interference AttemptShortly after the PTO issued a Notice of Allowance of the application that matured into Danisco’s ’240 patent, Novozymes again amended one of its own then-pending patent applications to claim a BSG α-amylase variant polypeptide with an E188P substitution, and subsequently requested an interference contesting entitlement to priority of the invention. […] The PTO examiner rejected Novozymes’s interference request […] After Danisco’s ’240 patent issued, Novozymes filed a request for continued examination, challenging the examiner’s conclusions and again arguing for priority over what it described as Danisco’s “interfering ’240 patent.” […] The examiner rejected Novozymes’s request.
Id. at 3-4.
Suit on Day of IssuanceUpon issuance of Novozymes’s ’573 patent, Danisco filed concurrent actions in the United States District Courts for both the Northern District of Iowa and the Northern District of California seeking declaratory judgments that its RSL products did not infringe Novozymes’s ’573 patent (Count 1) and that the ’573 patent was invalid (Count 2) […]
Id. at *4.
Legal Standard
DJ Action GenerallyThe 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.” […]. The burden is on the party claiming declaratory judgment jurisdiction, here Danisco, to establish that an Article III case or controversy existed at the time that the claim for declaratory relief was filed and that it has continued since. […]
Id. at *6 (some internal citations omitted).
MedImmune PrecedentArticle III does not mandate that the declaratory judgment defendant have threatened litigation or otherwise taken action to enforce its rights before a justiciable controversy can arise, and the Supreme Court has repeatedly found the existence of an actual case or controversy even in situations in which there was no indication that the declaratory judgment defendant was preparing to enforce its legal rights. See MedImmune, 549 U.S. at 132 n.11 […]. The Court has instead only “required 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.’” […] “‘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.’”
Id. at *7-8 (some citations omitted).
Analysis: History of Litigious Conduct and Attempted Interference Request Enough to Establish Controversy
Dispute ExistsThe record demonstrates that a definite and concrete patent dispute exists between the parties. Novozymes’s E188P α-amylase variant claim issued as the sole claim of its ’573 patent and is the same claim that Novozymes described as interfering with the claim in Danisco’s ’240 patent. Novozymes has insisted on multiple occasions that its ’573 patent claim reads on the BSG α-amylase with an E188P mutation, which is the active compound in Danisco’s RSL products and is claimed in Novozymes’s patent. The record shows that Novozymes sought its patent because it believed that Danisco’s products would infringe once the claim issued. Novozymes twice asserted that Danisco’s ’240 patent was invalid and that Novozymes, not Danisco, is entitled to a patent on the claimed BSG E188P α-amylase invention. Danisco has taken a legal position that is entirely opposed to the position taken by Novozymes, viz., that Danisco successfully prosecuted and obtained the ’240 patent, that it is the rightful owner of the claimed invention, and that its RSL products do not infringe the claim of Novozymes’s ’573 patent. Novozymes has twice sued Danisco or its prede- cessors in interest for patent infringement regarding related liquefaction products. The parties have plainly been at war over patents involving genetically modified α-amylase enzymes and are likely to be for the foreseeable future. They thus have adverse legal interests over a dispute of sufficient reality that is capable of conclusive resolution through a declaratory judgment.
Danisco US Inc. at *8-9 (text added).
No Distinction between Pre and Post Issuance ConductThe district court’s categorical distinction between pre- and post-issuance conduct is therefore irreconcilable with the Supreme Court’s insistence on applying a flexible totality of the circumstances test, its rejection of technical bright line rules in the context of justiciability, and our own precedent. See, e.g., Matthews Int’l Corp. v. Biosafe Eng’g, LLC, 695 F.3d 1322, 1328 (Fed. Cir. 2012) (“In determining whether a justiciable controversy is present, the analysis must be calibrated to the particular facts of each case.”). Contrary to the district court’s stated view, we have never held that “pre-issuance conduct” cannot constitute an affirmative act, nor have we held that the only affirmative acts sufficient to create justiciable con- troversies are “implied or express enforcement threat[s].”
Id. at *10.
Long History of Litigation Establishes SJ JurisdictionTaken together, Novozymes’s activities thus demonstrate that it has “engaged in a course of conduct that shows a preparedness and a willingness to enforce its patent rights.” […] That is enough to establish subject matter jurisdiction. Novozymes’s behavior validates that Danisco, quite reasonably, is more than a “nervous . . . possible infringer,” even if Novozymes is not currently “poised on the courthouse steps” to sue Danisco for infringement of the ’573 patent. […]
Id. at *11-12 (internal citations omitted).
Conclusion
In view of the foregoing, we conclude that the district court erred as a matter of law and that the totality of the circumstances presented here establishes a justiciable controversy. The judgment of the district court dismissing Counts 1 and 2 of Danisco’s complaint for lack of subject matter jurisdiction is therefore reversed and the case is remanded for further proceedings.
Danisco US Inc. at *13.

 
 
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