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Archived updates for Thursday, March 16, 2006

No DJ Jurisdiction for Mere Aprehension of Customer Suit

In Microchip Technology v. The Chamberlain Group (Fed. Cir.; March 15, 2006) the court held that Microchip’s apprehension of its customers being sued failed to provide declaratory judgment jurisdiction. According to Circuit Judge Lourie, there was not any "adverse legal interest" existing between Microchip and Chamberlain, and it was not eneough that the "practical effect" of Chamberlain’s actions was that Microchip could not sell its product without subjecting its customers (but not itself) to the threat of a patent infringement suit:

There was no underlying legal cause of action between Microchip and
Chamberlain in this action. Indeed, Microchip has not identified a single legal
claim that it believes Chamberlain could have brought against it in the absence
of this declaratory judgment action. See Aralac, Inc. v. Hat Corp. of Am., 166
F.2d 286, 295 (3d Cir. 1948) (explaining that "[t]he holder of a patent has no
dispute with a person who is not infringing or threatening to infringe")
(citation omitted). Moreover, Chamberlain has contended, and Microchip has not
sufficiently rebutted that contention, that Microchip has never been accused of
infringing the patents-in-suit. While Microchip’s customers may or may not have
had an "adverse legal interest" or have been at "legal risk," they were not
parties to this action. Nor has Microchip established a legal relationship
between it and a customer that had a legal interest adverse to Chamberlain, such
as the existence of an indemnity agreement between Microchip and its customer. At most, Microchip had only an economic interest in clarifying its customers’
rights under Chamberlain’s patents, which may have facilitated the sale of
Microchip’s products. Microchip perhaps would economically have benefited if its
customers had no fear of suit by Chamberlain. Such an economic interest alone,
however, cannot form the basis of an "actual controversy" under the Declaratory
Judgment Act. See id. (stating that "[a]n economic interest is not enough to
create justiciability"). Microchip itself was under no threat of legal harm.

Contrary to Microchip’s assertions, our precedent, including Arrowhead and
BP Chemicals, does not support the district court’s conclusion that it possessed
jurisdiction. In Arrowhead, both the declaratory plaintiff and the patentee were
competitors in the water treatment services industry. 846 F.2d at 733. The
declaratory plaintiff provided its customers with all the steps of a water
treatment process that the patentee alleged was covered by its patent. Arrowhead
was potentially an inducer of infringement and it indemnified its customer
against liability as well. Thus, there existed a legal cause of action between
the declaratory plaintiff and the patentee establishing an "actual controversy"
in that the patentee in Arrowhead could have brought a patent infringement suit
against the declaratory judgment plaintiff. Id. at 739 (noting that "defendant’s
conduct has obviously created a most reasonable and compelled apprehension that
continuing to sell its process could subject [the declaratory plaintiff] to
liability for substantial damages"). Such an adverse legal interest between the
declaratory plaintiff, Microchip, and the patentee, Chamberlain, does not exist
in this action. While this court in Arrowhead did note that acts of the
plaintiff in that case might subject it or its customers to risk of suit, in
this case there is no indication that Microchip is inducing or contributing to
infringement by its customers.

Nor does BP Chemicals support the district court's decision, as argued by Microchip. In BP Chemicals, the declaratory plaintiff, BP Chemicals, and the patentee, Union Carbide, were competitors in the business of licensing technology for the manufacture of ethylene polymers. 4 F.3d at 976. We affirmed the district court’s holding of no jurisdiction in BP Chemicals on the grounds that the patentee did not place BP Chemicals or its licensees in reasonable apprehension of suit and the declaratory plaintiff failed to demonstrate that it or its licensees were
actually infringing the patent-in-suit. Id. at 980-981. Thus, BP Chemicals
supports Chamberlain’s position, not Microchip’s.

Furthermore, we do not agree with Microchip that our holding in this action would frustrate the policy behind the Declaratory Judgment Act. In Arrowhead, we recognized that prior to enactment of the Declaratory Judgment Act competitors in a given industry were "rendered helpless" by patentees that would engage in "scare-the-customer-and-run tactics." 846 F.2d at 735. Chamberlain and Microchip, however, are not competitors in a given industry. Chamberlain is a GDO manufacturer and Microchip is a manufacturer of integrated circuits. Microchip does not manufacture GDOs. While it may have an interest in selling its KEELOQ® technology, such an interest does not inevitably lead to Chamberlain’s competitors being induced to practice Chamberlain’s patented technology. As indicated earlier, there is nothing in the record to indicate that Microchip has induced or contributed to infringement of the patents-in-suit or that the KEELOQ® technology cannot be used without infringing Chamberlain’s patent. Moreover, Microchip has not produced any agreement indemnifying a customer against infringement of the patents-in-suit. Thus, Microchip has no legal right to "clear the air."

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